Peter Thiel is a brilliant and successful man (who happens to have two degrees from Stanford, but that's not the point here) who came up with a neat program, the Thiel Fellowship, which encourages students to drop out of college and pursue starting up a business. If you are selected, you get $100,000 with no strings attached. There's NOTHING WRONG with the Thiel Fellowship. If you have an idea, apply, and if you get a Thiel Fellowship, take it. The fellowship is not Thiel's bad idea.
The bad idea that Peter Thiel is selling is that college isn't worthwhile. He has a whole page on the Thiel Fellow website devoted to the "college bubble". The Thiel Fellowship seems to be more about providing publicity to his "don't go to college message" than it is about helping young entrepreneurs start. I don't think he's being disingenuous, but I have concerns. The simplest one is this: let's say on the off chance you have a great idea and the skill to make it come to reality, all at the tender age of 18 or 19. Then let's go further and say you are one of only twenty people who are selected (I have seen no data on the number of applicants, but I would imagine that the odds are pretty low). Yes, you have two years of your young life to make a business, but don't imagine that $100K is a lot of money when it comes to starting up a business. Just like your friends in college, you are going to be living with roommates, driving a beat up car (or no car), eating ramen, drinking coffee, and working your ass off. At the end of two years you may be ready to pursue real money, hire employees, etc. However, what does the Thiel Fellowship tacitly encourage you to do if you can't realize your dream? Go back to college.
Dick Jumps Into the Job Market, While Jane Goes to School
You will see massive amounts of data on both sides of the college bubble debate, but it's hard to give that context. Yes, some people drop out and make a ton of money. Most college dropouts don't make more money, though; they make less than their peers with college degrees.
I'm going to tell you a story I've seen many times, although I'm going to genericize it. It's about time for high school graduation, and we have two new graduates to meet. They are both intelligent and hard-working, but they have very different plans.
Dick is sick of school; he thinks it is not paced for him, and he doesn't like doing homework. He has a lot of tech skills, so he decides to see if he can get a professional job. Very quickly he finds one doing IT work, and he'll be making $24,000 his first year. He's as happy as can be. He moves out of his parents' home into his own apartment, and he buys a new car.
Jane is a bit more bookish and likes school more than Dick. She is also intelligent, and also has tech skills, so she could follow Dick into the workforce, but she chooses to go to college to study information technology instead. Instead of earning $24K, she'll earn about $8K doing part-time and summer work. She'll be living in a dorm and won't have a car.
Over the next four years, Dick gets to tease Jane frequently, as she is broke all of the time and he has money. In fact, we'll be ridiculously generous and say that Dick gets a $2K raise each year for the next four years, so by the time Jane graduates with $25K in debt (even with working part-time and in the summer), he's making $32K and has earned $108K over the past four years. After Jane graduates, let's say that she's only making as much as Dick, so she gets a job making that same $32K. Now, it's really simple to say that Jane's college degree had a $133K opportunity cost.
That's oversimplifying, though.
First, Jane has some skills and knowledge that Dick doesn't. It's not that he hasn't learned anything in four years, but while Jane could focus on learning, Dick had work to do. He ended up repeating tasks (like setting up computers and unjamming printers). Jane worked hard for her degree, so classes, studying, and part-time employment took more than 40 hours during many weeks, but she was in a structured learning environment, and being broke she didn't have as much as Dick in the way of distractions. She knows a lot of the underpinning theories of technology, so when the current crop of equipment is on the scrap-heap, she'll not only learn the new tech more quickly than Dick will, she probably can anticipate some of the changes. She's also been educated in professional writing and communication, and that looks good for the boss.
Jane's Still Behind, But...
You can probably see where this is going to go. Jane is going to get promoted. Dick will be supportive at first, but as Jane gets promoted higher and given more raises, Dick will become bitter. He's just as intelligent as Jane, but something makes her promotable. To some extent Dick will attribute this to bias, since most of the managers at all levels in the company have college degrees. Yes, that's it, they are prejudiced, Dick says, ignoring the fact that they all may value college education more than he realizes for very practical reasons.
The reasons for Jane's promotability are perhaps not that she can configure a router faster than he can, but she can generally be given additional responsibility with the knowledge that she will be upfront about what progress has been made and what needs to be done. She has no inferiority complex, because she has that "piece of paper". Again, her communication skills, "soft skills" though they may be, mean that others understand what she's doing and how her work impacts others. Jane worked on group projects in college, and has practical experience. When she's asked to lead a group and someone doesn't pull their fair share, she knows how to handle the problem without stomping her feet. When this happens to Dick, he gets angry because he hasn't realized that there will always be loafers; he feels unfairly burdened to have to vet these people. He thinks it's his job to give them "what's coming to them". Jane would never have gotten through college and would be in a straightjacket if she had tried that approach more than once in college.
When Dave asks his manager why Jane got promoted over him, he gets the usual response. This isn't the post office, so seniority means nothing. The easiest point of comparison is the degree, so Dick fixates on that, arguing that it doesn't mean anything. Three years in, Jane's been promoted twice, earned $40K her second year, and is now making $50K, while Dick has gotten his usual $2K raises, which now seem measly. So in the past three years, Dick has made $102K, while Jane has earned $122K. He's still ahead by $88K, but that's dwindling fast; she has low rates on her loans and is repaying them quickly.
Short interlude on why these numbers actually don't mean much. Ask yourself how much you think Dick has saved over the past seven years? He's 25 now, but when he was 18, was he paying himself first? Was he investing in a 401k? What about a Roth IRA? His car is now paid off, and Jane's is not, but his car is 7 years old and he wants a new one. People with college degrees are more likely to save, so Jane hopefully started a little nest egg when she started. Does Dave have anything to show for his first seven years of employment? Sure, he lived better than Jane when she was in college, but ask Jane whether she had fun during college. What do you think she will say?
