One concern many international admits and applicants have is whether they will be able to get a student visa in time to come here for the fall semester. What do you say to them?
In the menu of things to worry about around admissions, the one that is scariest is the visa issue. We are staying in touch with our admitted students from around the world. They want to come here. We’re not hearing second thoughts about whether they want to go to Duke or to go to a U.S. business school more broadly. COVID-19 hasn’t changed that but they are just scared to death that they will not get visas. And so our response is to give them as much reassurance as possible that we will be ready for you when you can get here. That is something that requires a lot of communication given the fears on the part of these students that they won’t have access.
But my hope is that visas will be expended. As you know, higher education is a big business and if you care about our trade deficit, higher education is the sixth biggest contributor to a positive balance of trade. So we are not an unimportant industry in terms of the economy. My hope is that will lead to more expedited visa processing. But I obviously don’t control those decisions.
Bill, there is also much concern among first-year MBAs about summer internships and among second years about jobs. What is your view on how that is shaping up?
Flipping from the challenges of admissions to the career challenges, it’s a mixed set of issues. Luckily, so far, we have had very few companies that have reneged on their offers. I think most companies are aware that the current economic crisis is not a structural economic crisis. It is a health crisis that is affecting the economy. Once we have a solution to the health issues that is going to lead to a rapid bounce back. I think companies are smart enough to realize that they should take some short-term pain in order to be ready for the bounce back. So the good news is that we are not seeing those reneges. Obviously, there are some industries that are totally slammed and that have to take a pause. But so far, so good.
The more complicated thing is that if you were not doing the on-campus recruiting which happens earlier but a self-directed search which typically happens right now and there is a lot going on. All of that has been thrown up in the air. Who is ready to make decisions right now? They are just trying to hold on until the storm passes. So I worry quite a bit about people in that position and need something where they can get through the storm until companies are open for business and are hiring like gangbusters. I think that will happen when the vaccine is finally out there.
Do you think we’ll see a boom in MBA applications as a result of the recession? As you know, application volume tends to be counter-cyclical, rising in recessions as people seek to escape a downturn in grad school.
I’m not sure. I think the safer thing to assume is that the next application cycle will also be disrupted. The reason I think that is the case is that it is one thing to be in a recession but it is another thing to have employment levels as low as we are going to get to at the peak of the application season. People are going to be nervous about whether they will have a job or will be able to have enough of a cushion to go to business school so they can help pay their rent and buy their food. I think the chances are the next cycle will not see that bounce back. The disruption is so abrupt that the outcome that is simplest for me to imagine is this V-shaped crash and bounce back. But a V is a pretty steep decline and in the face of so much economic chaos, with Maslow’s Hierarchy of Needs, most people are going to be thinking about basic survival rather than business school.
Once the vaccine is in business, I think that changes things. Then, we are bouncing back from the very steep recession. Firms are going to be hiring. People who have experienced dislocation will realize that this is the right time to go to business school and to retool in some way that puts them in a position to take advantage of the upswing in employment opportunities.
Do you think the downturn will cause more business schools to close programs, if not their entire schools?
It would not surprise me. I think you will see universities go out of business. What I’ve communicated to our community is that this is going to be a massive hit to business schools and to higher education. It will be far worse than the Great Recession of ’08 in terms of the implications for universities and business schools. The reason is the impact of the last recession was all about endowment values. So if you are a Harvard and had a big endowment you saw that crashing down and that income stream that was funding your operations was at risk. But this crash is going to hurt enrollments. So it’s not just endowment income, it’s enrollment income. As a consequence, I do think this will be much harder to come through.
