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Investors and entrepreneurs are usually exuberant about the 1.65 billion strong global student market until they hear the bad news: the majority can’t afford anything beyond basic education. This, of course, doesn’t include the 122 million illiterate youth in the world today or the legions of non-formal and professional learners who may want to improve their skills but have little financial support.  But what if they did?  Enter Fintech. mobile-money-concept-hori

In the US, a deep pool of $1.3 trillion in student debt, persistent resource inequality in schools and outright administrative waste have served as a catalyst for Fintech companies to provide solutions from alternative loan payback schemes to teacher-centric apps that help school budgeting decisions.  This is to be commended. Yet as difficult as domestic problems may appear in the US, they are only a sideshow compared to the immense problems bubbling up in emerging markets, from constrained government and personal financial resources to a future with near Malthusian population growth, poor education performance but high expectations for a better life.

Tackling affordability challenges, at home and abroad, often happens in two ways.  Companies can bend the cost curve by creating markets that didn’t exist previously or which circumvent and disrupt traditional institutions that stifle change. Or they can try to create easier and more effective ways for consumers to actually pay for these products and services.  Within the education sector, I have chronicled numerous examples of edtech ventures that have successfully lowered the cost of access to hundreds of millions of students, from “schools in the box” across Africa to adaptive and  e-learning concepts in Asia to alternative financial solutions for low income populations. Yet the vast majority of emerging market students remain severely underserved despite a massive opening for financial innovation.

So what might prompt the globalization of Fintech?

Geo-locating problems.

I would start with identifying areas of education finance that seem ripe for positive disruption around the world, such as creating alternative student finance and loan access; improving the procurement, management and use of resources in schools; making international study abroad more affordable and less cash-based; and increasing financial literacy.

Next, I would view these areas of potential business through the lens of developing economies. Figure 1 provides some basic perspectives:

  • In the US, college is comparatively expensive (measured in both absolute tuition levels and median income as % annual college cost, or 52% in the US) but local students generally have access to federal and other forms of financial aid.  In many emerging markets this is flipped: students across Asia, Latin America and Africa enjoy government subsidized tuition at leading state universities but the seats are limited.  For those less gifted students, alternative options do exit through private institutions but often at a significantly cost premium and with little or no government financial support.
  • Larger emerging markets such as India, Pakistan and Nigeria have a basic lack of school and teacher capacity at all levels, leaving millions of children on the proverbial street. Moreover, given the widespread household demand for basic education outside public systems, the need for fintech solutions at the K12 level–primarily funding both households and schools–is immense.
  • Financial literacy, from managing loans to understanding how to save and invest, is a universal challenge.  But it runs deeper in countries without sophisticated banking systems. An increasingly tech-savvy generation in search of alternative apps and tools, such as in Africa with mobile banking, provides a the perfect market opportunity for financial training.
  • Administrative waste and inefficiency is practically synonymous with large, complex systems, including America. I have no idea and could not find data which measures “administrative waste” in school systems for large countries such as China, India, Nigeria and Brazil. But know first-hand that these countries are not paragons of efficiency.

 

Figure 1. Comparative Opportunities for Fintech in Education, US v Emerging Markets (EMs) 

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Developing a playbook

To develop some ideas further, globally ambitious Fintech competitors might take a look who has been doing what, and where around the world.  Here are some challenges to consider:

1. Providing more alternative finance sources in far away markets for students pursuing higher education, lifelong learning and workforce training. Many readers are already familiar with non-traditional student loan platforms such as Commonbond, Sofi, Credible and Earnest which provide a combination of student loan access, refinancing and consolidation using non-traditional sources such as outside pools of investors and venture capital.  This is now expanding to other stakeholders as well.  A recent article by the CEO of Sofi discusses 2017 student loan changes which may include income base repayment that places colleges with “skin in the game” and some responsibility for loan repayment, and the role of employers in how they manage employees with massive student deb. Internationally, a 2014 study by EY and IFC paper cited such examples Brazil and Africa (Eduloan (South Africa), IdealInvest (Brazil), Duco UC (Chile) and innovative loan repayment and financial support methods for higher education and professional training that included crowdfunding, social impact bonds and income-based repayment loan schemes.  But the amount of students serviced is a fraction of those in need, and it is largely local companies who are filling the breach.  Consider that China’s peer-to-peer lending market is far less regulated than US counterparts but has grown rapidly to over US$71 billion in online loans. Led by companies such as China Rapid Finance, Jimubox and Rong360, alternative lending has long been useful to individuals and families who require debt to fund tutoring and study abroad. New entrants such as e-commerce giant Alibaba, via MyBank, can now obtain loans of up to $805,000 based on a risk-adjusted online shopping history.  Chinese fintech firms are only one example, and far more sophisticated than many EM competitors.

2. Creating vehicles to fund international study abroad with the ability to track students into the workforce after graduation. The majority of the estimated 4.5 million students studying outside their home country do not rely on scholarships but pay in cash to universities and training institutes. As such, study abroad often resembles a luxury product which limits potential demand. Yet given the caliber and earning capacity of many international students, there should be more creative solutions available and some firms are responding.  Early entrants such as Flywire have flattened international payments networks for cross-border education tuition by providing peer-to-peer participation.  With a presence in 150 countries, Flywire is now collaborating with banks to achieve further scale and sophistication. Prodigy Finance in the UK focuses on funding foreign students who have been accepted at university but unable to get loans. Prodigy has been particularly successful–lending out $200m to 4,500 students since its launch in 2008–by using a model is that estimates potential earnings of graduates and use them for a proxy credit score that carries astonishing repayment rates of 99%.  It should come as no surprise that several large banks (Credit Suisse, Deutsche Bank) have signed up on this platform, which will significantly expand the amount of available capital to students worldwide.

3. Deploying student and school-centric financial tools that are localized to specific countries and regions. Student and school-centric financial tools are at the core of the US FinEdTech sector and have clear applications abroad. Firms such as Allovue provide solutions around school district budgeting that brings collaboration between teachers, principals and other administrators. ClassWallet is streamlining and localizing the management and procurement process for schools through an education funds tracking system. In the US context, Allovue’s  2017 predictions for EdFinTech suggest that the need to conform with new ESSA (Every Student Succeeds Act) regulations will necessitate greater autonomy and transparency at the local level, presumably where more efficient allocation of resources can occur.   In essence, the aim is to benignly decapitate the centralized bureaucracy and place financial choice and ultimate responsibility at the local classroom level, funded by teachers, for the direct needs of students.  This is something that all countries need, but have yet to successfully address.

4. Harnessing Edtech solutions to enhance general financial literacy and entrepreneurial finance in youth populations.  There are many cases to consider here and the international market is wide open.  For example, improving student loan management and budgeting is served by companies such as Student Loan Hero. In  Singapore, one of Asia’s leading financial centers, companies such as Knowlscape are providing immersive and gamified learning focused on financial concepts as well as digital curriculum for financial sector use in Asia and the Middle East.  Playmoolah is providing gamified financial education for kids. In Africa, a severe lack of financial literacy is being met locally through competitors such as Khonology, fintech incubators such as Village Capital, and start-ups MyBucks and Branch. Finally, India fintech companies such as BankBazaar and Capital Float are setting up education platforms to drive long-term customer acquisition strategy.  This list goes on.

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In sum, both Western and emerging market fintech firms are racing to grab market share within a global education sector that is rapidly accelerating in the face of weak affordability and financial inefficiencies.  And as we have seen in many new industries, from social media to e-commerce platforms, building early and deep networks of users in these countries can be critical to future success.  With education demand rocketing in the developing world, today’s US and European fintech firms have a unique opportunity to extend their competitive presence to education consumers globally.  But the clock is ticking.

trump

In 2016, the United States hosted over 1 million foreign students at an estimated $32.8 billion economic impact and over 400,000 jobs, a level that could easily exceed $45 billion by 2025. Under the outgoing Obama Administration, international student enrollments grew five-fold from 200,460 international students in 2009 and left the US as the top destination for international study.  Moreover, education was a key policy platform.  Obama’s 100,000 Strong in the Americas initiative encouraged US
students to study in Latin America and his 1 Million Strong initiative was designed to expand Mandarin Chinese language study as much as five-fold by 2020.  Even Michelle Obama’s Letting Girls Learn initiative became a touchstone for finding long-term solutions for gender participation in economic growth, particularly in the more unstable regions of South Asia, the Middle East and in African countries such as Nigeria.

President Trump’s America First policy begins with a more divisive rhetorical message to the rest of the world. But it is the potential policy changes–in trade, economics, immigration, security, and targeting countries such as China–that may directly impact international study in the US and the projection of American higher education leadership abroad.  This much is known: shortly after President Trump’s inauguration, the White House posted some of its key policy priorities including an America First Foreign Policy, broad commitments to pursuing or renegotiating “trade deals that work for all Americans” and issues related to curbing illegal immigration. How might Trump’s policies impact international education and US higher education?

I’m watching four specific areas that can have a material impact on international education activities.

Immigration and Visa Issues

Former New York Mayor Michael Bloomberg once suggested stapling a green card to every foreign student’s college diploma.  Good luck with that under a Trump Administration.  In fact, if more xenophobic tendencies become policy it will more difficult for foreign students study in the US, find work-study internships or so-called Optional Practical Training (OPT) in the STEM fields, and to find employment after graduation.  In practical terms, approval of F1 and M1 visas for students in full time and vocational study are under the management of the Department of Homeland Security. There are a number of circumstances under which the department could take a harder line on certain regions such as South Asia, Middle Eastern countries such as Saudi Arabia (the leading source country for students studying English in the US) and students from Mexico.

