After the Gold Rush

On February 21, 2013, Richard McKenzie stood in a California yacht club and prepared to address a modest audience. He was there to talk to members of a local Rotary Club about massive open online courses, or MOOCs, a technological wonder that would soon shake the windows and rattle the walls of college campuses the world over.

A few dozen people had shown up. Mr. McKenzie, an emeritus professor of economics at the University of California at Irvine’s business school, was there to warn them: Don’t buy the hype.

This was not the message Mr. McKenzie had planned to deliver when he pitched the talk two months earlier. Back then he had been convinced that the free, online courses were about to change higher education, and also his own life.

He had spent the fall and winter watching the registration count for his course “Microeconomics for Managers” the way most economists watch a stock ticker. It climbed by hundreds per day: to 10,000, then 20,000, then 30,000 — more students than he had taught in 45 years in the classroom, and more than were enrolled on the Irvine campus.

It had stoked his ambition. Nobody knew what kind of fame or fortune might lie in store for those who staked out territory on the right side of the revolution, but as far as anyone could tell, the potential was huge.

“There is the bragging rights that go with the new course (‘I can now teach tens of thousands of students a quarter’),” the professor wrote that winter in an email to a colleague, as well as “potential financial benefits” from the sale of textbooks and other course materials.

That was before everything fell apart. Before he became overwhelmed by the unwieldiness of a massive online classroom. Before the chief executive of his university’s corporate partner badmouthed him. Before his bosses took her side. Before he lost his intellectual property, then his dignity. Before he decided to sue.

Court documents, along with hundreds of other records obtained by The Chronicle in an open-records request, shed new light on a case that, while covered only briefly in the press, cast a long shadow over one university’s attempt to navigate the uncertainties of innovation.

The records, some of which were heavily redacted by the university’s lawyers before they were turned over to The Chronicle, show how officials and a professor tripped over one another as they raced into the future. At a time when universities faced pressure to adopt the “fail fast” mantra of the tech industry, the records offer a stark reminder of what haste, and failure, can cost.

It was 2012, and disruption was in the air, in the news, and on the conference agendas.

People were enthralled by MOOCs, online classrooms that could draw bigger crowds than the Rose Bowl. College leaders wondered if the courses, the offspring of Stanford University computer scientists and stepkids of Silicon Valley speculators, were about to turn traditional institutions into dinosaurs. Some professors were pioneers, and others were skeptics.

Richard McKenzie became something rarer: He was a casualty.

Mr. McKenzie, who is now 74, was never supposed to become a successful academic. He grew up in Raleigh, N.C., raised by abusive, alcoholic parents. At age 10, following his mother’s suicide, he was sent to live at a rural orphanage. According to Mr. McKenzie, during his senior year of high school, a professor from a nearby university looked at his IQ and SAT scores and suggested he become a truck driver.

He went to college anyway, eventually earning a doctorate from Virginia Tech. A few years into his academic career, Mr. McKenzie teamed up with Gordon Tullock, a renowned economist who was then at Virginia Tech, on a textbook called The New World of Economics. The text, which focused on using economics to understand human behavior, became a hit. Now in its sixth edition, it is considered a classic of the genre — and a precursor, in Mr. McKenzie’s view, to best sellers such as Freakonomics.

The Irvine economist remained a man in search of an audience. He wrote dozens of books, some with splashy titles meant to appeal to mainstream readers. Sometimes he would position himself in the slipstream of other, commercially successful texts. After a pair of business professors struck gold with The Millionaire Next Door in 1996, he teamed up with Dwight R. Lee, a Georgia-based economist, to write Getting Rich in America. When Dan Ariely, a behavioral economist at Duke University, made a hit with his 2008 book Predictably Irrational, Mr. McKenzie wrote Predictably Rational?, a rejoinder that used an almost identical cover design.

None of those books catapulted him to national prominence, but he kept cranking out new work. “Richard has always been fairly optimistic about these projects he gets himself in,” said Mr. Lee, who has collaborated with Mr. McKenzie on several books, in an interview. “That’s part of his productivity. Despite the evidence, he’s pretty convinced the next one is going to be a winner.”

