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Young People Are Screwed: Here's How To Survive (pandodaily.com)
220 points by dkasper 1714 days ago | hide | past | web | 176 comments | favorite



While it is true that a four year college degree at Yale, or Stanford or USC can easily set you back $200K, the only reasonable thing about 'point 2' is that we don't need Spanish Majors, but we do need scientists, mathematicians, and engineeers. And a California State education is about $5k a year [1] or $20K for four years. Same cost as a car these days. You can pay off a car with a 60month loan, why not your college education.

[1] http://www.calstate.edu/budget/fybudget/2011-2012/documentat...

[2] http://www.commerce.gov/news/press-releases/2011/07/14/new-c...


The main fallacy of the whole rising-college-tuition thing is that students don't actually pay "sticker price". The actual cost is much less:

http://www.bloomberg.com/news/2012-11-27/misconceptions-101-...


Paying sticker on a college education is like paying above sticker on a car. The college I went to was a private institution and had a sticker price of $35k my freshman year and over $40k my senior year. Room and board and textbooks were additional.

I took loans for everything not covered by scholarships or grants and I owe barely $20k.


> The actual cost is much less

... often.

OTOH, If you don't fit the mold, you may be screwed...

I've known any number of students who actually were paying full price for tuition at top-tier private universities [to the tune of $50,000/year] despite being quite poor. Some took out massive loans, others did full-time work and attended as best they could.


What do you mean by "quite poor?" To my knowledge, if they're poor, they're poor. I don't know anyone who was legitimately poor that did not qualify for financial aid.

EDIT (reply to below): Your point about the estranged parent is valid; a wealthy parent refusing to pay is the only case in which a "poor" student does not get much financial aid. Foreign students are not entirely excluded from financial aid, though they get much less. Studying abroad is a luxury, and the case of a poor foreign student whose family lives in the US who chooses not to attend an affordable state/local college is very much an edge case.

By and large, if your family is poor, you qualify for financial aid.


Er, "no significant savings, income, or other resources to draw upon."

The "system" generally tries to support poor people, but there are an awful lot of rules in place to try and make sure people pay their "fair share" and prevent cheating. I think usually those rules have more or less the desired effect, but like any rules, they can be rather blunt instruments, and end up hurting people as well.

Some examples:

+ Foreign students are often ineligible for grants and aid (even those from the university itself), no matter how poor they and their parents are. [There are exceptions, e.g. Harvard (which has lots of money and extremely high admission standards), but my experience is that they are very rare.]

+ In many cases a parent's income is considered in calculating the student's resources, even if the student has no contact with or leverage over the parent and that parent is not willing to pay anything. The reason for such rules is obvious: to avoid parents pretending to be estranged in order to avoid paying their fair share. However it still can end up hurting students who really don't have any choice in the matter...


In my case I couldn't receive FAFSA and in turn many other forms of financial aid until I turned 23 (technically, the year where on January 1st I was 23) because I'm estranged from my parents and couldn't get their tax return info. I was making between 17K & 20K per year before 2011. This pretty much put a University education out the realm of possibility for a while.

In the end my (paid out of pocket) associates degree, some luck, and a few Hail-Mary career moves put me in roughly the situation I hoped to be in post university and I didn't have to graduate at 25/26 years old with student loans.


Another example: having tax-free purchasing power can count against you. Specifically, clergy may receive a tax-free payment on their home. That is counted by colleges as income, even if your home is entirely paid off, which can boost your "income" from 20k/yr to 50k/yr. I know one student who must pay about 15k/yr to a "full-need" college, despite her parent's annual income being 25k.


Your second + fits my situation exactly. My parents are divorced and neither would pay for college. I'm 24 and basically just starting college now that I can at least get enough loans from the government to afford community college tuition. I've had to work really shitty jobs for the last six years just to be able to pay for rent and food. (The rent they would have charged me to live at home was more expensive than my options for moving out.)

If I lived somewhere like europe I'd be graduated and quite happy by now instead of really bitter.


You qualify for aid. If you're 24, you are now an independent student and parent income is no longer factored into the financial aid equation. You are basically low-income in a college's eyes.

Education about financial aid goes a long way. Just because someone qualifies for aid but does not seek it does not prove my point wrong.

http://www.fastweb.com/financial-aid/articles/699-fafsa-and-...


Wow, way to be a dick. I like how you also ignored the part where I said I had to wait six years for the aid WHICH I AM CURRENTLY NOW ON that you somehow think I'm still not familiar with due to laziness/stupidity.


Isn't financial assistance for the non-wealthy generally intended to counteract class boundaries to getting a quality education? If you have wealthy parents, almost always you grew up wealthy and well-educated, and various assistance programs are just not intended for you.

Yeah it sucks to accumulate $50,000 / year in debt to maintain your social class standing by attending prestigious universities, if your parents could care less, but why is it some rich kids birthright anyways to attend some wonderful school, when there are probably kids a lot more hardworking, driven, and coming up from adversity, that are more deserving?


The point is that there isn't a perfect correlation between "unable to pay" and "covered by aid", despite the best intentions, so some of those people not getting aid are not wealthy at all (and they may be downright poor).

People fall through the cracks, and that's a problem.


At Stanford, it's a policy that if your family makes less than $100,000/yr, they waive tuition. At Harvard and some other Ivies, they do it at $60,000/yr.


At Brown, that is the case as well (at 60k/yr). And yet, there are federal and school policies in place to prevent students from paying less than their fair share. I know students whose families earn about 25-30k/yr, who have siblings, and are still expected to pay ~15k/yr. My family's Expected Family Contribution last year was something like 20k (which is more than they were able to pay, so I still had to go into debt). However, due to the fact that I earned about 10k at an internship the previous summer, despite my parent's income remaining constant, our EFC increased to 28k. And, due to my unusually high income, I was eligible for about 4k less in subsidized federal loans (which I've had to max out). Meaning I've had to rely on private loans to make up the difference this year. While I'm forever grateful for the aid I have received, there are still waaay too many cracks students can fall through.


Yup, gotta love being punished for working hard. :/ It also especially sucks when you have a high EFC and your parents are only willing to contribute, uh, $0.


Unfortunately, a policy that is rarely actually followed. It's amazing how private colleges will bend over backwards to find you have an EFC that requires them to provide little to no financial assistance.


in the average case. sure, for every outlier on the high side it's likely there's an equally-outlying data point on the low side, etc.


College costs a lot more than just tuition. You have room and board, fees and 'service charges' galore, textbooks, living expenses, etc.


I am aware. I've got one in college, one recently graduated, and one entering next year. And many of my kid's peers are currently in college. All of the room and board costs in every college we've looked at, or sent someone too, could be paid with a part time job taken at the same time as attending classes.

The idea that getting a STEM degree is outside the reach of kids today without going into lifelong debt is a myth.


Agreed. I went to a dirt cheap state university and worked part time throughout college. With help from my not very well off parents, I came out without any debt at all.

One of my gigs was Resident Assistant. While it may not have been the most lucrative job, it did cover room and board and included a stipend which easily covered textbooks and fees.


One of the things I remember distinctly in High School oh so many years ago was the overwhelming impression handed down by the administration that if you couldn't make it into a top tier college you may as well just go vocational and rebuild transmissions for the rest of your life.

It was such a pervasive piece of propaganda nonsense that entire groups of my peers, with their wallet terrified parent's blessing, made long reaching life long decisions not to pursue an upper education but try and land in the best possible vocational job.

I personally was so terrorized by it that I flaked out and never even took the SATs, convinced that my mediocre high school GPA had damned me to a life of cleaning drainage gutters, resurfacing outdoor wooden structures or at best tech support in a call center that, defeated, I didn't even try.

It wasn't until several years after graduating High School, fed up with dead-end bullshit jobs that I signed up to the local community college almost on a dare. I met with a very old, nearing retirement, placement councilor who completely turned my world upside down.

He carefully and patiently explained to me that the myth the education system propagated, the one that I, my classmates and our parents had been fed, was a complete a total line of nonsense. I sat there, in raw disbelief as I found out that I could finish my first two years of my undergrad there, then transfer every single one of my credits and start as a junior at the local state university. And I could do it at some ridiculous price that I, even making next to nothing, could easily afford.

I thought he was a liar, a schemer who was trying to put me onto something. Everything he said sounded like such a polar opposite of the system described to me during my teenage years that I went to another campus for the school and spoke to a completely different councilor who only confirmed everything, and also told me that the degree program I was interested in was so close to another program that if I took 2 more courses I could get both degrees almost for the price of one.

It's like spending a fortune on off-sale, high fashion brand shirts only to find out that if you wait a season you can pick up most of the same stuff at discount clothiers like Ross for $10 a shirt.

It took me a long time, as I was working and had significant living expenses to handle, but I finished my B.S. in 5 and a half years and my M.S. in 3 and a half -- debt free, paid for either on my own or by spending 20 minutes filling out grant applications at the student aid office.

It was madness. And it was the truth.

edit

a previous set of back of the envelope numbers

http://news.ycombinator.com/item?id=3753975


Room and board is double-counting. You'd ultimately have to pay for that anyways (college or not), so it's hard to attribute that entirely to the "cost of college" - it's not a net cost.


Counting tuition + room + board + opportunity cost is double counting. But you have to count either room and board or opportunity cost.


It still needs to be paid and financed. Many colleges are in higher-rent areas (though many also are not). Students will need loans, income, stipends, or grants for these expenses.

