On the latest episode of Recode Decode, 2U CEO Chip Paucek said the idea of taking college courses online has turned a corner. Starting with USC, Georgetown and UNC Chapel Hill, his company struck deals with name-brand graduate schools to get some distance from the connotation of “online college” as a huckster’s playground.
“The great schools weren’t doing anything online, and we really believed that you could do something great if you had institutional will to make the students equal, end the segregation of the online student,” Paucek said. “Give them the real rights, the real degree, the same quality, the same faculty, but you needed a great school to buy in.”
Ten years since starting the company, Paucek still says it’s “early days” for 2U — after all, some of its partners are hundreds of years old — but he believes that the future of higher ed has to be online. At the end of the day, however, the classes the company offers will depend on talented professors who may be accustomed to physical classrooms to teach them.
“There’s one particular professor in the Chapel Hill program that we really kept trying to push to do some of the newer things and he kept sort of insisting on wanting to do it the way that he’s comfortable,” Paucek said. “So we end up filming him and letting him do his thing. Even though it has fewer bells and whistles, it’s the second-highest rated course. Why? Because he’s brilliant.”
Below, we’ve shared a lightly edited full transcript of Kara’s conversation with Chip.
Kara Swisher: Today in the red chair is Chip Paucek, the CEO of 2U. It partners with colleges and universities to offer online programs. He co-founded the company more than 10 years ago. Chip, welcome to Recode Decode.
Chip Paucek: Oh, thank you. Thrilled to be here.
Good. We have a lot to talk about. I was just telling you, I was just interviewing the head of the World Bank, so you’re coming off of a thing. But one of the things he was talking about was online stuff. He was very interested in that and not investing in bridges and tunnels, but more in those kind of programs. And one of the things he noted to me was that he got the head of Dubai to pay for turning all of Sal Khan’s stuff into Arabic, to get it translated into Arabic, and he employed like 7,000 people at once, and that was not a World Bank program I would’ve seen before.
I just wanna talk a little bit about your company and then we wanna talk about where education’s going and where it should be going.
Well, I started the company over a decade ago. We partner with top universities to build really high-quality online programs.
Right. Where were you before that?
That’s a great story. So, this is the third venture-backed startup for me and the only that worked. So I produced a PBS television show for a really long time, my first one, and it produced a bunch of celebrities, which is really cool.
It was called “Standard Deviance.” It was middle school, high school, college courses taught by comedians and actors. So like, TJ Miller from “Silicon Valley.”
Yeah. And Kerry Washington from “Scandal,” so a bunch of great actors, but ultimately, the business wasn’t successful, so it didn’t return capital and whatnot, but I learned a ton. Then I ran Hooked on Phonics, so I was CEO of Hooked on Phonics for …
We all remember that. Explain what Hooked on Phonics … I know what it is.
Hooked on Phonics is a reading program for kids. The famous one with the infomercials. “Hooked on Phonics worked for me.”
Yeah. It was like Kars4Kids. You remember them.
I think I was on QVC like 35 times or some nonsense, selling Hooked on Phonics. So, yes. I’ve had an interesting career, all in education.
Where did that go? Where did Hooked on Phonics go?
Hooked on Phonics has been through a bunch of different owners. I honestly don’t know where it is now. I left to start 2U. It was called Tutor at the time. So, my career has been all in education, except for one stint where I ran a U.S. Senator’s reelection campaign, Barbara Mikulski from here in Maryland.
That’s my backstory. I get, interestingly …
Sorry, why did you run Barbara Mikulski’s campaign?
I thought you’d ask that.
I haven’t thought about her. Man, she is something.
Right out of college, I graduated from GW, and right out of college, people forget how rough the job market was in ’92, and I got a job working for Barbara Mikulski as, basically, her assistant scheduler, which is the funny … it’s like the worst job on the Hill because basically all you do is say “no” because the scheduler takes the yeses. I got to know her really personally and when I started my first company, she’s like, “Why are you leaving?” and I gave her a business plan. Next day, I come in and — one of the cooler days of my career — there’s a Senate wax seal envelope and I open it up and there’s a check. And she became my third investor in my first company.
Wow. Oh, cool.
I’d go to the Hill every quarter to tell her what was going on in the company. Ultimately, I didn’t make her any money.
Oh, poor Barbara.
And then at the end, she asked me to come and be her deputy campaign manager, so I co-ran her campaign in 2004. Yeah, 2004.
Oh, wow. She was a great politician.
It was an incredible experience. And then I started 2U [after] leaving Hooked on Phonics.
What was the impetus for it? To teach, right? To find new ways of teaching? If it was 10 years ago, it was early days.
It was very early days.
I remember Miles Gilburne had one, a reading one. There was a lot of early, early versions of this.
We really believed that the world was ready for really high-quality online education, but people thought we were kind of crazy. People thought we were loons, honestly. At the time, no one was doing anything online from any of the great schools, so I would argue it was like the first wave of online ed where it was all for-profit, and I’m sure we’re gonna talk about that. But for-profit education has a bad rap for a reason. For a long time, it wasn’t particularly very good.
