Professors Snider and Cooper were right. Be chrool (sic) to your scuel (sic).
DISCLAIMER: (And we disclaim things so infrequently, you know this is big.) This post references and links to a story that originally appeared in the Las Vegas Review-Journal, a paper that treats even hints of copyright violation the way Genghis Khan treated Central Asia. The R-J and reporter Richard Lake provided much of the raw material for this post, as did the unfortunate MySpace page of the post’s protagonist.
Time for a painfully simple exercise. We’re going to give you a series of words – concepts, really. Then say whether each is good, or bad. Look at each one irrespective of anything else. Here’s an example:
Clean air – good or bad?
Don’t overthink it. It’s not “clean air, but what about all the manufacturing jobs that will be lost if the parts of particulate matter per million rises a tiny fraction?” It’s simply, “clean air”.
Understand? Answered it? Then let’s go.
Puppies – good or bad?
Ending terrorism – good or bad?
Education – good or bad?
Slow down there, Ace.
After years of real-world examples, there’s no getting around it – all levels of government spend far too much taxpayer money to put people in classrooms where they’ll neither do anything productive nor develop the capacity for doing anything productive.
(People are going to misinterpret this post, and they’re going to start by misinterpreting that line. We’re not saying elementary schools shouldn’t teach basic math and grammar. We’re saying college is more often than not a waste of time.)
In the last century, college/university has gone from a place where you learn a profession, to a mandatory rite of passage for kids with good grades who come from white-collar families, to a mandatory rite of passage for everyone, to a necessity no less fundamental than food and water.
That’s wrong on several fronts. Amassing debt before entering the real world isn’t necessarily bad, but the debt has to have a purpose. Seeing as this post is about education, let’s use a SAT analogy:
Borrowing money to buy a house : borrowing money to buy lottery tickets :: borrowing money to study engineering : borrowing money to study sociology.
No matter how hard we hammer the opposite point, some commenters are still going to miss it, and lament that we’re downplaying the importance of education. Again, we’re not. But the unalloyed word “education” isn’t always an absolute good.
Meet J.T. Creedon, student government president at the College of Southern Nevada. Guess how many years he’s been going there.
No, higher.
10. That is not a typo.
He’s 28 years old.
(We can only speculate as to how many of the people who voted for him wouldn’t have voted for John McCain for president because he was “too old.”)
Education, ideally, is a financial investment for the educatee: make little money for 4 years, so you can make a lot more money for 4 decades. Sure, there are purists who don’t concern themselves with such philistine values, and who argue that the trivium and quadrivium are ends in themselves – and that education for its own sake is our very purpose here on Earth. This argument will be valid the moment classrooms build themselves and professors forgo salaries.
The economic argument occasionally carries weight among the purists, if they can use it to serve their own ends. Money becomes suddenly important to some people when the possibility of losing it presents itself.
The legislators and executive officeholders in Nevada, like those in a lot of states, spent far too much taxpayer money during the good years and now face a budget crisis. In Nevada, education makes up 28% of the state budget.
To hear the pro-“education” forces, if you want to deny unlimited funds for students, teachers and administrators; or even get the percentage down to 26 or so, that means you want children to be illiterate and innumerate.
First, tens of millions of kids already are illiterate and innumerate, with no incentive for them to read, write, add, divide and calculate square roots. Read Facebook, Twitter, MySpace (especially MySpace, where we’re pretty sure you need to be convicted of a felony to open an account) or the comments on any site other than Deadspin if you don’t believe us. Most of these kids’ parents aren’t exactly qualifying for Rhodes scholarships themselves.
Creedon is exactly the kind of person that a blanket funding policy attracts, and helps render financially impotent. Creedon had only moved to Nevada when – well, when he was an age at which most community college students are a year from graduating. Now at 28, he’s not close to done. From the Review-Journal:
(H)e’s probably going to leave for an out-of-state university.
“I really want to go to a place where it’s a little more stable for the next two years,” he says.
He’s applied to universities across the country, from New York to Texas to Washington state. He’s received one acceptance letter and waits to hear from the rest. He also applied to UNLV, but that’s just his safety net in case he doesn’t get in anywhere else.
