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Peter Thiel: We’re in a Higher Education Bubble

343 points by gsharma 16y ago

hinathan 16y ago
Makes a lot of sense — especially given the amount of remedial education a lot of not-particularly-cheap colleges are having to undertake. Seems plausible that a lot of the investment (both in terms of municipal and state subsidies, as well as private debt) being made now won't bear a meaningful return for a long time, if at all.
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petegrif 16y ago
great piece - the man has a point
kenjackson 16y ago
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.
- jdavid 16y ago
  Then invent a new credential system and you will be plenty wealthy. i have heard people murmuring about one.
  - kenjackson 16y ago
    New credential systems are created all the time. One we hear people talk about nowadays on HN is a GitHub repository. Another one is acceptance into YC. All a credential is is something you've done in the past which implies your ability to do something in the future. Graduating with a degree in Econ from Harvard implies that you might be a good consultant for McKinsey. Founding Facebook implies you might be a good founder for a future effort. Having a great GitHub project implies you might be a good programmer for some simliar tasks.
    - patio11 16y ago
      YC is a better example of a credential than a Github account. The function of credentials is to outsource decision making about quality: you have to actually read code to extract signal about a candidate from Github, a task which is expensive and beyond the capabilities of most investors and people with hiring authority. "YC alum", by comparison, tells you a lot about somebody in a sentence and doesn't require any work to understand - pg et al already did the vetting for you. There probably exists a spectrum of opinions on whether the credential is useful because of the vetting or the experience of the actual program. Candidly, I think that YC probably has a value add in attendance. Higher education? Not generally, no. I have a $140,000 degree (two, technically) which basically certifies that at 18 years old I was smart enough to get into my university and then, for the next four years, I did not die or fail to sign my loan docs. I know I learned some things of value in those four years, but I could just as easily have written myself a course of study with zero commercial potential, and my degree would say the same thing in a language 99.998% of Americans can't even read anyway. (East Asian Studies degree written in... Latin?!
      - kenjackson 16y ago
gatsby 16y ago
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: http://features.blogs.fortune.cnn.com/2011/04/06/chris-whittles-plan-to-make-a-world-class-private-school/ 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_school_numbers.jpg http://fortunefeatures.files.wordpress.com/2011/04/avenues_s...
r00fus 16y ago
A lot of this higher education bubble has to do with unnecessary costs of higher education, like, say textbooks: http://hubpages.com/hub/College-Text-Books-Rent-or-Buy http://hubpages.com/hub/College-Text-Books-Rent-or-Buy 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 16y ago
  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.
hinathan 16y ago
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" http://www.oftwominds.com/blogapril11/consumer-devolution-two4-11.html http://www.oftwominds.com/blogapril11/consumer-devolution-tw...
rkischuk 16y ago
Makes sense. Same symptoms as the housing bubble. 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.
microarchitect 16y ago
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.
- gammarator 16y ago
  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.
  - microarchitect 16y ago
    Fair enough, this is a valid point. To me, this indicates that there's an opportunity here for folks like Theil who have the ability to command the respect of the students at Harvard to get these students interested in opportunities other than those that lead to a quick financial payoffs but instead might have a bigger impact on society.
  - mbesto 16y ago
    > * Instead, it introduces them to lucrative career options (e.g., investment banking) available mainly to Ivy League grads.* What happens when two bubbles collide? A bigger "POP"?
jdavid 16y ago
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.
- entangld 16y ago
  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.
- hessenwolf 16y ago
  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?
tomjen3 16y ago
Thiel is wrong - education is valuable, college very much so. But an English degree is not higher education, it is a fiction we created for those who want to go to college but can't hack it in the real world. A STEM or a law degree will make you a lot of money.
- daeken 16y ago
  > Thiel is wrong - education is valuable, college very much so. Depending on your definition of "education", I agree with the first part of your statement. The second part of your statement I wholeheartedly disagree with. Education in general is a very valuable thing, but a classroom education is not the only one, and college can be valuable but is not necessarily so. I'm a high-school dropout, yet I've never regretted it for a second -- I have a good deal of education, but it comes from self-exploration and experimentation and it's shown itself to be quite valuable so far. My case is by no means the norm, but propping college up as the only path is pretty silly.
  - aksbhat 16y ago
    First, your assertion "college can be valuable but is not necessarily so" makes no sense. You can always claim that "X can be valuable but is not necessarily so". Where X can be anything in this universe. Second, you are trying to turn a personal experience into a generalization. A good question to ask would be what would happen If the college enrollment dropped by 10% or 20% or 50% ? How would this affect the workforce and the industrial output? Another extremely important question is that how do you decide who exactly should drop out?? Should people drop out on basis of financial resources or some limited test of intelligence. The problem is that it is hard to tell who should enroll and who shouldn't. While certain subjects can be learnt online, a large number of subjects cannot be learnt. A university provides Labs, Wide range of subjects, access to a social network of like minded people, Faculty, Assessment and most importantly some guarantee of Academic Integrity. Universities are an example of the Theory of the firm.[1] You can surely separate different components of college education which I mentioned above, however there will be significant transaction costs. The underlying theme of this discussion is not about education or elitism. It is about allocation of capital. Peter Thiel being a Venture Capitalist is interested in allocation of capital, thus the whole 20 under 20. Dont confuse his efforts with education or elitism. If anything his program might be more elitist than Harvard. [1] http://en.wikipedia.org/wiki/The_Nature_of_the_Firm http://en.wikipedia.org/wiki/The_Nature_of_the_Firm
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cvander 16y ago
