I was just turned on to this Scott Galloway idea that the bottom is probably going to fall out of educational institutions in the future and only the top 40 or top 50 are going to survive and thrive. The whole article is interesting, and this wasn’t the crux of it but it was maybe the most intriguing part to me.
The strongest brand in the world is not Apple or Mercedes-Benz or Coca-Cola. The strongest brands are MIT, Oxford, and Stanford. Academics and administrators at the top universities have decided over the last 30 years that we’re no longer public servants; we’re luxury goods. We get a lot of ego gratification every time our deans stand up in front of the faculty and say, “This year, we didn’t reject 85 percent of applicants; we rejected 87 percent!,” and there’s a huge round of applause. That is tantamount to the head of a homeless shelter bragging about turning away nine of ten people who showed up last night. We as academics and administrators have lost the script. It’s not true of everyone. The chancellor at Berkeley is working hard to expand seats. I think the University of California and the University of Texas both see that it’s important that those seats expand as the population grows.
But the ultimate vehicle for a luxury item is to massively and almost artificially constrain supply. Birkin bags are $12,000 because they create the illusion of scarcity. I’ll have 170 kids in my brand-strategy class in the fall. We charge them $7,000 per student. That’s $1.2 million that we get for 12 nights of me in a classroom. $100,000 a night. The gross margins on that offering are somewhere between 92 and 96 points. There is no other product in the world that’s been able to sustain 90-plus points of margin for this long at this high of a price point. Ferrari can’t do it. Hermès can’t do it. Apple can’t do it. Apple’s gross margins are 38 points. Hermès and luxury goods are somewhere between 50 and 60 points. There has never been a luxury item that’s been able to garner the type of gross margins as university education.
New York Magazine