In which I answer a question about starting a business while you’re studying. Here’s the blog post in question.
When I was studying in university, I’d watch Globe Trekker (from Lonely Planet TV series) just days before my exams.
Do you have interesting habits/activities you do before exams? If you have “homework music”, what are they?
My mom has a Vietnamese colleague with a law degree. Apparently, it’s more lucrative to sell cookware in Singapore than practise law in Vietnam. White collar jobs, welcome to 2011.
There’s an article on the Wall Street Journal, “China to Cancel College Majors That Don’t Pay“. China is tackling the problem of jobless graduates in her country. This is the start of the nightmare of something I wrote over a year ago on education:
They [the universities] might go create more graduates who make higher salaries. What might those be? Those academic fields where the economy pays well for, for example, medicine, law, accountancy, banking, biotechnology and computer science. The arts and philosophy majors are doomed, I tell ya. The education syllabus might well be skewed towards commercially profitable disciplines.
China is at least thinking about it.
A nation-wide purge of university majors that don’t pay means you’re essentially specialising. Individually, a university might use that as a hook, such as offering excellent biotechnology classes taught by world-renown people in those fields. Nationally, it will be a disaster.
How do you determine which majors don’t pay? The implicit assumption is you know which majors don’t pay now and in the future. The implicit assumption is that you know what’s going to happen next. You don’t.
When radio was invented, people thought nobody would pay for advertising, since it’s a broadcast medium to nobody in particular (anyone can listen in).
When the telephone was invented, people thought face-to-face communications would die. We still value face-to-face communications now. Never mind the teenage girl who texts 563 messages a day (though I’m sure she still wants to meet up with her friends. Those messages are probably “Meet where?”, “K” (the short form of OK), and “lol”).
When the television was invented, people thought it’s ugly. Black and white? Who’d watch?
When the Internet was invented, nobody thought it’d be a commercially viable medium. Look at all the online stores now.
When music could be digitised, people started sharing MP3s. Music labels sued their customers. They lost money. Apple iTunes is doing fine though.
When Amazon was started, it was to be an online bookstore. The major bookstores didn’t think it will work. They’re now in financial trouble.
It takes an average of 4 years to graduate with a degree. A lot can happen in 4 years. By the time you graduate with a PhD in ornithology specialising in dodos, nobody is hiring a dodo hunter. The job is no longer relevant…
… but it doesn’t mean you’re irrelevant. Adapt your skills. Become an exotic bird care specialist.
Let’s say China purges all non-manufacturing related majors. That means most of her graduates know only manufacturing related stuff. If the economy suddenly rewards creativity-based knowledge work, China will be struggling to move. Remember, it takes 4 years to churn out graduates. You’ll be 4 years behind.
Hmm? China’s too big? The dinosaurs thought they’d live forever too. A meteor wiped them out. Doesn’t matter how big you are. A big enough meteor will still wipe you out. You may quote me. Hey, let me help you:
Doesn’t matter how big you are. A big enough meteor will still wipe you out.
A university shouldn’t model against Amazon. You should not offer long-tail majors. You can’t afford to. The proliferation of majors is probably to attract as many students as possible.
Nobody hires a dodo hunter.
Make the time and money you spend while studying in university count. The value of a degree doesn’t fluctuate much, year to year. But if you take just one year longer to obtain that degree, it means you’ve wasted one year of your life and another few thousands of dollars in tuition fees. Which means it takes that much longer for you to repay the tuition fee loan (if you took out one).
University/college tips from Bryarly
University/college tips from Emily
Today I went to the library. Never mind the reason. Suffice to say, I decided the best use of my morning was to go to the library.
While I was browsing the shelves, I found this book Spent, by Geoffrey Miller. He’s an evolutionary psychologist, and it happens that his writing is a little… dry at times. Whole blocks of text with few bolds, italics and headings to break the flow.
Degrees and sexual evolution
I persevered and managed to skim through some of the chapters. Basically, his premise of modern consumerism and marketing is affected by sexual evolution. You buy stuff to show you’re a better mate. You buy expensive (but deemed as socially coveted) goods to show off. You buy stuff that’s seemingly a waste to show you can waste resources.
