Tuesday, December 11, 2012

Should your kid go to college (part 1)?

Rand University, Johannesburg, South Africa - my college after high school

No. First read "8 Alternatives to College" on the blog - The Altucher Confidential - and then bookmark the blog so that you will be able to enjoy sound advice, shared with common sense and logic derived from experience, as often as you'd like.

Now… here’s my take on a U.S. (insert your country here) college education:

1.     Colleges feature resort-style facilities at prices similar to luxury beach resorts – send your kid to a beach resort in Dominican Republic; it will cost the same, but she will have more fun, and it will be more educational
2.     The college experience is mostly ‘party-time’ for young kids, depriving them of quality learning, independent thinking and general life experience
3.     The lost ‘opportunity cost’ of attending college can be measured in more than just money (see # 2 above, and # 4 below)
4.     The product does not match either the aspirational value, usefulness, or cost of the goods sold, especially when measured in $ return on investment, or ROI
5.     In the past students were at least taught a sense of entitlement based on learning, future earnings, etc.  Today, that value proposition is also gone
6.     Colleges stifle young creativity (at a peak during early years). Innovation and new ideas – during a time of abundant availability – are sacrificed, focusing instead on ‘book knowledge’ about historical events, thoughts and philosophies
7.   Colleges support the teaching of risk avoidance and mitigation (“you need to graduate to get a good job”).  Young people have greater risk tolerance.  The older we get, the more risk averse we become

Let’s revisit point # 4 above:

Q: What can one buy for $150,000 (i.e. the average cost of a 4-year degree in the US)? 

How about a year spent teaching English to kids in Japan, a turnkey retail business (e.g. the entry cost of a Subway franchise is about $100,000), and about $40,000 in cash ‘left over’ to fund the first few months of business expenses, if required.

The difference in ROI is not only significant, but also material in terms of breaking the mold young people are coerced into.  The mantra: “get an education, in order to get a job, in order to qualify for a lifetime of middle-class debt” vs. self-employment and – more importantly – sustainable, debt-free, self-sufficiency!

As a small business owner, you will generate an income for yourself and other people.  You will employ people who graduated with student debt, like an accountant.  You will have equity and you will start creating wealth on day one – creating assets with value.  These assets can be sold, allowing you to buy another business; or leveraged, allowing you to expand your existing business, open a second store, etc.

Some of your kid’s high school friends, who went to college, will likely ask your self-employed child for work.  She will be unlikely to hire these grads, because they are unlikely to offer any value to the business commensurate with their sense of entitlement, drilled into them at home, and at school!