In one of his more personal works, The Home: A Memoir of Growing Up in an Orphanage, Mr. McKenzie connected his tireless work ethic to his traumatic early childhood. “When you have been hollowed out, emotionally emptied, at a very early age, denied a sense of self-worth,” he wrote, “something needs to be created to fill that void.”

He filled the void with numbers. After entering academe, the young economist sought things to count to his name. First it was degrees, then it was books. “When all else I’ve got seems relatively unimportant,” he wrote, “I can remember there are a bunch of cards with my name on them in the Library of Congress.”

And yet in his reflective moments he understood the futility of these attempts to quantify his esteem. Numbers can impress, but they don’t always reflect true value.

“It’s all too easy,” Mr. McKenzie wrote in The Home, “for the count itself, as distinguished from the quality of what is counted, to take on a life of its own.”

In 2012 the MOOC peddler that had counted the most online learners was Coursera, a Silicon Valley-based company founded that April by Daphne Koller and Andrew Ng, a pair of talented and supremely well-connected Stanford computer scientists.

The company itself was small enough to fit in a handful of offices in Mountain View, Calif., and yet it quickly surpassed two million registrations for its free courses, a number 30 times as great as the enrollment of the largest state university. The company’s founders were ubiquitous, appearing on campuses and in the press with ominous tidings from the near future.

“The tsunami is coming whether we like it or not,” Ms. Koller told The Atlantic that spring. “You can be crushed or you can surf, and it is better to surf.”

The upside of allying with the company seemed huge. The exposure afforded by Coursera’s massive classrooms meant that professors could, in theory, become gurus of their disciplines. Colleges that weren’t even the most popular institutions in their regions had a chance to become household names in India, China, or Brazil. Publishers salivated at the possibility of selling their products to even a fraction of the thousands of students who were signing up for MOOCs.

Mr. McKenzie, who had retired from Irvine’s business school a year earlier, sensed an opportunity. He had seen the promise in video lectures long before the term “MOOC” entered the lexicon. For years he had been recording video tutorials based on a textbook, called Microeconomics for MBAs, that he and Mr. Lee had written.

The textbook had been a dud — “I don’t think we paid off the advance,” said Mr. Lee — but Mr. McKenzie had high hopes for the videos. A decade earlier, he had started making video modules to supplement his teaching on the Irvine campus. When YouTube came along, he posted lessons there, using an overhead camera to film himself making notes as he narrated off-screen. The production values on the videos were not great, but the lack of polish gave them a kind of office-hours intimacy.

As Mr. McKenzie approached retirement, he built a recording studio in a shed behind his house and filmed nearly 30 hours of lectures, which he planned to sell as a series of five DVDs. He imagined them being used in business classes around the world. “I look forward to talking with professors about quantity discounts for adoptions for classes,” he said in a 2011 promotional video.

When massive online courses took off, in 2012, it seemed like kismet. Mr. McKenzie approached administrators in Irvine’s extension school that spring and told them he had an online course recorded and ready to go.

Gary Matkin, dean of the extension school, a money-making arm of the university that focuses on adult learners, also saw opportunity in MOOCs. Irvine had been early to open education, and having an existing inventory of online courses that could be fitted to Coursera’s platform meant the university could possibly jump the line of institutions that were clamoring to join the company’s exclusive club of course providers.

Late that summer, a brisk negotiation commenced between the university and the upstart company. Coursera wanted to deal directly with Irvine’s professors, according to Mr. Matkin, but the dean refused. He later said he was trying to put himself in a position to protect the university’s interests as well as the intellectual property of its professors.

“We wanted to make the university the intermediary between the faculty member and Coursera,” he told The Chronicle, “so we could really make sure faculty members knew what they were giving up.”

Things moved quickly. Coursera wanted to announce its new university partners by mid-September; Irvine hurried to get its papers in order and just barely made the company’s deadline. “A lot of processes were not fully worked out,” said Mr. Matkin.

On September 17, 2012, Irvine signed a contract with the company. The plan was to offer seven courses beginning in January, including Mr. McKenzie’s microeconomics course.

