Is Higher Education a classic bubble? 7 reasons to think so

Peter Thiel, co-founder of Paypal and first major investor in Facebook, has a track record in spotting bubbles, namely the internet and housing bubbles. He thinks he’s spotted another: Higher Education. But he’s not alone, an increasing amount of commentary and evidence points in this direction. Like the housing market, where people rushed to take out loans (mortgages) based on the belief that the value of their asset will always rise (or at least stay the same), many suffered a shock when the value dropped.

Interesting idea, but where’s the evidence?

1. Blind belief

Criticising Higher Education is like “saying there’s no Santa Claus” claims Thiel. This is a feature of all bubbles, believes Thiel, where ‘groupthink’ takes over and false assumptions become absolute beliefs, and even debate of the negative consequences is seen as ‘party-pooping’.

2. Pricing

Huge hikes in prices for the buyer (almost tripling in UK), now seem unrelated to the real price of the degree. Since ’78 a US degree has increased by 650 points above inflation, compared to the housing bubble at only 50. This is exactly what happened in everything from tulips to internet stocks and housing. There is no compelling evidence that the future worth of degrees will be guaranteed. That’s the mistake made in all bubbles.

3. Unintended consequences

In a bubble, real demand is brutal, and in a buyers’ market may lead to degrees being simple indicators of ‘class’ rather than intrinsic value. In adopting the £9000 (or close) fees, Universities may be creating their own bubble, dislocating cost from real value. Institutional brand ranking, and they are brands (academics & students come and go, and content owned by publishers), may lead employers to dismiss degrees from institutions perceived as second-rate. In short, your degree may become a liability while your debt remains all too real.

4. Student short-termism

Decisions made by young people are measurably short-term, with factors like ‘fun’ or ‘easy’ often playing a part in their decisions. This is a distorting factor, as it over-values some subjects and degrees over others. This generation could become the most indebted generation ever, in a time when debt has been shown to be an indicator of failure. What makes this bubble so dangerous may be naivety.

5. University short-termism

No one could really claim that the huge hikes in pricing reflect corresponding hikes in the value of University tuition. So what’s happening? Universities are complicit in this. They raise prices because they can, without attention to lowering costs through online learning, fourth semesters etc. In fact the quality of tuition may have fallen, with more students and less qualified lecturers, matched by salary inflation at the top, higher numbers of administrators and wasteful capital expenditure in largely empty buildings. I've blogged on this before.

6. Context changes

Just because degrees lead to value now, doesn’t mean they will in the future. The chicken that comes out for its feed from the farmer every day, may suddenly find its neck wrung. When a bubble bursts, the rising tide that raised all ships, suddenly falls, leaving huge numbers stranded. As unemployment rises, a similar effect takes place with large numbers of debt-laden graduates on the market. There is already evidence of graduate wages stagnating or falling.

7. Tsunami of debt

The student debt bubble in the US has reached $1 trillion and raising eyebrow. Delayed payment means the accumulation of huge debts by students, and in this case, ultimately, the bailout would come from the state. Heard that before? In the US SLABS (Student Loan Asset-Backed Security) underpin students loans and have Federal Guarantees. A recipe for a massive default?

Conclusion

The truth of the matter, I suspect, is that Higher Education has become simply an extension of school, but with delayed school fees. Shortly the majority will be moving seamlessly from school to higher education. Many will enjoy the fruits of a meander through University but may (literally) pay a heavy and disproportionate price later. However, as Shakespeare said in The Merchant of Venice, ‘All that glisters is not gold’, and debts, as that great play so eloquently shows, distort human behaviour in unpredictable and distasteful ways. A degree should be seen as more than a fiscal investment, but that does not mean taking ridiculous risks when you’re only 18 years old.

Why Royal Wedding is lethal for young girls

When I became a school Governor in a comprehensive school, I was shocked at the lack of educational ambition, among both working class boys and girls, even their parents. It was something that was less obvious in Calvinist Scotland, where I was brought up. I saw, and spoke to, young girls who were infatuated with make-up, looks, fashion and the lethal, mistaken hope that luck, marriage or fate will get them somewhere. They had given up on education as a means of advancement before they had even started. Since then I've been looking for causes.

Rousseau and reading

“Reading is the great plague of childhood” said Rousseau, in Emile (On Education). What he meant was the way the dead hand of a fixed narrative can shape a child’s outlook, not always to good ends. This is a debate that goes all the way back to Plato, who warned that an early infatuation with fiction has its dangers.

There was a vivid illustration of Rousseau’s point on Radio this week, when a smart, young, black, woman author, Michelle Gaye, who’s written a book called ‘Pride and Premiership: from Wags to Riches’ (what a great title), described today’s young women as being obsessed with the Cinderella narrative. She saw the WAG phenomenon, the relentless pursuit of footballers, who would rescue them from their ordinary lives, as a playing out of this narrative. The poor girl gets her prince. It’s a fixed, fictional narrative that drives young girls (and men) to extremes of behaviour, fuelled by a newspaper and magazine industry that has long abandoned serious and real events, for the perpetuation of fairy stories.

