I’m proud to say that I’m the father of highly accomplished identical twin high school senior daughters, and like their friends and more than three million other 12th graders around the nation, they’ve just experienced the first wave of this year’s college acceptances and rejections. But the one question I’ve been wondering about as they await subsequent communiques from all the wonderful public and private institutions to which they’ve applied, is this: Is college a sucker bet?
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I’m worried that it just might be for a lot of kids and their parents. That’s because in this radically changing economic era we’ve entered – an Economic Revolution, I firmly believe, driven by near-infinite information flows and as profound in scope and scale as the Industrial Revolution before it – a traditionally structured college education looks increasingly like an anachronism.
And a damn expensive anachronism at that. A world of Internet-enabled, omnipresent information is attacking some of the core advantages that a college education has traditionally provided for graduates, sapping its economic horsepower even as its cost soars.
Correlation Is Not Causality
But wait, you say – all the studies!
Any challenge to the notion that Americans must have college degrees to earn higher incomes is typically met with an immediate fusillade of evidentiary studies which show that those with college degrees now have a bigger income advantage over those without than ever before. And factually, that is true, although the differential actually retreated in a recent study.
But as any study-wielding social science or education academician very well knows, causation is not causality. Just because statistics show that those with a degree earn more than those without doesn’t mean the acquisition of a college degree causes the difference.
It just means there’s a correlation. Similar correlations no doubt exist between higher earning power and higher intelligence, higher earning power and growing up in a higher income household, higher earning power and higher work effort, and so on.
That’s just to say that the idea that a college education guarantees you a higher income – or anything else, other than a large tab that someone’s got to pick up – is a fallacy.
Unsurprisingly, not many academic institutions have any interest in deconstructing income/education mythology that benefits their current business model. Also not surprisingly, not many politicians or lobbyists sit around DC hotel lobbies dreaming up programs that encourage Americans to work longer hours or take more entrepreneurial risks — but they’re happily introduce bill after bill to expand funding for college education. So the train rolls on.
A College Degree’s Sources Of Economic Advantage Are Diminishing
College degrees have historically held two sources of economic value: One was how much more the degree enabled you to contribute economically based on what you learned during the years you were acquiring it. (Years which currently cost about $41,000 each at the typical U.S. private college.)
The second source of economic value was the signaling value of the degree itself: If you’re a graduate of Dartmouth, the reasoning went, you must be a lot smarter than the average bear, and you really must be a lot smarter than the average bear without a college degree.
Studies have indicated that this signaling value has been worth a lot – particularly since U.S. employers are blocked on anti-discrimination grounds from giving any kind of IQ tests to job applicants. In a world of limited, imperfect information about prospective employees, employers could at least use the “brand” of your university to suggest how intelligent and capable you were likely to be as a member of their team.
So armed with only aptitude tests and a reasonably well-accepted, US News & World Report sort of hierarchy of college selectivity, there was a certain logic that drove the value of college degrees: Yale grad must be smarter than University of Oklahoma grad, who in turn must be smarter than Red Rocks Community College grad, who in turn must be smarter than high school grad, who in turn must be smarter than high school dropout.
The mad scramble by kids and their parents to get the kids into top colleges has therefore traditionally offered some pretty solid economic. In a non-transparent world, something that stood for the unknowable – The Ivy League degree-as-answer to the question of “How good IS this job candidate, really?” – was worth a lot.
But as the available information about each of us becomes more and more easily accessible and evident, a “magic box” that stood for how smart you are becomes less and relevant. If I can use the Web and social media to find out everything there is to know about you – what you’re good at, what you know a lot about, where you’ve worked, what you’ve accomplished, what your friends and colleagues and former bosses say and think about you, what certifications you have, and objective measures of how smart you are – I really don’t give two flips, as an employer, about your college degree.
So for instance, let’s Google (NASDAQ: GOOG) you. I learn a whole lot in a snap. You were an athlete. You were in a play. You wrote a brilliant Tumblr post about baseball statistics. You made an impassioned speech before your city council when they were trying to sell off your childhood baseball diamond for development.
Now let me check your Facebook (NASDAQ: FB) profile. You smile a lot and seem like you come from a great family and your sister’s a NASA astronaut. You’re still close to your grandmother and visit her in the nursing home often. You’re a gamer. You post funny videos. You have a black Lab.
