Seed funding isn't a loan, it's equity. Nobody is suggesting that students give up 20% of all future income to the entity funding their education, which would roughly correspond to seed funding.
That being said, there are some efforts towards equity-financing humans that are in their infancy.
GP said that startups aren't given unsecured loans of $250k, and therefore it would be madness to give unsecured loans of that magnitude to individuals, so they can invest in a college education for themselves.
...except startups do get money of that magnitude that is essentially unsecured. If the startup folds, the investor loses the money, in the same way a borrower loses the money if the lender defaults.
So if there's a way to get unsecured money to startups for risky ideas without the founders having to indebt themselves for eternity, there ought to be a way to do the same for individuals wanting a college education without indebting themselves for eternity.
You can't put "almost" on a false statement and make it true. Equity isn't "almost" a loan by any stretch of the imagination, just as going to a movie isn't "almost" "making an unsecured loan to a movie theater" (if you don't enjoy the movie, you still lose your money).
> startups do get money of that magnitude that is essentially unsecured. If the startup folds, the investor loses the money, in the same way a borrower loses the money if the lender defaults.
This is stretching the meaning of debt beyond all recognition (and accuracy). The ownership that comes with seed funding doesn't just involve giving them money like debt does. First off, you're entitled to a _proportion_ to their value/revenue in perpetuity, as opposed to a fixed principal+interest as with debt. Secondly, part-ownership of a company gives you rights to the company you own beyond a revenue stream: which is why seed funders have partial control over the companies that they partially own (eg sitting on boards).
> So if there's a way to get unsecured money to startups for risky ideas without the founders having to indebt themselves for eternity, there ought to be a way to do the same for individuals wanting a college education without indebting themselves for eternity.
As I said in my comment, equity financing for humans is in its infancy, and I've been in support of it for a long time. The comparison to seed funding, however, is ludicrous, since (as I said), rights in perpetuity to income streams are not on the table, and neither is the ability to (partially) make career decisions for the recipient of the funds.
Actually, people are. Income based repayment of student loan debt is already one such mechanism. But there are also universities that are piloting post-payment of college tuition via income sharing agreements.
Yes, I mention that in the last sentence of my extremely short comment. But my point stands: none of these plans come anywhere near seed funding's 15-20% of ownership, or the rough equivalent for "equity financing" humans: the rights to 15-20% of labor income in perpetuity.
Hah. I misread your last sentence as "equity financing humans in their infancy" as in from birth. That sounded pretty batty to me, which makes sense now I see that's not what you said. My bad.
That's actually how it works in Europe. Universities are government paid, the student pays something below $ 2000 per year. But tax rates here are higher, so it is indeed roughly "in exchange for 20% of all future income"
> That being said, there are some efforts towards equity-financing humans that are in their infancy.
I find this pretty funny, because equity investments in humans go back thousands of years under the traditional name "slavery".
(Edit: expanding on the point a bit, it is true that legally a slave's owner almost always owns 100% of the equity. However, this is so suboptimal for skilled labor that skilled slaves held equity in themselves, in the form of a "right" (agreement with their owner, though the rate could be set by custom rather than negotiated) to keep a percentage of their earnings. This equity was a gift from the owner, but it boosted his total earnings.)
I see people say this a lot, but the details of the equity investment really do matter.
For example, an equity investment that gives the investor rights to 10% of the student's income for 20 years, capped at $100,000 total, is not at all the same thing as rights to 100% of income in perpetuity (which would be closer to "slavery" as commonly understood). Note that student loans that are large enough to not be effectively payable are a lot closer to the latter than to the former.
"Slavery" also tends to come with legal restrictions of various sorts (on freedom of movement, freedom to make various choices, etc, etc) and inequality before the law (different punishments for the same behavior). Those sorts of things are emphatically _not_ being suggested in modern-day equity financing.
(There are also income-dependent loans, including with expiration dates; in practice those can be hard to tell apart from equity financing with a finite time horizon and a payout cap. The UK has been funding college via such loans along these lines for close to a decade now, I believe.)
Anyway, the most important question here from my point of view is how to properly align incentives. With equity financing, _if_ the student is interested in having a good income it is very much in the financer's interest to help that along (via mentorship, access to professional networks, etc), and incentives align well. If the financer is the university itself, that also provides incentives to produce graduates who can get a reasonable job. Of course if the student's goal is _not_ a "good income" we end up with incentive misalignment; similar if we want a university education to provide more than preparation for productive employment. (This last is already a problem in practice if universities get rated on how their students do in the workplace, by the way.) So I won't claim that equity financing is the right thing in all cases, but there are definitely situations where it would be a lot better than what we have now, and I think people should have the choice of financing their education this way if they want to.
> is not at all the same thing as rights to 100% of income in perpetuity (which would be closer to "slavery" as commonly understood).
It might be closer to slavery as commonly understood, but it's pretty far away from slavery as practiced.
> "Slavery" also tends to come with legal restrictions of various sorts (on freedom of movement, freedom to make various choices, etc, etc) and inequality before the law (different punishments for the same behavior). Those sorts of things are emphatically _not_ being suggested in modern-day equity financing.
If equity financing happens at all, they will be, as conditions of the initial "loan".
> It might be closer to slavery as commonly understood, but it's pretty far away from slavery as practiced.
Slavery as practiced looked quite distinct in different places and different time periods. But yes, it was rare to claim 100% of the work product because then the slaves would starve.
> If equity financing happens at all, they will be, as conditions of the initial "loan".
Like I said, as far as I can tell equity financing has been happening for almost 10 years in the UK, without such conditions.
The very fact that you can rationalize the enslavement of a young person by saying "at least we 're allowing them to go where they want" is absolutely fucking horrific.
It should be illegal to agree to give away future earnings in this manner, specifically because morally corrupt people like yourself can rationalize your way into it.
