Gyroscopic Investing

Is anyone else tired of hearing about whether higher education is a good "investment".

To me, the whole narrative of higher education as a means of making more money misses the mark by a wide margin.  I think that education (when it works) enlarges the mind in countless non-economic ways and simply makes the experience of living a more rich, nuanced, and interesting experience. 

If I knew for certain that education would not have resulted in any additional earning power, I would still have heartily pursued it, because I like the person it has made me.  I like that I feel like I have the tools to make sense out of the world around me. 

Money is great, but I think that the ability to navigate life in a meaningful and interesting way is far more important.  In fact, I think that in most situations money is simply a by-product of a sophisticated understanding of your environment, which is one of the by-products of education.  Having a sophisticated understanding of your environment, however, has so many other benefits that it seems silly to focus only on the earning power component.

MT:

Education is incredibly valuable for all the reasons you state.  However, there would be far fewer universities doing business today were it not for the implied vocational benefit of having a degree.  The trouble is that the economic benefits are overstated.  I just checked the current undergrad tuition at my alma mater and back-tracked it to what it was about four decades ago.  Tuition is now 17 times higher in nominal terms and three times higher in real terms since then.  For those interested in education per se, one might ask "has there been a corresponding increase in the knowledge obtained from a degree?"  I don't think so. For those who see college as a career prerequisite, have starting salaries for graduates risen in real terms?  No.  Had expenses risen just to keep up with inflation, that university's tuition would now be just 1/3 of today's level.  So, the other 2/3 increase is for some other reason, or reasons, not present in the cost structure of four decades ago.

Given the inherent non-economic advantages associated with being an educated individual, I think everyone would be better off if higher education were cheaper and more accessible.  To do that, we'll have to drive out those costs not essential to the academic experience.  One way of doing that is to stop guaranteeing that runaway costs will be paid via government-subsidized student debt.

There are a lot of great educational values out there in the form of community colleges and state universities.

It isn't necessary to spend a fortune to receive a good education, though everything in this field IS a lot more expensive than it was in prior years.

For someone who really wanted to get a degree from a private university, you can often transfer in as much as two years of credit from another institution.  Thus, you could potentially go to a community college for two years, transfer to a private university for two years and get a degree from the private school for 40% or more less (considering the cost of the community college in the package) than someone who attended the private school for four years.

I also think there is value in attending different schools.  Although the story I am about to tell sounds bizarre now, it didn't feel all that strange when I did it.  I finished my undergraduate degree in three and a half years, and here is the path I took and the schools I attended:

Summer before Year One:  Community College #1
Year One:  Private University #1.
Summer before Year Two:  Community College #1
Year Two:  Private University #2
Year Three:  Fall: Private University #3 Program through Private University #2; Spring: Private University #2
Summer before Year Four:  First Half: Public University #1; Second Half: Public University #2
Fourth Year: Private University #2 (graduated in December from Private University #2)

Looking back, I am very happy that I was able to experience so many different campus environments.

For those conscientious enough to enroll in the upper level courses, community colleges have indeed been a bargain basement way to pay for the first two years of school before transferring to a 4-year college.  However, budgetary issues have changed the landscape a bit.  Many community and state colleges now make it very difficult to enroll in the most sought after classes.  As a result, a 4-year degree has now become a 5-year or longer degree.

I agree with you.  There are more reasons to pursue an education than money. 

What I hate to see is a young person go out and indebt themselves for the next 30 years of their life in order to obtain an "education." 

I think that this happens so often b/c student loans are backed by the government, and therefore it's insanely easy for an 18 year old student to take out a six figure loan to finance a degree that may not be very marketable. 

I also think that government backing of student loans encourages schools to push tuition as high as they can get away with. 

MediumTex wrote:
I think that education (when it works) enlarges the mind in countless non-economic ways and simply makes the experience of living a more rich, nuanced, and interesting experience. 

Agree, and in this sense there are many many better ways to obtain an education than conventional wisdom would let on.

If someone wants a formal education, there's probably little difference between a community college and a big University or private school.  The textbooks aren't much different, and, with the internet, if you're really curious about a topic and feel like your professor hasn't covered it, it's pretty easy to self-educate.

