During a brainstorming session recently, a colleague asked me why is tertiary education so expensive?

I had to look at the tertiary education value chain and I came put with two or three reasons: [1] Lecture costs [2] Infrastructure [buildings, tools etc] and [3] maybe textbooks.

I’m not 100% sure of the answers, but Elon Musk was asked a similar question about what makes the manufacturing of rockets so expensive and I found his answer interesting.

He said something similar to below:

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Let’s say you are trying to figure out why is this part or product expensive?

Is it because of something fundamentally foolish we are doing?

Or is it because our volume is too low?

Then you say what if our volume was a million units a year? Is it still expensive?

If it is still expensive at a million units a year, then volume is not the reason why your thing is expensive. There is something fundamental about the design.

Then the focus should be on reducing the complexity of the design.

Find a way of changing the component to be something not fundamentally expensive.

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The main reason the costs should come down when volume increase is mainly the economies of scales that should kick in when volume increases.

Economies of scale are cost advantages reaped by companies when production becomes efficient. Companies can achieve economies of scale by increasing production and lowering costs. 

Basically economies of scale is a proportionate saving in costs gained by an increased level of production.

The thing with tertiary education or any business that offers expensive products is that if [using Elon Musk’s thinking] increasing the unit volume does not reduce the costs, then there is something fundamentally wrong with the design.

In South Africa, the cost of tertiary education is very high, however there is a high demand of tertiary education.

So high costs, high volume in demand but costs is not coming down. Then it is a design problem.

Why are the economies of scale not kicking in?

The challenge is how to engineer a product [eduction] to be efficient so that you can benefit from the economies of scale.

I’m still working on this design challenge at Lora, but Elon Musk’s thinking has confirmed my suspicion that there is something fundamentally amiss with the design of tertiary education.

My colleague thinks that keeping tertiary costs high despite the high volume of demand is a way to keeping it tertiary eduction inaccessible and elite.

You are not making it expensive because it is expensive, you are making it expensive because you want to make it elite and profit from the elitism.

This way of thinking is okay if you are Louis Vuitton, but problematic when you are offering tertiary education and the masses who need it cannot access it.

Education is a socio-economic need, not a want.

And herein lies a disruptive innovation opportunity: Redesigning tertiary education to make it accessible to the masses who truly needs it.

Ps: Please feel share your ideas of to redesign tertiary education to maximise economies of scale.