Books are another large cost.


A lot of this article has points I agree with but feels swarmy and misdirected.

The take-away seems to be "forget about getting educated, pick up a few O'reilly books, make a website, make sure your friends are doing the same".

Yeah a lot of stuff is tough for young folks. Yeah we probably have got some tough things coming. We've got a lot of collective debt, healthcare problems, student debt, global warming, etc etc etc.

I agree with avoiding debt - it should be every young persons first priority. Go to college, work on the side, take a year off, work full time, go back etc IF you want an education. Yeah it sucks but its better than coming out and realizing you essentially are enslaved for the next X years of life.

I also feel like these articles always skirt the issue that education has a very strong correlation to earnings - even still today. If you take on huge debt your actual earnings may be different but the macro-trend is that education increasingly correlates with high pay and high employment. At the same time, everyone needs to be realistic - look at the prospects for what you are getting educated in (ex. wanna-be social science majors and prospective law students should look before they leap).

Lastly I feel like everyone needs to get better at doing things themselves and being sustainable. Cant afford a ton of food - start learning to grow a small vegetable garden and cook for yourself - its cheaper and way better than the shit you are going to eat at Chiles. Cant afford a big screen TV - well congrats you dont need one, marketers are just going to tunnel shit to you through it. In other words, a lot of the things and systems that have been setup in US and integrated into normal living are really not needed and sometimes surprisingly undesirable - Im not suggesting we all live in huts but it wouldnt kill us to all be forced to learn skills that fall outside of going to work and swiping our credit cards for everything else.


I agree with avoiding debt - it should be every young persons first priority. Go to college, work on the side, take a year off, work full time, go back etc IF you want an education. Yeah it sucks but its better than coming out and realizing you essentially are enslaved for the next X years of life.

I'm not sure how this makes sense, financially. You'll generally earn much more with a degree, so 4 years of college followed by 4 years of work will leave you with much more money than alternating years of college & work.

It's much more important to focus on increasing your income than decreasing your debt. Negotiating a salary increase once pretty much means an extra $X,000/year for the rest of your life, whereas growing your own food will save you $X00 and you have to do the work again each year. Do it if it satisfies you, but recognize you'll have a much higher (financial) RoI by focusing on earning more.


Your point is correct in many scenarios.

If an engineering major who genuinely wants to be an engineer said should I take time off school to pay for the next year - Id likely point him/her to exactly what you just said. Very much agree

The big problem is that many people do the following... they say say Ill take on debt for undergrad and get paid pretty well so I can pay it off. Then they graduate, work for a couple years, pay a bit off and then say "you know what if I get that professional degree Ill be making even more". So they go back to school and add more debt and then they come out and are making more money. And then they do something similar like say "if I pull out a big mortgage and leverage myself in the housing market I can live well and increase my net worth faster". I know this is hyperbole but its a common path for many many people - essentially trying to use debt as a tool...

And then when they have a lot of debt and are making a lot of money... something "unforeseen" happens. The market falls apart, lose their job, they decide they hate their profession, they get divorced, housing market falls apart, get sick, etc - thats when all the accumulated debt can really run you over.

I agree that debt can be utilized to do good but it can turn on someone real quick if they keep the cycle going.


About two years I broke out the BLS data for US employment % vs level of education into a series of graphs.

Numbers for the non-HS degree went up to about 17% unemployment worst scenario. Grad degrees topped out at 4%.

The biggest differentiator was high school: that dropped outcomes by about 5%, iirc. Some college - not even completed college - dropped about 4% down in the outcome. People with BS+ degrees did quite well.

The big takeaway from that was, "education pays off". Anecdotally, people who are willing to move and be self-motivated could do well even with a Humanities degree.

Of course, I only know one CS guy who couldn't get work.


What I've been always interested in is why people leave school at given intervals, statistically speaking.

If, for argument's sake, 90% of high school dropouts are dropouts because they were too lazy to go to school, it stands to reason that they will also do poorly in the workplace, being too lazy to go to work. That doesn't mean the remaining 10% who had to drop out due to unfortunate life circumstances will also have trouble finding and maintaing quality work the same way.

Because of that, it is really not clear what role education plays. Does the education and degree count for something, or does increasing levels of education just increasingly filter out those who lack the qualities that are appealing in the workplace, placing a bias towards those who have more education with respect to such interpretations?

The answer to that makes a huge difference in determining if education pays or not.


That's a really good question. I don't have a data-driven answer. I think that its a mix, to be honest - you have to have grit to get through education in the US, and success comes via grit quite often. But you can have grit and not an education.


> About two years I broke out the BLS data for US employment % vs level of education into a series of graphs.

I've posted it elsewhere, but CR also had that graph in his blog: http://cr4re.com/charts/chart-images/EducationUnemploymentSe...

I find it quite an oversight that pando quoted the CR unemployment duration, but not the UE by education. The second graph makes the pando article look silly IMO.


Agreed. Unemployment rate for those with at least a Bachelor's degree NEVER topped 5%, even during the depths of the recession in 2008-9.

Pretty amazing stat on its own. And this includes people who graduated with the minimum passing GPA (2.0?) from the worst college with the most useless major.


Maybe it was the people with the minimum GPA and the most useless major that are the 5% of college grads that are unemployed.

Also, you might be a 3.5 GPA Literature major employed at Starbucks. You wouldn't be part of the 5% unemployed, but that huge college debt didn't buy you anything, either. Or you gave up looking for employment, so you don't get in the numbers, either.


Or the sort of people who are more likely to get university degrees are also the sort of people more likely to have connections, money, opportunities, behaviour, etc. that lead to employment.


"I also feel like these articles always skirt the issue that education has a very strong correlation to earnings - even still today."

Unfortunately, only causation will pay back the $200K ;-)


Other than the overt sexism, ("They are no smarter than you, and they are definitely way less organized and far less attentive to detail. So go show them what you are made of.") this article makes some fair points. That said, the author seems to be on a vendetta against post-secondary education. H asserts that an education "probably won't" pay for itself. This is a total falsehood. The nontrivial positive returns of collegiate degrees have been documented by numerous studies.

(http://www.nytimes.com/2010/09/21/education/21college.html?_...)

Moreover, this is not, as he asserts, only true of top 25 schools.

(http://www.businessweek.com/interactive_reports/bs_collegeRO...)

On this front, he appears to be talking out of his ass.

I do agree that the world has changed drastically over the past 3 decades, and that the precedents for education and occupations have irrevocably changed for the worst.

I thinks some qualification is necessary for his contention about "making things." This is not necessarily a recipe for success, especially if what you make is superfluous. If the economy tanks, you'll still be the first to go. To ensure career resiliency, one needs to pick a field that 1) won't be obviated by technology in the near future, and 2) is fundamental to society and thus will never go away. If anything, I think that this skews towards more abstract fields that are removed from physical labor. All physical labor can or will be able to be performed by technology at far greater efficiency and far lower cost. Machines won't be able to think anytime soon, which is why coding is such an attractive profession. Computers aren't going out of fashion, and will, for the foreseeable future, require people to write software for them.


Exactly right, glory to the makers I say.

I graduated college in 2003 with a business degree from CMU and 10K in debt. I played poker professionally for about a year, then went to work for an ad agency for 18 months, then worked for a start-up doing marketing for 18 months.

At the start-up, I learned that you can work really hard at marketing, spin your wheels with all sorts brochures and websites and conference speaking and presos, and not do a bit of good. That's a scary thought - that you might just be useless, or at least that your job is only a multiplier to the people actually building the thing.

The start-up marketing experience (and living with two software developers) made me start to worry and yearn for change. As the start-up I worked for began crumbling in 2007, and I began to get whiffs of pending financial meltdown in early 2008, I made the switch to making software, instead of making brochures.

And that was either a very smart or very lucky choice, because if I had tried to find a new marketing job, I'm not sure where I'd be today. But making software sure does pay OK, and having people use your software sure feels a lot better than having people NOT read your brochures.


"Your parents and grandparents want what is best for you. But they do not understand your world in the slightest. You should probably ignore them."

This is great advice. It was true when I started my career, some ten years ago - I think it's even more true now. The path I chose in life was, and probably still is, incomprehensible to my parents. They have the best intentions, I'm sure, but for the very long time they couldn't understand that my computer is for work, for example. And later they just didn't want to believe me that I am actually working (I was telecommuting) and kept repeating things like "get out of the room and go find some job".

Most parents wish all the best for their children, but they are frequently completely incapable of understanding the differences between their and our situations. And the worst thing is you cannot tell them this, because you'll be rude, and on the other hand they are not going to understand on their own, because they are "older and they know already".

So ignoring bad advice from parents while pretending to do what they wish is the only sensible choice, but a hard one. I have many friends who followed their parents dreams - mainly journalists, but also many others - who are really screwed now.

It's a real problem and someone should write a guide how to respectfully disagree with one's parents and how to convince them to at least stop complaining.


The ideal solution I think, is simple:

"Followers of the Way [of Chán], if you want to get the kind of understanding that accords with the Dharma, never be misled by others. Whether you're facing inward or facing outward, whatever you meet up with, just kill it! If you meet a buddha, kill the buddha. If you meet a patriarch, kill the patriarch. If you meet an arhat, kill the arhat. If you meet your parents, kill your parents. If you meet your kinfolk, kill your kinfolk. Then for the first time you will gain emancipation, will not be entangled with things, will pass freely anywhere you wish to go." - Linji Yixuan [0][1]

Before you object with something to the tune of "But I'm living with them!", I said it was simple, not easy.