People started signing up for “Microeconomics for Managers” immediately after Coursera listed it: 2,700 students registered in the first 36 hours. After 10 days the number had risen to 8,000, shooting upward at a rate of 650 per day.

Watching the count rise, Mr. McKenzie wondered how many new customers he might have for Microeconomics for MBAs, the underperforming textbook upon which he had based the course. The usual barrier to selling textbooks, of course, is the incremental work of persuading individual faculty members who would instruct a few dozen students to buy the text each semester. But a massive course could give Mr. McKenzie a direct line to droves of students all at once.

Mr. McKenzie promised to push the textbook in his MOOC. “You can understand that I want to drive sales as much as you do,” he wrote in an email to an official at Cambridge University Press.

The Irvine economist joined the choir of true believers. He told friends and colleagues that he was embarking for the “Wild West of education.” He offered to preach about the coming revolution on the radio, on a policy blog, at the Rotary Club gathering. He wrote an essay on MOOCs and pitched versions of it to The Chronicle, The Wall Street Journal, and other publications.

“Many university administrators and professors are oblivious to what is happening in their midst,” Mr. McKenzie wrote in the essay. “The technology waves will surely shake the foundation of the conventional university model.”

In the week leading up to the debut of his massive course, however, the professor found himself on shaky ground with his supervisors.

By mid-January, registrations for Irvine’s seven inaugural MOOCs had surpassed 225,000, and the university had a few other “irons in the fire” with Coursera, Mr. Matkin said in an email to Dean Florez, a former California state senator who had taken a special interest in MOOCs.

Still, Irvine officials doubted that the courses would make any real money in the short term. “There absolutely is no business model yet,” wrote Mr. Matkin in an email to colleagues at Irvine’s medical school. “Any actual financial return to UCI or other faculty members is really vague right now.”

Mr. McKenzie, however, was developing a business model of his own.

As sign-ups for his course ticked past 30,000, the professor pitched his Irvine bosses on an “executive concierge service” for his microeconomics course. His idea was to let as many as 200 students pay for a privileged status that would entitle them to email him directly as often as 10 times per week. He offered to manage the experiment himself — and collect the revenues.

Irvine officials resisted, but Mr. McKenzie did not let the issue go easily. He also objected to the university’s reluctance to use his preferred grading system in the course, a letter-based scheme that was incompatible with Coursera’s gradebook. Melissa Loble, an associate dean at the extension school, reassured Mr. McKenzie that it was a technical issue and that the company was not trying to change the way he had taught for decades.

“Honestly,” wrote Ms. Loble to her fellow administrators, “I think he is trying to raise issues with anything he can, in order to use it as leverage for this concierge service.”

Mr. Matkin finally intervened. He explained to the professor that they could not allow the concierge service or “anything that looks like a grade” on the MOOC, for technical reasons having to do with Irvine’s course-approval process. The university also had contractual and good-faith obligations to Coursera, said the dean, and did not want to spring any surprises on the company now, two days before “Microeconomics for Managers” was supposed to debut.

“I hope you understand that this whole MOOC thing and our involvement in it has been accomplished at breakneck speed,” wrote Mr. Matkin, “and there are many loose ends in almost all aspects of this current gold rush.”

On January 21, the day the course was set to go live, the two sides reached a détente. Mr. McKenzie agreed to drop his grading system and the concierge service but insisted that his intellectual property rights be respected.

“You definitely won and have the rights to the material you produced and convey those rights only in writing,” replied Mr. Matkin, “except that in this case we went ahead so quickly that the whole IP thing lagged behind.”

That sentence would become a sticking point in an investigation and, later, in a lawsuit against Mr. Matkin and the university.

At the time, it was merely confusing. Mr. McKenzie told a colleague the next day that he no longer trusted the dean’s intentions and feared that the university was attempting a “rights grab.” But he was also eager to move past their disagreement and get excited once more about exploring higher education’s new frontier.

That day Mr. McKenzie’s economics course went live to more than 35,000 students from all over the world.

That’s when the real problems began.

Counting registrations for an online course was easy — exhilarating, even. The reality of actually teaching all those people was trickier.

