Hi guys. my reader Amanda has raised a great point recently with me and I have had long discussion with her about it, so let me just summarize her key point. So she said that working class people get very defensive when I discuss the issue of degrees because it is far easier for someone rich people to have that conversation without getting defensive. For a rich student, if the degree doesn't work out for some reason (like if they really struggle with the course or they just don't like the career that awaits them at the end of that course), then it's not hard for them to just change course and ask their parents for more money and help. But for a poor student, this is it - they get their one shot at a degree and they have no safety net: their parents probably spent their life savings paying for this degree in the hope that it will really pay off and this will be their key to social mobility, paving their way to a much better, brighter future. So if I were to turn around and say, "you got your parents to use all their life savings pay for your degree from a private university that's even not worth the paper it is printed on? Oh you've got the rest of your life to regret that decision." How do you react when someone gives you really bad news like that? Obviously, many have chosen to shoot the messenger but how bad that piece of news actually is depends on how high a price you paid for that degree. The higher the price they paid, the more likely they are to reach for a gun and shoot the messenger in the face. In order to understand the mindset that is creating this situation, let's move away from the emotional subject of the degree for a moment and use a more down to earth analogy.
Let's imagine we're at a high school (or whatever you call it locally, JCs in Singapore) and at the end of the academic year, the 18 year old students are going to have a massive party. In most countries, you'll call that a prom. So this student likes K-pop and watches the band BTS perform in the music video "Idol" and he thinks, oh everyone in the band look awesome in the music video - then he sees that one of the outlandish outfits is on sale for $1,000 in town at a K-pop exhibition. So he goes and buys it, tries it on and shows it to his best friend excitedly, "so how do I look?" Let's just say BTS wear some pretty outrageous outfits which would probably work if you're a member of the world's most popular K-pop band - they can do no wrong at the moment. They can wear something utterly hideous in their music videos, but because they are BTS, that song is going to become a massive hit and with some post production magic, nobody is going to question their clothing choice. But if an 18 year old in Singapore tries on the same outfit, he is going to look oh so ridiculous as if he was on his way to a Comic Con event dressed as a character from some movie that no one has watched. So if the best friend is honest and says, "dude, seriously, please don't turn up at the prom wearing this, everyone will take out their phones - you will go viral instantly and not in a good way. I'm being honest, please save yourself the humiliation." Let's assume our 18 year old student cannot just take the ridiculous outfit back to the store and get his $1,000 back. If our 18 year old student is a rich kid and can easily afford to run out to buy something else of a similar value (or more), he would just laugh and say, "oh yeah I did think it was a little bit over the top, I guess I'm not K-pop boy band material then! No worries - I will go buy something else then whilst I put my K-pop career on hold for now."
But what if it is a poor kid who spent his life savings buying that $1,000 outfit? Now what if there was no way for that poor kid to actually get his money back on that, then that's quite a disaster - he is now either faced with the choice of turning up at the prom looking ridiculous or having nothing to wear to the prom and turning up looking woefully under-dressed. Neither options are good. I want you to put yourself in his shoes for just that minute when he realizes that he has made a really bad decision with his full sum of his life savings and that there is little left to do but to try to handle the consequences of that bad decision. He would be angry, he would be in shock but most of all, there would be a sense of denial which would be a really common respond when someone is given very bad news. After all, when you're left with nothing but messy consequences that you have to clean up, going into denial is one way to avoid having to deal with those consequences for a short while but that often means shooting the messenger. There are far worse consequences for the poor kid having made the same bad decision as the rich kid, who was simply going to go buy a different outfit; if that rich kid makes yet another bad decision and buys yet another hideous outfit, no problem - he will just keep spending money until he finally buys something that will be appropriate for the prom. The bottom line is that life is incredibly unfair: rich people get away with making awful decisions time and time again because their money get away with those mistakes whereas with poor people, there just isn't that safety net at all. Allow me to move onto another story which has affected me personally to illustrate this point of the how massive a difference this 'safety net' made of money can make.