Right. University of Arizona or whatever.
You mean University of Phoenix.
Phoenix. Sorry, yeah.
And Phoenix was better than many of them.
Yeah, but there were lots of those.
There were lots of those.
The great schools weren’t doing anything online, and we really believed that you could do something great if you had institutional will to make the students equal, end the segregation of the online student. Give them the real rights, the real degree, the same quality, the same faculty, but you needed a great school to buy in. And it’s not obvious why they said yes, but we were able to convince University of Southern California to sign up with us, and then Georgetown, your alma mater, and then University of North Carolina-Chapel Hill.
What was the pitch during those days? Harvard and MIT were relatively early, though it wasn’t 10 years ago.
No, really, at this point, USC and Georgetown and Chapel Hill, they all took a huge risk that they didn’t have any data to support the decision. The pitch was, this is where the world’s gonna go and we really believed it could be great.
The university had to be convinced, first of all, that it was gonna be extremely high-quality, that this wasn’t gonna be some dumbed-down version of what they’ve done because. If you think about it, companies don’t last this long. My youngest university partner is 12 years older than Walt Disney. Companies just don’t last this long, so be really careful about that brand experience and the high quality and delivering the student outcome.
We were pretty passionate. We were able to convince University of Southern California first to give it a shot, and then quickly thereafter, Georgetown, and then after that, Chapel Hill.
Explain the initial offering.
The initial offer was, we’re gonna bring you online, 2U will be behind the scenes. What’s interesting is most people have never heard of the company even though we’re four-and-a-half years public and one of the better-performing technology stocks, because my job is to work behind the scenes to promote and support Georgetown and USC, not 2U.
The pitch was we’re gonna do a bunch of things that you don’t particularly do typically or do that well. You’re gonna do all instruction. You’re gonna grant the degree. You’re gonna make the admissions decision in terms of who gets in. You’ll do all accreditation. You’ll do everything that you’d want your university to do, so it’s like the real thing. And I’ll provide the tech platform, all the student support, all the faculty support, things like clinical placements.
As an example, one of my degrees at Georgetown is a Master of Science in Midwifery. You wouldn’t wanna go to the midwife that delivered the virtual baby, right?
No, not at all.
We have a huge clinical placement network. Back then, that was all something that we had to build. I give those early schools a ton of credit because we weren’t very good at it in 2008 and we had to learn.
So the pitch then, one of them … I was just at a university the other day and someone, I think it was the head of the university, was like, “We’re not gonna have this school in 30 years.” He was talking about various different things. And you see all these iterations, and we’ll get to that later. But when you were selling them on it, obviously they wanted more students in the doors, not outside the doors or coming in.
Right. But the key is the right students for them. In other words, what they represent in the community, the quality of student, the quality of faculty that they’ve built their history on. And in the case of Georgetown, it’s 100 years older than Coca-Cola. You’re talking about some of the oldest standing institutions in our culture.
1876, no, I know.
If you look across my portfolio, like Yale is 75 years older than America. I mean, these schools, pretty credible.
But what was the pitch to them for you? That they needed to have more students or that they were missing students or what?
Expand their mission and reach and drive new revenue for the school. It’s both … it’s sort of a combination of mission and dollars. Sustainability is not optional, so it needs to all be sustainable and work, but it was all about quality to start.
So not anybody could get in.
No, and I don’t make that call.
They make that call.
Right, of who’s gonna get in.
Now, the business for 2U is we stand behind the scenes, we share tuition revenue over a long contract. My shortest contract is 10 years, they’re non-cancelable. So it’s a non-trivial decision to do this on both sides. And the reason is, I’ll invest about 10 million of net-negative cash over the first four to five years of that 10-year life, before I swing to 2U’s side to profit. The university is typically good in about a year, but the money is secondary. First and foremost, will it work? And if you look at online education, unfortunately, a long history of not working for people, necessarily, the student outcome …
Well there’s different types, we can talk about the different types. But the getting in part is that this would expand their student body. For people that couldn’t go there or …
So I guess I would say, why should you pick up your life, quit your job, and move to attend a school — grad school, these are all graduate programs — why should you pick up your life, quit your job to attend if you could get everything you would get from a school like USC, but do it in your local community at that quality level, with that rigor, with that affiliation, like you’re becoming a Trojan, a Tar Heel, a Hoya, not just a random 1 and 0.
So one of the things that we brought to the table that at the time people thought was truly idiotic was live classes. Our average class size across the entire portfolio is today about 14 students. So you’re talking about super-intimate live classes with the faculty, instead of just being fully asynchronous. I hate the term asynchronous because people often …
Explain that to people.
It means like, the canned lec … In an asynchronous program, you never …
You watch a lecture.
You watch a lecture, basically.
And then you answer questions based on …
In the 2U programs, you watch a lot of pre-recorded content, but then you go to class once a week with your faculty and your fellow students.
Right, and those are all online students?
