His point about the declining value of business school in particular is nominally sound, but he pinpoints the wrong source of the problem.
The problem with business school is that it's started seeing itself in competition with law school, and accordingly, it's started focusing on younger and younger candidates. Average ages of first-year MBA students have been getting younger, especially at the top-tier programs like HBS and Stanford.
This is, quite frankly, defeating the original purpose of business school: to be a finishing school, and not a preparatory school. Back in the day, you got an MBA because you had learned a thing or two in your work experience, and would like to reflect on it through the prism of various frameworks, theories, and leaders. But it was critical that you had an empirical knowledge base to work with, or else the lessons were vague and meaningless. The topics demanded practical knowledge of the general subject.
Today, b-school is trying to position itself as an entry vehicle into the working world. You graduate, you go to b-school, you learn some mumbo-jumbo about how this whole working world -- which you've never experienced -- is supposed to work. And then you get sent off into that world, ready to be an entitled prick and piss off everyone around you who has actually experienced the real thing. People who will laugh at your frameworks and your theories, because they've heard them from the last 20,000 MBAs who came before you.
B-school can still be relevant in today's business world, and in the business world of the future. But it needs to decide what it wants to be. And, whatever that is, it should be something more than simply an alternative to law school for 22-to-25-year-olds.
"Today, b-school is trying to position itself as an entry vehicle into the working world."
I do think there needs to be something that fills this position though. I think the ideal would be for b-school to work more like BYU or a salmon farm, e.g.
* Students show up straight out of undergrad and learn for 3 - 4 months.
* Students start their own project and work on it for another 4 - 6 months.
* Students apply to Y Combinator or one of the other seed accelerators, and continue building out their business over the next two years.
* Students who have shipped something significant are then allowed to come back at any point between two and ten years later.
I do think there needs to be something that fills this position though.
It doesn't even necessarily have to be that complex. What's wrong with:
1. Graduate with a bachelor's degree
2. Work for 2-3 years
3. Go back to school with practical experience
I think this would be a good model for all post-undergraduate educations (not just professional ones like business, or law). A few years of seasoning out in the field does everyone good.
Do you mean the way most male BYU students go on missions in the middle of undergrad, then finish older? Because 999 out of 1000 times, the mission has nothing to do with their field of education. Or was it something else?
"Do you mean the way most male BYU students go on missions in the middle of undergrad, then finish older?"
Yes. Not a perfect comparison as you point out, but that seems like roughly the right model. That way you have some mentors and a network you can tap into while you're building your first business, as well as some basic knowledge to get you started.
What if in general there were an option for higher education that was more spread out?
I'm imagining a system that is more based on apprenticeship; where you work and you learn at the same time, and after a certain number of years, you have taken enough classes to be given a degree in some area.
I guess the idea would be to have a company that is also an accredited university (with professors who do research and publish papers and stuff). I've decided to call this a companiversity.
Lets pretend it is a software companiversity. I guess the idea is that you just hire the best students right out of high-school, and they agree to work for you and you pay them to work on various contracts that the companiversity takes (presumably less than someone with a degree).
They also get to take classes at your internal university and earn a degree for free. The overhead that it costs the university to administer classes is paid for by the products that they delivered.
I guess the idea is to eliminate the huge amount of debt that college students accrue, return some of the opportunity-cost loss that college students experience by not entering the workforce, and give students that are entering technical professions some semblance of experience to increase their market value once they leave.
What if in general there were an option for higher education that was more spread out?
This is how most higher ed actually works out in practice. Where I grew up in Minnesota at least 50% of students at the U of MN worked and went to school part time and took 6-8 years to get a degree.
Though they have an employment rate that's on par or worse than us, Europe has more apprenticeship, training type programs. I wonder if there's less of a stigma in their societies against vocational programs.
I really don't think that's true. I started my MBA at Carnegie Mellon when I was 20. Having been in the workforce for a number of years now, I don't think I would have gotten anything much else out of it on the academic side had I started later. The one thing I might have missed out on to a degree by going so young is the networking. I tended to spend a lot more time outside of class with undergrad students who were my own age. That being said I'm still happy I went when I did.
Your comment is exactly correct -- you wouldn't have gotten anything more on the academic side, but you missed out on the networking. Speaking from my MBA experience, the networking was 95-99% of the value.
