Elite colleges are not necessarily the place to get the best life prep

http://www.nytimes.com/2015/03/23/books/review-in-where-you-go-is-not-who-youll-be-frank-bruni-examines-college-admissions-mania.html?_r=0

This is especially true for wealthier Americans and "elite" institutions, where admission is seen more as a status symbol (like a Tesla or a LV bag) rather than a vehicle for educating and cultivating a young person for the benefit of society (a university's true mission). But actually, the data suggest that graduates of elite schools do not have significantly better life outcomes on the whole vs. graduates from "moderate" state schools. Sure, there are some segments where your pedigree really matters, but do you want to spend the rest of your life in those circles, surrounded by pompous pricks (some snobby corners of tech, Wall Street, etc.)?

And of course two major drawbacks of attending an elite private school are (1) debt and (2) a more bubble experience (your peers will be more homogeneous, and you may not get exposure to many real-life challenges that help a student thrive in the adult world). Also, some students may feel complacent that admission is the endpoint - they made it. Life is just about marketing yourself and jumping through the hoops to earn some administrator's approval, and then you're on easy street.

But admission is actually just the start - students should be driven to maximize their precious opportunity and realize that it is just a first step along a path that has many greater challenges and learnings ahead. Students may feel entitled ("I'm going to have a degree from Yale - of course the top employers will want me, I'm so awesome!"), and then lose focus (or even get lazy) - while other similarly-talented students snubbed by the Ivies might have a chip on their shoulder, rededicating themselves at a state school to be the best they can be. And let's be honest - undergrad chemistry or econ at Harvard vs. Texas will be taught at about the same quality (and probably not much better than Coursera). The concepts and knowledge are identical - it's just how motivated the student is to think critically, set healthy goals, and apply the learnings productively. Upon graduation, which student will likely have more grit and tenacity to succeed in the workplace? Savvy employers know that character/fortitude is way more important than pedigree to help the org succeed.

Some other sick facts about the perverted system:

• In some cases, families are paying admissions "coaches" $50K and starting at age 12 to get their resume in good enough shape to be competitive. Just imagine what message that is sending to the kid for what is required to get ahead.
• Stanford set the record recently for a 5% undergrad admissions rate. Now the bar has moved so of course the Ivies will try to match. They often do this by advertising to students with good metrics, but low chance of admission (maybe no legacy or not from the right demos). This helps puff up their "exclusivity rating" by making the median scores of their applicants look better, while lowering their admissions rates. And as we know from Apple, exclusivity begets disproportionate interest, even if the underlying product doesn't merit it.
• Many administrators and admissions officers know that the system has gone off the rails and want to fix it, but they fear that they will be the only one and then be at a disadvantage vs. their rivals who perpetuate the misguided process.

Measuring the Return on Investment (ROI) of College

http://www.payscale.com/college-education-value-2013

I think the study's methodology is weak and does not prove causation. For the "return" part of ROI, they look at the median pay of grads for 30 years of working, adjusted to 2013 dollars. They project out pay increases by looking at grads from 1983 to 2012 (i.e. the earlier grads are later in their careers, and forecast what recent grads will earn at the same age). But of course that is fraught with problems, because universities could change a lot in quality and student composition over 30 years. And the economy changes a lot over time, so an older person may see very different wage changes from 1990-2010 vs. a recent grad from 2010-2030 (especially for degrees that saw a lot of industry growth or contraction). Also, I am not sure if they were looking at total earnings or just base pay, because we know that some jobs may have lower base pay but make up for it with better benefits, equity, or pensions. Students who went on to graduate/professional education were excluded, but that could be a problem too since some universities have a high % of students with those career aspirations (and those jobs tend to pay higher).

Also, are we measuring the ROI of the school, or the ROI of the students? University is not the only factor determining a person's future salary. Some Stanford students would still make similar money if they attended higher or lower ranked schools because of their abilities and ambition. But that is what the study should try to answer - if Joe Smith went to Cal vs. Stanford vs. Caltech and studied the same subject and pursued the same career path, how would his pay differ? This would be expensive and maybe unfeasible, but to control for student quality variation, they should have looked at each decile of US high school students (by general aggregated admission criteria), mapped out which college they attended, and then looked at their earnings over the first 5 years after graduation (30 years is overkill, entails too much uncertainty, and recent grad wages are a good predictor of late career wages anyway). But still, variation in regional pay and career choices would still confound the results.

This info would be tough to obtain as well, but possibly a cleaner way to answer the question would be to query employers. Do their compensation departments place a premium on various schools for certain job roles? Same with grad schools - do they give bonus points to students who went to undergrad at certain places (and convert that to a $ value)? Also repaying student loans has an opportunity cost, and there is value in the networking and relationships that one obtains in college. So it would be nice if they could incorporate those factors into their model as well. What do you think?

