Minerva’s Plan to Disrupt Universities: A Talk with CEO Ben Nelson

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see that you are having a problem and reintroduce that concept in a completely different field to apply it. And if you make a breakthrough, your political science professor can see that you have made that breakthrough and apply it in yet another exercise. You can’t do that offline.

X: But it sounds like you’re completely doing away with the actual content—the factual information students need to know about the real world. Isn’t there some role for the old “sage on the stage” model of education? Looking back on my own college experience at Harvard, some of the most memorable experiences for me were watching great teachers like Stephen Jay Gould, whose classes were always packed because he was a master lecturer.

BN: We expect our students to watch MOOCs, read books—what a crazy idea!—and engage with adaptive learning platforms. Our critique of that is that traditional universities charge their students for information that should be free, and that they themselves are giving away in other contexts. Think about the absurdity of it. Stanford goes and says, ‘We are giving away our AI course free to everyone on the planet—except if you were admitted to Stanford, in which case it will be $5,000, please!’

X: You’re going to move each cohort at Minerva to a new city each year. What’s the pedagogical theory behind that? Again, it seems like you’re creating a logistical headache for yourselves.

BN: You’re right, it would be much easier to have them stay in San Francisco. Even easier, not to find them housing in San Francisco but say we can do this in Chico. But you have to look at what we are trying to do. We are trying to educate leaders in a variety of fields, in a global context. That is what the curriculum is designed for. In fact, if you look at what every top-tier university purports to be doing, they are supposed to be educating the people who will create or invent or run the major institutions of society. And so, the question is, who do you want running your institutions? Those people who have been sequestered away from society and sheltered from it, and have gotten this kind of approximation of the real world, and then go off? Or those that in this critical age where they still have brain plasticity and are still getting to understand how things work, are not sheltered from society but thrown right into it?

Much like we think knowledge dissemination should be free and ubiquitous, and it is not the purview of the university to charge for it but to curate it, we also believe that experiential education has to be experienced. It’s one thing to take a class on cultural differences. It’s a hell of a lot better to go to India and try to hail a taxi and be respectful of the person who was there before you, or stand in line for the train from Guangzhou to Hong Kong. That is how you learn culture. That is how you learn the way the world works.

X: Other attempts to create online universities, notably Altius Education, have crashed and burned recently after failing to win the support of the traditional accreditation bodies in higher education. But Minerva, through KGI, has already received accreditation from the Western Association of Schools and Colleges (WASC) for several of its degree offerings. How did you avoid the wrath of the accreditation system?

BN: Here’s how we look at the accreditation system. We have long publicly argued that there should be a new pathway for innovative companies and institutions to get accreditation. We have also always said that we don’t need that new pathway. We are extraordinarily well funded. We have an academic roster that would make any university on the planet blush. Probably most importantly, there is zero financial exchange with our academic partners for incubation. We are not paying them a dime. It’s the same way KGI was created: It was incubated within Claremont Graduate Universities and then spun out.

So the way we didn’t incur the wrath of the accreditation folks was by not giving any reason to incur wrath. I don’t know if there was any reason given for the Altius decision, but I do know there was a transaction there—a revenue split [between Altius and the host institution for its online college, Tiffin University of Ohio]. Whether or not there was fire, one could imagine there was smoke. You could question, well, why are they really doing it? Who is in control? Is it above-board, or they just paying them for their accreditation? Most profit-non-profit relationships are like that. And we refused to do that.

WASC has been great. They had some initial confusion about the contract [between Minerva and KGI]. It took their legal counsel a while to get it, because it is complex. But we have now done three reviews with them and passed all three, and are doing a fourth next week.

X: So if I understand you, you’re saying that the accreditation system truly is anti-innovation, but at Minerva you have had the resources to work around that?

BN: What we are saying is that the traditional way is great, if you are starting Minerva. If you are starting the world’s greatest university and you’re not paying off anyone to do it, what is the accreditor going to say? No?

The process was actually really good for us. They made us go through a huge amount of documentation and made us answer a bunch of questions that we never had to answer before. You may say, ‘Oh, we’ll figure it out when the students show up,’ but WASC doesn’t let you do that. Students are coming: you need to know what orientation looks like. You need to do emergency planning.

I am not in favor of bureaucracy, but it was good for us. But if I am Codecademy or Udacity or what have you, I am not going to want to go through all of this stuff. I think it’s bad for the system. So we need to introduce new models without the same barriers. The system is set up to keep new players out.