I don't think there's anything less educational about skipping college altogether and learning to do something useful (fix a car, speak Chinese, whatever)...sometimes learning to do one thing really well is educational beyond the skill one learns in that it you start to see parallels between your chosen field and others, and you've also learned what it takes to perfect a skill, should you be interested in doing so again in the future. 

A college education was my meal ticket out of poverty.  It was also a necessary entry ticket to the career field I happen to have chosen.  So for me, the motivation was economic and the ROI/ROE ("return on effort") has been excellent.

Once I achieved financial freedom, I was able to have time freedom, which in turn has led to lifestyle freedom.  I still continue to learn, but the Internet now makes learning inexpensive and easy.

I believe that knowledge and education is the best investment one can make.  It's just that a formal education may not be as critical in today's world (unless a formal degree is an entry requirement for one's chosen profession).

I wish financial literacy had been taught in schools.  I stumbled upon it out of frustration (I was running ever so faster on the treadmill and not getting ahead) and it has made all the difference for me.

Here is what Steve Jobs says about his college education experience:
http://www.youtube.com/watch?v=D1R-jKKp3NA&eurl=

Personally, I found college incredibly enriching.  It was well worth the price of admission.  However, there are a few other factors to consider for the future.

First, the traditional college education is not the only way to educate yourself.  Just as one example, consider MIT OpenCourseware.  A sufficiently self-motivated individual with an internet connection can essentially take courses from one of the finest science and engineering schools on the planet, free of charge.

Second, college is very expensive.  Money and time always have alternative uses.  If a college education costs, say, $150,000, this is a considerable sum of money.  This could serve as a hefty sum of seed capital for a business.  Clearly this is not the right answer for everyone but I think it's a good fit for some.  As the cost of college rises, this alternative use will become more and more attractive.

I think you're seeing a growth of alternatives to a traditional college education along with a simultaneous rise in the costs of that same college education.  As these trends accelerate, I see no reason why might more and more frequently look at these alternatives.  Self-educating with $200,000 of seed capital and getting a four-year jump on your peers has a lot of value.  How much will be down to the individual.

Here's an interesting interview...

http://finance.yahoo.com/blogs/daily-ti ... 4-224.html

Who needs college when you have this forum? 

Ah yes, the value of a college education.

I can now discuss GAAP for deferred gains and the Incompleteness Theorem with people who have trouble with simple arithmetic.  Therefore I am constantly seen as the outside, the alien, the guy that's too smart to be "one" of "us", the fancy college man.  Oh and I'm rich too.  Because I have degrees.

I can now be seen as a loser for having two degrees in subjects most people tell me are "impossible" to learn or perform and having no apparent use for either.  So I am constantly seen as the "brilliant but lazy" scholar who cannot apply himself or who doesn't want to work.

All the stigma with none of the associated prosperity.  What more could you ask for? 

College... it has taught me clever and scientific ways to critically think and consider problems.  I can now apply this massive intellect to such dilemmas as how to best upsale fries to the customers, a feat for which I receive no recognition or advancement.  Marvelous.

(Feeling a little facetious and frustrated today.  Do not mind me.)

plooker,

Pretend for about ten minutes that you just found out you had less than a year to live.

After contemplating that for a while, ask yourself whether you would rather be in that situation or the one you are in now.

Positive mental attitude is what normally determines survival rates when in a bad set of circumstances.

pplooker wrote: I can now be seen as a loser for having two degrees in subjects most people tell me are "impossible" to learn or perform and having no apparent use for either.  So I am constantly seen as the "brilliant but lazy" scholar who cannot apply himself or who doesn't want to work.

I can now apply this massive intellect to such dilemmas as how to best upsale fries to the customers, a feat for which I receive no recognition or advancement.  Marvelous.

(Feeling a little facetious and frustrated today.  Do not mind me.)

Well...with the unemployment situation being what it is right now, you might step back and be happy that you have a job at all.

Sounds like you're a manager at a restaurant, which, although it sounds like it is not that fulfilling to you, is likely great experience.  People who know GAAP and the Incompleteness Theorem are a dime a dozen.  People who can motivate those who "have problems with simple arithmetic" to apply the principals learned in business schools are rare and valuable.  Maybe look at this as an opportunity to hone your managerial skills. 

Nine times out of ten a good manager is of more value than a good technician, IMO.

 

An interesting viewpoint in the WSJ:

WSJ: How to Get a Real Education