In 2018, a Harvard expert named Clayton Christensen predicted that 50% of the 4,000 colleges in the U.S. will be bankrupt in the next 10 to 15 years. The cause will be that online education will disrupt traditional face-to-face institutions, coupled with a decline in the number of college-aged students. There is just too much supply and not enough demand, and online education just exacerbates that imbalance.
My guess is that some of these colleges, their faculty, staff, students and communities would love to keep their doors open. Having worked in higher education for 20 years and experienced the cycles of enrollment, the playbook for survival is to add and/or subtract new academic programs or sports, shrink the number of faculty and staff, divest unnecessary physical space and find new sources of revenue. That last one right there is the Holy Grail that we have been dreaming about for decades.
Craig Ross is the Cross Divisional Budget and Facilities Officer and teaches the Finance of Higher Education Master’s course at State University of New York (SUNY) at Brockport. This post is part of CoinDesk’s 2021 universities package.
The problem with this strategy is the approximately 4,000 colleges and universities in the U.S. are fighting for the same pool of students, projected to decline an additional 11 to 15% by 2025. As a result, the colleges and universities that survive will not do so based on new academic programs or sports, but the ones that right-size and have the greatest reserves to weather the storm.
I have been at the table for these conversations or in the room at budget town hall or committee meetings, and in my head I have been screaming, just buy bitcoin!!! The harsh reality is that it is probably better for me to just keep that locked up right there in my head. If not, the silence in the room would be deafening unless there was laughter, which is nearly as plausible depending on the audience. If I suggested just buy bitcoin, it’s possible my office might be located in the basement before I knew it. I hope that I have a stapler, at least.
Eventually, I would have been proven right, as we know anyone who has held bitcoin longer than four years has never lost. Higher education is notoriously slow to adopt new technology or change, widely described as glacial. I’m not suggesting that higher education alter its entire business processes around cryptocurrencies and smart contracts, but in Michael Saylor-like fashion hold all of their cash reserves and endowment funds in bitcoin. As bitcoiners know, adoption is inevitable; by the time higher education catches on, the opportunity for large bankruptcy avoiding gains will be gone.
Other than higher education’s inability to enact change quickly, there are environmental, social and governance (ESG) issues that will make most colleges in higher education the last to act. Nearly every college in the United States incorporates environmental sustainability into their strategic plans, or have committees charged with doing so. This is a noble endeavor, but bitcoin and the FUD around mining is intractable and in direct conflict with the institution’s sustainability goals. Furthermore, approximately 1,000 higher education institutions happily subject themselves to the organization named the Association for the Advancement of Sustainability in Higher Education (AASHE) and their Sustainability Tracking, Assessment and Rating System (STARS). They proudly advertise on their websites a rating of bronze, silver, gold or platinum.
One of the criteria for how well an institution scores is based on how much of the endowment is invested in fossil fuels. In September, Harvard dropped all investments in its endowment related to oil and gas. Can you imagine the criticisms if they confirm that they have already bought bitcoin! Institutions that disinvest from fossil fuels in the name of environmental sustainability are making a monumental strategic error that will be hard pressed to unwind, thus delaying their entry into bitcoin. (To be clear, I’m not talking about the small investments schools have already made in bitcoin; I mean Michael Saylor-sized outlays.)
My favorite quote from MicroStrategy CEO and bitcoin advocate Michael Saylor is “you don’t have to invest all of your money in bitcoin, just the money you don’t want to lose.” If higher education institutions don’t invest in a Saylor-like fashion, Christensen will be right. In August of 2020, Wells College, located in upstate New York, and 200 other small, private colleges were in danger of closing due to the pandemic. At the end of 2019, Wells College endowment was valued at $27 million if its president had invested it all in bitcoin on Jan. 1, 2020, the endowment would be valued at $180 million today, give or take a few million. Anyone can be a Monday morning quarterback, and yes Bitcoin is volatile, but over time it is only volatile in one direction. Just buy bitcoin!
Another challenge in delaying bitcoin purchases is the endowment fund managers’ overall lack of understanding of bitcoin and self preservation. I say self-preservation because every fund manager thinks they can outperform the market, if not then why would we need them? If you were paying attention, bitcoin was the best-performing asset from 2010-2020 and is likely to be the best performing asset for the next decade. It’s going to be tough to beat.
In addition, there’s evidence colleges don’t understand the opportunity. For example, a recent article in Inside Higher Education reported that colleges are “lining up” to accept bitcoin, but one college is quoted as saying it “immediately liquidate the cryptocurrency gift, which mitigates any risk involved with this type of donation.”
I wonder if they have seen this website, which compares stupid sutff you bought at a date in the past and what it would be worth in bitcoin today. For example, if you bought bitcoin in 2011 instead of a $249 Nintendo 3DS, your bitcoin would be worth $13,458,000 today. I had that moment in 2017 when I offered to donate $500 in bitcoin to a college (which will go unnamed). The only stipulation was for them to HODL, to avoid their stupid moment. Well, thankfully, they didn’t take me up on the offer, and it’s worth about $4,000 today.
So, where is the Michael Saylor of higher education? Personally, I am hoping he or she is at a small, private college in a community somewhere in the Rust Belt or Appalachia, the underdog, like most early bitcoiners. It would be me – but I’m tied up at the moment moving my office to the basement.