2011 April 15 Friday
Peter Thiel: The Faith-Based Education Bubble

PayPal co-founder Peter Thiel says the big remaining bubble is over-priced and over-revered education.

Instead, for Thiel, the bubble that has taken the place of housing is the higher education bubble. “A true bubble is when something is overvalued and intensely believed,” he says. “Education may be the only thing people still believe in in the United States. To question education is really dangerous. It is the absolute taboo. It’s like telling the world there’s no Santa Claus.”

The education bubble is built upon the (still very strongly embraced) Blank Slate fantasy of human nature. The faith or elites profess in this fantasy represents a combination of many myth into one big super-myth. The Horatio Alger self-made man myth is one of the foundations for the super-myth. The idea that with a sort of will-to-power we can make ourselves into anything fits well with the idea that given sufficient training anyone can do anything, that the possibilities for achievement are limitless.

The faith in education is also built upon a modern version of a belief in natural human equality of ability and ambition. Whereas in a previous era our equality was seen as a result of our all having souls and all having equal standing in the eyes of god today belief in god is out of favor. So the equality myth needs a new foundation. Today our equal standing is seen by secular believers in equality as the product of the environment. Educational institutions have sold this modification of one of America's founding myths because this newer myth so serves the interests of colleges and universities. They can keep raising their prices, building new buildings, and raising their salaries. What's not to like?

This bubble, like all bubbles will come to an end. Thiel thinks college graduates, going back to live with parents while saddled with debts (that can't be dumped in bankruptcy court - college debt is like serfdom), are sending a message to society at large that the myth is exaggerated. Thiel is offering money to a small group of talented people to drop out of college and start businesses. I appreciate the symbolism. But people are still going to want to get skills. Also, Thiel's recruitment of only the very best for his scheme still leaves what he's promoting as an elite phenomenon. The biggest problem isn't elite kids going to Ivy Leagues (though that is a lot of money wasted). No, the biggest problem comes from all the kids of less than top ability trying to copy the smartest by going to very expensive colleges for 4 years to learn skills that do not do enough (or anything in most cases) to raise their productivity.

While rapidly rising college tuition prices are well known it still amazes me to find that the cost of higher education in the United States has doubled since the year 2000. Only energy has gone up faster. The energy cost problem looks pretty hard to solve. By contrast the education bubble can be popped with sufficient political will to shift toward an educational system that replaces most labor in schools with automation.

Cut out most of the labor costs using online delivery of cheap pre-recorded lectures on basic subjects, online tests to check your skills, proctored tests for certified knowledge on specific topics. Break up schooling into many pieces where lectures, course material, tutorials, and tests are all available for purchase separately. Use computer automation to greatly reduce the labor needed to deliver courses. Labor is the biggest cost in education. So automate most of what humans now do. The result will be higher quality and lower costs.

Share |      By Randall Parker at 2011 April 15 09:55 PM  Education Incentives

bbartlog said at April 16, 2011 2:47 PM:

Automation to deliver the actual skills (to those capable of developing them) is one piece of the puzzle. Another piece is good employer skill tests - both so that the college degree is no longer as necessary as a credential, and so that those who claim to have taught themselves something can be evaluated.
The student debt thing is really sinister and destructive, IMO. Some of these people have basically ruined their lives after having some fairy tale sold to them by higher education. I can understand why they made student debt harder to walk away from than other kinds (otherwise declaring bankruptcy immediately after college would be quite a winning and popular strategy), but with the scale of the debts now being incurred it can make for a lifelong problem. The sinister aspect is the extent to which an industry exists for pushing people into making just these bad choices; seems like the guys who resell mortgage debt as bonds got burned and now want as much as possible of a new, more bulletproof kind of debt to repackage.
One other related thing I wonder about is the overrepresentation of women in higher education and the long-term implications for the perceived value of a degree. Historically, professions that came to be female-dominated would simply lose their status. The profession of schoolteacher is one example. Does this mean that we can expect learning/education in general to start being perceived as unmanly? We might well slide in the direction of something like Mexican culture, which doesn't in general place a high premium on education. Alternatively, we might expect the already high reverence for the military to grow even further, so that some employers start wanting relevant military experience rather than a college degree.

J said at April 16, 2011 4:01 PM:

Another piece is good employer skill tests

Ruled illegal by Griggs v. Duke Power Co. Colleges are a very inefficient substitute: graduates are "ranked" according to which colleges they graduated from, and having no college degree (falsely) signals to employers that the candidate is dumb.

The skill tests must be independent of employers.

Also, young people would be best advised to build up a portfolio of job-related accomplishments, instead of writing emotive, confessional college application essays.

bbartlog said at April 16, 2011 7:26 PM:

Griggs v Duke power made it illegal to use IQ tests, or any other tests that had disparate impact *and* could not be shown to be directly relevant to the job. Of course as a practical matter this means that many places bend over backward to avoid any disparate impact, because even if the skill test is relevant you don't necessarily want to have to convince someone of it in court. Nonetheless skill tests are alive and well; in my experience applying for jobs I've taken computerized tests for perl and AutoCAD skill. And an IQ test ... described as a test of 'problem solving ability' but I know an IQ test when I see it, and just because it's technically illegal doesn't mean some companies won't use it. In fact below a certain company size (I think there were like eleven guys there) it becomes quite difficult to make the statistical case for disparate impact, so they might have been safe.

Michael L said at April 16, 2011 11:17 PM:

if he thinks vocational training should be cheaper for American students, let him put his money where his mouth is. If he is feeling generous, he should create an organization dedicated to developing and carrying out such cheaper vocational education, whether in engineering or trades or what have you. It obviously should be self-supporting, i.e. develop a way to train to an acceptable standard while charging as much as normal people can reasonably afford.

