For years, pundits have speculated that online instruction could begin to overtake traditional higher education, but too often have offered few details about how this would happen. Already, however, you can see a path through which tech companies could gain a foothold in the higher ed market.
Here's one scenario — told through the vantage point of Amazon's Jeff Bezos in 2030. I don't know if it's going to happen, but as you'll see in the footnotes, Amazon is already making moves that could suggest it would be a potent competitor to existing colleges and universities.
To Our Shareowners:
After the spectacular and occasionally criminal failure of several for-profit college companies in the years following the Great Recession1, some critics argued that the pursuit of profit was fundamentally at odds with the mission of high-quality education. Amazon University, now in its 15th year and serving more than a million customers, has proven those critics wrong and delivers higher-quality, lower-cost educational offerings than the once-vaunted nonprofits that continue to charge high tuition in pursuit of a short-term revenue boost.2
A dreamy business offering has at least four characteristics. Customers love it, it can grow to very large size, it has strong returns on capital, and it’s durable in time — with the potential to endure for decades.3 Amazon University meets this standard, and then some.
Like some of our other ventures in the past, Amazon University was started out to fill an internal need.4 We needed our employees to have certain skills. So we found a way to give them just that.
We started out with Career Choice, a benefit offered to employees through which we paid 95 percent of tuition for classes in in-demand fields to help our employees progress in their careers. Within a few years, we started offering classrooms on site.5 From the beginning, it was about filling needs not just at Amazon but in the larger community: The first graduate of the program earned a nursing degree.6
Separately, in 2013, we launched a certification program for various Amazon Web Services engineers, letting companies using AWS easily train or hire workers who could manage AWS infrastructure.7
But we also found that many of our employees, even those with advanced degrees from prestigious universities, were incompetent at core aspects of their jobs here at Amazon. Due to our obsession with rewarding competency, hard work, and results,8 we searched for a solution. Luckily, it was right there in front of us.
In 2013, our subsidiary Zappos became a trailblazer in the use of "badges" to let employees demonstrate mastery of a skill and earn raises.9 Leaning heavily on that expertise, Amazon, in 2018, decided to revamp Career Choice and build an internal competency-based education system.10 Employees would earn a badge for a discrete skill, and earning a number of related badges awarded mastery of a "track."11 Over time, we created tracks for supply-chain logistics, factory equipment operation, and, eventually, management, accounting, and more.
We then began offering these courses at cost online, and created an official policy within Amazon that allowed for hiring talent at all levels who had Amazon badges in place of, or in addition to, more traditional education credentials.12 We called it Amazon University.
Over time, we found badges to be nearly a prerequisite for hiring in many divisions of the company, and internal surveys demonstrated less and less interest in where or if the potential hire went to college, and more interest in completion of (and scores in) certain tracks.
Again, we offered these products at low prices because we were attempting to improve the pool of potential talent, and we succeeded. Over time, we also learned that other Silicon Valley businesses were using our badge system as a proxy for hiring and promotion, and that over the course of a few years more traditional firms, like General Electric, were doing so as well.13
While we considered lucrative licensing deals for these products, we were, as always, focused on creating lifelong loyal Amazon customers, and therefore continued to offer our educational services at cost and introduced many as free to Prime members.14 Over time, some schools and new nonprofits created wraparound services that included encouragement and a physical sense of community, which helped certain types of students who may not have otherwise completed badges to do exactly that, and we began expanding our physical classroom presence within or near our warehouses.15 We also decided early on to not participate in the federal aid system. A study of the system found the process cumbersome, confusing, and dissatisfying to customers; it also had tended to create bad incentives among institutions participating.16
We continue to be obsessed with the quality of our educational offerings, which is reflected in our students' enthusiasm and persistence. Of those students who completed one badge, 90 percent go on to complete a second, and 75 percent go on to complete a "track.".17 Of those who complete one track, 40 percent go on to complete a second.18 In surveys of customers, 95 percent believe that their badges helped them secure a job or salary increase and were worth the cost,19 while market research suggests that as many as half of major US employers now consider Amazon badges to be one of their top five criteria when determining whom to hire.
Over time we have heard from many customers — or, as we like to call them, alumni — who have told us how important their Amazon education has been to them, and asking how to give back. We tell them the single best thing they can do is to purchase shares in Amazon. Not only does this give the company more capital for us to invest in educational services and continue to offer them at cost, but it also broadens our pool of investors who share our core value of doing everything we can for the customer, thus helping prevent takeover attempts from those seeking short-term profits.20 We also suggest they volunteer their time to nonprofits that assist students and keep them on track in completing their Amazon badges.
Recently, due to customer demand, we have begun to explore offering some courses in the liberal arts and are already offering these courses at a subsidy to select Prime members. We are also investing a significant amount of money into artificial intelligence that could help reduce the need for human evaluators.
The future of Amazon University is strong as we continue to become the first truly global university. As our alumni network and reputation with customers and employers grow, we predict increasing demand for our services. We are excited about the future of a more educated, less indebted citizenry.
Jeffrey P. Bezos
Founder and Chief Executive Officer
Alexander Holt is a policy analyst with the Education Policy Program at New America, where he conducts research on the economics of higher education.
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