[0]: https://en.wikipedia.org/wiki/Linji_Yixuan

[1]: I'm fairly sure he doesn't mean it literally, but then I've never read the quote in context.


If I understand Buddhism correctly, then since everything (including you) is really just ultimately nothing, going to college is unimportant, unless it helps you in realizing that everything is nothing. Debt is bad, because it will enslave you, and likely lead you to think that money, etc. is actually something. College is may also be unhelpful, because it may lead you to think that an Education is not nothing. If you truly understand that everything is nothing, then the only logical choice is to spend your life helping others escape their enslavement of thinking that they truly exist. College may not be useful for that.

On the other hand, if you think that we do actually exist and that college might actually be worth something, then I don't think Buddhist philosophy is going to be helpful.


I'm not exactly a Buddhist, but I'm 99% sure that's not it:

Yamaoka Tesshu, as a young student of Zen, visited one master after another. He called upon Dokuon of Shokoku.

Desiring to show his attainment, he said: "The mind, Buddha, and sentient beings, after all, do not exist. The true nature of phenomena is emptiness. There is no realization, no delusion, no sage, no mediocrity. There is no giving and nothing to be received."

Dokuon, who was smoking quietly, said nothing. Suddenly he whacked Yamaoka with his bamboo pipe. This made the youth quite angry.

"If nothing exists," inquired Dokuon, "where did this anger come from?" [0]

[0]: http://www.101zenstories.com/index.php?story=82

[1]: https://en.wikipedia.org/wiki/101_Zen_Stories


It 'isn't' helpful. It's religious nonsense.


This is true, though what is most confusing about it is that sometimes the older people are actually correct but no necessarily for the exact reasons that they will tell you.


Firstly, it's misleading to say that the cost of a UC Berkeley education is $210,000. That's the price is you're an out-of-state resident and you receive no financial aid. In-state residents without financial aid end up paying roughly $120,000 (and the cost is even less since most students live off-campus after their first year, but I digress). Going to the flagship state college in the state you live in is generally a highly affordable choice for anyone.

Secondly, a private school education typically runs around $200-240k, a number that is calculated to include room, board, books, and living expenses.

Third, you need to realize that most people get financial aid at private colleges (and state colleges). The irony is that top private colleges (i.e. Ivy Leagues) are actually more affordable options than state colleges for low-income students because of financial aid policies for which households earning even low six-figures can qualify. The only people who actually pay full price are people whose families have gross incomes of ~200k+. If they have a sibling in college at the same time, even then they might get financial aid!

Fourth, for middle-class families that straddle the line between "too rich for significant financial aid" and "too poor for parents/myself to easily pay," students should be aware of merit scholarships. Many liberal-arts colleges offer them. USC, despite its reputation as a wealthy private college, is well-known for "buying" good students by offering them generous scholarships (full-ride, half-ride) dependent on your performance on the PSAT.


>Secondly, a private school education typically runs around $200-240k, a number that is calculated to include room, board, books, and living expenses.

That's not entirely correct. The tuitions at many private schools these days lists at ~$200k for a 4-year undergrad and does not include expenses.

For example

https://undergraduate.admissions.gwu.edu/costs-attendance

Lists just tution at $45,735 while R&B is $10,530. So, assuming the rates don't change, tuition for an undergrad is $182,940 and other expenses run another $58,600 for a grand total of $241,540. So yeah, it's at around your upper bound, but just the difference between your lower and upper boundary was literally the entirety of my undergrad + grad degrees.


Your math doesn't add up. The total for 4 years is $225,060. Which falls in the range I provided.

EDIT (reply to below): Okay, adding the un-cited items adds up to just about $240k (keeping in mind that some of those fees are one-time only). Which is right at my range.

Obviously, $200k-240k is not some sort of hard-and-fast rule. It's an estimate I threw out there, and it doesn't really detract from my point to nitpick at it.


You didn't include the other expenses from their site (linked previously).


Hi, I'm an out of state Cal student who gets no (free) financial aid ( I get some lower interest loans). The above number is accurate.

My family has a gross income of less than what you describe, and I have no siblings.

Merit scholarships are non unique to your argument. By definition few people will get them.

College is still expensive, as demand for a degree exceeds the supply of high quality schools, prices have only gone up.


That gross income figure applies only in the context of top private schools. UCs don't have enough funding for generous financial aid; I believe out of state students receive even less aid.

This is what I was saying when I said that many top private colleges are more affordable than state colleges.

Merit scholarships are in the context of alternatives to Ivy League educations. If you're not a star student, and are from a middle-class family, you should be going to your in-state state school anyway.


maybe I just fell for the usnews rankings

as a first generation college student, it's hard to say 'no'.

perhaps my circumstances are too unique.


Interesting. So the impending diarrhea I had during the last section of my PSAT cost me a potential free ride at USC (I scored a notch below what it took to be a top merit scholar).

Oh well ended up at a state school anyway.


Networking is seriously important. It will be valuable now and for the far off future. It's the worst thing holding back my buddies at our small town back home. They don't know anyone who is successful and wouldn't have anything to offer a successful person anyways. So, they are stuck in their small ecosystem of the local pub and trading tips on low paying low skilled jobs.

Combine skills, networking and the leverage of reach (through the internet) and you might find yourself in a position where you are wondering what all the fuss is about. There is a ton of work which needs to be done out there, but too few people who have figured out how to change with the times.

Edit: In other words, things may change so much to be unrecognizable in ten years. So, networking is the only thing that you can really count on to always be important.


I'm still trying to figure out the networking thing. I think this article kind of got it though - worry about friends, not your network. Today I had a really great chat with the director of the co-op program at my college. She's a pretty good professional contact, and has experience running her own business, as well. But I think she'll remember me as a friend after today.

Same with a specialist doctor I see. When I met him, I was 17 and he was a fresh grad on his first week on the job. Now we have a 6 year relationship and we're kind of on equal terms.

I'm trying to think of more people in my life this way - people I previously thought of as unapproachable elders are becoming friends. Hope I'm on the right track.


The article is very hyperbolic, and I don't think that the author meant to say that networking is unimportant. I think he was trying to say that your friends are more important for determining your success than your network.

And I agree with that. Your friends, much more than your network, define your outlook on life, your general attitude towards various successes and failures, the things you place the most importance in. If all of your friends are get-out-there-and-do-something people, it will rub off on you, even if not to the same extreme.

Furthermore, it's much easier to do something extreme or different if you have a friend group that wants to do it with you. Starting a business on your own is nearly impossible. Starting a business with a close friend is no cake walk, but now there is motivation. And regardless of what sort of way you try to be successful, friends can pool their networking resources.


This article, like many articles on Hacker News equates the value of education into dollars. Education, intrinsically, cannot be solely measured in dollars. The problem isn't people getting useless degrees, its degrees that don't correspond to high paying jobs in the current economy costing too much. THERE IS NO SHAME IN GETTING A DEGREE IN LITERATURE. Education should be free.

I just get a knee jerk reaction to any article like this because it wholly overlooks how education is supposed to make you a better human being, not a money making machine.

Articles like this take the easy way and basically say ASSIMILATE or die. Yea, thats going to solve the problem...


> THERE IS NO SHAME IN GETTING A DEGREE IN LITERATURE.

I agree with you, but the supply side of the education system agrees with you all the way to the bank.

The real point is: the traditional education model is usually a bad financial deal. If you want to learn, do so -- but don't be swindled into taking out loans for it.


I agree with your real point, however, I would not say the current model is the traditional or even universal model. Countries other than the US have much better models. I just get tired of the discussion not focusing on the problem and instead accepting it. Universities are often the best place to get an awesome education in the humanities. Withholding that opportunity because education has been transformed into some financial investment, instead of a holistic investments that not everyone can take is just plain sad.

I think its also important to point out that the skills and concepts you learn in areas such as the social sciences and humanities are still financially lucrative. As long as our economy is dominated by big corporations there will be managers and CEOs whos only job is to delegate tasks to and organize the humans beneath them. Understanding human power structures and having the ability to persuade and communicate effectively with people will always be the real big money ticket.


Absent massive political change, the only way the price will come down for humanities degrees is if people stop signing up for them. Supply and demand.

It is the logical next step to tell the colleges: "No, I will not pay the same for your Art History degree as for an Engineering degree - Engineering will pay for itself at that price by getting me a good job while Art History won't."


There is no shame in pursuing a career in literature, but whether it is wise or not to spend $200k to get there instead of 75 cents in late fees at the public library..that's another thing altogether.


No shame in going to the library, either. (Less snob cred, though.)


There's plenty of money to be made, it's a question of hard work. Luck? You were already lucky to be born in the western world.

I think education is the answer, but not the type people seem focused on. I'm talking about life skills children can learn from good teachers and, much more importantly, good parents. Work hard, it's important. Learn life lessons, like cooking...all the basics that are more basic than the 3 Rs.


It's not just a question of hard work, it's a question of hard work in the right field, and at the right place.


True, but fields around math, science and engineering have (as far as I'm aware) been rather reliable.


Since the beginning of the financial crisis the media has constantly been repeating that the housing market was key to recovery and that the government had to do things to help prop up house prices.