So you’re not … We don’t put a camera at the back of the classroom, the physical classroom, because if you were going to make a movie out of a play you wouldn’t put a camera at the back of the theater, you’d just have a crappy movie. So you make a movie, not a play.
So when you’re producing for the online environment, you can do a bunch of things that wouldn’t just be recording the professor. And we do that. But then you go to class, and then you do your clinical placement. So when you put that all together, you’re talking about high-quality student outcomes, high-quality graduation rates, board pass rates.
In the case of Georgetown, we really — even after we fully launched the program, we’d been running it a couple years — when we really captured the minds of the faculty was when the first set of graduates, which was a big number, passed their boards at very close to the same rate as the campus program. That was where … that’s the rubber that meets the road.
Right, very close but not quite.
The on-campus program at the time was high 90s, it was like 99 point something. And we were like, half a percentage point lower.
So what kind of people wanna do this? What’s the thing? That you just don’t want to leave your town or …
Well, the biggest cost to graduate education is the opportunity cost. So most people, if you’re gonna go to grad school, even like an MBA, if you’re going to a campus program you’re typically quitting your job and you’re going to campus for two years. Whatever you’re making during that two years, you’re typically either borrowing or getting from family. So the people across the entire portfolio of 2U’s programs — whether it be Speech Pathology or Physical Therapy or Data Science, sort of using extremes — they’re typically employed and they stay employed. So you’re able to continue your career, building your career or the next step in your career, without sacrificing the current job.
So on balance, it’s typically a slightly older student. But I think we’re at the very front edge of this. It’s my belief that all of graduate education is gonna go this way, it’s just the value proposition to the consumer is so much better. I feel like, not that I’m gonna get out a joint and smoke it here …
Oh, we don’t do that.
But I feel like the Elon Musk/Tesla stage of life is the … Like, electric cars, you’re at such the early stage of the market, I really believe that’s where we are in online education. It’s very early days. So we think all of it will go online over time, even disciplines that you wouldn’t immediately expect.
They could. And we’re gonna get to that in a second. So the people that wanna do this, what do they typically pay? The tuition cost? No, because there’s different tuitions.
The tuition is the same price as the campus price.
Oh wow, okay, all right, okay, so it could be super high. And are scholarships available in the same manner?
If there are scholarships, most of graduate education is not … we actually … 2U deploys quite a few scholarships to track different groups of students. But overall, graduate education is either self-pay or loans. So if the campus tuition price is a certain price …
$5,000 or whatever, it’s not $10,000. Twenty?
No, most of the programs, like an MBA will cost you somewhere between, on the low end let’s say $55,000 and on the high end $100,000 for the full program. And so the online program …
Right. That’s two years, right?
That’s two years.
So that depends on the school. But you don’t have your room and board, and you don’t have … you know, you’re employed during that time. So the debt burden to the student is substantially lower.
Right, right, right. And then getting in, how do they split between it? Does that open their student body amount that they can allow in? Correct?
You’re talking about significant size increase for the school. Now, you’re not talking about taking a school from 200 students on-campus to 10,000.
But the typical 2U program will enroll somewhere between 300-500 new students per year for the school. If you look at a program like Georgetown, the Nursing program at Georgetown was quite small in that case.
Yeah, it was.
‘Cause most graduate education, most of the programs …
I lived with Georgetown nurses.
Oh you did?
Yeah, they were my roommates. They were crazy.
Well, that’s a fabulous school.
They’re wild. Nurses are crazy. They work like hell, but they also …
We have a lot of nursing programs, and we have three …
Talking to you, Kate Curran. But go ahead, keep going. Going back to the Nursing, but let’s not discuss partying nurses, but go ahead.
This is awesome. So I would say the individual programs, you might have a student body of 50, 100, 200 students. And then in the case of our size, you get 300-500 per year, so you would have a student body between let’s say 500 and 1,000. So it’s a significant expansion for the school. It’s a good revenue source for the school. But it’s gotta work.
Until we have proven that we can create really high-quality graduates with good jobs and the student outcome side, no one would have continued to purchase …
And when you’re saying they have to do special classes, why do you have to segregate them? Again, I know you don’t want a camera in the back, but what’s the thinking behind that? Because that is kind of a different student, right?
Well, offering a really intimate experience where you’re gonna be with your faculty. I mean, the faculty in these programs, you don’t get to Georgetown or Berkeley or Yale or any of our schools and be faculty there without being pretty exceptional.
So having that faculty time … I actually took our MBA program, so I graduated, I’ve gotta be one of the only people that’s done an IPO while being in an MBA program, by the way. I didn’t do it to eat my own dog food, I didn’t do it to talk about it, I didn’t do it for the Hair Club For Men …
Who did you take, at which school?
And it took me four years, so I was like the longest-standing student in the history of Kenan-Flagler Business School. But kidding aside, having that experience, I could tell you: From the standpoint of the faculty interaction? Huge part of the value proposition. But then the student interaction, you remember your fellow students even more than you remember your faculty, from wherever you went to school.