For clarification: are you referring to your MBA or to an undergraduate business degree? If you were in a graduate program at 20, then you're probably an outlier (in a good way!) to begin with. If you're talking about undergraduate-level business major or focus, then I think that's a different animal altogether -- and should be treated as such.
My biggest concern with the MBA (master's level) right now is that it's converging too much on the same territory and same age group as the undergraduate business curriculum. There is absolutely a lot of value in an undergraduate business curriculum, but it should be fundamentally different from the curriculum at the graduate level. The fact that the two curricula are very similar right now is indicative of a problem, IMO.
You bring up a good point that the undergrad and graduate curriculums should probably be different. However, they need to offer intro classes for the majority of subjects because most students won't know accounting and finance even if they've been in the working world for awhile beforehand. I think the clear advantage to the graduate program is that you can study only business. While I suppose I can have more intelligent conversations with other college-educated folk because I had to read Kant, Bentham, etc., I wouldn't mind having skipped all those philosophy classes in undergrad. There are also more advanced classes in the graduate business curriculum. I'm not sure what it is exactly about the curriculum that you see as problematic or would suggest changing.
Nothing's wrong with the curriculum on a nominal level. It's all well and good. The problem is that you can much more fully appreciate the material when you've had an empirical base from which to view it. As we know, 99% of the best-laid plans in the business world come down, in the end, to politics. That's something you could imagine, but probably wouldn't really grok, until you'd been out in the wild and brushed up against the subject.
Another example: the people. I learned a lot from my classmates at my MBA program, but that's probably because a lot of them had different professional backgrounds. If we were all the same -- no backgrounds yet, other than our majors in undergrad and perhaps some college internships -- then I'd question what these people would actually have to teach me, or me them.
I'd love to see the graduate business program be a lot more selective on the basis of actual leadership experience or actual business results. Select for the people who've kicked some ass in the real world. Then make the program super peer-focused, and make the whole thing basically the Hogwarts of business badassery. A bunch of super-accomplished people getting together and, for lack of a better word, hacking business.
The theories and frameworks are great, but to your point, I think a lot of that stuff is undergrad material. Or maybe core/primer/refrsher material in the graduate program.
Is that taught using the "case" method? What exactly did you say in case studies when experienced managers were talking? </curious> Because an MBA is as much about learning from fellow students as it is from professors.
We did do some case studies, but probably fewer than at other schools. Having limited management experience really had no effect on my ability to participate in case studies or in class though. I was still just as able to argue that a company should have used a loss leader strategy instead of cost-plus pricing, or argue why a certain market would be winner-take-all resulting in a natural monopoly, or that another student's argument ignored the price inelasticity of the product. None of these things require that you have actually implemented them yourself in order to have a good grasp of the concepts.
I'm glad these articles are being written and taken seriously. We definitely need to end the heresy of questioning the value of higher education. Students need to understand that debt is the opposite of freedom, and student loans are (as the article pointed out) much harder to escape than almost any other kind of debt.
That said, I'd like to see someone take on education in a stronger form. This particular article mocks an english teacher (another one asks who would spend $250,000 to read chaucer). Alrighty, agreed, not worth spending $250,000 to read Chaucer.
How about engineering at a highly regarded state supported institution? How about Computer Science at the University of Washington or Illinois? Or even at a private university? How about going pre-med (though Medicine is clearly somewhat positional, rejecting many applicants than would be capable of completing the program), or to law school (probably even more positional than medicine in determining the value of your degree).
Please understand, I'm not saying the answer is an obvious "yes" or "no" in any of these cases. If you're a good enough programmer to pass data structures at college that teaches the class for real, it could very well make sense to drop out and do YC or take that 100K startup from Thiel. But we do need to start distinguishing between different types of education: different majors, institutions, motivations.
Definitely time to move past asking whether it's worth spending $250k to study Chaucer. There's much more interesting material here.
I think the bubble is already cracking and about to burst. If you take a look at all of the top for profit schools their enrollments have declined dramatically.
Some degrees are certainly worth the money. All it takes is simple 5th or 6th grade math, which is not done for any number of reasons.
I did the math, let me explain how it worked:
-My parents had $X saved up for me to go to college (in my name I might add, so it was legally mine)
-My dad was a faculty member at a local university which entitled me to free tuition
-I attended that school for over 2 years, for free
-I did the math that I could earn low to mid 5 figures with my degree, or make six to seven figures by dropping out and focusing on my current business I had been building
-I dropped out, and I made a ton
People are (or at least were) confused by what I was doing. I could have gone to a better school and not had a whole lot of debt. I could have stayed an extra year and a half and received my free college degree (minus the cost of books.) I did the math and it was damn simple math. Not a single other one of my friends did the math. Oddly enough, my brother did do the math and is attending an expensive engineering school for a degree in a special field.