The diversity of the massive audience was overwhelming. There were students who didn’t seem to have graduated high school and others who had doctorates. And many of them, no matter how educated, seemed determined to clog the forums with comments that, in Mr. McKenzie’s opinion, did not reflect thoughtful engagement with the course material.

The professor doubted if they were even watching his free videos, let alone buying and reading his textbook.

“How do you teach courses when the spread of backgrounds, and privilege, is so great?” he wrote to a former student. “Don’t have a clue as to how I can work my way through this maze.”

Mr. McKenzie tried to get the students on the same page. In the absence of a common text, he posed economic riddles about how beer costs less than water in the Czech Republic and why it might be more environmentally conscientious to drive to work than to walk. Unable to shut down runaway discussions, as he might in a normal classroom, he urged students to sort themselves in groups, hoping to weed out the ones who didn’t do the homework and “just want to expound their views.”

The professor openly lamented the state of the discussion forums. He called them an example of the “tragedy of the commons” — an economic concept that refers to the ruination of a free, open space by people who use it to serve their own ends.

The hundreds of students thronging the forums were just part of the problem. The professor was more disturbed by the thousands who were not participating at all.

Fewer than half of the 37,000 people who registered for “Microeconomics for Managers” actually logged in when the course opened, according to an analysis Mr. McKenzie later sent to students. Only a quarter watched a single one of his video lectures, the professor said, and fewer than 2 percent participated in the discussion forums. In the notes he prepared for his talk to the Rotary Club, Mr. McKenzie suggested that only “several hundred” did all their homework in those first weeks.

Where were the others? Why did they register if they weren’t going to show up?

The worst-kept secret about massive courses is that relatively few of the students who register for MOOCs actually finish them, but in early 2013 colleges were only beginning to understand what sort of behavior to expect from students in massive courses.

In March 2012, the Massachusetts Institute of Technology’s first massive course had attracted 155,000 sign-ups. But only 23,300 people ever tried a problem set, and only 10,500 stuck around for the midterm. That September, Duke opened an astronomy course to 60,000 registered students, but only 16,700 ever tried a problem set, and 2,900 contributed to discussion forums. Those numbers still dwarfed the capacities of even the largest lecture halls, but in general the huge registration figures seemed to have more to do with aspiration than with education.

Mr. McKenzie was dismayed to find this out firsthand. On January 30, nine days after the course started, he vented his frustration in a message to students.

“When I signed on to teach this course, I believed that the enrollment count would be real,” he wrote, but he now understood that the headcount was “meaningless.” He suggested that the inactive majority either join in or drop out. But Coursera would not let him kick them out of the course, he later told a former student in an email.

“I think,” said Mr. McKenzie of the company, “they want to keep the numbers pretense going.”

The first two weeks of the course were bad, but things really started coming apart in the third. And it had nothing to do with Mr. McKenzie’s students.

That’s when Mr. McKenzie discovered that Coursera had been giving away his video lectures.

There was a button on the course website, it turned out, where users could download the videos free. Fifteen days after the course opened, the videos already had been downloaded more than 20,000 times, according to Mr. McKenzie.

The professor thought the videos would be available only to stream online, not given away. “Did I miss something in our discussions on this matter?” he wrote to Irvine officials. “Did I sign away the download rights in some way?”

He had not. Mr. Matkin, the dean, later told an investigator that he did not know about Coursera’s free-download feature.

The next morning Mr. McKenzie met with Mr. Matkin, Ms. Loble, and Larry Cooperman, associate dean for open education at Irvine, at a cafe on the west side of campus. The professor had proposed an in-person meeting weeks earlier, noting the “inherent limitations of emails.” He hoped it would be an opportunity to smooth things over after their tense exchange over the grading policy and his proposed “concierge service.”

Instead, Mr. McKenzie felt as if he had walked into an ambush.

A day earlier, Ms. Koller visited the Irvine campus to give a talk about the “online revolution.” The Coursera president had impressed Mr. Matkin and his team throughout the winter, and she had seemed enthusiastic about including Irvine in some of the company’s strategic projects. They had discussed the possibility of licensing some of the university’s courses, including Mr. McKenzie’s, to other institutions.

