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This article doesn't explain why we should believe that stockmarket performance, going forward, will be anything like the S&P's performance from 1993 to now. I

This article doesn't explain why we should believe that stockmarket performance, going forward, will be anything like the S&P's performance from 1993 to now. It's also not clear why we should believe the Payscale College ROI figures. I clicked around a bunch and couldn't find any description of their actual methodology for computing it. In particular, before we can take it seriously we need to know how well they've done at estimating the true counterfactual earnings of people who could have gone to University X but did not. And that's really hard to do! (Without multiple universes handy)

brians 9y ago
Well, you could repeat it for all the 24-year periods from 1917 through now. I wouldn't expect very different results, though accounting for college deferments will be fun.
- dsjoerg 9y ago
  that's effectively only ~4 observations then (100/24). i wouldn't want to make a very important life decision based on data from only 4 observations. with only 4 observations, "common sense" and other forms of first-principles reasoning are much more important than the 4 data points. also one should consider data from other countries and other historical eras.
  - FalcorTheDog 9y ago
    It's not though. There are ~75 24-year windows you can use between 1913 and today. I suspect you will find similar results with almost all of those windows. Obviously past performance is not an indicator of the future, but 75 data points is a pretty decent amount of data.
    - FalcorTheDog 9y ago
      Following up, I plugged in the data from here into Excel: http://www.multpl.com/s-p-500-historical-prices/table/by-year http://www.multpl.com/s-p-500-historical-prices/table/by-yea... Some observations: -there are 122 24-year windows in the dataset -not a single 24-year period had a negative return -the lowest average return for a 24-year window was 0.15% in the window from 1874-1897 -there have been only two 24-year windows since 1876 with average annualized returns less than 2% -every window since 1912 has been at least 3% -every window since 1968 has been at least 7.1% (the author's assumption) -every window since 1971 has been at least 8% Note that this doesn't take inflation into account, but also does not factor in the returns from reinvested dividends. Those effects would probably approximately cancel each other out, but hard to say.
    - dsjoerg 9y ago
      Those 75 data points are not independent observations, because the windows overlap so much. Remember that using "year" as the granularity is arbitrary anyway; if we had daily, hourly or by-the-minute data going back to 1913, then we could have more "data points" but we would not have any better insight or statistical significance into the original question. My point is that having 100 years of investment data is much more like having 4 data points than it is like having 75 or 75 *12 (if you cut the years into months). Even though you literally have 75 data points, they are pretty close to a copy-paste of each other; not statistically independent.
- munin 9y ago
  The results can be different: http://www.nytimes.com/interactive/2011/01/02/business/20110102-metrics-graphic.html?mcubz=1&_r=0 http://www.nytimes.com/interactive/2011/01/02/business/20110...
twic 9y ago
> This article doesn't explain why we should believe that stockmarket performance, going forward, will be anything like the S&P's performance from 1993 to now. Nor why we should believe that a college degree's wage premium will be anything like its performance from 1993 to now.
- smt88 9y ago
  As automation replaces low-skill jobs, the wage premium may actually skyrocket for those who are able to get a job.
  - digitalzombie 9y ago
    > As automation replaces low-skill jobs, the wage premium may actually skyrocket for those who are able to get a job. There was an article recently about automation actually lower the cost. I had a debate about this with my libertarian friend. Buddy: "Automation is a great!" I know he's libertarian I was curious if he would support government program for the job that's being displaced. I'm for automation too. Me: "So what about the people who are displace?" Buddy: Well for the job that left over from automation will go up. So if waiters got displace, the rest of the worker who sill wait table will have their wages rises. I didn't have a response to this because I have no idea if it's true or not. Then on reddit and hacknews there was an article talking about automation will cause wages to go down for the job automation is taken over. As for your comment of either job wages going up or not. Anyway, it goes on and on until his solution was: family, church, community, and he very very reluctantly states government assistance. Also throughout said talk, he never thought about these people or flesh out a real plan for this. Your comment reminded me of this conversation. I'm not entirely sure if you're talking about the people who's getting replace or the other job. Either way unskilled workers still need a skill/trade to even get a job that's not automated. If we're going to automate away all or most of the low skill job then what happen to these unskilled people? For the people that are able to land a job, I think it's your speculation, in term of wages will go up. I think education either college or vocational school or online or whatever is going to help unskilled labor pool. And how are they even going to even do that given that the job pool for unskilled or low skill labors are going away? How do they train for skill while having no money?

