Peter Thiel and the Challenging of the Meritocracy

Many people have linked to this Techcrunch article by Sarah Lacy about Peter Thiel and an education bubble. Here’s Freddie DeBoer and E.D. Kain (at his new Forbes blog that covers a lot of education territory) on the article. I actually think the argument is flawed because it tries to wrap itself in an egalitarian critique and misses a far, far more interesting critique of the state of elite higher education.

From the article (my bold):

Thiel talks about consumption masquerading as investment during the housing bubble, as people would take out speculative interest-only loans to get a bigger house with a pool and tell themselves they were being frugal and saving for retirement. Similarly, the idea that attending Harvard is all about learning? Yeah. No one pays a quarter of a million dollars just to read Chaucer. The implicit promise is that you work hard to get there, and then you are set for life. It can lead to an unhealthy sense of entitlement. “It’s what you’ve been told all your life, and it’s how schools rationalize a quarter of a million dollars in debt,” Thiel says….

But Thiel’s issues with education run even deeper. He thinks it’s fundamentally wrong for a society to pin people’s best hope for a better life on something that is by definition exclusionary. “If Harvard were really the best education, if it makes that much of a difference, why not franchise it so more people can attend? Why not create 100 Harvard affiliates?” he says. “It’s something about the scarcity and the status. In education your value depends on other people failing. Whenever Darwinism is invoked it’s usually a justification for doing something mean. It’s a way to ignore that people are falling through the cracks, because you pretend that if they could just go to Harvard, they’d be fine. Maybe that’s not true.”…

Thiel’s solution to opening the minds of those who can’t easily go to Harvard? Poke a small but solid hole in this Ivy League bubble by convincing some of the most talented kids to stop out of school and try another path. The idea of the successful drop out has been well documented in technology entrepreneurship circles. But Thiel and Founders Fund managing partner Luke Nosek wanted to fund something less one-off, so they came up with the idea of the “20 Under 20″ program last September, announcing it just days later at San Francisco Disrupt. The idea was simple: Pick the best twenty kids he could find under 20 years of age and pay them $100,000 over two years to leave school and start a company instead…

Of course, if the problem Thiel sees with the higher education bubble is elitism, why were so many of the invitees Ivy League kids? Where were the smart inner-city kids let down by economic blight and a failing education system of a city like Detroit; the kids who need to be lifted up the most? Thiel notes it wasn’t all elites. Many of the applicants came from other countries, some from remote villages in emerging markets.

But the program has a clear bias towards talent, and like it or not, talent tends to be found in private universities. Besides, he’s not advocating that stopping out of school is for everyone any more than he’s arguing everyone should be an entrepreneur. But to start a new aspirational example– an alternative path– it makes sense to start with the people who have all the options. “Everyone thinks kids in inner-city Detroit should do something else,” Thiel says. “We’re saying maybe people at Harvard need to be doing something else. We have to reset what the bar is at the top.”

So what’s the problem we need to solve?  According to the article it’s that higher education, especially at the elite end, is exclusionary and involves high debts, perhaps artificially so. The piece hits a wall quickly – Thiel wants more people from Harvard and elite colleges to work as entrepreneurs using language around the idea that everybody who can go to college shouldn’t have to, especially if they have to take on a lot of debt.

In practice, people who can get into Ivy League schools are probably going to be ok, and we as a society shouldn’t spend too much time worrying about their work outcomes.  I like to make a note when I see wonks fret about whether the right kinds of people can get into Ivy League schools but never make a stink about the mass defunding of higher public education. The real worries for everyone about student debt should be the people in for-profit schools and people who drop out, not those at the top of the food chain.

But what I found frustrating is that the piece is near a serious critique of something that is even more sacred to our culture, our embrace of the meritocracy. I think the Thiel critique would be more fascinating if it was couched in the idea that elite education is structured not only to replicate the status quo but to find a way to collect the best minds across society and dedicate them to the replication of that status quo.

The idea that talent would be more naturally distributed throughout society without a meritocracy and with one talent would be concentrated at the high end was a serious worry a generation ago. Daniel Bell, Public Interest, 1972, On Meritocracy and Equality:

But with that transformation came an unexpected reaction. Previously, talent had been distributed throughout the society, and each class or social group had its own natural leaders. Now all men of talent were raised into a common elite, and those below had no excuses for their failures; they bore the stigma of rejection, they were known inferiors.

Others worried that the best working-class minds that would build unions and a stronger labor force would be scooped up by the meritocracy and become the foot soldiers for management (see the recent movie Ressources humaines for an example of this narrative). If you view entrepreneurial activities as the act of challenging and disassembling powerful incumbents, as I imagine Thiel does, the meritocracy poses a very similar problem.

This critique would go: Right now our best minds go off to the financial sector and high-end business and law programs, channeled through elite education. To pick an example at random, our best minds are hard at work making sure JP Morgan can squeeze local businesses with ever increasing interchange fees, instead of at work in Silicon Valley coming up with a way to circumvent and take apart that oligarchy using technology. They’ll continue to find ways to create regulatory arbitrage, or find obtuse mechanisms to manipulate earnings reports, or help one group of corporations sue another group of corporations, instead of creating real new value and innovation. The carrot and stick of meritocratic rewards and debt collection push our elite onto this track, and Thiel’s program can break that cycle. I’m not sure where I stand on it in practice, but it’s an interesting debate.

