Crazy Finance: Episode 2 - Is College Still Worth It?

0:00Being an entrepreneur is a 24-7 job. And when you're hiring, you need a partner that works as hard as you do. That hiring partner is LinkedIn Jobs. When you clock out, LinkedIn clocks in. LinkedIn makes it easy to post your job for free, share with your network, get qualified candidates that you can manage all in one place. For one thing, you can post a job. LinkedIn's new feature can help you write job descriptions and then quickly get your job in front of the right people. You get qualified candidates. At the end of the day, the most important thing to your business is the quality of the candidates.

0:30And with LinkedIn, of course, you can feel confident that you're getting the best. Based on LinkedIn data, 72 % of small and medium businesses say using LinkedIn helps them find high-quality candidates. Find out why more than 2.5 million small businesses use LinkedIn for hiring today. Find your next great hire on LinkedIn. Post your job for free at linkedin.com slash altature. That's linkedin.com slash altature to post your job for free. Terms and conditions apply. Today on the James Altucher Show. If you're a kid listening to this, if you're an 18-year-old, do not go to college. Please do not go to college.

1:09College is just a gigantic scam. I think there are certain people that should just not go to college. What's happened is because the government guarantees the college the payment, there's no reason for the college to charge less for tuition. There's no reason a product should go up faster than inflation every single year unless there's some sort of weird guarantee that there's no risk in it because they couldn't really assess the risk. Like who gives somebody$200 ,000 worth of loans at the age of 18 through 22? I hope trade schools make a comeback because we need those skills very badly.

1:50This isn't your average business podcast and he's not your average host. This is the James Altucher Show.

2:07Welcome to another episode of Crazy Finance. Might not be crazy to you, but these are my personal feelings about personal finance. I normally don't like that phrase, personal finance. It's like a book that tells me, oh, put 60 % in stock, 40 % in bonds, own your home, go to a good college so you can make more than the people who don't go to college. And none of these things I feel are true, plus many more items. I have with me here today, Doug Hill. Doug, welcome. James, thanks for having me. We've known each other for, what, eight years now. And this is the first time you've invited me. I don't know if it took you that long to get to know me and how much I had to offer.

2:49But anyway, I'm glad to be here. Well, we've had so many discussions about so many of these issues. Doug and I worked together on a lot of different projects and we've discussed all these issues before. So I figured, okay, let's just discuss them with the cameras on. And last time we discussed whether or not it was a worthwhile investment to own your own home. And I argued, no, you argued, yes. I think we had a little influence on each other. And by the way, I don't take my own advice as we revealed at the end of the last episode. I own a home, but I hate myself for it. So it's a disconnect I have.

3:26And today I want to talk about you should never send your kids to college. And by the way, if you're a kid listening to this, if you're an 18 year old, do not go to college. Please do not go to college. And I know that means some people are going to not let their kids listen to this episode, but college is just a gigantic scam. And homeownership might be mildly a scam, but you made some good points about homeownership, Doug, which I appreciate. There's very few reasons why I would say, oh yeah, college is a good choice for you. Doug, did you send your kids to college? Yeah. I have, between me and Mary, four kids, they all went to college.

4:06And our deal with them was, you know we have Virginia a lot of good schools to go to Virginia will help pay for most of it so that was the deal we made I met you around the time James when our kids were in college and your don't go to college uh theme had already surfaced and you already written about it a ton and after going through the process I what should I reveal if I agree or disagree with you right now Tell me. Okay. I very much agree with your assessment on it. I don't think, I'm not going to say never, because I do think that there are some trades. Like, I'm going to go to the doctor here in the next couple of weeks.

4:51I want that guy to have all the school, all the college that he can consume before I go into his office. But for most people, I think you're right. I think it's a waste of money. I think the way that the system's set up right now with student loans and the government funding and financing college institutions is broken. I think that it just skyrockets prices of universities and colleges all over the nation for everybody. And the ones that are stuck holding the bag are the people that are taking the loans out to actually make that happen to get a four-year degree or spend six years to get a four-year degree in something that they didn't really need.

5:27Yeah, and like, I mean, we'll go through the financials in a second, but your point even about you want the kid to go to, the doctor to go to medical school, first off, there is some evidence people do learn medicine in medical school, as to be expected. In fact, there's a lot of research that shows a person is the best doctor they will ever be the one year after they graduate medical school. But most of their career, they're not in that one year. they start declining almost immediately. It's depending on what action, like if you're a surgeon, your muscle skills get weaker. Or I don't even know what all the issues are.

