I Wanna Be a Billionaire
An Open Letter to Peter Thiel
In May, PayPal co-founder Peter Thiel announced his first class of “Thiel Fellows,” 20 young people who each get $100,000 from Thiel’s foundation for skipping college and pursuing their investment ideas.
Dear Mr. Thiel:
Please forgive a letter from a stranger. While we may have overlapped as young upper middle class residents of the San Francisco Bay Area in the 1970s, I don’t believe we’ve ever actually met, and certainly my daily activities rarely put me in touch with venture capitalists.
But lately your name has been coming up a lot in my crowd. Your recent pronouncement that college is an overrated bubble and your plan to pay 20 teenagers to drop out of college have caused quite a stir in both the middlebrow media and the education community. After reading around in what Google turned up about you, it would, of course, be tempting to take some easy shots at the idea of education as a strictly economic good, the gaping historical blind spots in libertarian politics, the tired oversimplifications in your book on multiculturalism at Stanford, or just about how hard generally it is to overcome the ideological limitations that come with being a white boy with money. It would be fun to respond to the tit of your "I no longer believe that freedom and democracy are compatible" with the tat of “Democracy is the road to socialism.”
But ultimately just trying to trump your Ayn Rand with my Karl Marx would only be preaching to our respective choirs, and it would be a shame to waste the publicity opportunity you’ve created for higher education. As with movie stars or professional athletes who tweet about politics or religion, The New York Times and the Huffington Post tend to pay more attention when rich guys like you or Bill Gates talk about education than when actual educators do. So pardon my shameless attempt to use your prominence to shine some light on what’s actually happening in higher education.
First, let me say congratulations on that “20 under 20” thing. It’s easy to see why you’re such a rich guy. You’ve plucked the brightest people out of the best schools, talked them into working for well below market wages (50 grand a year for two years—that’s even less than what college professors make), and told the world that this is just philanthropy on your part, that you’re just saving these kids from the drudgery of college and helping them make the world a better place by coming up with the next PayPal or Facebook. If one or two of them does come up with a money-maker, you’re poised to get a piece of the action as the angel on the ground floor, and you get even richer. Well played, sir.
Your ability to pull off this talent plunder seems to derive from your reputation among finance and high tech people as the bubble guy, the genius who can accurately identify and track the movement of the “bubble”—“when something is overvalued and intensely believed”—from high tech to housing, and now to higher education. You primed the pump to lure the talented 20 by grabbing contrarian headlines with the bold declaration that the emperor universities had no clothes.
And here your PR gifts may have overshadowed your analytic skills, because, with no disrespect to your bubble prognostication talents, we should point out that you’re not alone these days in thinking college is overpriced. And we should also recognize that, in strict ROI terms, college has probably always been overvalued. For decades, lots and lots of people have paid dearly for fancy undergraduate and advanced degrees in art history, anthropology, English, and philosophy knowing full well that they might never really break even on that investment. Unlike the housing bubble, where people thought of their astronomical mortgages as savings accounts, the hedges against the higher ed bubble seem to be the people willing to ante up for education regardless of the market for their degrees and, in the case of the really overpriced Ivies and Ivy wannabes, the line of rich people still willing to pay a premium for pedigree, connection, and really pretty campuses.
While most of the headlines from your observations about education have come from the relatively pedestrian bubble comment, I think that the far more interesting idea was the one quoted in your interview with TechCrunch:
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. Whenever Darwinism is invoked it’s usually a justification for doing something mean. It’s a way to ignore that people are falling through the cracks, because you pretend that if they could just go to Harvard, they’d be fine.
I really love this, for a bunch of reasons. It always makes me tingle whenever billionaires go all populist. But the really exquisite thing here is your ability, after all those years at Stanford and the many more years spent cracking the Forbes 400, to pretend that you’ve just discovered the fundamentally mean connection between scarcity (whether it’s food or shelter or diamonds or Super Bowl rings or the best tables at the coolest restaurants) and value in competitive capitalist arrangements. I have to admire the balls of an avowed libertarian who will disavow Darwin with a straight face.
But along with the brio, your comment also sheds some substantive light on the higher education predicament. Along with your talent for predicting the future, you seem to have a decent grasp on the past. It turns out that we did build a hundred Harvards, only the franchising came not from an IPO or an Angel investor, but rather massive and widespread public investment. Following the 18th century examples of the University of North Carolina and the University of Georgia, and building on the work of the Morrill Land-Grant Act and teacher training institutions, the American public research universities that grew dramatically and thrived in the first two-thirds of the 20th century provided widespread affordable access to top-notch classical and practical learning. In a triumph of the sort of democracy that Thomas Jefferson imagined when he founded the University of Virginia, regular people could pay nominal fees to universities in Charlottesville, Seattle, Austin, Berkeley, Los Angeles, Chapel Hill, Buffalo, Madison, Ann Arbor, Columbus, and Champagne–Urbana and get more or less the same gold standard education (and much better semi-professional sports teams) that the chosen few got at Harvard, Princeton, and Yale. Instead of getting your undergraduate and law degrees at Stanford you could have gone across the bay to Berkeley and gotten pretty much the same education with pretty much the same opportunities for a fraction of the price.
Public universities were one of the primary drivers of the middle class expansion and prosperity that turned the 20th century into the American century. A huge amount of the basic research that fueled the exponential scientific and technological advances of the last 40 years was conducted at publicly funded universities. And state universities and colleges have given millions of American working class people, veterans, women and people of color opportunities they wouldn’t have had otherwise.