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In this case, though, it's a little hard to separate out the reputation effects vs. the quality of education vs. network effects.

I.e. do Stanford kids earn more money because we graduate with a good education or because of the Stanford name premium or because we just happened to make friends at a school where there is a lot of smart people.

If it's because of the quality of education, then you could say Stanford is worth it. If it's because of the network effects, then maybe yes maybe no. An expensive networking program for sure, but maybe not replicable by any other experience (and thus worth it). If it's the reputation effect, then Stanford should be concerned, as companies could potentially test for real skills some day, undercutting the reputational aspect of our degree.

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I agree that those factors are heavily linked in such a data set and it's pretty hard to draw any meaningful conclusions about ROI.

Another interesting question: are Stanford students successful because they went to Stanford, or is Stanford successful because of its students? I am sure it is symbiotic, but maybe that is why the top US schools have been locked in an "arms race" to recruit star profs, improve the student experience, etc. to woo the top talent. I guess they realize that a key to their success is the general quality of their "customer base" (but the spending is also partly irrational pissing contest). Though I am pretty sure that most students accepted at Stanford would become professionally successful no matter what university they attend (a testament to the merits of the admission process), even dropping out and going Zuck style. But if Stanford and say Ole Miss (sorry for offending any alum) do a "trading places" student body swap, I think that plenty of Ole Miss students would not be able to capitalize on the Stanford experience as effectively, leading to lower outcomes. And if the avg. quality of one's peers decreases, that may have negative effects on one's performance. But on the flipside, the sudden infusion of Stanford-caliber students to Ole Miss would have profound benefits for that institution on many levels.

So I guess college students should have much more bargaining power vis-a-vis university administrators. They could form a union haha and demand lower tuition or face a walk-out. But that threat is not credible, unless all of them can join startups the next year, or the Ivy League is able to take in the thousands of striking Stanford students en masse. Plus Stanford would replace them with eager "scab" students from US public schools and Asia - probably lower quality students, but "passable" to keep the place running. Therefore, it seems that the top schools are engaged in a certain degree of price fixing and cartelization (i.e. why is the tuition at Stanford pretty similar to that of Carnegie Mellon or Columbia, despite massive geographic and programmatic cost differences?). Unlike Wall St. and Si. Valley, they refuse get in a self-destructive price war, or steal away top talent from each other with cash/other incentives. Maybe that is illegal, but if absolute student body quality is the goal (as it pertains to national rankings or other metrics that administrator bonuses are based on), then it's worth it (and their endowments can justify it). But really, just imagine how that would affect recruiting if Stanford decided to slash its tuition by 1/3? 50% of undergrads are on some sort of financial aid anyway, so it wouldn't be such a shock to their finances. Well, no one ever suggested that higher education was an efficient market. :)

Stanford and Silicon Valley

http://www.newyorker.com/reporting/2012/04/30/120430fa_fact_auletta?currentPage=all

"...so many [Stf students] will take the exhortation to occupy Wall Street quite literally after graduation. So before making any decision, we ask one, very simple question: What will I get out of it?”- Stf senior in the Daily

Despite the title, this article is more of a guided tour of Stf rather than criticism of Stf's ties to business (apart from the obvious C.O.I. implications and threat to the "pure learning and personal growth" objective of a college education, but these are not unique to Stf). I do think that there is legit concern that Stf is becoming too monolithic and engineering-heavy, but that's where the $ and headline-grabbing innovation is happening.

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http://www.kqed.org/a/forum/R201206051000

The guest did mention that for East Coast schools, people would cry foul if a president/chancellor had such overt ties to companies as Hennessey does (if only he had ties to Hennessey Cognac and LVMH group!). Not sure what he bases that on, but at Stf I guess it's no biggie. Every big shot there who isn't a Spanish prof has some connections to some company.

The guest also compared how Cal's endowment is miniscule compared to Stf's, and Stf on paper is actually more racially diverse than Cal. But that doesn't take economic class into account. I am sure that you fellow alum would agree that while Stf had many people of color and foreigners, they (we) often came from upper-middle-class to rich backgrounds. So they (we) probably have more in common culturally with wealthy whites than with rural and/or poor minorities (who may have trouble adjusting to the Stf scene?). A good % of students at Cal are the first in their families to enroll in a top school, or even college in general. UC is more of a way to move up in society, whereas Stf is for the kids of people who have already made it (stereotype I know). 

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When the host (Dave Iverson, also a Stanford graduate) stated that Stanford is more diverse than Cal my thought was the same (that the measure of diversity being relied upon to make the claim is not multi-dimensional); nevertheless, it's not the type of claim I would expect to hear on NPR!

I think your email brings up an interesting point... but that point might be transient.  At present Stanford might actually be more affordable for low-income families; given the ties to industry and the alumni network it might also be more likely to afford a given individual a "leg-up" in the world.  Of course, if the "Middle Class Scholarship Act" is passed the reality would be closer to the historical truth.

