

The education bubble: Tech progress may reduce the demand for high-end jobs - terio
http://www.economist.com/blogs/schumpeter/2011/04/higher_education

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jonnathanson
His point about the declining value of business school in particular is
nominally sound, but he pinpoints the wrong source of the problem.

The problem with business school is that it's started seeing itself in
competition with law school, and accordingly, it's started focusing on younger
and younger candidates. Average ages of first-year MBA students have been
getting younger, especially at the top-tier programs like HBS and Stanford.

This is, quite frankly, defeating the original purpose of business school: to
be a finishing school, and not a preparatory school. Back in the day, you got
an MBA because you had learned a thing or two in your work experience, and
would like to reflect on it through the prism of various frameworks, theories,
and leaders. But it was critical that you _had_ an empirical knowledge base to
work with, or else the lessons were vague and meaningless. The topics demanded
practical knowledge of the general subject.

Today, b-school is trying to position itself as an entry vehicle into the
working world. You graduate, you go to b-school, you learn some mumbo-jumbo
about how this whole working world -- which you've never experienced -- is
supposed to work. And then you get sent off into that world, ready to be an
entitled prick and piss off everyone around you who has actually experienced
the real thing. People who will laugh at your frameworks and your theories,
because they've heard them from the last 20,000 MBAs who came before you.

B-school can still be relevant in today's business world, and in the business
world of the future. But it needs to decide what it wants to be. And, whatever
that is, it should be something more than simply an alternative to law school
for 22-to-25-year-olds.

~~~
Alex3917
"Today, b-school is trying to position itself as an entry vehicle into the
working world."

I do think there needs to be something that fills this position though. I
think the ideal would be for b-school to work more like BYU or a salmon farm,
e.g.

* Students show up straight out of undergrad and learn for 3 - 4 months.

* Students start their own project and work on it for another 4 - 6 months.

* Students apply to Y Combinator or one of the other seed accelerators, and continue building out their business over the next two years.

* Students who have shipped something significant are then allowed to come back at any point between two and ten years later.

~~~
ohyes
You know, I really like this idea.

What if in general there were an option for higher education that was more
spread out?

I'm imagining a system that is more based on apprenticeship; where you work
and you learn at the same time, and after a certain number of years, you have
taken enough classes to be given a degree in some area.

I guess the idea would be to have a company that is also an accredited
university (with professors who do research and publish papers and stuff).
I've decided to call this a companiversity.

Lets pretend it is a software companiversity. I guess the idea is that you
just hire the best students right out of high-school, and they agree to work
for you and you pay them to work on various contracts that the companiversity
takes (presumably less than someone with a degree).

They also get to take classes at your internal university and earn a degree
for free. The overhead that it costs the university to administer classes is
paid for by the products that they delivered.

I guess the idea is to eliminate the huge amount of debt that college students
accrue, return some of the opportunity-cost loss that college students
experience by not entering the workforce, and give students that are entering
technical professions some semblance of experience to increase their market
value once they leave.

~~~
rdouble
_What if in general there were an option for higher education that was more
spread out?_

This is how most higher ed actually works out in practice. Where I grew up in
Minnesota at least 50% of students at the U of MN worked and went to school
part time and took 6-8 years to get a degree.

------
geebee
I'm glad these articles are being written and taken seriously. We definitely
need to end the heresy of questioning the value of higher education. Students
need to understand that debt is the opposite of freedom, and student loans are
(as the article pointed out) much harder to escape than almost any other kind
of debt.

That said, I'd like to see someone take on education in a stronger form. This
particular article mocks an english teacher (another one asks who would spend
$250,000 to read chaucer). Alrighty, agreed, not worth spending $250,000 to
read Chaucer.

How about engineering at a highly regarded state supported institution? How
about Computer Science at the University of Washington or Illinois? Or even at
a private university? How about going pre-med (though Medicine is clearly
somewhat positional, rejecting many applicants than would be capable of
completing the program), or to law school (probably even more positional than
medicine in determining the value of your degree).

Please understand, I'm not saying the answer is an obvious "yes" or "no" in
any of these cases. If you're a good enough programmer to pass data structures
at college that teaches the class for real, it could very well make sense to
drop out and do YC or take that 100K startup from Thiel. But we do need to
start distinguishing between different types of education: different majors,
institutions, motivations.

Definitely time to move past asking whether it's worth spending $250k to study
Chaucer. There's much more interesting material here.

~~~
AJ007
I think the bubble is already cracking and about to burst. If you take a look
at all of the top for profit schools their enrollments have declined
dramatically.

Some degrees are certainly worth the money. All it takes is simple 5th or 6th
grade math, which is not done for any number of reasons.