6:05But someone once asked me, like if you're gonna have brain surgery, wouldn't you want someone to have graduated Harvard Medical School than someone who didn't go to medical school? And my reply was, I want someone who's done a thousand brain surgeries to operate on me. And I don't care what medical school they went to. I just want someone who knows how to do brain surgery. And I feel like, just like with, let's separate colleges from trade schools, just like with trade schools. Why can't they just learn how to be a brain surgeon in trade school? Like, why do they need to go to, you know, four years of undergraduate, four years of medical school, two years of residency?

6:40Okay, the residency I get because that gives you real world experience. But it seems like I could just churn out more doctors for less cost if they just have maybe two years of very specialized medical school and then residency, maybe three or four years, maybe more residency. Yeah, I think I very much disagree with that. Those are the types of things where I'm not a doctor. You're not a doctor, right? I play one on Twitter occasionally. I was an epidemiologist during COVID. I want that guy going to eight years of school, two years of residency. I want him doing all the things. And I think the only way you can actually do brain surgery on someone is if you have gone through medical school.

7:24I mean, maybe that's not true in all places in the world, but I want that guy that's done not only a thousand brain surgeries, but has been successful in those brain surgeries and people live through them. I think that's the big key. Okay, you might be right. I'm willing to defer on this. Like you might be right, but what did you study in college? I was business and finance. Do you feel that has served useful in your career? Yeah. I mean, it's hard to know, right? Because what do you learn in business and finance? Yeah, it's hard to know. You learn through business strategy and you learn about financial documents and that sort of thing.

7:59I probably could have learned that outside of school. If you had been an entrepreneur, for instance, let's say you opened a shoe store. And I'm not saying instead of going to college, open a shoe store, but just giving an example. You would have learned P &L. You would have learned inventory management. You would have learned marketing. you know all these things that you would take classes on your life depends on you actually really learning them you're not just taking a test and getting an a b or c whether you make a living or not for yourself or your family or whatever depends on if you do these things better than someone who's just reading a textbook yeah no and i think you're right i'm probably one of the probably one or two of my kids are probably the people who didn't need to go to college and they probably would have been just as good or better off, assuming that, I mean, we graduated around the same time, James, and the world was a lot different.

8:55But for me, the reason to go to school was so that I was a little more marketable to get a job. I mean, that's really what it was back in the late 80s, early 90s. You just wanted to stand out because not everyone did go to college. And so having a college degree back then did give you an edge when you walked in and sat down at someone's desk for an interview. All things equal, had I gotten the opportunity to relive that part of my life and go and find a job, and Noah's going to find a job right out of high school. And I think studies even proved that that person, when you take into account the financial side of getting all the loans, that person, the earnings that they've made early on in their career, they do better off in the long term if they stick with the same trading.

9:43Right. So the funny thing about that though, is first off, I've seen those studies. All those studies of course are done at colleges. They're a little biased, but the thing is that was at a time when you're right, certain jobs, and even now certain jobs, they filter, they need ways to filter the candidates. So the first filter is, did you go to college or not? And a lot of jobs won't even look at you if you don't go to college. Like if you want to work as an investment banker, chances are you have to go to college. Like my story is I majored in computer science. I went to graduate school in computer science in order to get a major and do all this stuff.

10:18I had to do a lot of computer programming. And then when I had my first real job after everything, I was so bad at programming and I had done my 10 ,000 hours of programming in college or whatever, but I was so bad at it compared to what the job needed that they had to send me to remedial programming classes for a month in order to get me up to speed. And it wasn't like I had this rocket science job. I was a junior programmer analyst was my title at HBO. So working on, you know, programming things to make the TV schedule work. Like it just wasn't a big deal, but I couldn't do it despite going to graduate school and programming all through graduate school.

10:57So then I started looking into, well, what's the deal here? So let's say, you know, the average, you know, the average tuition is a hard number to come up with. Technically, the average tuition in the U.S. is$16 ,000 a semester, and that goes from the highest to the lowest. So who knows what any one person is paying. But let's say you go to a good school, you might be paying anywhere between$20 ,000 and$70 ,000 a semester. And that doesn't include, you know, in some cases, it doesn't, but it might not include housing. It might not include your food. It definitely doesn't include clothes. It doesn't include textbooks, which are oddly expensive, like$200 for a book or maybe even more.

11:39And what's happened is because the government guarantees the college, the payment, there's no reason for the college to charge less for tuition. So colleges have actually charged more, more than inflation every single year for the past 60 years. So it's not on average. Every single year, colleges have raised their tuition more than the inflation raised every single year for the past 60 years. And it's basically ever since in the 1960s, the US government started guaranteeing the college, you're gonna get paid no matter what, the student owes the government the money. They don't owe the college, we'll pay you no matter what.

