Peter Thiel and the Higher Education “Bubble”
By now, many of you have read Peter Thiel’s thoughts on higher education that have been making the rounds on the internet all week. Thiel, the billionaire founder of PayPal and early investor in Facebook is certainly an intelligent man, but let’s remember that his specialty is in entrepreneurship, so it’s not surprising that he’d evangelize the concept of dropping out of school to start a business. That being said, let’s deconstruct the two main points his argument.
1. Higher Education is overvalued, much like web companies ten years ago, and the housing market of recent years. It is no longer the rock-solid investment it used to be.
Fair enough, I don’t think it’s a stretch to say that higher education is overvalued, given that most of us were brought up with the promise that a college degree is the golden ticket to happiness and prosperity. There’s little doubt that crushing student loan debt hamstrings the promise of higher education, but I don’t think it’s fair to say that college isn’t a good investment anymore. It may not be the home run that it was before soaring tuition prices left students facing upwards of $100,000 in debt, but that doesn’t mean it isn’t worth it in the long run.
It’s easy to jump on higher education when so many recently-graduated students are out of work, but let’s not forget that it’s a bad economy, it’s cyclical, and there are better days ahead. Despite the panic that seems to be setting in on campuses around the nation, students with a bachelors degree, on average, earn much more than those with only a high school education, and this is unlikely to change in any meaningful way in the near future. Beyond just salaries though, a degree still opens the door to many jobs that people may find more fulfilling than the offerings available to non-graduates. College is not as good an investment as it was twenty years ago, it’s true. But this does not automatically make it a bad investment.
2. Top students would be better served by dropping out and starting businesses.
I feel like we’ve heard this one before. Obviously it’s easy to point to some incredibly successful people like Mark Zuckerberg, Bill Gates, or Steve Jobs that turned out alright without degrees. These are remarkable entrepreneurs, and they should be celebrated, but their halo obscures our view of thousands of students who have tried the same gambit and failed.
I’m not saying college is a perfect place that everybody should finish in every situation; many bright students find themselves in a position where dropping out is a reasonable gamble. If you have an idea for a business though, do yourself a favor and try to get some legs under it while you’re still in school. Students have plenty of free time, and there’s no reason to quit college on a whim and a prayer.
Thiel is backing up his words with a fellowship program, where he will pay twenty students $100,000 to drop out of school and start their own companies. It’s likely that many of these students will find success, and Thiel will espouse the merits of dropping out. But let’s not forget though that dropping out without Peter Thiel waiting by the front door with bags full of money is still risky.
It’s true that some of the richest people in the world did not finish college (many of them attended an Ivy League school before dropping out, but that’s a different story for a different day). It’s important not to lose sight of the fact though that these people are the exception, not the rule. Graduating with a bachelor’s degree certainly doesn’t guarantee you riches, and yes debt is a growing problem, but that degree is still the ticket to most of this country’s high paying jobs. There’s no shame in graduating before trying to start a company — four years really isn’t that long — and if it doesn’t work out, that diploma is still a nice cushion to fall back on, no matter what Peter Thiel tries to tell you.