Equally important, there is the impact on student decision-making psychology and whether they feel welcome in the country. Past history has shown that even the perception of anti-foreign attitudes–and possible incidents related to such a tense environment–can impact enrollments, sometimes seriously.  We saw this happen during the anti-Indian measures and violence in Australia in 2009 and, more recently, a clear trend of weakening UK enrollments following imposed limits on foreign visas and work-study programs. This last effect has been to stifle growth in the one of the world’s most popular study destinations, a trend that may be reinforced in the wake of Brexit preparations.

China.

The new administration’s trade czar, Peter Navarro, has well-known hardline views on China. His documentary, Death by China (which has a lead endorsement by then-businessman Donald J. Trump) focuses squarely on China as the villain of America’s manufacturing decline. His 2006 book, The Coming China Wars, was among the first to take aim at China’s rapid industrialization and the potential negative impact it has on the US and the world.  At the very minimum, we should expect a more confrontational Sino-US trade relationship.

How might trade friction and retaliatory policies might impact education dealing with China?  First, if even a portion of Chinese students vote with their feet and go elsewhere there will be a magnified impact. China accounted for over 378,000 students in the US in 2016, equivalent to one-third of all international student enrollments.  While it is doubtful that a Trump Administration will tamper with Chinese student visas, the more likely scenario could be a psychological change in the event Chinese students begin to feel less comfortable.

A second impact could potentially be on US educational institutions operating in or hoping to enter China.  US universities operate hundreds of academic programs, research centers and a number of high profile branch campuses in China, from NYU Shanghai to Duke, with many more in line for approval by China’s Ministry of Education.  China could retaliate by not approving US academic programs pending at the MOE, increasing the regulatory scrutiny or even shuttering existing programs. In fact, any increased bilateral tension would come in the context of Chinese President Xi Jinping’s recent moves to limit Western education and thought and give a pretext to such moves, thus increasingly the probability.

Expansionary Fiscal Policy and the US Dollar viz. EM Currencies

Trump is targeting a $1 trillion infrastructure spending plan with an ambitious goal of creating 25 million new jobs.  To what extent this stimulus will be cut down by deficit hawks in Congress is unclear, but at least directionally it points to a relatively higher inflationary environment, rising interest rates and a stronger dollar.  As I have written previously, the strength of the US dollar adversely impacts international student enrollments from emerging markets, the leading source for internationally mobile students. In the latest round beginning roughly in 2014, countries such as Mexico, Malaysia, Nigeria, and South Africa have been hit hardest while India and China only moderately. A further strengthening of the dollar by 15-20%  against selected currencies could have a wider and deeper impact on students and their family budgets precisely at a time when university admissions officers in the US are attempting to diversify enrollments away from China and into new markets.

Renegotiating Trade  

TPP is dead. America will now shift toward bilateral trade negotiations.  In my view, China’s trade relationship could hark back to the volatile and persistent Most Favored Nation (MFN) debates in the 1990s which pitted China against the US worker. If so, there the possibility of serious trade tensions that promise to derail parts of the bilateral relationship and invite tit-for-tat economic retaliation.  China’s neighbors, Korea and Japan, may also be in the crosshairs as both are serious global competitors in manufacturing and high-tech industries–precisely where Trump has pledged to rebuild America.  In Latin America, a pending renegotiation NAFTA could re-scramble trade relations that have been largely sedentary for decades with increased pressure on Mexico.

Why does this matter?  Apart from the fact the international education itself is a tradable service (referred to in the US as a “deemed export”), a country’s trade with the rest of the world is often correlated with international study activities.  Limiting trade flows impacts economic, human and technology exchange which logically feeds into international educational exchanges.  In more practical terms, trade deals relating to IP protection and knowledge industries–such as the TPP–were designed to form greater protections that include the ability for American universities to conduct research and development on a global basis. In this sense any future trade tensions may also impact America’s education presence abroad.

Final Reckoning?

It is too early to handicap how deep and fast such changes can impact America’s international education activities, and there are counter arguments to consider.  I remain cautiously optimistic that Trump will see the light on international education. This is because Trump’s changes to trade agreements and the international order may be more symbolic than substantive, and the time it takes to effect such change can be measured in years or decades rather than months.  Moreover, a stronger and more entrepreneurial US economy sits well with potential students around the world and could also reinforce the overall attraction of US study, despite the proclaimed focus on domestic revival.  Finally, the alternatives for international students looking for liberal, English speaking study destinations are limited:  consider that the UK post-Brexit is moving toward their own stricter immigration laws while Australia, a prime potential beneficiary from Asian students, has only one-fifth the level of foreign students compared to the US and a lot less infrastructure to sustain student growth. Canada, despite its attractions, represents an even smaller higher education market.

In the end, President Trump could also recognize that what makes America great is its universities and schools, at home and abroad, which play a critical role in creating knowledge, technology, scientific discovery, and of course, direct and indirectly–stable jobs and badly needed exports.

Russia is not an education superpower.  What if it were? This may not be an idle question as the country seeks to bolster its international position–no less under a Trump Administration–and to counteract the perception of either being a state-sponsored hacker or geopolitical bully.

Domestically, Russia’s persistent de-population trend over the past quarter century coincides with a global shift to renewable energy and a structural shift in commodities demand which injects long-term economic pressure on its growth trajectory, regional relationships and social stability.  But there is an opening for the Kremlin to revive foreign investment activities, scientific innovation and elevate Russia’s “soft power” status:  move toward a more open, privately-funded and globally engaged education sector.

Post-Soviet Education Measures

It has been 25 years since the fall of the U.S.S.R.  Based on a 1989 census the former Soviet Union had a literacy rate of nearly 100 per cent in urban areas with 60% of children over 15 years competing secondary school and 8 per cent completing higher education with a degree.  According to the OECD, nearly 52% of high school graduates were enrolled in tertiary education by 1992.  This placed Russia well above OECD averages at the time.  Since then, the introduction of private education models for professional training and K12 schools, and a partial opening to the West following glasnost, has improved Russia’s educational performance further.

Figure 1 summarizes this comparison over the past two decades.

Notably, certain measures–such as adult literacy, primary class sizes, secondary enrollment rates–have not changed much over the past 25 years given their already advanced levels. But other trends–affordability, completion of higher education (rocketing from 8% to 54% among 25-64 year age group between 1992 and 2015) and the number of foreign students at Russian universities (213,347 enrolled, placing Russia as the 6th largest higher education system for international students)–all increased markedly.

Figure 1: Selected Education Measures in Soviet-Era and Modern Russia: 1992 v. 2015

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As a result, Russia is today among the most highly educated countries in the OECD.  Despite a recession beginning in 2015 and Western sanctions following its Crimea adventure, Russia’s economic competitiveness as measured by  the World Economic Forum Global Competitiveness Index improved to 45th position this year and the IMF is forecasting a return to growth in 2017 on the back of increased domestic demand.  Yet ask anyone if they can name any Russian companies with global influence outside of Gazprom and there is likely to be a blank stare.

This translates to education investment and activities as well.  Data compiled in the Global Edunomic Index ranks Russia as 16th out of 49 countries across emerging and frontier economies, which seems far below its potential. This is because the GEI’s latest reading has Russia scoring comparatively high on most education measures but falling behind from a foreign opportunity, policy and risk perspective.

Figure 2 sets out these comparative rankings against affordability (eg. GDP on a purchasing power parity basis) where Russia is highlighted (in yellow) behind Poland, Estonia and the Czech Republic, and has roughly the same ranking as much poorer (but rapidly educated) Vietnam.

Figure 2: GDP Per Capita PPP and Global Edunomic Index (GEI) Rankings

screenshot-2016-12-30-10-18-16                                      Source: 3/1 Global Research

 

Privatization and Investment

Lest there be any doubt, Vladimir Putin does recognize the need for education innovation, private sector solutions and the critical role of education to Russia’s future.  In 2012, Russia’s May decrees focused on raising the standards of living across Russia’s interior regions and highlighted the role educational disparities and the need to improve both the global rankings of universities and students in the provinces. But with a reduction in the current education budget for 2016-17 by 11.5%, falling university enrollments and the impact from Western sanctions, there are already calls to suspend the “privatization” of higher education.

Foreign collaboration and investment can fill the gap.  But how?

I recently completed some work on Russia that looked at potential growth areas using a small sampling (see Figure 3) of where Russia’s own investors and education entrepreneurs are moving.

They include:

In short, private education solutions directed at the professional employment market, more efficient tools to manage schools and students, online test preparation (with angles for Russians studying abroad), and edtech startup support is taking shape in Russia.  Moreover, these education ventures lie primarily outside the state sector and are focused on increasing efficiencies, student access and international collaboration.  Several emerging technology platforms such as Dnevnik.ru are exportable.

Figure 3. Selected Education and Edtech Investments in the Russian Federation

russia-comps

In higher education, Russia is already the 6th largest market for international students with roughly the size of Australia’s international student enrollments.  But more aggressive moves to globalize its universities through joint or branch campuses at home and deeper online collaboration with online providers could bring benefits. Coursera, which currently runs five university partnerships in the country, offers a early test case.

Outside of its borders, Russia already has fair amount of engagement through international branch campuses in Central Asia –according to C-BERT, Russia has 18 international branch campuses of which nine are in Central Asia and one in China but no campuses in Western Europe, the US, Africa or South America–and manages numerous dual degree programs in China based on a history of collaboration beginning with the Chinese Communist Party under Mao Zedong.  But its presence in the US and Europe continues to be limited, and its home universities attract a pittance of Western students.  While China, India and Saudi Arabia accounted for over half of international students studying in the US in 2015, Russia didn’t make the top 25 source countries.