12:24So the colleges are saying, hey, that's great, thank you. and they just keep raising the tuition. There's no reason a product should go up faster than inflation every single year, unless there's some sort of weird guarantee that there's no risk in it. If there's risk in it, people would make better, the colleges would make better decisions, but there's no risk. As the government says, it's all yours. And then students who don't know any better take out these enormous loans. Like if you go to like, I don't know, one of my daughters went to a school in the middle of Pennsylvania, was neither here nor there.

12:58and she's paying like almost the same tuition that someone going to Harvard would pay. And if she was borrowing this money, but kids don't know how to make risk assessments. Like that part of your brain isn't fully developed until you're 25 years old. So kids won't take the risk. And as a parent, I feel bad saying no. Like it's just, I feel bad. And no, you can't go to college. It's a bad idea. And so it's just the cycle continues. And now your point is, you know, does it result in a better job? It's unclear to me because you're forgetting the fact that, okay, there's all this tuition to pay back plus the interest payment.

13:38So it's actually much more than the tuition. And then what if you had spent four years, you know, building businesses instead of four years studying business, would you have been, by the time you were 22 years old, by the the average student in the US goes to college for six years, takes six years on average to graduate a four-year college on average. And what if you had spent that six years starting businesses, even shitty little businesses that didn't work out. And by the time you were 24, you'd either started one big business or a bunch of like smaller businesses. You ran a pizza store, you ran a flower shop, you ran a drug store or whatever, and you weren't saddled with all this debt.

14:17Like just the basic economics, it seems you would have been much better off, even in the long run. Yeah, and even back when we went to school, I mean, tuition was a fraction. You know, like you said, tuition's been outpacing inflation for a long time. And even under that scenario, yes, I would have been better off. I think, and this is where I land on it, I think there are certain people that should just not go to college. They go there for the experience and they go there for the life experience and that sort of thing. And they don't intend to use what they learned there for a higher level employment, like doctors, lawyers, engineers, things where you need more training, typically, to even get in the door because it's very competitive work environment, even though there are a lot of jobs out there, but still very competitive for the higher payments.

15:05And then for the rest of the people, like we were talking in the green room, I think trade schools are starting to make a comeback here.

15:17take a quick break if you like this episode i'd really really appreciate it would mean so much to me please share it with your friends and subscribe to the podcast email me at altitra gmail.com and tell me why you subscribed thanks

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17:13Being an entrepreneur is a 24-7 job. And when you're hiring, you need a partner that works as hard as you do. That hiring partner is LinkedIn Jobs. When you clock out, LinkedIn clocks in. LinkedIn makes it easy to post your job for free, share with your network, get qualified candidates that you can manage all in one place. For one thing, you can post a job. LinkedIn's new feature can help you write job descriptions and then quickly get your job in front of the right people. You get qualified candidates. At the end of the day, the most important thing to your business is the quality of the candidates.

17:45And with LinkedIn, of course, you can feel confident that you're getting the best. Based on LinkedIn data, 72 % of small and medium businesses say using LinkedIn helps them find high-quality candidates. Find out why more than 2.5 million small businesses use LinkedIn for hiring today. Find your next great hire on LinkedIn. Post your job for free at linkedin.com slash altature. That's linkedin.com slash altature to post your job for free. Terms and conditions apply. I think trade schools are starting to make a comeback here. I grew up in Stratum, New Hampshire, went to Exeter High School, and they had a trade shop.

18:26So people would go there, and it was a metal shop, and they would do work on cars and that sort of thing. And those guys, they would go there after school, and they'd fix cars and that sort of thing. And you start opening up a mechanic shop, just like you're saying, you could do very well for yourself if you're good at it. And like that kid going to college rather than just going to trade school is probably a big mistake because they're not going to learn anything that's going to accelerate what they want to do, which is to fix cars. How much does trade school cost? I don't really know. I don't, I'm not familiar.

18:58I don't know. But it's like a fraction of colleges. I have to believe that it's a much lower percentage. We could look it up, but like electricians. I had electrician here not too long ago, I almost had to take out a line of credit to pay this guy what he wanted for a job that he was working on for me. I mean, it was an amazing amount of money. And I'm like, you're only here for a day and a half. Like, how can it be that? And he's got insurance he has to pay and he makes a very good wage, I'm sure. Yeah. And so my concern is, and look, in high school, I hate to say it, we had a bias. We all thought those kids were the stupid kids, right?

