University of Wisconsin to Consider Shuttering MBA Program

The rising sun shines on Grainger Hall, home to the Wisconsin School of Business at the University of Wisconsin-Madison, during a summer morning on July 9, 2016. (Photo by Jeff Miller/UW-Madison)

The University of Wisconsin School of Business has announced that it is considering closing its MBA program.

Higher education, like business, is in an unprecedented period of accelerated change along several dimensions, including technology, globalization, and the changing expectations of students at all levels. To advance our standing as a top business school, we must respond to this reality.

In this vein, over the last several months, the Wisconsin School of Business has been studying how to best serve students and employers. We are currently having discussions within the School regarding the strategic direction of our portfolio of offerings. Included in the discussion is growing our undergraduate BBA and Master’s programs, evolving the focus of our Centers, and considering the future of the Full-Time MBA. These conversations will continue over the coming weeks and respect our governance processes.

This illustrates the impact of some of the fundamental trends in higher ed I wrote about earlier in the week.

Wisconsin appears to be a very undergraduate focused business school. It has 2,550 undergrads, but only 197 traditional MBA students.  Its MBA program is ranked 34th in the county by US News. So it falls into the category of many Midwest/Big Ten institutions of “good, even very good, but not elite.”  Note that several Big Ten universities have MBA programs ranked below Wisconsin. Rightly or wrongly, this will fuel speculation around many programs ranked in the same tier.

Decisions like this are the subtext of Gov. Scott Walker’s weakening of tenure laws.

“I do not believe the academy is precisely like a business,” Regina Millner, [University of Wisconsin] board president, said at the meeting. “But we cannot have quality, serve our students, have quality faculty if we do not have a sound financial system. This is a different century, this is a different time …. We need to protect that quality by making certain critical decisions.” Repeatedly during the meeting, Millner and other regents cited the need, in an era of tight budgets, for “flexibility” to close programs — and eliminate faculty jobs in the process.

The changes appear to have been designed to allow the university to shutter underperforming programs, which would be difficult to do if tenured faculty couldn’t be laid off.

We will see what the university does, but painful decisions like these are inevitable in era we are in. Every state university is not going to be able to be everything to everybody. They are probably going to have to pick and choose. In the impossible dreamworld, Big Ten schools might event pool some of the programs to specialize across states to help them compete with elite schools, the same way some states like Indiana have partitioned programs within the state.

A final note about the Wisconsin School of Business. In 2007 a group of alumni jointly donated $85 million to the school to purchase the naming rights for 20 years.  The twist is that the school would remain unnamed during that time, and would simply by the School of Business. In an era when donors are eager to plaster their names all over everything they can buy, I think this was one the classiest moves I’ve seen. It would be especially disappointing for them if the school ends up closing after they made such a selfless gift.

from Aaron M. Renn
http://www.urbanophile.com/2017/10/20/university-of-wisconsin-to-consider-shuttering-mba-program/

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Superstar Effect, Everything Edition

The Economist has a long and important article in the current issue called “Globalisation has marginalised many regions in the rich world” (now they tell us…).  One of the interesting tidbits in a chart that illustrates increasing concentration among a vast array of industries. They track the share of GDP by industry being generated in the top four metro areas in 2002 and 2014 to show change in concentration overtime.

The dots aren’t all fully labeled and so we really don’t get the details behind his. The key is how many segments have become more concentrated versus less. Again, I’m reminded of former GE CEO Jack Welch, who saw this coming and famously said he only wanted to be in a business if he could be number one or number two. (Subsequently a number of industries rolled up into de facto “two towers” models: CVS and Walgreens, Home Depot and Loews, AT&T and Verizon, etc).

This is putting a lot of regions – the article highlights Scranton – in a serious pinch. There’s a lot in this article, so read the whole thing. Some additional highlights:

Between 1990 and 2010 the rate of economic convergence across American states slowed to less than half what it had been between 1880 and 1980. It has since fallen close to zero. Rich cities started pulling away from less well-off counterparts (see chart 1). According to the Brookings Institution, a think-tank, in the decade to 2015 productivity growth in American metropolitan areas was highest in the top 10% and the bottom 20% (where, by definition, the baseline was low). Struggling middle-income cities like Scranton fell further behind. A recent report by the OECD found that, in its mostly-rich members, the average productivity gap between the most productive 10% of regions and the bottom 75% widened by nearly 60% over the past 20 years.