I have been working hard during the pandemic and not spending that much money because it has been so hard to travel given the travel restrictions imposed. Thus my spending in the last two years have gone right down and I've ended up with a substantial pile of cash to invest - well I can't just leave it sitting in my current account earning virtually no interest. So allow me to summarize the situation, let's say I had £500,000 to invest and I chose to divide it into five pots of £100,000 each (I am really simplifying the situation here but the loss/profit figures are accurate) and I invested it in five different options which we shall call A, B, C, D and E. So here's the current situation: I have lost a lot of money on one of them, option A has given me a massive lost of -62%, it was a hideously bad investment decision. That means of the £100,000 I had invested in it, it is now worth approximately £38,000 only. That is a horrific result under any circumstances, but if I look at how my other investments have been going, one of them - let's call it option B - has done phenomenally well, it has made about +40% in a period of just under a year and I expect it to continue doing well. The other options C, D and E have all done okay as well, nothing spectacular but very respectable growth figures around 6% to 8% so if you looked at the overall performance of that investment portfolio, once you have taken into account all the loss and profit across the different options, I come out at just over +1% which isn't bad given the complete disaster I had on option A. This perfectly illustrates why you need a balanced portfolio: you must never put all your eggs in one basket.
If we looked at what happened with option A in isolation, yeah that was an unmitigated clusterfuck - I am shocked and ashamed that even someone like me who works in a senior position in investment banking can make such a terrible decision. But at least overall, I came out relatively okay given that I still made a very small profit overall on that portfolio. However, if you were to contrast this to a situation where a poorer man put all his life savings into option A because he heard that this was a great opportunity to make a massive profit - he would be thinking, "if this all pans out with option A, I can retire, I never have to work again, then I can even stop worrying about how I am going to pay for my children's university fees." Then disaster struck and he loses 62% of his investments on option A instead of making a huge profit - so now his children are wondering if they can actually go to university, his wife is screaming at him for having lost most of the money in their retirement fund and instead of retiring, he now faces financial ruin and probably has go to on working until he is 70 or 75. I'm not going to mention the name of the companies involved in option A because there's still several ongoing court cases by investors against not just the company itself but the financial company who helped facilitate the way their investment products - yes there was clearly a case of negligence and mismanagement but the money is gone so at best get the satisfaction of seeing some of the offenders thrown in jail. In short, I know that some poorer people who have invested in option A have actually committed suicide this year when they realized they had lost so much money. Therein lies the difference between me going "meh, my portfolio didn't make much this year, that's actually quite disappointing" vs "oh did you hear about that person who hung himself after he lost much of his life savings on option A?"
So this issue goes beyond expecting people like me to be a lot more tactful or sensitive when it comes to trying to tell poor people when they have made a really bad decision, we need to recognize that when a poor person makes a bad decision, their opportunity cost is a lot higher compared to when a rich person makes the same bad decision. Thus when I invest £100,000 into option A and lose £62,000 of it, how much that loss hurts me depends on three factors: firstly, how the rest of my investment portfolio is doing to mitigate that loss: I am fortunate to have another investment option B that has done stunningly well and at this stage, that's just luck. Without option B doing so well, I would have had to swallow a significant loss across my entire portfolio. Secondly, if that loss of £62,000 is a significant amount compared to my overall net worth - allow me to explain that: so imagine if I only had £100,000 to my name and I lost £62,000 of it, that's a 62% loss and that's when people kill themselves. But if I am worth £10 million (just to pick a nice round number), then that loss represents not even 1% of my total net worth, it is merely 0.62% and that's a number that is so small it is not worth getting upset over. Finally, we have to consider what my earning capacity is relative to that loss of £62,000 - if I was a young teaching assistant in the UK, they earn about £17,500 a year and that loss would have been three and a half years' salary before tax and after tax, it would probably be nearly five years' salary. But for someone like myself with a much higher Big Mac Index, it would be so rude to boast, but thankfully I could make that amount back a lot more quickly.