So that intimacy of the online environment, we have a bunch of marriages that have happened in the programs, so people meeting in the program. We’re not a dating service, but …
What are you, Tinder? We’re gonna get back to that.
We are not education Tinder. But the fact is, you do meet people and you become close to one another and you learn a lot from one another.
We’re here with Chip Paucek, the CEO of 2U. We’re talking about him taking a course, of getting an MBA. What did you do with that then, did you start a company? No, I’m kidding. Why did you take an MBA course?
Eh. My wife and my board asked me the same question when I told them I wanted to do this. They both thought I was a little insane. I had been a liberal arts graduate, so just to get into me a little bit, first-generation college graduate. Got to GW, got a Pell grant to go there.
Higher ed completely changed my life, it’s hard to overstate. Met my wife at GW, we’re still together 28 years later. GW couldn’t have changed me more, but I was a liberal arts major, and I had never taken a single business course. And I get out of college and I start a company, and I just really wanted it.
I had read the balance sheet for a long time but I had never made one. So Chapel Hill had been an aspirational school for me growing up, so I really wanted to do this.
Did you not get in?
You know, it’s interesting. I only applied to some schools in Florida, just to give you an idea, I’d been out to Florida three times in my life. I bought my first winter coat of my life with the guy who’s now my general counsel, at GW. So I hadn’t seen much of the world, but the one place I had seen, is I’d taken …
UNC. It’s a great school.
Well, no. I’d taken a close-up, one of those Presidential Classroom type things, in D.C. So I’d seen the D.C. schools.
So I applied to GW and Georgetown and American. I didn’t get into your alma mater. I got into GW.
It got harder after the basketball thing.
Well, you know, GW today, it’s unbelievably intense.
I wouldn’t get into Georgetown today.
I wouldn’t get into GW either, today.
Mine was a backup school. Georgetown used to be a backup school.
That’s funny. Where was your …
I didn’t get in everywhere else. No, I didn’t get into Stanford. I didn’t apply to too many colleges. My brother was at Stanford.
I keep telling — my son now is in the process — I keep telling him that there’s so many great schools and I’d be thrilled if he went to any of our partner schools, they’re all pretty exceptional.
Yeah. I’m gonna try to find a way to buy a gym or something for one of them, for my kid. I’m kidding. Sadly, I did not take that job at Amazon when I was offered it 20 years ago. I cannot do that this time.
In any case, let’s get back to online education. So you’re being the back end of it. Let’s talk about the landscape of where we are right now, because there’s so many MOOCs, I can’t even remember, I just called them MOOCs just now. Multi …
Massive open online courses.
Well, it’s a little bit of a “whatever” there.
Yes. Let’s talk about each of them, and then there’s other things, like LinkedIn bought one that was advanced.
Let’s go through each of them. So can you split them up just to where we are in online education?
I would talk about three waves. The first wave I mentioned earlier was the for-profits. Unfortunately, not all of it worked, which by the way, is not good for America.
Why is that? Explain what they did.
Well, the first schools to go online were not the schools that we all know. They were all for-profit schools that were built to try to serve a much wider group of people. And we need more education, not less. We desperately need more college attainability. People need the access.
That’s not what some Silicon Valley people think. But go ahead.
Yeah. I’ll tell you, when I hear Peter Thiel talk about funding dropouts, you want to get me going?
Yeah. When I hear Peter Thiel talk about anything, I get going. So let’s not go there with Peter.
But the notion that somehow, most people … You need the access.
Yes, of course you do.
It’s crazy. Being a three-time CEO, this is the only one that worked. This one worked to the extreme, but my first one I ran for a decade and it failed. So when people are running around Silicon Valley talking about failing forward, failing fast, give me a break.
Not just that. I was with one of them and I made a Shakespeare reference and they were like, “What?” Like, “Oh my God, you didn’t finish college, did you?”
I keep blaming Facebook’s problems on the fact that Mark Zuckerberg didn’t take enough humanities courses. But I now believe it’s true, actually.
Well, when we are hiring today …
“Jean-Paul Sartre would help you here!”
We have 2,500 employees, and when we hire, right now critical thinking, reading, writing, making an argument, being persuasive …
Referencing Shakespeare or whoever. Or Toni Morrison or anybody.
It was interesting, because it’s absolutely the most important part, is having a widely read and widely referenced …
Critical. Even in tech.
Of course. Most of all in tech, because they’re in charge of everything.
Well, everybody loves to say, “We don’t need that now. We just need you to know the code.”
So there was first the for-profits, which are just down and dirty, just the way they are in the real world.
No. I think there was a lot of innovation occurring in the for-profit space. We wouldn’t be where we are if they hadn’t launched. Unfortunately, too many people selling a criminal justice degree, and it’s not obvious what somebody’s going to do with that. So if you get out and you have a bunch of debt and you don’t have an opportunity after, that’s not good.
Right, yeah. It’s like Trump University, for example.
Well, I’m not gonna go there.
Yeah, I know you are.
It’s a sham and they got sued. But anyway. So there are those, but Trump University was actually one of them, was one of the many. So then what else? Then MOOCs, right?
