The Value of College...Questioned

According to the Department of Education, no more than half of those who started college in 2006 will have a four-year bachelor's degree within six years. So says a May 15, 2010, article in The New York Times. This story makes a compelling case for why an increasingly expensive college education may no longer be the right choice for everyone looking to enter the American work force. "College degrees are simply not necessary for many jobs," notes the article. "Of the 30 jobs projected to grow at the fastest rate over the next decade in the United States, only seven typically require a bachelor’s degree, according to the Bureau of Labor Statistics."

Three days after this article was published, a counter-view went live, and the crux of the critic's point is seen in this chart. The author states, "I think the answer lies in the most straightforward data of all: the relative pay of college graduates and everyone else."


This data arrives via the Bureau of Labor Statistics, and it examines median weekly pay for "the four main educational-attainment groups going back to 1979."


The author sums up, "As you can see, the real pay of college graduates has risen over the past 25 years. The real pay of every other group has dropped."


I'm not arguing against college education, but let me point something out. Yes, this data shows that college graduates are faring better than their non-graduate counterparts. But real weekly income for graduates went from about $950 in 1979 to $1,150 in 2009. This is a 21% increase over 30 years. I went to the US Inflation Calculator and learned that cost $100 in 1979 would cost $295.51 in 2009, an inflation rate change of 195.5%. It's fair to say that the year-over-year benefits of a bachelor's degree pale against the rising tide of general cost increases.


In 1979, the cost of a year of undergraduate education at the University of Pennsylvania was $5,270 for tuition and general fees. (Let's ignore room, board, etc.) Roundly speaking, that's $21,000 for a four-year education. If I had invested $21,000 into the S&P 500 index fund in 1983, it would have grown to $154,938 by the end of 2009, according to the stock market CAGR calculator at Moneychimp. That's adjusted for inflation. The unadjusted total would be $341,250.


Again, I'm not suggesting that all of the money poured into a conventional education might be better poured into long-term investments. But this certainly provides a different look at return on investment and might give some people additional pause to wonder if the current cost of a degree will truly be worthwhile. In some fields, the answer probably remains a resounding affirmative. But if I had my English degree to do all over again, I'd just pocket the cash, sink it into an index fund, and be better off for it. On-the-job experience and hard work has proven far more beneficial.

Why Your Parents Didn't Need to Occupy Anywhere

For the last two years, I've been collaborating on a personal finance book called "Where Does It All Go?" (now entering third draft). Chapter 1 opens with a discussion about how many people live with the frustration of feeling that they have things worse than their parents or grandparents did, and surely this must be due to their own inadequacies and failings. As the Occupy protests and the many, many personal testaments on We Are the 99 Percent show, this sense is widespread and far from unfounded. It is much harder for Americans now than it was a generation or two ago.

In the book, my colleague and I detail four primary ways in which this is true. But sometimes, a single picture can be worth more than a long chapter passage, especially if that picture is interactive.

I came across The State of Working America site this morning and its interactive look at "When income grows, who gains?" There are many reasons why today's generation is worse off than its predecessors, and in the book, we don't even touch on what this graphic so profoundly illustrates: Most if not all of the economic growth in America is not going to 90% of the population.

The graph's total data spans from 1917 to 2008. I picked the segment from 1950 to 1975. This was the prime of my grandfather's life, after he'd served in World War II, received G.I. funding through a Master's in Business at Harvard, and started his professional career. In this 25-year span, his family went through periods of boom and bust. I've heard stories of holidays where the kids got little more than fruit, and I know they came to Oregon in the late 1960s with barely $5,000 to their name. But my grandfather worked like mad, paid his fair share, and it all worked out.  He lived in a world where advances in the overall economy fell across all demographics. They ate well, took vacations, built up savings, owned their homes, and always had good health care.

As you can see, in my grandparents' time, the richest 10% of the country only got 30% of the growth. The other 70% went to the 90% masses -- people like us.

This is my generation, today. I started my career in 1990. In my generation, the masses got only 5% of the growth. Everything else went to the 10% richest, and, as you can see, the top 1% took nearly all of that.

The truly disturbing aspect of this chart is not today's disparity between the top 10% or even 1% and everybody else. The really scary part is that the top 1% are experiencing exponential growth. Look at the general shape of the curve. That's not linear. It's exponential, and you can see the "knee" of the curve happen in the early 1980s, as President Reagan started relaxing many of the old restrictions on businesses. Those who controlled the businesses were able to profit immensely and gather nearly all of the growth to themselves, leaving the 90% to combat inflation in whatever ways they could find. This has left us with everything from emergency rooms overstuffed with the uninsured (supposedly) middle class to a nation ballooning in obesity from cheap, carbohydrate-laden foods.