I bring this up because I know the idea that the debt of law school forces promising lawyers away from public interest and towards corporate law firms, firms that are the only ones who can pay enough to cover student loan payments, is a serious worry (I’ve only read The Destruction of Young Lawyers on this, but I know there’s more). I like the idea that we have to extend that analysis to the undergraduate level, both for the age of high college debt and the age of massive, entrenched inequality.

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10 Responses to Peter Thiel and the Challenging of the Meritocracy

  1. Pingback: Asymptosis » The (de)merits of meritocracy

  2. The Analyst says:

    I think one of if not the primary reason so many of “our best minds” go to top corporations, law firms, financial firms, etc. is less that they’re the only places that can afford to pay enough to cover student debt, but because they offer a relatively risk-free way to make a good living, relative to more “societally beneficial” endeavors like entrepreneurship. If these individuals conduct even a subconscious analysis, it isn’t hard to imagine how careers with the aforementioned firms provide the highest expected value, whether the information with which they’re using is accurate or not is another story (e.g. accounting for burnout at ibanks and whiteshoe lawfirms).

  3. Kroppi says:

    From a European point of view, the problem of then best lawyers chosing large corporations with high salaries rather than public jobs because of debt is biased. In the continent, law school is virtually free and most students still prefer corporate jobs with high salaries.

    And as far as equality and meritocracy are concerned, lawyers in Europe are the same as lawyers in the USA, i.e young/urban/upper class(/white). The question of debt is irrelevant if we discuss meritocracy or career choices.

    That being said, higher education in incredibly overpriced in the US and sort of accurately priced in European private school so the “bubble” theory seems to make sense.

  4. Noah says:

    Sounds to me like a supply crunch in education! Time for national universities… 😉

  5. Stephen Morris says:

    Education is not so much a bubble as an arms race.

    Education has become a positional good. In a winner-takes-all society, schools and universities have become the gatekeepers to the Winners’ Circle.

    People studying business do so not because they will acquire valuable skills (skills that they couldn’t acquire on the job anyway). They do so because completing such a course is a hard-to-fake signal that they are worthy of admission into the Winners’ Circle.

    In general, arms races are public bads. In the absence of transaction costs and Prisoners’ Dilemma, individuals would negotiate amongst themselves to arrive at a better solution, one which generally would involve fewer resources dedicated to arms.








  7. First, Thiel’s biggest problem is the assumption that only an Ivy education matters.

    Here’s a 2010 tally from BusinessWeek of the undergrad schools our CEOs come from – they include the “school of hard knocks” as one school outside of the Ivy realm (Steve Jobs is a distinguished alum): Thiel would be shocked, SHOCKED! at the number of public institutions that have graduated top leaders. True leadership is not just Ivy colored.

    Now on Wall Street, it is true that Ivy predominates – and in Washington, there is a high degree of the Ivy league networking going on. If those two sectors were functioning beautifully, Thiel would have a leg to stand on. But Wall Street and Washington are two of the most dysfunctional sectors in the world right now, filled with the voracity of greed, not the audacity of hope. Mike says it beautifully here:

    “To pick an example at random, our best minds are hard at work making sure JP Morgan can squeeze local businesses with ever increasing interchange fees, instead of at work in Silicon Valley coming up with a way to circumvent and take apart that oligarchy using technology. ”

    And let’s not forget, our best and brightest developed canny instruments that enabled them to profit mightily by obscuring risk and betting against the US housing market starting around 2006 or so. How’s THAT for maximizing the intellectual capital of America?! Rather tragic all around. We’re paying a very high price for the squandering of such incredible potential.

    And frankly, I’d like people to look at the Ivy League curriculum and analyze why such failure and lack of ethics can come from such a wealth of riches and resources.

    Secondly, the real issue is not “meritocracy – it is the cost of higher education today, combined with the stagnation of wages we’ve seen since Reagan. Higher education is becoming priced out of the realm of possibility for anyone who is not the very wealthy. That’s the real issue, not whether or not Harvard needs to be franchised.

    [Mike – as a guy from Chicago – do you buy the theory that the Ivy League is THE only ticket to success? I do not.]

  8. Pingback: Yglesias Zero-Sum Competition In Legal Services « Politics

  9. Pingback: on the concentration of the “best minds” « facilegestures

  10. Alex SL says:

    Whenever I read these pieces of yours, I cannot help but feel serious doubts about the premise that it is actually the “best minds” who end up as managers, traders and top lawyers. Neither with the econ or law students I knew, nor with the architects of the current economy it seems as if they are particularly brilliant.

    The most materialistic, well now we are talking. But really intelligent and highly educated people often (not always) have a lot of empathy, and are repulsed by this kind of job. Really intelligent and highly educated people are often post-materialistic, and value being able to do what they want much higher than working 50 hours a week to earn millions. And really intelligent people will presumably try to avoid being a cog in the machine that plunders the masses to the point where it is storming of the Bastille time and the cogs get lynched. Real intelligence would be to work for a stable, equitable system in which you do not have to fear that your daughter gets abducted for ransom on her way to school because your own wealth acquisition has made thousands of others desperate.

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