Certain collaborations have already hit self-inflicted problems. Skulkova Moscow School of Management, a private and globally-oriented business school, has created a useful template for international cooperation yet its incubation project with MIT, after a terrific start, was beset by corruption and other issues.  There has been continued collaboration between US and Russian universities despite the past few years of bilateral tensions but also moves to crackdown on “foreign funding” and influence. Perhaps the most benign segment is the K12 level, where international private schools are thriving in large cities such as Moscow and St Petersburg.  As of 2016, there were 28 International Baccalaureate “World Schools” but the increasing demand for students to be “internationally tracked” to pursue higher education studies abroad (including to the US) will most likely reach far beyond this number no matter what the government does (to find a recent comparison, look to China’s recent international K12 policies).

Caveats

There are, of course, important reasons that most foreign investors don’t know or care about Russian opportunities in the education and related technology industries: they fear the IP theft, political risk, anti-foreign bias and corruption that might come with it.  One could do worse than to read Hermitage CEO Bill Browder’s hair-raising memoir Red Notice to see why such fears can be more than justified, even by the most savvy foreign investors in Russia.  As someone who has worked across the most challenging markets for my entire career, I’m not naive to that.  Yet changes are afoot.

I would submit that ventures lying far from the security-state apparatus or strategic industries (energy, telecommunications, defense, banks) could potentially provide an opening for foreign investors if the current pendulum swings and Russia seeks to engage more deeply–economically, financially and culturally–with the rest of the world. A more confident but economically challenged Russia, with renewed US engagement from the private sector, could open the door.

International education and and related technology would be the most obvious place to start.

What is the GEI?

The Global Edunomic Index (GEI) was recently published over at  3/1 Global Research.  Within it we analyzed education, economic and investment risk/environment data across 49 Emerging and Frontier Markets and then stack-ranked them using our internal scoring methodology.  Why? To help companies, universities and investors make sense of the world’s rapid development of human capital and how countries rank based on a selection of critical performance measures.

Here is what we asked:

  • How do educational achievement and skills correlate with an individual country’s economic growth trajectory, the quality and sustainability of its companies, its competitive positioning, risk profile and the potential returns to investors?
  • Which countries offer the most and least attractive environment for investment into human capital, education and related technology industries based on their size and development path, and how is this changing over time?
  • Where should stakeholders and investors look for the next set of emerging opportunities based on this data?

The GEI is premised on the idea–repeatedly explored by this blog–that private sector investment and innovation have a central role to play in the development of human capital in Emerging and Frontier Markets, acting both as a partner with the public sector and as an independent source of disruption and development.

2016 GEI Rankings and Results

With its combination large populations, economic growth and high educational outcomes Asia dominates the top ranks with China, Korea, India and Vietnam scoring in the top ten slots across the 49 countries including in the GEI. The balance is represented by leaders in Emerging Europe—Czech Republic and Poland—and Qatar and UAE, each with strong fundamentals and higher developed investment environments for transnational education (See figures below).

 

2016 Global Edunomic Index (GEI) Scoring 

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GDP v GEI Rankings

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Regional Notes

If we use a more narrow aggregation, a number of initial insights are revealed both across and within specific regions:

Americas

The Americas were led by Mexico (14) and Argentina (15), and further down the list, Brazil (24) and Chile (25). The contrast between Mexico and Brazil is instructive: each with large populations but a different set of education profiles and increasingly divergent economic paths in light of Brazil’s deepening recession. Separately, Argentina emerges as a relatively strong investment case within the Americas after a long period in the wilderness. Peru (33) and Colombia (34) rank in the middle of the GEI.

Africa

With the exception of South Africa (35), African countries scored at the lowest levels across economic inclusion and education attainment measures and thus were largely at the bottom of the rankings. This includes leading regional countries such as Nigeria (46), Ghana (47) and Kenya (48), a fact that becomes urgent considering that Nigeria and Kenya have among the highest percentage of youths under-14 years of age in their populations. Experienced observers of Africa should not be surprised by these results: a combination of poor performance in productivity, insufficient education access, and operating environments plagued by governance issues has marred sustainable, value-added growth opportunities across the continent, despite some success with private education and training investment.

Northern Africa, represented by Egypt (38), scored higher than most of African counterparts but still remained in the bottom quartile of the rankings. However both countries have more developed educational systems and the potential for gains in the years ahead.

Emerging Europe

In many respects Emerging Europe is a different comparative class to other countries in the GEI despite their inclusion as Emerging Market representatives. Several countries have small populations, strong educational achievement, an advanced EU-formulated operating environment, and highly productive economies. Yet rankings differ widely. Notably: Turkey (12) ranks high next to Czech Republic and Estonia and followed by Russia (16), while Southern European countries such as Greece (19), Romania (27) and Bulgaria (28) less so.

Asia

Asia’s lead rankings from China (1), Korea (2), Malaysia (3), India (5) and Vietnam (10)—and respectable showing from Thailand (11) and Indonesia (13)—contrast sharply with other regional participants further down the pecking order such as Philippines (29), Sri Lanka (37), Pakistan (42) and Bangladesh (43). These three laggards have one thing in common: youthful populations and increasing pressure on employment, but also an opportunity to move ahead if productivity and education intensity rises.

Middle East

Apart from the unique profile of Gulf countries UAE (4) and Qatar (9) mentioned previously, and to a lesser extent Bahrain (26), Middle East countries such as Jordan (36) and Oman (39) faced more acute economic challenges and generally lagged in terms of educational outcomes and productivity.

 

Read the full report and its methodology here.

59817891For many years US education officials have lauded the remarkable success of Finland in math and science, where its 15 year-old students have, along with a handful of Asian countries, dominated the global rankings as measured by comparative international PISA scores. US Education Secretary Arne Duncan lamented that US students are one to two years behind Finland and Korea in math. McKinsey saw the middling performance of American students—in 2012 it ranked 35 out of 64 countries in math and 27 in science—as the “economic equivalent of a national recession.”

Although Finland’s case may be exceptional, its highly selective and well-trained teachers were central to its educational gains, where primary teachers must hold a 5-year Masters Degree and only 7% of applicants were accepted into teacher programs in 2015 (by comparison, Teachers College at Columbia, among the nation’s finest graduate programs, had a 57% acceptance rate). What is less understood is that Finland has also been creative, experimental and strategic with respect to what and how its students learn. As a tiny country facing crippling economic crises—the collapse of Nokia (which was worth 20% of GDP in 2011), demographic challenges within an aging population, and recent economic growth dipping to 1.5% which places it just behind Greece as among the worst economic performers in the EU —Finland doesn’t have time to dawdle on education policy.  Its latest pivot?  Embedding the critical foreign languages of Mandarin, Arabic and Japanese into its high school curriculum which, it should be emphasized, will be in addition to the mandatory English its students are expected to master by their teenage years.

On the surface, this new initiative from a small polyglot corner of Europe seems to be far from the American experience where less than 1 per cent of the adult population is proficient in a foreign language they studied at school; only 7 per cent of college students enrolled in a language course; with 8 in 10 American’s speaking only one language; and where K12 language study is usually not required or, if it is, as an afterthought to core studies. Indeed with the global English market projected to exceed 2 billion speakers by 2020, many Americans may wonder why they should learn foreign languages at all.

Paradoxically, as the rest of the world masters the English language the competitive threat to the US will intensify. America’s lack of foreign language capabilities is already proving to be a growing concern to national security, economic competitiveness, trade and sustainable employment. The root problem is a population unprepared to engage and compete with foreign countries in any language other than English, and a failure to see the advantage that mass multilingualism will bring.

Consider:

  • Of the 3.3 million employees at the Pentagon and Department of Defense, only 7.9% have reported language skills and almost half of these are Spanish language and therefore not relevant to operational deployments in the Middle East, Asia or Africa. More worryingly, only 28% of positions that require foreign language proficiency were filled in 2015. But this is not a new problem or one confined to the military. Back in 2009 only 61 per cent of foreign language positions were filled at the US State Department, where foreign languages, one would think, are supposed to be part of everyone’s job description. Even today there are shortages of skills in strategic languages such as Chinese, Korean, Dari, Turkish and Russian.
  • In the fight against terrorism, the Intelligence Community or “IC” (including the CIA, NSA, DIA, and FBI) continues to face challenges to “identify or build and enable proficient human capability to process information into actionable intelligence.” The FBI currently relies on a language resource base of roughly 1,400 linguists, which represents an 85% gain in linguists than prior to September 11, 2001. So important are languages to counterintelligence work that the FBI adopted the so-called FLIP (Foreign Language Incentive Pay) in order to hire and retain linguists and translators in critical languages. Yet even financial incentives can’t fill the gaps. Frustrated with this pipeline, the IC launched the STARTALK program to help support immersive language learning at the K-12 grade levels as part of an early intervention solution.
  • In international trade, business services continue to be America’s leading export sector.  Future success will depend on delivering value to customers in non-English speaking emerging markets. It is simply impossible to measure the opportunity cost of a mono-linguistic US workforce from corporations to small businesses to start-ups. Yet anyone who has experienced miscommunications between headquarters and local country operations, time wasted over failed negotiations and contracts, the opening of high-risk markets, and a genuine lack of cultural sensitivity critical to international business success knows how language capabilities can tip the balance. English may be the “global business language” with many multinationals such as Airbus, Renault, Samsung, and Rakuten adopting it as a means of internal communication, but this has nothing to do with how these companies operate with target consumers in countries around the world or how they win and retain business.