Anyone who gets deep in to debt for a non-marketable degree is a sucker. Anyone who gets deep in to debt in order to teach that same degree to others as a university faculty member is a participant in an elaborate ponzi scheme.
There is nothing wrong with higher education. There is nothing wrong with devoting your entire life to something that will not earn you a penny. There is something wrong with elaborate and needless waste.
Technology can, and will, bring education prices back down to earth. Accreditation along with deep rooted special interests means this will take a lot longer than it should.
What gets me about many of these articles is how broad a brush they often use when describing "the education bubble." And so I appreciate that this article at least gestures at different types of grad school, and how student/consumer demand may be decreasing.
But I'd to read more about specific bad "educational investment" decisions, and what makes these decisions bad, as a way of prescribing better pathways for students sizing up their college or grad school options. Specifically, what are the bigger competing opportunities that should entice these "kids" away from educational debt and opportunity cost? Thiel's program can only be a very small part of the re-balancing act, I think.
Point me in the right direction if you've already read it...
That is part of what makes a bubble a bubble. Individual houses have been good investments for particular reasons; individual e-commerce plays or telecom companies made sense in the mid-90's. But when people start calling up their broker to buy the next Internet IPO, or trying to invest in "housing" as a category--or when parents tell their kids to get "A degree," it naturally selects for the worst version of those.
Thiel's program is more of a signal than anything. I dropped out of college five years ago, and people thought I was crazy. I had lunch a couple months ago with my high school classmates (from a regionally well-regarded prep school), and I'm pretty happy with how my career and prospects stack up.
Thanks. The relationship to the housing bubble is interesting, no doubt. In my mind, no two things have been more connected to class aspirations/freedoms over the last 50 years than home ownership and higher ed. There are class and race issues at play in both cases, which makes new prescriptions pretty tough to make, especially on a political level.
But a problem has been identified here -- too many people are spending too much on money on phantom educational assets. Now the solution -- fewer people should go to college. (Especially expensive low to mid tier schools?) I guess what I was really asking above, is: so what should they do instead? And I'm guessing the answer ain't so pretty, something even more offensive to the idea of the American dream than the analogous housing case, of "sorry, just keep on renting."
I went to college for a year, and I'm doing just fine without it. That used to be the standard path. There are plenty of well-paying jobs that don't require a degree--many trades pay far better than white-collar jobs, for example, and sales jobs often don't require a degree.
And there's nothing wrong with renting, either. You buy housing as you need it, just like you buy food as you need it--I don't feel ripped off that I eat peaches but don't own an orchard.
I think the "bubble" argument is that education is overpriced for value delivered. If someone can't pay off their school debt, what's the economic return on the schooling? I can see the objections to such analysis for undergrad, but surely the economic returns on professional education should be reflected in financial returns.
The replacement of "educated" workers by technology suggests similar value problems. If someone is truly replaceable by automation, and can't find other work, were they ever properly educated in the first place? Or were they socialized to a particular work ethic, and trained to follow very complicated instructions? I would expect an educated person to use their analytic abilities and grasp of principles and ability to learn, to find how to use automation, somewhere, to do more work of better quality. If they can't do that, then I question just how well they were educated in the first place.
So the bubble might be reflected not in the price, but in the crummy product delivered at that price.
You bring up a good point. One of my favorite T-shirt sayings is "Go away or I shall replace you with a small shell script". If someone could be replaced with a shell script, or even a major application, they were not well educated in the first place. Despite all the work on AI, computers are still only useful in extremely narrow niches, and absolutely require humans to provide the context necessary for their output to be useful.
I've always thought that t-shirt was pretty offensive. If your manager wore a shirt saying "go away or I'll outsource you to India" what would you think about that? They've both as true as each other...
Education is not an unstable bubble. Looking at the low and high end of the market there does seem to be an education bubble despite plenty of vary good state schools with reasonable tuition.
What people seem to miss is unlike the housing or gold bubble tuition costs don't really feed off each other. The high end is really just a luxury in another form and nothing is stopping Breitling from selling 300,000$ watches any time soon. And the low end is a direct government subsidy (like corn farming) which will continue as long as the government feels the need to waste money.
