Peter Thiel’s Thoughts On The Education Bubble

Peter Thiel is one of the Co-Founders of PayPal and a key member of the ‘PayPal Mafia’ who went to go on and dominate the startup world, creating companies like Youtube, Tesla, SpaceX, LinkedIN and many others.


He’s also the Co-Founder of Palantir, the first outside investor in Facebook and the author of Zero to One (2014). As we’ll discuss today and on the With Joe Wehbe Podcast, he’s also the creator of The Thiel Fellowship, which gives young people $100,000 to quit college for a year and go work on their ideas.


There are entrepreneurs and their are entrepreneurs… I don’t know Thiel personally, but what I do respect about him is that he is a no-fluff deep-thinker. He doesn’t muck around on Twitter like the rest of his Silicon Valley peers, he is not afraid to be a contrarian (someone who goes against the crowd) and he has phenomenal insights into education.


On episodes 195-202 (or thereabouts) I dive deep into his education philosophy, and it’s impacts on learning and society.


Why should you care about Peter Thiel?

  • If we want ‘education’ to lead to innovation, he is someone who has very valid thoughts on this. It’s hard to see this being done effectively by people from the public sector who run or administer the schooling system — how will they cultivate innovative thinkers? The people in our systems who are charged with innovating do not usually go through or operate in environments that cultivate it!
  • He is, without-a-doubt a Without-The-Box thinker on the topics of education and business/entrepreneurship. Yes, there is more to life than business, but it is a dominant vehicle for driving change.
  • If you want to be a leader and an innovator, he is someone who agitates some of the right things to think about, and specifically, the right ways of thinking, which we’ll get to when discussing his book.

Firstly… what sort of product is education?


This is one of Thiel’s opening questions… what sort of good is education?


Firstly, is it an investment? Are we investing in our future career prospects?


Secondly, is it a consumption good? Is it a four year party that we pay for using a vicious debt system?


Thirdly, is it an insurance policy? (This one always gets a laugh — for me it was an insurance policy). Is it this idea of being able to protect yourself from falling through the cracks of society? This is a sentiment I think we can all recognise within ourselves and those around us, but Thiel has a good follow up question… why have the cracks become so big?


And fourth and most entertaining, one of Thiel’s latest impressions is that it’s a sort of crazy tournament where people compete to get into top-tier schools that don’t change and improve much over time.


It is crazy to think about how lumped together and interwoven these things are.


Five Reasons For The Education Bubble


Thiel points out that there is a serious bubble in education. This comes back to the idea of the ‘expensive insurance premiums’ we’re paying in many parts of the Western World for this supposed salvation.


Reason One — Debt & Insurance Premiums.


Cost of tuition in the USA, according to Thiel, has risen 400% since 1980 (after inflation). This was mitigated because the time taken to pay-off the debt was getting shorter and shorter… up until 2000!


Since the turn of the millennium it’s taking longer and longer in the US to pay-off the debt. This is scary, especially because you can’t declare bankruptcy on this debt.


Reason Two — Intangibility of Learning as a Product.


We’re in the era of bubbles, and Thiel talks about why education is different to the housing (2008) and tech (2000—2002) bubbles.


For one thing, the product is more intangible — ‘this will be useful in the future, you’ll see’. Of course the problem is, this is the nature of learning, the best things to learn are all intangible which is why I don’t think there should be a debt system for them… it’s a bad fit in an age where these conventional career paths are becoming less desirable and there isn’t an immediate payback on expensive learning.


Bubbles have other features too — they make consumption goods feel like investments (he uses the example of people in the housing bubble buying houses with pools and thinking of it as an ‘investment’). They also require abstractions away from reality… which means that people immersed in them are in this sort of ‘la-la land’ that is not in touch with reality, but they can’t tell. We definitely see this in education, which is a confusing term… most people are getting a reality check once they graduate and enter the workforce, and the world of academia that dominates colleges and universities is a strange echo chamber for what Nassim Nicholas Taleb labels ‘careerism’.


For a scary example of this check out The Big Short or the documentary Princes of the Yen about Japan’s economic circus and central bank meddling in the late 1980’s—90’s.


Reason ThreeMonopolistic.


Thiel doesn’t explicitly state this, it’s my observation. As my Constant Student Co-Founder Scott McKeon says, universities used to be monopolies of information (before widespread literacy and Google came along), then they evolved to be monopolies of qualification (certifying you to do a particular job). Thiel talks a lot about monopolies in Zero to One. The strong monopolies universities and colleges have as the default post-high school option or ‘dream’ for young people creates a huge bottleneck.


Because of this, prices go up over time (to deal with demand) without the quality of the education changing at all (everything looks good as tuition keeps rolling in… why change?). This is a bad feedback loop, and is why so many people studying today do not find their studies to apply to the workforce or what the latest is in their industry — please be mindful though, this is a major generalisation. Some specific degrees, schools and universities do a lot better than others, but this is the overall story.


Reason Four — Failure to Imagine an Alternate Future.


Alright, why is all this madness going on? Why don’t people change? Thiel says it’s partly due to a ‘failure to imagine an alternate future’. Powerful.


I see this a lot, I’ve heard it straight from the mouths of Constant Students. They don’t know what else to do, and the problem is that the alternate future is very much ‘Thousand Doors’-esque, i.e. one door at a time, whereas the story that they’ll do the degree and either get successful or figure it out later is naive.


But the spirit to imagine this and believe in oneself is taken away by the same schooling systems! Your grades seem to measure your intelligence, if you don’t participate in the system you feel like you’re getting left behind, so the psychological pressure to conform is huge. But when you participate in it, the stress of studying whilst working, managing deadlines and assignments etc. takes away time, energy and confidence to image an alternative.


Reason Five — People’s ambitions get beaten out of them!


Thiel speaks from his own experience, that when you track people from K-12 and then into the system, they don’t have the resilience to bounce back when they don’t get automatic success.


‘There’s always this idea that there’s so many people ahead of you, so many people better than you, so who are you to think you can do anything different?’ and this cycle becomes self-fulfilling and no one does anything different.


More resources on Peter Thiel


I will have two or three more blog posts unpacking Thiel’s education philosophy, and specifically diving into his book Zero to One and unpacking The Thiel Fellowship.


This will also correspond to episodes 195-202 on the With Joe Wehbe Podcast


But what’s better than my opinions? Yours! Check out some of the material I’ve used to source this series on the blog and podcast!


Peter Thiel: U.S. College System as Corrupt as Church 500 Years Ago

Education as Signalling — Peter Thiel on the Economics and Declining Quality of Higher Education

Peter Thiel EDUCATES College Professor who asks: “What’s your problem with higher education?”

Peter Thiel on markets, technology, and education

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