To be sure, the US is not Finland and its ability to engage across multiple contexts globally will depend less on foreign language capabilities than other factors such as innovation and hard power. But Americans would be mighty arrogant to ignore the dramatic economic, political, social and security benefits that can accrue from a multi-lingual society. Does anyone believe that America would be less competitive, effective and respected in the world if each of its citizens spoke two or three languages?  If so, how can this national opportunity cost be turned to a gain?

I would argue that the US educational system must shift foreign language learning beyond its current optional or high school elective status and toward a central part of the curriculum. To do this will require ambitious goals.

First, language learning should start early where it can be supported by immersive, well-resourced and supportive learning environments. Forget about waiting until high school and university: every child should begin to learn a second language in elementary school. As an amateur linguist, I would partially credit my ability to get through the challenges in studying Mandarin, Korean and later Russian with the long weekend hours of Hebrew I started learning at age nine, which exposed me to another ancient language with a different writing system far removed from English.  But this path is hardly the norm. I would have had a much easier time learning thousands of Chinese characters if I had been exposed to the language gradually, as part of normal elementary school studies. In building a national education program where the objective is have all students—some motivated, others lazy—be functional in a foreign language, an early start is essential.

Furthermore, those who believe language learning is not a priority may want to examine the other benefits to early immersion. Longitudinal research has demonstrated for years that students enrolled in early language immersion programs perform as well if not better than non-immersion students in the areas of math and science. Bilingual students have also “outperformed monolinguals in the areas of divergent thinking, pattern recognition, and problem solving.” Other studies show that learning languages boosts brain plasticity and the capacity of learning. At minimum, learning a language can enhance rather than distract from building broader cognitive skills and the earlier this becomes part of the normal school day the higher probability of student success.

Second, we must deepen public-private cooperation to build a national capacity for language acquisition. The current K12 battleground at the national and state levels  is simply not equipped to handle alone the dramatic changes in curriculum, testing systems, and language teacher training.  One solution could be language immersion schools, both public and private (or combined), which offer effective and scalable schools.

For example, according to Center for Applied linguistics data US-based language immersion schools grew at an annual growth rate of 10% over the past decade but still represent less than 1% of the total number of K12 schools in the United States. In 2000 there were approximately 260 dual language programs in the US, a level rising to  2,000 by 2011 and an estimated 2,350 by 2015. At present over 45% of these immersion schools focus on Spanish with the balance teaching French (22%) and Mandarin Chinese (13%)—still a very narrow selection. With China looming as America’s most serious economic competitor of this century, it should come as no surprise that Chinese language immersion is driving incremental growth nationally with the number of Mandarin immersion schools rising almost ten-fold, from only 13 programs in 2003 to 147 by 2013 and over 200 by 2015.

Yet the baseline is low. Enrollment figures for each program are unavailable but we can conservatively estimate that total national enrollments in Mandarin immersion programs would range from 17,640 students (assuming 120 students per program, six classes (K-5) times 20 students per class) to 22,050 students nationwide (assuming 150 students per school). That is a drop in the ocean compared to the total K12 enrollment private school enrollment of roughly 55.6 million primary and secondary students in 2016.

Building these programs into a larger platform will require the participation of public schools, charters and private initiatives at all levels, as well as accelerated activity and collaboration from strategic and financial investors. There are a number of effective models worth emulating:

Utah’s Dual Language Immersion Initiative sets the gold standard for state-level commitment to language learning. Established in 2008, Utah provides dual language immersion across 163 schools for the 2016-17 school year, of which 47 are Chinese language programs, 20 in French, 88 in Spanish, 2 in German, and 6 in Portuguese. The model uses is a 50:50 language immersion with English with most courses beginning in the first grade. State funding was initially provided at inception with a goal of educating 30,000 students per year by 2015 and higher benchmarks ahead. Over 20 percent of elementary schools now offer immersion in Utah and the progression of students to college is showing positive results.

• STARTALK was launched in 2006 by the Office of the Director of National Intelligence (ODNI) and awarded to the National Center for Foreign Languages at the University of Maryland. The program focuses on so-called critical languages and is designed to provide summer programs and promote best practices training to students and teachers at the kindergarten through college level. As a grants-based program, its reach is limited but it acts as a resource center for interested schools and organizations. STARTALK could be template for multinational corporations entering into similar arrangements with universities or other institutions to help support the roll out of language programs to schools at younger ages—an initiative akin to Intel or GE supporting STEM education.

• Privately funded schools such as the Chinese American International School in San Francisco and Hudson Way Immersion School in the New York area, offer impressive language learning models. Yet from a national perspective the norm has been single or small multiple schools, limited in capital funding, focused on a particular geographic cache and backed by Mom & Pop entrepreneurs. There are exceptions: the global network of Alliance Francaise is dotted across the country and brands such as LePort Schools, which embeds early language learning into its Montessori programs, has expanded to multiple campuses in California, Brooklyn and the Washington DC area. Companies such as Language Stars also provide a range of supplementary learning resources at scale.

With government budgets limited, the depth of private capital participation in the language education segment can make a significant difference in scale by creating new schools expansion and funding acquisition roll-ups and collaborative networks among existing, particularly as demand continues to outstrips supply. In Asia, English language immersions school chains (the doppelganger of foreign language immersion) such as Eton Kids, RISE, Elite K12, Maple Leaf, Nord Anglia and Yew Chung International School of Singapore have demonstrated that immersion programs can be achieved at significant scale and that various stages of investor capital are available to support quality expansion of bilingual education models. US investors can take a lesson from the Asian playbook.

Third, educators need to harness technology more aggressively to further widen access, increase retention, and lower teaching costs. Tens of millions of children are learning English online through one-to-one or one-to-many lessons on their computers and mobile devices though companies such as iTutor Group, TAL Education and VIPKIDS in China, and Cheungdahm Learning and Megastudy in Korea. Many of these lessons are private but the technology platforms exist to service school systems or students with supplementary work from home on a cost-effective basis.

From a unit cost perspective, US schools and students deploying education technology to learn languages may have an added advantage: while Chinese or Indian students often must pay a higher rate for online English language teachers, American programs can hire accredited language teachers and tutors across the developing world, whether in China or Colombia or Egypt, at relatively lower cost in both absolute and US dollar terms.

Fourth, students should be motivated with tangible incentives if they make an effort to master a critical foreign language. It is not enough for educators, parents and economic stakeholders to make foreign learning a mandatory skill for living and working in this century; they need to pay for it. Incentives could include college admission preferences, financial aid and/or research support for students with proficiency in “critical” languages learned in prior study, employer-sponsored apprenticeships and internships for students with exceptional language faculties, and start-up capital for ventures that combine foreign language with market or critical research needs.

Recent efforts such as the National Security Language Initiative For Youth to encourage and pay for study abroad, and the Boren Scholarships , which are part of the National Security Education Program for promising undergraduate students, provide a useful blueprint. Yet these programs tend to be narrowly focused on national security and limited in scope to those transitioning to new careers in intelligence, diplomacy and security. Non-security areas where language learning can be used effectively for careers—for example, in global health, environmental science, energy and business—would be well suited to create incentives of their own.

None of these initiatives will be easy, even if the education agenda in the US were not so overloaded with other challenges that include basic reading and math literacy.  But as the rest of the world increases their own language capabilities, the inescapable conclusion is that America will suffer if it does nothing.

This article was first published at EdSurge on June 7,2016

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There is little doubt that China’s record $1.7 billion invested in 44 edtech companies last year is helping to provide one of the world’s most dynamic education market with increased access quality learning and spurring a movement toward social impact investing. But in the competitive scramble for gaining market share at high cost and rapid speed—not to mention the rush for early investors to cash out—there are seeds of potential failure. In fact, many Chinese online education companies are already folding with only an estimated five percent of such firms earning a profit in 2015, despite an overall online market that exceeded $20 billion in sales. (All monetary figures in this piece are in US dollars.)

The latest test of public scrutiny is 51Talk, an online English language platform that uses teachers in the Philippines to conduct synchronous one-on-one classes with Chinese students through an Uber-inspired “shared economy” model. 51Talk recently filed for a small but high profile $45 million initial public offering in the U.S. (under its parent company China Online Education Group). But it is already facing “six suspicions” in a Chinese-language article at Whale Media. What’s so suspect? Its claim to be the “largest online education company in China” by using an unsourced research report as well as its own hand-picked measures for what is considered “largest”; its creative use of “gross billings” that reflect up-front cash paid by students without revealing average student retention levels in its courses; its accumulated losses ($50.5 million in 2015, $15.4 million in Q1 2016) based on heavy student acquisition costs as well as deferment of employee costs; and issues surrounding tax compliance, social welfare obligations and other financial issues.

Time, of course, will unravel this tangle of issues. Yet it’s worth noting that Chinese education companies have their own unique historical context. Here are a few points to remember.

China’s Early Market Entrants

First, China’s education market demographics, dating back to the turn of this century, will never be repeated, as primary enrollments are now declining. But between 2000 and 2012, the country saw a massive expansion in student enrollment; the number of K-12 students jumped from 233 million to 251 million, and higher-ed students increased from five million to more than 24 million.

This sudden growth created unprecedented demand for tutoring services, international student pathways, higher education and English language study. This meant that China’s early entrants benefited from substantial unmet demand, peak K-12 populations, a shortage of university seats, and mass urban affordability for items such as educational games, private schools, study-abroad programs, and the services that support them.

