“If you think education is expensive, try ignorance.”
It may be just a bumper sticker aphorism, but lately it’s got me thinking. Peter Thiel, early Facebook investor and Paypal cofounder, announced recently that he’s offering $100,000 to 24 young people to drop out of school and pursue an entrepreneurial idea in Silicon Valley. Thiel says the emphasis on having a degree has created “a bubble” in education, and he believes ideas can develop in a start-up environment much faster than on a university campus.
“We need more innovation,” he told the Financial Times recently. “There’s a tremendous cost to having the most talented people in society take on enormous debt, then take well-paying but dead-end jobs to service those loans for the next 15 to 20 years of their lives.”
Thiel is right: we need more innovation. But I question whether encouraging our youth to forgo school and go straight into the workforce is a way to improve this situation.
Sure, a college education isn’t cheap—four years at MIT comes with a price tag of over $200,000—but as with most market-based offerings, that price reflects value. The debt that the students take on to get that degree is an investment in themselves, much like a good company makes investments to grow its business.
Education improves your chances of success in life. Research shows that college graduates make more money than non-graduates. Over an adult’s working life, high school graduates can expect, on average, to earn $1.2 million; those with a bachelor’s degree, $2.1 million; and people with a master’s degree, $2.5 million, according to data from the U.S. Census Bureau.
Education also enhances your ability to innovate and start a business. College teaches people how to think, how to attack a problem, and how to write. It gives students a good foundation in basic science and technology. Students can’t learn these things at a start-up because startups are not built for this kind of training. To have the spirit and energy to start a company is one thing, but you have to have certain fundamental skills. Without them, you are a lemonade stand entrepreneur. What we need are innovation-based entrepreneurs.
There are certainly high profile examples of people who dropped out of college to start a company and became runaway successes: Bill Gates, Mark Zuckerberg, Steve Jobs, and Larry Ellison. So, yes, for some, it makes sense in highly specific cases—by the way, notice that they are all in the software/web industry—to leave school and accelerate the time in which they start their businesses. But that does not mean this is generally the case. Beyond the software industry—biotech, medical devices, clean energy, telecommunications, and microprocessors, for example—it’s harder to find examples of dropouts who became successful entrepreneurs.
And what about all the other people who dropped out of school and didn’t make it? What was their Plan B? I’m not talking about an alternative that means giving up the hope of being an entrepreneur and punching a clock at a big company. I mean: what was their next idea? How did they adjust their existing product to a new market? How did they achieve scale? Entrepreneurship is a great training ground for some things, but it’s a horrific training ground for other things. Education improves your chances of making it.
Some contend that entrepreneurship can’t be taught, and that institutes of higher learning are of no use to aspiring business owners. I strongly disagree. Every day, in this magical square-mile here at MIT, the skills of entrepreneurship are conveyed not just in the classroom, but also through extracurricular activities, mentoring, networking, and experimentation. Students are infected with the spirit and the possibilities through the vibrant eco-chamber that has developed both by design and organically.
Students who pass through here start companies at a prolific rate. According to MIT Sloan School of Management professor Ed Roberts’ detailed study, MIT students and alums launch approximately 900 new ventures each year, and over half of all MIT-related companies are established within 10 years of the time the founder graduates. These numbers indicate that something very powerful is happening here and that people are learning how to be entrepreneurs in this institute of higher learning.
Encouraging students to drop out of school by setting up a competition and offering a substantial monetary incentive in the name of accelerating innovation is a terrible idea. While I applaud the call to action and spirit of experimentation, I believe this program is highly counter-productive. We ought to encourage students to think imaginatively, learn how to be innovative, and even start companies while they are in school. Vanessa Green MBA ’11 and the team of OnChip, which is commercializing new power electronics technology developed at MIT, offer a compelling example of how this is possible.
We should think long term about investing in our young people. Rather than accepting a binary choice between the “ivory tower” or the “real world,” those of us in higher education should design hybrid action/learning eco-chambers to promote innovation. We ought to develop courses that provide students with both a solid foundation in science and mathematics and the leadership skills necessary to translate this knowledge into new ventures. We should create extracurricular programs that give students a platform for pursuing experimentation opportunities, developing trusted mentoring relationships, and networking. This will compress the learning curve and help our students achieve the capabilities, confidence, and contacts that over the long term are necessary to become successful innovation-based entrepreneurs.
[Editor’s note: This article also appears on the MIT Sloan Experts blog.]
