Phi Beta Cons

The Calcified Credentials Game

Peter Thiel is a maverick of the modern libertarian-right. He founded PayPal with the idea that it could compete as a standalone international currency. He bet heavily against the housing market before its collapse. And he now funds futurist ventures like seasteading and longevity research.

As Apple once said of entrepreneurs like Thiel, “You can quote them, disagree with them, glorify or vilify them. About the only thing you can’t do is ignore them.” And, unfortunately for the incumbent-apologists of academia, Thiel, the “philosopher CEO,” turned to education with NRO’s Matthew Shaffer last month, saying, in part:

“Education is a bubble in a classic sense. To call something a bubble, it must be overpriced and there must be an intense belief in it. Housing was a classic bubble, as were tech stocks in the ’90s, because they were both very overvalued, but there was an incredibly widespread belief that almost could not be questioned — you had to own a house in 2005, and you had to be in an equity-market index fund in 1999.

I recall reading about Thiel a few years ago, during the height of the housing bubble, being asked in an interview why he (a billionaire, remember) was renting his California home. It was just too over-valued, he said. When it comes to education, then, perhaps it’s no surprise that Thiel has launched a series of fellowships, awarding teenagers $100,000 to drop out of college and pursue their start-up ventures.

Certainly both homes and education command intense, and nearly religious, belief in their soundness as long term investments without regard to cost, quality, and the time value of money. But the housing and education bubbles are different in at least one critical aspect, which I’ll highlight in a moment. 

But first, from from the New York Times:

“The whole thing is kind of scary, for somebody like me who’s paying for college myself,” said Ms. Murphy, who plans to be a teacher. “I turn 20 tomorrow, I’m already in debt, and if tuition goes up again next year, I’ll be in an even worse position.” … 

At the University of South Carolina, budget cuts have already pushed tuition to $9,786, more than double what it was a decade ago and well above both the national and regional averages.

Ms. Murphy will spend at least her first few productive years paying down her loans. But her decision to spend on higher education is not simply due to the “intense belief” of which Peter Thiel warns. It’s not due to personal degree mania. She’s getting a degree because the “market” — distorted as it might be — demands it.

Middle States Association, for instance, requires accredited schools to hire only college graduates. And schools that seek eligibility for many private and public grants need that accreditation.  Steve Jobs couldn’t teach at a such a school. That’s a rather alarming thing.

While education seems likely to be a bubble because of intense demand, its high price, and dubious claims of universal value, groups like Middle States might be unintentionally compounding the problem with overly aggressive baseline requirements.


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