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Second, despite this growth, China’s consumer education market remains remarkably difficult to quantify. Consider that the recognized education giant of China, New Oriental, claims a large share of TOEFL and related overseas test preparation, but only one to two percent market share in China’s aggregate after-school tutoring market. Now try to figure out the other 98 percent of addressable consumers supplied by over 75,000 firms in the English language segment alone, not to mention other after-school tutoring competitors.

The result is that China’s ill-defined, but super-sized market plays havoc on investor expectations. Several high-flying Chinese companies listed in the US have been severely cut down to size. Take, for example, Ambow Education which was whacked with questions over financial and governance issues; ChinaCast, the first satellite-based online education company, which was crippled by executive corruption allegations; ChinaEdu, an online higher education service provider, which pulled its moribund public listing in the US via merger after years of sluggish growth on top of its anemic size and a tightly regulated customer base; and one-time investor darling Beijing Jadebird, a joint venture between India’s Aptech and Peking University, which after many years has faded quietly into the woodwork.

This leads to the third point: companies that consolidated their market share and shrewdly utilized financial resources were able to emerge dominant in China by also extending their brands to new education segments. New Oriental’s launch of its popular online platform, Koolearn, extended its learning center network into online tutoring. TAL’s move into early-stage edtech investing seeks to leverage synergies with U.S. higher education companies such as Minerva and Knewton. NetDragonWebsoft’s pivot from multi-level gaming to learning games culminated in its offshore acquisition of diversified global K-12 education provider, Promethean. As a result, early investors in these companies enjoyed smart returns since their IPOs, as Figure 1 indicates. But they are outliers.

In Search of China’s Next Unicorn

Fourth, unlike the past decade, today’s new crop of existing and aspiring Chinese Unicorns (see Figure 2) emerge from a startup scene that is soaked with education-focused venture capital. There is good reason: China’s thriving consumer-facing learning market is now richer as well as more mobile, tech-savvy, and globally obsessed than ever before, ushering in new opportunities in areas such as English language tutoring, international credentialing, virtual reality, and learning-based games. This has led nearly all of China’s leading internet companies (including Alibaba and Tencent) to invest in direct-to-consumer edtech startups and subsidiaries (along with leaders from India, South Africa and Europe), as covered here on Educelerate.

 

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I have previously argued that Asia is emerging as the world’s edtech laboratory with China at its center. And that companies that can harness the right technology, deliver consistent quality to China’s consumer-facing education sector, and maintain sustainable levels of returns to both investors and students, will be the world’s next education leaders.

But with high expectations comes the fall. Relatively few Chinese education companies have proven that they can handle the added investor and regulatory scrutiny that comes with being a public company, particularly in the US. This time around, at least we have history as a guide.

To the naked eye, India looks like an oasis in the middle of a wrenching emerging market economic downturn. In 2015 Indian GDP grew by 7.2% with the IMF projecting 7.6% growth over the 2016-17 period. FDI reached a record US$63 billion in 2015, exceeding China for the first time. And despite more recent concerns over a heated investment cycle and credit issues among India companies, the subcontinent remains a stable and low beta market when compared to its commodity and oil-based exporting peers. But look again, further over the horizon, and the outlook is far less assuring.

Between now and 2050 India will need to employ 300 million additional workers to its existing workforce, and they won’t be tilling the fields. Where to employ them, how to train them, who will pay, howIndia to create a productive use of an impending youth bulge are important questions that will consume Indian policymakers and investors in the years to come. India today has the largest K12 system in the world, with more than 260 million students, a level roughly 30% larger than China and 10 times that of the US. Yet many children are left behind. In fact, looking at India’s respectable college enrollment rates obscures a more troubling picture in the student pipeline: lagging enrollment and completion rates at the secondary/high schools level; an acute lack of teachers to provide quality classroom education; impending shortages of University seats; and a lack of budgetary flexibility to make bold education spending choices in the midst of unacceptably high poverty levels, creaky infrastructure and rural healthcare challenges.

How India responds to these educational challenges will not only have a critical impact on sustaining economic growth but will also define the scale of foreign engagement and investment in areas such as technology and services industries. The Modi government is prepared to take bold steps in terms of universal access to education and research capacity building as part of its “Make in India” economic platform. But government alone will not be the answer given the scale of the challenge, and time is not on their side.

Consider the following:

I. India does well at the high end of achievement but fails further down

Let’s begin with the positive. Figures 1 and 2 set the stage by comparing a range of emerging markets with large populations. Between 2000 and 2013, our cluster of emerging economies experienced dramatic gains in net adjusted income per capita, which correlated strongly with enrolling students into colleges and universities. India was no exception; in fact, its enrollment levels were comparatively high given that its growth in net adjusted income per capita lagged significantly behind China. By 2015, India’s number of enrolled tertiary students approached 29 million compared to 35 million for China. Coupled with a rising number of Indian students studying abroad, the size of Indian graduates represent an laudable achievement that bodes well for the country’s emerging role in the world of science, technology and innovation.

Figure 1: Net Adjusted Income Per Capita v. Tertiary Enrollment Ratios (%): 2000
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Figure 2: Net Adjusted Income Per Capita v. Tertiary Enrollment Ratios (%): 2014
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But focusing on the elite end of India’s educational system obscures some hard truths. India’s comparative situation shifts dramatically to the worse when we look earlier in the student cycle and, specifically, the number of students who make it to high school (upper secondary). By 2014 approximately 56.4% of Indian students were enrolled in high school based on GER (gross enrollment rate) data, as noted in Figure 3. Pakistan, at 31.1%, was even more abysmal, undoubtedly due to the lagging participation of girls, which was a mere 23.2% GER (compared to India’s female enrollment rate of 54.8%, which is nothing to get excited about). But it is here that China pulls far away from India, registering a upper secondary enrollment rate of 87.2%. This has important implications for labor markets and academic achievement in both countries, to the detriment of India. Moreover, India’s close neighbor, Indonesia, was also comparatively strong with a 74.2% enrollment rate.

In short, India may look competitive in enrolling University students and does well at the top end of the brain race, but the number of students left behind represents an immense and growing societal challenge. India passed the RTE Act (Right to Education) in 2009 which secures free and compulsory education for children ages 3-14, but not older. Student drop-outs also skew India’s tertiary data, as these students are off the grid and not counted part of an educational system that has failed them (and no longer counted in the % of high school students who can go to college).

Figure 3: Net Adjusted Income Per Capita v. Secondary Enrollment Ratios (%): 2014

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II. India’s Shortage of Teachers Is Worsening

On the supply side, India’s teacher shortage looks desperate. An estimate by the University Grants Committee concluded that India today needs 1.4 million more trained teachers but does not have the training necessary at University level, where 12 of the 40 central Universities lack a faculty of education. On the demand side, India’s number of pre-primary students has been exceeding China’s levels since 2003 so that accumulating pipeline of early age students is now moving into primary and secondary school grades.

Back in 2014, India was already enrolling approximately 46 million students at pre-primary levels compared to 37 million in China, or close to 10 million additional students per year over Chinese levels. As Figure 4 indicates, the pressure has not been abating but deepening over time, making it even more difficult for India’s stretched educational system to absorb even higher enrollments and provide the level of quality teaching required.

Figure 4: Pre-Primary Enrollments in India and China: 2000-2014

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Figure 5 underscores the fact that India’s primary level teacher-pupil ratios lags our entire country set, including Nigeria and Pakistan. Despite India’s marked improvements since 2000, it still has relatively high teacher-pupil ratios of 33.6x in 2000 and 25.9x in 2013. The only other direct comparable to India in terms of population—China—enjoyed a much lower teacher-pupil ratio of 15.1x in 2013, which no doubt contributes to the latter’s superior educational performance. Conversely, the impact of teacher shortages on educational quality in India leads not only to higher student attrition rates but a drag on future economic growth and productivity.

Figure 5: Teacher-Pupil Ratios (x), 2000 v. 2013

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III. India lags in both educating its women and employing them

Female participation in India’s labor force is falling as the aggregate population pool expands, from an already low level of 38.9% in 2005 to only 28.6% per cent in 2014, according to World Bank/ILO modeling data. Figure 6 places India against selected markets with one clear result: India resides at the lower level of both enrollment and labor force participation on a gender basis. Comparatively, what is most striking is the equivalent rate of female participation in China’s labor force by 2014, which was 70.4% and its 88.2% female high school enrollment—a massive difference from India’s 26% and 54.8%. But this lament also suggests that India’s “gender dividend” could be an enormous fillip to economic growth if more women with higher educational attainment levels are put to work.

Figure 6: Female Enrollment Rates at Secondary Level v. Employment

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IV. Can India Afford It?

India’s ability to increase spending on education is further complicated by its stubbornly high poverty levels despite tremendous improvement over the past decade. As Figure 7 indicates, India had 74% poverty rate in 2000 (based on a measure of US$3.10 per day) which shrank to less than 58% in 2013. India’s expanding population complicates these statistics but the message is clear.

Although education is an important component of any anti-poverty effort, the country’s poverty rates are severe and issues such as basic health, nutrition and infrastructure can crowd out limited budget resources and the ability to tackle specific education gaps. Note that India’s public expenditure on education has traditionally been low at approximately 3.38% of GDP between 2000-2012.

