Scott Galloway On How The Pandemic Could Disrupt Higher Education
FREDERIK PLEITGEN, CNN SENIOR INTERNATIONAL CORRESPONDENT: I'm Fred Pleitgen in Denmark, and this country is rapidly reopening its schools. Now, one of the things that you don't see in Danish schools is students or teachers wearing masks. It's something that the Danes don't believe in. But you do see a lot of hand sanitizing and lot of hand washing. This school, for instance, has these basins here, so children can wash their hands at any point in time. Also, there's a lot of taped-off areas to make sure that kids don't get too close to each other and keep that physical distance. Now, this school, in particular, is a really interesting one. Because of the physical distancing measures, they didn't have enough space for all the students to come back, so they actually moved some of their lessons into the local church. So the math lessons, from the church, with the teacher standing in the pulpit. And they even do some of the lessons, for statistics, in the local church graveyard, because there are a lot of numbers on all those headstones. And the Danish government actually encourages that. They say schools should do as many lessons as possible outside.</s>COOPER: CNN's Fred Pleitgen in Copenhagen. We're going to be showing you those type of dispatches, from around the world, throughout this hour to show how other countries are managing this, and how things could look in the United States come the fall. For now, here at home, The Chronicle of Higher Education surveyed more than 700 schools on their plans, and 67 percent, more than two out of three said they are working toward in-person instruction. Now, this week, Notre Dame University announced a plan to reopen campus for a truncated term this fall. Sanjay and I spoke with the University President, Father John Jenkins, earlier.</s>COOPER: Father Jenkins, to the parent of a Notre Dame student who asks, you know, how are you going to keep my son or my daughter safe this fall, what do you say?</s>REV. JOHN JENKINS, PRESIDENT, UNIVERSITY OF NOTRE DAME: You know, we're going to do everything we can, and we believe, consulting with the very best medical advice, and working over the next three months, to get all the details right. We can keep your son or daughter safe here on campus. We would not make that decision if we were not confident about that. We value the on-campus experience deeply. We care about the education these students receive. So, I think those two combined led us to this decision. And, as I say, the safety of these young men and women are our highest priority.</s>GUPTA: Father, you know, everyone talks about testing. Testing is going to be necessary. It's going to be a major component from what I've read of your plan. Do you have the capacity to test, you know, the student body? We're talking more than 12,000 people, obviously, faculty as well. Is that a -- is that a realistic, at this point, objective goal?</s>JENKINS: Let me tell you, Sanjay, if we don't have testing capacity, we won't open, you know, again, because that's a critical component. Everyone we've spoken to has given us confidence that we will. As you well know the testing -- test availability is ramping up, and ramping up rapidly. I believe we'll be there by the time we welcome students back. Again, if we can't do that, that's a critical component to success, we won't open. But I believe we will be there.</s>COOPER: And, as you know, a lot of, you know, educational institutions, colleges, secondary schools, you know, lower schools, as businesses, are trying to figure out how to make this work, so a lot are looking at your plan. If a student tests positive, what happens then?</s>JENKINS: We have space for isolating that student, who's positive, and quarantining those with whom that student has become -- come in close contact with. So, that's critical part two. We have to be able to isolate those -- those who have contracted the virus. And so, we have the -- we have to identify those facilities, and we have that in place.</s>GUPTA: You know, people are going to hear this. Obviously, people -- there may be some people who are just concerned. Either they have a pre-existing condition or, for faculty members, who -- who are vulnerable because of their age, how are you going to handle that? Do they -- do they have to return? Can they opt out? What is their status going to be?</s>JENKINS: Well certainly those who have, you know, a vulnerable status, we have to look at those, and allow them to teach in different ways. I believe we can structure the classroom and structure the interaction. So, faculty will be kept pretty safe. I think that's -- that's not as challenging. I worry, to be honest with you I worry more about the students because they -- it's very hard to keep them distanced from one another. You know undergraduates. But faculty and students, to provide the classroom that can keep them distanced, and, you know, if it's necessary, to conduct office hours by Zoom or whatever, we can do that. So, we haven't worked out the details. But we will keep the faculty safe. And if people have conditions that prevent them, certainly that will be something we'll take into consideration.</s>COOPER: You've instructed students and teachers to prepare for the possibility of, I'm quoting, unexpected severe new outbreak of COVID- 19, said could -- that it could mean a return to remote learning. And I know you've said that the odds are you will have positive cases on campus. Obviously, we hope that doesn't happen. What of -- I mean, is there an event that would trigger an actual shutdown of campus? I mean I guess if the spread continued, if there was a widespread outbreak, you would -- what would happen?