Cinderella crushed

The Diana affair was mass hysteria, based around this ‘princess’ myth, albeit a tragic extension to the story, where the princess, being driven from the Ritz, gets smashed to pieces in that most fairy tale of cities, Paris. The crowds, of largely women, that flocked to the streets and laid flowers, were not shedding tears for Diana. They were playing out a narrative that locked them into a fatuous fairy tale. They had never met the woman, and acted upon their anger that the fairy tale had been usurped. It was a cathartic vehicle for their own failed dreams. They weren’t mourning Diana, they were mourning the death of a fairy tale. The story had been hijacked and skewered. Childhood dreams were being crushed.

Frankie Boyle hits a nerve

Frankie Boyle shocked the nation, and shot to fame on the back of one famous joke that hit a nerve with anyone who saw through this nonsense, when he recommended that we celebrate Diana’s death by, “by staging a gang-bang in a minefield”. It was typical Boyle, but clever in its own way, because it is so extreme. It was a disturbing and obscene counterpoint to an equally disturbing and obscene myth. It got 1.6 million hits on YouTube.

When Princes go bad

Prince Charles screwed around with the Princess story, and got burned. He’s now forever a baddy, having shacked up with one of the ugly sisters. That wasn’t meant to happen. It’s not what we wanted. Prince Andrew married Fergie, a puffed up, rouged, pantomime buffoon, and they’re still playing out the Cinderella tale gone wrong. Both have turned into money-grabbing caricatures of a Prince and Princess, and we all shout ‘boo’ when they appear. The youngest has already been written off, after his ‘nazi’ uniform gag. What a lark – eh? They thought they had supressed all that German Nazi stuff when Edward abdicated, then he splashes it all over the forever loyal, Royal, red-tops.

Third time lucky?

Third time lucky the nation hopes. This time it may work, and Royalty will clear away the broken crockery and put a new mug on the mantelpiece for the nation to adore. This time it’s an unbreakable plastic mug, as this Prince is an anodyne cypher of a man, devoid of personality and original thought. He may very well play out his destined role as the quiet actor in this crooked old pantomine. So the fairy tale will continue with the WC wedding. A large section of the nation will, once again, play out their role, resurrecting the memory of Diana and what should have been. The tape is rewound and her bloody death and possible marriage to a dark skinned foreigner, can be erased. England will revert back to buying bricabrac, eating cake, and watching their Cinderella marry her (gormless) Prince, on TV. Once again, young women will be seduced by a dangerous fiction, that if you get a makeover, tan and hawk yourself around the circuit, you’ll find your Prince.

Disneyfication of Royalty

In the second half of the 20^th century two forces united in UK popular culture, Disney and Royalty. Royalty became Disnified, in the sense that the sanitised, feudal idea of a ‘Prince’ and ‘Princess’ was seen as ideal and aspirational. Young women are being seduced by this ideal into believing that it’s possible, when it’s the very opposite. Princes have been replaced by boorish footballers, but it’s the same old myth. Was there anything more depressing than the recent series Big Fat Gypsy Wedding, where the Disneyfication of the wedding reached absurd proportions. The lower the caste in society, the more they hang on to these dreams, as it’s a way of avoiding reality.

Don’t read Cinderella to your children, especially your girls, it’s a lethal cocktail of falsehoods that will do them inestimable harm.

Tony Buzan, true or false?

Just finished a fantastically readable book on memory, Moonwalking with Einstein – The Art and Science of Remembering Everything by Joshua Foer. In addition to scotching the usual myths about photographic memories, it’s a fine introduction to how important memory is, along with the techniques, which anyone can learn, to improve their memories. Foer takes up the challenge of entering the US memory Championships, ends up the winner, and the book is the story of that journey. But the weirdest episode in the book is his encounter with the eccentric Tony Buzan.

I’ve always been suspicious of Buzan’s hyperbolic claims and the fact that his books seem like an endless series of re-treads, so it was satisfying to read that an expert on memory, and others, had similar, if not harsher opinions.

Brain is not a muscle

Foer clearly dislikes the ’brain is like a muscle’ analogy that Buzan trots out, “Buzan’s most hyperbolic claims about the collateral effect of ‘brain exercise’ should inspire a measured dose (at least) of scepticism.” Foer is not alone. Ed Cooke, an English memory grand master, has similar views, “Ah, yes the estimable Tony Buzan. Did he try to sell you that nonsense about the brain being a muscle?...Anyone who knows the first thing about the respective characteristics of brains knows how risible that analogy is.” To be fair, it’s only an analogy, that suggests that practice improves memory, which it does, so I’d let him off on that one.

Self-styled guru

Foer also thinks that Buzan takes the “self-styled guru” thing too far, “he seems to cultivate the sense of aloofness and inaccessibility that are a prerequisite for any self-respecting guru”. But it’s the interview that’s most telling. Buzan is half an hour late for the interview (maybe he forgot the time) and Foer damns him with faint praise, “Everything about Buzan gives the strong impression of someone wanting to make a strong impression”. Buzan often reminds Foer that he is a modern Renaissance man but all Foer finds is “Buzan’s tidy little narrative”.