….

When countries with lots of low-wage workers begin trading with richer economies, pay for similarly skilled workers converges. Those in poor economies grow richer while in rich countries workers get poorer. The effects are felt more in some places than others, and not only because the sort of people who lose out to trade tend to live in similar places. Globalisation did direct damage to many local and regional economies because of the way those regions work.

The past few decades have been good for the richest firms and places. They are as productive as ever; America’s slowing productivity is the result of increasingly poor performance by firms below the upper ranks. Across a wide range of industries the share of output generated by America’s top four metropolitan areas for each industry has risen, often substantially. In the financial industry their share of output rose from 18% to 29%, and in retail, wholesale and logistics from 15% to 21% between 2001 and 2014.

But it is a different story within borders. Diffusion of technology from top firms in one country to laggard firms in the same country has slowed down. The authors of the study reckon that a lack of interest in adapting technologies to local circumstances may account for part of this, suggesting that the more the best firms focus on a global (rather than domestic) market, the slower productivity-improving techniques and technologies spread locally. The rise of superstar firms means that fewer places are home to businesses operating at the productivity frontier and that domestic investment is lower than it should be. In less dynamic local markets, nonsuperstars seem neither willing nor able to adopt the best technology.

 

from Aaron M. Renn
http://www.urbanophile.com/2017/10/19/superstar-effect-everything-edition/

The Changing Urban Patterns in College Degreed Younger Adults

While doing some research for a forthcoming presentation, I was looking at some data about younger people with college degrees and put together some maps I’ll share with you today.

The Census Bureau tracks educational attainment by age cohort. I decided to look at 25-34 year olds with a bachelors degree or higher. This is roughly today’s “young, educated Millennial” segment. Here is a chart showing the change in the share of 25-34yos with degrees between 2000 and 2016:

Keep in mind these aren’t the same people – this is not a longitudinal study. The 25-34yos in 2000 are Generation X – my generation. This is simply a look at how the concentration of people in that age group has shifted over time. (To interpret the scale, multiply by 100 and that’s the percentage point change in college degree attainment).

You can see right away that the big increases here are in the “usual suspect” cities: NYC, Boston, DC, Bay Area, LA, Seattle, Portland, Chicago. Also Pittsburgh’s brain gain is shown and also a great showing for Nashville.

Some metro areas – the ones in red – actually saw a decline in educational attainment in that age group. Not good.

Because the nation as a whole grew more educated during that time, another way to look at it is the change in college degree attainment vs. the national change for that age group, which was 7.4 percentage points. Because of some system quirks, the color scheme is different on this one. Blue is a change higher than the national average, purple is a change below the national average.

Interesting to say the least.

Now there are many caveats on this. One, your ability to grow your share of people with college degrees in part depends on your base. Pittsburgh started with low share in that age range. It’s a lot harder to post gains when you’re already high. So some of these coastal markets may slow down in growth over time. After all, you can’t get above 100% by definition.

Secondly, this is the share of people with college degrees, not the total people with college degrees. Partisans of Texas or Atlanta will be quick to note that they grew so much total population that their total number of people with degrees went up a lot more than some of these coastal cities. That’s true.

But it’s obvious these maps are telling us something important about what’s been happening in America. It helps us understand why, for example, Pittsburgh became a hot story and tech center. Or why Nashville went from just another Sunbelt sprawlburg to a hip and trendy city. Or the boom in Chicago’s Loop. The poor showing by Atlanta foots to its per capita income erosion vs. the national average and weak per capita GDP figures.

While the total number of people with degree matters, the share also matters. A city dominated by highly educated people will have a different culture, attitude, etc. vs. one where interests are more divided between highly educated and lesser educated, for example.  Something of the divergence between coastal elite cities and the interior is illuminated, if not necessarily in causal form. There have been some very divergent trends in demographics in these places.

from Aaron M. Renn
http://www.urbanophile.com/2017/10/18/the-changing-urban-patterns-in-college-degreed-younger-adults/

Universities Must Reinvent Themselves

Foellinger Auditorium at the University of Illinois

Jon Marcus has a lengthy feature in the Washington Monthly that is in effect a plea for more government funding for universities, especially research, with a focus on Midwest institutions.

