The True Cost of the Education Bubble

I hinted at it in my last post, but have addressed it in more depth in my column this week at Forbes.  A brief excerpt:

The theme from all these failures is distorted signals and corrupted communication.  People, no matter how savvy, cannot possibly research every nook and cranny of the economy before making an investment.  They make decisions, therefore, based on signals – prices, interest rates, perceived risks, and the profit history of other similar investments.  If these signals are artificially altered or corrupted, bad decisions that destroy wealth and growth will result.

Which brings me back to education.    I will tell you something almost every business owner knows:  We business owners may whine from time to time that banks won’t lend us money, but what really is in short support are great people.  Nothing has more long-term impact on an economy than amount and types of skills that are sought by future workers.  That is why everyone accepts as a truism that education is critical to economic health.

Unfortunately, there is good evidence that our education policies have already done long-term harm.   The signals we send to kids making their higher education plans have disconnected them from reality in a number of fundamental ways, causing them to make bad decisions for themselves and the broader economy.

Examples follow.  Read it all.

  • Richard Harrington

    American Public Media's MarketPlace had a fascinating story on 11/10. People from foreign countries are using agencies to get them into US universities using fraudulent grades, transcripts, applications, etc. The foreign high schools give out free A's because they want to talk about the number of students who go to US universities. The agencies get paid per successful student so they have an incentive to do anything to get students into the university. And, the universities like having all of these students paying full tuition. Pretty much everyone involved is gaming the system.

  • IGotBupkis, Sailing the Economic Seas Betwixt Scylla And Charybdis

    My suggestion if you want to hire Great People: Fire the HR department.

    HR people are, for the most part, lazy ass slugs who don't want to do anything but look at bits of paper that tell them who to hire. They create ridiculous excuses for job descriptions that demonstrate zero knowledge of either the job needs or market likelihoods (Yes, making it a "requirement" that someone know two different ridiculously obscure software programs is actually going to find you people who know those things, as opposed to someone willing to lie about knowing those things on the presumption that they can fake it). It favors a market in damned-near useless "certificates" for some fields, when those certificates show much more how good you are at taking tests and how much spare money you have to burn than it does how much you understand anything. They favor people just out of college rather than someone with 20-30 years of experience in a field... because, after all, experience isn't worth jack compared to a freshly minted degree.

    I'm sure that's not true for all HR people but my own job experiences have shown that to be the fact for most of them.

  • http://hardwick.fi/blog Sam Hardwick

    There's a spelling mistake in that column: "shear" should be "sheer".

  • http://hardwick.fi/blog Sam Hardwick

    And "well be a factor" should be "will be a factor".

  • RobH

    Great insight in that article. I've never considered how easy credit could lead to misallocation of human capital, but it makes perfect sense. One more unintended consequence. I also hadn't heard that stats on growth of particular majors.

  • Ted Rado

    Igotbupkis:

    You are SO right. Many years ago, I was Mgr. of Process Development in the Technology Div. of a chemical company. The VP of HR was an MBA who trid to tell me whom to hire. In intervieing engineers, I was looking for people with lots of initiative and a real interest in their profession. Experience applicable to our needs was a plus as well. The MBA tried twisting my arm to hire anyone with a warm body and a Ch.E. degree. I guess he believed that his job was to get slots filled rather than find the best person available.

    The real world shakes out slackers and incompetents. I have very seldom seen anybody who is competent and works hard lose their job. I have seen lots of people at the low end of the skills/effort scale go out the door.
    A company cannot afford to have a weaker staff than their competitors.

    It is not enough for a young person to study something for which there is a commercial demand. They must also apply themselves dilligently after finishing university. They can't rest on their oars.

  • stan

    Davidson College was the first to eliminate loans from financial aid packages (and offers aid which covers 100% of its students demonstrated financial need).

  • Bram

    Our HR posts my job descriptions and gives me all the resumes - then screens the ones I ask for.

    Last time we hired a full slate of interns, we had a tough time finding well-qualified Industrial Engineering, Math, or Business Majors. Half our hires were foreign students.

    I think the college bubble is to correct as soon as my generation's kids graduate High School. I'm willing to pay a lot for their educations - after they tell me their plans for college and beyond. And, it would make me proud if my son decided he is better suited to learn a trade.

  • Jim Collins

    It isn't only colleges, some of these tech schools are doing pretty much the same thing. A while back I was interviewing candidates for 3D Mechanical CAD. I was getting the honor students from several of these schools in and around Pittsburgh. Every one of them had a protfolio of pretty pictures and passed a software test, but, every one of them failed to give a correct answer to a basic question. The question was "Where would you find information on how to draw a 6-32 thread?". Most of them didn't know what a 6-32 thread was. I would have accepted Machinery's Handbook, McMaster-Carr's website or even a Drafting book. All of these people had "Associates" degrees in Mechanical Drafting.

    By the way a 6-32 screw thread is 0.138 inches in diameter and has 32 threads per inch.

    As far as there being no jobs availible, there are plenty of jobs, what we are short of is qualified people to fill them. My current employer is always looking for good welders and fitters, but, you would be suprised how many fail a test we give before hiring. The test is a Drug test.