I'd really like to understand where you're coming from here, because I feel like we're talking past each other. I'll ignore the personal attacks, and hope you'll refrain from them in the future.
First of all, a misconception I really want to correct: I am talking about "no restrictions on what the young person chooses to do" (including what work they do, etc), not "at least they can go where they want". This seems pretty clearly different from "slavery" to me, and I'd really like to understand why you feel differently.
The way I see it, we have an adult who wants to learn a set of skills (and the argument over whether _that_ is the purpose of postsecondary education is a very important one, but the fact of the matter is that attempts at "universal college" seem to be driven by the "it will get you good jobs" motive, not by the "it will make you a more reflective and critical thinker" motive). Yes, they are young, but they are not a small child incapable of making decisions. And yes, I would support guardrails to prevent abusive contracts, not because they are young but because this stuff can be complicated and not everyone involved is in the top 5% in intelligence; those guardrails are sadly lacking in the current college funding setup in the US.
If you disagree on the basic premise so far, I'd like to understand where you disagree.
If you agree on what the goal is (teaching people skills), there are various ways to finance the acquisition of these skills. The ones I am aware of:
1) One could save up enough money to pay for the relevant lessons, then take the lessons. Or be earning enough money while taking the lessons; the "work your way through college" route. This has the chicken-and-egg problem of likely wanting the lessons to increase earning potential (though perhaps just to have a less-uncomfortable job, of course) and therefore lacking that earning potential, and hence ability to save, right now.
2) One could take out a loan to pay for the lessons now, with the goal of using the increased earning power to pay back the loan. This is the current US model, in large part. Especially for socioeconomically disadvantaged students. There are all sorts of well-known issues with this model.
3) One could rely on one's family/friends/whatever to finance the education. This is largely the historical university model pre-20th-century and is a big part of the model in the US for socioeconomically advantaged students. This model basically involves an intergenerational transfer plus an implied "pay it forward" obligation. In some families the obligation may be explicit (e.g. parents finance older children who then promise to help finance younger siblings). This model has obvious inequity problems.
4) One could rely on labor performed as part of the learning process to finance it. This is the historic apprentice/journeyman model. I think it's under-explored in many cases today, though internships _can_ be something along these lines. The mismatch between how much those pay and the actual costs of postsecondary education mean this model doesn't work very well typically.
5) One could rely on "the state" to finance education. This is similar to #3 except (1) it does not rely on accidents of birth and (2) the "pay it forward" obligation is compulsory, via taxes or a period of restricted work options after graduation (e.g. as practiced in the USSR). This model does well on fairness metrics, but I think it suffers from some serious incentive misalignment and resource misallocation issues. It can also be adversely affected by demographic trends (e.g. if the financing structure assumes population growth which then does not happen). Fundamentally, this is in fact equity financing, done by society at large.
6) Equity financing of some sort by non-state entities. This avoids some of the failure modes of option #3, in that financing is not based on parentage. It allows the time-shifting of expenses vs income all the models except #1 manage. It does involve a commitment of part of future income, as does option #2 and option #5 (albeit this last hides that commitment more). I believe it's preferable to option #2 because it builds in things like "your payments won't be too much to bear" by default, whereas option #2 requires hoop-jumping as soon as something doesn't work as expected.
There's an important discussion to be had between option #5 and option #6. I think that discussion is a valuable one, and I _think_ incentive effects can be better with option #6 and option #6 is more likely to lead to more flexible terms that can be better tailored to suit preferences. But I can also see state-funded fairly flexible programs; it really depends on how its set up. I would not be at all surprised if the tradeoff here varies widely by individual and by how non-corrupt and competent your government is.
I do think that option #6 is definitely a much better fit than options #1-4 for modern post-secondary education.
I also think that option #6 can be trialed, and even largely transitioned to, without needing to solve the coordination problems that option #5 involves (i.e. legislation). So even if someone feels option #5 is clearly best here, it may be worth supporting option #6 over option #2, say, while at the same time continuing to push for option #5. Again, I feel that in practice options #5 and #6 are more similar than many people seem to think.
Note that _all_ of these options except #1 can be (and have been), abused in various ways, unfortunately.
Do you see other options for financing post-secondary education? What options do you prefer out of the list above or whatever ones you add? Do you have fundamental disagreements with my characterization of the 6 options above?
You're morally corrupt and I have no problems repeating that.
I read just far enough to know your argument was going to be "free will to decide what contract to sign".
Except that entire line of thinking can be destroyed with a single observation.
contracts freely signed can and are deemed invalid if they're too onerous. Boom. Your entire argument falls apart.
Allowing a 17-18 year old to sign away their labor for longer than they've currently been alive is called ownership. We do this with corporations in the form of stocks. WE DO NOT DO THIS WITH PEOPLE.
There are things in this world that we as a society do not fucking do, and selling ownership to young adults is one of them.
You're completely ignorant of people and the world. completely. The first thing these companies will start doing is trying to protect their investment, only because it's a human being involved it's going to start turning into control and oversight.
> I read just far enough to know your argument was going to be "free will to decide what contract to sign".
Uh... That means you literally needed to read one or two more sentences to see that this is not the argument.
If you're going to make claims about me and my understanding of the world, please have the decency to base them on what I say, not on what you guess I am going to say.
> The first thing these companies will start doing is trying to protect their investment
Why are you assuming that the equity financing will be by "companies"? The entities trying it right now are non-profit universities and governments. Who can still fuck it up in the way you describe, of course, just like they have already fucked up debt-funded education.
And there is plenty of "contol and oversight" going on with state-funded education (my option #5) as well, I should note. And I absolutely agree this NOT a good thing.
That being said, there are some efforts towards equity-financing humans that are in their infancy.