What Thiel doesn't get is that the reason why it's a bubble is also what keeps it afloat. It's exclusionary, and something inherent in humans is a desire to categorize and compartmentalize -- credentials.<p>Sure, if you're starting a web startup or a basketball team, no one cares where you went to school (although an offensive lineman in football benefits from going to a top tier school -- despite football being a meritocracy its surprisingly difficult to measure how effective linemen are). But the top lawyers, doctors, professors, and even business managers will be recruited from where people think the best people are.<p>The ironic thing is that the only reason people listen to Peter Thiel is because of his credentials as PayPal co-founder and VC investor. There are a million people have an opinion on education and tecnology. There's too much noise -- the ideas that are listened to are those that come from people who have done soemthing in the past -- a credential. At a massive scale college is still THE credential.<p>And surprisingly the internet has actually made elite schools more important, not less. Pre-internet regional schools were often held in near equal esteem as Harvard/Yale. As information became more fluid (USNWR and the internet) the ranking of credentials became easier to obtain. This won't change.
Posted this as a TechCrunch comment but wanted to cross-post here:<p>The challenge higher education is going to face is that the signaling mechanism that higher education provide (i.e. you were good enough to get into Harvard so you're good enough to work for Goldman Sachs) is going to become de-coupled from the institution's ability to impart knowledge on people. A few decades ago, most of what you needed to learn to be productive in society was best learned at a university. Today, most of the what you need to learn to be productive in society is best learned on your own, online, for free. There are exceptions but 99% of human knowledge is no longer locked up within a university.<p>Contrast that with the cost of higher education.To go to UCLA as an out-of-state student it now costs $50K/year (<a href="http://www.admissions.ucla.edu/prospect/budget.htm" rel="nofollow">http://www.admissions.ucla.edu/prospect/budget.htm</a>). And that's a <i>public</i> school. And it's rising 8% a year. So the cost of learning has plummeted to almost nothing and yet 18-22 year old kids are taking out six figure loans to "learn". This makes no sense and feels very unsustainable.<p>And here's what I think will change the game: alternative signaling and credentialing mechanisms. When universities no longer have a monopoly (or near-monopoly) on signaling/credentialing we'll witness a sea change. I'd offer that this is already starting to happen in certain parts of industry. Would you rather hire an engineer with a lot of GitHub followers, a great reputation on Stack Overflow and/or someone who is a Y Combinator alum or would you rather higher a Stanford or MIT grad? It's a bit of a toss-up for many people to answer that and given that the comparison is Stanford/MIT and not the 4,000 "lesser" schools, that says something.<p>This change won't happen overnight but Thiel is on the money here. Higher ed is a $500 billion industry in the U.S. alone and I think its value proposition has never been more questionable than it is today.
Here's what Piaw Na, a Xoogler, said about this piece-- it's worth quoting:<p>"When the Thiel Foundation came to a local startup incubator to pitch, it came under heavy fire. For one, a lot of their recruiting heavily targeted existing Ivy League/MIT/Caltech students. These were students who were going to do great regardless of whether or not they pursued traditional college paths.<p>In other words, if this is an attack on the traditional college path, Thiel's definitely sided with their filtering mechanisms.<p>One guy who was present said the following: "You guys denied admission to the program from the one candidate who was actually making money as an entrepreneur!"
Before I went to college, higher education received the reverence of some sort of religious institution. Not only would attending college/grad school guarantee easy middle class living, it was the Path. Universities were these Higher Grounds, noble and humble institutions pursuing the best of the human spirit.<p>Then they sack you with six figures of non-dischargeable debt and you're back living with your parents sending out resumes.<p>I don't think a "bubble" is the appropriate term, I think "exploitation" is better. The value that universities provide (either as learning environments or signalling systems) is nowhere near commensurate with their costs to young people. Young people have no idea though: they don't know the performance of the university in terms of enhancing graduates' incomes nor what a reasonable level of education debt is. And universities are completely negligent (and in some cases outright deceptive) in providing this info to incoming students.<p>Education debt WILL be made dischargeable in bankruptcy again, there is simply too much pressure (edu debt is larger than credit card debt). When it does, you can expect tuition rates to plummet, back in line to their real net present values. In my opinion this could not happen soon enough.<p>The university comes from an era that never really existed of large, stable corporations providing steady employment to "educated" worker bees. The university was the 0-cost-to-employer filtering system to ensure Big Co highers the best people. That model simply doesnt make sense anymore.