During her visit, however, Ms. Koller told extension-school officials she was disturbed by some of the things Mr. McKenzie was saying to his students.

Specifically, she pointed to two messages the professor had posted during the first two weeks of the course: one in which he told inactive students to either tune in or drop out, and another in which he pressed students to buy his textbook.

Mr. McKenzie’s finickiness had tested Mr. Matkin’s patience even before his course opened, and Ms. Koller’s complaints seemed to reignite the dean’s frustration.

At the cafe, he told Mr. McKenzie that he had created an embarrassment.

Mr. McKenzie was taken aback. The way he saw things, he had gone above and beyond the level of effort that had been asked of him, spending, by his own accounting, 25 to 50 hours a week on the course.

After coffee, Ms. Loble wrote Mr. McKenzie a diplomatic email. She praised his passion for the course and the quality of his teaching materials, but said she agreed with Ms. Koller and Mr. Matkin about the professor’s tone. Communicating to a large, diverse, public audience required sensitivity to how one’s words might be interpreted, explained the associate dean. She offered to ghostwrite messages to Mr. McKenzie’s students in the future.

“At the end of the day,” Ms. Loble told the professor, “we all just want to make sure that anyone enrolled in the course, regardless of his/her intentions, can have a positive experience.”

Once again, the future of Mr. McKenzie’s massive course was in doubt.

Ms. Loble warned the professor that canceling the course could hurt his reputation and the university’s. Earlier that week, a professor at the Georgia Institute of Technology had been forced to suspend her Coursera course because of technical difficulties. That professor had been shamed in the media, said Ms. Loble, along with Georgia Tech and Coursera.

The associate dean made a similar case against turning off the button that was allowing people to download free copies of Mr. McKenzie’s lectures. Coursera alone had the power to disable the button, she said in an interview with The Chronicle, and the company did not want to do it.

Ms. Loble said Coursera officials had told her a story about a pair of professors at the University of Washington who made a similar request to disable the download feature. Those professors had ended up regretting it, according to the company officials; there had been a backlash, and their reputations had been tarnished.

Ms. Loble relayed this story to Mr. McKenzie, and advised him against pressing Coursera to disable the button.

Mr. Matkin told Mr. McKenzie that he had no one to blame but himself for the loss of his intellectual property.

“We do not accept responsibility,” wrote the dean in an email, large portions of which were redacted by the university, “for your ignorance of the downloadable feature of the videos.”

Mr. McKenzie and his bosses eventually reached an agreement: The professor stepped aside, and “Microeconomics for Managers” would go on without him. The university offered to pay him his full $2,500 teaching stipend, plus $15,000 for permission to use his videos and quizzes through the end of the course. During that time, people would continue to be able to download the course materials free.

On February 16, 2013, Mr. McKenzie sent a farewell note to his students. “Because of disagreements over how to best conduct this course,” he wrote, “I’ve agreed to disengage from it, with regret.”

A professor dropping out of his own MOOC was news. Two days later, The Chronicle reported on Mr. McKenzie’s departure. Both Mr. Matkin and Ms. Koller alluded to the difficulty of teaching a course as vast and diverse as a MOOC. Mr. McKenzie declined to comment.

A few days later, the professor gave his talk to the Rotary Club, which he titled “The MOOC Mess.” It’s been a “tough and sad two weeks,” he told the Rotarians, according to his outline of the talk.

On February 25, Mr. Matkin sent Mr. McKenzie a new contract that would permit the university and Coursera to keep using his videos and quizzes for the duration of the term. With the contract was a message:

“It is important that we not raise any more red flags to the press,” wrote the dean, “so the less said (or written) about your stepping back, the better.”

He offered Mr. McKenzie any assistance he needed in dealing with the press, or communicating with any students from the courses, or with anything in general.

“Thanks,” he said, “for your continued cooperation.”

The professor did not cooperate for long.

That May, Mr. McKenzie filed a complaint against his former supervisors under the state’s whistle-blower laws. The university opened an investigation and enlisted Thomas R. Bradford, a tort lawyer from nearby Burbank, to look into whether it had engaged in “improper governmental activity” in its dealing with the professor.

