One phrase: Compounded Network Effects.

We know that Network Effects benefit companies like Telecoms - because the more people are on the network, is the more compelling the value proposition to join the network, which increases the size of the network which increases the value proposition - and Social Networks - everybody is on Facebook because everybody else is on Facebook - but it never occurred to me that a more powerful network effect is at work in higher education.

The more people that have a Bachelor’s Degree, is the more the value of a Bachelor’s Degree and everything else below is reduced (which actually runs counter to a network effect - but not really). Or said another way, the more people have a BA or BSc, is the greater the value of an MA, MBA, MSc, etc. If you get a BA, and everybody else has a BA, in order for you to stand out you have to get a higher degree. The more that happens, is the more everybody else is pressured into getting a ‘better degree’ - which reinforces the entire system.

Also, once you get a degree, and you are hiring - it’s more likely that you will look for people with either your credentials or higher (for most jobs that require some amount of education). That adds to the cycle.

So just on the basis of different levels of degrees, we have seen one aspect of network effects being compounded the larger each network gets. 

To add one more layer to it, each higher educational institution also has a brand. Some are differentiated from others (i.e. Ivy Leagues) which compounds these effects even further.

Not only do you now not just want to get a BA/BSc, you want to get one from Harvard, Yale, Stanford, MIT, etc. to stand out - otherwise you are just blending in. The more people get degrees from those institutions is the more other people will want to, which further compounds those network effects. So we have another set of compounding happening here.

To parlay this to telecoms or social networking, it would be the equivalent of not just wanting to get a cellphone - but to get an AT&T cellphone. Or not just joining a social network, but joining Facebook.

I don’t think the compounded effect is in play with telecoms and I don’t think it is in effect for social networks either. 

I am not sure what can be learned from this, or if there is a neat business model hiding in there somewhere - but I imagine that someday someone will come across some model that leverages compounding network effects like Higher Education has, but I haven’t seen that yet.

If you have any ideas or thoughts, would love to hear about them in the comments.