Bilionaire Peter Theil thinks folks should drop out of college. And he’s paying them to do it. The Thiel Fellowship recruits college students aged 20 and under to drop out of college and focus on building a business for two years. Twenty-four were chosen and will have $100,000 each to invest in their “business.” Thiel believes that one of the consequences of our society’s allegiance to higher education is “the enormous amounts of debt it’s putting on people is actually constraining people’s ability to do things that are not as remunerative.”
I largely agree with that assessment. But programs like these won’t help fix the problems of college debt, college unpreparedness, or lack of entrepreneurship.
College Is Still a Great Investment
There are few reasons why young entrepreneurs cannot build a business while in school. Plenty of entrepreneurs have done it and continue to do so. One such entrepreneur is Tayo Ola, a senior at Kean University in New Jersey, who co-founded Supreme Team Entertainment Group, an event planning business, during his freshman year. “It is always important to have a backup plan in case if anything happens,” Ola said by email. “A degree and education is always important in any aspect of life.” Or how about Kevin Systrom. His name may not be familiar but his company, Instagram, sure is. It was recently purchased by Facebook for $1 billion. Years ago while he was an undergrad he was offered a job at Facebook but turned it down to complete his degree.
And for all the talk of what college cannot do, research continues to show that college graduates, on average, earn more than their high school-educated peers and the gap only grows over time. Moreover, based on $100,000 tuition and an average college graduate’s salary, the rate of return on a college degree is over 15% a year. This is more than twice the “average rate of return in the stock market during the last 60 years (6.8%).”
Furthermore, the unemployment rate for college grads is also much lower than their high school-educated peers. Yes, college isn’t for everyone. But until people can find what is best for them, the best alternative is probably to earn a degree they can afford in a major they’re actually interested in. Because at the end of the day time — and ignorance for that matter — costs almost as much money as tuition.
Only looking out for the wealthy?
Thiel’s endeavor doesn’t seem to be focused on middle- or lower-income students — even though a lack of entrepreneurship being taught in colleges and students facing crushing loan debt after they graduate, are afflictions that disproportionately affect that segment the most. Apparently, the Thiel fellowship is just another option for well-heeled students who can afford to drop out or leave school for two years. But in the real world — outside of his Silicon Valley bubble — students are actually going to school so they can get a job and support themselves.
But imagine if the “average” student did follow Thiel’s advice. Put yourself in the shoes of those students’ parents: You’re struggling and hoping your son/daughter can go off to school, learn some valuable skills, and follow their passion. They tell you they’re interested in dropping out to start a full-time business, and all you can think of is the over 50% of small businesses that fail in five years; plus the fact that it’s never been easier to start a part-time business and earn one’s degree simultaneously. Instead, your child chose to gamble their future and will most likely fail in the process.
Nothing New to See Here
The irony is what he’s proposing isn’t as new or controversial as his supporters — and even critics — give him credit for: there’s nothing revolutionary about this fellowship. We’ve long known that some folks can afford to do whatever they would like on whatever timetable suits them, while many others have little choice but to put their head down and go the traditional course. He and others cite successful entrepreneurs like Zuckerberg who didn’t finish college. But what they fail to say is that folks like Zuckerberg had wealthy parents to fall back on. So did Bill Gates. And as glamorous as the college-dropout-turned-billionaire story is, it frequently resembles Cliff Notes and leaves out some crucial aspects. In Zuckerberg’s case, hiring COO Sheryl Sandberg — a Harvard MBA and long-time veteran of Google — in 2008 proved instrumental to Facebook’s success: the amount of users has grown from 70 million to over 840 million, and prior to her arrival a business plan did not even exist. Yet, as of last year Facebook was profitable to the tune of over $1 billion. Of course, Sandberg doesn’t deserve all the credit but Facebook’s continued success is far more dependent on a capable and well-educated executive team than it is on one lone college dropout.
But maybe it’s a good thing. Thiel isn’t inducing middle-or lower-income students to drop out and just hope the $100,000 he’s offering will lead to a successful business. The odds are it won’t. All the entrepreneurs are left with then is some experience (which, arguably, they could have attained building the business part-time) and their newly attained social network, which may not even return their calls.
I don’t think college is the be-all and end-all. At one point I dropped out myself. I worked, learned some great skills, and overall look back and feel that time was valuable. But it wasn’t free. Time costs money, and that’s what people don’t realize. Of course, these students could re-enroll in school at any time or even after the two years is up. I’m not saying it’s ever impossible to finish. But in the far majority of cases, it just doesn’t pay to quit.
It’s also particularly interesting that Thiel, a Stanford Law grad, recently chose to teach a course at Stanford University, one of the top-ranked schools in the world. Even some professors thought Thiel’s motives may be suspect and that he was more interested in recruiting bright minds than teaching anything of substance. Something else also comes to mind. He claims to be focused on the pressing issue of college debt so you would think his focus would be on teaching those who are facing the most barriers to earn their degree — community college students, public school students, and low-income students in general. Nope. He’s just trying to get access to the brightest minds that can afford a Stanford degree so he can recruit them.