Yeah. You know what’s interesting, before the MOOCs, we’re already on the scene, just no one’s ever heard of us.
So there were people like me that were helping the real schools go online and offer the real thing.
Going towards real schools …
Yeah. The MOOCs were a moment in time where all of a sudden everybody got captivated that online was going to …
These were the schools themselves.
The schools themselves and the general … I was pretty surprised that the New York Times, where you’re at now, was writing about it every week, because we actually didn’t think that it was gonna fundamentally change everything. It did raise people’s attention that all of a sudden …
My biggest issue as a CEO is preconceived notions of online education are bad. People think it stinks. So having all of a sudden the word “Harvard” or the word “Stanford” or “MIT” appear around online education is a positive.
Right. And the way they did it is themselves, right? Correct?
No. There were a bunch of companies.
Oh, that’s right.
Udacity, Coursera, EdX. Some nonprofit.
I thought MIT did it by itself.
MIT did a bunch of things by themselves.
Yeah, that one course they did.
They did. But then they partnered with EdX which is partly owned by MIT. Harvard and MIT own EdX.
That’s right. That’s what I mean when I say they did it themselves.
They did. And then there are companies like Coursera or FutureLearn that offered massive open online courses as companies, and now those companies in some ways are trying to figure out how to turn into 2U.
Which is just white label, essentially.
It’s more that you’re offering something … It’s not just lifelong learning. You’re actually offering the real degree or a certificate, having achieved …
So these MOOCs are just taking courses.
They’re just taking courses.
Not the whole thing. Just taking courses. Or auditing, really, is what it was.
That’s right. With asynchronous interaction, or interaction through forums, or interaction with all of the people who were online taking the course but not personal interaction.
And then there’s continuing learning stuff.
There is. There’s a bunch of that.
Right. Like Lynda was that, the computer courses, a lot of them …
Linda. You probably heard of Udemy.
A company that just went public about a month ago that’s run by a very good friend of mine called Pluralsight.
And they … explain what those do.
Pluralsight is very intense technical training, you can think of it as Netflix for coders.
Yeah. Udemy is the same way, right?
So it’s very intense technical training, they IPO’d four weeks ago. So what’s interesting about ed tech is that one of the things that’s notable about our IPO, not to switch to that, is that first of all, most for-profit education hadn’t been successful, and there was really nothing like us on the market. And Wall Street likes familiarity.
So our IPO was like, we’re almost like the anti-unicorn. In some ways … I raised $102 million of venture capital and my Series D post-money was $280 million. Our IPO was half a billion. We didn’t get to big numbers until well into our public journey, so it’s a much more traditional story.
The reason I go there is, online education has had, it’s a tough road. What I’m proud of is, we’re paving a road …
But these advancements are interesting, because it’s the idea that continuing education is constant education.
You never stop.
And LinkedIn bought Lynda.
And then there’s ones that just help you play the banjo or learn Spanish.
Yeah. You’re probably talking about Masterclass, learn acting from so and so, learn dribbling from Stephen Curry.
Right. And then there’s YouTube. Which is just a big mess of videos on everything.
There’s a whole bunch of video on everything. But libraries have had a ton of books for years and years and years.
That’s a good way of putting it.
And you need it curated.
Yeah, no. They’re all on the floor. My kids use them, though, I have to say, to learn how to play Fortnite or whatever.
Well, but interestingly, our kids, same age …
You don’t have a degree on Fortnite, don’t tell me that.
You don’t have a degree in Fortnite, do you?
We don’t have a degree in Fortnite. No.
Because my kid would be summa cum laude.
But don’t you think that it’s just going the other way right now? Fortnite?
What do you mean? I don’t know. I’ve been through so many of these, I just don’t remember. There was vampires at one point.
In my life, my kids …
Angry Birds, another moment.
Yeah. Fortnite has been big.
Plants and Vampires, remember that one?
Plants and Zombies.
I like that one, personally.
I don’t care. I just hate them all. They’re making me buy another PS-whatever this week.
I don’t know. I’m not doing it. I’m declining. And when you tell them, “Why don’t you want the old one?” Oh no. No.
Anyway, let’s get back to … So there was all these different kinds. But they’re not any one thing. What do you think is emerging? The idea of a degree system?
I firmly believe that over the next 20 years, this is the way you will get your degree. Even in something like the MD. We firmly believe that the value proposition is just better for the student.
Right. And explain why you think that. You’re making this bold prediction that nobody will go to Harvard.
Well, if you can get everything that you would have gotten in the campus program, including the affiliation with the school, which is something I feel like gets left out a lot …
Sure, “I went to Georgetown.” “I went to …”
Well, more than that. I’m a Tarheel. I didn’t just go to the school. An example of something we do in these programs is we do these immersions, where students go physically.
Which is a good idea.
Well, we thought it was really a bad idea in the beginning. And Chapel Hill was like, “Nope, we’re gonna do it.” And we were like, “You can’t do that, you’re taking away the one thing that we’re selling, which is that you don’t have to go.”