Thus in this case, at least I am grateful that I am in a position whereby I am able to mitigate the situation by making better investment decisions and simply by earning more money at work. Now someone who is in a working class job, they will find it a lot harder to do that because they are completely dependent on others for good advice and it takes a lot of experience to know whose advice you can trust when it comes to investments. I trusted two different people when it came to options A and B - both of whom seemed to be smart, older, very experienced guys who knew what they were talking about when it came to investments yet one just totally bombed whilst the other performed so incredibly well. So if even someone like me who works in investment banking can struggle in this aspect, can you imagine a teacher or a taxi driver trying to make the same difficult decisions about what to do with their savings? Secondly, as a businessman, I am in a position to simply pursue a lot more new business aggressively and if those pan out, then I can earn a lot more in commissions and bonuses - a teacher cannot do that. Thus no matter how hard teachers works, the salary they earn is fixed even if the class sizes dramatically increase and their workload double, their salary would stay exactly the same. That's why I am in a much better position to do something very constructive to react to having made a massive loss after having invested in option A, to try to fix the terrible mistake that I had made whilst someone in a working class job who will be left feeling a lot more helpless in a similar situation, as they know they are simply unable to fix the same mistake.
But hold on, at least in my case, I'm the one who is taking responsibility for the situation, cleaning up the mess I made and making things right - remember the rich kid who spent $1,000 buying a hideous suit that he saw in a BTS music video? He is not even using his own money to make things right - no, he is using his parents' money to make things right so he can show up at the prom looking awesome rather than be the walking joke that everyone wants to take a selfie with for all the wrong reasons. Thus in fact it is the parents of the rich kid who are bailing him out when he makes a stupid mistake and the rich kid can simply hang that ridiculous looking suit up in the closet and say, "who knows, maybe there will be a fancy dress or Halloween party and then I could go dressed up as a delusional K-pop star wannabe in this fucking awful suit, now wouldn't that be so hilarious?" It is an inconvenient truth but am I really telling you something that you don't already know? Rich people get away with mistakes in a way that poor people never will, rich people can either spend their way out of their problems or simply make more money to put things right in a way poor people simply can't - this is utterly unfair of course but when I point this out on my blog, oh I hate a lot of hate from poor working class people who claim that I am looking down on them. After all, I didn't create all this unfairness in society in the first place, I'm merely pointing out what is happening by by talking about the situation in my blog. If I simply deleted my blog today and said absolutely nothing about the situation, would this unfairness just somehow magically go away overnight? No, of course not - it would not, simply because I am not the cause of the problem so how would shooting the messenger help?
Imagine we are at Orchard Road and we see a smartly dressed lady was walking down the street then a pigeon flies by and shits on her, the pigeon poo squarely lands on her should but the lady doesn't notice at all. So you decide to be helpful and point out to this lady that her right shoulder is currently covered in fresh pigeon shit but instead of being grateful to you, she screams at you angrily as if you were the pigeon who has just shat on her. Her response is understandable to some degree, you've just given her a very unpleasant piece of news and her perfect day has been utterly ruined. Maybe she was on her way for a hot date or an important business meeting and thus she needed someone like the messenger to vent her anger on. But in this situation, surely the sooner she is aware of the mess on her shoulder, the sooner she can try to do something about it be it trying to clean it off or rushing home to change her clothes. This then boils down to the intention of the person who pointed out the mess to the lady: was there any malice involved? Were you trying to mock her, belittle her and make her feel even worse about a terrible situation? Or were you just trying to help? And even if the person pointing out the mess to the lady did it in a tactless or rude manner, quite frankly I think the lady has far bigger problems to deal with like the mess on her dress than the person who spoke to her about it! It is shocking that people in such a situation can lose track of any kind of perspective when it comes to which problem they ought to deal with first - surely when you have a crisis, you need a list to prioritize what is your biggest problem to solve first? Common sense would dictate that the bigger the crisis the more calm and rational we need to be.
