The Education of Millionaires - Michael Ellsberg [125]
I hope my book is a step in the right direction.
■ IF YOU’RE UNDER TWENTY, THIS MAN MAY WANT TO PAY YOU $100,000 TO “STOP OUT” OF COLLEGE
Peter Thiel is another person who sees that higher education may be going the way of the housing market. Thiel cofounded PayPal, which sold to eBay for $1.5 billion. In 2004, he famously invested $500,000 in Facebook—the first outside investment in the company—and the stake is now worth billions. As president of Clarium Capital, he oversees over $2 billion in assets.
In January 2011 I met with Peter in his San Francisco mansion—far and away the most stunning piece of real estate in which I have ever stepped foot—which he rents, overlooking the Palace of Fine Arts near the Marina.
Peter gestured toward his majestic rented living room. “The house I’m living in—very nice house. The people who built it spent seven years building it. At the end of the seven years, they decided not to move in. What they had chosen to do with their lives changed during those seven years. I think it’s very hard to know what people want to do over twenty years. One of the things that went wrong with housing—when people did the mortgage calculators and compared it to renting—was a big-picture mistake: If you rent, you have options. If you buy, you have fewer options. So buying should be a lot cheaper than renting, because of all the options you’re giving up.”
Peter, who holds undergraduate and law degrees from Stanford, sees an analogy here with investments in formal education. “Take the tracks where one can make a plausible case that formal education is an investible decision. These tend to be the college tracks that are less fun. Premed and engineering: those are the two where college is really not just a high-priced consumption decision. You’re spending a lot of Friday nights in the library, memorizing organic chemistry or doing engineering problems.
“But even in these limited cases where college is actually an investment, it only works if you actually do that career. Your premed, plus medical school, plus residency, only is a good investment if you commit to being a doctor for the rest of your life. The challenge with that is that you are constraining the kinds of choices you make when you’re just eighteen, starting out.
“You’re implicitly giving up on a lot of other things, very early on—so the rewards have to be a lot better to make it worth it. It’s this piece about flexibility and adaptability that people never think about. One of the things people said during the housing boom, 2005, is ‘Yes, this house costs a million dollars, and maybe the price is a little high right now, and it’s cheaper to rent, and I might like to spend that down payment on other things—but it will be fine over twenty years.’ That may be true. But one of the things that’s implicit with that statement is that you know the path your life is going to be on over the next twenty years.
“Similarly, the economics of becoming a doctor or an engineer—the few things where formal education actually makes a lot of sense—should be insanely higher than anything else. If they’re just close, that’s very bad, because there’s all this flexibility and adaptability you’re giving up.”
Partly to combat these problems Peter sees in higher education, he has funded the Thiel Fellowship (http://www.thielfoundation.org), which is awarding twenty budding entrepreneurs under the age of twenty $100,000 each to “stop out” of school and start their business directly. He caused waves around the nation when he announced this program in 2010. The press release says, “From Facebook to SpaceX to Halcyon Molecular, some of the world’s most transformational technologies were created by people who stopped out of school because they had ideas that couldn’t wait until graduation. This fellowship will encourage the most brilliant and promising young people not to wait on their ideas, either.”6
In predictable fashion, commentators enthralled by the allkids-must-go-to-college-or-they’ll-end-up-as-janitors ideology reacted in horror. Jacob