Recently, I toured two institutions of higher learning. In both cases, what struck me was the outlandishness of the physical plant. The auditoriums, student lounges, dining areas, and fitness facilities exceeded those of large luxury hotels. The office space would have accomodated a corporation several times the size of the faculty.

The number of square feet of improved real estate per student must be astronomical. If a shopping mall had this high a ratio of space to traffic, it would go broke in six months.

Much of this physical plant was of recent vintage. To me, it seems counterintuitive that colleges and universities would be making huge investments in construction in today's economy. I would not have thought that the response to the information age would be to pour resources into brick and mortar. Is academia, home of the last believing Marxists, also the last bastion for factories?

If I were undertaking a strategic plan for a college or university, I would take into account three major features of the post-industrial economy.

1. As I have been saying for years, The importance of physical capital has decreased, and the importance of human talent has increased.

2. The importance of general human capital (knowledge that can be applied across many different types of firms) has increased, and the importance of specific human capital (knowledge of a particular firm's procedures and terminology) has decreased.

3. The cost of distributing information over the Internet is approaching zero.

What do these trends imply for the future of higher education?

The diminished importance of traditional capital implies that the critical investments for universities will not be those that enhance physical facilities. They will be investments that enhance the effectiveness of faculty and students.

The diminished importance of firm-specific human capital means that university-wide curriculum initiatives are going to be relatively unfruitful. Relationships with colleagues outside a particular college or university are going to be increasingly significant.

The low cost of distributing information means that it will become increasingly difficult to charge for course materials. Instead, as John Perry Barlow has argued, people will be paying for relationships rather than for information.

Administrators in higher education should be focused on relationships.

• A college needs to focus on relationships that can help to bring in desired students. These might be relationships with high school guidance offices, with private college counselors, with overseas high school administrators, etc.

• A college needs to make sure that students derive value from their relationships to one another. One of the schools I toured, the University of Rochester, recently decided to put all freshman into a single group of dormitories. The goal is to strengthen student relationships.

• A college needs to maintain relationships with faculty at other campuses and other external resources.

  There may be opportunities to "outsource" various functions.

  • You may not want to have a certain course or department, but you could offer your students the opportunity to take the course using the Internet.
  • You may not be able to staff a 24x7 help center for calculus students, but you can co-operate with other universities to provide such a service over the Internet.
  • Using electronic media, you may be able to integrate external speakers much more than was possible in the past.

• A college must maintain relationships with post-graduate institutions, including employers, graduate schools, and professional schools. This can include obtaining feedback about what the college's particular strengths and weaknesses appear to be, as reflected in the performance of its graduates.

• Relationships among alumni can be deepened. However, alumni ties to one another could be based more on common interests than on a common graduation year. Subscription-based alumni relationship services could become a significant revenue source.

My guess is that we will see a trend in which a student's college becomes his or her "home base" but not the sole source for education. With the opportunity to study abroad, spend a year at another college, and use the Internet, the typical undergraduate may obtain at least half of the necessary credits from outside the home institution.

Faculty also will be less focused on their institutional colleagues and more focused on their peers at other universities. More professors may affiliate with multiple institutions.

Administrators will find it difficult to convince faculty to implement a college-wide educational "vision." Instead, they will have to let individual professors decide which courses they are best suited to teach. When this process leaves gaps, they will be filled from the outside.

As students and faculty increase their external interactions, administrators may become uneasy. They might experience the ongoing changes as a loss of control. As their institutions become more fluid, they may yearn for something solid and concrete. Like more buildings.