The education "Bubble"

[Frisco_Slug_Esq]

Fair warning: This article will piss off a lot of you.

Fair warning: This article will piss off a lot of you.

I can say that with confidence because it’s about Peter Thiel. And Thiel – the PayPal co-founder, hedge fund manager and venture capitalist – not only has a special talent for making money, he has a special talent for making people furious.

Some people are contrarian for the sake of getting headlines or outsmarting the markets. For Thiel, it’s simply how he views the world. Of course a side benefit for the natural contrarian is it frequently leads to things like headlines and money.

Consider the 2000 Nasdaq crash. Thiel was one of the few who saw in coming. There’s a famous story about PayPal’s March 2000 venture capital round. The offer was “only” at a $500 million-or-so valuation. Nearly everyone on the board and the management team balked, except Thiel who calmly told the room that this was a bubble at its peak, and the company needed to take every dime it could right now. That’s how close PayPal came to being dot com roadkill a la WebVan or Pets.com.

And after the crash, Thiel insisted there hadn’t really been a crash: He argued the equity bubble had simply shifted onto the housing market. Thiel was so convinced of this thesis that until recently, he refused to buy property, despite his soaring personal net worth. And, again, he was right.

So Friday, as I sat with Thiel in his San Francisco home that he finally owns, I was curious what he thinks of the current Web frenzy. Not surprisingly, another Internet bubble seemed the farthest thing from his mind. But, he argued, America is under the spell of a bubble of a very different kind. Is it an emerging markets bubble? You could argue that, Thiel says, but he also notes that with half of the world’s population surging to modernity, it’s hard to argue the emerging world is overvalued.

Instead, for Thiel, the bubble that has taken the place of housing is the higher education bubble. “A true bubble is when something is overvalued and intensely believed,” he says. “Education may be the only thing people still believe in in the United States. To question education is really dangerous. It is the absolute taboo. It’s like telling the world there’s no Santa Claus.”

Like the housing bubble, the education bubble is about security and insurance against the future. Both whisper a seductive promise into the ears of worried Americans: Do this and you will be safe. The excesses of both were always excused by a core national belief that no matter what happens in the world, these were the best investments you could make. Housing prices would always go up, and you will always make more money if you are college educated.

Like any good bubble, this belief– while rooted in truth– gets pushed to unhealthy levels. Thiel talks about consumption masquerading as investment during the housing bubble, as people would take out speculative interest-only loans to get a bigger house with a pool and tell themselves they were being frugal and saving for retirement. Similarly, the idea that attending Harvard is all about learning? Yeah. No one pays a quarter of a million dollars just to read Chaucer. The implicit promise is that you work hard to get there, and then you are set for life. It can lead to an unhealthy sense of entitlement. “It’s what you’ve been told all your life, and it’s how schools rationalize a quarter of a million dollars in debt,” Thiel says.

Thiel isn’t totally alone in the first part of his education bubble assertion. It used to be a given that a college education was always worth the investment– even if you had to take out student loans to get one. But over the last year, as unemployment hovers around double digits, the cost of universities soars and kids graduate and move back home with their parents, the once-heretical question of whether education is worth the exorbitant price has started to be re-examined even by the most hard-core members of American intelligensia.

Making matters worse was a 2005 President George W. Bush decree that student loan debt is the one thing you can’t wriggle away from by declaring personal bankruptcy, says Thiel. “It’s actually worse than a bad mortgage,” he says. “You have to get rid of the future you wanted to pay off all the debt from the fancy school that was supposed to give you that future.”

But Thiel’s issues with education run even deeper. He thinks it’s fundamentally wrong for a society to pin people’s best hope for a better life on something that is by definition exclusionary. “If Harvard were really the best education, if it makes that much of a difference, why not franchise it so more people can attend? Why not create 100 Harvard affiliates?” he says. “It’s something about the scarcity and the status. In education your value depends on other people failing. Whenever Darwinism is invoked it’s usually a justification for doing something mean. It’s a way to ignore that people are falling through the cracks, because you pretend that if they could just go to Harvard, they’d be fine. Maybe that’s not true.”

And that ripples down to other private colleges and universities. At an event two weeks ago, I met Geoffrey Canada, one of the stars of the documentary “Waiting for Superman.” He talked about a college he advises that argued they couldn’t possible cut their fees for the simple reason that people would deem them to be less-prestigious.

Sarah Lacy
http://techcrunch.com/2011/04/10/pe...nd-its-not-the-internet-its-higher-education/

 

[Byron In Exile]

Fair warning: This article will piss off a lot of you.

Well, I'd better not read it, then, because I'm hopping mad as it is.

 

[Frisco_Slug_Esq]

Well, I'd better not read it, then, because I'm hopping mad as it is.

Mad as in Hatter, Tyson, or the average taxpayer...?

 

[vrosej10]

Interesting article. It is always good to question societal institutions and beliefs. This is not the reason I am at uni. I am there because I truly love to learn.

 

[lustatopia]

As Busybody says, "Too Long." Could you distill that down to a Haiku, please?

 

[Frisco_Slug_Esq]

Interesting article. It is always good to question societal institutions and beliefs. This is not the reason I am at uni. I am there because I truly love to learn.

Most people are there for job training.

My dad was a computer guy for the railroad. They sent him to IBM to learn.

I was a computer guy too. Then I went and got a degree surrounded by people trying to be computer guys for Sprint...

Ever read "Player Piano?"

What happens when EVERYBODY is a PhD?
__________________
Don't shoot me! Ahm just the passion play's Player Piano player.
A_J, the Stupid

 

[Byron In Exile]

Mad as in Hatter, Tyson, or the average taxpayer...?

Yes..

