Michael Milken
The Milken Institute
The Global Higher
Education Marketplace
T
he importance the average Asian family places on education—based on the
time and percentage of income they are
willing to spend on it—far outweighs
its importance in any other part of the
world. The investments being poured
into research and higher education in China
and the Greater Middle East dwarf those being
Key Notes
made elsewhere around the globe.
The major competition in this
In the United States, just 25 percentury will be the competition
cent of postsecondary students are
for human capital, especially those
so-called traditional students, i.e.,
entrepreneurs, investors, scientists,
18-22 year-olds enrolled in fourartists and students who have
year residential colleges and unithe knowledge, skills, experience
or potential to drive economic
versities. Michael Milken, chairman
growth and create jobs.
of the Milken Institute and Knowledge Universe Education, considIt is wholly unrealistic to aim for a
ers these factors and other aspects
residential college experience for
all learners—most of whom, as we
of the global higher education marknow, are more than 25 years old
ketplace and asks whether Ameriand have jobs and/or families.
can institutions want to play a significant role in the world of higher
Vastly expanding educational opportunity to reach the majority of
education. If so, he urges increasing
learners is crucial because education
involvement in Asia and the Middle
is the primary means by which we
East, as well as greater attention to
can confront the massive and comnontraditional students, particularplicated problems facing humanity
ly via the deployment of technoltoday. The current state of technology to learning. Milken identifies
ogy allows for such expansion if
we are willing to pursue it with
human capital as the world’s most
creative and open minds.
precious asset, and education as
one of the best ways to build huIf only a quarter of our citizens
man capital. He also points to edearn a college degree, and half of the
adult population in the United States
ucation as the primary solution to
has never taken a single college
humanity’s biggest problems, rangclass, then most are falling behind.
ing from poverty and disease to enThis group is vastly underserved
ergy and the environment, and to
by our nation’s traditional colleges
terrorism and war. Excerpts of his
and universities. We must deliver
new means of knowledge access.
remarks are reprinted here.
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FORUM FUTURES 2009
A New Global Perspective
I have spent much of my time during the last
three years outside the United States, traveling
in nearly two dozen countries. As we consider
research and education around the globe, a few
trends are worth highlighting:
Building Human Capital
The major competition in this century will be
the competition for human capital, especially
those entrepreneurs, investors, scientists, artists and students who have the knowledge,
skills, experience or potential to drive economic growth and create jobs. Human capital today
is mobile. The nationalistic feeling that someone native to a country has to lead its large organizations is gone; instead, companies look
for talent and ability where ever they can find
it: Eli Lilly’s CEO was born in Morocco; the
CEO of Pearson, the leading British publishing company, was born in the United States;
Eastman Kodak’s CEO was born in Spain; and
PepsiCo’s CEO was born in India, to name a
few. The recruiter for the two-million-squarefoot biomedical sciences research complex,
Biopolis, in Singapore, earns 20 times more
than the head of the U.S. National Institutes
of Health. His job is to convince the best and
brightest scientists from around the world to
do their research in Singapore. China’s Z-Park,
a massive high-tech incubator for innovation in
technology, business and financing in Beijing,
just outside the gates to Tsinghua University,
is home to some 18,000 companies, including more than 1,500 foreign firms. Z-Park officials engage in aggressive recruitment efforts to
lure the best innovators and researchers from
around the world.
Medical Tourism
So-called medical tourism is booming as many countries acquire
the ability to offer high-quality medical care at lower costs. In
the United States, for example, the total cost for a heart-valve replacement averages $200,000; in India, the average cost for the
same procedure is $10,000. In 2007, nearly 200,000 foreigners traveled to India for medical procedures. At the same time,
the world’s major multinational pharmaceutical companies are
shifting that industry to Asia. And some of the world’s largest
sovereign wealth funds (the Abu Dhabi Investment Authority,
the Government of Singapore, the Kuwait Investment Authority, and others) are using their wealth to fund medical research,
better medical treatment, and hospital facilities. Meanwhile, in
the United States, federal funding of medical research has fallen
45% as a percentage of GDP over the last 30 years. Moreover,
U.S. industries spend more today on tort litigation than on research and development.
U.S. Immigration Policy
Since 9/11, barriers to foreign students hoping to study in
the United States have been raised, as has competition from
other countries to enroll foreign students. It has also become more difficult for foreign graduates of U.S. colleges
and universities to stay in the United States and, in many
instances, more appealing for them to either return home
or work elsewhere. Venture capitalist John Doerr has said
in regard to foreign graduates of U.S. institutions: “When
you graduate with an advanced degree in the sciences or
engineering, we then make you go home. We should be stapling a green card to your diploma.” I couldn’t agree more.
We could transfer trillions of dollars to the United States in
human capital if we would let the world’s best and brightest
come to study and stay to live and work. Their contributions as citizens would create millions of new jobs without
threatening American workers.