The question to ask is, How strong is your balance sheet? Right now, we’re seeing in different industries the error of really cheap money led people to create balance sheets that loaded up on debt significantly and did not have the amount of cash on hand for the current environment. Those firms are the ones right now that are the first to go under. For a business school or university, it’s do you have the reserves and the assets to survive. I suspect that the top business schools are all going to have strong balance sheets. They are going to take a big hit but they will be able to weather that hit and get through to the other side of the COVID-19 crisis. But for schools that don’t have a strong balance sheet, haven’t built up cash to get them through this downturn and are very dependent on tuition income, those schools are going to really struggle to keep their heads above water.
Bill, you don’t impress me as a guy who goes to Vegas and bets very much. But if you had to give me odds on whether the next academic year will start on a physical campus or online, what do you think they could be?
I think the odds are in our favor that we will be open, and I’ll walk you through why I say that. I am not a medical doctor or a public health official and you’re right I am not a gambler. So take all of this with a grain of salt. But luckily I am part of a community that does have experts in the health domain. One of our faculty members, Mark McClellan, is a former FDA commissioner and is involved in the national response to the current crisis.
Here’s why I’m optimistic about physically opening. Number one, we are going to see better treatments. Right now we are in clinical trials for treatments of COVID-19, and we will move from a world of speculating what treatments are effective. We will have developed quite a bit of experience. One example is the use of ventilators. There is a lot of heterogeneity in terms of the successful use of ventilators for treating COVID-19 cases and best practices will emerge. So treatment will get much better for people who do test positive.
The second thing is I think we will have solved the testing issues which have continued to plague this country. The key to really successful management and engagement is whether you have access to really easy testing. My belief is by the time we get into the summer, I believe we will have a home test kit. And with that kit, you open the door for people to say, ‘Yes, I’ve tested negative. I’m clear.’ So it’s okay to come to the classroom and engage with other people. And I also think that with the advent of much deeper testing, we’ll come up with better tracing. Apple and Google are doing work on contact tracing to help identify and therefore stop outbreaks when people are engaged.
The next thing is that treatment will also be much better and the level of panic will go down once we get past the surge. The big issue in New York City is that their hospitals are overwhelmed so they are actually impacting the delivery teams and many of those people are getting infected. So you then have this vicious cycle of the more cases you process, the less ability you have to successfully treat people. Past the surge, we’ll have best practices, treatments and identification that will bring the comfort level up with re-engaging with society.
With that said, I’m speculating and it may be that we come up with creative things where we move into a half we are here together and half we are still social distancing. One example would be what if you had half your students show up for one class and half for another and you alternate via online. That way you can have space, at least one empty seat, between you and the next student.
So I think we will be more creative about how to maintain appropriate standards to keep the curve flat while we engage as much as we possibly can. So I am optimistic but I have no qualifications.
Today, the Kellogg School said it would waive the GMAT and the GRE for applicants for this final round and also encouraged rejected candidates in rounds one and two to come back for reconsideration. What do you think of that?
I’ve heard that some schools are dispensing with the idea of standardized testing. It’s really interesting to hear that if you have been rejected, you can reapply in the same application cycle. I have never heard that in all my years. To me that says that whatever I said about this year being the most topsy-turvy year ever, I must be understating that.
Of course, Fuqua and Kellogg routinely turn down highly qualified people for admission. So you have a deep bench from which to draw from.
It definitely gives you a stronger base to work from. It’s like having a strong balance sheet. A strong brand gives you a strong base to work from. That is extremely important in the current environment. I also think it’s a time when schools can identify their brands in terms of how they navigate the current conditions. That is an opportunity for all of us to think about how we respond and how we position ourselves in the current environment and beyond. These will be much tougher times for business schools but with tough times I do believe come opportunities for creativity and innovation and for articulating who you are and what you stand for.
At the end of the day, I was on a panel right as this crisis was breaking. The question was, who is your customer? Ultimately, it is society. If we can’t produce the talent and insights that help us tackle the challenges in the world then we are not doing our jobs. So we need to make sure we are responsive to the times we are in and the times we will face in being a positive force in society and helping to improve lives. This is an opportunity for us to step up and show how we can do that.