Figure 7: Poverty Headcount (in Millions) at $3.10 per day (US$, 2011 PPP)

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Fortunately, the private and household sectors are picking up some slack. PPP and philanthropic initiatives at the primary level have scaled well over the past decade, including companies such as Intel and Educomp and well-healed foundations at Bharti and Tata. Households are also sharing the burden, perhaps in response to a lack of public solutions. According to one household spending survey released by MasterCard, surveyed Indian families (mainly urban) have among the highest propensity to spend on academic tutoring in Asia relative to income levels (approximately 55% of those surveyed).

Despite this, India will require a lot more engagement from domestic and foreign institutions, companies and investors if it expects to create a quantum leap in education capacity against a rapidly expanding and youthful population. Without incurring more debt upon an already immense national burden, market-based solutions need to take root.

V. Money, Education and Technology

In a recent speech entitled “Money and Education” the government of India’s central bank and ex-Chicago economist, Raghuram Rajan, defined the solution to India’s education crisis across three areas: lowering the cost of education (particularly at college level), embracing technology, and improving University research capabilities.

As I discussed earlier, the latter point—expanding India’s research capabilities—is an important consideration for future competitiveness and indigenous innovation but does not go to the root of India’s more serious problems of educational quality, training and universal access. However Raja’s first two points—technology and cost—are more relevant as well as complimentary.

There are reasons to be sanguine. India’s market in e-commerce for retail purchases currently exceeds $600 billion and is expected to reach $1 trillion over the next three years. This bodes well for future consumer behavior and purchases that are directed at online education and related technology solutions, with China being the most relevant example. Even more importantly, risk capital is flowing to new ideas as the domestic edtech start-up and venture world grows rapidly alongside India’s traditional education and technology leaders such as Everronn, Aptech, NIIT, Emergent Global, Jetking, Classteacher and many others.

However foreign investment remains a wild card. At the transnational University level as well as areas such as private international schools, learning technologies, credentials and vocational platforms, there has been much greater promise than actual results. For years private, for-profit degree education has been suspect by stakeholders which has forced, where possible, creative work-around corporate structures for operating schools and businesses. Non-profit Universities and online platforms have also been hampered, despite some notable successes at free-access Khan Academy and Coursera.

India should drop the mask and internationalize its markets if it hopes to meet the daunting education and employment challenges ahead. Foreign collaboration is critical. Its neighbors—China, Vietnam, Malaysia—have all moved in this direction as both education and labor markets seek a wider connectivity abroad. Pronouncements from the Reserve Bank of India can help, but execution is critical. Time, and human potential, is wasting.

The theory of comparative advantage is one of the most important concepts in international trade.  From 18th century economist David Ricardo’s explanation of why England should produce cloth and Portugal make wine–but not each country producing both– to more modern examples of credit card service centers in Bangalore or iPhone manufacturing operations in China, we intuitively understand that countries cannot and should not produce everything.  Yet somehow when it comes to education these trade principles are often ignored.

00281353-0575d6701eb5597ea6ffeec300cfe6bc-arc614x376-w614-us1To students of economics, comparative advantage is a logical and elegant textbook explanation of how the world works. But what happens when an entire country outsources their educational system to a foreign, private provider? And what if the private group happens to be a commercial, non-state entity?

When the small, West African country of Liberia signed such a contract with Bridge International Academies recently, the response was swift and virulent, if not predictable:

  • United Nations Special Rapporteur Kishore Singh warned that the “provision of public education of good quality is a core function of the State. Abandoning this to the commercial benefit of a private constitute a gross violation of the right to education (italics mine).”
  • Local teachers questioned how a for-profit entity could benefit off of their country’s “fragile” educational system.
  • Union groups sharply denounced the “privatization vultures” at Bridge (and, by extension, presumably such “vultures” as Mark Zuckerberg, Gates Foundation, World Bank IFC, and UK DID, all of whom are interested shareholders).
  • In a slightly more nuanced critique, a UNESCO Director wrote that the lack of previous experience in rural Liberia should disqualify Bridge from entering into the contract, and more generally that such public-private partnerships (PPPs) that promise scale and effectiveness should be further investigated before moving ahead.

Beyond the rhetoric, there are two lines of thought here: one, Liberia should continue as always to manage the entire primary school system as a matter of sovereignty, and two, if it must outsource advisors for teaching and education support that entity should be be public and non-profit.

Let’s first examine the claimed “right to education” for Liberia’s school-age children. Liberia has emerged from over a decade of civil war (1990s to early 2000s) and a more recent Ebola epidemic and commodity crash that has exacted a toll on its educational system so devastating that over a decade of education statistics are not even reported in the UNESCO’s statistical database.  Partly as a result, in 2015 Liberia had among the world’s lowest literacy rates at 54.5%, which were not only lower than the African average  of 73.9% but also below all countries defined as Low Income by the UN, which have an average literacy rate of 68%.  From here the statistics get worse.  Following a relative high rate of primary attendance, as the years go by over 22% of lower secondary age students drop out of school and face predictably negative consequences over time.

Figure 1 sets out some of the more dismal performance metrics for Liberia in the context of Sub-Saharan Africa, South Asia and Latin America.

            Figure 1: Liberia’s Education Data in Comparative Context

africaedUndeniably Liberia is a failed education state that does not provide adequate access to quality education for its population. Weakened economic growth has also made it more reliant on aid.  The past two decades of educational attainment growth, and the inevitable positive economic impact the results from this, have been lost. It doesn’t need to stay that way. At what point should the idea that somebody else can manage it better–perhaps even for an interim period–be accepted in the interest or “rights” of students?

The evidence suggests right now. Which leads to another question: Who can best provide this? And why not a private company such as Bridge International Academies or many of its competitors, local and foreign, that are sprouting up across emerging markets?

In my view, three issues matter here to Liberia and many other parts of Africa: quality, resource cost, and time.

Quality. There is no a priori reason why public-private partnerships should be inferior or less likely to succeed.  On the contrary, the wave of school and emerging Edtech solutions across Africa and emerging markets such as India and Brazil, from the management of schools to providing student finances to training teachers to business-education advocacy and Corporate Social Responsibility (CSR), suggests that public options are either not effectively meeting demand or lack the financial and technological resources to do so.  Companies from Omega Schools, Lekki Peninsula Affordable Schools, m-learning start-up One University NetworkGEMS and others will continue to fill the education void in Africa.

Indeed a plethora of private solutions already coincide with public and multilateral education programs around the world, so much so that the “outsourcing” of educational training, advice and management is a normal occurrence in the developing world. In the case of Liberia, a single contracted educational provider was deemed sufficient to manage the entire (admittedly small) primary school system, a fact that somehow was threatening.  To be fair, there has been criticism about Bridge’s pedagogy and use of Android-based curriculum but this is beyond the scope of my analysis. Yet given that the company has grown rapidly across places like Kenya and Uganda based on tuition paid at the household level–that is, parents with limited resources choosing and paying for these schools out of pocket–it would be difficult to argue that Bridge’s market-based educational model is flawed or not delivering on its promises, in which case it would be out of business. More importantly, if the alternatives were so much more effective, where were they when Liberia needed them?

Resource Cost. Liberia is spending approximately 2.8% of its 2 billion GDP, which is equivalent to a paltry $56 million or $139 per student annually (based on an estimated school age cohort in Liberia is 400,541).  By comparison, the entire budget of the Los Angeles Unified School District ($6.78 billion), with has over 640, 000 students, is over 3x Liberia’s entire GDP.  Per student cost in LA is $10,593. Bridge’s contact is valued at $65 million over five years which amounts to $13 million per year and $58 per primary student. This is below Liberia’s average current spending level of $139 per student; in fact, Bridge’s entire modus operandi is to deliver a lower-cost “School in a Box” model at scale, as it does with in Uganda and Kenya. Is this confiscatory?

There is no evidence that less expensive contracts at similar scale and quality are available (with public or multilateral agencies, for example), and Bridge already has a transparent track record in Africa. Moreover a quick glance at Devex, a leading development marketplace, suggests that pricing for a country-wide and multi-year initiative in education, whether in Africa or emerging Asia, does not come cheaply from anyone, whether public providers, NGOs, or teams of well-fed education consultants.

But the more profound way to look at this is by understanding the opportunity cost. Outsourcing to Bridge will free up efforts by Liberia’s government and private resources to tackle structural economic problems, including diversification away from mining and more attention paid to industries such as agricultural processing, infrastructure and tourism. Why not take the near-term education burden off the backs of pressured government bureaucrats to focus on areas where they have greater chance of success? With proper monitoring of Bridge’s performance measures through pilot school roll-outs and buy-in from local constituents (teachers, administrators), Liberia can focus on what it can do more effectively, and cheaply, rather than trying to bootstrap its education system from abysmally low levels.

Time. What would it cost for Liberia to provide the level of education across its primary system that Bridge has promised?  We don’t know, but an educated guess would be a significant amount of money to rebuild, conceptualize, negotiate, bring in advisers (again) and then implement, assess and discuss, particularly when the country is facing a crippling economic crisis.   Time is critical.  Students in Liberia who are given access to quality education today can have a salutary impact on the economy and society tomorrow.  Missing that chance ensures another generation of poverty and despair, while the cost of inaction gets worse.

Liberia is perhaps an extreme example of education outsourcing at the country level rather than at the township, district or school level–and as such has struck a particular nerve about “national sovereignty.”  But its lessons are no less relevant.  Education is a globally tradable good and service and should be viewed as such by those in the field.  As with many other socially impactful industries, from healthcare to environmental solutions, technology-enabled access to education will continue to drive wider areas of trade, access and collaboration.  Countries and constituents may seek to build their own domestic education industries, erect barriers to this trade, raise tariffs on foreign education products and services; or they might bring in outside technology, services and advice as a long-term plan to “import substitute” their own educational efforts over time.

