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.
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.
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.
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.
Frankly, Thiel's rhetorical "Why aren't there 100 Harvard franchises?" question is a reasonable one to ask. By its own admission, Harvard turns down hundreds -- maybe even thousands -- of students each year who are qualified to attend Harvard. There simply isn't enough space, and at the highest tiers, it becomes a crapshoot. Kid A and Kid B could be equally qualified, and both could have made it through the gauntlet and down to the wire, but Kid B wins out in the end through a process verging on picking straws. For the rest of his life, Kid B is "Harvard-educated," while Kid A is deemed by many folks in society to be Kid B's intellectual inferior.
But what if Harvard had enough capacity to admit everyone who met its admissions standards? It's a question worth asking. Would Harvard cease to be "Harvard" if that were the case? Thiel's point is that it would -- which is indicative of a problem with our valuation of Harvard.
Be that as it may, your overall point is sound. Harvard may have some mystique baked into its valuation, but most of us still hold the valuation -- mystique and all -- in high esteem. We accept it at face value. So long as we continue to do so, the bubble stays afloat.
In order to test Thiel's thesis, we'd have to go a step further and ask ourselves: what would, in theory, cause the bubble to pop? What would it take? Given that this bubble (for lack of a better word) has been propped up for hundreds of years, and is still going strong, what straw would break the camel's back?
I'd argue that it's Stanford. Or, rather, everything the proverbial Stanford represents: Silicon Valley, something approaching new-money meritocracy, and so forth. If enough Stanfords emerge across the world, suddenly the time-honored value of the Harvard degree seems less shiny than it once was.
[Interestingly enough, Harvard does a pretty darned good job at being a Stanford, too. But, for the set of Harvard attendees who are there to collect the credential and not to start up a company, the value of that credential-qua-credential would decrease in a bubble-deflating scenario].
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.
A rule of thumbs for bubbles is each one must have a "why this time it's different" elevator pitch ("Dow 40,000', "there's only local housing markets").
Exclusivity likely is a large part of what gives an elite education its value, normally - a Harvard education has indeed generally been highly prized. But what keeps a bubble afloat is bubble dynamics. Even a valuable item can be over-valued. The self-validating quality of increasing prices and valuations really does works well for a while - like it did for all the other bubbles - and can then can be expected to stop working - like it did for all the other bubbles.
From the article: "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[...]”"
You're probably right on Harvard-as-a-filter, but Thiel has seen this.
I remember before the internet, and a degree from Harvard, Yale or Oxford still would've made you Jesus-with-a-keyboard. It's about branding, i.e., transitive trust - I trust Harvard, Harvard trusts you, therefore I trust you.
As joe-the-user points out, this gives it value, and has nothing to do with whether it is currently over- or under-valued.
There's a subtle but big difference between what he said (at least how I read it) and what you said he said.
You're implying he said credentials are worthless or meaningless.
He actually was saying that there's a bubble in education. That is, the cost of education is overvalued vs the return one typically gets. Yes, he talks about the exclusionary nature of institutions but I don't think his point is that credentialing is pointless. His point is that the system has built a bubble (overvalued not worthless)
The problem with credentials you get from some universities (even elite ones) is that they are of much less value than you paid for it. It like buying house in San Francisco Sunset district ("elite" town) for 2M and saying it is a great deal. No. It is great deal for 500K but not for 2M since max rent was is 4K.
> 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.
That million people haven't founded such significant ventures as PayPal is. That's why you call'em "a million", not by names.
You're assuming that the schools don't in themselves add value beyond signalling.
Even after adjusting for academic achievement students from top-tier university do better post-university, as this broadly tends to hold true across subjects. Of course this could be purely be down to signalling effect, but if so it would imply signalling has as strong impact across all industries not just a handful of professional ones.
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.
What changed in the second half of the 20th century is that academia became (for students and professors) a national, rather than a regional, market. Now every top high school student vies for an Ivy League slot, and there just aren't enough of them to accommodate all the great students, especially when there's an implicit contract between the Ivy League and the WASP old-board that about half of the slots are going to go to entitled aristocrats based on privilege rather than merit.
The national market actually makes the process a lot noisier, not a more efficient informational market.
The internet didn't create the national market. That began in the 1960s (air travel, television) if not earlier. The Internet just sped the process along by making it a lot easier for people to send out 20+ applications and clog up the system. The job market has the same problem. It's not flow of information that's the problem. It's, for lack of a better word, spam: content without information.