  • Mark 2

    @Jim wow I would hate to work for you. If I spent two years learning how to do design drawings, and your all bent out of shape because I don't know about the "Volume 14 of the Kinsley manual" (google it)

    See it is a two way street, your employee brings in the general knowledge he learned in school about the tools and you need to provide the specifics for your shop.

    I would have never gotten ahead in computer science when I got out of college and they just plunked me in a seat and didn't tell me about the resources available to me.

  • Mark 2

    @Jim again - and it takes gall to think that all 3-D drafting has to do with your screw, and no other industry would have any type of drafting need.

    The kids you wouldn't hire got lucky in my opinion.

  • Jim Collins

    Mark,
    Aparently you don't know squat about Mechanical Drafting. The question that I asked is supposed to be basic knowledge.

    You are not supposed to memorize it, but,you should know where to look it up. If they had a degree in just Drafting then I would understand, but, their degree is in MECHANICAL drafting.

  • Jim Collins

    Mark,
    It would be the same as you finishing your degree in Computer Science and not knowing what a bit or byte is. It is that basic. They should have been taught to use those references in class.

  • LTMG

    I have an engineering degree and an MBA in industrial management. These have served me very well since 1980 to keep the income flowing and to weather five economic downturns.

    On the other hand, while pursuing these degrees did teach me how to solve problems well, they did little or nothing to help me develop better judgment.

    Years ago I read Professor Allan Bloom's "The Closing of the American Mind" in which he argues that a liberal education in the Western classics is essential to learning how to think and form judgments. If I had the chance to restart my tertiary education, I would remain an undergraduate an extra year and take courses in literature, politics, history, philosophy, and perhaps theology. I feel I would have been a better young supervisor and manager had I pursued a liberal education in addition to the engineering and business education.

    It is not necessary to have a liberal college education to learn judgment. My son, for example, learned a great deal about how to think on account of his Jesuit high school education. Benjamin Franklin, in his autobiography, describes in more than sufficient detail how he educated himself. One could emulate his example and do the very same thing using books that should be readily available in a moderately sized municipal library or through inter-library loan.

    There is an important place, I believe, for liberal education in conjunction with a hard science, applied science, or business education.

  • Mark 2

    @Jim, it would be interesting to hear the Tech Schools rebuttal on why they would graduate, let alone give honors, to such obviously unqualified graduates.

  • Jim Collins

    Mark,
    It would be interesting to hear it, but, I'm afraid that I know the answer. Several years ago I was asked to teach a class in 3D modeling at a community college. Since it was an evening class, the majority of my students were what was called "non-traditional students". These were older people, who usually had some experience in their area of study. I had about 8 "traditional students" straight out of high school. I started with the basics, including where to find information on threads, screws, wire gages and other necessary references, as well as how to use that information. By the mid-term all of my "traditional students' had dropped the class. When they were asked why they were dropping my class, they told their advisor that my class was boring, that they weren't getting to create "cool" models and renderings. My "non-traditional" students had no problems with what I was teaching and upon completion of the class, I recieved very high marks on a survey that the college took. When I turned in my final grades, the department head called me into his office and told me that my services were not going to be needed next term. When I asked why that was, his answer was that the college was a business and word had gotten around that I was "too hard" on my students and that nobody wanted to take my class.

    A few years later, I went back to school to get my engineering degree. When it was time to enroll for classes the next term, I found out that there was an entire intelligence network on which professors and instructors were easy graders, who didn't take roll and who didn't give out homework. There was also info on who was considered "too hard". Unless a "too hard" instructor had tenure, they usually weren't there for more than a few terms, because not enough students would sign-up for their class.

    Every one of those students I interviewed, had a portfolio of "cool" models and renderings. I'm afraid that those tech school instructors were playing to their customer base and weren't "too hard".

  • LTMG

    I have hired many engineers, including quite a few fresh graduates, and several technicians. My preferred profile is somebody who worked while going to school and either did practical projects at school or did internships.

    When I interview candidates I try to scare them a bit with the fact that both I and the people who work for me will achieve superior results. Every person that I have hired who both met the profile and I didn't manage to scare off has, without exception, gone on to earn an enviable career. Students who seek easy instructors and professors will earn their own reward, and I have zero sympathy for them.

    Schools that dismiss instructors and professors who challenge their students will not get a call from me when I want to hire fresh graduates. Nor will I approve educational reimbursement for employees to wish to attend those schools. Like Mr. Collins, I taught at the college level, over 300 MBA candidates in my case. I strove to give them useful information and maintain academic standards, like Mr. Collins did.

  • Mark

    Eh, there is always a tradeoff, between being to hard and stuffy, and just wanting to have fun fun fun. Usually there is a good in between level.

    It is the teachers and professors who know the right level who are the best. I have felt ripped of in classes that were too easy, and horrible in classes where the prof was mean, and unnecessarily tough just for the heck of it (the prof taught all sessions of a gateway class, couldn't be avoided)

    So you might consider - making the classes a bit more balanced, while still showing much “Volume 14 of the Kinsley manual” the next time you go to teach.