I have been on the stump about this. When you force innovation to go outside a company, the company will die, and that’s no big deal. It is irrelevant if University X goes out of business and University Y takes its business. That happens all the time. But if you force innovation outside of an entire industry, that industry will die, and we can’t afford for that to happen in higher education. That is what the accreditation system is forcing.

At the high end, Minerva can come in. But there are no new Minervas. We announced our founding two years ago and we don’t have a single follower. Meanwhile, there are at least two Airbnb’s for dogs. Seriously. What else in the Valley doesn’t get copied?

X: What makes Minerva a venture-backable business?

BN: It’s an excellent question. Minerva, I would argue, is a classical venture-backed institution—which means that it’s almost entirely unable to be venture-backed today. It is addressing a deep societal need in a revolutionary way, at a much higher quality and lower cost than incumbents. Most importantly, it derives value less from profits streams and much more from the value of the assets it creates: the brand. That is about as classic, textbook, 1980s-era venture capitalist as you can get. But that’s not what VC is today, except for a few practitioners at the very highest level.

X: When you say the asset is the brand, do you mean that the exit scenario here for the investors is to raise Minerva’s visibility until you’re able to go public, rather than selling to some other company or educational institution?

BN: Public markets are probably the only logical exit. But the secondary markets are becoming more and more robust. There are all these vehicles now that aggregate [private] investors. Are we going to go public or stay private? I don’t know, but the liquidity event is going to be the trading of our shares. We will not sell to another university—they will not be able to afford us.

X: How do you take what you’ve got—five faculty members and 19 students—and scale it up to something that produces significant revenue?

BN: The good news is that the scale we need to achieve is not foreign to higher education. My alma mater had 10,000 undergraduates. Iowa State has 50,000. Because we are trying to do something which is that size, yes, we add the complexity of various locations, but frankly a lot of those universities also run study-abroad programs.

Think of the complexity we avoid. No sports, no classrooms, no facilities except residence halls. No administrative buildings, no faculty offices. And our faculty-to-student ratio is going to be very good. A lot of universities are at eight-to-one or five-to-one; we are not going to get to that level. We are going to be in the teens-to-one. So the faculty will be a rational-sized faculty from a university perspective, the student body will be a rationally sized student body, and even if we wind up getting to an Ohio State level, it’s an order of magnitude that is realistic.

X: Are you designing the technology platform so that it can scale up to handle tens of thousands of students taking hundreds of classes?

BN: As much as we need to, at this point. Every platform has its architectural iterations on the way up. The technology hurdle isn’t the number of classes you have, it’s what happens inside the classes. That is the hard part. Getting 20 live video streams to work effectively across borders: that is the challenge. If you have one class or 20 classes, it’s just more Amazon instances.

X: Tuition at Minerva will be relatively low—just $10,000 per year. That’s so low that, on the one hand, I wonder why you’re bothering to collect it at all, when you have only a couple dozen students. On the other hand, is it high enough to really fund the operation and become self-sustaining as you grow?

BN: That’s where having 7,000 to 20,000 students comes in. If we don’t collect tuition, we are not self-sustaining. The founding class is 19 students. But when you have a few hundred, or a couple of thousand students a year—we think $10,000 is a great deal compared to $40,000.

But it’s still $10,000. It’s a lot of money. We have a huge respect for that. At my last company [Snapfish] I sold my product 9 cents at a time. At a $10,000 ticket price, I have to deliver the most spectacular experience in the world.

X: How will financial aid work at Minerva, and how will it differ from the practices at other universities?

BN: It will be different in a couple of very important ways. Number one, it doesn’t distinguish based on who you are or who your parents are. It’s not about credit scores. That is really important. Second, at least for a while, we imagine that a lot of it is going to be about low-interest student loans. The reason for that is you can have a much broader impact with a much smaller amount of money than if you do scholarships. Loans are a market, and you can create mechanisms to make the market work at a much lower cost per student than scholarships. Scholarships are not a market: they come from generous individuals. You can try to scale that, but you have to fight for every dollar. We are more focused on creating scalable mechanisms that don’t discriminate.

