Back to the Future with Peter Thiel
The hedge-fund billionaire says we need more innovation — and less herd-thinking — to open a new frontier.


The Great Recession of 2008 to the present is helping to bring the education bubble to a head. When parents have invested enormous amounts of money in their kids’ education, to find their kids coming back to live with them — well, that was not what they bargained for. So the crazy bubble in education is at a point where it is very close to unraveling.

In early 2009, there was a question of why the stimulus money was not going to infrastructure, and a very large amount was going to subsidizing college loans and encouraging people to go back to school. The argument was that we get a higher return on human capital than on infrastructure. While that’s certainly possible, and I agree that human capital is extremely important, I think we’re not actually measuring the return we’re getting on the human capital. It is, in fact, considered in some ways inappropriate to even ask the question of what the return is. We are given bromides to the effect of, “Well, you know college education is good, but it’s good precisely because it doesn’t teach you anything specific; you become a more well-rounded person, a better citizen, you learn how to learn.” There tends to be an evasion of specificity of what exactly it is that is learned. And so these human-capital intuitions may be very far off in a lot of colleges.

shaffer: But people are freely choosing all this education in a free market, despite those extravagant costs, presumably because it’s the only way to signal things like self-discipline and intelligence. So the market does seem to demand those signals. Are there any alternatives?

THIEL: Yes, college is a signaling mechanism. It is possible that the universities were too cheap in the ’70s and ’80s, and they are sort of these somewhat parasitic entities that could capture way more of the share of the gains from providing this signaling mechanism. And so they were providing this signaling service, and they now are capturing most or all of the value.

But one part of it that I do not think is market-driven is that the government sector is one in which your pay grade is very mechanically driven by your university or your degree. So I tend to think we shouldn’t say that it’s a market that’s demanding education when probably the most dogmatic part of the market involves government workers. Do teachers need to get an education degree to become teachers? Do you pay people more if they’ve had a master’s degree than if they haven’t? I tend to think that if you shifted the requirements for government workers to a pure merit thing, that would help resolve a lot of the market distortions. And it might also set a very good precedent for large corporations in the private sector that sometimes function like government bureaucracies

shaffer: So what do we do to, as it were, short the education market?

THIEL: Well, I don’t want to transfer this into equity advice [laughs]. But I would say that for people who are starting college or thinking of going to college or graduate school, the exercise that’s probably very valuable to go through is to think of what the teleology of education is, what the purpose of it is, where it is going. When I look back on my own education — I went to Stanford undergrad and law school, I went straight through, graduating from law school at 24 — I don’t have any big regrets about doing it. The costs have gone up way more, so it’s trickier now. But if I had to do something over, I would try to think about it a lot more than I did at the time. Paradoxically, education has become a way to avoid thinking about your future. Instead of thinking about your future, you go to school and defer thinking about your life.

There are a lot of different things that could be done on a policy level. We should have less government subsidy of college loans. We should be getting rid of government guarantees for student loans — that’s one of the main reasons these things get underwritten. What we have going on with Sallie Mae is very analogous to the Fannie Mae problem with housing. We should get rid of educational credentials as a legitimate hiring criterion for the government. That’s what I’d start with.


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