The Education Bubble
An education bubble? Huh?
Oh yeah. If you have recently gone to college, are about to go to college, or have kids/family that are going through college you probably know what the prices are like at the moment…ridiculous.
There is no doubt about it, we are currently experiencing the inflation of an education bubble. What does that mean? For the answer let’s look to the definition of a housing bubble providing by Investopedia:
A run-up in housing prices fueled by demand, speculation and the belief that recent history is an infallible forecast of the future. Housing bubbles usually start with an increase in demand (a shift to the right in the demand curve), in the face of limited supply which takes a relatively long period of time to replenish and increase. Speculators enter the market, believing that profits can be made through short-term buying and selling. This further drives demand. At some point, demand decreases (a shift to the left in the demand curve), or stagnates at the same time supply increases, resulting in a sharp drop in prices – and the bubble bursts.
The Bubble Ingredients
Education costs are increasing, by some estimates, at 4 times the inflation rate. This is a big deal considering that education is already one of the biggest investments you will ever make in your life. The problem is only exacerbated by government grants. But government grants are supposed to help people afford an education, right? Yes, but the more grants the government puts out the higher the price of education. Coincidence? I don’t think so. Run-up in prices? Check.
From the second you are born the thought of furthering your education as a precursor to being successful is driven into your head. Everyone from your parents, grandparents to governors, and even presidents tell you that higher education is the only way.
But the problem is that there are over 300 million people in this country. You can not have a one-size-fits-all solution. Dare I say that higher education may not be the right choice for everyone? The demand is artificially inflated by forcing people to think that they need to go to college even if they wouldn’t have thought so otherwise. High demand? Check.
This creates a competitive atmosphere for getting into schools. And the more prestigious a school, the higher the competition to get in, the higher a price they can charge. Limited Supply? Check.
What happens to a balloon when you fill it with too much air? It bursts right in your face.
Eventually the already exorbitant prices will get a little too exorbitant. And I don’t think we’re too far from that occurring. Like any other investment, one would expect a positive return. But what happens when the cost of education exceeds the return?
People will stop investing. People will decide to stop going to school. The bubble will burst.
The Signaling Problem
The education bubble is a bit different than other bubbles because the education system is the standard for signaling expertise. The easiest way to get a job in this country is to show a degree from an accredited college/university. This shows that you are educated, smarter than the competition, that you are the right person for the job.
When a housing bubble bursts people stop buying houses. They are forced to sell what they can’t afford or just give it up in foreclosure and rent (or in recent history the government will use tax money to pay your housing bills with other people’s money).
But what happens when the education bubble bursts? How do you signal your expertise? How do you signal that you have knowledge? How do you get a job?
The Education Alternative
Self-education is more possible than ever. The amount of free-flowing information sharing has turned the internet into what universities were meant to be: an open forum for education and discussion. While most universities tend to push a certain view on a subject, you can get opposing views with one click of a button on the internet. And you can debate without fear of angering a professor and hurting your grade (don’t believe me? Let’s start a debate in the comment section below :)).
So how do you show your potential employer that you are the right person for the job?
The Signaling Solution
Imagine you want to hire a marketing manager and you have two candidates. One candidate graduated at the top of his class from a prestigious school with a marketing degree. The second candidate never went to school. But the second candidate runs an authority marketing blog that gets thousands of loyal visitors per month. You read the blog and it’s clear that this candidate knows what he/she is talking about.
Who do you hire? Someone that knows how to pass tests and get good grades or someone who has exhibited their knowledge and expertise and already has experience building an online presence and audience?
Experience and the exhibition of knowledge trumps exhibition of GPA every time.
Knowledge is power. And as G.I. Joe would say “knowing is half the battle.” The other half? Go show it off!
Your Two Cents:
Do you think there is an education bubble? If so, do you think it is close to bursting? Do you think blogging can be a good alternative for signaling your expertise? Can self-education online be a good alternative to traditional university education (I’m focusing on education here, not extra-curricular activities ;)). Am I just crazy?