So why should these people do instead? Well, I'll leave that for part 2. In the meantime, please let me know what you think - why do people often shoot the messenger when given bad news then? If you were in a situation whereby you were given very bad news, would you shoot the messenger or ask the messenger for help? Am I over emphasizing the role of social class in this issue or is it the elephant in the room that no one dares to mention? Or am I too harsh on people who have gone into denial upon receiving a piece of bad news, which is actually a fairly human response to such a situation? Do these people ever move beyond that state of denial (to presumably seek a decent solution for the problem) or are they just perpetually stuck there? In the meantime, I'm predicting that I'm going to get a whole lot of hate mail again from all the usual haters as a result of this post. Please leave a comment below and many thanks for reading.
Lol so in the US someone did try to quantify the rate of return on investment of getting a degree by the university. They took into account factors like tuition, cost of living, and the average salary post graduation for the next 10 years, 20 years, and 50 years. https://cew.georgetown.edu/cew-reports/collegeroi/
ReplyDeleteCan you guess what universities had the lowest return on investment? It was art and music schools! I suppose since they're so expensive but cater to a very specific job niche. Though I'm surprised even the most highly prestigious schools like Julliard was near the bottom 1%. These had a negative Net Present Value over 10 years, but became positive after 20 years.
Anyway, as for the ivy leagues like Harvard, their 10 year net present value was around $286k. While an average government funded university in America had a 10 year Net Present Value of around $80k-120k. Considering Harvard costs about $200k in tuition and living costs upfront, and the average state school costs around $80k or less, in this case the equivalent compound interest rate over 10 years is about the same for both only because of differences in tuition. But if we compared Harvard to the US's equivalent of SIM, which are private for-profit universities that charge the same high tuition as Harvard, then the private universities have an average 10 year net present value of $29k. Jeezus, thats a compound interest rate of 1% per year compared to Harvard's 10% a year. 10% is not bad actually, its level with most of the consistently high performing safe investments.
But universities tend to obscure this kind of hard financial data. They recruit based on emotions and dreams, not necessarily numbers. However, one can diversify an "education portfolio" just like an investment portfolio using internships/apprenticeships or just getting to know the people who are hiring in your area. Its just this is very different from high school where one only needs to memorize the topic and score well on an exam. That's what sets the real world apart from school, the need to hustle beyond academics.
As for art & music schools, it seems to be the reserve for rich kids whose parents can support them through a crazy expensive degree only for them to be in a position whereby their parents can pay their bills even if they are not in a position to earn a decent salary from a career in the arts. If rich kids end up in these private universities, guess what? Once again, their parents' money can provide a safety net in the following ways:
Delete1. They can easily hit the reset button by doing another (expensive) degree but hey, who is counting the money when your parents are so rich? They can keep trying till they succeed and there's a massive safety net for them as long as their parents are willing to keep bailing them out. Poor people don't have that luxury, they usually get that one shot to have a degree and that's it. No second chances.
2. Rich kids probably have a more interesting CV anyway because their parents probably have paid for them to do loads of interesting activities along the way, so they're not completely dependent on this degree to prove their talents, skills and unique abilities to employers, but they can point to other interesting things they have done along the way. For poorer working class kids, acing a degree from a good university is a "put all your eggs in one basket" strategy - it's the equivalent of going to the horse races and placing your parents' life savings on horse no. 10 and you are really hoping that horse no. 10 wins so it will all pay off. They have to do that as their parents didn't have the money to pay for them to do interesting stuff when they were younger, so everything is riding on this degree.
3. And of course, if all else fails, there's good old nepotism. Rich parents know people who owe them favors to get their dumb kids jobs that they don't deserve to get - whereas poor working class parents can't do a thing for their kids when it comes to getting them an internship at the top investment bank in town. That's why rich kids shrug off failures like "it's okay, don't worry - I am sure we'll work something out" whilst poor kids start by shooting the messenger before going into a massive tantrum about how life is so unfair to them.