  • Jim Collins

    Mark,
    I have no intention to teach again. My main objective in teaching that class was to have students capable of obtaining an entry level job using that software. Several of my "non-traditional students did just that.

    I had to change jobs earlier this year. My current employer does heavy metal fabrication. Untill now 1/4" steel was armour plate, to them it is tissue paper. There are rules and practices that I am scrambling to learn. The reason that I can still be productive while learning is a good knowledge of the basics. These students are not being taught those basics.

    One of the complaints of the OWS crowd is that colleges are ripping them off. I'd have to agree with that to a point, but, when students want the easy way out and the colleges go along with their customer base, who is ripping who off?

    There is a push to make Engineering classes easier to attract more female and minority students. Do you want to cross a bridge designed by one of these students?

  • Ted Rado

    LTMG:

    When I was an engineering student (a million years ago), I got permission from the Engineering College Dean to substitute math and advanced engineering courses for required liberal arts courses. I wound up being much better prepared for my engineering career as a consequence.

    Among my interests are history (mainly military history) and classical music. I have a library of several hundred volumes of military history books. I also have most of Mozart, Beethoven, Haydn, Bach, Brahms, and many other composers' works. I also studied music theory on my own.

    It is my belief that one can easily learn liberal arts atuff on one's own time after college. One should concentrate on gaining expertise in one's chosen field while in university. If one choses to take snap courses, one pays the price.

    I don't feel I missed anything as a result of my decisions. I am much more knowledgable in history, geography, and serious music than most of my liberal arts friends.

    One learns decision making and organized thought via any number of routes. The argument that one needs to be a liberal arts major to be able to think clearly is nonsense.

  • Druid

    “Where would you find information on how to draw a 6-32 thread?”

    Instantly, Machinists’ Handbook ?

    Wrong - Machinery’s Handbook is correct.

    Myself, used it during VOTEC School, Engineering Drafting, circa 1983. Instructor was a retired Lear-Sigler engineer. I haven’t opened that book since then, but have opened plenty where adding a ¼” to your plate is a standard allowance for corrosion.

  • Jim Collins

    Druid,

    Did you ever do an ink drawing on linen? I was a year ahead of you (1982) in Vo-Tech. Our instructor was retired from Lockheed. I remember doing a layout drawing of a huge spur gear, that was used by a burning table with an optical trace sensor to cut it out of 3 inch steel. We used an offset to allow for the burn kerf. The idea was to reduce the amount of final machining time. The inked linen drawing was perfect for the sensor to read.

    When I went to community college for my Machine Design/CAD degree, I was allowed to test out of some classes (including the one where they teach about 6-32 threads) in favor of CNC and Computer Repair classes. Those became a huge advantage later.

  • Mark

    @Jim, as far as students looking for the easiest way - that is somewhat natural even among the most motivated of learners.

    It is up to the faculty, and the department to make sure standards are maintained.

  • markm

    I'm an electrical (really electronics) engineer, and I know what a 6-32 thread is, and where to look up the dimensions (McMaster-Carr). I'm not sure about the best way to draw threads in Autocad,but I couldn't build the box to hold a circuit board without selecting screws and understanding the dimensions.

    A good, experienced draftsman or machinist will not only know such things, but he'll let the engineer know when there's a better way. The "CAD Draftsman" who couldn't answer Jim's question is someone who never built anything, and probably never even repaired anything - and without any hands-on experience, he'll make drawings that cannot be built, let alone repaired.

    As for the "entire intelligence network on which professors and instructors were easy graders, who didn’t take roll and who didn’t give out homework", when I was in college 30 years ago, the important thing I looked for from that network was who would teach the subject well. Even for the distribution courses - if I had to take a course in history, I'd learn history... But in the engineering school (Oklahoma State U), the quality of teaching was all you'd hear from the network; a couple of tenured professors weren't much interested in teaching their classes, but *every* professor or instructor gave out crushing homework loads and graded like a fiend - and that's the way it should be. When you cross a bridge, you want the designer to have worked harder than necessary, and to have believed that any error is unacceptable. Even in consumer electronics, they might fail because the designers (and marketing) chose low price over quality, but if they fail faster than they're supposed to because the designers didn't do all the computations - three times - that's going to cost more than he makes in a decade.

  • Steve

    So, what does the education system have to do with finding great workers? Nothing. Great workers have great values, great attitudes, street smarts and a big picture sense of the business. This is stuff that is learned at home when the TV and Playstation are on, the parents should be imparting these things.

  • http://www.freelanceunbound.com Simon Clarke

    From the Forbes piece: "more than half of the humanities (e.g. non-science) majors that do graduate end up in jobs that don’t actually require a college degree"

    The trouble is that, as the jobs market is flooded with communications and other liberal arts graduates, employers start to use possession of a degree as a basic filter when hiring.

    The net effect is that, though a humanities degree may not be much use in the job they end up doing, they are required to have it in order to get the job. So most jobs now DO require a college degree. It's a nightmare of education inflation...