Either way, the promise of education outsourcing as a way students are educated, workers are trained and economies are structured is only going to gather pace as the needs of populations continue to rise.

 

This article was published in Edsurge on March 21,2016.

Could China buy America’s top universities? When this question appeared on Quora a few years ago it was quickly dismissed as unworkable from a governance perspective. But the ambition behind the question remains: If Chinese investors could, they would. What else might China acquire from America’s $1.3 trillion education industry if Harvard is out of reach? We are about to find out.

The unlikely parallel is Hollywood. In just the first few weeks of 2016 Chinese conglomerate Wanda Group acquired blockbuster Legendary Entertainment for $3.5 billion following its previous $2.6 billion acquisition of AMC Theaters; China Media Capital injected $100 million into blockbuster Imagine Entertainment, and Perfect World Pictures arranged a $500 million finance deal with Universal Pictures. In the adjacent digital games market Chinese acquisitions are stacked high, including Internet giant Tencent’s investments in Riot Games, Epic Games, a strategic minority stake in Activision Blizzard, and, more recently, established content streaming partnerships with HBO, Warner Brothers and the NBA.

Meanwhile e-commerce leader Alibaba has invested in companies ranging from LA-based Snapchat to startups such as Fanatics (online sports) and Kabam (video games), and more recently in online education company iTutor Group. China’s total M&A activity in the US during 2015 was $14 billion, with an additional $2.3 billion invested directly in startups since 2012, but this is only the beginning for the media and entertainment sector.

What do education and the Hollywood entertainment complex have in common? Despite obvious differences, both are industries where consumer demand is off the charts in China and where creative talent, technology, intellectual property (IP) and innovative content are coveted. Both are being disrupted by digital delivery models and adjacent competitors. Both operate in global markets where “Made in America” matters.

To date, US and UK education-related businesses have received a paltry $350 million in investment from China and other regional investors, based on our estimates. But there are strategic and financial reasons why China’s investment into US education will accelerate.

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First, intensifying competition within China’s domestic education sector is creating acute needs to differentiate by using unique foreign content, services and technology. The latest example is TAL Education’s investment in Knewton following an earlier investment in the Minerva Project, a type of alliance that not only offers China exposure to advanced technologies and innovative US education brands, but also signals to local consumers a superior level of quality and prestige.

Second, China’s internal educational reforms are driving consumer choice. Specifically, changes in the national gaokao and zhongkao exams, experimental admission standards at selected universities, and the internationalization of higher education pathways are fueling explosive demand for international schools in China and boarding schools abroad. A growing emphasis on early-age English immersion programs and extracurricular experiences also makes U.S.-based companies attractive partners.

Third, Chinese companies are looking to continue serving Chinese students even if they study overseas. Thus far, Chinese students are studying in both U.S. colleges and higher schools at record levels. Yet Chinese competitors, such as Universities and service providers, are largely absent in the U.S. In 2015, there were 304,000 Chinese students in U.S. higher education and 34,758 students in U.S. K-12 system, the latter growing 290% in a single year. According to the National Association of Foreign Student Advisers, international students overall contributed roughly $30.5 billion of economic value in 2015; a simple extrapolation, based on Chinese students as a percentage of total international students in the U.S., puts China’s contribution at over $10 billion annually. Yet despite such a large potential revenue base, there is a dearth of Chinese investment into US-based pathways, tutoring, boarding school and service businesses.

Fourth, from an American perspective a potential Chinese investor can provide access to its own deep market and a built-in platform for product distribution and student access. Many U.S.-based education and edtech companies simply do not have the networks, knowledge and resources to execute a meaningful China strategy, despite a scattershot of loose cooperative partnerships in emerging markets of questionable value and depth. With U.S. education markets offering limited scale compared to emerging economies, the case for venture and private equity-backed firms, from K-12 tutoring to proprietary vocational colleges, to search for more investment-intensive Chinese partnerships—including partial sales or buyouts—grows stronger.

Fifth, China itself is an emerging edtech market with an impressive lineup of mobile, e-commerce and media competitors, from well-known conglomerates mentioned above to new ventures such as NetDragon Education, iTutorGroup, and 17zuoye. Last year marked a high point of early-stage capital raises in China, amounting to $317 million in the first half of 2015 and placing China on a globally competitive level. Furthermore, many of these firms are cash rich, acquisitive, and innovative. For some, the added benefit of diversifying away from Renminbi (the Chinese currency) denominated revenues and risk—and possibly increasing their public valuations at home—provides a further nudge.

Industry after industry in China has struggled with intensifying domestic competition, a push toward innovation, exacting consumer demands, and the extension of their businesses abroad.

In the U.S., total Chinese investment now exceeds $50 billion and could reach $200 billion by the end of the decade. The question is not whether a critical mass of Chinese investment will enter America’s vaunted education sector, but when it will arrive. From U.S. education entrepreneurs to college leaders to venerable US education brands in need of a remake, Chinese capital, and the potential market access it can provide, may soon be coming to a classroom near you.

 

This article was published at Educelerate on March 7,2016.

Have foreign education companies “cracked the code” for educating the rest of the world?

Earlier this month the online education company Udemy reported that over 10 million students had taken “at least one of its courses” and that growth overseas was surging. While this milestone should be applauded, such a grand, but largely meaningless figure is increasingly routine among online platforms in a world full of massive, under-educated populations. Rather it begs the question: if developing countries have such an enormous need for education and skills development, and online education is providing the access and “disruptive” forces to hoover up millions of students, why do so few US education companies boast large international enrollments, or at least disclose a more detailed accounting of their international operations?

Building Global Silicon Valley Leaders in EdTech

Is EdTech too focused on satisfying Silicon Valley-centric user metrics at the expense of thinking about truly massive global numbers?

With an estimated 2.37 billion workers in the world’s key emerging markets and an additional 416 million high school and college students projected to enter the workforce over the next 35 years, the developing world is in a race against time to absorb impending youth bulges and head-off potential employment crises.

Figure 1 shows the relative level of working age population (ages 15-64) from key emerging markets in 2010 and projects them out to 2050. These estimates immediately underscore where the most acute employment pressures will occur through 2050 — India (+318 million additional workers), Pakistan (+115 million), Bangladesh (+41 million) and to lesser extent Indonesia (+28 million) — all of which lag far behind the OECD and other Asian peers in both high school graduation and college enrollment rates. Furthermore this data set does not even include several other countries in Emerging Asia or a surging working age population in Africa where the 15-19 year old population is expected to exceed 151 million by 203o (see Figure 2 for comparative data).

Figure 1: Working Age Population, 2010-2050 by Country


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Figure 2: Comparative Education Data by Region

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Comparative Education Data Globally

Not surprisingly, the most challenged countries are confronted with debilitating gaps in public funding for education and are turning to technology and the private sector for help. Hence the familiar opportunity for disruptive innovation that uses low-cost access and technology or fills unaddressed market segments.

But the view from the ground is more complicated. To get my head around this, I scanned the data on some of the new “disruptive” companies (whether backed by venture capital or foundations) involved in professional skills and higher education, but this only resulted in more questions:

  • How can so many companies in my sample claim to be serving 178 or 180 countries around the world, but only a few indicate the actual percentage of subscribers and student users, or revenue derived from these markets?((And forget about profits, the 10 million-student Udemy “might be profitable in 2017 or 2018.”))
  • Is it possible that so many competitors can operate as self-proclaimed “global leaders” or “leading global platforms” all at once? At what point can companies represent themselves as legitimate, serious international competitors without merely blowing smoke to investors?
  • Can a collection of loose channel partnerships or international investors, a strategy used by many rapidly scaling online entities including start-ups, truly provide the level of control, sustainability and local incentives to ensure future and profitable growth in such large and diverse markets?

My research led to Figure 3, a simple matrix which aligns so-called “global depth” (y axis), based on indicators such as enrollment, staff, and partnerships, with a level of product pricing (x axis) that takes into account both non and for-profit entities. Admittedly the matrix is based on a cursory scan of available public documents, announcements and information gleaned through internal inquiries. Private companies are also under no obligation to report these details and most do not. I also understand that the absence of evidence is not evidence of absence (and if any companies wish to set the record straight, we will happily review such), but lack of data is precisely the point of this post.

Figure 3: Selection of Global/EM Intensity, Estimated Enrollments versus Pricing

 

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There are, of course, competitors that show meaningful international market penetration (across the top quadrants in Figure 3). But this does not change the fact that the many companies under review appear to have an insignificant if not overrated presence in global markets despite statements to the contrary. Examining evidence in terms of geographic presence, student enrollments, users or subscribers and most critically (for commercial entities), revenue and profits, supports this contention.

Global Intensity and Education Companies

Why, Then, the Discrepancy between Rhetoric and Reality?

Here are a few hard facts to consider. In the context of education — which carries its own added social, economic and regulatory context — we need to immediately resist the tendency to define international expansion as a scalable, plug-and-play, and inevitably lucrative option that indiscriminately displaces local competitors, institutions and culture because it was built in Silicon Valley or based upon Western education models. There have been many promising international models, both in education and broadly across technology, which have utterly failed in emerging markets, let alone supplant local competition. Back in 2013, I raised a few such issues about the MOOC rush into China (see “MOOCs in China—Dream On?”) and the legacy of initial failures from such illustrious names as Google, eBay, Zynga, Groupon, Facebook and others. Challenges remain for foreign education competitors based on regulation, language, domestic competition, and market entry models, in China and elsewhere.