Moving Into Mid-Career
Let's jump ahead five years. Dick has now been given additional responsibilities and is making $50K a year, but Jane has been promoted and is making $75K. In absolute numbers her opportunity cost of college has now pared down to below $40K, and she's not even ten years into her career.
Dick thinks that he is mature and responsible and has grown in the past five years (and he has!). He asks about being promoted to a management spot; he sees Jane in her project management role and thinks it looks more fun than administering machines. His boss, being nice, tells Dick to think about going back to school part-time and earning a degree. Dick doesn't hear this, he just hears "we won't promote you without a degree". Dick points to his certifications, and is told that those only show skill at managing technology. The truth is that Dick has never developed creative problem-solving skills because he has never been asked to be creative. If Dick had read A Brave New World, he would see that he had been a beta-minus his whole adult life. Rather than go back to school, Dick hits the bar and complains about how the company won't promote him even though he is as talented and skilled as Jane. He fails to realize that were this the case, he would be promoted. No one has the ability or desire to promote solely on a credential.
Simultaneously, Jane is enjoying her work as a project manager and happy with her pay, but she feels she could go further. She talks to her boss about how to make this happen. Her boss says, "at my level, nearly everyone has a master's degree; it's not a requirement, but it's useful to gain some additional skills." After some soul-searching, Jane decides to pursue a part-time MS in Information Technology. This requires taking the GRE, applying to school, and working hard taking two graduate classes a semester in addition to her job and her life. She thought undergrad was hard, but this is something else. She continues, though, not because of the dream of promotion (which wouldn't be enough to motivate her through this), but because she realizes she enjoys the challenge, the hard classes, the bright peers, and the practical knowledge she's gaining alongside the growth in her abstract thinking. All told, it takes her about four years (including taking time to decide, prepping for and taking the GRE, applying to competitive schools and waiting to get admitted), and at the end, she's given a promotion to lead an entire project. Her company helped pay for her MS, which was expensive, and she's now in middle management, above the first line managers but below the executives. She's starting to influence what the company does.
Then the bottom drops out. Through no fault of either, the company tanks, and Dick and Jane are both laid off.
Climbing Back into the Job Market
Conventional wisdom says that a job search will take about one month for each $10K in annual income you want to replace. Dick hopes to find another job in six months to replace his $60K, while Jane might wait a full year to replace her $120K. However, that's not what happens.
For Dick, he has trouble finding a job. There are other people his age who have similar skills sets, some with college degrees and some without. He realizes that, all other things being equal, a company will hire someone with a degree over someone without. After 17 years in industry, his first years are lost in the noise of other data, so someone with only 12 years (or only five years) is just as competitive, and doesn't make as much. Eventually Dick does find a job, but he's now making $40K again, because the only way he could get back into the market was to lower his salary expectation.
Jane's experience is more valuable because of the experiences that she was offered, not because of her degrees. Her degrees are valuable, especially the MS, because the people hiring her know that someone with an MS from a good, recognized university has skills and a strong work ethic. These people are at a level where the real risk in hiring is not the salary that they have to pay, but the outcome of the project they will put into Jane's hands. It may take her a bit longer, but Jane can command a good salary. The opportunity cost of the degree is long gone. Jane is now established middle class. She's not relying on transient knowledge or skill for her employment anymore, because she has success at running the show.
OK, wow, that was way longer than I thought it would be. Again, this is just a story, a single story, and it doesn't explain every situation. Jane won't always get a master's degree. Sometimes Dick will go back to college.
But What About Entrepreneurialism?
There's a simple solution for Dick: start his own business. He can do it, he's smart and hard-working. Let's see what happens when, after being laid off, both decide it's time to start businesses. Let's assume that each has an idea that has an equal likelihood of succeeding.
Jane starts off the way she was taught, by analyzing the problem. She researches others in the same market space, and what has worked and what hasn't. She sees what has been created and figures out a way to position herself to add something of value. Then she writes a business plan and starts talking to people.
Dick is more about passion; he jumps in and starts trying to build a prototype, thinking that he can leverage the prototype and start turning money over quickly, or perhaps use the prototype to get venture capital (VC).
Who's going to be more successful? Well, probably Jane. Remember, their ideas are equally good. However, Jane has three aces in her pocket: her professional network, her experience, and her degrees. Her professional network means that she is known to the people she needs to influence to get funding. Her experience serves as bona fides to the people who might fund her, lending her credibility as a known quantity. Her degrees helped her get both of these things, and she was able to learn about the world of entrepreneurialism and VC. She doesn't need a prototype, and she's not likely to be the one writing the code anyway. She needs a business plan showing potential investors what she's going to do that's innovative, and how she's going to use that idea to make money.
Summing Up
If tonight I had a flash of brilliance that I was sure would be the next FacePhoneNet, I have means to start a business. I know where money comes from and how it works. I know how to program, but I can also find and train the right people. I could make ten calls before the end of this evening (and it's almost 9PM!) to start the process. I don't know if I could get money, but I know I would be able to do all of the right things to get money, and that I would be competitive.
If you have a flash of brilliance and the means (perhaps rich parents?) to make the idea into something fruitful, by all means go for it. However, before you do, take a look at KickStarter, see how many projects their are by people who don't have degrees and people who do have degrees. What differences can you see? Who's getting funding.
You may not agree with it, but you know the answer. Want to prove me wrong? I encourage it.
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