The Cost of Education and Credentialism
The average student owes £45,800 and only one in five will pay this off. Is a university degree worth the money? It's time to take The Sniff Test.
I always wanted to be a stockbroker. Staring from the back of the car, onto the wide lawns of those double fronted houses, my mother told me we were in the stockbroker belt. I didn’t know what a stockbroker was.
A stockbroker is someone who invests other people’s money until it is all gone -Woody Allen
Nowadays, we call this job a wealth manager. Trading of shares is done by machine, but the advisory work and some of the investing is still done by humans.
Wealth managers are paid a percentage of other people’s money. It’s been a great place to be collecting these tolls for the past forty years and there is one big reason why.
Interest rates peaked at over 15% around 1980 and fell to almost zero four decades later. This is the cost of money and it became very cheap. As cheapness is relative, when one thing drops in price, something else becomes expensive.
As money is a measure of most things, most things became more expensive. Or at least most things that weren’t undergoing constant improvement, such as computers and televisions.
If you bought shares and bonds, a house or property, or fine wine and art, it went up in value year after year. If you or your family own any of these, you probably believe it is a great investment.
Interest rates fell all over the world, or the world as matters in finance at least. Anything that could be made overseas at lower cost fell in price, while anything in limited supply and hard to move, rose. This chart shows the change in price of goods and services in America this century.
A university education is increasingly funded by debt. This debt is provided by the government and the amount you can borrow keeps rising. When students have more to spend, because they borrow more, colleges and universities raise prices to soak up the extra money. As the cost of education rises, the government increases the amount that can be borrowed.
The additional money has to be spent on something. College campuses are more pleasant than they used to be, with great sports facilities and a wider range of courses to study. The daughter of one friend flies by private jet to be a cheerleader for the college team.
It’s not as expensive to study in the UK as in the US, but the trend is the same. There is over £200 billion of outstanding student debt and the government estimates only a fifth of it will be paid back in full.
Starting out in the City in the 1990s, I didn’t know about the interest rate super-cycle that is the backdrop to my career. Interest rates went up while I was at university, the latest stock market crash was fresh in the mind, and we were entering recession. I studied economics from text books written before 1980, or from papers arguing about the pressing needs of the economy, which is journalism with maths.
My degree did not prepare me to be a stockbroker, or anything else for that matter.
Learning from dead poets
Dead Poets Society is a fantastic film, which I showed my daughters hoping that they would take the same lessons from it that I did. But this is not how we learn, which ironically is what the film is about. I write about how we learn here.
My favourite scene, as I remember it, has the headmaster admonishing Robin Williams’ character for his unconventional teaching methods. His job is to get the boys to university, not to teach them to think, which they will have plenty of time to do when they are older.
Despite the best efforts of our educators, we do not pour knowledge from mind to mind, like water between buckets. Instead, we have a searchlight that seeks out and locks onto things, from which we draw conjectures and perceptions. Our interpretation is never exactly the same as that of those who are teaching us.
Having studied the arts at A-level, I had to take maths in my first year at university. The tutor told us that god would earn alpha plus, he would earn alpha, and that the best we could hope for was alpha minus. Oxford has a weird grading system.
The way to top marks is to capture as much as you can in your bucket and pour it out onto the exam paper as faithfully as possible. Everyone’s bucket leaks, albeit at wildly different rates, meaning we cannot exactly match the examiner’s thinking, and therefore cannot score an alpha. But the more we remember and the better we conform, the closer we get.
This does change as you click through the academic gears. The purpose of a PhD is to challenge convention and produce novel work. Up until that point though, education is a memory test and those memories leak away.
The rise of credentialism
You are buying credentials with your further education. You are showing the world that you can stay the course, retain and repeat what you are told, and that you are happy to do it. Plus, you must do it.
Companies use computer algorithms to screen candidates. There are a lot of applicants and the program needs an easy way to filter people out. If you don’t have a degree or two, then you don’t get an interview.
The most recent government statistics say that over half of people between 21 and 34 years old have a degree. That compares with just over a third aged 55 to 64. What used to be an elite qualification is now the norm. By definition, there cannot be enough elite jobs for over half the population.
In order to stand out you need another degree, which means more debt and more fees. No self-respecting company is seen hiring sub-standard employees and the algorithm is tweaked, to filter out those without a post graduate qualification.
Is this what companies want?
Education is a memory test, business is an experiment
The purpose of education is to make us useful members of society. This includes reading and writing, basic numeracy and a willingness to conform. Obedience is rewarded in school and the workplace.
As the number of students rises, universities try to make degrees more relevant to the workplace. Vocational subjects, including nursing and the law, are the most popular, with a corresponding decline in the arts, which teach people why things happen. Science remains useful to know how to do things.
For those who are good at memory tests, there are several careers that continue this path. Medicine, law and accountancy provide qualifications that are widely recognised, while banking has exams that are not. If you want recognition as a banker you must invest in an MBA, which buys you a network of contacts and a language in which to speak with them, rather than any great commercial insights.
By the age of thirty you need to know how to make money. Partners at law and accountancy firms must do this, as must doctors if they want an income to pay off student debt. Banking is all about winning business and you must spend your early career learning from those around you.