Planting Field Offices in a Few, Comfortable Capitals

There are also conceptual differences over what constitutes a deep international presence. American education competitors have long deployed what I would call a “global light” strategy by expanding into developed trade and finance centers such as Hong Kong and Singapore, or English-friendly markets such as Australia, the UK and South Africa. Some focus on single countries. Very often such moves provide a semblance of global presence that appease a risk-averse (and English speaking) Board of Directors and provides a little sizzle on their investor story ((Actually, for start-ups like Knewton and Minerva Project, it is uncertain if international opportunity attracted their recent foreign investors, or if the need to look abroad for new capital brought their market expansion roadmap along for the ride.)), but offers little reach into the far larger though less accessible developing markets which would offer far more material impact. For example, General Assembly provides high-priced IT and related courses overseas in London, Sydney and Hong Kong, but has little physical presence in large emerging economies themselves. Cengage previously ran its main offshore presence in Australia, before it was sold to another party and became Open Colleges, landing eventually into the hands of Apollo Global. DeVry’s international strategy is overwhelmingly focused on Brazil. Lynda, prior to its merger with LinkedIn, managed an European markets hub in Vienna and posted some Spanish language content.

Make no mistake, placing nodes of operations in selected markets or finding Chinese investors to prop up a capital table can certainly add to an overall business and global baby steps are fine. But this does not equate with being a “leading global platform” and, at its worst, merely passes for international window-dressing.

Free Online or Premium On-Ground, but not Premium Online?

What is clear is that demonstrably “international” competitors in online education have tended to be low-cost or freemium models. MOOCs such as Coursera and EdX, as well as Khan Academy’s Global Schoolhouse Model, are prime examples of mass online platforms delivered at no or low cost to students and which have deep global roots. By comparison, the premium online training site Pluralsight (which, unfortunately, discloses few details on international operations) notes some activity in India, but not in China or the vast majority of countries. Within school models (i.e., on-ground), private international K-12 schools have scaled impressively — from premium level tuition in Asia (e.g., Nord Anglia, Dulwich) to low-cost provision in Africa at Bridge or Omega schools — but most are using online solutions to compliment their physical presence. There are also classroom-based higher education players such as Laureate, Kaplan, Pearson, and to a lesser extent Apollo who have scaled internationally through aggressive in-market M&A strategies.

Bottom line: given the thousands of ambitious US-based education companies and start-ups that want to disrupt the education world, the field is considerably thin.

Flat World Fallacies

The World is FlatTo understand why, consider the “The World is Flat” argument popularized by Thomas Friedman. In his 2005 book of the same name, Friedman’s insight was that the world was “flattening” —culturally, geographically, physically (in terms of distance) and economically — with direct competition from India and China creating intense job dislocation in the US, from computer software to radiology. The argument was compelling in the midst of rapid changes in information technology and communications, and at the margins some US jobs were impacted, but most were not and many never will be.((In a lengthy rebuke to Friedman’s argument, Economist Edward Leamer wrote an entertaining and lucid paper (See A Flat World, A Level Playing Field, a Small World After All, or None of the Above?) which describes how difficult it would be to rapidly “flatten” the global labor market as evidenced by slow changes in income inequality between rich and poor nations. He goes on to conclude that “physically, culturally and economically the world is not flat. Never has been, never will” (his italics).))

Simply put, distance, location and things like trust between business exchanges matter quite a lot. As a practitioner in emerging economies, I make a living in search of solutions to such problems, and I mention the Flat World idea here for a specific reason: because it has become a mantra for many people running edtech businesses in the US and who seek to expand globally with little, if any, friction.Clayton Christensen Institute for Disruptive Innovation

The close cousin to the Flat World — disruptive innovation — is another tonic to Western educational entrepreneurs and companies who think they can magically disrupt a wide variety of disparate educational systems across the emerging world. Taken together, both concepts are compelling: who can doubt the ability to disrupt a $6 trillion education industry with superior technology in a Flat World? No barriers to entry. Massive scale. Instant adoption. Differentiated content. Limited local competition in overlooked segments. Pricing power at the low-end of the pyramid, selected affordability at the upper middle end.

If only it were so easy. Much as my colleague Christopher Nyren laughs at Silicon Valley’s flat-headed thinking about the ability for software to eat the $1 trillion US education market (see “Why Education Does Not Need Marc Andreessen“), there are many reasons to be level headed on the global disruptive power of Western education products, services, technology and intellectual property (“IP”). At a time when US for-profit colleges are under immense pressure, and amply funded edtech firms fight over a limited US market pie and ways to sustain themselves, most Western education groups have yet to make a dent in emerging markets. The newest technology-centric entrants have tried to maximize market exposure through a scattershot of “partnerships” or field offices or foreign investors on their way to being disruptors in 180 countries, but true leaders in none.

Conclusion: What is Disrupting the Disruptors?

From the above market observations and commentary, I have drawn the following four key challenges facing US edtech upstarts as they belatedly look abroad.

University degrees remain the gold standard in emerging economies and a key aspirational objective at the household level. In many countries, replacing or even disrupting college degrees is anathema to upward mobility. According to one reputable source, the level of higher education enrollments globally could exceed 520 million by 2035, from less than 100 million in 2000. College enrollment rates in Africa are projected to rise from 7 to 30% over the coming decades when students already face capacity driven wait lists of several years, a problem being addressed by the Silicon Valley edtech start-up One University Network. In Vietnam, a World Bank skills analysis underscored the country’s concentration on higher education degrees over technical skills, in part since households looked down on vocational training. Non-traditional online degrees in Asian countries such as Indonesia, China, Malaysia and Korea offer non-traditional education, but are priced cheap, considered inferior and usually do not do not carry equivalent accreditation (not to mention value in the workplace). Naturally, credentials can and do supplement degrees and provide some form of skills training and signaling for high school graduates — as they do in the US — but the drive toward a traditional university degree is only going to intensify. Degrees are sticky — replacing them with something else of value in the developing world will not be easy.

Second, new Credentialing models are not new in many countries outside the US where vocational and skills-based education has long been a substitute for poorly developed higher education systems. It seems as if an entire generation of US-educated entrepreneurs have discovered skills-based, vocational and competency-based education as a disruptive innovation. But many emerging economies have operated deep vocational and competency-based education systems for decades led by a diverse group of institutions, from public institutions, “Open University” systems and corporate universities to small, mom-and-pop private training organizations. Parts of Asia, for instance, have been heavily influenced by Germany’s dual-VET Meister system and Australia’s TAFE qualifications. In more advanced Asian countries such as Korea and Japan, a so-called “license regime” that matches jobs with licenses, which require specialized training, has a long tradition from the placement of higher-end technology technicians to Japanese ikebana flower arrangers.

What this means for foreign education companies is that many emerging markets are already highly competitive, well acquainted with credentialing, and have local systems that favor incumbents and their relationships with employers. Local companies and institutions are also increasingly technologically savvy, deploying the latest adaptive learning or online service platforms (for relevance in Asia, see “How Asia is Emerging As the World’s EdTech Laboratory“). In this sense, vocational and skills-based sectors cannot be considered “overlooked” market segments ripe for disruption, but rather are embedded within local education-to-employment systems — though to be sure, there is always room for more differentiated products and services at a quality level.

Third, cost pressures that give rise to student debt loads in the US — and a compelling case for disruption — are largely absent in the developing world, where tuition is often heavily subsidized by the state. For 2015-16, the College Board estimates US tuition costs $9,041 for 4-year public colleges and $32,405 for $-year non-profit colleges. At around $500 to $3,000 in India, and $2,500-$3,500 in China, education costs in the US are anywhere from triple to over 10 times the levels in emerging markets. Of course, these figures have not been PPP-adjusted for affordability, but neither do they take into account household savings rates that are comparatively low in America or college living costs which are generally higher. Rather it is meant to illustrate that the market for substituting a Western credential or education service based on relatively low cost is often less applicable outside the US context.

This is not to deny major financial constraints and their impact on education access in emerging markets, or the massive need for private capital and innovation in regions such as South Asia, West Africa or Brazil to meet demand. However, it is clear that cost will not drive foreign college students to consider new, disruptive models.

Fourth, the historical record is largely against foreign business models that favor multiple cooperative partnerships over deeper investment on the ground in terms of time, resources and equity — in short, having skin-in-the-game and tolerating higher risk-payoff options. I have previously discussed some these challenges and failures among universities and other groups expanding globally in this context (see “What Multinationals Can Teach Universities Expanding into Emerging Markets“) including many cases of misaligned partnership incentives, a lack of sustainable financial returns, insufficient understanding of product adaptability and acceptance in local markets, and remote-control management with insufficient day-to-day commitment. The implications for online learning models are equally serious, where “asset light” approaches can lead to insufficient control over product, distribution, IP and management.

There are always exceptions, such as the Khan Academies of the world, and companies certainly still have time to succeed abroad (especially one like Lynda which can leverage LinkedIn’s own growing global presence and deep network effects), but it is no coincidence that many education businesses with physical assets and concrete acquisitions have thus far outstripped their online and organic focused peers in penetrating emerging markets with durability and depth — such global plays and ranged from international K12 and language schools to college campuses, training facilities and research centers.

The foregoing issues do not in any way diminish the exciting opportunities for education companies across the student cycle and the vast majority of the world. Do emerging markets want their education disrupted? Yes, but at varying degrees and with many operational limitations. Are US edtech companies effectively disrupting these markets? No, but there is still massive untapped opportunity — though the challenges will be formidable without a committed and coherent global strategy.