Peter Thiel, Co-Founder of PayPal
"Education is a bubble in a classic sense. To call something a bubble, it must be overpriced and there must be an intense belief in it. Housing was a classic bubble, as were tech stocks in the '90s, because they were both very overvalued, but there was an incredibly widespread belief that almost could not be questioned - you had to own a house in 2005, and you had to be in an equity-market index fund in 1999." ~ Peter Thiel on higher education for NRO.
Peter Thiel is a highly successful entrepreneur, venture capitalist, hedge fund manager, and perhaps most notably co-founder of Internet giant PayPal.
He is also a staunch libertarian, and anything but meek about voicing his philosophy.
When it comes to higher education in America today, Thiel is less than impressed:
"It's basically extremely overpriced. People are not getting their money's worth, objectively, when you do the math. And at the same time it is something that is incredibly intensively believed; there's this sort of psycho-social component to people taking on these enormous debts when they go to college simply because that's what everybody's doing."
Like Thiel, we at Money Morning believe that America has been swallowed by a student loan bubble.
And, like Thiel, we've thought up some reasonable alternatives to the blind pursuit of higher education.
For instance, we suggested starting a business. There is something about real-world experience that can't be replicated in higher education right now.
Just look at the commentary by some of the business elite.
Joel Peterson, who is Chairman of JetBlue Airways (NASDAQ:JBLU) and graduate of Stanford Business School, frankly writes, "It's important to acknowledge that many of the key factors that contribute to business success are the ones you learn at your mother's knee, and that others can only be picked up on the front lines."
It's really something to think about - kids are being sold a product and shelling out billions to opt in, when, if you listen closely, many of the business elite scoff at the value of higher education.
"You know, we've looked at the math on this, and I estimate that 70 to 80 percent of the colleges in the U.S. are not generating a positive return on investment. Even at the top universities, it may be positive in some sense - but the counterfactual question is, how well would their students have done had they not gone to college? Are they really just selecting for talented people who would have done well anyway? Or are you actually educating them? That's the kind of question that isn't analyzed very carefully. My suspicion is that they're just good at identifying talented people rather than adding value. So there are a lot of things about it that are very strange," Thiel surmised to NRO.
But here's the cool thing about Thiel. He does more than just talk the talk; this is a guy who thought up a solution to the student loan bubble and implemented it himself:
Thiel created a "20 Under 20" fellowship program that accepts applicants under the age of 20. Thiel Fellows receive a no-strings-attached grant of $100,000 to skip, or drop out of, college and instead focus on their work, research, and self-education.
Thiel Fellows are mentored by a network of visionary thinkers, investors, scientists, and entrepreneurs, all aimed at providing guidance and business connections that arguably cannot be replicated in any classroom.
The first 24 Thiel Fellows were announced back in 2011. A litany of success stories ensued, such that Thiel decided to continue the program on an annual basis.
In the first "class" alone, more than 10 of the Fellows started their own companies, and one has already released a product into the market, according to James O'Neill, head of the Thiel Foundation.
For instance, Andrew Hsu formed a business called Airy Labs to develop mobile and tablet social learning games for children. Airy reportedly received $1.5 million in venture capital funding. Hsu was only 20 years old at the time of launch.
"I have never let my schooling interfere with my education." ~ Mark Twain
Critics accuse Thiel of "cherry-picking" prodigies - youths who are bound to succeed no matter what.
Their argument is that the majority of college-bound students would not thrive in his program, would not do well for themselves by skipping college, and should not be encouraged to do so.
Even so, I believe it's a brilliant idea to offer alternatives.
I am not saying higher education is always a waste of time and money - but if it's not done carefully it can lead to playing financial catch-up for decades.
And it turns out that other venture capitalists, and even some universities, are making the same play as Thiel, by launching similar entrepreneurial programs.
Young people shouldn't allow tradition, hype, or easy-access to financial aid dictate what path they choose to pursue after high school.
Thiel's alternative stimulates actual thought and scrutiny about this illusion that higher education will automatically shift one's socio-economic status.
Further increases in student loan debt spells disaster for the US economy; find out why the Student Loan Bubble is the Next Subprime here...
- National Review:
Back to the Future with Peter Thiel
- Money Morning:
How higher education can be the worst investment ever
- Business Insider:
Google has started hiring more people who didn't go to college
Are colleges afraid of Peter Thiel?