I agree with Thiel's essential point. We need to take a step back and ask ourselves what benefit is being derived from sending all these kids to college. The kids also need to look carefully at the risk vs cost vs benefit of taking on debt in return for potentially higher future earnings.<p>Having said that, his statement "If Harvard were really the best education, if it makes that much of a difference, why not franchise it so more people can attend" misses the point entirely. Sure, Harvard probably has above average education. However, the reason it's sought after is because of the perception that all your peers at Harvard will be extremely smart talented individuals. As a society, we're hoping that that by putting all these really smart kids together in the "Harvard environment", they'll go on create things that they wouldn't have been able to on their own.<p>The point I'm trying to make is that the exclusivity of Harvard isn't "an excuse to do something mean", but rather an effort to create conditions where our smartest youngsters can get together and really change the world. I do, of course, agree that there are many other ways of achieving this goal than just college education.
Money quote from this piece feels relevant: "Once you enable students to borrow $36,000 a year, then magically the costs of a year in college (or for-profit school offering worthless "skills" that do no more for the hapless student than a high school diploma) rise to $36,000"<p><a href="http://www.oftwominds.com/blogapril11/consumer-devolution-two4-11.html" rel="nofollow">http://www.oftwominds.com/blogapril11/consumer-devolution-tw...</a>
I think Thiel is right - sort of. At least, if you consider the large amount of money spend on a college degree in the US. Let me compare this to Germany. In Germany, universities and therefore higher education is free. You just enroll, take classes, pay your rent and after a couple of years, you are done and usually have a degree that is very competitive around the world.<p>But every student knows that there are areas that lead to high-paying jobs such as engineering, while in other areas such as history, communications, philosophy, languages, you will have trouble finding a job, not even speaking of a high-paying job. Still, people are usually more or less aware of the fact that they might end up having an average-income job.<p>In the US, higher education is a financial investment where people expect a financial return. In Germany, higher education is mostly an investment of time and people are much more aware of the possible outcomes. We don't have a bubble here.
For anyone interested in learning more about the education bubble, there is a good article in this month's Fortune magazine about the creation of a new for-profit K-12 school in NYC:<p><a href="http://features.blogs.fortune.cnn.com/2011/04/06/chris-whittles-plan-to-make-a-world-class-private-school/" rel="nofollow">http://features.blogs.fortune.cnn.com/2011/04/06/chris-whitt...</a><p>The article highlights some really interesting and shocking facts about private K-12 education (i.e. Harvard's 2010 acceptance rate was 6.9%, while acceptance to NYC's top private schools combined was 5.0%; Harvard's 2010-11 tuition was $34,976 and Horace Mann's tuition was $35,670).<p><a href="http://fortunefeatures.files.wordpress.com/2011/04/avenues_school_numbers.jpg" rel="nofollow">http://fortunefeatures.files.wordpress.com/2011/04/avenues_s...</a>
A lot of this higher education bubble has to do with unnecessary costs of higher education, like, say textbooks: <a href="http://hubpages.com/hub/College-Text-Books-Rent-or-Buy" rel="nofollow">http://hubpages.com/hub/College-Text-Books-Rent-or-Buy</a><p>What will disrupt higher education in entirety is a properly done asynchronous class-schedule structure that allows students to take the time they need to finish the course. Coupled with some or full location independence and mandatory collaboration, it could be drastically more economical.
providing access to everyone for something by nature devalues it. as we try to democratize and socialize the world we try to give everything away.<p>college is just another victim of this. no one wants to tell a parent that their new born child is ugly and no one wants to live in a world where we can't all hope to be anything.<p>the housing bubble was the result of parents telling their kids to buy homes, because that's the american dream.<p>if education is a bubble, if housing is a bubble, then the american dream might just be a bubble too.<p>maybe it's time we invent a new dream.<p>a long while a go we dreamed of working less. i feel like in a creative economy, one where the generation of creative ideas is of principal, maybe we need more time to be creative and to share.<p>i think largely as a whole we are at peak capitalism. capitalism seems to best fit when resources are expansive. i feel like in the next 20 years resources will be less scarce than in the previous 20, and that is a strong signal that we no longer need to focus on exploration and expansion as much as we do living within our means.
