In 2009 I was invited to speak to the annual meeting of a mid-sized accounting firm in Florida. Of course, the big topic of conversation was the housing bubble and the financial crisis which resulted. The audience, with the exception of one liberal academic, was generally sympathetic to the message that government, not the market, was the principle malefactor. And since the audience was made up of working accountants who had to live under the whims of federal regulators, they were more than sympathetic to the view, which had not yet been widely accepted, that the mark-to-market accounting regulations were a major factor in the disaster.
My wife, Susan, signaled from the back of the room that it was time to go lest we miss our flight. As I thanked my host and worked my way towards the back of the room to exit, questions kept coming from the audience, and I answered on the fly as well as I could. Just before I walked through the door there was one more question: “Okay, I get what happened with the housing bubble, but what’s the next bubble?” Silence, people leaning in with ears perked to hear the answer, and me not sure…autos, commercial real estate, commodities had been the leading candidates for next bubble in the financial press. None of that seemed quite right, though. They really wanted to know, and I wasn’t sure of the answer, so I said a quick prayer for an answer and out of my mouth popped “Higher Ed. There’s a College Bubble.” Shocked looks, murmurs, concerned looks. I didn’t know it at the time but the firm had an unusual number of higher education clients.
Since then, the College Bubble hypothesis has slowly gained acceptance. I wrote a number of pieces on the topic here starting in 2010 and most recently focusing particularly on seminaries. The Center for College Affordability is a think tank which has been largely dedicated to this topic long before I took it up. Mark Perry of the Carpe Diem blog and the American Enterprise Institute often writes on this theme. My friend Glenn Reynolds of Instapundit fame, who is also a law school professor, writes on it regularly and is about to publish a book on the subject.
And the College Bubble is not just for conservatives anymore. CNBC did one of their mini-documentaries on the subject, though like most liberal media it couldn’t decide whether the target was the higher-ed bubble or just for-profit schools. The New York Times did a piece recently along similar lines, and then there was the 60 Minutes piece, hosted by Morley Safer which focused on PayPal founder Peter Thiel‘s attack on the college bubble. The piece was, of course, strongly biased. It was a venerable old dinosaur hosting a venerable old dinosaur in order to defend a venerable old dinosaur. But the mere existence of a 60 Minutes segment examining the hypothesis that higher education has become a bubble was a devastating blow (or better yet, a sharp prick) to the overinflated wind bag full of nostrums about the essential value of a college education at any cost.
60 Minutes’ arguments were predictably weak. An ad hominem attack on Thiel’s philanthropic activities fell flat. So what if his foundation supports projects which Morley Safer finds odd? Thiel supports the Seasteading Institute in its dream to create floating libertarian city states. Yeah, it’s an odd idea. So were skyscrapers. So was PayPal. Some odd ideas work out and some don’t. At least seasteaders are using their own money.
Since Safer was just not up to the task of debating Thiel himself, he turned to an academic to make the case for college, Vivek Wadhwa. Wadhwa is one of those academics able to amass educational credentials and still mix in business circles. 60 Minutes neglected to inform their audience, however, that he is a fellow at Singularity University. For those unfamiliar with Singularity, it is the idea that man and machine will shortly merge together creating super-intelligent cyborgs who (or is it ‘which’?) will solve the problem of death, probably in the lifetime of many living today. It’s kind of like in Terminator, only with Skynet as a good guy. So much for Thiel’s crazy ideas about people living on floating platforms.
Wadhwa argued that Thiel’s plan to invest directly in promising young people who start businesses directly out of high school is a bad idea for several reasons. First, many of the kids will fail. But so what? Many students fail. About a third never graduate. About half take 5 or 6 years. And of those who make it through and get their degree, many fail in their careers anyway. Which kind of failure do you learn more from: Failing at school, or failing at business? Probably the latter since in that case you are forced to think about the things which really matter in the real world. And the students who fail to finish schools or to make careers out of their degrees still have all that debt, whereas the entrepreneurs who fail take only Thiel’s money down with them. And what’s so bad about failing anyway? Most of my lessons are imbedded in scar tissue, literal and figurative. Failure teaches.
Wadhwa argues that U.S. colleges and universities are the best in the world. Maybe that’s true, but so what? U.S. homes were probably the best in the world too, but that doesn’t mean that we had no bubble. U.S. tech firms in the late 90s were the best in the world, but that didn’t mean they were reasonably valued. Bubble-ness is a factor of quality AND PRICE. The point is that there is no asset of such great quality that it is a good buy no matter how high the price goes. A college diploma is no exception to that rule.
Furthermore, there has been a severe contraction in the quality of higher education in America. Did we really think we could open the floodgates and not affect the quality of graduates? Can you turn college into the new high school, and not get high school-like results? Grade inflation will only keep the problem concealed for so long before the general public becomes aware that outside of a few highly challenging programs and majors, the quality of American higher education is plummeting. Graduates are mastering fewer facts, can’t think critically about the facts they have mastered, and can’t express whatever ideas they have mastered in clear, cogent, grammatically correct sentences. Employers already know this.
The final straw Wadhwa grasps at is the idea of socialization. He argues (I am not joking) that partying is a valuable part of the college experience because it teaches students interpersonal skills. Whah? Look, it’s fun to party, I’ll give you that. But it is a consumption good, not an investment, and anybody who says otherwise has perhaps partied just a little too much.
Jerry Bowyer, Forbes Contributor