But university research is in trouble, and so is an economy more dependent on it than many people understand. Federal funding for basic research—more than half of it conducted on university campuses like this one—has effectively declined since 2008, failing to keep pace with inflation. This is before taking into account Trump administration proposals to slash the National Science Foundation (NSF) and National Institutes of Health (NIH) budgets by billions of dollars more.

Trump’s cuts would affect all research universities, but not equally. The problem is more pronounced at public universities than private ones, and especially at public institutions in the Midwest, which have historically conducted some of the nation’s most important research. These schools are desperately needed to diversify economies that rely disproportionately on manufacturing and agriculture and lack the wealthy private institutions that fuel the knowledge industries found in Silicon Valley or along Boston’s 128/I-95 corridor. Yet many flagship Midwestern research universities are being weakened by deep state budget cuts. Threats to pensions (in Illinois) and tenure (in Wisconsin) portend an exodus of faculty and their all-important research funding, and have already resulted in a frenzy of poaching by better-funded and higher-paying private institutions, industry, and international competitors.

Marcus argues that elite private universities both already get more research dollars and have gigantic endowments that will put them at an advantage in an era of diminished state and federal support, positioning the Midwestern state schools as relative losers in the future.

He gets at a real problem. I agree with him on the need for increased STEM funding, the criticality of Midwest universities to their states’ economic futures, and the fact that they are under threat.  But unfortunately he misses a lot of very important, and more important, points.

1. The “Superstar Effect.” I’ve been doing a series on how many domains are becoming increasingly subject to superstar economics in which the very top of the pyramid is pulling away from the rest. We see this in everything from venture capital to tennis.

Marcus brackets Harvard, MIT, and Stanford with Iowa, Illinois, Ohio State, and Wisconsin. But these are not comparable institutions. The former are superstars, the latter are very good but definitely in a lower league.

I note in a forthcoming article in City Journal:

The heartland suffers because of the “superstar” effect. In today’s world, the spoils often go to the very top of the hierarchy. The heartland is too often good, even very good, but not the best. An exception that proves the rule is Carnegie Mellon University’s computer-science department, which attracted companies like Uber and Google to set up shop in Pittsburgh. The heartland needs to develop more such leading departments in its universities and attract some top talent. To do this, changes in cultural attitudes will be critical.

This problem has a money dimension, but it’s not primarily a money problem. (Culture plays a large role in keeping these institutions from rising to the top as well, something I can’t go into right now). The imbalance of funds is as much an effect as a cause. Pouring more federal funds into the current system might in fact fuel greater divergence, not less. And there’s the simple math problem that there can by definition only be a handful of elite programs in any specialty.

2. The state-university divorce is mutual.  Marcus brings up the Morrill Act and land-grant universities. Part of the goal of that was to educate the residents of these states in the agricultural and industrial arts. But state universities today increasingly are not interested in educating their own small-town farm boys and the like. They are looking to attract the best students from around the country and the world. This both increases their reputation, and brings in much greater revenue because of the vastly higher tuition paid by out of state students.

Foreign students from places like China are now aggressively recruited to universities like Illinois, in part because they are paying very high rack rates with cash. Indiana University, my alma mater, was largely populated with working and middle class Hoosiers and some Chicago suburbanites when I went there. Today it has a much more upscale vibe and has become a destination for East Coast kids who can’t get into the Ivies. (“From Bloomingdale’s to Bloomington” as the Journal once quipped).

Similarly, there’s a conflict in institutional interest between state government and flagship universities when it comes to the destinations of graduates. States want graduates to stay local. Marcus touts this as one of the university’s benefits:

More than one in five graduate students who worked on sponsored research at eight Big Ten universities studied by Ohio State economist Bruce Weinberg, including Indiana, Michigan, Minnesota, Purdue, and Ohio State, stayed in the state where they attended school—13 percent of them within 50 miles of the campus. That may not sound like a lot—and, indeed, the exodus of highly educated people is a serious problem—but it’s significant when considering that the jobs for these students exist in a national labor market. People with engineering Ph.D.s from Minnesota could take their talents anywhere. If even 20 percent stick around, that’s a big win for states that can’t expect an influx of educated elites from other parts of the country. These graduates provide an educated workforce that employers need, create jobs themselves by starting their own businesses, and pay taxes.