PS: As long as demand is unlimited and wages elastic Technology can't really destroy jobs in the long term even as it disrupts industry after industry. Still, people will always look for the best workers, so even if a degree might not mean an increase in pay the unemployment rate for people with a BS is 1/2 that of those without one for a reason.
It has more to do with people getting degrees for the wrong reasons: being educated doesn't mean you will always have economic security.
And that's where the housing bubble analogy comes in: there are many good reasons to buy a house, but doing so because you expect its value to increase constantly is not one of them.
The Education and Housing markets are complex systems. The bubble analogy works as a vary simplified analogy to describe how some markets can see sustained prices increases for a while followed by a sudden drop.
This works with Housing, at a fundamental level if people decided to more houses one year the price increases, and if people buy fewer houses one year the value of your house decreases which can quickly cycle though to dramatic shifts. However, if fewer people decided to get a degree the value of your degree increases.
Both systems have a constant: massive government subsidies that distort the true supply, demand, and economic ROI for the good. There could not have been a housing bubble without Fannie and Freddie, the FHA, and the protected-by-regulation class of bond ratings agencies.
Similarly, there would not be an education bubble without federal loan guarantees -- certainly they have escalated cost of college, and most of the shady for-profit colleges thrive on student subsidies.
What is really interesting is how little the price could increase before market forces brought things back to reality. Housing is such a large percentage of the worlds wealth that we never saw the sort crazy multiples over value that other bubbles get to. EX: http://en.wikipedia.org/wiki/Japanese_asset_price_bubble
Bubbles require rapid credit expansion. There may be varied reasons for what fuels a particular bubble, but the necessary precondition is easy money/credit.
When the government regulates the currency & credit markets tightly, then government should share in the responsibility for the bubble.
I'd recommend looking at a chart of GDP from before the Fed was established for the express purpose of mitigating boom/bust cycles.
It looks like a jigsaw. If you look at a chart of actual numbers, it's pretty clear that the countercyclical tools available to the fed diminish the effect of bubbles.
The largest and least stable bubbles are often driven by credit but there is a wide range of causes. For example, one of the largest and less talked about bubbles comes from the shift from defined benefit plains to 401k style investing. In the mid-1980s there were fewer than 8 million participants with less than $100 billion of assets in 401(k) plans.[3] By 2006 there were seventy million participants with more than $3 trillion of assets in 401(k) plans. Now, what happens to the US stock market as baby boomers retire and there is a significant shift between people buying and selling stocks?
PS: Many bubbles are simply money looking for somewhere to hide. Assume the US cut it's military budget by 80% and paid of the debt in 20 years, where do you think that money would end up?
"There could not have been a housing bubble without Fannie and Freddie, the FHA, and the protected-by-regulation class of bond ratings agencies."
I beg to differ. You could have pulled the full cost of every defaulted mortgage out of the bottom line of a single big-5 investment bank and not even bankrupted it. But we had all these crazy hyper-leveraged instruments that turned a 50 billion dollar problem into a 5 trillion dollar problem. The issue wasn't the mortgages, it was the leverage and gambling.
Hasn't this always been true? Universities have always offered plenty of degrees in fields that are hard if not impossible to find good paying jobs in.
> As long as demand is unlimited and wages elastic Technology can't really destroy jobs in the long term even as it disrupts industry after industry
Sure it can- because in the real world demand /is/ limited [which is why bubbles pop] and wages are pretty inelastic [because raising wages is seen as a one-way ratchet].
Computer programmers can pretend it isn't true as long as we want, but that's because if someone does come up with a real AI, we're going to be the last ones out of the building.
I think the author is confusing the members that currently make up the set of high-end jobs with the set itself.
In 1995 I was writing HTML templating engines and session management code. An HR person might have called me a "templating and session engineer." By that definition the role I was filling is now obsolete: standardized technologies have been developed that mean I will never find work as a templating and session engineer again. I am not crying about that development.
The coming obsolescence of particular high-end jobs opens an opportunity for new high-end jobs. The world has fewer Unix admins per Unix server than it did fifteen years ago, and the world is better off for that. (Apropos the recent "Linux admin shortage looms" non-story recent posted here.)
The author is perpetuating the same fallacious argument that wheelwrights were at the dawn of the age of automobiles.