 

[Frisco_Slug_Esq]

As Busybody says, "Too Long." Could you distill that down to a Haiku, please?

Education bought
By public cash we have not
Boom the cycle bust

 

[Frisco_Slug_Esq]

Yes..

Great clarity.

 

[lustatopia]

Education bought
By public cash we have not
Boom the cycle bust

Gosh, that's impressive Frisco!

 

[Frisco_Slug_Esq]

Gosh, that's impressive Frisco!

 

[Byron In Exile]

Most people are there for job training.

My dad was a computer guy for the railroad. They sent him to IBM to learn.

I was a computer guy too. Then I went and got a degree surrounded by people trying to be computer guys for Sprint...

Ever read "Player Piano?"

What happens when EVERYBODY is a PhD?

http://i115.photobucket.com/albums/n307/byroninexile/hh/card1.jpg

 

[rosco rathbone]

I knew I made the right move when I bailed on higher education after grade 16.

 

[Frisco_Slug_Esq]

http://i115.photobucket.com/albums/n307/byroninexile/hh/card1.jpg

LOL

All our arts and crafts were those and paper tape rolls...

 

[Frisco_Slug_Esq]

I knew I made the right move when I bailed on higher education after grade 16.

There was an article I read sometime back, and I still kick myself in the ass for not saving it, which was a lament by an East German intellectual complaining bitterly about reunification, Capitalism and the lack of a job. In her People's Paradise, everyone she knew had their PhD and was given a job by the government; there was full employment. Yet with all this education, she seemed to be at a loss to understand WHY there was no longer an East Germany...

 

[rosco rathbone]

Worthless paper from Commie diploma mills...

 

[Frisco_Slug_Esq]

Worthless paper from Commie diploma mills...

Are we still talking East Germany?

Or perhaps the Germany of the early 20th Century?

Everyone worked for the government and life was better than ever...

 

[rosco rathbone]

I had to summarize some boring papers on skills-based income inequality for this organisation I intern at and I was surprised to learn a couple of things

. I thought a lot more people had college educations in this country than actually do. I would have guessed at least half, at the very least. It's a lot less than that.

The other thing is that all the job growth is among people with either advanced degrees or no school at all. The really bad place to be is in the middle, with a high school diploma, some junior college, or an associate degree, that kind of thing. Even a BA won't get you much these days. The charts look like a big U.

 

[vrosej10]

Education bought
By public cash we have not
Boom the cycle bust

I fricken hate it when people call shit that are not haiku, haiku. Guy's try fucking lunes. They have three lines and almost no rules!!! ARGHHHhttp://en.wikipedia.org/wiki/Lune_(poetry)

 

[lustatopia]

Maybe there is an education bubble. But what it's really all about is the creation (or recreation) of a class system in America. Higher ed has become a bit like fashion labels, where you go to school defines the floor you start your career off on. People who pay big bucks to go to Harvard get the designer label for their curriculum vitae for which they paid. And it's probably worth it. The downside isn't so much the economic Tulip Mania aspect as the decline of American culture into a new kind of class division where social mobility, once the defining factor of 20th century American life is severely limited. What you get is a ruling class that behaves like the Bushes and Obamas. It's the end of the American dream.

 

[Frisco_Slug_Esq]

I fricken hate it when people call shit that are not haiku, haiku. Guy's try fucking lunes. They have three lines and almost no rules!!! ARGHHHhttp://en.wikipedia.org/wiki/Lune_(poetry)

Please avoid the fans
I apologize for the shit;
It was on the fly.

 

[Frisco_Slug_Esq]

Maybe there is an education bubble. But what it's really all about is the creation (or recreation) of a class system in America. Higher ed has become a bit like fashion labels, where you go to school defines the floor you start your career off on. People who pay big bucks to go to Harvard get the designer label for their curriculum vitae for which they paid. And it's probably worth it. The downside isn't so much the economic Tulip Mania aspect as the decline of American culture into a new kind of class division where social mobility, once the defining factor of 20th century American life is severely limited. What you get is a ruling class that behaves like the Bushes and Obamas. It's the end of the American dream.

That's how we end up with Gorelick doing everything from National Security to Housing Mortgages...

 

[Frisco_Slug_Esq]

I had to summarize some boring papers on skills-based income inequality for this organisation I intern at and I was surprised to learn a couple of things

. I thought a lot more people had college educations in this country than actually do. I would have guessed at least half, at the very least. It's a lot less than that.

The other thing is that all the job growth is among people with either advanced degrees or no school at all. The really bad place to be is in the middle, with a high school diploma, some junior college, or an associate degree, that kind of thing. Even a BA won't get you much these days. The charts look like a big U.

And even guys like me can get in who really didn't even finish high school; promoted for the safety of the other students.

 

[vrosej10]

Maybe there is an education bubble. But what it's really all about is the creation (or recreation) of a class system in America. Higher ed has become a bit like fashion labels, where you go to school defines the floor you start your career off on. People who pay big bucks to go to Harvard get the designer label for their curriculum vitae for which they paid. And it's probably worth it. The downside isn't so much the economic Tulip Mania aspect as the decline of American culture into a new kind of class division where social mobility, once the defining factor of 20th century American life is severely limited. What you get is a ruling class that behaves like the Bushes and Obamas. It's the end of the American dream.

I think there's truth in that and I suspect we are going the same way.

 

[chillywilly2]

Interesting article. It is always good to question societal institutions and beliefs. This is not the reason I am at uni. I am there because I truly love to learn.

Sounds like a hobby. Nice as long as you can afford it.


Like they say...it takes money to make money and you have to be carefull where you invest it. Sometimes an educatuon isn't always the right place.

You need to crunch the numbers as to what it costs, payback time..its gotta add up.