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Digital Subscriptions > Newsweek International > 3rd March 2017 > DROPOUT U


Disruptor-extraordinaire PETER THIEL says college is a big con and he’s going to ix it


PAUL GU’S parents were angry and confused. Their son, who in 2011 was halfway through a degree in economics and computer science, was on the phone telling them he wanted to pursue something called a Thiel Fellowship. As one of 24 “uniquely talented” teenagers, he’d get $100,000 over two years to start a company he and a classmate had dreamed up. The catch was that he’d have to drop out of college.

Gu’s parents had moved from Hebei, China, to Phoenix when he was 6 years old. They’d never heard of Peter Thiel, the libertarian billionaire who’d co-founded PayPal, then made prescient and extraordinarily lucrative investments in Facebook, Spotify, Yelp and other tech high-liers. As with most Americans, immigrant or otherwise, their version of the American dream included a college education as the foundation of upward mobility. But as Thiel sees it, today’s elite universities are overpriced relics holding back innovation and contributing to a technology deicit that will have disastrous economic consequences. He believes gumptious kids like Gu shouldn’t spend their late teens and early 20s piling up debt that will push them into gainful but unrewarding jobs. Instead, they should pursue “radical innovation that will benefit society.”

Thiel suggested he could do a better job than degree-making institutions by giving bright, ambitious young adults the freedom to reach for loftier goals. To do that, his fellowship would offer a monthly stipend and opportunities for mentorship, business guidance and networking.

By taking aim at higher education, Thiel intended to stir up a storm, and he did. Harvard President Larry Summers says the idea is “the single most misdirected bit of philanthropy in this decade.” Higher education needs to change, Summers adds, but using philanthropic dollars to tempt people to drop out of college “is a very dangerous idea.”

Thiel says it’s Summers and his colleagues who are hawking a mendacious dream. Higher-education costs have increased at twice the rate of inlation, and student debt now tops $1.3 trillion. The rise in debt has coincided with a decline in business startups by adults under 35—creating what a recent study by the Kaufman Foundation calls “a lost generation” of entrepreneurs.

Thiel, who predicted the bursting of the tech and housing bubbles, believes the education debt bubble will be next. “There’s been an incredible escalation in price without corresponding improvements in the product, and yet people still believe that college is just something that you have to do. Whenever something is overvalued and intensely believed, that’s a sign of a bubble.”

HIGH DEGREE OF DIFFICULTY: Thiel fellows, from left, Jihad Kawas, Maddy Maxey and Ben Yu.
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