Coding Academies and the Future of Higher Education

I recently had an extraordinarily interesting conversation with Darrell Silver, the cofounder and CEO of Thinkful, a coding academy that currently has about 1,600 students. It is doing lots of innovative things, explaining why much of traditional higher education is struggling. It and other coding academies provide hope that our nation’s future human capital needs can be fulfilled more efficiently and effectively than currently. The coding academy model reeks with incentives and innovation, keys to educational reform. Thinkful is an online institution, so it avoids enormous capital costs (expensive buildings empty for much of the year); it uses as its faculty part-time professionals who do this in addition to a regular job; it offers students a zero tuition option using an Income Share Agreement model that motivates both student and Thinkful to perform well. It is for-profit, adding incentives to deliver students services cheaply while providing them very marketable skills. It has only one job: train individuals to be more productive in the work force in a relatively short period of time. There are no sustainability coordinators or diversity and inclusion specialists—it is all about learning.

In short, it may be the future of higher learning in America. You can’t currently use a Pell Grant or get a federally subsidized student loan to go there, but Mr. Silver and his team have innovated their way around that problem and the restrictions involved with it, like a small handful of traditional schools (e.g., Hillsdale College) have also very successfully done. Thinkful is not alone: the coding academy business is booming, while traditional higher education likely will enter its ninth year of enrollment decline this fall.

Thinkful trains mostly young adults (the average student is about 30) in computer programming and related skills needed by American business. If you want to pay cash for their typical six month training program, you can write a check for somewhere between $10,000 and $14,000. But if you are struggling financially and if Thinkful believes you have the desire and the ability to succeed (and only 10 to 20% of interested students do), they will make you a deal: pay nothing, but sign a contract giving them somewhere between 10 and 14% of your post-training income for two or three years. It is the ultimate “skin in the game” model—both the student and Thinkful have enormous incentives for the student to successfully complete the program and get a job utilizing newly acquired skills. Unlike in traditional higher education, the student’s interests are very closely aligned with that of the school. Mr. Silver tells me about 85% of participants get a full-time job within six months of completing the academy’s program. He thinks a five to ten fold growth in scale over the next few years is highly reasonable and, indeed, expected.

Having high level computer skills is not for everyone, and, as an economist I am confident if there were, say, a 100 fold growth in similar coding academies over the next few years, we would be hearing about unemployed computer geniuses—supply would grow faster than demand, lowering the remunerative value of such training. But the coding academy model undoubtedly works in other occupations as well, for example learning skills like welding or becoming experts in hospital patient information system management. Some Thinkful students have bachelor’s degrees, although many have some college training (say two years) but quit college thinking they are not on a vocationally fruitful path and don’t want to run up more student loan debt.

Will traditional universities learn from this model? You would think so, but incentives are not well aligned for that to happen. As long as taxpayers are willing to continue to subsidize the currently horrendously inefficient and costly system, university personnel will fight to keep it, with its not over demanding work ethic, relatively high level of job security, etc. But public support is waning, enrollments are falling, and a birth dearth is confronting the academy (partly aided and abetted by academic indifference or even hostility for traditional family arrangements stressing child-raising). The traditional university is not dead, nor should it be in my opinion. But it needs to respond to this new efficient form of higher learning.