Again, 28. An age at which:
- Steve Jobs had already sold millions of computers, taken Apple public, and ceded operational control of it to a professional CEO;
- George Harrison had embarked on a solo career, because the Beatles had already broken up;
- Steven Spielberg had directed Jaws, then the biggest-grossing movie in history;
- Theo Epstein was responsible for the day-to-day operations of the Boston Red Sox;
- Thousands of other people were doing something productive.
But hey, Creedon’s getting an education. Given that there’s a positive correlation between duration of post-secondary study and real-world success, those eventual 12 years in the classroom will certainly make Creedon a bigger star than Jobs, Harrison, Epstein and Spielberg combined.
We don’t mean to use an outlier as indicative of an entire group. Instead we mean to show that Creedon’s no outlier. His eventual diploma, should be ever earn one, will be in history and/or political science. That puts him square in the majority of unproductive, barely employable college graduates, but 95% of students at his college never graduate (necessitating the rare bold/italics/underlining hat trick.) Our educational system doesn’t merely turn these dropouts out by the myriad, it does so for obscene prices – both in terms of taxpayer wealth confiscated and of student loans incurred.
The president of Creedon’s actual college – not merely that of the student government – has that analytical flair that academics are famous for (again, from the Review-Journal):
Already, the college had to turn away 5,300 students in the fall.
“Had we been able to accommodate those students, our enrollment would have been much higher,” (Michael) Richards says.
They should phrase Richards’ statement as a true/false question in one of the community college’s introductory math tests.
What makes J.T. Creedon reprehensible is…well, several things and they’re difficult to rank, but what struck us hardest was his insistence on taking the moral high ground of concerning himself with the nebulous well-being of others, rather than looking at the financial necrotizing fasciitis case in the mirror. He publicly advocates securing ever more funding for students such as himself – oblivious to the reality that his own example is as strong an argument as any for gargantuan financial cuts.
This world would be a far better place if people took care of their own business first. J.T. Creedon is welcome to save the world from a shortage of overlearned, underexperienced waiters and retail clerks. That he feels an obligation to do so while taxpayers continue to wean him, well into adulthood, is his problem, and ultimately society’s.
—————
If your kid says he wants to go to college, or even merely thinks that that’s what you’re supposed to do when you get out of high school, part of being a parent is assessment and counsel. J.T. Creedon could have spent $3000 to enroll in truck driving school a decade ago, graduated with a commercial license a month later, and at the absolute minimum made $600,000 since then.
Heck, J.B. Hunt would have paid for his schooling, requiring only a one-year apprenticeship and allowing Creedon 9 years of freedom. But truck drivers never get on TV, nor do they have the luxury of organizing protests. They’re too busy delivering the food and drink that parasites require to survive.
Creedon could have learned to deal blackjack in even less time than it takes to learn to drive a truck. He could have done so for far less money, but with similar earning potential. (Albeit without ever seeing daylight nor breathing clean air. We live in a world of tradeoffs.)
Society can’t function without physicians and pharmacists. Nor without contractors and carpenters. But it’ll do just fine without directionless leeches.
This was Part I of a two-part series on higher education and how it pertains to the financial life of either you or the 20-something in your life. Part II, which is a lot less depressing than Part II, goes live Monday.
**This article is featured in the Yakezie Carnival on Judgement Day 2011**
and
How to invest with inflation still in the distance
Every Friday we review and rework a post we’d written months earlier for someone else’s site. This lets us test our theories, and the content-to-input payoff with these posts is pretty sweet, too.
This is from Consumerism Commentary. Updated notes in blue:
People have feared inflation ever since… well, since the dollar’s last rampant bout of inflation in 1977. However, there’s every reason to believe that this time inflationary pressures are too overwhelming to discount. (The consumer price index rose 1.1% in 2010. In other words, inflation remains low thanks to the Fed’s tight monetary policy. Now if we keep predicting inflation, sooner or later we’ll be right. But for the last 10 months, prices have been even stabler than they were the previous 10 months – when annualized inflation was 1.9%. In short, we were wrong in the short-term.) Or two colossal reasons, at least:
1. Legislative and executive leaders of the federal government, for whom fiscal restraint is a dirty term. No matter how laudable their objectives, they propose to spend and borrow an ungodly amount to achieve them. Any non-politician reading this blog knows the term “regardless of cost” can never be taken literally, but our elected betters think otherwise and aren’t concerned about the inevitable results.