brians 9y ago

Well, you could repeat it for all the 24-year periods from 1917 through now. I wouldn't expect very different results, though accounting for college deferments will be fun.

dsjoerg 9y ago
that's effectively only ~4 observations then (100/24). i wouldn't want to make a very important life decision based on data from only 4 observations. with only 4 observations, "common sense" and other forms of first-principles reasoning are much more important than the 4 data points. also one should consider data from other countries and other historical eras.
- FalcorTheDog 9y ago
  It's not though. There are ~75 24-year windows you can use between 1913 and today. I suspect you will find similar results with almost all of those windows. Obviously past performance is not an indicator of the future, but 75 data points is a pretty decent amount of data.
  - FalcorTheDog 9y ago
    Following up, I plugged in the data from here into Excel: http://www.multpl.com/s-p-500-historical-prices/table/by-year http://www.multpl.com/s-p-500-historical-prices/table/by-yea... Some observations: -there are 122 24-year windows in the dataset -not a single 24-year period had a negative return -the lowest average return for a 24-year window was 0.15% in the window from 1874-1897 -there have been only two 24-year windows since 1876 with average annualized returns less than 2% -every window since 1912 has been at least 3% -every window since 1968 has been at least 7.1% (the author's assumption) -every window since 1971 has been at least 8% Note that this doesn't take inflation into account, but also does not factor in the returns from reinvested dividends. Those effects would probably approximately cancel each other out, but hard to say.
  - dsjoerg 9y ago
    Those 75 data points are not independent observations, because the windows overlap so much. Remember that using "year" as the granularity is arbitrary anyway; if we had daily, hourly or by-the-minute data going back to 1913, then we could have more "data points" but we would not have any better insight or statistical significance into the original question. My point is that having 100 years of investment data is much more like having 4 data points than it is like having 75 or 75 *12 (if you cut the years into months). Even though you literally have 75 data points, they are pretty close to a copy-paste of each other; not statistically independent.
munin 9y ago
The results can be different: http://www.nytimes.com/interactive/2011/01/02/business/20110102-metrics-graphic.html?mcubz=1&_r=0 http://www.nytimes.com/interactive/2011/01/02/business/20110...

twic 9y ago

> This article doesn't explain why we should believe that stockmarket performance, going forward, will be anything like the S&P's performance from 1993 to now. Nor why we should believe that a college degree's wage premium will be anything like its performance from 1993 to now.

smt88 9y ago
As automation replaces low-skill jobs, the wage premium may actually skyrocket for those who are able to get a job.
- digitalzombie 9y ago
  > As automation replaces low-skill jobs, the wage premium may actually skyrocket for those who are able to get a job. There was an article recently about automation actually lower the cost. I had a debate about this with my libertarian friend. Buddy: "Automation is a great!" I know he's libertarian I was curious if he would support government program for the job that's being displaced. I'm for automation too. Me: "So what about the people who are displace?" Buddy: Well for the job that left over from automation will go up. So if waiters got displace, the rest of the worker who sill wait table will have their wages rises. I didn't have a response to this because I have no idea if it's true or not. Then on reddit and hacknews there was an article talking about automation will cause wages to go down for the job automation is taken over. As for your comment of either job wages going up or not. Anyway, it goes on and on until his solution was: family, church, community, and he very very reluctantly states government assistance. Also throughout said talk, he never thought about these people or flesh out a real plan for this. Your comment reminded me of this conversation. I'm not entirely sure if you're talking about the people who's getting replace or the other job. Either way unskilled workers still need a skill/trade to even get a job that's not automated. If we're going to automate away all or most of the low skill job then what happen to these unskilled people? For the people that are able to land a job, I think it's your speculation, in term of wages will go up. I think education either college or vocational school or online or whatever is going to help unskilled labor pool. And how are they even going to even do that given that the job pool for unskilled or low skill labors are going away? How do they train for skill while having no money?