</s>JENKINS: Yes. We -- that's what we'd have to -- we'd have to. If it were widespread, if the official -- the health officials in the region said "You have to shut down," we have to shut down. And what we've done is provide a way in which we could move quickly online. Now, obviously, there is sort of all sorts of gradeiations here. And if it's -- if it's single students, if it's 10 students, that's not a shutdown. If it's extensive, if it's in the community, that's a different story. And I will tell you. We have to work out. And we're in the process of working out what is the threshold for making that call, and we don't do it alone. We do it in conversation with health officials and with medical experts. So, we'll get there by that time. But we need to recognize that this is our goal. But if certain things occur, we may have to go to contingency plan.</s>GUPTA: We talked to Magic Johnson a couple weeks ago. We talked to the Commissioner of the MLB. Athletics is on everyone's mind and you can't help but think of Notre Dame and think of athletics, especially me as a Michigan guy, if you know what I mean, Father. But that does -- that does present a whole additional set of challenges, right? I mean limiting the spread of COVID-19 among athletes in that environment, what do you think? Academics, you've addressed. What about athletics?</s>JENKINS: Well, our first priority is the education of our students. So, that's what we focus on so far. But, you know, about athletics, it's something where we certainly thought about, and will think about more. Two things. I mean one is the actual game and the participants. And that's in itself is a challenge, but it's a more contained challenge. Limited number of people, testing we can -- we could do that. As you know, Major League Baseball is going to play without fans. That's a more manageable thing. So, the next question is well what about people in the stadium? And that's a -- that's a more difficult question, right, because so many people from so many places. So, that's something we're going to grapple with in every school, and indeed, every Sports League in America is going to grapple with that. I don't have the answers yet. Perhaps -- perhaps some spacing in the stadium, if we go ahead, would be possible. But I'd be speculating at this point. We just have to see what is possible. Our first priority is to get those kids in the classroom. But then, when we have clarity on that, we'll talk about the athletics.</s>COOPER: Well Father John Jenkins, we wish you the best in this. Thank you so much.</s>JENKINS: Really enjoyed it. Thank -- thanks to both of you.</s>COOPER: Let's look further now into the future of higher learning, and how this pandemic could be pushing it there. Our next guest teaches marketing at New York University Stern School of Business. He recently told New York Magazine that a reckoning is coming for colleges and universities in just a matter of weeks. He's Professor Scott Galloway. He joins us now. Professor Galloway, what do you think the future of higher education is, where you talk about this reckoning, what do you mean?</s>SCOTT GALLOWAY, CLINICAL PROFESSOR OF MARKETING, NYU STERN SCHOOL OF BUSINESS, AUTHOR, "THE FOUR" AND "THE ALGEBRA OF HAPPINESS," CO-HOST, PIVOT PODCAST: Well we have raised tuition rates 1,400 percent in the last 40 years. This is a time of year that's supposed to be a nervous but a rewarding time of year, where people figure out where they're going to school. And instead, it's become a time of year, where people try to imagine how they're going to take several hundred thousand dollars on in household debt. So, I think that, you know, we have raised -- when I say "We," I mean academic community, we've raised prices faster than healthcare. And at the same time, the underlying innovation, if you walked into a class today, it wouldn't look, smell, or feel much different than it did 40 years ago. So, I think we've kind of stuck out the mother of all chins and the fist of COVID-19 is coming for us. I think this involves huge disruption, and I think it starts this fall.</s>GUPTA: So, you think this reckoning was coming anyway, Professor? I mean, the pandemic just sort of pushed it over the edge?</s>GALLOWAY: Yes, if you think about it, COVID-19 is more of an accelerant than a change agent. And when you -- I went to UCLA and Berkeley on a total of $7,000 in tuition for undergraduate and graduate. And now you're looking at students who have taken on more debt and credit card debt, which results in household formation later, much more risk aggressive -- much more risk-averse in terms of the businesses they start, and families really suffering. This has been long overdue. There's a collective statement across America amongst parents watching their kids on Zoom going, "This is what I've been paying for?" So, you have -- think of another product that charges over $100,000 that gets 90-plus points of gross margin other than a pharmaceutical for a rare cancer. There's no product in the world, not Hermes, not Ferrari, not Apple, that gets these sorts of extraordinary margins for a product that largely hasn't changed in five decades. So, quite frankly, we have this coming.</s>COOPER: Do you think -- do you think some colleges realizing this, or fearing this, is -- that's one of the pushes that they want to get kids back on campus because they feel like the longer, you know, it's remote learning, or online, more and more people are going to say "What are we paying for?"</s>GALLOWAY: 100 percent. Just as stock market analysts are looking at companies that have the most cash on their balance sheet, we're going to look at universities. And the ones that have large tuitions, Tier 2 brands, and their primary value-add was getting your kid out of the house for four years to kind of marinate. When that experience goes away, you're going to see demand destruction like you've never seen. You're going to see the top-tier schools go into their waiting lists. They'll be fine. They'll clear the waiting list. There's never been a better time to be on a waiting list of a Tier 1 school, which will force the Tier 2 schools to go much deeper into their waiting list. And then the Tier 3 schools, Anderson, are going to reach into their waiting list, which they don't have. Of the 2,800 schools, the median endowment is $7 million, meaning a lot of these schools, if 20 percent or 30 percent of the students don't show up, which the surveys say they're planning not to do in fall, we could see 20 percent to 40 percent of universities start a death march similar to what department stores have done. Second tier universities are to education what department stores are to retail, and that is they're about to begin a death march.