As someone who would like to own a house in the future, I find it quite unfair that the government is helping to maintain bubble prices. It is yet another way for current homeowners to to extract as much money as possible from the next generation. However, that is even not the main concern for my generation.

Here is an interesting fact: My house whenever I can afford it, will _not_ be the most expensive thing I will have to buy in my life. My retirement savings are.

With lower expected long term investment returns and interest rates, the expected cost of securing a retirement annuity goes up steeply and there is much less money left for everything else.

All the news article I read on the subject of house prices assume that low interest rates prop up prices since they allow for cheaper financing and lower mortgage payments. However, as a 30yo who would like to one day be a homeowner AND also one day retire, this is not the effect low interest rates have on my budget.

The low interest rates are currently more than offset by low expected returns on investments which make it much more difficult to secure retirement.

I decided to try to quantify the effects of low returns on my budget:

I calculated that if I managed to get 4% _real_ returns on my savings, which is what most online savings calculators assume by default and about what the previous generation got, I would need to save 23% of my income to maintain standards of living after retirement (This includes home equity and what the government saves on my behalf, those "entitlements").

If real returns were 3%, I would need to save 27% of my income, if they were 2%, I would need to save 35% and 1% would require saving 42%. This assumes a saving period from the age of 30 to 60 and retirement from 60 to 90. This is a somewhat optimistic scenario but with two equal periods of 30 years, it makes one data-point easy to calculate: With 0% real returns, to maintain standards of living. we would spend half the money before retirement and half after so we'd have to save 50% of our income.

Long term real returns going down from 4% to 2%, increases the amount we need to save by 12% of our income. This means we have this much less money to put on housing and other things. For example, if our after tax household income was $50 000. We would need to save an additional $500 a month ($6000 a year) for retirement.

Is it even possible nowadays to get a safe 2% real (~4% nominal) return? The investment opportunities I see are closer to 0.5% or 1%.

Meanwhile the cost of financing a $200 000 mortgage go down by about $4000 a year or $333 per month when mortgage rates go down by 2%.

If I bought the same house when returns and mortgage rates both went lower by 2%, I would need to find an additional $166 per month ($2000/year) to keep my retirement savings on track. If I decided to recoup this $166 per month by buying a less expensive house, at 4% interest, it would have to be $50 000 cheaper.

I realize that expected returns and mortgage rates don’t necessarily move in sync and it may be that mortgage rates have bigger downward moves than expected returns but this still all makes me uncertain about my ability to spend while saving for retirement.

Here is the graph I made showing how much we have to save relative to long term real returns on investments to maintain standards of living at retirement( https://picasaweb.google.com/lh/photo/d4vj9i43MIPd8H7MqUq_Bt... ).

Here is the math I did for reference (let me know if I made any mistakes):

I : Annual Income S: savings ratio

The amount saved each year of my working life is I x S The amount spent each year of my working life is I x (1-S)

For example, if our household after tax income I=50k and we save 10k for retirement, S=0.20, we get to spend 40k that year.

We would like to maintain our standards of living after retirement which means we would like the amount we spend I x (1-S) to be equal the amount of our retirement pension payments. That is, if we save 20%, (spend 40k, save 10k) we would like to get a 40k pension at retirement.

The value of our savings at retirement should be enough to give us this annuity. To calculate S, the proportion of our income we should save to achieve this goal, I take:

Future Value of my savings FV(I x S) = Present Value (at retirement) of the pension annuity PV(I x (1-S))

Taking the formulas from here: http://en.wikipedia.org/wiki/Time_value_of_money

I arrive at

S = 1/( x + 1 ) where x=1/((1-1/(1+i)^m)/((1+i)^n - 1))

(See https://picasaweb.google.com/lh/photo/rdEbvkw5wx78_dnqZuL4Qt... )

i is the real (above inflation) returns on my investments which, assuming I don’t take too much risk, should follow the trend of long term real interest rates. n is number of years we are savings m is number of years we plan to be retired.

Lets say, that I start saving for retirement at 30, retire at 60 and live to 90. That’s 30 years of savings and 30 years of being retired, a somewhat optimistic scenario (n = m = 30).

Here is the graph showing how much we should save relative to long term real returns on investments ( https://picasaweb.google.com/lh/photo/d4vj9i43MIPd8H7MqUq_Bt... ).


The punchline, of course, is that retirement won't be a realistic option for our generation at 60. 25-75 leaves 50 working years, and that's what it'll probably take so we can pay for the boomer generation to retire and also save for our own. And I don't think it's a bad thing. It's patently ridiculous for a person to spend half their life not working, why should it involve less than an unreasonable savings rate to do?


> It's patently ridiculous for a person to spend half their life not working

Why is this ridiculous?

  The idea that the poor should have leisure has always been shocking to the
  rich. In England, in the early nineteenth century, fifteen hours was the
  ordinary day's work for a man; children sometimes did as much, and very
  commonly did twelve hours a day. When meddlesome busybodies suggested that
  perhaps these hours were rather long, they were told that work kept adults from
  drink and children from mischief. 
-- http://www.zpub.com/notes/idle.html

Genuinely curious - I'm no economist, and don't understand whether Russell's argument is full of holes, outdated, both, or if rather his proposed reallocation and reduction (through technology) of work is something we should be aspire to.


You are onto something here.

Let me explain you what the problem is. The concept of work is relatively modern compared to the entire human history. Organized work is something that was needed to scale organized living, and growth of human population. Without agriculture, architecture, transport, communication and health care human kind wouldn't have made it till now. Hunter gatherers had it a little easy, each man for his own or at the max his offspring. But this was not scalable, then extremely unpredictable. To scale we had to get down to staying at one place for long periods of time[read: civilization], and then produce food in bulk quantities[Read: Agriculture/farming]. But no man would work for others, so then came in the concept of doing other kind of work. Like building homes, pottery, carts etc and then people would trade one for the other.

This was still OK, until the kingdoms and kings came along. And then automatically came the concept of slavery, then soldiers who are supposed to die for king. Misery was the norm in this era. A lot of people were stuck building large monuments and cities for kings. Its during this period the notion 'born into richness' and 'born into poverty' evolved and to a very large extent continues till today.

If you are born to some one poor, the world assumes you now have absolutely no 'right' to be rich. And if you do get rich by your work, the rick kids/people think of it as unfair to them. And now matter how lazy, unproductive some rich guy is he considers it unfair to him that he must become poor out of his own actions.


wut?

Tribes have specialized warriors, and also would raid other tribes for loot and spoils of war which included slaves. This didn't need the creation of Kingdoms to achieve this. Man will come up with this at the proto-civ stage because other humans beings are the best tools.

You also are drawing some sort of line of intent, that hunter gatherers knew to move towards agriculture, AFAIK the data on how the transition occurred is spotty and is still being debated.

EVEN then, from tribal structures and from studying nomadis/hunter gatherers its clear that "men did work for others", at the very least for the good of the tribe, and often because the village headsman would be able to mobilize people to work on mutually beneficial tasks like say, a granary, or even a juju enhancing spirit walk.

Bulk food also is something of a recent phenomenon, if you look at the chart of human population growth its balooned since around 1950, and before that the total human population of the world was nearly a billion people.

And thats with the invention of the plough, harness, irrigation and so on.

While agriculture was massively advantageous compared to whatever we had before, it wasn't without its own pitfalls - such as famines, droughts, pests, bad crops and so on.

Finally your last para is at odds with the entire ethos of the USA for a large portion of its existence, that you could get somewhere with merit. Matter of fact its only in the recent past that this has stopped being true.


It's patently ridiculous to spend even half your life working, yet alone from 18 to 65 (or whatever the retirement age is now). Why have we automated so many things yet work the same hours? There is no virtue in work what-so-ever. It is a means to an end and nothing more. If I could have robots grow my food, manufacture my appliances and create entertainment for me then I would spend all my life enjoying it and not give that a second thought.

This 'cult of work' needs to go. We're not here to use our hands to modify the structure of matter and energy, we're here to figure out why we're here, enjoy and love each other and have a good time.


> we're here to figure out why we're here

Turns out we're here to work.

Seriously, I don't know about you, but I have a list a million pages long of problems I'd like to see solved by the human race, and I'm pretty sure everyone can chip in on at least one of them. Navel-gazing doesn't get anyone very far.


My list of problems is about as long and I would love to see them solved. I've researched and thought a great deal about why these problems occur and the root cause of them is invariably humanity itself.

We look at how much food the human race produces and see that there is absolutely no reason why anyone should starve, yet many people do. We have plenty of water yet people die of dehydration. Why is this? Our technology is clearly advanced enough that these problems should not exist. Should we keep working to improve our technology?

My argument is that we should drop what we're doing, take a step back and think about how we got into this mess - that we stop working and consider where we're going and how we are getting there. Why, in a huge corporation, are there some employees earning minimum wage and barely making enough to survive while someone working the exact same hours has two houses and three cars? Why are there people living on the streets in what are apparently first world countries? Why is the inequality gap growing instead of decreasing? Shouldn't all this work be improving the situation?

My contention is that we cannot work ourselves out of this problem. We need to sit down, think and talk. We need to empathise with each other and share. I believe that the solution to the problems that plague people will find their remedy on the social level. That is, information, and access to that information, is the key to resolving them, not working hard to keep the streets clean or developing the newest iPhone or building new houses. Don't get me wrong, those things are important too, but we have the capability to automate a lot of them yet we have not done so. Why are robots not roaming the streets and keeping them spotless? Why are people working for pennies in factories to make our smartphones?

