Commoditization sets in but it is always an uncomfortable transition

From TaxProf Blog via Instapundit who notes "IT’S LESS FUN TO WORK IN A DECLINING INDUSTRY, AND ACADEMIA IS A DECLINING INDUSTRY"

Inside Higher Ed, Avoiding ‘The Big Quit’ in the New Year:

Colleges and universities saw greater numbers of departures last year. In Inside Higher Ed’s 2022 Survey of College and University Chief Academic Officers, 79 percent of provosts observed that their faculty members were leaving a somewhat higher to significantly higher rates in comparison to past data trends. ... The reasons cited for the departures include burnout, low compensation, lack of remote or hybrid work options, and recent racial and political unrest—which places pressure on workplace relationships and complicates people’s sense of belonging.

Tax Prof, links and quote several other sources to the same point - something is amiss in academia.  

I think Reynolds of Instapundit is on to something.  All companies and all industries experience an S-curve of development.  The following illustrates the sigmoid of development for all companies or sectors.  

 

Click to enlarge.

At the founding, the company consumes resources and rarely produces a profit.  Stick with it and focus well and you get to the first inflection where losses turn into profits.  At that point, you then usually have a marvelous ride up the the long leg.  

The sunk costs of the early investment are returned and, with sufficient capacity, you are throwing off cash left right and center.  These are the salad days.

At some point though, you get to the second inflection point.  Consumer taste shift, new competitors enter, new investments have to be made.  The upper bound of the s-curve is where commoditization sets in.  You have to watch every penny.  Carefully.  

It is still possible to make good money but through strict diligence and focus.  

Not like the long leg where you almost can't avoid making money owing to past beneficial decisions and good early investments.

Over the past century or so we went from 5% of the population getting a college degree to 30%.  We went from 80 million people to 320 million people.  Government funding, grants, and loan programs made it easy for people to find the money to attend University.  These were the long leg of the industry, the salad days.  

And just as companies on the long leg invest their surplus cash on large salaries and gorgeous cafeterias and wonderful health centers and gymnasiums for employees to stay fit, so to did universities indulge in ever fatter administrative bloat, nicer cafeterias and residential buildings, ever more PhD candidates while having fewer PhD positions, etc.  

Academia has hit the second inflection point.  They have to compete on price and quality.  They have to focus on costs.  The demand for a degree is shrinking.  The affordability and access to loans looks increasingly questionable.  There are not going to be the bodies with the dollars that made the 1980s-2015 run such a pleasure for so many academics.  

Universities are not done.  It is not a catastrophe.  It is just the entirely predictable (and it was predicted) discipline of the sigmoid curve.  Commoditization has set in.  Decisions have to be made but fortunately there are plenty of reasonably transparent transitions which have to be made.  

But tens of thousands of other corporations and enterprises have made the same transition in the past.  Transitioning from boon years to commodity years is hard but it is very doable.