Five months later, Mr. Bradford delivered his report. The investigator concluded that the university had failed to protect the professor’s intellectual property. “As dean of continuing education,” wrote Mr. Bradford, “the responsibility for the failure rests with Dean Matkin.”

On February 3, 2014, Mr. McKenzie filed a lawsuit against Mr. Matkin, the University of California, Ms. Koller, and Coursera.

Lawyers for the professor argued that Irvine’s failure to protect his property had cost Mr. McKenzie $230,000, since the video lectures ended up being downloaded “more than 230,000 times.” The professor was entitled to at least that amount, they argued, plus punitive damages for “willful and wanton conduct,” which had inflicted “significant emotional injuries in the form of shame, mortification, and hurt feelings.”

Over all, the complaint painted a picture of university officials who were more interested in staying in the good graces of a powerful corporate partner than in preserving a longtime professor’s academic freedom, his intellectual property, and his basic dignity.

The lawsuit was settled in April 2014, on undisclosed terms.

Not long after Mr. McKenzie left his course, a backlash against MOOCs began to gather force.

Faculty members began speaking out about the possible consequences of working with MOOC companies. A bill was shelved that would have pressed California’s public universities to grant credits to students who completed the free, online courses. Several projects aimed at merging MOOCs with traditional degree programs failed to gain traction.

Coursera continued to grow, as did its registration count, but colleges leaders and faculty members gradually realized that it was not going to change their lives.

Mr. Matkin, who is still dean of continuing education at Irvine, declines to comment on the case directly, citing legal reasons, except to call it an “anomaly” involving “special issues” and “special personalities.”

“In the early days of MOOCs, none of us really knew what we were getting into, including the professors who were involved,” he says. “We were all learning together.”

The dean resists the idea that Irvine officials had been overly deferential to Coursera in those early months. The university was accommodating to its corporate partner, he says, but not inappropriately so. “Any time we enter a partnership, we want to keep our end of the bargain,” says Mr. Matkin, “so we were very anxious to be responsive to what they wanted.”

Irvine’s relationship with the company has changed since those early days. The university signed a new contract last summer. Instructors now have to promise not to sue the university or Coursera or any of their officers for pretty much any reason having to do with the course, including copyright infringement, libel, slander, defamation, right of publicity, and invasion of privacy.

LaunchSquad, a company that handles media relations for Coursera, declined to make Ms. Koller available for an interview. A detailed list of questions sent to a spokeswoman went unanswered. “We’re not interested in chatting about 2014,” said Kelsey Nelson, the spokeswoman, in an email.

Ms. Nelson sent The Chronicle a statement from the company, which read in part: “Over the last four years, we have been transparent with our partners about the varying levels of engagement they can expect on the platform compared to traditional on-campus classroom environments.”

These days, Irvine’s massive courses typically run on their own. It’s easier for everyone that way, says Mr. Matkin. “What we learned is you try to present a MOOC for what it is,” says the dean. “It’s a free course, with relatively little interaction with faculty members.”

Quietly, the courses have started to make money through the sale of certificates to students who complete them. The university and the company split the revenues.

Mr. McKenzie declines to comment on the case to The Chronicle, also citing legal reasons.

The professor says he still has great affection for the institution where he taught for decades. In his notes for his talk at the Rotary Club, he emphasized a distinction between the university proper and its extension school. “What has happened to me,” he wrote, “would never have been tolerated by the faculty and administration on campus.”

He has taken down the recording equipment from the shed behind his house. But he hasn’t stopped writing. In retirement, he hopes to add a couple more books to his count. “You want to make your mark,” he says. Right now he’s working on a unified-field theory that reframes economics as a “brain-centered discipline.” He thinks it could be a winner.

He has written a book about MOOCs, too, but he keeps that one to himself.

Steve Kolowich writes about how colleges are changing, and staying the same, in the digital age. Follow him on Twitter @stevekolowich, or write to him at steve.kolowich@chronicle.com.

Correction (6/9/2016, 3:06 p.m.): This article originally misstated how long Mr. McKenzie taught at Irvine. It was two decades, not four decades. The article has been updated to reflect this correction.