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7 responses to “Minerva’s Plan to Disrupt Universities: A Talk with CEO Ben Nelson”

  1. lump1 says:

    Wow, I teach at a university, but this one seems better. It would have been very easy for them to take shortcuts and charge thousands for access to lecture downloads and mercenary distributed test-graders, and call that an education. I’m impressed that they’re avoiding such shortcuts. To me, it sounds like they’re so ambitious that their money will inevitably run out and they will be forced into compromises. But maybe this wet blanket attitude of mine is the reason why I’m a college instructor and not an entrepreneur.

    Just one comment about tenure, though. A lot of people have this misconception that tenure is somehow economically unsustainable at universities. I suspect it’s actually a huge money-saver. It’s because universities offer tenure that they can afford to pay much smaller salaries and still hire top research talent. For sure, a faculty member choosing between a tenure-track and non-tenure-track job might take the latter, but only if it paid *a lot* more. The figure I’ve seen is around $25,000, but I suspect that’s actually an underestimate. But even it it’s right, offering tenure basically means that universities can hire professors for $25,000/year less than their market value. That’s nothing to scoff at, even for people trying to start something educationally “disruptive”.

    • Wade Roush says:

      Hey lump1, thanks for your comment. I agree that Minerva’s plan sounds costly: they may have to go back for several more rounds of venture funding before they get anywhere close to breaking even based on tuition alone, and in that case the question the investors will ask is how fast are they growing? VCs are often willing to re-up based on rapid growth. So my bet is that scaling rapidly, rather than budgeting per se, is going to be their greatest challenge. Thanks for your observation about tenure: I didn’t think to ask them whether they plan to pay faculty more or less than the market rates.

  2. Bill Ghormley says:

    Ah, Minerva! Experiential learning in a new package — powerful concepts intermingled to produce an approach that should achieve Minerva’s goal: to give the world critical thinkers who can communicate. The Brand “Minerva” is a bit regal, and obscure — the goddess of Truth and Wisdom (aka Athena) sits on the Xconomy HQ building in Cambridge — but is she built into the semiotics of this new business? I feel they should drive much harder to depict the graphical and philosophical dimensions of their enterprise — reaching for Minerva/Athena! The gravitas of tying into ancient empires for the deepest wells of knowledge is not exploited to build Brand tools from what I’ve seen — Ben needs to go get those and embrace them!

    • Wade Roush says:

      I have a feeling they’re trying to avoid all the trappings of traditional academia right now, including things like a fancy Latin or Greek motto or symbol. The Minerva sites are utilitarian to the point of severity. The logo is a ring or Mobius strip with the inverted/shadow image of an (empty) shield in the middle. Or is it an acorn? I can’t tell.

  3. ezrabiggins says:

    My assessment of for-profit colleges is that they are organized crime operating within the law. They cold call as desperately as the salesmen in Glengarry Glenross; they bring in anyone with a pulse–a pulse and financial aid. And that’s the scam. As with privatized prisons, the destruction of public sector unions and the fraudulent ‘bankruptcy’ of Detroit, the euphemistically titled ‘venture capitalists’ have seen that we have entered a post-consumerist capitalism. Why go after public funds? For the same reason the bank robber gave: That’s where the money is.
    So here is a venture capitalist–another venture capitalist–with a sudden passion for education. But this one seems to have pitched a new twist on the edudollar racket to his (mysteriously anonymous) backers. An upscale for-profit college company–er, project. The students have come for the faculty names (but he’s not interested in prestige). The faculty names, it is alluded, are making very big bucks (they are a speculative investment). You raised the pertinent question, but didn’t press it when he double-talked you. What return do these heavy investors foresee? What is the game here? It doesn’t look like it’s the tuition, no profit in that at current scale. And it won’t be the familiar public money grab via financial aid. There are no Ivy Leaguers coming out of neighborhood public schools. The most electric word in his vocabulary as far as he is concerned seems to be China. He knows something, or sees something, that his backers see too but, I think, most of us don’t see yet.
    I’ve cast a lot of aspersions to conclude with nothing more than ‘Something smells fishy.’ But I will claim as justification several centuries’ history of venture capitalism.

  4. Tran Khanh says:

    I do aggree that online education will be very important in the future. However, in low-developing country (the ones who need education the most), it’ very likely that they’re lack support for online education.

    http://www.tuicoding.com

  5. Zhan Hui Hoe says:

    Nothing can ever happen if no one is willing to take the first step. His mission resonates with the younger generation. Kudos! The hardest part in doing anything, in my opinion, is initiating and then sustaining. I definitely believe that Minerva Project will spearhead the revolution in education.