The inevitability of open and affordable learning solutions for higher education (and high school) markets can be explained by recounting a bet Warren Buffet made with hedge fund managers back in 2007.
“Warren Buffett challenged finance professionals in the hedge fund industry to accept a bet that, over ten years, an unmanaged S&P-500 index fund charging only token fees would outperform a set of at least five hedge funds chosen by investment pros.”
The bet, for $500,000, was accepted by only one hedge fund investor and just recently settled ahead of schedule, because the outcome was significantly one-sided in favor of the S&P 500 index over hedge funds. For the 10-year period, the investors in the selected hedge funds would have averaged approximately 2.2% earnings, while those investing in the unmanaged index would have earned 7.1%.
The hedge fund manager who wagered with Buffett said the high investor fees charged by hedge funds was a critical factor. It seems that hedge funds are a good deal for the people who run the funds, those who pass along inflated management costs to their investors.
As Buffett points out in his investment advice, in aggregate, and regardless of their intent to outperform the market index,“active” investors will achieve average performance. “However, these investors will incur far greater costs. So, on balance, their aggregate results after these costs will be worse than those of the passive investors.”
This story provides a useful framework for explaining why the time has finally arrived for affordable and open alternatives to traditional textbooks. Simply put, while traditional textbook publishers tack on high operational and technology-development costs to their content products. They also invest heavily in company/product brands and author name brands to differentiate themselves in a competitive market, a market in which a significant majority of the content (general education and core business courses) is already freely available.
The costs associated with these non-content investments are passed along in the content products of traditional publishers.
Fortunately, affordable learning content providers have proved that they can deliver similar content products (textbooks and online courses) without those unnecessary costs. By combining their central mission of providing truly affordable solutions with a focus on quality content and learning, affordable solutions providers are redefining the core textbook industry. Along the way, they are innovating publishing processes and business models.
The growth of affordable content providers is already having a big impact on the textbook market and, by 2025, these providers will drive the effective price of content for general education and core business courses to $0-$20, depending on the format and services provided.
That growth and that impact are why affordable content is ready to step from the fringe of the market onto center stage.
If you are new to open and affordable learning content solutions, here is just a short list of significant organizations and companies that are working to transform the industry.
- Lumen Learning
- Open Textbook Library University of Minnesota
- Open Course Library
- Lyryx Open Textbooks
In addition to these initiatives, there are many other instructor or discipline-specific efforts that result in excellent affordable content solutions. Two quick examples are the Open Text Bookstore for mathematics content and the recently published Core Economics open textbook.
If you have any doubt about the breadth and impact of this movement, simply peruse this list of open educational textbooks.
Over the coming weeks, I will write in more detail about the innovation of affordable content — from content and learning design to publishing processes and business models. In the meantime, if you want to learn more about the affordable content industry and how EdBooks is bringing innovation to the space, join us for our webinar Thursday, September 21, at 10:00 AM.