But there’s a name for a school whose graduates predominantly stay local: community college. If a large percentage of students are staying in local second tier economic markets, that’s not necessarily a good thing for the institution’s standing. For example, in some fields, schools are ranked in part by the average salary of graduates, something that benefits schools that send grads to the most elite markets. To become superstars, their level of talent export would need to increase, not decrease.

This is a structural conflict. In a superstar world, universities are facing pressure from the market to try to move upwards toward MIT and Harvard. But states give them money in part to carry out a local mission of educating the state’s children and producing talent for the local market, activities that tend not to promote elite status.

To the extent that state universities want to cater to foreign students, rich East Coast kids, and elite market employers, state governments are right to question whether their funding levels make sense. The Michigan model (mostly private and less public money at an institution that is trying to be elite) or outright conversion into a private school (trading public funds for freedom to pursue elite status) might actually be a painful but realistic solution for some schools. (Note that Ivy League Cornell was a rare private land grand college).

3. Conflation of “universities” with STEM research. The article opens with a description of biomedical research in progress at Ohio State University. But the reality is that the STEM research that leads to spinoff businesses is a small part of what universities do. A lot of schools have seen rapidly rising tuition as they’ve splurged on luxury facilities to attract students. Universities have also seen vast expansions of their administrative staff, who are often very well paid. Many university departments don’t do research at all in terms that the average person would understand it. Significant tracts of the humanities, social sciences, and cultural studies fields are basically political activism in academic garb.

These would all be areas that could be cut without affecting a university’s ability to spin off the next high tech startup or cure a disease. They might all be good things to do, but they aren’t entitled to funding on the basis of a STEM research halo.

In short, the university needs to be seen in part as a disaggregated set of entities and activities, of which hard STEM fields are only one. Universities themselves are making some of their own choices to fund things other than STEM research.

4. Universities need to be reinvented for the 21st century. Marcus’ article doesn’t mention any reform of universities, merely talks about the threat represented by decreased funding. But in light of all of the above, plus many more things such as the potential for technology to revolutionize teaching, one would think there’s be more focus on how these institutions should be reinventing themselves.

He could have, for example, interviewed Purdue University president Mitch Daniels, who somehow managed to get a handle on costs and has frozen tuition since his arrival. He’s also making forays into online learning and even setting up a high school in Indianapolis to try to better prepare minority students to qualify for admission. Some of his ideas might work, others might not. But reinvention needs to be on the table.

The truth is that from a teaching perspective, it’s not clear at all the value that universities provide. The biggest function they serve is credentialing. The value of your education in the marketplace is really the value of the brand of the institution you attended, especially in an era of grade inflation. As one of my buddies noted, “The hardest part about Harvard is getting in.”

As Naval Ravikant of AngelList put it in a tweetstorm:

If the primary purpose of school was education, the Internet should obsolete it. But school is mainly about credentialing. Schools survive anti-educational thinking (e.g., groupthink) due to symbiosis between institutions that issue and accept credentials. Employers looking past traditional credentials can arbitrage the gap. The more meritocracy an industry, the faster it moves past false credentialing, i.e., the MBA and tech startups. A generation of autodidacts, educated by the Internet and leveraged by technology, will eventually starve the industrial-education system.

Naval is known for provocative predictions, and admits this won’t happen soon. Who knows if it ever will. The key point is that the legacy university business model is not guaranteed to last forever, any more than anyone else’s legacy model is. The landscape in which our universities operate is changing around them. While I am on board with Marcus with spending more on STEM research, there are a lot bigger problems than government money and threats to tenure in Wisconsin bearing down on the Midwest public university.

 

from Aaron M. Renn
http://www.urbanophile.com/2017/10/17/universities-must-reinvent-themselves/

Why Small, Struggling Cities Don’t Need “Talent”

Photo Credit: CT Senate Democrats, CC BY-NC-ND 2.0

I recently recorded a podcast with my colleague Steve Eide in which he argued against the idea that attracting high talented people into government is what was needed for smaller, post-industrial cities.

