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Why Materials Costs Aren’t the Problem in Education

Posted in CEO Jose Ferreira on March 26, 2013 by

Why Materials Costs Aren't the Problem in Education

Students spend a lot of their day learning.

They spend six or more hours in bricks-and-mortar classrooms each day, listening to teachers, talking with peers, and working with textbooks/software/technology (collectively, “materials”). Then they spend a few more hours working through materials after school. Some students learn more in the classroom environment; others learn more by using materials to teach themselves.

Despite how huge and complex the education system is, students do primarily just those two things: attend classes and work with materials.

For all kinds of reasons I won’t go into here, it’s very difficult to innovate — especially at scale — the bricks-and-mortar classrooms side of the system. But it’s eminently possible to innovate the materials side. In fact, we’re currently in an innovation boom.

Just as this innovation boom has begun to proliferate, though, materials creators have received growing criticism over the price of their products. People have long complained about textbook prices, but over the last few years it has been increasingly argued in some quarters that the high costs of education ought to be addressed by lowering materials costs.

But materials are only around 1 or 2 percent of global education expenditure. Bricks-and-mortar classrooms — and all the costs associated with operating them — make up the rest.

We would all like education to be more affordable, but focusing on reducing materials cost is pointless. It’s far too small an expenditure. In fact, it’s worse than pointless — it’s dangerous. It would deter investment in innovation in exactly that part of the education ecosystem where much of the innovation at scale is occurring.

Why, then, do some people insist on lowering systemic costs by focusing on materials? Perhaps they are unaware of the enormous skew in relative cost between these two sides of the education system. Perhaps they think the cost of bricks-and-mortar classrooms cannot possibly be changed (if so, keep an eye on Khan Academy, MOOCs, and online courses). Perhaps they reflexively dislike materials since their providers tend to be for-profit entities. Or they may do so for their own perceived self-interest, opposing innovation in order to protect the status quo.

On an ROI basis, the materials industry is fantastically productive. It produces or facilitates an extraordinary percentage of learning, yet accounts for only 1 percent or so of the cost. Materials creators operate efficient and relatively low-margin businesses. And with digitally delivered products, price per unit will likely decline (after a period of intense investment over the next few years).

The best way to lower systemic costs in education is to average down the cost of bricks-and-mortar classrooms with digital products and courses — exactly what the materials industry is focused on right now. The world’s major learning companies are now or will soon be making more revenue from technology and services than from printed textbooks. Online courses will, over time, tend to reduce the systemic costs of bricks-and-mortar classrooms. This will be true even in primary and secondary education, which tend to be very cost-efficient. It will be even more so in higher ed, which is not as efficient and, more importantly, is priced on the basis of scarcity rather than operating cost.

If anyone is hoping to see materials diminish as a percentage of total education expenditure, the next couple of decades are likely to be disappointing. Assuming a significant increase in technology-driven education, materials will instead increase its overall share of the global education system while tending to lower the overall cost for each student. For those of us who would like to see dramatic innovation in education, that is a very good thing.

This article originally appeared in the March issue of Knerd Dispatch, the Knewton newsletter. Subscribe here.