We were totally wrong.
Just for a short time.
And they were so popular that they had to increase the number that they would allow students to take for credit.
Like for a weekend.
So you show up and there are 500 students dipped in their Carolina blue, going to the Dean Dome to have that shared experience.
Or being on campus with the Old Well.
And then there was another one, there was another university in San Francisco, and I’m blanking because I’ve written about it before, where they’re a smaller university. University’s created from nothing.
That’s another friend of mine, Ben Nelson, the entrepreneur.
Yeah. That’s a different way. That’s going there.
No. Well, part of it. It’s blended. And you can argue everything I do is blended, because you’re putting somebody in to do their clinical.
But there’s a couple Minerva-like programs.
There are. There has not been — college replacement, which is what you’re talking about now.
You can’t really name one that’s really worked.
Yes. Because it’s a degree from Minerva, right?
It’s hard. It’s a long putt. Now, to give them credit, what I love about …
No, they’re very good professors, it’s very interesting.
But what’s interesting there is that they’re trying to go after a big idea.
And I feel like ed tech’s been plagued by too many people doing small things.
You need some big, bold ideas.
All right. So the idea is that you get your degree. So what happens to colleges? Because one of the issues I know with colleges, it’s increasingly hard to get into colleges, and yet a lot … It’s only a small group of them it’s increasingly hard to get in. And then there’s a vast amount of universities and colleges that have a hard time attracting students.
Yeah. So I personally believe that those, the latter part, is over-reported, and if you look at the top 500 schools, generally speaking, tons of demand for the undergrad level.
You and I are sitting here saying we couldn’t get into Georgetown or GW today. Schools that weren’t aspirational when I was growing up are now completely aspirational. There’s so much worldwide demand for those schools.
Now, if you’re a small, unbranded private liberal arts college somewhere in the country that no one’s ever heard of, you can’t be charging the kind of prices you are and have that be sustainable.
One of the things we feel like we’re bringing to the table is, sustainability as part of the ecosystem’s important. My company’s doing well, the university’s doing well. Why? Student wins, university wins, I win. It’s pretty simple. So if the student doesn’t win, nobody wins. But I also have to make sure that the university has a strong, sustainable operation going.
So from a cost standpoint, we actually do think that long term we can have a really significant impact both on the overall student cost and on the actual cost of tuition.
So why at all have the gathering places of universities? Do you feel like it’s gonna just not have them? There’s gonna be a Harvard, right?
Yeah no, actually, I believe the campus programs will continue to exist for a really long time.
One of the things that’s tricky about it is, the world can’t pick up their life and go to Stanford. That’s not most people’s experience. Most people, most of undergrad to be clear, is not the person going to Georgetown or the person going to Stanford. So over time, how do we serve that population?
And serve them with something that’s …
But you only do graduate programs.
Yeah. We’ve got some cooking.
Although there is the experience part of it that people want.
There is. But we do believe that there’s a way to accomplish that in the same way that we’ve done some of the graduate programs.
So doing graduate is only because those are people in the working … and they want to do, they would do say a Wharton executive program, or things like that.
Yeah. The Wharton executive program is one way to think about it. Our Berkeley data science program or our Harvard business analytics program, those are all really good. But there’s also a huge shortage of speech pathologists in the world. When my youngest …
So you could start targeting those.
We do today. So we do speech pathology, we do physical therapy, we do occupational therapy, we do social work. We do public health. Those are all really attractive.
We’re gonna talk about the tech about that, deciding what jobs should be done. Because you could often go, “You don’t want to do that degree, you don’t want to go over here. Here’s where jobs are.”
We try to focus only on those, as a company we have choices as to where we can put our capital. So we try to put our capital in places where …
The jobs. So you’ll have good outcomes.
Talk about the technology of where we’re going with this. Right now it’s on computers, right? People look at it on computers, or … ?
It’s almost entirely mobile at this point.
Mobile. Oh, they just go on their phones?
Yeah. Well, their phones, their iPads.
So, mobile’s huge, because we have a mobile workforce, so …
Right. They’re sitting in the park, taking …
Now, we did a really interesting deal with — you might have seen something about it — with WeWork where every student in every 2U-backed program can go to any WeWork on the planet at no cost. Sort of breakthrough opportunity …
It’s a place to go and do their lessons and stuff like that, and sitting there.
So the tech, you know, it is mostly mobile at this point, now you of course can do it on your laptop.
Is it more on iPads or phones?
Quite a bit of both. Phone’s getting pretty big.
Yeah, I guess you’re right. With this new giant iPhone coming …
The live classes aren’t as good on the phone — you know, those little tiny people — but on the iPad, it’s great.
iPad, it’s great. Or they can do it on a computer?
They can do it on computer.
Where is that going? Where are we with VR for you, for example?
It’s tough. The number of VR startups in education that are dead now… Education is not the place where you can reach the mass consumer that you need to popularize it.
It makes total sense, doesn’t it?