He has a strong opinion and this will always generate a big debate. But what I like the most, is that by talking of the education bubble and creating an option for students (the 20 kids program with $100k), we're going to test his theory soon. If that works, how about some of the top education programs replicating his model?
jonbischke 16y ago
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 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.
- jonbischke 16y ago
  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? (~$500 billion/365/24/60 = ~$1 million/minute)
- _delirium 16y ago
  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.
martinshen 16y ago
I plan to write a blog post about this later but I'm starting to think that the term "College Drop Out" has started to become more valuable than "College Graduate." This may not be completely true right now but in 5 years when today's 25 year olds are hiring, the term may possibly be more valuable.
rgrieselhuber 16y ago
Something that is hinted at the end of the article but not fully addressed: the risk of creating a new elite (if elitism is the problem) is there just as much in the new system (such as Thiel is) as it was the original institution.
- dougabug 16y ago
  There will always be an elite. But society needs a humble, wiser elite, who lead by example, talent, and perseverance; leaders who provide valuable insight, rather than protect their advantage by raising walls. Ken Thompson is the best kind of elite, an elite mind who gave us the foundational tools to build a whole new industry.
aksbhat 16y ago
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.
WA 16y ago
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.
- barry-cotter 16y ago
  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.
  - kayoone 16y ago
    In Germany you dont even need to go to college to get a good education in your field. They have a system where Companies train new people from school (they have to take tests and stuff to get in) for the job. For 3 years you work in the company, go to school and get paid around 600 EUR a month. After successfully completing that you have a degree that enables you to work as a Software Developer or Media Designer for example.
dougabug 16y ago
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."
ericingram 16y ago
I couldn't agree more.
mousa 16y ago
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.
wyclif 16y ago
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!"
shareme 16y ago
In a free competitive situation the government if it wanted to give value to higher education while hobbling other competitive items would make higher education at state schools somewhat free thus reducing the competitive edge of for-profits while also reducing the debt load per student which spurs job creation because more college graduates can afford to start businesses and startups.. At least in the USA the main reason why college is not free is that the major debate in congress occurred during the years after Vietnam Veterans returned and US congress people had a cultural bias towards giving those returning from Vietnam and those who did not fight in Vietnam a 'free college education' and like all political laws very hard to over-turn through a renewed debate..
reader5000 16y ago
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.
- mdemare 16y ago
  >Education debt WILL be made dischargeable in bankruptcy again, there is simply too much pressure. I'm not sure if that's possible - isn't essentially every graduate bankrupt? Couldn't every student get rid of their debts then?
random42 16y ago
Is Peter Thiel qualified to opine on Education? (This is not a snark, but I am genuinely curious to know how to process his opinion.)
- freshfunk 16y ago
  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.
acconrad 16y ago
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).
jmm 16y ago
I think there are different facets to the bubble that need to be separated out to talk coherently about its implications... 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=aoglHAxZffTI 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/index.html 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.
juiceandjuice 16y ago
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. The real bubble is groupthink.
dpatru 16y ago
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.
korch 16y ago
I don't think Higher Education is in a bubble for one very specific reason: there is no way to open the investment flood gates and attract a large number of speculative investors. You can't flip college degrees the same way you'd flip a house or a startup. They have zero re-sell value. It's pretty difficult to base a bubble on a product that cannot be resold. The only option is that more kids and families go into further debt to pay increasing fees to colleges. I don't see a way to combine this with the derivatives markets by the mass re-selling of investment products to mostly non-professional investors. So the hallmark characteristic of a bubble is not to be found here. I'll agree higher ed is in a true bubble only after some financial wizards figure out a way to re-package college loans into "special investment vehicles" and re-sell them to the general public, and then those securities rise in value by a respectable bubble multiple. Until then, high ed can be argued to be an inefficient, get-your-ticket-punched diploma-mill of bureaucratic drain on society's resources that does more harm than good, but it's not a financial bubble.
Goladus 16y ago
This article is horrible. It's a superficial story about Peter Thiel and Founders Fund framed as a controversial argument about the value of higher education. It really doesn't do anything more than pose the questions and include a few quotes from Peter Thiel. Techcrunch trolls the internet once again.
genbattle 16y ago
In the end a University degree is just a piece of paper. What matters is the quality of the knowledge and mentoring you receive from your lecturers and from the university as a whole. I think this situation is a result of the financial crash; Thiel is right, people have fled to something they see as a safe investment to increase their personal worth. People are going (back) to university so they have the qualitifications they need to get a job that would have previously required very little in the way of formal education. The market is flooded with educated job-seekers, so people must now set themselves apart with something else.
jacques_chester 16y ago
Thought bubble: Companies use universities as a filtering mechanism, like recruiters. But recruiters get paid and universities do not. Conclusion: universities should get into the recruitment business.
intenex 16y ago
Thiel's going to have a lot of success with this first batch - if I may say so myself, being one of the finalists. It's remarkably generous of him to offer 100k without any equity exchange whatsoever - the terms are far better than those offered by YComb and arguably quite equal in beneficial environment acquired - particularly as it's for 2 years and not a quarter-year mini-stint. We'll see what happens in two years ; )