I believe that answering these questions and doing something about them will go a lot further than turning up to a 9-5 every day. It's all very good having an engine that can produce a thousand horsepower but if the steering wheel is not used to aim the car in the right direction, it will crash. The engine is already good enough - the direction seems to be terribly wrong.


Sitting around and navel-gazing still isn't going to solve any of those problems. You won't know what the solutions are for sure until you try them, and that takes work.

> Why are people working for pennies in factories to make our smartphones?

Because it's a better alternative to subsistence farming, usually. I mean, whatever caused them to voluntarily choose to work for pennies in a factory must have been even worse. Now you want to put them out of a job?

Even if you want to redistribute the wealth, it still needs to be generated in the first place or the whole thing collapses. And you're not going to stumble upon a better social and economic system by not producing as much wealth anymore.


If you like what you're doing, it's not work, it's a hobby.


I couldn't agree more. I'm in good company too: "road to happiness and prosperity lies in an organized diminution of work" (Bertrand Russell - In Prise of Idleness, http://www.zpub.com/notes/idle.html). The trouble is that the organized diminution of (human) work requires so much work itself :).


That's all fine and well for people like us that don't necessarily do hard labor for 30-40 years. But those that have to do physical labor aren't actually living longer. The rise in life expectancy is due to a fall in infant death rates and the wealthy living longer because they have access to really good health care.


That is my conclusion too. I hope I can still code at 70.


Work keeps your brain sharp. I've met 80+ year old judges that can keep young lawyers on their toes peppering them with questions to test their arguments.


...as long as you don't run into any health issues that affect your cognitive capacity, and you are able to maintain a position that matches your -likely declining- abilities.

I would like to think that I can look forward to retirement - travel, family, personal projects, etc. - without having to also continually worry over my status at work. But I'm not terribly optimistic.


I think the best plan is try to evolve your work over time into an area that you're happy. My goal by 70 is to be able to get up and go to a job where I'm excited and happy to be even at 70. My Dad is almost 70 and that's how he feels, his ambition is to keep doing the work he loves until he dies.


I cannot find it right now, but there are recent studies showing that, as long as we are healthy, we do NOT lose cognitive abilities with ageing.


To still code at 70, you may need to code a little less now. By that, I mean make sure to get up from your computer from time to time and get plenty of physical exercise.


Why do you want to own a house? Is it as an impediment to relocating? For the risk of a highly leveraged investment? Or so that you can spend time and money fixing leaking pipes on Tuesday evening and patching the gypsum board on Saturday?

Ever notice how most small businesses deal with real-estate? Hint: they don't negotiate a thirty year lock-in.


This is probably a contentious topic, but housing security is a useful thing. Owning a residence, and perhaps more saliently owning it without debt, provides a certain level of housing security that is quite precious when you are older. The other benefit of owning property is that you can use it to generate income when you're not using it. While being a landlord is a pain, if you're willing to give up some of the return you can negotiate that out to a third party and that provides a bit of income security.

Sometimes having one less thing to worry about can be the difference between taking a risk that changes your life in a positive way and not taking it.

The bottom line for me is that I've never heard anyone say "I wish I had more things to worry about."


I own a house. I can't wait to sell it. For me, the house is one more thing to worry about. On the other hand, my apartment lease gives me no worries.

If I was rich, I might like to own a house, but only for the freedom of doing whatever I want with it.


I cannot understand why leasing (or renting) can be considered superior to owning your own place. Sure it does prevent you from just moving on a whim - something i don't think people should be doing anyhow - but the money paid as rent is like throwing it into the sea!


> the money paid as rent is like throwing it into the sea!

The same can be said of mortgage interest. The fair comparison to the renter with no savings is the homeowner owing the full value of the house to the bank, and the fair comparison to a mortgage-less homeowner is a renter with investments and savings equal to the price of the house they're in.

Better arguments for your position might be

1. Mortgage rates are lower than rental prices in many places,

2. Paying off a mortgage is "enforced savings". People leasing property mostly spend the difference instead of investing it.

3. Some kind of projection of house and rental prices rising more quickly than the market.


> 1. Mortgage rates are lower than rental prices in many places

When this is true, this actually is a very convincing argument. Not only that, but you can effectively arbitrage yourself into a lot of wealth this way. You buy a house and move into it for awhile, but then you buy a new house, move into the new house, and rent out the old house. (You get better mortgage terms that way.) Rinse and repeat whenever you can afford to do so and you eventually end up with a large portfolio of profitable properties.

Of course, it's arbitrage--if enough people do it, it stops working. You can keep it going with more money, if you can make larger down payments, since at that point you're turning a one time lump sum into an ongoing cash flow. But eventually you have to have more money to make money, so not even this might be workable.


> Mortgage rates are lower than rental prices in many places,

its unlikely that mortgage payments are lower than rent - otherwise, it'd be better to pay the mortgage than renting! You would buy a place, and rent out a room or two, and have the rent income plus your own money to pay the mortgage.

I m not against renting - but i just don't want people to think that a mortgage is some baggage that they are better off not having, and instead just pay rent. I want people to make the smartest choices, so that the only way rent rises is because costs to build houses rise, not because the landlord got greedy. To me, rent is like a tax on being alive.


There are various times where dislocations in the market make this more true than others. For example over the last 3 years due to the high foreclosure rate in Las Vegas Nevada you could buy a property for $125,000, leverage it at a 4% rate, an immediately rent it out for $1500 a month making it cash flow positive from the day you bought it. However, that situation was created by the mortgage crisis where these same houses had $300,000 mortgages with $2500 mortgage payments. Having watched prices in the bay area fluctuate I've seen the markets on both sides (renting was cheaper than buying and buying was cheaper than renting) at various times.


>its unlikely that mortgage payments are lower than rent - otherwise, it'd be better to pay the mortgage than renting!

In some places, they are, and it is. However, I would be incredibly surprised if there is anywhere where the mortgage payments on a 100% LTV mortgage are lower than rent; and this is one of the reasons why many settled people don't own their own home. They can't (yet) afford a sufficient deposit to make the repayments affordable.


In my city (a) renting is with very, very few exceptions uniformly explicitly forbidden by home owner association agreements (bans that are now backed by recent state supreme court victories, the only places you can rent are in the small regions of the city that predate the explosive subdivision-based growth that started in the 70's--presumably driven by white flight, but I don't know for certain), (b) renting is made very unpalatable by a number of policies made by the city itself and (c) homestead property tax exemptions for homeowners that make owning very, very expensive if they don't live in their house themselves.


>its unlikely that mortgage payments are lower than rent - otherwise, it'd be better to pay the mortgage than renting! You would buy a place, and rent out a room or two, and have the rent income plus your own money to pay the mortgage.

I have friends doing just that. All it takes is the initial deposit capital (which many people don't have, or take years to save up) and credit rating.


Rent and interest are both taxes on not being rich. I don't really see any reason one is intrinsically better than the other, but rent entails a lot less risk.


The idea that people shouldn't be "moving on a whim" probably isn't much consolation to people in economically depressed areas who can't move to where the jobs are because they're stuck to their house.

In any case, if you buy a house at age 30, and you get the standard 30 year mortgage, you'll effectively be paying rent to the bank until you're 60 anyway. You would be very fortunate to own a home outright for most of your life. Some people never do.


This is not true in every case, it's magical thinking.

You can make a rational calculation of what works out better using local rental rates vs property prices (sometimes one of them is grossly out of proportion to the other), applying a liquidity and mobility premium and your expectations of what the rental and property markets will do long term.


You rent your clothes, your food, your transport, everything. You pay some money and when it's done, you have nothing to show for it. What's so special about rent that you consider that wasted money, but not the money spent on clothes, food, transport, and everything else that has a short effect or wears out?


Rarely true if you account for a decent return on investment on the difference between a mortgage payment and rent for an identical place.


I never find this answer convincing. Firstly, most renters are unlikely to invest the difference - we are a nation of spenders. Secondly, that rent will creep up, whereas my mortgage payment stays the same - eventually that difference will disappear, or even open up in the other direction. Thirdly, I'll have paid off my mortgage in another 12 years or so, at which point I can invest my entire payment every month whilst rent still needs to be paid. Over the time period I intend to stay in my house, I am confident I'll make out like a bandit compared to if I'd rented it.


Didn't we just learn that "investing" in real estate isn't always the best idea, either? Buying a house to live in on credit is part spending, part leveraged speculation.


Meh, I don't consider my house an investment (in that I don't expect it to generate a return), it's somewhere to live. Most people understand that a car is a terrible 'investment', but if you intend to drive the same one for a decade you're better off buying it than leasing it. Same thing, but different scale.


When I was backpacking through San Francisco I met a white-haired septugenarian in the hostel. He had a house in Connecticut that he rented out - and he'd spent the last 15 years of his life constantly travelling about the place on the proceeds. It wasn't opulence, but it was travel and he loved it.


I'm not against investing in real estate, but you have to be honest with yourself that that's what you're doing, and that it's not a risk-free investment, especially when you leverage it with debt.

The problem is that everyone casts it as an argument between renting and owning property fee simple. Actually, it's either an argument between renting housing and renting money, or it's an argument between having six to seven figures invested in residential real estate and having six to seven figures invested in anything else. Either way, it's not clear cut.


