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As we hurl into the Knowledge Economy, all the economies are
speculating upon their possible fates in the future, and what
would be their rightful places in the New World Order.
The modern economy is closely
linked to stocks as a major means of investments, and we have
seen from time to time irrational exuberance in stock prices
followed by corrections or sometimes even large scale crashes,
where large amounts of capital are simply wiped out. The
recent sub-prime crises and its roll-over effect have had a
chastening effect on investors. The hall of fame for stock
market manipulators includes controversial figures such as
Ivan Kreuger, Mike Millikan and our own Harshad Mehta and
Ketan Parikhs. Real estate also does not always give great
returns and it fact it was the erosion of real estate value
that triggered the loan defaults.
Contrary to what most of the
Indian middle class considers axiomatic, investments in gold,
real estate, stocks or mutual funds do not give great returns.
Great returns are always the result of investments in
education, acquisition of high value skills, and creation of
intellectual property by way of application of these skills in
creative and innovative contexts. Illiterate or uneducated
business leaders are a thing of the past. The current and
future leaders will be working at the frontiers of knowledge,
in science, technology including bio-technology and cutting
edge discoveries. Google is an example. There are many others.
Human capital, a concept
introduced by Nobel Laureate Theodore W. Schultz and
elaborated on by Nobel Laureate Gary Becker, is the notion
that individuals acquire skills and knowledge to increase
their value in labor markets. Experience, training, and
education are the three main mechanisms for acquiring human
capital, with education being primary for most individuals.
Education facilitates the acquisition of new skills and
knowledge that increase productivity. This increase in
productivity frees up resources to create new technologies,
new businesses, and new wealth, eventually resulting in
increased economic growth. Education is a "public good" in
that society benefits from increased education as well as the
individual.
An investment in education is
therefore the best option. Whether it is the education of your
children, your own education or the investment in the
education of the community, they all yield better returns than
any alternative investment. And of course you can always
invest in creating or promoting organizations that create,
design, develop and deliver educational products and services.
At various points of times in the
past, competitive advantage has accrued from domestication of
animals, harnessing various sources of energy, developing
successful business and governance model, but in the post WTO
post Internet continuously flattening and shrinking world, the
strategic advantages will come from continuous creativity,
innovation, efficient strategies of creating and deploying
intellectual property, all of which will flow from the ability
of a population to use education effectively.
As of now, high quality and modern
education was useful to only a small proportion of the
population, and was fulfilled by the classical traditional
tribal way of education. The system looked for naturally
occurring good learners, naturally occurring researchers and
knowledge creators (faculty), put the together on nice
campuses, and hoped that good education would happen. It
happened and there are a few splendid examples of the success
of this model all over the world. The key word here is 'few'.
And we could add the phrase 'and far between'. The problem
with the model is that it is not replicable. It is not
scalable in any meaningful terms. And lastly it is not even
sustainable. Somewhat along the principles of increase of
entropy, most splendid Institutes lose their luster over a few
decades, if not earlier.
In countries like India, a huge
dose of over-regulation ensures that they do not stand a
chance of survival.
And herein lies the opportunities
in education. One can draw an analogy between the Government's
efforts of providing drinking water or electrical power to
that of providing education. For both water and power, if a
consumer wants to be able to use it meaningfully, additional
arrangements have to be made so that the water is potable, the
electricity is available and the education is usable.
It is generally emerging in
various studies that only about 40% of MBA's are employable,
only about 25% of Engineering graduates are employable and of
the General B.A.,B.Sc. or B.Com graduates, only about 5% are
employable. So, again either the parent, the learner or the
employer has to make the additional effort of making them
employable. One idea that could help is like the statutory
warnings on Cigarettes, there should be a statutory warning in
all University announcements and brochures, web-sites giving
full disclosure of the unemployability ratios of their
graduates over the last 2 to 3 years. This information should
be mandatory under the RTI Act. Why on earth, should
taxpayer's money, and a special supplement collected under the
education-cess be spent on creating unemployable graduates?
Maybe there should be a mandatory
requirement of a warning sign at the entrances of Universities
and on all their documents like those required on cigarette
packets along the following lines "Investing 3 years of your
youth in this campus is likely to make you more unemployable
than you are now."
The biggest opportunity in the
education business is to augment the employability potential
of such people. Like the old adage that prevention is better
than cure, there could be an even more huge opportunity in
preventing unemployability, by appropriate education and
training. The opportunities for employment would not come
through the Rozgar Yojana schemes of the Government, but
through empowering the young boys and girls with skills that
are required by the global work-force.
The amount of education acquired
by workers has an important impact on labor market experience.
The most direct way that education affects the labor market
experience of workers is by increasing their productivity,
thus increasing their earnings. The more education individuals
acquire, the better they are able to absorb new information,
acquire new skills, and familiarize themselves with new
technologies. By increasing their human capital, workers
enhance the productivity of their labor and of the other
capital they use at work.