343 points by gsharma 16y ago

Makes a lot of sense — especially given the amount of remedial education a lot of not-particularly-cheap colleges are having to undertake. Seems plausible that a lot of the investment (both in terms of municipal and state subsidies, as well as private debt) being made now won't bear a meaningful return for a long time, if at all.

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petegrif 16y ago

great piece - the man has a point

kenjackson 16y ago

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.

jdavid 16y ago
Then invent a new credential system and you will be plenty wealthy. i have heard people murmuring about one.
- kenjackson 16y ago
  New credential systems are created all the time. One we hear people talk about nowadays on HN is a GitHub repository. Another one is acceptance into YC. All a credential is is something you've done in the past which implies your ability to do something in the future. Graduating with a degree in Econ from Harvard implies that you might be a good consultant for McKinsey. Founding Facebook implies you might be a good founder for a future effort. Having a great GitHub project implies you might be a good programmer for some simliar tasks.
  - patio11 16y ago
    YC is a better example of a credential than a Github account. The function of credentials is to outsource decision making about quality: you have to actually read code to extract signal about a candidate from Github, a task which is expensive and beyond the capabilities of most investors and people with hiring authority. "YC alum", by comparison, tells you a lot about somebody in a sentence and doesn't require any work to understand - pg et al already did the vetting for you. There probably exists a spectrum of opinions on whether the credential is useful because of the vetting or the experience of the actual program. Candidly, I think that YC probably has a value add in attendance. Higher education? Not generally, no. I have a $140,000 degree (two, technically) which basically certifies that at 18 years old I was smart enough to get into my university and then, for the next four years, I did not die or fail to sign my loan docs. I know I learned some things of value in those four years, but I could just as easily have written myself a course of study with zero commercial potential, and my degree would say the same thing in a language 99.998% of Americans can't even read anyway. (East Asian Studies degree written in... Latin?!
    - kenjackson 16y ago

gatsby 16y ago

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: http://features.blogs.fortune.cnn.com/2011/04/06/chris-whittles-plan-to-make-a-world-class-private-school/ 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_school_numbers.jpg http://fortunefeatures.files.wordpress.com/2011/04/avenues_s...