In many places in the US there are two issues:

-The max quality or size of rental properties is not that high, you may not be able to rent a nice freestanding house in some places because culturally speaking, people with more than $X usually buy.

-Landlord-tenant law may be very favourable to the landlord and not to the tenant. That motivates people to buy rather than rent and deal with shitty landlords.

In addition to that, people like being able to invest their time and money into improving their home to just the way they like it.

Having a long term place that is "home" is very important and comforting to many people. There is a reason that residences have all kinds of special legal protections and treatment that commercial real estate doesn't neccesarily have.


I think this is a very important point. In most places outside of the big cities (basically NY, SF, and Chicago), there is very little housing stock available for rent, aside from in low-income neighborhoods and near schools. Furthermore, what you do find is mostly people who are simple looking to sell but can't and are renting in the meantime--you had better bet that they will sell it out from under you at the first opportunity they get, and moving is not cheap.

Even if you are able to find a place to rent that is stable, now you have to deal with a landlord and (possibly) other tenants. You can't do what you want to the place, when you want to. I think this weighs on people.

I completely agree that too many people that shouldn't end up buying a place, and that buying a place is a lot of work. But it's about the only choice in most of the country.


A lot of other things can be an obstacle to relocating: wanting to have family close by, having put roots into a community you love. There are definitely tradeoffs to owning a home, but I've decided for me there's more upside than down.

I'm around halfway through the mortgage on my place and relish the thought that once it's paid, even if I eventually find myself between a rock and a financial hard place I'll have four walls and a roof and no obligation to anyone for them. I'll have a good 30 years (give or take) of earning potential left in me by that point which means I'll have plenty of disposable income on top of what I've been squirreling away all along for a retirement. Yeah, I've had to fix leaky pipes (and cursed the time spent doing it) but overall I find comfort in the thought that if current trends continue, I'll have a place to park FOREVER.


> Or so that you can spend time and money fixing leaking pipes on Tuesday evening and patching the gypsum board on Saturday?

Oh god, yes! Do I ever! I would love to have a pipe spring a leak on Tuesday and fix it on Tuesday, instead of spending Tuesday, Wednesday, and Thursday calling the maintenance guy every two hours to nag him to come fix it.

We spent 48 hours without a working toilet once because maintenance was too busy to come over and unclog it. When I owned my home, I would just go out to the garage, get the auger, and clear out the clog.

The Realtor.com app has replaced pornography for me. I can't wait for our lease to be up. Just six more months to go...


I would rather fix leaky pipes than fight a landlord trying to get him to do it. I much prefer living in a house that I own.


I completely understand where you're coming from. I'm in Canada, and all the above is reasons why I rent right now.

"Why do you want to own a house?"

It's actually not a bad proposition now in the US. Housing starts are heading up, prices are rock-bottom but starting to budge upwards again, and the common wisdom on real estate is now strongly negative.

What I'm saying is that someone would likely be able to get their money back (+ inflation) if they get a house these days and sell it later. Of course, they've got to deal with the headaches you mention, which personally still turns me off.


There are all sorts of US government incentives to own. For one the mortgage interest is federally tax deductible which amounts to effectively a ~30% discount on the beginning years of the mortgage (depending on your income, etc).

It's also a predictability thing. In lots of metro areas rents can fluctuate pretty substantially, even if you're getting a good return on the money you're investing instead of buying moving is still a pain in the ass.


the media has constantly been repeating that the housing market was key to recovery and that the government had to do things to help prop up house prices.

It is interesting how many people are misinformed about this. The government hasn't and can't do anything to "prop up" house prices. It only sets the prime interest rate, which affects the ability of people to borrow money (specifically does it affect ARM mortgages), essentially the ability of people to "afford" housing, or the rate at which they'll be able to convert the debt behind their mortgage into equity.

Here is an interesting fact: My house whenever I can afford it, will _not_ be the most expensive thing I will have to buy in my life. My retirement savings are.

Again, not true. As you get older, as you're converting larger and larger portions of that debt behind your mortgage into equity, it should be close to being paid off by the time you reach retirement (the theoretical pie in the sky for our generation). So the amount of "retirement savings" one needs depends on what kind of housing situation one is in at the beginning of retirement. The sub-prime lending crisis occurred because people who HAD worked their whole lives, had accumulated their retirement savings in their houses or whatnot were literally swindled out of that savings by real estate people selling them "refinance" lemon loans and banking on the commissions.


> The government hasn't and can't do anything to "prop up" house prices. It only sets the prime interest rate, which affects the ability of people to borrow money (specifically does it affect ARM mortgages), essentially the ability of people to "afford" housing, or the rate at which they'll be able to convert the debt behind their mortgage into equity.

What about implicit and explicitly guaranteeing higher risk mortgage through Fannie Mae and bank bail outs? By taking on some of the risks the government lowers costs which increases the number of people in the housing market increase price.

>Following their mission to meet federal Housing and Urban Development (HUD) housing goals, GSEs such as Fannie Mae, Freddie Mac and the Federal Home Loan Banks (FHLBanks) have striven to improve home ownership of low and middle income families, underserved areas, and generally through special affordable methods such as "the ability to obtain a 30-year fixed-rate mortgage with a low down payment http://en.wikipedia.org/wiki/Fannie_Mae


Not quite. The prime rate isn't set by the government but by the federal reserve which should be mostly independent from the government.

Propping up house prices was done through the bailout by helping banks with the mortgage backed securities, sometimes helping underwater mortgage holders and through fannie mae and freddy mac.

Also the equity on my house will be just a small part of my retirement savings. This part should cover housing during my retirement. I also expect to need food and such.


> The government hasn't and can't do anything to "prop up" house prices.

What about the mortgage interest rate deduction?


Which is not common outside of the US.


> It only sets the prime interest rate, which affects the ability of people to borrow money (specifically does it affect ARM mortgages)

It's even less than that. The Fed targets the Fed Funds Rate, which is the rate at which banks lend to each other overnight. ARMs are not based on overnight rates, but rather on rates of debt of duration of 1,5,7,10 yrs etc. (Granted the overnight rate may pull down the short end of the yield curve, but not necessarily.)


The government ... can't do anything to "prop up" house prices

http://en.wikipedia.org/wiki/Negative_gearing_%28Australia%2...

Negative gearing is a preferential tax treatment that has caused the Australian housing market to become one of the most expensive in the world.


I wish more people understood these issues with this clarity. Fed policy has had negative consequences for savers at the benefit of borrowers.

I wrote a simple app which compares 12 month CPI to current Treasury yields. What is scary is in the past year CPI (which many claim underestimates true inflation) at times has been higher than the returns on 30 year Treasuries. This is a rare event, and is the result of the FED buying Treasuries on the long end of the curve to artificially depress interest rates. Typically investors wouldn't tolerate such a low rate of return on their investments. Historical bond yields vs CPI can be viewed here: http://yield.io/


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You can achieve 4% investing in large cap dividend payers. The dividends alone can be 4%, and any price appreciation on top of that is gravy. Though of course, you have to diversify and thus put an immense amount of research in many companies.


Yeah if you are smart with your money you can still get close to 4% nominal which is about 2% real (inflation adjusted) and is what I used in my calculations. The previous generation used to be able to get 6% to 7% nominal.


My point is the Fed is significantly screwing around with the debt market which hurting anyone that invests in low risk loans (Treasuries, savings accounts, CDs, etc.). This doesn't have to be the case. Sure you might be "smart" and figure out how to get a 6% return, but reward for that 6% vs the risk is also lowered by fed activity.


Investing in large cap dividend stocks is not a "risk free" investment. Not that treasuries are either, but there is a built in assumption that the treasury will not default. If I adjusted the returns for taxes the situation would look much worse.


It's a good simple model, but I think it's TOO simple. If you own a house and pay off the mortgage, two massive changes occur: 1) You free up that monthly payment for investment, and 2) the amount of money required to maintain your standard of living nosedives. The same standard of living you get for $40k probably costs <$25k once the mortgage is paid.


When I first saw this post, it was greyed-out from down voting. Now, it's at the top of the thread. This place is strange.


I may not be applying to the easiest jobs to get but I'm finding it incredibly difficult to even get an interview. After graduating from a top 25 undergraduate business program in 2 years and then going on to earn my MA in econ in another 2 all the while playing Division 1 football I thought it might be easier than normal to get a job. Ideally I'd like to be at an audacious startup and even rode my bike 215 miles to a midwest tech event (http://goo.gl/JX1ud). No such luck, unemployed as ever.

On a positive note, it's my opinion that energy prices are a better indicator of economic growth than interest rates and energy prices should continue to fall for the foreseeable future. The only problem is how quickly the economy will artificially inflate after years of QE.


I might have misunderstood either you or the article, but the main point of the article seemed to be that people don't really have much use for business/econ grads - they need people who will write the software. So you're clearly pretty smart, but are you hoping to be a programmer/teaching yourself to program, or what? How is your story a response to this article?


I think point 1 is largely that business/econ isn't needed, however a large part of econ is dealing with data sets. Regardless, college isn't a tremendous metric of ability; how many times has the fallacy been sold that it doesn't matter what you graduated in, just that you graduate? Programming and comp sci are largely about logic, and teaching oneself how to program is certainly a fine suggestion but it's not a very efficient solution for somebody who has previously demonstrated aptitude and is still going to face a learning curve once employed.