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Reflecting on the classmates I met at Stf, my family was probably in the bottom quartile of wealth there, and you know that I had a fairly comfortable childhood. But privileged upbringings don't necessarily lead to social and self awareness. College is a good time to develop that as part of the maturation process, so spending 4 years in the "Stf-Paly bubble" may actually be a handicap for the rest of the student's life. But since Stf alum usually have financial means, they often can afford to engage in supplemental self-discovery activities like traveling the world, volunteering, and/or attending grad-professional schools - while public school students may need to rush into the rat race (if they're lucky enough to land a job) to support their families and pay back loans.

If business and political forces didn't perpetrate a massive transfer of assets from public service institutions to private elites (exacerbated by the recession), then maybe schools like the UCs would have more $ to maintain a quality educational experience and financial accessibility to the average student. But instead, many public schools are privatizing to some degree in order to cope with financial realities, thereby losing some essence of what made them special and egalitarian. As you said, it's true that Stf financial aid will literally work things out with any student's family so they pay only what they can no matter their situation. It's very generous, but that's not the problem - the bigger challenge is getting accepted at Stf first (admission rates are one of the lowest in the US, much worse now than when we were students - I think it fell from 15% to 8%). And in order for that to happen, you need legacy, connections, and/or demonstrated student excellence. All those come easier with wealth. Stf has a new fin aid program for families with household incomes below $100K (Ivy League has similar). So that is basically the plan for the 99% (well 80% actually). I wonder what the median family income is at Stf. vs. Cal. It could be 2X, and it's not like Cal families are poor.

http://news.stanford.edu/news/2009/april1/stanford-admission-rate-2013-040109.html
http://blogs.wsj.com/economics/2011/10/19/what-percent-are-you/?mod=wsj_share_twitter

Stf enjoys more donations partly because of their business partnerships (firms give because they want access to student and professor talent) and the quality of their people generate more IP royalties and alum charity. But also Stf's prestigious and large endowment gets access to prime investment opportunities that smaller institutions and maybe even the UCs can't tap. So the rich get richer. Iverson and the guest seemed to suggest that this is partially due to Cal's liberal, populist "bias" and Stf's conservative, pro-business appeal - the giants of Wall St. and Si Valley are turned off by Cal. Both schools are good at most things, but Berkeley has a rep for excellence in physical sciences, humanities, etc., while Stf may be better known for engineering and professional education, which are more relevant to businesses today. So I don't blame the VCs for preferring to tap the Stf pool over Cal, but it's just too bad that equally good if not better students and faculty at the UCs get less access to partnerships, jobs, and other opportunities.

Those with privilege shouldn't work to amass more privilege, especially at the expense of others who are deserving - I think Leland Stanford would agree with that (the later-in-life philanthropist Mr. Stanford, not the robber-baron Mr. Stanford). Those who make it to the top should send the elevator back down for others. Buildings at Cal are literally crumbling, classes cancelled, and staff are getting furloughed, while Apple gave Stf $50M last year (investment, not charity LOL) and Phil Knight donated untold millions to his alma mater to build the nicest b-school in the world (http://www.gsb.stanford.edu/about/knightcenter/). Why give charity to the rich? It's part of the bigger national issue. So of course Stf has the luxury to look all generous and righteous, allowing students whose families make under $X to attend for free (but what % of students is that exactly?). They are only able to be so "generous" because they exploited huge advantages in the zero-sum game vs. other schools (esp. public schools who are burdened by much more bureaucracy and uncertain budgets). 

The US transconti​nental railroads: not exactly a poster child for capitalism​, or are they?

http://www.kqed.org/a/forum/R201109061000




Richard White, a Stanford professor, recently published a book on the history of US railroads and the tycoons who ran them. Contrary to the popular mythology about the "heroic" and "self-made" champions of industry like Huntington and Stanford, it turns out that those men and the companies they ran only made it into the history books due to massive corruption, abuse of gov't resources, and human/environmental damage. And we have the general notion from econ 101 that firms make money by providing demanded goods/services to consumers in a cost-effective way. But for the railroads, every sort of business and market perversion you could think of (prior to the derivatives era) was attributed to them. Though we still have this strange adoration of the railroads as a romance and celebration of America, Old West freedom, and industrial capitalism.



Yes it was impressive that we could lay track from the Mississippi River to the Pacific in just a few years, and made amazing technological advances during the process, but it turned out to be a net loss for the country. Despite our misconceptions, many railroads went bankrupt or needed gov't "bailouts" to survive. And it was hardly free-market: transcontinentals were just not needed in the late 1800's (the demand for long-haul freight and personal transport just wasn't there to justify the huge costs), and even after the railroads were built, it was still cheaper and quicker to use SHIPS to get from SF to NYC, around South America and all. So what was the point of building them? Railroads were not reliable (especially during the winter months), so merchants still favored ships. Like any great capitalists, the railroads didn't respond to this deficiency with improved performance, but engaged in anti-competitive practice instead. They bought up most of the excess capacity on freight ships, creating scaricty and bringing ship rates closer to railroad rates. They negotiated with ship lines to get them to slow down their vessels too. Why try to outdo your competitors when you can just pay them to come down to your level instead?