Unfortunately, public commitment to state universities has been steadily shrinking over the last 30 years. As part of the general assault on the public sphere and the middle class, public state universities (the quintessential middle class institution) have seen their state support shrink dramatically over the span of a single generation. In my state (Washington), for example, the state covered about 80 percent of the cost of a student’s education in 1981. By 2013, that state support will have inverted to about 20 percent. What this means, of course, is that students have had to make up the difference and tuition has skyrocketed.
And that’s certainly one of the reasons why your claim that college is overvalued struck a chord with some people. The price to students and their families of a college education has been going up faster than PayPal stock. But that’s because state after state has pulled the plug on public funding. The actual cost of a public university has remained remarkably flat. In Washington, it’s the same as it was 20 years ago. If you leave out the elite private schools, it turns out that, far from being an overhyped bubble, college is, in fact, a really good deal.
But it’s still getting more and more out of reach for more and more people. Even though UCLA will cost you about a quarter what you’d pay at Stanford, that $12,000 a year (before those pesky luxuries like food and housing) is more than a lot of regular people can afford. And when regular people can no longer afford public universities, that’s a pretty sure sign of the middle class apocalypse.
Your notion of a higher education bubble, besides being wrong about public universities, only addresses the question of return on private investment. And I suppose that’s fair enough, given that you’re in the private investment business. But perhaps we should pause for at least a nostalgic moment to ask if there might be some value in public investment generally and in universities specifically, and not just for the masses, but also for penthouse people like you.
One of those people here in Washington is a man named Brad Smith, who serves as general counsel for the Microsoft branch of state government. Mr. Smith chaired a Governor’s Higher Education Task Force this year, a group composed mostly of Seattle business elites who helped us bring our public universities that much closer to full privatization. In his public appearances, Mr. Smith is very fond of telling people that Washington owes its economic good fortune to the lucky accident that the two Bills—Boeing and Gates—were born here. With Reaganesque charm, Mr. Smith lets his listeners know that the cornerstones of the Washington economy grew from the individual pluck and genius of two guys named Bill, both of whom were born on third base and both of whom dropped out of Ivy League colleges.
It’s a heartwarming story and makes for a great sound bite, but it’s worth mentioning that it’s not a stretch to say that Boeing and Microsoft (and all their billionaires and millionaires) wouldn’t exist as they are today without the massive investment of public funds.
The Grand Coulee Dam, built with federal money from Franklin Roosevelt’s New Deal and Public Works Administration, provided the electricity that powered the aluminum smelters in Vancouver and Longview that fed the Boeing factories in Seattle and Vancouver that churned out B-17 and B-29 bombers during World War II and B-47s and B-52s in the 1950s.
The Internet, without which Microsoft’s tremendous success and phenomenal profits would never have been possible, grew in part from research done by Leonard Kleinrock, a professor at the publicly funded University of California at Los Angeles who was educated at the publicly funded Bronx High School of Science and the publicly funded City College of New York. The early infrastructure for the Internet was created by the publicly funded National Science Foundation and the publicly funded United States Military.
It would be difficult to find any U.S. private company that does not benefit every day from the investment of tax dollars in education. A broad and well-funded public education system has been the key to the competitive advantage that our nation has enjoyed in the modern world. In order to continue to grow, capitalism must do one of two things: innovate or exploit. It must either continue to come up with goods and services for which people will pay the premium that supports a decently paid work force or it must produce crap as cheaply as possible by squeezing the maximum blood, sweat, and tears from a captive and exploited workforce. A strong public education system (and the political maturity and social mobility that comes with it) is the key to pushing the capitalist needle more toward innovation than exploitation.
And a capitalist world tilted toward exploitation is not just bad for the exploited, it will also be bad in the long run for the exploiters. The world that you and your friends are building—a world where public universities can become private in a generation, a world where unions as the counterbalance to rapacious capital are disappearing, a world that blames public employees for bankers’ sins, a world where the best and the brightest are developing software to make those sins easier to commit, a world where the richest one percent have more than the bottom 90—is a meaner world, a world where the fuse is always lit for upheaval, riots, and rebellion. You’ll find yourself constantly creating ever more elaborate schemes to blame victims, building more gated communities, and hiring more private cops. And that’s just no way to live, no matter how much money you have.
There will always be people like Mark Zuckerberg and the two Bills, people who can drop out of Harvard or Yale, synthesize existing research and technology, get rich and change the world. And your move to franchise the brilliant dropout is a clever one. But your young biotechnicians and social engineers and information entrepreneurs will be building on publicly-supported foundations that are currently withering from starvation. You’re hiring the individual entrepreneurs who will give us the next PayPal, but we’re losing the broad infrastructure that will give us the next internet.
All of your press usually mentions your rep as an iconoclast and slayer of sacred cows. But these days, everybody’s taking shots at higher education, and your voice is just one in a chorus trying to dismantle infrastructure and opportunity. If you really want to get ahead of the curve and step outside the box, start telling people that we need state and federal tax overhauls so we can start making the massive reinvestments that will make public universities public again. That’ll get people talking.
Again, thanks for bringing some attention to higher education. Sorry to bother you with the unsolicited missive. If you ever find yourself on the road between Seattle and Canada, look me up and I’ll buy you a beer.
Public University Professor and President, United Faculty of Washington State