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Costs, Higher Ed, and the Yugo
August 12, 2010 - 7:15pm

Q. Why don't Yugo's sustain much damage in a front-end collision?

A. The tow truck takes the impact.

Q. Why does a Yugo have rear a window defroster?

A. To keep your hands warm as you push it.

--from "The Yugo: The Rise and Fall of the Worst Car in History" by Jason Vuic.

What can this great book about the sad and untimely demise of Yugo teach us about higher education?

I probably would not add this book to all the great list of sources on the economics of higher ed that you have been providing. My plan is to go through your references and ideas, and try to make some sense of higher ed economics for myself. Thank you for all the sources, ideas, and analysis.

Linking the Yugo to Higher Ed Economics:

  • Cars are one of those categories where over the past five decades costs have come down significantly, while quality has gone consistently up. We can buy a much more reliable, safer, better performing, roomier, and longer lasting car for the same (real) dollars today than at any time in the past. Higher ed has clearly gone in the other direction. The Yugo story is perhaps the exception to this rule. Is the Yugo a cautionary tale about the wisdom of going for the "cheapest" educational structure?
  • Even though the Yugo was a terrible car, we also learn from Vuic's delightful book that (at least initially) the Yugo was a popular car. People were lined up at the dealerships with cash in hand, ready to plunk down deposits. At $4,000, the Yugo created its own category of cheap transportation. Is there a similar latent demand for really affordable higher education? Or does the Yugo prove that "cheap" and "quality" are not compatible?
  • The Yugo was so cheap because it was built on a very old (Fiat) design, and put together (badly) by very low-paid workers. Can I send my girls to an Eastern European country to go to college? The University of Ljubljana, the largest university in Slovenia with 64,000 students, might be a reasonable option for my kids when they leave home in 2015 and 2017.
  • The Yugo did not have to be so bad. One of the take home messages of Vuic's book is how incompetent the American Yugo ownership and management was. Rather than investing dollars in the car's quality, the Yugo America founders paid themselves big salaries, plowed the money into other businesses, and rode around in helicopters. Would things have been different if those dollars were spent on the car? They also spent tons of money on advertising, money today that could be saved with smart use of the web. So maybe an educational provider that does not spend money on advertising or marketing, and keeps management costs down, could provide a quality educational start-up for a reasonable cost.

Any Yugo owners out there?

On a program note, this blog will return from vacation 8/24.



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