He also pointed out the 2 extremes: the people supporting consumerism (despite the credit card debts and other financial disasters), and the people opposing pure consumerism. He also said both are dangerous, which I agree.
Anyway, he said something about education. I’m paraphrasing here, but he said university degrees are used as a shortcut to determine a person’s general intelligence. He also used the term IQ as well.
He said the people who scoff at the idea of using IQ to determine a person’s intelligence are usually already clever, and hang around people of their intelligence level. “Anyone with average intelligence can understand string theory!”, ignoring the fact that they’re surrounded by janitors and other school staff.
Schools require stringent tests to determine if you’re intelligent enough to attend at their establishment. The most prominent of these tests is the SAT. But the idea of an IQ test to determine intelligence threatens these schools. Because anyone can easily take a short IQ test to determine their intelligence.
If it’s easy to obtain, it’s harder to use it as a screen or charge for it. Thus, the academia typically scoff at the usefulness of an IQ test, ignoring the SAT they used for admission.
If it’s easy to fake, or is almost indistinguishable from the original, then the original loses value. The example used here is cubic zirconia, directly competing with diamonds.
Our ancestors might have developed humour, creativity and kindness to compete for quality mates. Those are alternative traits to body musculature, body symmetry and other physical properties. In time, those “inferior” traits won. There are women who prefer a guy with humour, creativity and kindness to other human beings.
Social status (or showing off)
What I’m getting at (and what I believe Geoffrey was suggesting), is that a degree is a social status object, just like any other social status object. Having a degree shows other people that you had the time and money to pursue a degree, and the discipline to actually fulfill the requirements to get a degree. It’s a shortcut. Having a degree doesn’t necessarily mean you’re intelligent because there are some graduates who are frightfully stupid.
I will admit right here that I’ve never actually applied anything I learned for my degree in my jobs. Maybe that I learnt C and Unix shell scripts and commands.
My only regret is that I didn’t try to do more during my university days. Maybe learning about how businesses actually work. Did you know an employee typically costs a company 3 times his salary to employ him? This means an employee has to do work that generate a revenue amount 3 times his own salary just to justify his existence in company payroll. Where does the money go? The lights, the cleaning, the pantry, the security, the stationery. How can a company survive then? Because there are sales people that generate revenue amounts equal to 10 times their salary. That’s why sales people can be highly paid.
What was I talking about? Oh yes, degrees.
To increase the value of the original, you can increase the precision of getting the original and/or decrease the credibility of the competition. For example, the judgement of diamond quality and the emphasis that cubic zirconia rings aren’t rare (thus not as “valuable”).
The crux of the matter is that educational institutes are afraid their degrees will lose value. Just read the backgrounds of those who fervently support the obtaining of degrees, and those with a “meh” attitude towards degrees. Are they academics? Do they hold a job? Are they entrepreneurs? Are they open to new ideas? Are they ambivalent? Do they propose alternatives?
I suggest you get a degree if you can. But start a business while you’re there. A degree is still a valuable social status object. But don’t kill yourself trying to get one.
Consider what you want out of your life. I would hate to think you would waste 4 years of your life and tons of money to just scrape by and get a degree. Do something useful while you’re there! Make it more than just a piece of paper!
Did you know that because cubic zirconia is cheap to produce, the processes can be refined to the point where they’re less flawed than diamonds? Imagine, “fake” diamonds that are “purer” than real diamonds!
Ok, I’m biased in this. I would suggest you start a business. But I would come off as fake, since I do have a university degree.
In these tough economic times, the value of a university (or college) degree is highly debated. Some people say you don’t need a degree (here and here). And there are also articles and studies saying a degree is (still) the best investment you can make (for example, here and here). [For the latter article, I would add that you be careful of the word “average” being thrown around. Because you read my blog, I would suggest that you’re more than just average.]
DISCLAIMER: The Singapore education system might be different from the system you have in your country. I can’t even tell you if the Singapore system as of writing now is the same as what I went through.