</s>GUPTA: This is provocative stuff.</s>COOPER: Yes.</s>GUPTA: And one of the things, Professor Galloway, you've also wrote about, you said that you think big universities are going to partner with Big Tech companies, I guess, like Google or Apple, whoever, to help them expand, not because they have to necessarily, because they think that there's an opportunity, I guess, these tech companies do. Is that right?</s>GALLOWAY: 100 percent. If you're Apple, or Amazon, or Google, you have this implicit agreement with the marketplace that your stock is going to double in five years, otherwise people will buy stock in Netflix or Salesforce. And in order to do that, Apple has to increase their topline revenue by about $150 billion over the next five years, which limits the number of industries. They have to go big-game hunting, and that literally limits them to government, defense, the auto industry, which is a low-margin business, and they will immediately zero-in onto, as they already are, healthcare and education. So, Big Tech is about to come into education, not because they want to, but because they have to. And the benefit to universities will be that if you're able to use Small Tech and Big Tech to effectively take 50 percent of your classes offline, that is effectively doubling the size of your campus. So, you're going to see a lot of universities leverage their brand, leverage their great leadership, such as Reverend Jenkins, and use technology to effectively double their capacity of their schools, which will let them lower their prices, increase their gross margin dollars. And this will have a hugely disruptive impact, again, on the culling of the herd, the culling of the Tier 3 universities.</s>COOPER: So, that's the -- the cost to college, I mean, do you think colleges then are going to lower their costs? And if you do, what do you see as the trigger to them doing that? Just -- just suddenly, they all have to start doing that?</s>GALLOWAY: Well, it depends on who we're talking about. So, let's look at the Ivys, which are more spectacle than historic. Only 64,000 students enrolled undergraduate at all eight Ivy League colleges, a half a percent of the 11 million kids at colleges across America. They're luxury brands. They're Hermes. Their benefit comes from artificial scarcity. They brag that they turn away 90 percent of their applicants, which in my view, is tantamount to the Head of a housing shelter bragging that he or she turned away 90 percent of applicants last night. They are no longer in the business of public service. They're in the business of finishing school for rich people, and some incredibly remarkable middle and lower income people. They will largely or most likely maintain their pricing power and double down on their exclusivity. The tier -- the big public schools, where two-thirds of kids are now enrolled, are likely, in my opinion, going to hold onto the script. The University of California, Berkeley will graduate more kids from low-income households this year than the entire Ivy League. And they will use technologies and opportunity to expand their seats at a lower cost. That will put cost pressure on the entire system. A lot of people are starting to do trade-offs around what is the certification and the education and a diminished experience worth. And this, like any other industry, is going to go through certain cost pressures. Name an industry that hasn't had to cut costs the last 40 years, and there's one, education. So, I think, at the very top, Anderson, they continue to be Hermes. They continue to have artificial scarcity. But everywhere else, you're going to see a destruction in pricing power. The companies that can expand their -- their margin dollars by larger volume will do so, which will create an enormous sucking, sound, and disruption, and chaos, at the bottom half of universities.</s>COOPER: This is the most interesting like five minutes I've had in a long time, and I wish this could go on longer.</s>GALLOWAY: Go on, Anderson. Go on.</s>COOPER: I would -- I would like to take your class. I know maybe that's the wrong message to leave this with. It's apparently it's all over--</s>GALLOWAY: Well for $7,000, if you get into NYU, you can take my class.</s>GUPTA: This could be a lot cheaper.</s>COOPER: Professor Scott Galloway, really fascinating. I want to read more of what you write.</s>GALLOWAY: Thank you.</s>COOPER: Because I just think it's -- it's a really -- it's opening my mind in a lot of ways. Thank you. I appreciate it.</s>GUPTA: Thank you, Sir.</s>GALLOWAY: Thanks.</s>COOPER: Yes. Up next, we want to take a look also the psychological impact from the virus on K-12 students, and the best ways that educators and parents can prepare children for their return back to school. First though, a report from our Paula Hancocks on students in South Korea, which has begun reopening schools.</s>PAULA HANCOCKS, CNN INTERNATIONAL CORRESPONDENT: I'm Paula Hancocks in Seoul. High school seniors have gone back to school this Wednesday across South Korea. And it really feels like a milestone in the country's fight against Coronavirus. Now, there were temperature checks at the front gate. There was hand sanitizer. There was social distancing in the classrooms, and also in the cafeteria. The desks, for example, in the classrooms had to be at least a meter apart. And here, in the cafeteria, you can see that every other seat has been blocked out, and you have these plastic partitions in between, to prevent any contamination. This is the one place on campus where students and teachers are allowed to take their masks off. Now, there have been some first-day issues. Dozens of schools in a City just West of Seoul had to close down after two students were found positive Wednesday morning.