Stepping away from the startup scene and simply looking at businesses in general, it's ridiculous to think that an employer would hire you and put you to work with no training. Also a hire should be a long term strategy, turnover is very expensive and destructive to company culture.

"Building something" is a relative idea. Aptitude is not. My story isn't specifically important, just that hiring is maybe overly focused on buzzwords and the short term. But I don't know.


"Tt's ridiculous to think that an employer would hire you and put you to work with no training."

What changed from the past is that now businesses are focused more on the short term. They want someone who is plug and play right out of school. When the managers themselves might hop job in the next year, there is no incentive to do anything but what helps them right away.

The way to show you can do the job is to show you have done something similar. For software it is some side project or open source contrib. I'm not sure for your case, but you need something you can talk about.


> I may not be applying to the easiest jobs to get but I'm finding it incredibly difficult to even get an interview. After graduating from a top 25 undergraduate business program in 2 years and then going on to earn my MA in econ in another 2 all the while playing Division 1 football I thought it might be easier than normal to get a job.

The single best source of job listings you're going to get at this stage are the ones from your school's career services. That is a list companies that are trying to hire a recent grad from your school, which gets you through a filter. When dealing with general-purpose résumé drops online, you end up in a pile of thousands of résumés, and unless you have certain words on your résumé ("Harvard", "Stanford", "Google", etc.), it's a pretty lost cause.

Another big thing is to network. Go to conferences and meetups and such, find people who have a background similar to you doing something you want to be doing and see if they have any suggestions to fill in the middle.

Finally, find some way to demonstrate that you can "do stuff". Take publicly available data and produce something out of it. Build a model with some data in a kaggle competition. Also...

> On a positive note, it's my opinion that energy prices are a better indicator of economic growth than interest rates and energy prices should continue to fall for the foreseeable future. The only problem is how quickly the economy will artificially inflate after years of QE.

Here's a possible place to start. You're an economist - give me numbers! Turn it into a blog post or three. Demonstrate that you can find data sets, build a model/visualization/whatever, and communicate your thesis clearly. Don't know how to do something along the way? Learn it. Do it. Advertise the fact that you can do it.

> Ideally I'd like to be at an audacious startup.

> Stepping away from the startup scene and simply looking at businesses in general, it's ridiculous to think that an employer would hire you and put you to work with no training. Also a hire should be a long term strategy, turnover is very expensive and destructive to company culture.

Part of the problem is startups don't often take a long term view out of necessity. When you're 20% of the workforce of a company, you need to be producing from day 1, or at the very least demonstrate that you're a quick enough self-taught learner that you don't need dedicated resources from the company to get you producing in a timely manner - otherwise, the company isn't going to last long enough to realize your potential.


> ... I'm finding it incredibly difficult to even get an interview.

This is where the networking comes in to play. It's easy to get an interview after someone introduces you.

> After graduating from a top 25 undergraduate business program in 2 years and then going on to earn my MA in econ in another 2 ... I thought it might be easier than normal to get a job. Ideally I'd like to be at an audacious startup...

How do you expect that business and economics degrees will help you join a startup? Most seem to want to hire people to build stuff. Perhaps you'd be better-equipped for starting one yourself.

> ... all the while playing Division 1 football ... and even rode my bike 215 miles to a midwest tech event ...

We get it, you're athletic. It's not really relevant.

> it's my opinion that energy prices are a better indicator of economic growth than interest rates

Why?


> I may not be applying to the easiest jobs to get but I'm finding it incredibly difficult to even get an interview.

I'm a developer, so I have it easy, but I just don't understand this mentality. If you're not getting any interviews, then you're aiming too high, right? Just point the nose down a tad and send out another 50 feelers. If that doesn't work, aim a little lower still. Follow up. Be a stalker.

If you played football, and have good grades, I guarantee UPS will hire you on the spot to throw boxes around. That's your lower bound. The question is where in the middle will you land. Then you start climbing.


"and energy prices should continue to fall for the foreseeable future"

Are you serious??


Note that the article draws on a graph from the blog Calculated Risk. I have followed CR for years, and after reading the pando article, I'm am convinced the pando author is completely out to lunch.

Just as one example: The author is cherry-picking CR's data. Here is the graph of unemployment vs education level: http://cr4re.com/charts/chart-images/EducationUnemploymentSe...

And still the author recommends avoiding higher education? Anybody who follows such clownish advice despite the data deserves what they have coming.

BTW: CR is an excellent source of economic information, but it will take you a year or so to truly digest some of what is being put in front of you. (The comment board is of mixed value. It used to be the best on the web.)


While its certainly fun to toss marketing under the bus, that's not really fair or reflective of reality. An engineers work only has value as long as it has customers. Marketing definitely has a real and important role to play, and really is worthy of the attention of smart, hard working young people.

I think the problem is that marketing was overdone. Too much of a good thing so to say.


You can get loan forgiveness in public sector jobs: teachers, peace corp, and government service. You can become a nurse after college, you don't have to write code, but it is not for everyone. The boomers will be retiring so there will be a huge need for medical and care givers. Also when they go, the jobs they left will open up (minus some losses for productivity). You can go the trade route as well, or accountancy etc...


Capitalism has an unnerving tendency to force people to work in the jobs that "no one wants to do" or that everyone needs, and aren't viewed as jobs that deserve high incomes. For instance, the US went to war partially because its citizens were being impressed into a foreign navy for essentially no pay. Young people were forced to become soldiers via the draft. Entire racial groups were forced to do manual labor that was "beneath" freemen. My guess is that, unless healthcare workers are able to demand higher wages in some way, that we'll "find" a cheap labor supply, be they foreign workers or "recruited" young workers. Or, for much the same reasons that teachers are underpaid compared to their skills and education level, society as a whole will refuse to raise healthcare wages once those jobs become a cornerstone of our society.


While I think he's made some important observations and I agree with some of his advice, I don't agree with his conclusion that young people are screwed.

Here's an important insight that I definitely agree with:

"But won’t a college degree pay for itself? It probably won’t."

It won't. You probably shouldn't get one if your goal is to make money.

Here's some advice I disagree with:

"My advice to young people is to figure out how to make something. That means either working with your hands, or learning how to type code with them."

The job market is a game of musical chairs. You can give a person a strategy for winning at musical chairs, but it doesn't change the fact that there are fewer and fewer chairs each round.

It's not reasonable to tell young people (or any people) that their goal should be to find a job so they can be self-sufficient and they can support themselves financially.


It's not reasonable to tell young people (or any people) that their goal should be to find a job so they can be self-sufficient and they can support themselves financially.

Are you kidding? How am I supposed to parse this properly? It reads like you are suggesting that it is not reasonable to suggest that you should get a job to keep yourself secure.


Yes. That is what I'm suggesting. And I am not kidding. Do you disagree?


I'm concerned that I'm maybe putting the wrong emphasis on some bit of what you said, because if I'm not then yes, I disagree with you.

There is no reason historically that people have not had to work to support themselves, and so to suggest that they not do this suggests either that you desire them all to become layabouts dependent on welfare or that you want them to stop working and die off. Please explain an alternate interpretation of this.


I don't want them to die off. I do want them to depend on welfare. Whether they layabout is up to them.

Historically, if you go way back, everyone grew/hunted their own food and built their own houses etc. This was a very brittle/brutal existence. Drought, disease, or a cold winter means I might die or my family might die.

So we learned to be efficient by dividing up tasks and specializing. This reduced the total amount of work that needed to be done to ensure our survival. Over time, technology (algorithms) continues to get more efficient thereby continuing to reduce the work necessary for survival.

Of course, this natural progression eventually leads us to point where the work necessary for our survival is completely automated. We're not there yet, but there will never again be enough jobs that everyone can have one.

That's a good thing. It frees people up to do what they want with their time.


"That's a good thing. It frees people up to do what they want with their time."

I agree with your premise.

IMO, socialism, like or it not, is an inevitable result of a highly technical society.

This is a good thing in the long term but it is going to result in decades of horribleness, at least in the US, because so little of the population is going to accept this until it is clearly inevitable.


Yes. There will be growing pains as we adjust to this new kind of economy.

When talking about socialism, it's important to distinguish between goods and services that have a level of scarcity and those that don't.

We have the resources to provide food for everyone, but we don't have the resources to provide private jets for everyone. That means there should be a market for private jets. There should always be a market for luxuries. There should never be a market for things we can easily give everyone. As technology advances, old markets will collapse and new markets will rise.

The government should provide for its people as much as it can. No more. No less.

The good news is that once society recognizes that having a job is optional, we no longer need to worry about silly things like minimum wage, living wage, or unions. You'd be working at a job because:

A. You enjoy spending your time that way. B. It pays enough that you're willing to sacrifice your time in order to gain access to luxuries.

If a job pays $3 an hour and you don't like it, then don't work at that job. It's in no way tied to your survival.


work != job


>It's not reasonable to tell young people (or any people) that their goal should be to find a job so they can be self-sufficient and they can support themselves financially.

It's quite correct to tell any given young person or group of young people to do so! That doesn't mean that it works as a policy prescription.

To take your musical chairs model a bit further: I might like there to be more chairs, I'd like that quite a lot actually. It'd be great to get youth unemployment down. In the mean-time though, you bet I'll be working on my musical chairs strategy, and if anyone asks me for advice I'd tell them to do the same. Will that fix the lack of chairs? No, of course not. It will keep me comfortably housed and fed though, and while that is not the only thing I care about it is rather important to me.

