Beyond the Education Bubble

Peter Thiel’s contrarian approach to higher education, as you might expect, has provoked considerable squealing from the usual suspects. Thiel believes higher education has become a speculative bubble, and that the price of a college education is vastly overvalued compared to its lifetime payoff. There are more college graduates than there are jobs that call for their qualifications, which means that for many unemployed or underemployed graduates a student loan is the equivalent of an underwater mortgage.

The education bubble, like the finance bubble, is fueled by excess money looking for an outlet and unscrupulous promoters looking for suckers. Just as shady bankers lured people into mortgages that were beyond their means, the higher education industrial complex — through its affiliated high school counselors — lures kids into obtaining what seems to be easy money through Sallie Mae with the promise of higher lifetime incomes. Meanwhile, the availability of this third-party money fuels an educational culture based on high-overhead and cost-plus markup — the same culture that gave us the Pentagon’s $600 toilet seats — and tuition increasing at more than four times the rate of inflation.

To challenge the college mystique, Thiel is in the process of selecting the twenty most promising candidates under age 20 to drop out, in return for $100,000 over two years to start a business. Hence the above-mentioned squeals of outrage.

Of course the idea that the educational panacea is overrated isn’t a new one. The late Joe Bageant pointed out that the “economic growth by sending everyone to college” meme was a fallacy of composition. The Empire, he said, only needed about 25% of its population in administrative-technical positions. Sending more than that to college just resulted in burger-flippers and floor-moppers with bachelor’s degrees.

There are some serious difficulties with Thiel’s position, in an economy organized on the kind of hyper-capitalist corporate model he seems to assume. In such an economy, as plenty of critics have pointed out, higher education — even if overpriced — will be indispensible to people seeking certain kinds of professional employment. It will continue to perform a signaling function, simply because HR departments will naturally desire some bureaucratic S.O.P. for processing human raw material without having to deal with a lot of special cases on an ad hoc basis. And I’ve seen more than one person argue that Thiel probably hires college educated people; if American higher education implodes, he’ll just hire cheaper credentialed Chinese tech workers.

John Robb, of Global Guerrillas blog, wants to go further than Thiel and challenge the existing state capitalist model of how employment itself generates demand for credentials (“The Education Bubble,” April 13).

The idea is not to eliminate higher education, but to eliminate the mass-production model by which it is organized: Transporting people to a central location with expensive physical plant and a bloated administrative bureaucracy in order to process them into human resources. Network technology, with its ability to move information cheaply rather than moving people, offers the potential of an alternative that “creates its own educational modules if needed (from scratch using modern tools and techniques).”

We’ve seen the first hints of this with MIT’s Open Courseware project, which puts its entire catalog of course syllabi and lectures online. And there are corporate capitalist challengers, like the University of Phoenix, offering a cheaper education in competition with the legacy colleges. But what happens when you combine the two? What happens when you combine online syllabi, video lectures, online conferencing and virtual classrooms into a single package on the U. Phoenix model — but the lectures and other content are provided on an open-source basis without the state’s copyright monopolies?

Education may provide an essential signaling function, given the conventional model of employment. But the conventional model of employment by a large bureaucratic corporation — with a conveyor belt running from schools to the HR department which sorts out the “resources” which are manufactured to spec — is itself becoming obsolete.

Industrial supply and distribution chains are radically shortening, and tools are becoming radically cheaper, which means that business enterprise will become much smaller and relocalized, with business models driven by those who actually own the tools and the skills.

So the organization and selection of educational options will be driven much more by producers’ own assessments of what they need to learn to be able to produce effectively, instead of a curriculum set to the specs of HR at GlobalEvilMegaCorp LLC. Curricula will be set on a much more decentralized, bottom-up and ad hoc basis, with the student — not the corporate employer — as the real customer.

Higher education, as conventionally understood, is a legacy of the 20th century model in which giant interlocking bureaucratic institutions — large oligopoly corporations, centralized government agencies, bloated bureaucratic universities — dominate society.

That model is dying.