Deploying Technology
In 1976, the IBM System 370 Model 168 computer cost $8
million and had 8 megabytes of storage. That’s $1 million per
megabyte. In 2007, Apple introduced its iPod Classic, which
cost $249 and had 120 gigabytes of storage. That’s <$0.002
per megabyte. In other words, the iPod has 15,000 times
the storage capacity of IBM’s largest computer in 1976, and
the cost per megabyte of the IBM was 500 million times that
of the iPod. But speed is important too. In that regard, the
United States ranks 25th in speed of broadband data. Japan,
17th on the list, can move data 10,000 times faster than we
can in the United States.
There are two billion cell phones in use around the world
today—far more cell phones than wire lines. And the cost of
calls has plummeted: In 1975, a phone call to India cost $10
per minute. Today, it costs about 4 cents per minute.
We are moving toward infinite digital storage and communication anytime and anywhere. If we want it, the virtual classroom can be a reality: anyone speaking in nearly any classroom can be seen almost any place in the world by anyone
else. Students in the United States, for example, could learn
about the American Revolutionary War and have a discussion
with a teacher and another class in England, simultaneously,
for very little cost.
In the 21st century, universal access to knowledge will become a reality. It’s no coincidence that the Berlin Wall fell just
as cheap copiers, faxes, and early e-mail systems came into
widespread use. As the cost of internet publishing continues
to dive toward zero, other walls will fall. Widely available access to democratic political representation, small-business financing, advanced medical treatment, specialized job training,
and other benefits will spread around the world. Eventually,
technological and social change will bring about philosophical
change as the disintegration of international barriers allows us
to better appreciate the interdependence of all humanity.
Educational institutions must adjust to this expanding use
of technology. Traditional pedagogical models are being challenged, yet education has been slow to adopt new technologies and capabilities. In contrast, the deployment of technology in finance, medical research, and other industries is far
advanced. Today we can do all our banking digitally, from
home. There is little need for the huge bank buildings that we
all used to visit regularly. In medicine, for another example, a
highly trained scientist in the early 1990s could read 500 genome letters in a day; today a $5,000 machine can read three
billion genome letters in one day—that is, six million times
more than the scientist. Today, just 25% of post-secondary
students in the United States are so-called traditional students,
i.e., 18-22 year-olds enrolled in four-year residential colleges
and universities. The United States is not unique in this respect, and if our aim is to reach the most potential learners
and build human capital, educational methods must evolve
and take advantage of technological advances.
Human Capital
Human capital is the most precious asset in the world. Humans
create new technologies, drive productivity, and are the essence
of such social capital as schools, police, civic and cultural institutions, and religious organizations. A nation’s vitality
depends on its human and social capital.
There are three key ways to build human capital. First, we have to create an
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67
Table 1. Humanity’s Top 10 Problems and Solutions
for the Next 50 Years
Problem
Noble Laureates’ Solution
My Solution
Democracy
Education
Education
Disease
Education
Education
Education
Education
Education
Energy
Energy
Education
Environment
Energy
Education
Food
Energy
Education
Population
Education
Education
Poverty
Education
Education
Terrorism and War
Education
Education
Water
Energy
Education
Figure 1. Return on Human Capital Investment
Preschool
Programs
School
Return
Opportunity Cost of Funds
Job Training
Age
Source: James Heckman, University of Chicago.
Figure 2. Investments in Education
World Returns
30%
Private
Social
20%
10%
Primary
Secondary
Higher
Source: George Psacharopolos & Harry Anthony Patrinos,
World Bank Working Paper 2881/2002.
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FORUM FUTURES 2009
environment where people want to live. There is no better
environment in the world than the United States in that people want to come here—particularly students who want to
attend the world’s leading higher education institutions. Second, and very much related to the first, we have to improve
peoples’ health and quality of life. Those are the goals of the
Milken Family Foundation, which focuses on strengthening
education and advancing medical research; the Milken Institute, a nonpartisan economic think tank; and FasterCures, a
nonprofit think tank focused on removing barriers to progress against all life-threatening diseases.
Finally, to build human capital we need to improve and
increase education and practical skills. Richard Smalley, winner of the Nobel Prize in Chemistry, surveyed thought leaders
around the world and developed a list of “Humanities Top 10
Problems and Solutions for the Next 50 Years.” At the Milken Institute’s Global Conference, we brought together several
Nobel Prize winners to delve further into these problems.
First, we asked whether they agreed with the list. Then, with
just some mild disagreements, the Nobel laureates ultimately
determined that each issue was related to either energy or
education. My conclusion is that education is the answer to
all of humanity’s greatest problems. (See Table 1.)