Exponential growth is unsustainable in any closed system, and it's obvious to anyone with eyes that the current trend cannot last much longer. My deep hope is that the primary world governments will recognize this and see the Occupy protests for what they are: a wake-up call to the dangers of this trend, not the whining of some allegedly idle, rabble-rousing losers. The media, of which I am professionally a part, has been reprehensible in its disdain for the protesters. And yes, on the whole, the protests are disorganized, diffuse, and sometimes incoherent. But that doesn't make them wrong.

We need to see the trend, hear the rising sentiment, and appreciate that these protesters have gone to great lengths in the face of their own economic adversities to remain peaceful. This is possibly a last chance to listen, to "get it." Because if these protests peter out and we see more years of this exponential rise in the super rich while the general population is left to flounder and stagnate, the outcome is inevitable. Centuries of history show repeatedly and invariably that the only possible result is rending, tragic violence that no amount of money can contain.

Amazon Looks to Burn Out Apple's Roots

Has it been so long that we've forgotten how Apple managed to maintain a foothold in the computing market at a time when the Microsoft/Intel duopoly was virtually universal? It was schools. Before aluminum unibody iBooks and even berry-colored iMacs, Apple has always made sure that it had mindshare in the education market. One could argue that it was this precedent that set the stage for today's shift to adopting iPads in modern classrooms.

Not the average classroom, of course. Not in districts like mine suffering from a $22 million budget shortfall. But in some universities and private/independent schools and, OK, maybe some fortunate public K-12s, teachers are looking to embrace the future and get their kids ahead of the curve. You're even starting to see education courses appear on how to use iPads in the classroom.

Why aren't all schools hopping on the iPad wagon? No doubt, there are many reasons, ranging from IT management concerns to outright pigheaded technophobia. But one of the top inhibitions has to be the $750 average price per device I wrote about earlier this year. When districts have to start implementing "budget closure days" in order to balance their bottom lines, who has $750 for every student to get a new tablet? There are roughly 55 million American elementary and secondary school students. Figure in a small group discount, and that's about $40 billion in iPads.

But along comes the 7-inch, Android-based Kindle Fire at $199. Suddenly, our budget to outfit every first through 12th grader drops to $11 billion. For reference, this is about the going rate for one month of U.S. war in Afghanistan and only slightly more than the bonus pay received by JP Morgan investment bankers in 2010.

So does it seem feasible that we as a country that still allegedly values its future could find a way to give our students each a tablet? I'd like to think so. If that sounds too entitled or socialist, fine. For $199 a pop, I'd find a way to come up with the money for each of my two boys. All I need to see is that the apps and content are there to make it worthwhile. (And sure, having teachers and administrators with a clue how to make use of current technology would be a great bonus.)

This brings us to the root of my point: I have yet to see anyone in the press discuss the Amazon Kindle Fire as an educational device in the same way that the iPad is now being touted, but in this regard I really think Amazon may have an iPad killer in the works. Do students need a camera or 3G wireless connectivity in a tablet? No. Those who want such things already have them in their phones. Do kids really need the bigger screen for virtual keyboard typing? No. You can create notes on a screen well enough, but serious content creation still demands a mouse, keyboard, and more pixels than you're going to cram into even 10 inches. And as someone who owns both a 10" Android tablet and a 7" NOOK Color, I can vouch for the fact that a 7" form factor is far more convenient. All it took was one business trip with both devices, and the 10" has stayed home ever since.

Yes, the Kindle Fire is being sold at a few bucks under Amazon's manufacturing cost in order to hit that tantalizing $199 price point, because Amazon knows it will make up the money on content purchases made through the device. But check out Amazon's Android app store, which I find far preferable to the chaos of the conventional Android Marketplace. I'll wager that the 1,125 educational titles now listed in Amazon's store will grow by several times over the next year. Amazon already has a full-blown textbook division, complete with a Kindle-based rental sub-site. And does it matter that the Kindle Fire doesn't have expandable storage when all of your purchases can be stored on and streamed from Amazon's Cloud Drive for free?

The only drawback I see here is that slowly yet surely, those who ride the Amazon education train will become locked into Amazon's platform. The other day, I picked up my old high school American History textbook to check a fact. In 25 years, if my kids want to do this, they might have to be paying to make sure they can still access their Amazon digital content. This rankles, but I also think it's inevitable as the world gradually, increasingly makes premium content, including books, into a subscription service. Whether you pay Amazon or Apple or Microsoft or whatever other mega-providers emerge in the future, you're going to pay someone as sure as you pay the utility companies today. But I digress.

I want my kids, and all kids, to have a tablet as part of their everyday learning and curriculum. Google was unable to take the wind from Apple's sails in this regard because it didn't have any control over the hardware ecosystem. Amazon has now remedied that problem, and in the Kindle Fire the company has an entry device into a complete content infrastructure that's tailor-made for student and educator needs. All that's left is to see the software developers leap in with the same creativity that they've shown on the iPad. Here's to hoping that Amazon will encourage them in this pursuit and recognize the educational gold mine now within its reach.