Calculating the return on
investment in education has intrigued economists since early
this century. Initial analyses of the effects of education on
earnings were done by estimating tuition and foregone costs
for given levels of schooling and then discounting the
earnings differentials between workers at those different
levels. Most estimates showed rates or returns on education
comparable to rates of return on investment in physical
capital.
The amount of education an
individual receives not only affects his earnings, but the
quality of his employment as well. In his book Studies in
Human Capital, Jacob Mincer stated that educated workers have
three advantages relative to less-educated workers: higher
wages, greater employment stability, and greater upward
mobility in income. Increased earnings by workers with higher
education levels are a result of two factors. First, as
discussed earlier, increased human capital results in higher
productivity that allows workers to extract higher hourly
wages. Second, increased education increases labor force
participation, decreases the probability of unemployment, and
decreases job turnover. The result is that highly educated
workers labor a greater number of hours annually for higher
hourly wages than their less educated labor market
competitors.
Educational needs are not confined
to the traditional school and college going stage, but now
span the entire life-span.
We are now getting around to
accept that learning in the future will not be limited to the
compulsory school education, which is part of the Sarva
Shiksha Abhiyan, for all, followed by a tertiary education for
a few, but will move towards a life-long learning phenomenon,
with well demarcated stages spanning early childhood to well
beyond the standard retirement age. In other words life-span
learning will stretch from the cradle to the grave, from the
womb to the tomb.
The traditional Hindu life-span is
considered to be of 4 stages, Brahmacharya, grihastha,
vanaprastha and sanyas. Shakespeare in this stages of life has
categorised life as comprising 7 stages. A more detailed
classification of the stages of life could be as shishu, bala,
kishore, yuva, vayask, praudh, vriddha etc again probably 7
stages.
From a modern perspective taking
account of longer life-spans, rapid growth in knowledge,
obsolescence of erstwhile knowledge skills, and the need to
learn, un-learn and re-learn throughout the life, maybe we
could look at the continuum of life-span learning as
comprising the following stages :
1. Pre-natal, neo-natal and
pre-school learning : 5 years
2. Classes 1 to 5 of schooling :
5 years
3. Classes 6 to 10 of schooling
: 5 years
4. Senior secondary school : 2
years
5. Traditional University degree
: 3 years
6. Additional years in
professional education/ P.G. Degree : 2 years
7. Specialized
training/qualifications/ preparations for career : 2-3 years
8. First job adjustments : 5
years
9. Job changing period : 5 years
10. Settling down to a career/
lifestyle : 10 years
11. Mid-life crises : 10 years
12. Retirement Planning : 5
years
13. First phase of post-
retirement : 5 years
14. Second Phase of
post-retirement : 5 years
15. The final years : 5 to 20
years
The total need per person over a
lifetime is about 50 years compared to the minimal 20 to 25
years for educated persons now, that is almost a 100%
increase. Multiply this by the relatively larger fraction of
the population that needs to be educated, say about 70 crores.
And an average of about 200 hours of learning per year , we
have a need of 700,000 crore-hours of learning to be
developed. Even at a very modest average cost of Rs20/- per
hour of learning over the entire range, we are talking of a
market opportunity of Rs 14,000,000 crores. If this sounds too
much, just recall that a 2 year Management program to which
the admission ratio is a very small percent, the tuition fee
is Rs 11 lakh, and that too in a Government created Institute
in India, not at the London School of Economics. Therefore, if
anything the above is an under-estimate of the market
opportunity in the education sector.
As for the benefits arising from
having acquired the right skills, we only have to look at the
7 figure salaries being offered to the few students coming out
of the premier Institutions. For the ordinary, Ernst and Young
in a study some years ago had found that by acquiring basic
skills in English and the use of ICT, an average graduate
could move his income potential from the range of $50 per
month to about $250 per month. If he has skills in let us say
legal matters such as contracting, drafting or Intellectual
Property it can move up to several hundred dollars per hour.
India has over the last decades
initiated reforms. While we are still dragging our feet in
some ways, the fact is that India was one of the founding
members of the WTO, and education is one of the 12 services
that are covered under the services agreement, and within
education 4 modes of deliveries have been agreed, while
testing is also being actively considered as an educational
service. There is already considerable movement in promoting
'for-profit' education, and some members of the Planning
Commission have supported the idea. Of course a number of
people oppose it on some alternative philosophy. In any case,
in the education business opportunities that are coming up,
all economies that are making the transition to knowledge
economy (and who isn't doing so ?) need education desperately
in larger numbers.
Apart from the large foreign
players such as Pearson and Kaplan taking an interest in
India, apparently Mukesh Ambani has decided upon entering the
education space, and this will also transform the face of
education.
Access to funds should not be a
problem, as there is already a weary population disillusioned
by the traditional businesses. Funds from abroad are
accessible, and Indian ventures can also now invest and buy
companies abroad. So we have a tremendous opportunity of
really going fast, going worldwide, and creating another
success story.
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