From Washington Post: Poor kids who do everything right don’t do better than rich kids who do everything wrong
I had to double-check because the chart seems to contradicts the author’s thesis that the American meritocracy is dead and that upward mobility is impossible.
It doesn’t look so bad when you consider that 67% of poor college grads are at least 50-percentile in wealth compared to 49% of rich high school dropouts. It’s even better when you compare poor high school dropouts vs. poor college graduates, which is why a college degree may still be worth the money and the best pathway out of poverty, especially if you major in STEM.
This is why, despite being on the ‘right’–and how colleges have become like ‘West Point’, but instead of producing lieutenants they are producing SJWs–I’m not so quick to join the anti-college bandwagon, because the evidence still suggests that a college degree is worthwhile, especially for STEM. Yes, there is a a lot of student loan debt, but also a ton of financial aid for students of all socioeconomic levels. There is almost no excuse for someone of a reasonably high IQ to not take advantage of these generous financial aid programs to major in STEM.
Some of the most common arguments against college are as follows:
“I have a degree and all I can find are crappy jobs. Therefore, college is useless.” This is a legitimate grievance, and I have empathy for millennials who have degrees and are unable to find decent jobs, but this not necessarily proof that college is worthless. For every story of indebtedness and bad jobs prospects, there are other stories, especially on Reddit, of 20 and 30-something graduates in fields such as accounting, STEM, or finance who have solid six-figure jobs, a home, and are paying off their student loan debt. In the case of grads who have bad jobs, consider that getting the degree may have been necessary to get the job in the first place, and despite the low pay, is better than having no job.
“Look how rich and successful I became (in a field outside of my college degree); the degree is useless, because I became successful in a field that is not applicable to the degree.” You see this a lot – college grads who major in finance or computer science who become rich and successful in fields outside of computer computer science or finance, and so it would seem like the degree was not necessary. But when you look closer, often these people leveraged their degree early in life, and after amassing financial and social capital (thanks to the early job opportunities and connections afforded by the degree), were later able to parlay these resources to an unrelated endeavor.
“I became really rich and successful without a degree and or after dropping out.” Examples include Steve Jobs and Bill Gates, although to their credit neither boasted like this and were more humble. There’s a major survivorship bias here. 80-95% of small businesses fail within a decade, and failures never get as much media attention as successes, giving the false impression that most small businesses succeed. Then you have post-2008 economic trends that favor big, successful companies, that can leverage cheap credit, economies of scale, and networking effects, to keep growing and crowding out smaller businesses. As I explain in Pencil Pushers, success in entrepreneurship requires top-5 percent talent, whereas most day jobs require maybe only top-50 percent talent, to make less money. Bill Gates, Michael Dell, Mark Zuckerberg, and Steve Jobs were able to leverage their superior IQs (as well as connections, family wealth, luck & timing, and other factors) to succeed wildly without a college diploma, which is not applicable to the vast majority of college dropouts who try to follow in their lead, and fail.
Look at all the failed efforts since 2011 or so to create a viable competitor to Facebook (remember Ello, which I correctly predicted would fail), Instagram, Snapchat, or Twitter, just like tons of money was wasted trying to create a competitor to Google (Bing anyone? There’s a joke that the only reason Bing has market share is because everyone who buys a PC must first use Bing to install Chrome) or the iPod and iPhone (Zune anyone?). The money could have been better spent on Facebook stock (which has surged from $30 to $132 in just four years, and keeps going up to no end), Google stock (up 1100% since 2005), Amazon stock (up 150% since 2014), the S&P 500 (which has nearly doubled since 2011), or on Bay Area real estate (which also has doubled since 2011) than starting an actual company. That’s how easy wealth is created…by piggybacking on existing successes, not trying to create one from the ground up. Sometimes the path of least resistance is the best one.
Contrary to the $200,000 figure cited by James Altucher and others, the average debt per graduate is only around $25,000 – or about the cost of a new car. But unlike a car new, which loses 30-50% of its value after the first year, a degree creates wealth both in terms of higher lifetime earnings and as an inflation hedge. This is because wages for non-graduates have lagged the CPI, and college graduates have seen the most wage growth since the 2009 recovery. This makes a degree a good hedge against inflation and wage deflation.
It doesn’t bear repeating that the higher education system is broken, that too many students are taking on debt to major in low-ROI subjects, and that there is a lot of indoctrination, but as bad as it is, a college degree may still be the best shot for reasonably intelligent people to enter the middle class.