r00fus 16y ago

A lot of this higher education bubble has to do with unnecessary costs of higher education, like, say textbooks: http://hubpages.com/hub/College-Text-Books-Rent-or-Buy http://hubpages.com/hub/College-Text-Books-Rent-or-Buy 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 16y ago
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.

hinathan 16y ago

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" http://www.oftwominds.com/blogapril11/consumer-devolution-two4-11.html http://www.oftwominds.com/blogapril11/consumer-devolution-tw...

rkischuk 16y ago

Makes sense. Same symptoms as the housing bubble. 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.

microarchitect 16y ago

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.

gammarator 16y ago
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.
- microarchitect 16y ago
  Fair enough, this is a valid point. To me, this indicates that there's an opportunity here for folks like Theil who have the ability to command the respect of the students at Harvard to get these students interested in opportunities other than those that lead to a quick financial payoffs but instead might have a bigger impact on society.
- mbesto 16y ago
  > * Instead, it introduces them to lucrative career options (e.g., investment banking) available mainly to Ivy League grads.* What happens when two bubbles collide? A bigger "POP"?

jdavid 16y ago

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.

entangld 16y ago
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.
hessenwolf 16y ago
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?

tomjen3 16y ago

Thiel is wrong - education is valuable, college very much so. But an English degree is not higher education, it is a fiction we created for those who want to go to college but can't hack it in the real world. A STEM or a law degree will make you a lot of money.

daeken 16y ago
> Thiel is wrong - education is valuable, college very much so. Depending on your definition of "education", I agree with the first part of your statement. The second part of your statement I wholeheartedly disagree with. Education in general is a very valuable thing, but a classroom education is not the only one, and college can be valuable but is not necessarily so. I'm a high-school dropout, yet I've never regretted it for a second -- I have a good deal of education, but it comes from self-exploration and experimentation and it's shown itself to be quite valuable so far. My case is by no means the norm, but propping college up as the only path is pretty silly.
- aksbhat 16y ago
  First, your assertion "college can be valuable but is not necessarily so" makes no sense. You can always claim that "X can be valuable but is not necessarily so". Where X can be anything in this universe. Second, you are trying to turn a personal experience into a generalization. A good question to ask would be what would happen If the college enrollment dropped by 10% or 20% or 50% ? How would this affect the workforce and the industrial output? Another extremely important question is that how do you decide who exactly should drop out?? Should people drop out on basis of financial resources or some limited test of intelligence. The problem is that it is hard to tell who should enroll and who shouldn't. While certain subjects can be learnt online, a large number of subjects cannot be learnt. A university provides Labs, Wide range of subjects, access to a social network of like minded people, Faculty, Assessment and most importantly some guarantee of Academic Integrity. Universities are an example of the Theory of the firm.[1] You can surely separate different components of college education which I mentioned above, however there will be significant transaction costs. The underlying theme of this discussion is not about education or elitism. It is about allocation of capital. Peter Thiel being a Venture Capitalist is interested in allocation of capital, thus the whole 20 under 20. Dont confuse his efforts with education or elitism. If anything his program might be more elitist than Harvard. [1] http://en.wikipedia.org/wiki/The_Nature_of_the_Firm http://en.wikipedia.org/wiki/The_Nature_of_the_Firm

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cvander 16y ago

He has a strong opinion and this will always generate a big debate. But what I like the most, is that by talking of the education bubble and creating an option for students (the 20 kids program with $100k), we're going to test his theory soon. If that works, how about some of the top education programs replicating his model?

jonbischke 16y ago

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 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.

jonbischke 16y ago
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? (~$500 billion/365/24/60 = ~$1 million/minute)
_delirium 16y ago
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.

martinshen 16y ago

I plan to write a blog post about this later but I'm starting to think that the term "College Drop Out" has started to become more valuable than "College Graduate." This may not be completely true right now but in 5 years when today's 25 year olds are hiring, the term may possibly be more valuable.

rgrieselhuber 16y ago

Something that is hinted at the end of the article but not fully addressed: the risk of creating a new elite (if elitism is the problem) is there just as much in the new system (such as Thiel is) as it was the original institution.

dougabug 16y ago
There will always be an elite. But society needs a humble, wiser elite, who lead by example, talent, and perseverance; leaders who provide valuable insight, rather than protect their advantage by raising walls. Ken Thompson is the best kind of elite, an elite mind who gave us the foundational tools to build a whole new industry.

aksbhat 16y ago

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.