Would a degree from Yale have value if everyone got in? Much less.

Would I advise an individual who got accepted to go? Yes of course I would.


Excellent points. But it's important to remember that as the number of chairs keeps decreasing, your advice becomes less appropriate for any given young person. Personally, even today, I would advise most individuals who got accepted by Yale not to go. The quality of free online education is so high that we've essentially reached the point where "everyone got in" to Yale.

What does the decrease in the number of chairs mean? It means that less work is necessary and fewer jobs are necessary to support our society. This is good. We should want it to continue decreasing. I would like there to be fewer chairs, and faster. =)


Sure enough, but to strain the analogy even further, if we need fewer chairs then we need to find a place for people not playing the game to sit.

Also, the quality of free online education is not high enough to make it folly to go to Yale. Of course you still have to into account the cost, but for many people that will be much lower than sticker because of their generous endowment funded financial aid policies.


Exactly. Instead of spending energy trying to increase the number of chairs, we need to find a place for the people not playing the game to sit. My hope is that society realizes this before we go through too much pain and suffering.

Regarding the Yale degree, I agree that it will always be useful and valuable to some people. But even then, the value of a Yale degree to someone graduating today is different from the value of a Yale degree to someone graduating four years from now.


> It won't. You probably shouldn't get one if your goal is to make money.

For most majors, this is true. Absolutely not true for lucrative fields that effectively require one: engineering, medicine, finance


The scariest thing in the article is the unemployment graph from Calculated Risk. Isn't it interested at how Wall Street has gotten better and better at inflating bubbles that take longer and longer to recover from.

I just wish the gov't was more focused on creating jobs instead of all the other BS they're fighting with each other over.


Huh? You do realize that we are in month 60-something, ie the upswing, of that graph that began in 2007. Private sector has been creating jobs for over 3 years now, etc.

What that graph really shows is how deep the Great Recession was-- it should be compared to the Great Depression rather than the garden-variety recessions we've had since then.


Indeed. Today's kids may or may not be screwed, but I don't think CR's chart implies what the article's author infers from it.

Starting the article off with post-apocalyptic imagery seems to be the wrong tone to make any constructive statement.


There is a lot of focus on programmers , which is absolutely fine: they are usually the "makers". However I wonder why admins get overlooked. Just like the plumber or the electrician, sys/net admins are the handyman/tradesmen of the computing world, and as software deployments grow, so will their demand.


I'm sure a great admin is worth their weight in gold for an org with a headcount of 10,000. I'm not so sure for an org of 10.

I think, and I could well be wrong, that the trend for successful companies is towards the latter. None of this is to say the field is bad or will go away any time soon, just food for thought.


One admin for 10 programmers is a huge multiplier. That admin can take care of the non programming needs so that the devs have more time to focus on code than context switching to handle the crap.


admins are going to be replaced by programs that software engineers write (consider devops, heroku, aws, etc).


The sys admins I've known have generally been some of the most technical people I've met. They talk to vendors, know a lot about hardware, and have a great understanding about unix/ linux. They're not just administering your infrastructure, but also troubleshooting really low level things. How exactly is 'troubleshooting' going to be replaced by programs?


All of those services are run by sysadmins using software, not by software themselves. They just moved up a level of abstraction (take a look at the SRE listings, places are crowded with trying to hire proper devops/SRE). They have become the utility, which is where my plumbing/eletrician analogy comes in.

You might argue this is just suggesting there is a greater demand for software engineers, and that may be true, but I would be very skeptical of someone saying sysadmins would be replaced. Why haven't we replaced plumbers/electricians? Clearly we have utilities/plumbing/wiring that has been deployed for decades with little to no maintenance? Yet the profession still exists. The reality is, it still takes these tradesmen to build new environments, and support the frequent changes that technology throws us.


Nooooo. They are being managed by software. Facebook has 1 admin per 1000 MySQL instances. You can't do that except with software. If the DevOps guy is spending much time touching servers, you got the wrong guy.

I've been through this multiple times. In each case, I hired a good Devops guy and told him to work his way out of a job ASAP. Typically, he was down to spending 1/3 of his time on ops of any kind, including DevOps, within 6 months. At that stage I had him helping Prof Svcs, QA, and the Developers by directly writing product code.


Any sysadmin worth his salt today is a devops. Go to Heroku or AWS and you'll find lots of job listings for system engineers.

It's true that we'll be able to get more done with fewer sysadmins, but that doesn't mean we'll have fewer sysadmins. The Jevons paradox suggests we might even have more sysadmins.


software engineers are going to be replaced by programs that software engineers write, it is just going to take longer.


I really don't get generation-based hatred from the author. My grandfather (who raised me) worked long and hard for decades, first as a marine, later a railroad worker and then finally a manager at AT&T/Bell. He paid far, far more into the social system than he was ever able to take out. I've felt the pain of our increasingly stratified society first hand, but I have little respect for the practice of blaming a generation who have given so much and taken so little in return. Yes medical expenses are spiraling out of control, but that's a structural problem, not a sign of a generation as a whole "screwing young people".


I feel like this article would have a greater thrust if it focused more on the perils of college and the job market nowadays and less on software programming as the overarching solution for young people. It really hits a more accessible tone that way, because frankly, only a small fraction of young people are interested in a coding lifestyle. A young person with little or no debt and a good head on their shoulders is in pretty good shape, regardless of the waters they dip their toes into.


> "My advice to young people is to figure out how to make something."

Problem: patents.

Good luck making things as a "little guy" with patents (software or otherwise) in the way. Patents and similar government-granted monopolies are all, by definition, obstacles to economic activity through an accessible and competitive market. They are also the most difficult to overcome for those starting at the bottom.

Want economic recovery? Break monopolies.


Although the article has some good advice I have to cringe at the us versus them mentality set at the start. Blaming the fate of the young on the healthcare bill of the old is a false dichotomy.

Our parents reached a fairly good finantial state that we may not be able to attain but I have to ask if blaming them for the current state of affairs is the easy way out. Is it not like blaming immigrants for lack of employment?


I'm wondering how this article compares to other countries. In Germany you don’t necessarily need to pay expensive medical bills, and Universities have either no fee at all, or a very small one (500 € per Semester usually).

So after getting a Bachelor’s degree, you can be pretty much debt free.

Is this then only a problem for the USA?


Consider that many German students (I don’t have numbers, just a subjective impression) get Bafög, a government-issued loan to pay for fees/rent/living.


I'm finding it hard to reconcile Lesson 2 which implies a school even of the caliber of UC Berkeley isn't worth it with Lesson 4 to get successful friends.

A selective college is probably the best place to develop close friendships with people destined to be successful.


I completely agree. Meeting smart and driven young people without the luxury of college is hard. Convincing those people to be your friends when you don't have a shared background is even harder.


I've always considered Prop 13 as a way for the babyboomers to screw over their own kids.


Idiots who don't plan their future are screwed, everyone else is perfectly fine. This isn't a change from the past, it's just that today's idiots are visible due to the internet.


Another piece of advice: take your diplomas and expertise in Law, Journalism, Medicine and others to developing countries. They may not pay as much, but the jobs are there...


This may be OT but it relates to survivalism for our generation (I'm 20). As I get older, like the OP, I'm seeing Entrepreneurialism and, personally, Agorism as two of the many strategies that should be focused on to influence people, mostly non statist capilists who don't innovate as much as they should, to change their philosophies so that disruptions, subsidies, and investments can occur in various other markets here in Puerto Rico besides the pharmaceutical.

I don't classify myself as libertarian, I'm all about direct democracy and believe highly in sovereignty, however the ongoing regulations and the centralization and manipulation of the housing sector, the energy sector, and the food and liquor sector here in PR have gone overboard just like in the states and it has lead me to believe that all of this is caused by us submitting into conformity after we have generate a bit of passive income without focusing on taking down some barriers and instead we're maneuvering around them.

Why the hell does someone that has a self sufficient house, windmills, solar panels and all, takes water from a deep well STILL have to pay a minimum electricity bill or the government would regulate his energy and tax him like if he were to be selling it. To us country folk that do not like to be taxed on our own property, this sort of regulation is going to be taken down- it'll only get worse when more ways to decentralize markets happen and we get our hands in them like 3d printing.

I'm naive and you can justify calling me a fool but this is modern day slavery, and that's what the article is generally touching upon. Not sure if the above was the best example, but to me it's the most relational.

We're obligated, enslaved, to fix many problems that we haven't caused on top of worrying about the elderly before we retire, as shown by some of the comments here- no problem, people had it harder back in the days..Especially here in PR. Have you seen Clint Eastwood's Super Bowl Half time commercial? That's what came to my mind after finishing reading this..

Besides showing an interest in a certain market by crowdfunding capital and displaying market interest how can one influence non statist capitalists to invest lets say in informing the majority of the Puerto Rican population to take the current issues we should really be focusing on seriously? I know my kind and they're not generally inclined to think on these things day by day but please be kind enough to criticize my philosophy. Focusing on mostly the pharmaceutical market, the general PR'an population won't stand a chance to adapt to this change of thought on survivalism..

Again excuse this if it's OT, this is my first post.


So the obvious solution seems to fix this world while we can, so we can retire and leave something better for our heirs.

I find this distress motivational.


I am loving these illustrations


This post is so dead on... love it.




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