You know how selective tech companies brag about their 1:250 acceptance rates? For an even moderately qualified applicant, odds are closer to 1:15 to 1:4. Companies get a ridiculous number of spam CVs-- often in duplicate or triplicate, because many of the worst recruiters are prolific spammers, and because the least-qualified applicants send out so many CVs. On this note, be very careful about using recruiters and make sure they won't send out your CV without your consent; the worst recruiters not only throw CVs around promiscuously, but often "upgrade" details, meaning that a later (honest) CV submission may contradict one on file, make you seem a liar, and flush you out on that alone.
It's not fluidity of information that is the problem. In an efficient market for information, no one would give a shit about college prestige in the first place because the (smarter and harder-working) 85th-percentile state-school graduate would beat the 65th-percentile Ivy graduate, hands down. College prestige only matters because people are often typecast to the average quality of a student from their school, at least as the starting assumption about a young person with a blank CV. The problem isn't "fluidity" of information but that personnel markets (job market, academic admissions) are clogged up with so much useless spam information that separating the signal from noise is nearly impossible.
Posted this as a TechCrunch comment but wanted to cross-post here:
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.
Contrast that with the cost of higher education.To go to UCLA as an out-of-state student it now costs $50K/year (http://www.admissions.ucla.edu/prospect/budget.htm). And that's a public 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.
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.
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.
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.
This knowledge hasn't been locked up for decades, though. It's been possible since at least the mid-20th-century to self-teach yourself the standard material in any major field, at least at an undergraduate level, by going to a library and reading, from the introductory textbooks up through the advanced ones. There are some things that might be hard to replicate (e.g. getting hands-on chemistry lab experience), but you could certainly self-teach the equivalent of a 4-year program in mathematics or history or theoretical physics.
A few people even did. In mathematics it's not that uncommon to find self-taught people, though it still isn't the norm. But overall not many people do it. Why will people do so now? Just because the material can be accessed without going to a library? Given that it takes some effort to work your way through a 4-year physics program, was the effort of going to the library to pick up Griffiths/Feynman/Landau really the main bottleneck?
I can definitely buy some change on the margins and in poorer countries (people who had no access to a library), but I'm confused why the internet will mean that people who for decades have not been teaching themselves physics, despite the books being available, will now do so.
BTW, if my math is correct, the entire amount spent on the Thiel fellowships ($2 million) is the equivalent to what Americans spent on higher education every two minutes. Interesting perspective eh?
Here's what Piaw Na, a Xoogler, said about this piece-- it's worth quoting:
"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.
In other words, if this is an attack on the traditional college path, Thiel's definitely sided with their filtering mechanisms.
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.
Then they sack you with six figures of non-dischargeable debt and you're back living with your parents sending out resumes.
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.
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.
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.
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.
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.
Sharing the "Harvard environment" with talented peers can be pleasant, horizon-expanding, and occasionally inspirational. In my experience, though, it doesn't often inspire young people to change the world. Instead, it introduces them to lucrative career options (e.g., investment banking) available mainly to Ivy League grads. Given the massive salary differential compared to virtually anything else one could choose, most go that route.
"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."
Where by "change the world" you mean "continue to see that the Haves remain the Haves." You are correct to identity gathering a critical mass of best and brightest as a key part of the Harvard/Stanford "best of the best" puzzle, but the goal isn't to improve what they do, it's to introduce them to each other so that in 20 years they can sit on each others boards and amicably divide up the spoils of the markets they control. Quite a few students think the way you do, but the parents and especially the board members don't.
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"
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.
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.
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.
In Germany, the number of Abiturients, those who go to college prep schools has been going up for decades. They have also relatively recently opened pure universities up to certain relatively narrow classes of non-Abiturients.
Given that the number of people with college degrees has been increasing steadily by age group in Germany, and that someone is paying for it, i.e. the state, i.e. the taxpayer, I don't see that "bubble" is an inappropriate word.
Germany probably has less of a higher education bubble than any other Western country though, because they have the best apprenticeship and vocational training system in the world. I believe this is only stable because Germany is enormously class and status conscious, and as a result has early streaming. I don't doubt that some potential is wasted, but probably the fact that Hauptschüler are not hindering the eductaion of Realschüler and Gymnasien would justify the system by itself.
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:
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).
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.
I don't have any evidence to back this up but my sense is that the cost of textbooks is actually falling, not rising. Companies like Chegg and Bookrenter have made it cheaper for students and digital textbooks will likely help to accelerate this trend. The major increase in costs have been due to tuition and that shows no signs of abating.
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.
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.
the housing bubble was the result of parents telling their kids to buy homes, because that's the american dream.
if education is a bubble, if housing is a bubble, then the american dream might just be a bubble too.
maybe it's time we invent a new dream.
