Post-Education Startups: The Next Wave

apocalypseI’ve had a bunch of conversations lately with some really cool startups and couldn’t figure out how to mentally classify them. By all practical appearances they weren’t education companies, at least not in the traditional sense of ever showing up in the BMO Education Book or being asked to present at Signal Hill. They aren’t in the K-12 space or the post-secondary space or even the corporate training space. But what they were doing and the outcomes they were producing (or planning to produce) were virtually identical to those of education companies. So I’ve recently started calling them the post-education companies.

Let’s examine this by thinking about what the goals of the traditional education companies are. For starters, school is about learning right? Yet at the same time anyone with a web connection and a Khan Academy “subscription” knows that much of the learning you can do nowadays is fairly free and largely ubiquitous. It’s truly the modern equivalent of “dropping 150 grand on an education you could have gotten for a dollar fifty in late charges at the public library” (P.S. I heard Khan rocked the house at TED last week. Can’t tell you how proud I was to hear that!). School is still a necessity, especially for younger children but the older we get, with certain exceptions, the less “necessary” it is to be in school in order to learn.

Schools also provide socialization. They don’t have a monopoly on this of course but I’d say that a huge benefit of attending a school like Stanford or Harvard is that you’re building a great network of friends. And that’s just a true of a student from an impoverished community who finds their way to a state school and is suddenly associating with the children of much wealthier parents than she had. In fact, some would go so far as to say this is the major driver of value in education. To the extent that people stay surrounded by people of their socioeconomic strata they will, more often than not, remain in that strata. Give them the opportunity to jump ahead and be surrounded by people from a higher strata and you give them a chance to move themselves to that join that strata. Exactly the kind of stuff Gladwell wrote about back in 1999.

But schools need not define networks now and my thesis is that increasingly they don’t. You can join a network (a very powerful one) by getting admitted to YCombinator. Have a little more money? Get an invite to TED. Peter Thiel is doing his best to build an anti-school network with his “Stop Out of School” thing. These are all networks you can join that really have nothing to do with school (although where you went to school may of course play a role in which of these networks you can join).

But networks also provide something else extremely powerful. They provide an external signal. Sam is “good enough” to get into Stanford. Tina is “good enough” to be invited to TED. Schools historically have had almost a near-monopoly on signaling. After all, how the heck were you supposed to know who the smart people were in the 70s other than by what school they went to? But today does it really matter whether someone went to Stanford or to YCombinator? For my doctor, um, yes… But for a business guy or software engineer? I’m not sure that the signal sent by Stanford and the one sent by YC are all that differentiated.

But here’s the challenge, the learning, networking and signaling benefits that organizations like YCombinator and TED provide aren’t all that scalable. YC admits a relatively small handful of startups each year. TED’s invitees number just north of a thousand. How do you account for the other 6.9 billion people on the planet? That’s where the post-education companies come in. The companies I’ve been talking to are pursuing scalable ways to provide one or more of these benefits to the masses.

Some of these guys you already know. Certainly Khan Academy is a great example of someone providing learning to the masses without being a “school”. Quora and Stack Overflow are two more. Are those education companies? I don’t know and I don’t know that it matters. They’re providing some of the same benefits as education companies do. Learning for sure and increasingly Quora, Stack Overflow and others are going to be playing a major role in the signaling game (if you don’t believe me check out Careers 2.0 for an example of the massive disruption in its earliest stage).

And obviously the reputation graph companies have the potential to play a huge role in signaling. As I’ve written about before here, higher education is a trillion dollar industry globally where, depending on which economist you ask, anywhere from a significant amount to the vast majority of the value is creating by the signaling effect of the education. It’s not the only value driver of course (many professions absolutely require the training that traditional education provides them) but it’s a vastly underrated portion of where value is created in education. Simply put, companies building the reputation graph have an opportunity to be a vastly more efficient form of signaling to the market.

I’m really excited about the emerging landscape for these post-education companies. I’ve seen a number which are pre-launch or too early to shine too much of a spotlight on at this point. But I’ve seen enough to feel convinced that the landscape is going to change pretty dramatically in the coming years.

Looking forward to the comments and if you know of other companies that fall into this post-education bucket, I’d love to hear about them.

08. March 2011 by Jon
Categories: Disruption, Reputation Graph | 5 comments

  • Semil Shah

    Jon, great post. Some of what you write reminds me of the old principles from Michael Spence's paper on why all used cars are lemons. Also, like the distinction between scalable and nonscalable education brands. Universities are going to find that out the tough way, as well.

  • San Kim

    Definitely agree we need to devalue the signalling power of school networks. What's ironic is that it's still a major signalling tool for many startups looking to hire – even for incubators looking at applications (especially when there's little traction or product to show).

    What I love about Stack Overflow is that it measure not only someone's knowledge/skills, but their willingness to contribute to the community and help others around them – which is very important to most startups and tech companies.

    It will be interesting to see just how well these reputation graphs can start to solve these problems on a grander scale, not just for niche communities like Stack Overflow.

  • Sense4NDReason

    You may like an article I have written called “How do you like them Apples or The Great British Phone Con: ” – available here: http://economopolis.blogspot.c

    It was inspired by that “Good Will Hunting” clip.

    Something I was able to figure out without specific education in telecommunications and written 9 years ago.

  • Armansingh Singh33
  • Armansingh Singh33