You do this by seeking out the most successful and latching onto them. Your searchlight mind seeks information and makes conjectures from what it locks onto. You do not learn how to do this in school.
Many of the most successful people have a process to do their work. This is more like a framework than a thick text book packed with facts. The framework is flexible and adaptable, and from the outside it can seem as if they are making it up as they go along. In many ways they are.
Everyone has a plan until they get punched in the mouth - Mike Tyson
What to study at university
I noted before that many of the jobs that will be available to you, do not exist today. The most useful thing you can learn, in addition to the ability and willingness to do so, is where you believe we are in the big cycles that will play out over your career. The next best thing is to learn how to do something.
Artificial intelligence is not coming for your job if you are young, because you don’t have one, other than a temporary gig to pay the bills. AI is going to help you do your job, at least for the first part of your career, during which you must develop an understanding of the context of your role. Show up, do, pass exams, but fail to understand your chosen business, and you will stall around thirty.
The best advice I heard before going to university was to attend the lectures of interesting people. I ignored it, because I was after my credential, which narrowed my focus. I did not seek out understanding, I took my bucket to wherever I was told to listen.
I didn’t know who was interesting because I was waiting to be told. Most of my fellow students were the same and there was little point asking them. A year spent attending random lectures would have been a good idea, but you are in far too much of a hurry when you are young and have time on your hands.
My rough guide is as follows. If you take a vocational subject, then make some time to study cycles. These are the substance of the arts. You can minor in philosophy, economics or literature, but remember you are doing this to understand the sweep of history, rather than for another credential.
If you are studying the arts, learn to code. You most likely will not need this in a job, because no-code computing is already with us, but it will teach you organisation and hopefully data management and statistics. These are valuable skills, even if only for doing your personal finances.
If you are studying languages, you’ve probably got it right. You’ll get some literature to understand history, and the ability to talk and learn from lots more people. As a great friend and contemporary said to me,
“I wish I’d done languages because nothing I learned was the slightest use in my business.”
What to do for a career
There are big cycles unfolding, which are referred to as exponential technologies. These are in narrow fields such as nuclear fission and blockchains, and broad ones such as AI and climate technology. These latter two will be integral to all businesses within a decade, and if you learn about them you can apply them anywhere.
The population is getting older and must be cared for. We will need smarter kids to pay for this and the technologies that enable them. Sustainability means reversing the trend to make things in the cheapest place possible, which was the hallmark of the past forty years. This goes by ugly phrases such as reshoring and friend-shoring, and will create high demand for security and defence, and a continued demand for government.
For generations we have gone to schools and universities to learn skills that we hope would land us a job to become passionate about. The advent of artificial intelligence, no-code computing and massive data, has changed that. This is the first generation that can study what they are passionate about, then go find the skills to make it a living.
What you wish you knew now
In researching this essay, I came across advice for twenty years olds from those in their thirties. It is striking how little of this is to do with careers. Most of it is social and I group it into three categories, for reference rather than recommendation.
Social
“You will lose 90% of your friends in next 10 years. Stop caring so much for their opinions.”
“People you like are not always right and people you hate are not always wrong.”
Living Life
“Spend the money on that thing you want to do. Someday you'll have the extra money but not the time or health to do it.”
Career
“Money has no morals.”
“Start a personal brand.”
My recommendations, from a greater distance, are:
“Find a mentor”
“When you think you are the smartest in the room, leave the room”, and
“Save don’t speculate, compound interest rocks.”
As for your education, if you intend to work for someone else, you will need to pay up front. Just try and make the most of your university time by studying more than your narrow curriculum. But if you want to work for yourself, there has never been a better time to follow your passion.
Stephen Fry in one of his criticisms of the Catholic Church, made the point that Galileo was tortured for trying to explain the Copernicus theory After centuries of an academic monopoly, during which time their solipsism included a belief that the Earth was the centre of the Universe, it beggars belief that an evidence backed challenge to that dogma would meet with such a violent riposte. But it did because an entire belief system was constructed on a very primitive scientific analysis leading to a dogma that could not bend in the face of new evidence
What is Latin for, ‘but it’s the science’ ?
Remembering the old British Telecom ad where the character ‘Beattie’ played by Maureen Lipman in a call to a friend said,
“Oh but she’s got an ology” referencing a degree though not knowing in what subject
It seems this pursuit of an ology became government policy under Blair and expanded ever since to the point that Nick Clegg’s Liberal Democrats were willing to abandon a 2010 election pledge on tuition fees to just have a feel of one of those leather bound red cases, a move that should have resulted in their political extinction
In 2010 also though, Stephen Hawking made what was an extraordinarily arrogant comment that,
‘Philosophy was dead’ implying that only those in academic discipline were entitled to observe and debate the pros and cons of science and physics
Thus the first step into academic discipline must be to get that ology first no matter the cost
The main argument against that, as made by the late Christopher Hitchens in his debate with William Dembski is that without philosophy, academia tends to miss observable evidence simply because it’s not in the book
Seems to me as though the pursuit of the ology at all costs can lead to blind adherence to dogma and humanity of course must follow ‘argumentum ad verecundiam’.
It must be okay because the experts said so