Sal Khan: Building a better university

February 8, 2012: 11:06 AM ET

The Khan Academy founder discusses the flaws of the U.S. university system, college affordability, and what he's looking for in a job candidate.

Interview by Scott Olster, editor

sal_khanFORTUNE -- Student debt is nearing a record $1 trillion in the U.S. Jobless law school grads are suing their alma maters for false advertising. Needless to say, the cost of higher education -- not to mention the return on the investment -- has become a sore spot for many.

With an election on the horizon, the Obama Administration has not been deaf to the grumbling. The president addressed the topic in his State of the Union, and his administration has since launched a campaign to stem the rise in college tuition by tying a school's federal aid prospects to its affordability. Vice President Joe Biden, Secretary of Education Arne Duncan, and Senator John Kerry were dispatched to university campuses earlier this week to tout the plan. In all the tut-tut over college affordability, there been some nostalgia for the time when some world-class, public universities -- The City University of New York and The University of California, for example -- didn't charge any tuition for many of its students.

Salman Khan's Khan Academy -- a free, nonprofit education site with more than 2,800 video lessons and financial backing from the likes of Google (GOOG) and the Gates Foundation -- has picked up this mantle, at least in spirit. Fortune caught up with Khan a few months ago while he was just about to speak at the Future of State Universities Conference in Dallas. Here is an edited transcript of the conversation.

Fortune: Judging from the counter on your site, it looks like Khan Academy is not too far away from delivering its 120-millionth lesson. What has surprised you the most about all those users?

Sal Khan: I've been surprised at how motivated a lot of people are that you wouldn't traditionally think would be that kind of a motivated student. They were the kid who failed out of college, failed out of high school, hated academics.

I gave a talk last week to a bunch of chief learning officers from companies and one woman came by and said, "My husband hated school. He's dyslexic. He was a fireman and he just started watching the videos and he got really into it. He got really into math, really into physics. Went back to college, got a math degree and a physics degree, a master's in physics, and is now teaching physics."

And so, it's this reality that there are people like that out there that have completely gotten frustrated and disengaged with the traditional model that tends to judge you and label you in very early stages and really doesn't let you learn at your own pace.

What would you say are the limitations of what you are offering at Khan Academy?

The main limitation is we're not granting people formal credentials. We get a lot of letters from people, they're not going to class anymore. And they're just showing up to take an exam to get a credential. And we all know that happens. We did a little bit of that ourselves in college.

At the end of the day, the most that we can do is teach and learn. We can give someone rewards and badges to make them feel good, but they can't put that on their resumes just yet.

Speaking of resumes and credentials, it seems like more people are getting degrees, but they say less and less about how well someone will perform on the job. What's your take?

It's a bit of a statement on the existing system that us or Google or Facebook have to have such a rigorous interview process because we really don't know what a 4.0 in computer science means any more. I think the conversation has to go beyond getting more people to major in electrical engineering or computer science. The conversation is how do we equip people so that they can actually perform well in that type of environment?

How would you pull that off?

Right now, the priority in a four-year institution is to learn things for exams and in your spare time and your summers you might be able to do an internship. I actually think that should be flipped around. I think the focus should be doing internships. An internship 30 years ago was working the mailroom. An internship today at Google is optimizing an algorithm that researchers at universities don't even have access to. I would say the interns that we had this past summer were doing far more rigorous theory than they would do in their coursework. So when I say internship, it's not getting coffee for the boss or stocking mail.

Many universities, especially public ones, are dealing with painful cuts in government funding and bracing for the possibility of more to come. How do you think that affects what you are trying to do at Khan Academy?

I'd like to see a reality where if someone wants to work when they turn 18 to help support their family and they learn at their own pace on something like the Khan Academy or other things, that they can just on their own get a bunch of the credits they need just by testing out of things. And maybe they have to show up on campus for a semester of labs or something. You're getting a person like that to the end point that they need to get to, in a way that's actually good for everybody.

Then again, so many people land jobs in a way that has very little to do with academic merit. It has to do with the people that they meet while they were at school.

I agree with that. I think the strongest argument there is business school. I think the one thing business school does very well is that they kind of understand that that's what they are about. But I think society has recognized that business school is an optional thing. What you are describing is a powerful tool, just as going to a fancy prep school -- going to Andover or Exeter -- is great. But that's not something that we necessarily have to say everyone has to have access to….

Is the idea to keep Khan Academy free going forward?

Yes. It is core to our mission in that the learning part of Khan Academy will always be free. The incremental cost for us to teach an incremental student is zero or close to zero. So it's our mission that we shouldn't put a gate there.

When I thought about the two home run outcomes as a for-profit or as a not-for-profit, as a for-profit, a home run outcome for Khan Academy is we reach a bunch of users, we capture a bunch of revenue, maybe we get acquired or we have some type of an exit, an IPO, and Sal will be rich. That's not bad, not a bad thing. But the home run as a not-for-profit institution is just maybe we can be this new breed of institution that is kind of like a Stanford or MIT, but the brand isn't built purely on its selectivity. The brand is based on its quality of what it's delivering and it can reach millions, or maybe one day billions, of students and maybe be around for hundreds of years.

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