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.
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 disagree with this "providing access to everyone for something by nature devalues it"
It's not just that everyone has access. It's also that bubbles create huge numbers of over-valued objects. If these for-profit colleges were cranking out well-trained software engineers we'd see a rise in overall real value (there'd be more technical co-founders available). Instead they're charging students 25k for online classes in degrees that society has no demand for. The same way pyramid schemes sell you junk to sell to your friends. You end up with a bunch of junk you can't sell. The degrees provide little or no real value to the workforce, and they're not even a filter anymore. That's what's really wrong with them.
1. Providing food for everbody devalues food, but frees up the labour of everybody to make cool shit.
2. ???
3. No - it was a result of poorly underwritten loans, made possible by a lengthening/abtraction of the underwriting chain through mortgage backed bonds.
4. ???
5. ???
6. Peak capitalism? Where did you get that idea from? Do you honestly think we have reached maximal productive capacity? Do you know how much more cool shit I will be able to do when quantum computing gets here? Do you know how many people still do menial jobs that could be automated, freeing up those people to build other cool shit for me to have a better time?
> 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.
Yes, the three words that define the last 10 years (in this context) are: exceptional, entitled, and special. Many people are merely average.
The devaluation of vo-tech schools also contributes to the bubble. Much of the CS technical skill training (like configuring a router, network planning, etc) needs to moved to vocational technical schools. You don't need a 4-year masters degree (nor the student debt) to do basic design and troubleshooting.
providing access to everyone for something by nature devalues it
Particularly true in education. Consider a hypothetical scenario where a law is passed that all CS curriculums across the nation have to be synchronized. Could you take the curriculum from MIT or CMU and simply drop it on Podunk U unchanged? Probably not. The only way to provide access is actually to lower standards.
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.
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.
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).
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).
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.
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: http://www.admissions.college.harvard.edu/financial_aid/hfai...
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.
Yes, because he "predicted" the dot-com bubble and "predicted" the housing bubble. He's also a super smart dude who created PayPal, is extremely rich and successful.
Yes, I'm being snarky. I'm open to his opinion but I also missing where he's qualified to make a more informed opinion.
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.
Brilliant and thought provoking, heretical words. Exclusionary access, prohibitive cost, insular culture, overgrown complexity concealing fundamental ideas...
“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."
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.
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.
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).
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.
[+] [-] kenjackson|15 years ago|reply
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.
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.
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.
[+] [-] jonnathanson|15 years ago|reply
But what if Harvard had enough capacity to admit everyone who met its admissions standards? It's a question worth asking. Would Harvard cease to be "Harvard" if that were the case? Thiel's point is that it would -- which is indicative of a problem with our valuation of Harvard.
Be that as it may, your overall point is sound. Harvard may have some mystique baked into its valuation, but most of us still hold the valuation -- mystique and all -- in high esteem. We accept it at face value. So long as we continue to do so, the bubble stays afloat.
In order to test Thiel's thesis, we'd have to go a step further and ask ourselves: what would, in theory, cause the bubble to pop? What would it take? Given that this bubble (for lack of a better word) has been propped up for hundreds of years, and is still going strong, what straw would break the camel's back?
I'd argue that it's Stanford. Or, rather, everything the proverbial Stanford represents: Silicon Valley, something approaching new-money meritocracy, and so forth. If enough Stanfords emerge across the world, suddenly the time-honored value of the Harvard degree seems less shiny than it once was.
[Interestingly enough, Harvard does a pretty darned good job at being a Stanford, too. But, for the set of Harvard attendees who are there to collect the credential and not to start up a company, the value of that credential-qua-credential would decrease in a bubble-deflating scenario].
[+] [-] joe_the_user|15 years ago|reply
A rule of thumbs for bubbles is each one must have a "why this time it's different" elevator pitch ("Dow 40,000', "there's only local housing markets").
Exclusivity likely is a large part of what gives an elite education its value, normally - a Harvard education has indeed generally been highly prized. But what keeps a bubble afloat is bubble dynamics. Even a valuable item can be over-valued. The self-validating quality of increasing prices and valuations really does works well for a while - like it did for all the other bubbles - and can then can be expected to stop working - like it did for all the other bubbles.
[+] [-] gammarator|15 years ago|reply
Federally guaranteed student loans.
[1] http://www.thebigmoney.com/articles/money-trail/2010/06/17/s...
[+] [-] JoachimSchipper|15 years ago|reply
You're probably right on Harvard-as-a-filter, but Thiel has seen this.
