Posted by: crudbasher | April 11, 2011

The Great College Cost Bubble Experiment

Dang what a great way to start the week – with a controversial idea!

I suggest reading this whole article but let me summarize: Peter Thiel is a big player in Silicon Valley. He says that higher education in the US is in a bubble. (I agree). He says “[a] true bubble is when something is over-valued and intensely believed” and wants to conduct an experiment to see if there is a better way.

He’s going to give 20 students $100k each over 2 years to drop out of college and start their own businesses. The thinking is that you could be much better off after that 2 years than if you had gone to school and racked up huge students loan debt.

If this works, it could be huge. In 2 years time we will be able to compare this group of 20 with college students who are starting today.

Ok so a few thoughts right away:

  1. These students are self motivated and not your average college freshmen.
  2. This won’t work for everyone.
  3. Not everyone has a Silicon Valley backer who wants to invest in them.

All that is true and yet… The Internet’s biggest disruptive power is by connecting people. All the businesses that have been trampled over the last decade have been the ones who make money by connecting people. Newspapers connect their writers with readers. Record companies connect musicians with listeners. Can we say that colleges connect teachers with students? If that’s the case they are really doomed and it really is a bubble.

What Peter Theig is doing is showing how the Internet can connect smart, motivated young people with backers.  I predict that if this experiment works, you will see a lot more of this. Not only that, but it will hurt the best universities the most because their best students will be siphoned off. More importantly is the implicit relationship between business and universities. Right now businesses expect the best people to come from universities and thus support them by hiring only from them. What if the best people aren’t there anymore?

The mind reels with the implications…. Thus is the nature of disruption.

Any thoughts?

Annotations after the jump.

  • This could be huge if it works.

    tags: education radical innovative nell

    • Fair warning: This article will piss off a lot of you.

      I can say that with confidence because it’s about Peter Thiel. And Thiel – the PayPal co-founder, hedge fund manager and venture capitalist – not only has a special talent for making money, he has a special talent for making people furious.

    • Consider the 2000 Nasdaq crash. Thiel was one of the few who saw in coming.
    • And after the crash, Thiel insisted there hadn’t really been a crash: He argued the equity bubble had simply shifted onto the housing market. Thiel was so convinced of this thesis that until recently, he refused to buy property, despite his soaring personal net worth. And, again, he was right.
    • he argued, America is under the spell of a bubble of a very different kind.
    • Instead, for Thiel, the bubble that has taken the place of housing is the higher education bubble. “A true bubble is when something is over-valued and intensely believed,” he says. “Education may be the only thing people still believe in in the United States. To question education is really dangerous. It is the absolute taboo. It’s like telling the world there’s no Santa Claus.”
    • Like the housing bubble, the education bubble is about security and insurance against the future. Both whisper a seductive promise into the ears of worried Americans: Do this and you will be safe. The excesses of both were always excused by a core national belief that no matter what happens in the world, these were the best investments you could make. Housing prices would always go up, and you will always make more money if you are college educated.
    • “It’s what you’ve been told all your life, and it’s how schools rationalize a quarter of a million dollars in debt,” Thiel says.
    • But Thiel’s issues with education run even deeper. He thinks it’s fundamentally wrong for a society to pin people’s best hope for a better life on  something that is by definition exclusionary. “If Harvard were really the best education, if it makes that much of a difference, why not franchise it so more people can attend? Why not create 100 Harvard affiliates?” he says. “It’s something about the scarcity and the status. In education your value depends on other people failing.
    • Thiel’s solution to opening the minds of those who can’t easily go to Harvard? Poke a small but solid hole in this Ivy League bubble by convincing some of the most talented kids to stop out of school and try another path.
    • But Thiel and Founders Fund managing partner Luke Nosek wanted to fund something less one-off, so they came up with the idea of the “20 Under 20″ program last September, announcing it just days later at San Francisco Disrupt. The idea was simple: Pick the best twenty kids he could find under 20 years of age and pay them $100,000 over two years to leave school and start a company instead.
    • Thiel thinks there’s been a sea-change in the last three years, as debt has mounted and the economy has faltered. “This wouldn’t have been feasible in 2007,” he says. “Parents see kids moving back home after college and they’re thinking, ‘Something is not working.
    • the program has a clear bias towards talent, and like it or not, talent tends to be found in private universities. Besides, he’s not advocating that stopping out of school is for everyone any more than he’s arguing everyone should be an entrepreneur.
    • with education, there’s barely any counter-narrative at all, because it is rooted in the most elite echelons of the upper class.
    • Thiel assumes this is why his relatively modest plan to get 20 kids to stop out of school for a few years is so threatening to a lot of the people who have the biggest megaphones to scream about it. “The people who are the most critical of this program are the ones who are most complacent with where the country is right now,” he says.

Posted from Diigo. The rest of my favorite links are here.



  1. […] of the more innovative ideas are the products of young people below the age of 20. Peter Thiel, an Internet investor has given 200k to 20 young people to drop out of school and start their own companies. Many of them […]

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