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Drop Out and Grow Rich : The Remix

A bunch of people e-mailed me about the Drop Out and Grow Rich article I posted yesterday. A friend of mine pointed out a few things, most importantly that I failed to give the college grad interest on his money. Fixing that (and making him pay interest if he was negative, but only after the first 4 years of college) put him very close to the high school grad with private school money. Never charging him interest for being negative got him slightly above that same person.

Then it was pointed out that the difference in earnings wasn't 900k as the college-mongers claimed. It was more like 1.3mil. I had no good data on salary increases, so I assumed the inflation rate. I guess it stands to reason that after a while job experience means more than the degree, so the gap gets smaller.

If I fudged the grad's income to equal a 900k lifetime earnings difference, the Dropout with Private School money is again the winner, but is still followed closely by the grad. If I fudge the dropout's starting income (to $29,692) to get the 900k difference, the grad still beats the dropout with public level money, but only by 300k. Also, the dropout would be beating him until age 58.

The Thiel Fellowship

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Two years ago, Peter Thiel piloted his Thiel Fellowship. It targets twenty students under the age of twenty and gives them $100,000 to drop out of college and journey to entrepreneurship. Their projects range from scientific research to educational startups. It was originally created to fight the proclaimed education bubble and to also foster innovation.

It has now been two years for it's original class of fellows, marking the end of their affiliation with the program. It's an interesting program to say the least. The concept of an education bubble is under hot debate. But, I completely understand where Peter Thiel is coming form.

He believes one goes to college for the sole purpose of getting a job, i.e. making lots of money. For those who subscribe to this belief, yes there is an education bubble. Engineering degrees at universities like the University of Texas at Austin post higher graduate salaries than many private universities whose tuition is upwards of $50,000 a year. If you believe the main purpose of life is to make money, which is by no means wrong, then yes we are in an education bubble.

I, on the other hand, do not believe that the sole goal of going to college is getting a job, despite how counter-intuitive that may sound. I do plan on going to college for the experience. But from a total-rational perspective, I do see why my purpose of investing in higher education is flawed.

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