Should I buy the steel sword now or later?
In the role-playing video games I’ve played when I was younger, I would arrive in a town and I’d be immediately broke. I’d go buy the best armour and weapons money can buy. Inevitably, the game designers made it such that it’s highly unlikely you would have enough money to buy every single piece of best armour and weapons for your character(s).
Now you have a decision to make.
“I don’t have enough money. Should I buy that bronze sword now so I can continue with the adventure? Or just tough it out until I reach the next town, where I can buy the steel sword for just a little bit more money?”
That degree you’re thinking of getting is that adamantium sword. And it’s available for purchase about, oh, 8 towns later. You better tough it out…
A degree is traditionally considered the be-all-end-all. Once you have it, you’re set for life. It’ll open doors for you in the corporate world. People judge you (highly?) based on a piece of paper that you have. Job recruiters screen you based on the type of degree you have, looking for computer science degree graduates even though someone with a bachelor of science (majoring in applied mathematics and computational science) is just as qualified *cough*.
There is always another sword better than whatever you have (even adamantium). It doesn’t happen in games because they’re finite. But in real life, there’s always something better you can have. Maybe a professional certificate in something. Certifications by Microsoft, Oracle or any company/organisation that’s respected.
Don’t waste your freedom
Through my primary school, secondary school and junior college days, I had to wake up early and be at school by 7:30am. School ends sometime in the afternoon, where I might have extra curricular activities.
When I was drafted into the military, I was told when I had to wake up. I was told when and what to do in my waking hours. And I was told when to go to bed.
When I started at a job, I had to be in the office at 8:30am. I could only go for lunch between 12 noon and 2pm, and only for 1 hour. I could only go home after 6pm.
I only had freedom of time when I was in the university (and now, when I’m working for myself). When I was in university, I typically took about 20 credits per semester (about 5 classes), which was about 20+ hours of lectures and tutorial work. The class timings were still fixed, but for the first time in my educational life, I had some degree (no pun intended) of freedom. I could choose which tutorial classes I wanted to attend. I could plan my time each week and even each day.
So if you’re looking for advice, I suggest this: Go to university/college and get your degree if you can (keeping the cost of time and money in mind). But start a business while you’re there.
Don’t give me that cranberry about not having enough time. Even if you stretch it, lectures and tutorials only consume up to 30 hours per week of your time. You still have 10 hours more per week than if you’re working full time! Make use of that.
Don’t drink (alcohol). Don’t do drugs. Don’t party (too much). Don’t smoke.
I get that this period of time might be liberating to you, but it’s also the time where your self-discipline is most tested. I’m not saying you can’t have fun. But if you can’t hold yourself accountable now, your future work at a job is going to suck cannonballs.
You have a huge university debt the moment you start. Don’t wait 4 years before struggling to find a job that pays enough that you can repay that.
If the statistics are true, most small businesses fail within 5 years. You have 4 years in university. Start failing then.
You can either start your own business and have some control over your future. Or you can work at a company where the company controls your future.
If you’re reading this, I assume you’re either a mathematician, a scientist or a programmer. Start a business. Get a degree. You’ll probably do fine either way. Even better, start a business while you’re getting your degree.
Here’s a quote from an article of The Seattle Times:
Valedictorians with straight-A’s were denied admission, while out-of-state students with lower grades were accepted.
The decision is based squarely on economics: Nonresident students in effect subsidize the education of Washington residents, providing a much-needed boost in revenue at a time the UW could see its funding cut by $200 million over the next biennium.
It’s not ideal. Revenue, budgets and other financial concerns affect the direction of education.
I wrote an article on the merits of a debtless university education. However minute or major, money has an impact on how educational institutes are run. Perhaps it’s the focus of the university’s educational efforts (maybe putting more money into “money-making” departments such as business, medical and legal). Perhaps it’s the decision to take in more students who pay more in tuition fees. And lower the number of student intake with perfectly good grades but don’t pay as much in tuition fees.