I did the math, let me explain how it worked:

-My parents had $X saved up for me to go to college (in my name I might add, so it was legally mine)

-My dad was a faculty member at a local university which entitled me to free tuition

-I attended that school for over 2 years, for free

-I did the math that I could earn low to mid 5 figures with my degree, or make six to seven figures by dropping out and focusing on my current business I had been building

-I dropped out, and I made a ton

People are (or at least were) confused by what I was doing. I could have gone
to a better school and not had a whole lot of debt. I could have stayed an
extra year and a half and received my free college degree (minus the cost of
books.) I did the math and it was damn simple math. Not a single other one of
my friends did the math. Oddly enough, my brother did do the math and is
attending an expensive engineering school for a degree in a special field.

Anyone who gets deep in to debt for a non-marketable degree is a sucker.
Anyone who gets deep in to debt in order to teach that same degree to others
as a university faculty member is a participant in an elaborate ponzi scheme.

There is nothing wrong with higher education. There is nothing wrong with
devoting your entire life to something that will not earn you a penny. There
is something wrong with elaborate and needless waste.

Technology can, and will, bring education prices back down to earth.
Accreditation along with deep rooted special interests means this will take a
lot longer than it should.

------
jmm
What gets me about many of these articles is how broad a brush they often use
when describing "the education bubble." And so I appreciate that this article
at least gestures at different types of grad school, and how student/consumer
demand may be decreasing.

But I'd to read more about specific bad "educational investment" decisions,
and what makes these decisions bad, as a way of prescribing better pathways
for students sizing up their college or grad school options. Specifically,
what are the bigger competing opportunities that should entice these "kids"
away from educational debt and opportunity cost? Thiel's program can only be a
very small part of the re-balancing act, I think.

Point me in the right direction if you've already read it...

~~~
byrneseyeview
That is part of what makes a bubble a bubble. Individual houses have been good
investments for particular reasons; individual e-commerce plays or telecom
companies made sense in the mid-90's. But when people start calling up their
broker to buy the next Internet IPO, or trying to invest in "housing" as a
category--or when parents tell their kids to get "A degree," it naturally
selects for the worst version of those.

Here are a couple examples:

* [http://www.bostonherald.com/news/regional/view.bg?articleid=...](http://www.bostonherald.com/news/regional/view.bg?articleid=1290088)

* <http://chronicle.com/article/Many-More-Students-Are/66223/>

Thiel's program is more of a signal than anything. I dropped out of college
five years ago, and people thought I was crazy. I had lunch a couple months
ago with my high school classmates (from a regionally well-regarded prep
school), and I'm pretty happy with how my career and prospects stack up.

~~~
jmm
Thanks. The relationship to the housing bubble is interesting, no doubt. In my
mind, no two things have been more connected to class aspirations/freedoms
over the last 50 years than home ownership and higher ed. There are class and
race issues at play in both cases, which makes new prescriptions pretty tough
to make, especially on a political level.

But a problem has been identified here -- too many people are spending too
much on money on phantom educational assets. Now the solution -- _fewer people
should go to college._ (Especially expensive low to mid tier schools?) I guess
what I was really asking above, is: so what should they do instead? And I'm
guessing the answer ain't so pretty, something even more offensive to the idea
of the American dream than the analogous housing case, of "sorry, just keep on
renting."

~~~
byrneseyeview
I went to college for a year, and I'm doing just fine without it. That used to
be the standard path. There are plenty of well-paying jobs that don't require
a degree--many trades pay far better than white-collar jobs, for example, and
sales jobs often don't require a degree.

And there's nothing wrong with renting, either. You buy housing as you need
it, just like you buy food as you need it--I don't feel ripped off that I eat
peaches but don't own an orchard.

------
simpleTruth
Education is not an unstable bubble. Looking at the low and high end of the
market there does seem to be an education bubble despite plenty of vary good
state schools with reasonable tuition.

What people seem to miss is unlike the housing or gold bubble tuition costs
don't really feed off each other. The high end is really just a luxury in
another form and nothing is stopping Breitling from selling 300,000$ watches
any time soon. And the low end is a direct government subsidy (like corn
farming) which will continue as long as the government feels the need to waste
money.

PS: As long as demand is unlimited and wages elastic Technology can't really
destroy jobs in the long term even as it disrupts industry after industry.
Still, people will always look for the best workers, so even if a degree might
not mean an increase in pay the unemployment rate for people with a BS is 1/2
that of those without one for a reason.

~~~
dpapathanasiou
It has more to do with people getting degrees for the wrong reasons: being
educated doesn't mean you will always have economic security.

And that's where the housing bubble analogy comes in: there are many good
reasons to buy a house, but doing so because you expect its value to increase
constantly is not one of them.

~~~
simpleTruth
The Education and Housing markets are complex systems. The bubble analogy
works as a vary simplified analogy to describe how some markets can see
sustained prices increases for a while followed by a sudden drop.

This works with Housing, at a fundamental level if people decided to more
houses one year the price increases, and if people buy fewer houses one year
the value of your house decreases which can quickly cycle though to dramatic
shifts. However, if fewer people decided to get a degree the value of your
degree increases.