Bribing some smart college kids to do something may be a nice way to expand social network for future reference (maybe he can hire them later on or something) but it's a drop in the bucket in the big picture.

Michael L said at April 16, 2011 11:26 PM:

oh, ok, so Peter Thiel is actually running a venture capital fund or angel investor fund or something of that nature. That seems to be his main job. Should it then be surprising that he is interested in trying to groom founders of companies to invest in? Maybe the people he picked either already got engineering education as a hobby in high school or else show much promise in the field of sales, networking and standup BS'ing, which nowadays is an excellent path to being a successful exec.

Regardless, this has nothing to do with American educational system per se.

Engineer-Poet said at April 17, 2011 12:45 PM:

Allowing discharge of student loan debt in bankruptcy makes sense, except the results would be terribly un-PC.

If there is no way to charge off a student loan (because you can't repossess someone's classroom hours), the banks are secure.  They're going to have a very good shot at getting their money back, so they're willing to lend.  This allows even the academically unable to get loans for at least one or two semesters.  If they flunk out, no problem; the banks can still demand repayment and the schools make their admissions diversity/AA stats.

If student loans can go as bad as credit-card debt, there's a problem for schools.  Banks won't lend to bad prospects as readily or under as attractive terms.  This means that the less-able students (especially the diversity/AA group) needs a lot more financial aid or just plain can't go, and the admissions stats go to hell.  This yanks the rug back from the dirt nobody in the biz wants the public to see.

I understand that one of the initiatives under the Obama administration has been to make student loans a direct function of the Feds, with no banks involved.  This means that racial default statistics will be available under FOIA, and the dirt won't stay under the rug either.

fred-m said at April 17, 2011 1:28 PM:

The comments about "disparate impact" are dead on the mark. Government jobs at the Federal level are almost completely awarded on "credentials" (edumacation), and that is rapidly expanding to state & local governments, utilities, and to large corporate industry.

I am a registered engineer (PE). I first took the exam in the early '80s when it still had some teeth. I let my registrations lapse while working in another field (they put in some "continuing education" requirements) and had to go back and take the exam again. The current test is a joke and "disparate impact" is why. In a few more years they are going to require a Masters Degree to be allowed to take the test.

Just raising the "credentials" bar.

Education is definitely overvalued in non-technical fields, but credentialism will keep the bubble going longer than it otherwise would.

no i don't said at April 18, 2011 12:52 PM:

I continue to think that there should be free higher education in the U.S. as in many other countries. It is a government's duty to provide free education -including higher education- not only K through 12. That's what taxes ARE for. And when we talk about taxes, we are talking about so much money, so much money, it's hard to imagine.

I'm not talking about nationalizing higer ed. There should always exist the option of expensive elitist universities for rich first-class citizens, but also free education for the second and third class mortals who want to continue studying but can't.

Same can be said about medical care. There should of course continue to be private costly hospitals where you can be diagnosed by Dr. Hosue, Dr. J or Dr. Pepper, but there should be also public hospitals and universities that shouldn't just "be cheaper"; they should be FREE. Rather... paid for by the taxes YOU pay!


Ah, but that is just too god-damned socialist, right?

Mthson said at April 18, 2011 3:35 PM:

No I Don't,

If you had grown up watching every idiot around you making terrible decisions and being impervious to reason, you'd be less enthusiastic about personally subsidizing their incompetence.

Contribute to society by building your own life path, improving each year, and letting others do as they will.

Pete's Dragon said at April 19, 2011 1:08 PM:

IQ tests are illegal and college often simply functions as an expensive substitute. My suggestion would be to simply create at the high school level what we already have in college. Create different tiers of diplomas with increasingly higher standards, like cum laude, magna cum laude, summa cum laude degrees.

Your basic tier diploma would remain where it is now, so that the dropout rate doesn't decrease, and so parents don't throw a fit. Second tier can require tests and extra classes, perhaps geared towards a major. Third tier more of the same. At the end of it all you get an education that's prepared students for the workforce and that distinguishes students with aptitude and work ethic from those without. It's exactly what we have now, but without 4-5 extra years of spending. Employers would be able to look at a student's diploma and know their general aptitiude and skills. Require Tier 2 and 3 diplomas for any public institution other than community college. Students not on track to reach Tier 2 would be on notice that they needed to learn some marketable trade. Students entering professions requiring college training would then be motivated to work harder in high school so that they could get into a "real" college. We focus a lot on IQ, but there is still a lot of untapped potential there in the schools. Hard work may not make anything possible, but it certainly makes more things possible.

As a side note, there's a kid I knew in high school who is mildly autistic (or something) and not very bright. With the miracle of the internet and Facebook I have since become reacquainted (against my will), and learned that he now holds a masters degree from a moderately respectable public institution. But he is an unemployed English teacher who can't find a job or pay his sub-$500 per month rent. His writing, as he advertises his tutoring services, is appalling. He can't even find a job as a retail clerk because, he says, his potential employers probably think him overqualified. The problem isn't that he's overqualified for the retail position, but that he's underqualified for the master's degree. He should've been manning the retail counter for the last 10 years, but instead he spent it pursuing a worthless degree that did nothing but waste his time and money. If he'd stuck with even being a grocery store clerk he'd at least have ten years seniority, a few raises and - oh yes - a job.

no i don't said at April 20, 2011 1:19 PM:

"Contribute to society by building your own life path, improving each year, and letting others do as they will."

I really don't know what this sentence means or implies. So, while you let others do as they will -The Fed, Bush, Creationists, etc, etc,- I will continue to try to build my own life path, yes. I just hope to have a different social and economic system, in which it would be impossible to subsidize any idiot's incompetence.

Hey, we can live better; it might actually be possible!

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