A reader, Lachlan Wells, wrote this to me:
There is a system used here in Australia called HECS which is similar to what the named economist proposes except that you only pay what your degree is worth. The government loans you the money interest-free (but CPI indexed) and pays your entire tuition. After you reach a certain income threshold a percentage of your after-tax income is deducted from your pay to start paying off the debt.
This internalises a few issues that exist with the model you propose. Chiefly, if you are going to pay 4% of your income for life, you may as well go and study all the time and only have a crappy job on the side (at least that is what I would do since I love learning: if you are paying already, it is an incentive to get your moneys worth!). Also it is a government loan and not a loan through the university itself, so it can be deducted from income directly alongside income tax (so no messy tracking of income) and the money is not geared to any particular major (if it is an Arts degree in philosophy or an Engineering degree in microelectronics, the degree is paid for by HECS, so the university gets the funds it needs without the incentive of only churning out higher income degrees).
HECS is at least one thing I believe our government got right; most government programs have more faults than positives!
That was a response to the article I wrote on debtless university education. Thanks Lachlan for sharing the information.
So this HECS is Higher Education Contribution Scheme. As I understand it, it’s been replaced with HELP, Higher Education Loan Programme. But it’s also apparently listed as HECS-HELP, so take note.
The criteria to apply for HECS-HELP assistance is that
you are a Commonwealth supported student and
* an Australian citizen or
* the holder of a permanent humanitarian visa.
This university education tuition fee thing seems to be getting worse. It turns out that Britain’s plan to triple their tuition fees got a whole bunch of students and teachers riled up.
Disclaimer: You are advised to contact the appropriate authorities on relevant, up-to-date information. Criteria for application, loan repayment conditions and other nitty gritty details might change.
My friend Christopher has always been vocal about education. During one of our regular meetings, he relayed a possible solution to the debt carried by university graduates, proposed by an economist in America (I don’t know the name). So while I can’t give you a reference to research on your own, I believe the idea is still worth a discussion.
[Ed: Christopher gave the name of the economist. It’s Moshe Milevsky, and he’s from York University, Canada (not America, oops…)]
Now if you’re a student about to enter university education, or have been through a university education, you can understand the enormous amount of debt carried by you. Before you even step into the corporate world of the working class, you’ve already incurred a heap of debt. If you’re unfortunate, that’s on top of whatever credit card debt you’ve gotten yourself in. I myself had a student loan of more than 17,000 Singapore dollars to pay off before I graduated. I slaved and saved for over 2 years before I paid that off.
You don’t pay the university fees, but you still pay…
Anyway, the solution? Instead of taking an upfront loan from the bank, the student gets a free education from the university. Free as in, don’t have to pay school fees upfront to the university.
However, once the student graduates, he is to pay to the university a certain percentage of his income. For life. For eternity. Till the day he dies.
The percentage will be based on the type of work he does and the educational certification he receives. For high paying professionals such as medical doctors and lawyers, it’s 4%. For white collar jobs such as computer programmers, accountants, managers, it’s 3%. In Singapore, the polytechnic is considered a “lower” form of education than the university (as in a polytechnic diploma/degree is lower than a university degree). Polytechnic graduates will pay 2% of their income to the education institute. There’s also the ITE, Institute of Technical Education, whose graduates my friend has deemed a 1% of their income. ITE graduates are generally considered to be “lower” than polytechnic graduates. Singapore is a competitive place…
Now for the sake of argument, let’s say a 3-year university education costs about US$ 14000 in total. Let’s say the salary for the graduate is US$ 5000 per month, and he has to pay 3% of this salary to the university every month. You can always plug in different values for the following discussion. Let’s also assume that the salary remains unchanged (unlikely, but for the sake of argument and ease of calculation…).
3% of US$ 5000 is US$ 150. With an education costing US$ 14000, the graduate will pay it off in close to 8 years.
I know that’s a lot of assumptions, but I want you to pay close attention to this. The graduate has no debt to speak of. That’s the good part. You will have a tertiary education if you’re willing to work hard to graduate. Now for the bad part. After 8 years, you will continue to pay to the university 3% of your salary, even though technically speaking, you’ve paid off your “loan”.