~~~
watchandwait
Both systems have a constant: massive government subsidies that distort the
true supply, demand, and economic ROI for the good. There could not have been
a housing bubble without Fannie and Freddie, the FHA, and the protected-by-
regulation class of bond ratings agencies.

Similarly, there would not be an education bubble without federal loan
guarantees -- certainly they have escalated cost of college, and most of the
shady for-profit colleges thrive on student subsidies.

~~~
simpleTruth
Sorry, bubbles happen even without government action. Read up on the tulip
bubble for a classic one. <http://en.wikipedia.org/wiki/Tulip_mania>

There is also plenty of blame to spread around. EX: Irish
<http://en.wikipedia.org/wiki/Irish_property_bubble> burst 2008. UK
<http://en.wikipedia.org/wiki/British_property_bubble> burst 2008. Australian
<http://en.wikipedia.org/wiki/Australian_property_bubble> (yet to burst) etc.

What is really interesting is how little the price could increase before
market forces brought things back to reality. Housing is such a large
percentage of the worlds wealth that we never saw the sort crazy multiples
over value that other bubbles get to. EX:
<http://en.wikipedia.org/wiki/Japanese_asset_price_bubble>

~~~
jpadkins
Bubbles require rapid credit expansion. There may be varied reasons for what
fuels a particular bubble, but the necessary precondition is easy
money/credit.

When the government regulates the currency & credit markets tightly, then
government should share in the responsibility for the bubble.

~~~
jbooth
I'd recommend looking at a chart of GDP from _before_ the Fed was established
for the express purpose of mitigating boom/bust cycles.

It looks like a jigsaw. If you look at a chart of actual numbers, it's pretty
clear that the countercyclical tools available to the fed diminish the effect
of bubbles.

------
edw
I think the author is confusing the members that currently make up the set of
high-end jobs with the set itself.

In 1995 I was writing HTML templating engines and session management code. An
HR person might have called me a "templating and session engineer." _By that
definition_ the role I was filling is now obsolete: standardized technologies
have been developed that mean I will never find work as a templating and
session engineer again. I am not crying about that development.

The coming obsolescence of particular high-end jobs opens an opportunity for
new high-end jobs. The world has fewer Unix admins per Unix server than it did
fifteen years ago, and the world is better off for that. (Apropos the recent
"Linux admin shortage looms" non-story recent posted here.)

The author is perpetuating the same fallacious argument that wheelwrights were
at the dawn of the age of automobiles.

------
igorlev
It doesn't reduce the demand for high-end jobs, it might reduce the demand for
the currently large variety of high-end jobs. I always thought that the
development of science and technology pretty much meant that eventually
everything trends towards pure symbol manipulation within a computerized
environment, aka programming. Today we're programming ERP systems; tomorrow,
automated asteroid belt ore extractors and 3d printers. Even then, I'm sure
you'll have an even more bewildering variety of highly specialized technicians
than you have today.

~~~
yafujifide
What happens when computers are able to do their own symbol manipulation?

~~~
bioh42_2
It's hard to imagine.

The best I can do is think of Rome's slave based economy. Obviously slaves can
do anything the free Romans could, and they did. The Romans were either
plebes, dependent on government handouts like bread and circuses, or they were
wealthy and then they mostly went into politics.

~~~
gaius
A Roman slave wasn't much like what we think of as slaves now (i.e. blacks on
cotton plantations). Epictetus, for example, was a slave, and who even
remembers now who "owned" him?

~~~
tokenadult
There were many black artisans in urban areas of the antebellum south who were
slaves in just the way that Roman slaves were, doing highly skilled work
without personal freedom.

[http://www.amazon.com/Artisan-Workers-Upper-South-
Petersburg...](http://www.amazon.com/Artisan-Workers-Upper-South-
Petersburg/dp/0807133132)

------
Gaussian
If only there were a way to short middling private schools. The hedgies
shorting the for-profit schools are well documented. But you have to think
that the lower- to middle-tier non-profit private schools--the ones that
charge tuitions not unlike those of the Ivies--will be the first into the
fire. Perhaps Goldman can create a Middling Private School Index (the MPX) and
sell CDSs against it? The question: who can play the role of sucker on the
long side? I know! Taxpayers!

~~~
jnorthrop
Follow the model of John Paulson. He created a market so he could short the
housing bubble and it made him one of the richest men in the world.

------
fleitz
The best evidence for an education bubble can be found at Starbucks. The
amount of people who have advanced degrees and work at Starbucks is simply
astounding.

~~~
samfoo
Do you have any evidence that this is the case? Most of the people I know who
work as barristas (Starbucks or otherwise) are college students or people
obsessed with coffee. And in the suburbs the demographics change even more.
(Seattle)