WA 16y ago

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.

barry-cotter 16y ago
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.
- kayoone 16y ago
  In Germany you dont even need to go to college to get a good education in your field. They have a system where Companies train new people from school (they have to take tests and stuff to get in) for the job. For 3 years you work in the company, go to school and get paid around 600 EUR a month. After successfully completing that you have a degree that enables you to work as a Software Developer or Media Designer for example.

dougabug 16y ago

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."

ericingram 16y ago

I couldn't agree more.

mousa 16y ago

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.

wyclif 16y ago

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!"

shareme 16y ago

In a free competitive situation the government if it wanted to give value to higher education while hobbling other competitive items would make higher education at state schools somewhat free thus reducing the competitive edge of for-profits while also reducing the debt load per student which spurs job creation because more college graduates can afford to start businesses and startups.. At least in the USA the main reason why college is not free is that the major debate in congress occurred during the years after Vietnam Veterans returned and US congress people had a cultural bias towards giving those returning from Vietnam and those who did not fight in Vietnam a 'free college education' and like all political laws very hard to over-turn through a renewed debate..

reader5000 16y ago

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.

mdemare 16y ago
>Education debt WILL be made dischargeable in bankruptcy again, there is simply too much pressure. I'm not sure if that's possible - isn't essentially every graduate bankrupt? Couldn't every student get rid of their debts then?

random42 16y ago

Is Peter Thiel qualified to opine on Education? (This is not a snark, but I am genuinely curious to know how to process his opinion.)

freshfunk 16y ago
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.

acconrad 16y ago

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).

jmm 16y ago

I think there are different facets to the bubble that need to be separated out to talk coherently about its implications... 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=aoglHAxZffTI 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/index.html 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.

juiceandjuice 16y ago

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. The real bubble is groupthink.

dpatru 16y ago

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.

korch 16y ago

I don't think Higher Education is in a bubble for one very specific reason: there is no way to open the investment flood gates and attract a large number of speculative investors. You can't flip college degrees the same way you'd flip a house or a startup. They have zero re-sell value. It's pretty difficult to base a bubble on a product that cannot be resold. The only option is that more kids and families go into further debt to pay increasing fees to colleges. I don't see a way to combine this with the derivatives markets by the mass re-selling of investment products to mostly non-professional investors. So the hallmark characteristic of a bubble is not to be found here. I'll agree higher ed is in a true bubble only after some financial wizards figure out a way to re-package college loans into "special investment vehicles" and re-sell them to the general public, and then those securities rise in value by a respectable bubble multiple. Until then, high ed can be argued to be an inefficient, get-your-ticket-punched diploma-mill of bureaucratic drain on society's resources that does more harm than good, but it's not a financial bubble.

Goladus 16y ago

This article is horrible. It's a superficial story about Peter Thiel and Founders Fund framed as a controversial argument about the value of higher education. It really doesn't do anything more than pose the questions and include a few quotes from Peter Thiel. Techcrunch trolls the internet once again.

genbattle 16y ago

In the end a University degree is just a piece of paper. What matters is the quality of the knowledge and mentoring you receive from your lecturers and from the university as a whole. I think this situation is a result of the financial crash; Thiel is right, people have fled to something they see as a safe investment to increase their personal worth. People are going (back) to university so they have the qualitifications they need to get a job that would have previously required very little in the way of formal education. The market is flooded with educated job-seekers, so people must now set themselves apart with something else.

jacques_chester 16y ago

Thought bubble: Companies use universities as a filtering mechanism, like recruiters. But recruiters get paid and universities do not. Conclusion: universities should get into the recruitment business.

intenex 16y ago

Thiel's going to have a lot of success with this first batch - if I may say so myself, being one of the finalists. It's remarkably generous of him to offer 100k without any equity exchange whatsoever - the terms are far better than those offered by YComb and arguably quite equal in beneficial environment acquired - particularly as it's for 2 years and not a quarter-year mini-stint. We'll see what happens in two years ; )