Now my friend says this should work out fine over the long term. I’m too lazy to work out the calculations, assuming I even know what equations to use. He’s the finance guy, so I’m inclined to at least give him the benefit of the doubt.
Let’s put things in perspective. After you graduate, you might be say 22 years old. After working for that 8 years of “paying” the “debt”, you’ll be 30 years old. Let’s say you continue to work energetically till you’re 55 years old (which is optimistically young for retirement, in context with our current economic situation). That’s 25 years of income you’re giving to the university. For free. If you consider the fact that your salary is most likely to increase every year, we have one conclusion.
That university is going to be very rich. Imagine all the graduates out there working perpetually for you.
Take note when you incentivise
I pointed out to Christopher that whenever some factor is incentivised (particularly with money), that factor will be optimised, for better or worse. I’m reminded of something Joel Spolsky wrote on software bugs (I can’t find the article! Urghh…) He said something about an incentive for software testers if they find bugs. The more bugs they find and record, the more they get of whatever they’re incentivised with. So what happened? Testers found all kinds of bugs. Even trivial bugs that barely fulfill the criteria of being a bug. “The spec said it’s supposed to be red. Is that a light shade of mauve? File as bug.”
So what happens when the universities realise that they have armies of graduates pouring money back to them for all of eternity? They might go create more graduates who make higher salaries. What might those be? Those academic fields where the economy pays well for, for example, medicine, law, accountancy, banking, biotechnology and computer science. The arts and philosophy majors are doomed, I tell ya. The education syllabus might well be skewed towards commercially profitable disciplines.
Universities will be more inclined to partner with companies, finding lucrative positions for their graduates. Because the higher the graduates are paid, the more the university gets.
I’m not saying there aren’t profitable jobs for each discipline. I’m saying you optimise what you measure. And in this case, it’s money.
Another friend said that universities will do course-correction with the economy. If there are too many accountants and too few engineers, then just direct resources to the engineering faculty, and less to the business faculty. I suppose it could work. What of the lives of the accountant graduates that the university destroyed? It could take 3 years for the university to course-correct, by which time you’d have graduated into a world where there are accountants everywhere. Universities grooming polymaths such as Singularity University and Project Polymath aren’t that prevalent.
Christopher said, the whole point was that, with this surplus cashflow, more money can be devoted to research, the arts, culture, history. The disciplines where it’s either risky (you cannot guarantee eradication of HIV or cancer with research), or have little commercial value (at that point in time). I just believe humans have a way of rationalising that incentive. Whether it’s good or bad depends on the recipients, and whether debtless university education was worth it.
I don’t even know how to enforce the payment by the graduates. How would the universities keep track? Should the banks or some financial representative be involved? Should the companies hiring the graduates be involved? Should the government be involved? What if the graduate immigrates?
The shift of power between education and financial institutes
I actually have a deeper concern. I believe universities primarily support themselves through student fees, donations, and possibly entrepreneurial efforts by students and teachers. What would happen when they find themselves loaded with large amounts of money? Our mutual friend said that, with all the professors in the economic faculty, the universities would know what to do. Perhaps.
I bring you the story of the Knights Templar. They started off with little money, due to their vows of poverty. But as they grew in power and influence, so too did their wealth. As this wealth and power grew, they started becoming a banking institution. A written piece of paper with a monetary value and their stamp of approval is considered legitimate. They started out as a religious order, and they became a bank as well.
Now, student loans are usually granted by banks. What will happen if students no longer needed to get a loan from the bank to study at a university? Maybe not much, student loans can’t make up a large part of a bank’s revenue, right?
What if people started getting ideas that they don’t necessarily need to get a loan from the bank? What if they can borrow from the university? Entrepreneurial pursuits will likely get an approval from the university, particularly if the founders are graduates from that university, or the startup is related to or endorsed by the university. Will there be tension between the education institutes and financial institutes? Are universities more trusted than banks, given the recent economic meltdown?
So tell me, if you are given a choice between paying for your university education, or paying the university a fixed percentage of your salary for the rest of your life, which would you choose? Leave a comment.