I enjoy jousting with Steve on a variety of topics. He favors more aggressive state oversight of cities. As a rule I’m less sanguine about that.  Because we come at the world from different perspectives, I’m often challenged by his provocative contrarian ideas.

To wit, he took his “against talent” thesis and wrote it up for the American Conservative. Some of this is standard conservative takes on things like public sector unions, but there are a number of ideas sure to get people arguing:

Any unbiased observer of our cities can see that mediocrity is the salient characteristic of the typical local American politician. Another important problem in small and mid-sized cities is that they are poor and in need of revitalization, especially in Rust Belt areas. A natural conclusion to draw from the coincidence of inept leadership and socioeconomic decay is that better leaders are needed. But in the poorest, most troubled cities, talented leadership is not much of an asset, and it can be a liability. Talent does real harm by raising false expectations of a revival—distracting from mundane yet essential operational matters, and forestalling state intervention at critical junctures.

….

When public-spirited reformers call for better leadership for cities, they typically have in mind a collection of qualities that are more likely to be possessed by an outsider. They are not sounding the call for everyone to get behind this or that city councilmember, someone who got his start as a campaign worker to some local hack and has patiently waited his turn. Instead, they want someone with experience and/or education that most of the local crowd does not have, derived perhaps from service in the private sector or government at the federal or state level. This is likely to be someone who did not come up through the ranks and can thus apply a novel approach to longstanding challenges; who admires innovation; who can envision a solution to every problem, instead of a problem with every solution.

….

But there’s no such thing as a right to revitalization. City reformers call for inspired leadership because they see it as a condition of revitalization, but what if that’s impossible? Our conception of urban renaissance is unduly influenced by the experience of a small handful of large cities. If you look past New York, San Francisco and Boston, and survey their dozens of small and mid-sized Rust Belt peers, it is very difficult to find an example of true revitalization. In a forthcoming research report, I survey 96 major poor cities in the Rust Belt and find that every single one has seen its poverty rate increase since 1970.

….

Perhaps the biggest problem with the talented-outsider mayor is that he is apt to get ideas. He may be more educated than the local doofuses, but that does not mean he is fully enlightened. It’s a case where a little knowledge can become a dangerous thing. State and local politicians who are known as big thinkers will always be strong candidates for a “public official of the year” award from Governing magazine or singled out as one of “America’s 11 Most Interesting Mayors” by Politico. New York and DC-based reporters from national publications are naturally attracted to mayors who can speak the language of urbanism.

But too much of urbanists’ advice for small and mid-sized cities consists of trying to impose lessons from successful top tier cities such as New York, Washington, San Francisco and Boston. Poor small and mid-sized cities should spend more time comparing themselves to other poor, small, and mid-sized cities. If you’ve lost half your population since 1950, you probably don’t have an affordable housing crisis; you’re not grappling with the challenges of density but rather a lack of density. If you have no wealth to redistribute in the first place, then Bill de Blasio can teach you little about the joys of redistribution.

….

“Flexibility,” like “innovation,” may be a core value in Silicon Valley, but it’s frequently a bad thing in the world of municipal finance. Remember all the encomiums to “boring banking” in the wake of the 2008 financial crisis? Often enough, the same principle applies for how to run a city.

Click through to read the whole thing.

from Aaron M. Renn
http://www.urbanophile.com/2017/10/16/why-small-struggling-cities-dont-need-talent/

When Brain Drain Is a Good Thing

My latest piece is online over at City Lab and is a case study in brain circulation. You may recall my brief post on how Cardinal Spirits in Bloomington, Indiana has the best Made in Indiana logo ever. Today I tell their story through the lens one one of their founders, Adam Quirk, an Indiana native who move to New York City:

In some of these cases, brain drain appears to be real and a loss. But in other cases, brain drain is more like brain circulation: Well-educated young professionals leave town, gain experience, and then return to the sending community.