2. A federal funds rate that resembles Carlos Pena’s batting average, or Countdown with Keith Olbermann’s Nielsen ratings. Here’s a really quick primer, because a lot of people act like they know this stuff but don’t:
The Fed (Federal Reserve) is the nation’s central bank. It actually creates our money out of thin air, which it sells to the federal government to conduct its business with. Commercial and investment banks like Chase and Wachovia (whoops. Wachovia, now a subsidiary of Wells Fargo) also borrow from the Fed. The interest rate those banks pay is determined by the Fed and called the federal funds rate, which thus serves as a basis for just about every interest rate in the economy.
Most countries’ central banks set a single rate. The Fed instead sets a range — the more you borrow, the less you pay. This of course favors larger banks, although “favors larger banks” has been a relative term ever since the federal government confiscated $678 per United States citizen and gave lent it to AIG. Since December the range has been 0% to 0.25%, an all-time nadir. (Well, how about that. It hasn’t moved since. And Carlos Pena finished the season at .196, the worst batting average in the majors among guys who qualified for the title.) Inflation has kept pace (see above), barely registering and keeping the dollar’s value intact while jobs disappear. The range eventually has to rise, since it can’t go in any other direction. Once it rises, in concert with the demand for additional dollars that government spending is creating, inflation should ensue.
What does this mean in practical terms? It means getting your assets the hell out of cash, or at least out of U.S. dollars.
(Note: We’ve long advocated quoting the price of a dollar in terms of gold, instead of the other way around. Details here, but suffice it to say that the dollar has lost an annualized 28% of its value since this post first ran.)
The immediate temptation is to shop the world for the currencies the dollar will lose the most money against. There are candidates such as the New Zealand dollar and the CFA franc, but again, your investment will only then be as safe as that government’s fiscal conservatism.
One strategy that goes a step farther is to look at blue chip stocks that don’t trade in U.S. dollars. If the stock’s fundamentals are strong enough, it shouldn’t matter if it’s measured in Swedish kronor, Swiss francs, or almost any currency short of Zimbabwean dollars. Even if a localized bout of inflation causes the stock’s nominal price to artificially rise, its real price should remain consistently strong.
Here are some examples of giant corporations that don’t necessarily trade on the Big Board nor NASDAQ:
Yes, Toyota. Exhale. And while extolling the benefits of a particular security might make the author come across as a boiler room stock promoter, I’m not telling you to buy anything. I’m telling you to look critically at the reasons for a stock’s atypical behavior.
The fun part! What did those stocks do since then?
Let’s start by looking at which ones we chose. One of those companies had some bad if undeserved PR since we posted. That company’s public image would have taken a historic beating, the worst of the year, if another company on the list didn’t have a problem was 1000 times worse. Yeah, BP won’t want to relive last summer anytime soon. We chose these stocks 3 weeks before the Gulf of Mexico disaster, too.)
This is all syncopatic, to use a pseudo-word. We’ve also written at length about what a bargain BP stock is. But that was after Deepwater Horizon.
Royal Dutch Shell, up an annualized 41%.
BP, down an annualized 43%. However, it’s up almost an annualized 100% since its July nadir and continues rising.
Toyota, down since April on the Nikkei but making huge strides since the fall. Here’s the chart. Toyota was trading at 3750 when our exercise began. Prices in yen:
If you think a week of questionable publicity in one market can turn the world’s largest and most respected automotive company into a bad investment, you shouldn’t be investing in anything more demanding than an index fund. A few months from now, no one will remember the recent uncomfortable performance that the parent company of two of Toyota’s major competitors forced the company to undertake.
Furthermore, this is a perfect time to go contrarian. Toyota shares have dropped 20% in the last month. Think about why that might happen to a stock.
Gold is the traditional inflation hedge, but when you see an investment being sold during commercial breaks on general-interest TV shows, that opportunity has clearly evaporated. Besides, gold’s value has quadrupled in the last 8 years. (And has been growing even faster ever since.) That’s swell, but if you’re looking to preserve wealth, remember that time continues to move forward, not backward.
What about Treasury Inflation-Protected Securities, whose defensive strength is written right into their very name? These are a type of U.S. bond whose interest rate, as you can probably figure out, factors inflation in. TIPS are great in theory, as long as you can trust the government’s consumer price index numbers and you can trust the government’s ability to honor its debts. “Full faith and credit of the United States government” doesn’t mean quite the same now as it did when the phrase was coined.
**This post is featured in the Totally Money Blog Carnival 2**