It makes sense for things like …
Well, our physician assistant program, which was the first-ever online physician assistant program, it was with Yale. So we built a cadaver unit, so I could tell you all kinds of things about cadavers, we had to deal with cadavers.
My brother’s a doctor, he used to send me pictures of it. He shouldn’t have done that, but he did.
Well, the cadaver unit, you would wanna see.
No. I did, I saw too many.
But so the important thing is creating that unit. That’s something that over time we do believe new technology will make it better and better and better.
Right. That’s in order to see it and feel like you’re there?
Yeah, but today, the reality is, having great instruction and having great faculty, and going physically and doing it is a big part of what we do. So we just passed 43,000 clinical placements, just to give you an idea of the scale.
Okay. This is anywhere? You could put them in any hospital near where they are.
We’ve done it in, now, 37,000 different clinics. So literally everywhere.
Where they go to do their different thing, whether a midwife or speech therapist?
Now you know what’s cool about that?
What’s cool about that is, think about the impact on the local community when they graduate.
Right, that they will have a job. They’ve worked there and stuff like that.
That’s the key.
I want to get back to VR and haptics and things like that. There’s obviously all that going on. How far away is that?
I think for education, today, it’s not a viable use case. Now, a company like 2U, as we get more successful, will be able to invest before others will. But I would say, it’s not like VR today has been wildly successful for anybody, and you’re not gonna see a hugely successful education use case to start it.
That’s right, exactly, it’ll be porn. I just took a VR roller coaster ride. It was in a roller coaster and you wore VR, so you were physically riding a roller coaster.
Right, it was moving up and down.
That was cool.
That is cool.
I liked it.
Was that at Recode? I didn’t see that.
No, it was in Hong Kong, I was in Hong Kong with my son, and I was forced to go to a theme park. But it was interesting, it was interesting. I’m more interested in VR than other people are. I just played a game, those things that are in malls now. They’re quite fun.
Yep. You mean like you sit in the thing?
I’m the only person who likes VR, really. And I used to hate it, now I love it.
Yeah. I think it’s a pretty long putt for education right now.
Another long putt, all right, you’re making golf references everywhere we go.
I’m not even a golfer.
Don’t birdie at me. Okay, so what technologies, it’s just mobile, mobile, right?
Mobile, mobile, mobile. Live, and a single 2U course has more video content than a season of “Game of Thrones.” So, you’re talking about a lot of stuff.
But not as many dismemberments.
Not as many dismemberments. Although in the physician assistant program, there’s quite a few dismemberments.
I interviewed the little guy that wrote everything. J.J., whatever. The guy who wrote “Game of Thrones,” the actual author. He has like 10 letters in his name, whatever, him.
I read the first one, then I punted.
He was fascinating, he looks like just the nicest little man you’d ever wanna meet. My first question was like, “What is going on in your sick head that you make up all of this?”
That’s some crazy stuff. Oh, it’s crazy.
You know what I mean? This guy looks like your grandfather, and suddenly …
It’s crazy, and we’ll eventually see the end of it in another seven years.
Allegedly. So you don’t see any technologies being something that would replace …
No, definitively, over time, like VR, AR, you will have an impact, particularly in the physical disciplines. But really right now, I’ll give you an interesting lesson from even with our current technology, there’s one particular professor in the Chapel Hill program that we really kept trying to push to do some of the newer things and he kept sort of insisting on wanting to do it the way that he’s comfortable. So we end up filming him and letting him do his thing. Even though it has fewer bells and whistles, it’s the second-highest rated course. Why? Because he’s brilliant.
What did you try to make him do?
We do a lot of tech-enabled video. So you’re in front of a lightboard, so they’re drawing on it and they’re illustrating a lot of things. That was an accounting course, in the accounting course, that’s super useful, because you’re moving stuff between T accounts. And he really wanted to do it sort of …
The old-fashioned way.
The thing about the old-fashioned way, you’re still opening the old-fashioned way to a ton of people that could never experience it. So that’s hugely powerful. But you know, he’s just an incredible lecturer and it really worked well, so it’s very highly-rated.
All right, last couple of questions. Where are these students from?
Mostly the U.S.?
Mostly the U.S. So the interesting thing, when I tell you why should you pick up your life, quit your job and move to attend … A lesson learned of 2U from our early days. We spent a lot of capital doing international marketing for our schools. The value prop for an international student is not quite as aligned. Why? Because you kind of want to come here. If you can afford it, you can get in and you can speak enough English, you typically want to come here for some time period.
Now, we bought a company last year in Cape Town, South Africa, so we now have 500 employees in Cape Town, South Africa, that offered something like 2U, but instead of for a degree, it’s for a short course. And at Code, Eric Rosenbach taught one of the courses at Harvard on cybersecurity. It made me particularly proud when you got onstage and said, “That was one of the coolest presentations we’ve seen.”
It was, yeah.
So the short course, you’re talking about skills attainment for truly a worldwide audience. Sort of stand out from the crowd, get a certificate.