[+] [-] hessenwolf|15 years ago|reply
As joe-the-user points out, this gives it value, and has nothing to do with whether it is currently over- or under-valued.
[+] [-] freshfunk|15 years ago|reply
You're implying he said credentials are worthless or meaningless.
He actually was saying that there's a bubble in education. That is, the cost of education is overvalued vs the return one typically gets. Yes, he talks about the exclusionary nature of institutions but I don't think his point is that credentialing is pointless. His point is that the system has built a bubble (overvalued not worthless)
[+] [-] sdizdar|15 years ago|reply
[+] [-] jdavid|15 years ago|reply
[+] [-] dgudkov|15 years ago|reply
That million people haven't founded such significant ventures as PayPal is. That's why you call'em "a million", not by names.
[+] [-] jpadvo|15 years ago|reply
Otherwise, very interesting points. :)
[+] [-] ig1|15 years ago|reply
Even after adjusting for academic achievement students from top-tier university do better post-university, as this broadly tends to hold true across subjects. Of course this could be purely be down to signalling effect, but if so it would imply signalling has as strong impact across all industries not just a handful of professional ones.
[+] [-] michaelochurch|15 years ago|reply
What changed in the second half of the 20th century is that academia became (for students and professors) a national, rather than a regional, market. Now every top high school student vies for an Ivy League slot, and there just aren't enough of them to accommodate all the great students, especially when there's an implicit contract between the Ivy League and the WASP old-board that about half of the slots are going to go to entitled aristocrats based on privilege rather than merit.
The national market actually makes the process a lot noisier, not a more efficient informational market.
The internet didn't create the national market. That began in the 1960s (air travel, television) if not earlier. The Internet just sped the process along by making it a lot easier for people to send out 20+ applications and clog up the system. The job market has the same problem. It's not flow of information that's the problem. It's, for lack of a better word, spam: content without information.
You know how selective tech companies brag about their 1:250 acceptance rates? For an even moderately qualified applicant, odds are closer to 1:15 to 1:4. Companies get a ridiculous number of spam CVs-- often in duplicate or triplicate, because many of the worst recruiters are prolific spammers, and because the least-qualified applicants send out so many CVs. On this note, be very careful about using recruiters and make sure they won't send out your CV without your consent; the worst recruiters not only throw CVs around promiscuously, but often "upgrade" details, meaning that a later (honest) CV submission may contradict one on file, make you seem a liar, and flush you out on that alone.
It's not fluidity of information that is the problem. In an efficient market for information, no one would give a shit about college prestige in the first place because the (smarter and harder-working) 85th-percentile state-school graduate would beat the 65th-percentile Ivy graduate, hands down. College prestige only matters because people are often typecast to the average quality of a student from their school, at least as the starting assumption about a young person with a blank CV. The problem isn't "fluidity" of information but that personnel markets (job market, academic admissions) are clogged up with so much useless spam information that separating the signal from noise is nearly impossible.
[+] [-] ignifero|15 years ago|reply
Of course it's a bubble. It's the law and finance that sustains it. Inevitably, it will change, and the asians may have to pioneer it.
[+] [-] jonbischke|15 years ago|reply
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.
Contrast that with the cost of higher education.To go to UCLA as an out-of-state student it now costs $50K/year (http://www.admissions.ucla.edu/prospect/budget.htm). And that's a public 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.
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.
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.
[+] [-] _delirium|15 years ago|reply
This knowledge hasn't been locked up for decades, though. It's been possible since at least the mid-20th-century to self-teach yourself the standard material in any major field, at least at an undergraduate level, by going to a library and reading, from the introductory textbooks up through the advanced ones. There are some things that might be hard to replicate (e.g. getting hands-on chemistry lab experience), but you could certainly self-teach the equivalent of a 4-year program in mathematics or history or theoretical physics.
A few people even did. In mathematics it's not that uncommon to find self-taught people, though it still isn't the norm. But overall not many people do it. Why will people do so now? Just because the material can be accessed without going to a library? Given that it takes some effort to work your way through a 4-year physics program, was the effort of going to the library to pick up Griffiths/Feynman/Landau really the main bottleneck?
I can definitely buy some change on the margins and in poorer countries (people who had no access to a library), but I'm confused why the internet will mean that people who for decades have not been teaching themselves physics, despite the books being available, will now do so.
[+] [-] jonbischke|15 years ago|reply
(~$500 billion/365/24/60 = ~$1 million/minute)
[+] [-] calpaterson|15 years ago|reply
But only some of the time! Lots of things at undergraduate level are irrelevant to your ability to contribute to society
[+] [-] wyclif|15 years ago|reply
"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.