The most respected railroad men avoided transcont. projects like the plague, and what was left were speculators, washed-up entrepreneurs looking for another chance, and crooks (sound like other modern industries we know?). What was significant about this period was the advent of corporate lobbying. The US railroads were pretty much the first manifestation of the modern American corporation. They pushed for Washington to create the conditions necessary for their flawed businesses to survive, similar to a Maoist or Soviet failed central-planning project. They were justified as a necessary "public good", even though the public had virtually no need for their services at the time. But when something is a public good, we may irrationally spend to keep them going even if they aren't doing any good for us. And of course stakeholders needed to justify their decisions and get public buy-in with propaganda and marketing, hence the Manifest Destiny, pride, and nationalism angles. There's nothing that US industry can't do, we're settling the savage lands with good old US hard work, go west for adventure and riches young man, yadda yadda. Sadly, there was more public outcry against the greedy, inept railroad corporations back then vs. the current greedy, inept firms today. The author speculates that this is due to enhanced marketing and penetration of US corporations today (corps play a much bigger role in US life today), so we are less likely to condemn something that we are associated with.



DC gave the railroads (RRs) huge guaranteed loans and literally millions of acres of free land (that they still own today and don't pay taxes on), even on terribly risky projects with no evidence of future profitability. RRs sold junk bonds to eastern investors by hiding much unflattering financials from traders (in fact, the big 3 US ratings agencies were started to rate RR bonds). And still the incompetent RRs needed several public bailouts to break even (even though the tycoons and big investors made out quite well off the US dime). And worse, the RR bankruptcy terms were so lax that the same doofus execs were allowed to retain control of the firms (not like Obama forcing GM to change their leadership team in exchange for bailouts, just when their execs were getting effective). Their debts were written off, so now these failed firms had a huge financial advantage over the viable, honest RRs (also sound familiar?), and drove some of them out of business. Talk about dysfunctional markets: the weak kill off the strong? Like the fruit companies in Latin America, the RRs asked the gov't to step in to violently break up labor strikes, clear out local Indians, and such. As many people died working on the RRs each year as the Civil War battle of Shiloh, often without investigation, punishment to firms, and compensation to victims (especially if they were Chinese).



So now that these joke of RRs were built, what to do with them? The firms had to get people to use them to gain revenue, so there was a big push to encourage settlement (although net population transfer was eastbound in the early RR years), buffalo hunting, cattle ranching, and mining in the West. There was no real demand for increased cattle ranching, silver, and buffalo, but the demand was manufactured with major gov't incentives, often with terrible environmental consequences (overgrazing, buffalo near extinction, mining pollution). And all the booms associated with those economies of course ended in bust and disaster for many Americans too.



If we learned our lessons from the RRs, the current dot-bomb and housing crashes might have been avoided. It's ironic that the most ardent libertarian proponents of the free market are the ones who most strongly advocate for our most uncompetitive industries. It's not the free market principles that they love, it's just taking advantage of whatever system is in place (loopholes and all) to come out ahead, no matter the cost to others. Obama and others talk about the need to invest in the future so we don't fall behind. But the problem is investments are based on predictions and many of those made by gov'ts turn out to be wrong. Look at the CA high-speed rail project - another total boondoggle where the true demand just doesn't justify the huge costs. Considering all the areas where CA needs more cash, it is a huge opportunity cost to sink billions into another rail gamble. But this is the price you pay when ideology trumps economics.



We wanted to settle the west and make tons of money, so we thought building RRs would get us there. But it was ahead of its time and caused a whole bunch of other problems. If you believe in the free market, let the market demand tell you when it's time to build RRs. If they are so desirable and well-planned, then they will easily get their own funding and won't need gov't loans and bailouts. The author contrasts the Dakotas. South Dakota's RR network was built bailout-free, and turned out to be much more high-performing than the nearby gov't-supported RR in North Dakota. In Europe and Japan, RR firms had to raise their own private capital before breaking ground, so their networks were a lot leaner, better, and weren't subject to the moral hazard associated with US firms wasting other people's money without accountability. Or if the RRs are truly a public good, nationalize them with a set of transparent laws and public input governing their operation. Of course there is the opposite extreme with China, where the gov't invested billions into another un-needed high-speed network, just to create jobs and grease the palms of various bureaucrats. But projects were rushed, safety standards and training ignored, and many of their trains run with mostly empty seats.