Yeah, six to eight weeks, and an example of a course would be the Harvard cybersecurity course, or Oxford blockchain or MIT Internet of Things. Like skills attainment courses for the sort of corporate employee, or the lifelong learner. That is a true worldwide audience.
I did one of those. I actually took a train up to Philadelphia, when I worked at the Washington Post, an accounting course. It helped me catch a lot of terrible internet companies.
Well, if you want to take our blockchain course, I’ll get it for you.
Not today. But maybe. Not today. I don’t like school, I never did.
I kind of like it.
I got the heebie jeebies when I was over at Georgetown, because I was just like, “Oh, God, here.”
I mean, I like it enough. If you think about it, it’s kind of nuts that I actually did the MBA, and I got a lot out of it, I’ll tell you. Even though we were public through most of it.
I would take a poetry course, that’s what I would take.
So we’ve talked a lot about creative writing, and haven’t done it because we worry that even though there’s demand for it, we’re worried that somebody …
That it won’t place. Well, they won’t get a job anyway, so it doesn’t matter.
They won’t get a job doing that. So we’re worried, even though there’s a lot of people that really want it.
So is it mostly stuff that just is job focused?
Yeah, more job focused than not.
What’s the most unusual course you have?
The physician assistant program is pretty groundbreaking. You wouldn’t think of Speech Pathology or the Doctorate of Physical Therapy. That one’s pretty interesting for an online program. Our Data Science program at Berkeley was literally the first of its kind, no one had ever done Data Science. And that particular dean, she’s incredible, she basically pounded me to do it. We didn’t want to do it at first. This was way before data was hot. She insisted we do it and we eventually listened to her. Now, that’s super obvious that that was a huge win.
So to finish up, I want to talk about the broader aspect, finishing up. When you think about online education, what do you think the impact will have? Is it that more people are educated, or that people will go to colleges?
You may not have seen this, but something fascinating just happened, where Purdue University acquired …
That’s in Ohio? This is in Ohio, right? Where’s Purdue?
Purdue acquired Kaplan University, the for-profit, and turned it into Purdue Global. It’s sort of a notable moment, because you have a major state flagship embracing what would have been, and still is somewhat, controversial. Ten years ago, Kaplan was pretty controversial, but Kaplan is trying to educate a much broader …
It used to be owned by the Washington Post, Kaplan was.
They did mostly SAT, right?
Well Kaplan, way back, was test prep, and then over time got into becoming a for-profit university. So what I think is fascinating, having a state flagship purchase a former for-profit and offer that kind of programming more broadly, tells you where the world is going.
And does that impact your business? Eventually, you think about a lot of internet things, before it was done by a lot of people and everyone just had it in-house.
I would say, in general, we believe that that’s more good for our business than bad. It puts a lot of wind at our back as online ed gets more accepted. Once again, online education, people don’t think is any good. Over time, as it becomes more obvious to people, it’ll make our job marketing for our university partners easier. There will be some competition, but the market is so big. I feel like where 2U is right now is where Amazon was in the stage when they were adding the tabs.
Oh, by the way, Amazon’s getting into this business. I’m kidding. No, they will, what are you talking about?
Amazon will get into every business. But from the standpoint of our overall …
They would get into this business, wouldn’t they?
Sure, of course. Well, they already do internal corporate training. That’ll be where they start.
Right. Apple’s kind of in it, not really, it’s just university courses.
I think people want to receive their certification and their degree from Berkeley.
No, I get that, but you can see Apple, I mean, Apple’s had a history in this space but haven’t doubled down on it. They had Apple University.
Right, they’d have to figure out how to have all of the clinical apparatus and all of the other components.
Do you see those big ones getting in there, or buying their way in?
We do think it’s interesting that tech is waking up to ed tech. No question. So the Lynda purchase by LinkedIn, which obviously is now part of Microsoft, notable.
Yeah, yeah, absolutely. All right, Chip, last question. What’s the next course you’re taking? What are you getting a degree in? Nursing?
So I think my team and my wife and my family would kill me if I took a doctorate, but that would obviously be the next step for me.
Well, I did the MBA, so now I’ve got an advanced degree.
Okay. Do you need to be called Doctor, do I have to call you Dr. Chip?
You can call me Dr. Chip.
That’s good. No, I will not.
I will not do it. I will not do it. Anyway, this was great talking to you. It’s a really interesting discussion on where it’s going, because you’re right, it has changed so substantively in terms from the beginning.
But it’s really important.
Yeah, people don’t do it and think of it the way they should. I’m just thinking of my kids going to college and I’m thinking in a traditional way. I’m thinking my kid’s not going to college now, he’s just gonna do an online college.
They will, no, no, no, they will. But it’s interesting, as our company becomes more notable, so Valerie Jarrett joined our board. When she did, she said, “You haven’t heard of this company, but you soon will.” I mean, we feel like we’re starting to resonate.
We’re starting to resonate, you know?
And I guess I would argue that it’s early days, but it’s a huge opportunity. Because we just need more access to this kind of stuff, not less.
Great. Thank you so much. It’s great talking to you.