In other words, if this is an attack on the traditional college path, Thiel's definitely sided with their filtering mechanisms.
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!"
[+] [-] reader5000|15 years ago|reply
Then they sack you with six figures of non-dischargeable debt and you're back living with your parents sending out resumes.
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.
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.
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.
[+] [-] mdemare|15 years ago|reply
I'm not sure if that's possible - isn't essentially every graduate bankrupt? Couldn't every student get rid of their debts then?
[+] [-] microarchitect|15 years ago|reply
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.
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.
[+] [-] gammarator|15 years ago|reply
[+] [-] spenrose|15 years ago|reply
Where by "change the world" you mean "continue to see that the Haves remain the Haves." You are correct to identity gathering a critical mass of best and brightest as a key part of the Harvard/Stanford "best of the best" puzzle, but the goal isn't to improve what they do, it's to introduce them to each other so that in 20 years they can sit on each others boards and amicably divide up the spoils of the markets they control. Quite a few students think the way you do, but the parents and especially the board members don't.
[+] [-] hinathan|15 years ago|reply
http://www.oftwominds.com/blogapril11/consumer-devolution-tw...
[+] [-] WA|15 years ago|reply
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.
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.
[+] [-] barry-cotter|15 years ago|reply
Given that the number of people with college degrees has been increasing steadily by age group in Germany, and that someone is paying for it, i.e. the state, i.e. the taxpayer, I don't see that "bubble" is an inappropriate word.
Germany probably has less of a higher education bubble than any other Western country though, because they have the best apprenticeship and vocational training system in the world. I believe this is only stable because Germany is enormously class and status conscious, and as a result has early streaming. I don't doubt that some potential is wasted, but probably the fact that Hauptschüler are not hindering the eductaion of Realschüler and Gymnasien would justify the system by itself.
[+] [-] gatsby|15 years ago|reply
http://features.blogs.fortune.cnn.com/2011/04/06/chris-whitt...
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).
http://fortunefeatures.files.wordpress.com/2011/04/avenues_s...
[+] [-] r00fus|15 years ago|reply
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.
[+] [-] jonbischke|15 years ago|reply
[+] [-] jdavid|15 years ago|reply
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.
the housing bubble was the result of parents telling their kids to buy homes, because that's the american dream.
if education is a bubble, if housing is a bubble, then the american dream might just be a bubble too.
maybe it's time we invent a new dream.
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.
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.
[+] [-] entangld|15 years ago|reply
It's not just that everyone has access. It's also that bubbles create huge numbers of over-valued objects. If these for-profit colleges were cranking out well-trained software engineers we'd see a rise in overall real value (there'd be more technical co-founders available). Instead they're charging students 25k for online classes in degrees that society has no demand for. The same way pyramid schemes sell you junk to sell to your friends. You end up with a bunch of junk you can't sell. The degrees provide little or no real value to the workforce, and they're not even a filter anymore. That's what's really wrong with them.
[+] [-] hessenwolf|15 years ago|reply
[+] [-] cosmicray|15 years ago|reply
Yes, the three words that define the last 10 years (in this context) are: exceptional, entitled, and special. Many people are merely average.
The devaluation of vo-tech schools also contributes to the bubble. Much of the CS technical skill training (like configuring a router, network planning, etc) needs to moved to vocational technical schools. You don't need a 4-year masters degree (nor the student debt) to do basic design and troubleshooting.
[+] [-] gaius|15 years ago|reply
Particularly true in education. Consider a hypothetical scenario where a law is passed that all CS curriculums across the nation have to be synchronized. Could you take the curriculum from MIT or CMU and simply drop it on Podunk U unchanged? Probably not. The only way to provide access is actually to lower standards.
[+] [-] aksbhat|15 years ago|reply
[+] [-] dpatru|15 years ago|reply
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.
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.
[+] [-] acconrad|15 years ago|reply
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).
[+] [-] jmm|15 years ago|reply
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: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a...
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.
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: http://www.admissions.college.harvard.edu/financial_aid/hfai...
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.
[+] [-] random42|15 years ago|reply
[+] [-] freshfunk|15 years ago|reply
Yes, I'm being snarky. I'm open to his opinion but I also missing where he's qualified to make a more informed opinion.
[+] [-] mousa|15 years ago|reply
[+] [-] juiceandjuice|15 years ago|reply
The real bubble is groupthink.
[+] [-] unknown|15 years ago|reply
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[+] [-] dougabug|15 years ago|reply
“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."
[+] [-] rkischuk|15 years ago|reply
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.
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.
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).
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.