It doesn't reduce the demand for high-end jobs, it might reduce the demand for the currently large variety of high-end jobs. I always thought that the development of science and technology pretty much meant that eventually everything trends towards pure symbol manipulation within a computerized environment, aka programming. Today we're programming ERP systems; tomorrow, automated asteroid belt ore extractors and 3d printers. Even then, I'm sure you'll have an even more bewildering variety of highly specialized technicians than you have today.
It must be admitted that while-collar is replaceable, and often more so. Accountants could be mostly eliminated if we had a sane tax structure and automated/standardized banking/transaction standards. Ex: when I buy coffee using my business card in a city I'm not living in - that's definitely a business expense.
Primary care doctors are already just fancied-up mechanics is most cases, and robotic surgery is getting pretty good!
There will likely be a point in the future where the abilities of human technology surpass the abilities of humans themselves, making us irrelevant (relatively speaking). We will probably integrate with technology along the way, passing along our good and weeding out our bad, but the end result will be far different and superior to humans. It will be the byproduct of our race, much like we are the byproduct of the first multi-cellular organisms.
Throughout evolution, no species has ever permanently dominated the top of the food chain; it always gets replaced by something else. There's little reason to think that won't happen to us too.
The best I can do is think of Rome's slave based economy. Obviously slaves can do anything the free Romans could, and they did. The Romans were either plebes, dependent on government handouts like bread and circuses, or they were wealthy and then they mostly went into politics.
A Roman slave wasn't much like what we think of as slaves now (i.e. blacks on cotton plantations). Epictetus, for example, was a slave, and who even remembers now who "owned" him?
There were many black artisans in urban areas of the antebellum south who were slaves in just the way that Roman slaves were, doing highly skilled work without personal freedom.
Epictetus is, uhhh, an extremely atypical example of Roman slaves. Most of them weren't kept as pet philosophers.
Most of 'em were working in the fields, most of the rest were serving in their masters' houses, and the majority of the rest were probably doing far worse things (working in the mines or dying as gladiators).
We all retire and let the computers run the economy for us, and devote our lives to the pursuit of happiness, art, love and other non-practical endeavours.
And when the computers start caring about art too, they'll join us, no doubt.
I really hope your vision comes true - I spend too much time thinking that computers are actually going to end-up as the Romans - we'll be their slaves... (pets?)
Mind you, there's another alternative, even more depressing than the one you mention:
90% of the human population finds it impossible to transition to a life of plenty, where there's nothing to do other than enjoy yourself and/or pursue abstract notions, and so a great world war emerges, destroying everything that we've spent a million years of evolution to achieve, and ending humanity's brief reign on this planet.
If only there were a way to short middling private schools. The hedgies shorting the for-profit schools are well documented. But you have to think that the lower- to middle-tier non-profit private schools--the ones that charge tuitions not unlike those of the Ivies--will be the first into the fire. Perhaps Goldman can create a Middling Private School Index (the MPX) and sell CDSs against it? The question: who can play the role of sucker on the long side? I know! Taxpayers!
The best evidence for an education bubble can be found at Starbucks. The amount of people who have advanced degrees and work at Starbucks is simply astounding.
Do you have any evidence that this is the case? Most of the people I know who work as barristas (Starbucks or otherwise) are college students or people obsessed with coffee. And in the suburbs the demographics change even more. (Seattle)
The problem with business school is that it's started seeing itself in competition with law school, and accordingly, it's started focusing on younger and younger candidates. Average ages of first-year MBA students have been getting younger, especially at the top-tier programs like HBS and Stanford.
This is, quite frankly, defeating the original purpose of business school: to be a finishing school, and not a preparatory school. Back in the day, you got an MBA because you had learned a thing or two in your work experience, and would like to reflect on it through the prism of various frameworks, theories, and leaders. But it was critical that you had an empirical knowledge base to work with, or else the lessons were vague and meaningless. The topics demanded practical knowledge of the general subject.
Today, b-school is trying to position itself as an entry vehicle into the working world. You graduate, you go to b-school, you learn some mumbo-jumbo about how this whole working world -- which you've never experienced -- is supposed to work. And then you get sent off into that world, ready to be an entitled prick and piss off everyone around you who has actually experienced the real thing. People who will laugh at your frameworks and your theories, because they've heard them from the last 20,000 MBAs who came before you.
B-school can still be relevant in today's business world, and in the business world of the future. But it needs to decide what it wants to be. And, whatever that is, it should be something more than simply an alternative to law school for 22-to-25-year-olds.