Monday, January 27, 2014

The barbarians are at the gate! Of universities, moats and disruption! - by Aswath Damodaran

In my last post, I attempted to break down the bundled product that comprises a college education into its component parts, and closed by arguing that the future of universities rests on their ability to preserve the competitive advantages that have allowed them to get premium prices for these bundles and that of online education entrepreneurs on their capacity to find chinks in the university armor. 
In this one, I would like to look at the competitive advantages that colleges/universities have on each component and how close (or distant) the online threat is on each of them. Borrowing from the terminology of value investing, universities have moats around their “educational castles” and the online barbarians (at least as seen by the members of the educational establishment) are trying to breach the establishment. Since so much of this debate comes from one side of this divide or the other,  I decided that it would be good to try to look at both sides.