4. And of course, there are so many things you can do if your parents have a big pot of money: wanna start a business? No problem, ask daddy for some seed capital. Wanna try to see if you would like working in Dubai? No problem, ask daddy to buy you a ticket there and book a hotel for you for 2 weeks. Wanna go back to school and get some training in a new niche technology that is all the rage at the moment? No problem, just ask daddy to pay for the course. There are so many options open to rich kids who have that 'just ask daddy for more money' card to play whilst the poorer working class kids live in a totally different world where that option never existed in the first place.
DeleteOh yeah I forget that it is mostly rich kids who go to art schools who don't need to turn a profit after graduation. For the working (and even middle) class there is no backup plan if university doesn't work out. Like you said people take offense when you shit on degrees because it means you're telling them they are screwed for the next 5 or so years. At this point society is basically asking young people to take on a huge time and money risk just to get ahead in life. It's almost like starting a business, except the business is their degree/CV. At least with your bad investment you only invested money and not time, while a degree takes 4 years of life.
DeleteSo I was thinking the fact that rich people are insulated from this risk is why the university system is so risky for working class people in the first place. The lawmakers are not working class, instead they're rich people like Boris Johnson who think "oh university was a breeze, the price was very affordable for my parents and I found great jobs afterwards." It makes me look at the past US presidents and feel grateful Joe Biden didn't attend an ivy league because all the past ones(including Obama) did and have little idea how crushing student debt can be. Also, it just baffles me that politicians in America would rather win working class votes by talking about issues like abortion, gun control, and immigration, rather than economic issues like student debt. The fact that some janitorial jobs demand a bachelor's degree is just comical, that much risk for so little reward?
Well Amanda, let's put it this way: I think young people are guilty of a lot of navel gazing. Picture this: you have an imaginary neighbor with an 8 year old daughter, she invites you over to give you something from her kitchen. Whilst she is busy finding an appropriate container, you decide to make small talk with the daughter in the room. So you ask an innocent question like, "so how was school today?" The 8 year old girl then imagines you're genuinely interested and gives you the most mundane story about what happened during her English class - it gets to the point where you're staring out of the window, averting her gaze and thinking, will this kid ever shut the hell up? So maybe the game she played in English class was so freaking important to her - as an 8 year old, that's her entire world, her classroom and you just wanna get the gift from the kitchen and get back to your life which is far more interesting. So when the mother finally emerges from the kitchen, you literally take the gift and fly out of their apartment whilst saying, "thanks, byeeeeee" as you disappear out of the front door at the speed of light.
DeleteYeah guess what? University kids can still behave like that, they believe that us adults still give a shit about what they do at university. Let me tell you about this photographer called Tiffany (real name!) who is studying photography at one of the art colleges in London. She found my Instagram and asked if she could photograph me and I said only on the weekend. So at first she agreed okay let's do it this Saturday and I said fine, give me the details I'll keep my Saturday free for you. Turns out she got roped into helping her friend with another university photography project and she worked so late on that shoot she never got back to me and I said look I can't work with you if you're so disorganized. And she replied, she apologized for standing me up but she went on and on about 'but I'm so busy, this university course is crazy busy'. I then went on the attack - there's a difference between being busy and being disorganized. There are people who are far more busy than you yet they are well organized and don't miss appointments. I've been on the red carpet in Berlin posing for photographers whilst signing autographs and posing for selfies with my fans - you need my help, I don't need yours. You need a superstar to work with for free and I was kind enough to offer you my time for free, yet you could only see things from your point of view? I then said that university students are paying their universities to give them loads of homework whilst some of us in the real working world are being paid to do work in the office, so excuse me when I roll my eyes when you moan about how busy you are at university when you're not being paid a penny for the silly projects you do there. Needless to say, I never heard back from Tiffany.