I find the discussion here as well as the article myopic in the scope.
Programming/Web Startups are just a small part of the world.
You still need Doctors, Lawyers, Engineers and Scientists.
Sure one can question the utility of spending four years to get a
degree in Liberal Arts, but most other subjects require close supervision that one receives in a college education.
The bubble in education is not at the Harvard and Stanford level. Membership in that club is probably worth the cost. The bubble is in the lower-ranked schools that cost almost as much but don't deliver the exclusivity of Harvard. The people who will be hurt the most when the bubble pops are those people who overpaid for the knowledge they learned in college: People who attended average state schools who have a $600/month education loan payment for 30 years who have to compete for jobs with people learned the same thing for $600 in total.<p>Right now, there is no company that can give you for $600 the same education that a state school provides for $100,000. But such companies are coming. Khan Academy already is as good as any school in helping people learn. All that's missing is certification: comprehensive exams given in secure environments like normal standardized tests (SAT, ACT, LSAT, GMAT, ...) Compared to teaching, certification is easy.<p>The real big bubble in education is at the lower levels, at the elementary, middle, and high school level where schools are even more fungible than at the college level. Kids don't attend a middle school for the prestige. They go to learn. The bubble for the teacher unions will pop when states begin to ask why the state should pay union-level salaries for teachers to lecture when students actually do better with just a laptop and an internet connection.
This may already be covered (with 88 comments), but I fear this article will go on deaf ears, not just to education, but to general readers of TC (investors, et al). In the same way that companies use higher education as an over-valued indicator of capability, so do investors use incubators, and suffer from the well-known "Group Think" mentality. The important difference is that you have to pay for higher education, whereas with an incubator you get paid. The other nice part is that you can re-apply to an incubator as many times as you want, and there's no social norm about the age you have to attend, whereas with colleges it's a 1-chance opportunity when you're 18, so if you don't get into Harvard you just don't get in (yes, you can transfer, but it's highly discouraged, and mainly in relation to the money involved).<p>I believe my only gripe with the article is Thiel says you should not judge Harvard-caliber students if they went to Harvard or not, because we just don't have enough Harvard affiliates. But that's very hypocritical thinking for a venture capitalist, whose community resonates the same sentiment of judging YC-caliber companies when there aren't enough YC-affiliates (cause if that was the case, TechStars and other funds would hold the same esteem).
I think there are different facets to the bubble that need to be separated out to talk coherently about its implications...<p>You can look at the bubble from the vantage point of the schools that are competing to keep up with the spending of the ivys and have overextended themselves: <a href="http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aoglHAxZffTI" rel="nofollow">http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a...</a><p>And you can also look at it from the perspective of the students that are emerging from mid or low tier institutions with a hefty chunk of debt relative to their likely earning potential.<p>Peter's (or Sarah's) focus on the Harvard kids seems to be the least compelling part of a potential education bubble. These are smart kids who either leave school with no debt in the case that they are poor to lower middle class, and with parental support (of the monetary kind) if they're on the other side of the wealth spectrum. So maybe they're "wasting" four years where they could be creating a business, but they're not in dire straights upon graduation or necessarily compelled to sell their souls. Check out Harvard's financial aid policies: <a href="http://www.admissions.college.harvard.edu/financial_aid/hfai/index.html" rel="nofollow">http://www.admissions.college.harvard.edu/financial_aid/hfai...</a><p>I do think there needs to be some different paths put before kids in general as they contemplate "college as the only option" but I don't think Thiel is quite right to target the ivy kids as they have the least reason to fear an education bubble bursting -- because of the lasting [perceived] quality of their degree, their lack of debt in a lot of cases, their campus-born connections to smart and wealthy classmates and alums, and their smarts.
Thank you bubbles for allowing people to either have work or study. There's all this bubble talk, but when it comes down to it, if everyone really was just doing useful non-bubble stuff most of us in the first world wouldn't have anything to do. Our economists aren't ready for that.