Books

When he asked Buzan’s chauffeur (he drives around in an ivory coloured 1930s taxicab) about his boss’s books, the guy's caught off guard and says, “Same meat, different gravy”, and Foer clearly agrees that across 120 books there’s oodles of repetition. Indeed, the competitive memory community contains a great number of people who think he has “gotten rich peddling unscientific ideas about the brain” and that he’s, “a bit of an embarrassment”.

Pseudoscience

What Foer seems to find most annoying is Buzan’s “habit of lapsing into pseudoscience and hyperbole”. For example, “Very young children use 98% of all thinking tools. By the time they’re 12, they use about 75%. By the time they’re teenagers, they’re down to 50%, by the time they’re in University it’s less than 25%, and it’s less than 15% by the time they’re in industry”. I have to agree, there’s a point where credibility gives way to straight sales talk, and that’s a line he needn’t cross.

Mindmaps

He gives Mindmaps an endorsement but rejects Buzan’s claim that they’re the “ultimate mind-power tool” or a “revolutionary system”. I agree with Foer here. I don’t use mind maps, as they tend to limit the way I think, which is more language based than visual. But, like Foer, I agree than the increased ‘mindfulness’ and focus that mind-mapping brings can be useful.

Conclusion

Foer’s book is a rollicking tale of someone with an average memory, who simply set out to show that it can be massively productive through training, and engages with the serious science of memory, along with it’s role in a person’s character, life and learning. If you don’t like the pure science, it’s a wonderful introduction to how the mind and memory works.

PS

Another book I’d recommend along the same lines is Embrace the Wide Sky by Daniel Tammett which I’ve reviewed in this blog.

Diversity training damned in new study

Has diversity training become and end in itself rather than a means to an end? The vast amount of time and money spent on diversity training, when evaluated, is found wanting, mostly ineffective, even counter-productive. With evidence from large scale studies, from Kochan, Dobbin and now Kalev, you'd have thought that the message would have got through. The sad truth is that few on either the supply or demand side, give a damn about whether it works or not. It's become an article of faith.

I've blogged about this before, giving both an example of a diversity course I've experienced and a major study from Professor Frank Dobbin at Harvard, to show that diversity training is mostly a sham, a view, I should add, that is shared by the majority of people I've spoken to on the issue.

Massive study – diversity courses largely useless

Most diversity training is not evaluated at all or languishes in the Level 1, la la land of ‘happy sheets’. So check out Alexandra Kalev’s study from the University of Arizona. 31 years of data from 830 companies – how’s that for a Level 4 evaluative study! Her latest study found, after the delivery of diversity training, a 7.5% DROP in women managers, 10% DROP in black women managers and a 12% DROP in black men in senior management positions. There were similar DROPS among Latinos and Asians.

The strength of this study comes from the quantity and integrity of the data. It relies on compulsory federal EEOC (Equal Employment Opportunity Commission) filings on the number of women and people of colour in management, along with details of diversity training programmes.

Sensitivity training a problem

The bottom line is that the vast majority of diversity courses are useless, especially when driven by HRs perception of avoiding prosecution. The problem centres around courses run in response to legislative and external pressures. Kalev found that , "Most employers….force their managers and workers to go through training, and this is the least effective option in terms of increasing diversity. . . . Forcing people to go through training creates a backlash against diversity." One of the problems, that both Kalev and Dobbin found, was the focus on ‘sensitivity training’ where people are often forced to focus on interpersonal conflict. These were the training courses that produced a backlash, as they were intrinsically accusatory.

Diversity courses are “more symbolic than substantive," says University of California LAW Professor, Lauren Edelman, She independently reviewed Kalev's study and concluded that the problem was training in "response to the general legal environment and the fact that organizations copy one another."

One bright spot was the finding that some diversity initiatives, namely those that were voluntary and aligned with business goals, were successful. This is similar to Professor Frank Dobbin’s study at Harvard, who showed, in his massive study that ‘training’ was not the answer, and that other management interventions were much better, such as mentoring.

Kochan

Thomas Kochan, Professor of management at MIT’s Sloan School of Management’s five year study had previously come to the same conclusions, "The diversity industry is built on sand," he concluded. "The business case rhetoric for diversity is simply naive and overdone. There are no strong positive or negative effects of gender or racial diversity on business performance." The problem, according to Kochan, is the bogus claim that diversity leads to increased productivity. This is simply unproven as there is little or no hard data on the subject. Kochan found that none of the companies he contacted for his study had carried out any systematic evaluation of diversity training. Evidence around productivity is mostly anecdotal and repeated as a mantra by interested parties.

Groupthink

Companies, worldwide spend many hundreds of millions of dollars each year on diversity training. The tragic truth is that most of this is wasted. Groupthink seems to be at the heart of the matter. Groupthink among people who employ and promote people like themselves creates the problem. Groupthink among compliance training companies who simply do what they do without supporting evidence and tout ineffective ‘courses’. Groupthink in HR, who find it easier to just run ‘courses’ rather than tackle real business problems. The whole edifice is a house of cards.