But I think it definitely takes a certain element of maturity to see things from another person's point of view: students certainly want people to take what they do at university seriously especially if they have put in a lot of effort into their coursework but how do they reconcile that with the real world, where employers mostly aren't that interested at all in the details of what they did at university, really not beyond, "how is this going to help you with the work I'm gonna pay you to do at the company"? I'm afraid this younger generation struggle with this because someone like Tiffany will shut herself off from people like me who aren't prepared to give a shit about what she is doing at university but she is uploading her photographs onto Instagram and getting loads of likes for her work. But the cynic in me says, "yeah but she's not getting paid for it, the same way I'm not getting paid even if I get 100 likes for a selfie I upload onto Instagram, I just have my ego massaged but that's fine. I'm earning plenty of money as it is whilst people like Tiffany and Vera are broke."
DeleteMy opinion on university is that waaaaay too many young people are taking on too much debt for degrees that will never pay off in the long run. Too many people are going to university these days and getting a really really bad deal. We need to tell these people, "you're not university calibre, go do something else with your life that doesn't require a degree and you'll be a lot better of financially in the long run without huge student loans to repay." Oooh but they'll definitely shoot the messenger because I'm suggesting they're not smart enough to go down that route, to become a professional working in a role that requires a degree. So they ignore the messenger (or shoot him), get a degree from SIM, then end up halfway up the shit creek without a paddle despite the many warnings of "wrong way, turn back, shit creek ahead!"
Alex, I think the reason why students think they can get away with saying they are "busy" with school, is because 90% of the people they come across (other students) agree with them. When they encounter the 1 person in 10 who tells them to suck it up because its not gonna pay their bills, the university student can just think "I don't have to listen to this person, I have 9 other university students on my phone who are willing to listen to me complain and feel sorry for me." Basically they're feeling sorry for themselves by giving you that excuse, which is such a huge barrier to being successful.
DeleteThis reminds me of that Economist article about the west producing too many "elites" who think they're elite just because they have a degree. The thing is society can easily produce more graduates, but it cannot easily create more elite jobs. Someone has to lose out on an elite job if there are too many graduates, and chances are its going to be the student who went to the less elite university unless they have something on their CV to distinguish themselves over most other candidates.
I like your take on the distinction between "busy" and "disorganized." Computers are very busy but they are not disorganized at all. I think the main issue is that people don't learn in high school that its not the grades that matter, but how you can use the knowledge to create value later in life. Also nobody really handles money until they start leaving school. Recently I stopped submitting the last two assignments of a class I'm taking this semester, because my advisor said there's a grant deadline in January. If we win that grant, then that's 6 figures of cash available, and part of it or all of it goes towards my salary(I'd love to buy a new supercomputer...). The thing I found strange is that some people think the grades are more important than winning the grant money, and that making money is "the professor's job, not ours. We're just here to learn." Learn?! Who gets paid just to learn? What happens when I do finally get out and need to get people to pay me a lot of money for science? This goes back to what I mean by kids don't manage money till they leave school. Students(and even some adult office employees) are so used to money being someone else' problem that when they actually have to think about making it they just freeze like a deer in headlights. The stupid thing is what I'm learning in class is not even useful for the research I'm doing to win the grant money. What is taught in class is never cutting edge enough to be novel anyway.
DeleteThanks for your comments Amanda. I'm busy today and trying to fit in my booster jab as well - so I will write you a longer reply later today when I get back from work!
DeleteQuick lunch break post: I don't doubt that her university is keeping her very busy, but Tiffany is making the mistake that I actually care if she is busy or not at university. Like we discussed, there is a huge difference between busy and being disorganized - in fact, you can be not so busy and completely disorganized whilst there's someone like Anthony Fauci who is famously crazy busy but super well organized; so it suffices to say that Tiffany won't be in touch anymore given the way that conversation went! Someone needs to give Tiffany a slice of humble pie. She can boast about being busy when her schedule is full of PAID WORK, when she is being paid millions of dollars to work - yeah she will win my respect at that stage, perhaps I'm being a bitch but that's just me and you know me too well Amanda. I don't suffer fools gladly.
Delete