Quirk is a great example of how a short-term loss can turn into a long-term gain. He left Indiana for the big city. There, he obtained great professional experience and built his networks. He was also changed by the experience—not just be being exposed to and falling in love with the micro-distillery concept, but by also having New York City imprinted into his mental world.

When he returned to Indiana, he brought all that back with him. His improved digital media skills contribute to Bloomington’s local economy, and his microdistillery is enhancing the quality of place on offer in the city and its surrounding areas. But perhaps more importantly, Quirk’s New York City orientation helped him score a press coup for his company and his hometown. Whether strategically or by accident, he sought out a partnership for his spice blend in America’s top global city.

Click through to read the whole thing. Adam has a great story. And his gin is good too.

from Aaron M. Renn
http://www.urbanophile.com/2017/10/13/when-brain-drain-is-a-good-thing/

The Small City Struggle

Eduardo Porter at the New York Times picks up on a theme I’ve hit repeatedly in this blog over the years, namely the challenges that smaller cities/regions face in trying to adapt to the post-industrial economy.

You don’t want to be hit by a recession in a city like Steubenville, Ohio.

Eight years into the economic recovery, there are thousands fewer jobs in the metropolitan area that joins Steubenville with Weirton, W.Va., than there were at the onset of the Great Recession. Hourly wages are lower than they were a decade ago. The labor force has shrunk by 14 percent.

The dismal performance is not surprising. Built on coal and steel, Steubenville and Weirton were ill suited to survive the transformations brought about by globalization and the information economy. They have been losing population since the 1980s.

But what made them such bad places to ride out a recession was not just their industrial mix. With only about 120,000 people, they were just too small to adapt to the shock. And they may be too small to survive.

Steubenville and Weirton are on the losing side of yet another cleavage dividing the haves from the have-nots across the United States: geographic inequality.

Some of the advantages of big-city living are not hard to find. For starters, big cities have a greater variety of employers and thus more job opportunities in a richer mix of industries than do small cities, whose fortunes are often tied to those of just a small number of employers.

Bigger cities are more productive. They are more innovative. They draw better-educated workers by offering them higher wages. They develop a richer variety of industries. It should not be surprising that they are growing faster.

You can see articles on a similar theme in the Wall Street Journal and the Economist.

Back in 2009 I laid out a heuristic I called the “Urbanophile Conjecture”: if you want to be a successful city in the Midwest, it helps to be a state capital with at least 500,000 people. This defined success based on above national average population growth. There were some exceptions but this was a useful rule of thumb.

In 2008 I talked about “minimum sufficient scale.” This is the idea that there are certain things, such as a major airport, for which a region has to have a minimum size scale to support on a viable basis. To the extent that these things are necessity to compete in the modern economy, if you’re too small to support them you’re in trouble, unless you’re a sufficiently short distance from a larger place that can.

In 2010 I laid out the concept of “shadow cities” – those that were always or rapidly reduced to branch plant status that lacked a strong indigenous based of export (from the local market) industries.

When you add all this together, in the Midwest and Northeastern Rust Belt it seems to be mostly metro areas of 1-1.5 million or more that are doing well. Smaller metros can thrive, but it generally takes a major special asset like a state capital, major university, or Fortune 500 HQ.

Those bigger cities have thicker labor markets, airports, amenities like pro-sports, lots of restaurants, a critical mass of talent, often major export businesses, and major institutional that give them a leg up in rebuilding. Smaller cities are often lacking in these

Contrast Detroit with Flint.

Detroit: 4+ million person region, one of nation’s foremost collections of engineering talent, many HQs and dominant North American location of the auto industry, major international airport, primary trade gateway to Canada, a full panoply of major metro assets (sports, arts, etc).

Flint: A sub-one million person region. Originally HQ of GM but reduced to branch plant status quickly. Much lower talent concentrations. Minor airport only. Far fewer major institutional or corporate assets. (There are some, but not enough).

This difference helps explain the divergent strategic conditions facing those environments. Flint is in a much higher degree of difficulty situation.

Thinking of the future of these smaller places is important to the future urban agenda. We’re not talking one or two minor places, but many cities the collectively still have many people – people who are our fellow citizens – living in them.

from Aaron M. Renn
http://www.urbanophile.com/2017/10/12/the-small-city-struggle/