Better education has to start early. James Heckman, University of Chicago economist and 2000 Nobel Prize winner,
found that “the rate of return to a dollar investment made
while a person is young is higher than the rate of return to the
same dollar made at a later age.” Figure 1 shows the declining
rate of return on investments at the preschool level through
adult job training.
Research by World Bank economists George Psacharopolos and Harry Anthony Patrinos supports Heckman’s thesis
and separates the benefits of education into private and social
realms, as shown in Figure 2.
Clearly, the social benefits of an individual’s education are
significant. Gary Becker, another University of Chicago economist and 1992 Nobel Prize winner, posited that the U.S. balance sheet shouldn’t simply be based on financial assets; rather, he estimated that our nation’s assets were just 26% financial and that the remaining 74% comprised human capital.
The National Academies concurred with Becker’s thesis
when it wrote in its 2005 report, Rising Above the Gathering
Storm: “The vitality of a nation is derived in large part from
the productivity of well-trained people and the steady stream
of scientific and technical innovations they produce.” This
conclusion clearly reflects the National Academies’ focus on
science and engineering; no doubt the National Academy of
Arts and Sciences would speak to the value of citizens welltrained in the humanities as well.
For-Profit and Online Education
As recently as 1950, there were three unskilled jobs for every skilled position. Today, jobs requiring skills are four times
more prevalent than those for which manual labor suffices.
Social mobility increasingly depends on access to higher education. But if only a quarter of our citizens earn a college
degree, and half of the adult population in the United States
has never taken a single college class, then most are falling
behind. This group is vastly underserved by our nation’s traditional colleges and universities. We must deliver new means
of knowledge access.
For-profit and online education companies are working to
address the needs of this population by teaching them a skill,
for example, so that they can get a better job or, perhaps, by
retraining them so they can find a new job when their old one
has disappeared. Full degree courses in a wide variety of fields
are available online as well.
It is wholly unrealistic to aim for a residential college experience for all learners—most of whom, as we know, are
more than 25 years old and have jobs and/or families. The
advantages of an online education compared to traditional
colleges include:
• Lower costs
• Personalization of curriculum
• Convenience and flexibility
• Readily updated course material
• Self-paced learning
• Participation in the global community
In light of these advantages, online postsecondary enrollment has risen dramatically since 2000, when fewer than
200,000 students were taking online courses. By 2008, that
number topped 2 million and is projected to reach nearly 3.5
million by 2012.
Enrollment at for-profit postsecondary institutions—both
on campus and online—has skyrocketed as well. For-profit
schools offer unique advantages as well, including a focus on
practical skills that lead to jobs and the flexibility to create new
programs quickly. In 2007, enrollment in the four largest forprofit postsecondary education institutions was approximately
310,000 for the Apollo Group (which includes the University
of Phoenix), nearly 275,000 for Laureate Education and 78,000
each for Career Education and Education Management.
Another for-profit company, Embanet, works directly with
nonprofit colleges and universities to help move them online
at no cost and minimal risk. The company markets the institution and its particular degree program (e.g., nursing, MBA)
and students apply to the program through the institution’s
regular admissions process. The courses are created by the institution’s own professors, while teaching assistants can help
teach and grade students, as usual. The institutions invest no
money up front and receive a percentage of gross tuition revenues. This model offers the potential to help nonprofit, more
traditional colleges and universities vastly expand their reach.
The advantages of for-profit and online education, as well
as expansion of the traditional higher education model, make
it possible for more people to change and improve their lives
through education. It all adds up to more human capital and,
likewise, a more vital society and nation. Indeed, the benefits
of education are accruing around the globe: the five countries
with the fastest-growing postsecondary enrollment are China,
Vietnam, Romania, Greece and Saudi Arabia.
Conclusion
American colleges and universities are the best in the world.
But the world is changing and leading institutions would do
well to consider what role they want to play in the global
world of higher education. Vastly expanding educational opportunity to reach the majority of learners—who cannot afford the luxury of a residential educational experience much
less pursue it full-time—is crucial because education is the
primary means by which we can confront the massive and
complicated problems facing humanity today. The current
state of technology allows for such expansion if we are willing
to pursue it with creative and open minds.
Stocks, bonds, roads, factories, equipment and other capital goods comprise only a small fraction of our national balance sheet. The vast majority of assets are in human capital—
the skills and experience of people. We need to nurture those
assets by giving every citizen access to lifelong learning. By investing more of the nation’s abundant resources in education,
we can help assure the future of our democracy.
r
Michael Milken chairs Knowledge Universe Education, a for-profit
company with worldwide operations in early childhood education
and distance learning. He is chairman of the Milken Institute, a nonpartisan, economic think tank, and co-founder of the Milken Family
Foundation, which focuses on reform of primary and secondary
education and recognizes outstanding educators. Milken is also
chairman of FasterCures, which seeks improved efficiency in the
medical-research process. More information can be obtained at
www.mikemilken.com.
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