People in the valley have this weird notion that what is happening in the valley is happening everywhere. It's not. Most people go to mediocre state schools with a little bit of debt when they graduate, and then live in that area for the rest of their life. Most people don't go to Stanford, Harvard, Yale or Princeton and rack up $80k+ in student loans.<p>The real bubble is groupthink.
Brilliant and thought provoking, heretical words. Exclusionary access, prohibitive cost, insular culture, overgrown complexity concealing fundamental ideas...<p>“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."
Makes sense. Same symptoms as the housing bubble.<p>Housing bubble - people have a right to own a home, regardless of financial merit.
Education bubble - people have a right to a college education, regardless of academic or financial merit.<p>Housing bubble - massive federal infusion of cash that drove short-term costs artificially low, spiking sales prices while putting people in large, long-term debt for something they don't necessarily need (ownership - people do need housing).
Education bubble - massive federal infusion of cash that drives short-term costs of education artificially low (student loans), while putting people in large, long-term debt for something they don't necessarily need.<p>Common theme - long term infusion of federal cash into markets leads to profiteering at the expense of the average American citizen. (What should we expect for health care?) In particular, the artificial reduction of interest rates allows sellers to charge higher prices for the same services. The services provider collects more money. The purchaser pays the same (or potentially more if their interest rate is not fixed).<p>Also, and economics, duh, artificially low costs lead to artificially high demand, which without any sort of quality control, looks an awful lot like a bubble.
Makes a lot of sense — especially given the amount of remedial education a lot of not-particularly-cheap colleges are having to undertake. Seems plausible that a lot of the investment (both in terms of municipal and state subsidies, as well as private debt) being made now won't bear a meaningful return for a long time, if at all.
This article is horrible.<p>It's a superficial story about Peter Thiel and Founders Fund framed as a controversial argument about the value of higher education. It really doesn't do anything more than pose the questions and include a few quotes from Peter Thiel.<p>Techcrunch trolls the internet once again.
In the end a University degree is just a piece of paper. What matters is the quality of the knowledge and mentoring you receive from your lecturers and from the university as a whole.<p>I think this situation is a result of the financial crash; Thiel is right, people have fled to something they see as a safe investment to increase their personal worth. People are going (back) to university so they have the qualitifications they need to get a job that would have previously required very little in the way of formal education. The market is flooded with educated job-seekers, so people must now set themselves apart with something else.
Thought bubble: Companies use universities as a filtering mechanism, like recruiters. But recruiters get paid and universities do not. Conclusion: universities should get into the recruitment business.
Thiel's going to have a lot of success with this first batch - if I may say so myself, being one of the finalists. It's remarkably generous of him to offer 100k without any equity exchange whatsoever - the terms are far better than those offered by YComb and arguably quite equal in beneficial environment acquired - particularly as it's for 2 years and not a quarter-year mini-stint. We'll see what happens in two years ; )
He has a strong opinion and this will always generate a big debate. But what I like the most, is that by talking of the education bubble and creating an option for students (the 20 kids program with $100k), we're going to test his theory soon. If that works, how about some of the top education programs replicating his model?
I plan to write a blog post about this later but I'm starting to think that the term "College Drop Out" has started to become more valuable than "College Graduate." This may not be completely true right now but in 5 years when today's 25 year olds are hiring, the term may possibly be more valuable.
Something that is hinted at the end of the article but not fully addressed: the risk of creating a new elite (if elitism is the problem) is there just as much in the new system (such as Thiel is) as it was the original institution.
In a free competitive situation the government if it wanted to give value to higher education while hobbling other competitive items would make higher education at state schools somewhat free thus reducing the competitive edge of for-profits while also reducing the debt load per student which spurs job creation because more college graduates can afford to start businesses and startups..<p>At least in the USA the main reason why college is not free is that the major debate in congress occurred during the
years after Vietnam Veterans returned and US congress people had a cultural bias towards giving those returning from Vietnam and those who did not fight in Vietnam a 'free college education' and like all political laws very hard to over-turn through a renewed debate..
Thiel is wrong - education is valuable, college very much so.<p>But an English degree is not higher education, it is a fiction we created for those who want to go to college but can't hack it in the real world.<p>A STEM or a law degree will make you a lot of money.