Now let’s check your LinkedIn (NYSE: LNKD) profile. You’ve had a lot of responsibility for your age. You’re commendably endorsed by a former boss for some of the specific skill sets we’re seeking. You know a lot of the same people I know. You were employee of the year at Baskin Robbins and got very high compliments from your summer internship supervisor at Google.
Or else…you didn’t do or get any of that, which also tells me a lot. Or else you weren’t smart enough to make sure your accomplishments and talents are all out there for people like me to see, which makes me wonder, in this increasingly intensively recorded world, if you’re a lightweight, a Luddite, or some kind of anti-social troll. Do I want to hire someone that leaves no footprints?
The upshot? The more a prospective employer knows about who you really are, the less they’re going to care about what your $165,000 piece of paper suggests you are. When reality becomes more transparent, signaling mechanisms lose their value. It’s like having a satellite weather map versus the outcome of this year’s Groundhog Day.
So What Should A Bright Kid Do?
As with so many of our economy’s Industrial Age customs and practices, the transition from what has been to what comes next isn’t guaranteed to be smooth or orderly. Road maps that worked to guide our lives through a few centuries of one type of economic order won’t necessarily help much as we transition into this next information-saturated one.
There’s a good playbook for any kind of journey into uncertainty, though, and it’s definitely applicable here for any student facing the dilemma of preparing themselves to benefit from the whirlwind changes of an Economic Revolution:
- Recognize that something very different – and therefore uncertain – is happening in our economy, and that simply following traditional paths is unlikely to yield good results.
- Do the hard work of getting smart about the forces driving the economic change, and draw your own conclusions about where those forces are likely to take us.
- Figure out what mix of experiences, relationships, resources and credentials will best equip you for the journey, and create an intentional plan to acquire what you need, balanced by the time and cost of obtaining them.
- Take action and make it happen. If you’ve made some wrong calculations about what’s happening and the direction you’re personally heading, you’ll figure it out much faster through action than inaction. And like a hockey player turning sharply on the ice, you can use your momentum to swing quickly into action on a different vector.
So Is College A Sucker Bet?
From an economic standpoint, I’m afraid the answer for far too many young Americans is: Yes. The game is rigged, and not in your favor. You’re paying an incredibly inflated amount of money to acquire skills that can be had much less expensively, and the signaling value of the degree you’ll get is deflating like a jumpy castle when the birthday party’s ended.
My own sense is that there are growing returns to risk-taking and entrepreneurship, and diminishing returns to following old rules of how to get ahead. When I was a 17 year old college freshman in 1980, I concluded that I had made a bad decision in selecting an expensive, exclusive private school just two weeks into orientation. I packed my bags and decamped for my hometown state university, bulked up my course load, and blew threw an economics degree in three years for very little money.
The flexibility that having very little student debt afforded me changed my life – and flexibility is one of the very most important attributes anyone can have in a time of revolutionary change.
A conversation I had with a friend about that series of events the other day illustrates the dilemma. By going to school on the cheap, staying for summer classes and taking an extra course load, I got a degree in 1983 that cost me a grand total of about $10,000. My first job, at the local NBC TV station selling advertising, paid me about $20,000. Ratio of first job salary to college expense: 2-1.
My friend, about a decade younger, said he paid a total of about $100,000 for college and got a first job paying about $50,000. His ratio: 1-2.
How about yours? You’re going to peel off a cool $165,000. First job, if you’re lucky, still at about $50,000? Your ratio: 1-3.3.
Sure, everybody’s circumstances (and numbers) are different. But the back-of-the-envelope calculations aren’t looking too good, and they’re certainly heading in the wrong direction.
I don’t have a magic bullet or an easy answer. Silicon Valley’s Peter Thiel believes so strongly that the old rules are wrong that he’s paying 20 of the best and brightest a year to skip college in favor of a hands-on technology entrepreneurial education. What I do have is a very, very strong sense that the game has changed profoundly. The emperor may not be naked yet, but he is certainly walking around in just his tighty whities.
Good luck in this time of very difficult decision making. I feel your – and my girls’ – pain. But take charge of your future by observing, thinking, and acting on your own. Old roadmaps can lead to big trouble when the road ahead has changed and the travelers aren’t paying close attention.
Dave Maney has an economics degree from SUNY-Binghamton and an MBA from Stanford, so it’s easy for him to say, isn’t it? He is the Founder/CEO of Deke Digital LLC and can be found on Twitter and Google+.