19:37They didn't take the AP classes. They were building cars and building real skills. Yeah, because we were dumb kids. We didn't know. And the thing is, when's the last time you ever used trigonometry or calculus in life? No. When's the last time you had to cut open a frog like an AP biology? Like never. I don't think I've seen a frog since AP biology. I don't know the chemical periodic table elements or F equals MA. I don't know that anymore. Like, what is that? So that's a physics. That's FEMA. Oh, F-E-F. F equals MA. So force equals mass times something, I don't know, acceleration. And it's crazy.

20:18We never use any of this stuff again. I can't remember anything I've learned in college, even like the computer stuff. Again, I had to take remedial classes when I was on the job. And yet I paid all this money. I always wonder what would have my life had been like if I had taken those three years, I went three years to college. If I had taken those three years and two years to graduate school, so I've taken those five years and actually, let's say the first year, travel the world, okay? I still would have spent less money than I spent going to college. And then the second year, maybe working as a programmer someplace on real world things.

20:52Maybe the third year, having an idea, starting a business. I have no expenses or fewer expenses. I don't have to pay for textbooks. You know, I don't have to pay, maybe I live with my parents one year, or maybe I pay the same rent, but I don't have to pay tuition. and it just feels like life would be much better if kids didn't go to college. Like now I wish my kids hadn't, like actually one of my daughters did drop out after two years, and she's had an extra two years of making money and building a career, and okay, she's in her early 20s, so she hasn't had a big career yet, but I didn't have any kind of career until I was 27 years old.

21:31So it takes time anyway. So I just always wonder, I feel like my life would have been so much better if I hadn't gone to college. I think too, there's a son of mine, he's 30. Yeah, he's just turning 30. And he's a sales guy. And it's a very important skill. He talks to people on the phone and he does very well. And I think about college and his experience. It took him five years to get through. And And I think about how much of the socialization, how much of the interaction with people in a closed campus helped him socialize to the point where he could excel in a position like a sales position where you hear no 95 times out of 100 and be able to like, okay, and then move on.

22:22I don't think you're bored. Yeah, maybe ordered to hurt him. I don't know. He didn't take any sales classes at school. I guarantee you that. There were no sales. There's no classes on how to be a salesman. So that was just something he gravitated to. There was an opportunity presented. Yeah, I'll try it. Turns out he's good at it, right? So you don't need college for that, to your point. So I very much agree with you on that. I will stand firm. I want my doctors and lawyers and engineers, people who build bridges and dig tunnels that we drive through every day. I want those people going to school and really getting as much education as possible so that something bad doesn't happen.

22:59I agree on the bridges. You need trained professionals. Lawyers, I've lectured in front of conventions of lawyers, like lawyers barely know the law. The law they study in school is very abstract in many cases. It doesn't get specific until you pick an area and a geography you're going to live in and so on. And doctors, look, there's robots now doing surgery with higher success rate than professional doctors. diagnosis is all going to happen with AI. In some sectors of medicine, it's already happening much better than human doctors. The same thing is true with the legal industry. AI is replacing large chunks of the legal industry.

23:37But in terms of the sales and the socialization, don't forget, college is the last time in your life that you're basically only around people your age, give or take a year. So it's very unusual. It's not really training you for socialization in the outside college world. Because you're never, again, going to only hang out with people your demographic, almost your exact demographic. So in terms of age and cultural background and so on. But to your point though, things that are really important to live life, like having a sales ability, everybody needs to have some sales ability because you have to persuade people of doing things or else you're going to get overruled all the time.

24:13And copywriting, that's something you don't learn in college. You can't learn in college. It was such a valuable skill. There's so many valuable skills, like programming. I couldn't really learn it in college. I had to learn it outside of college. So look, I think there was a big scam when suddenly the government was backing every loan and colleges were able to raise tuition without anybody saying no. And it went along perfectly with kids who had no problem borrowing money because they couldn't really assess the risk. Who gives somebody$200 ,000 worth of loans at the age of 18 through 22? The government.

24:49Yeah, kids are graduating. And I remember one time I went around NYU interviewing seniors there and asking them how they were gonna pay down their debt. And I could repeat some of the answers. It would be ludicrous, but basically nobody had a rational answer that was gonna actually pay. They all had about a quarter million dollars in debt. Nobody actually had any rational way of paying down this debt. It's really debilitating when they graduate. And so I'm thinking now with AI, there's going to be alternatives and maybe people are starting to accept the fact that, oh, if I get a Google certificate at Coursera.com or the Khan Academy, which is one 1 ,000th of price, some jobs now will look at that, at least in terms of technical jobs.