High Anxiety
Audio Recording by George Hahn
I just returned from the U.S. and was struck by how tense things are. It feels similar to what I imagine the mood was during the Vietnam War. So let’s take a break and discuss something even more stressful: college admissions. Yay.
Last week I did a college tour with my son. It was a chance for us to bond and bask in the infinite possibilities that stretch out in front of him. The previous sentence is a lie. The college admissions process has kicked off (two years before he sets foot on a campus) and it’s already a flaming bag of shit, where a flaming bag of shit is a ton of unnecessary stress.
My industry (higher ed) is corrupt and second only to poverty re: preventable stress in U.S. households. Note: You likely had the reflexive synapse fire of “Reducing poverty is not that simple.” No, it is … that simple. It would just mean lower stock prices and a more progressive tax policy. The incumbents deploy the illusion of complexity as a weapon of mass distraction from a simple, hard truth: The U.S. chooses to let 1 in 5 households with children live in poverty. But that’s another post.
Wonder Drug
Despite the lie we tell ourselves (you don’t need college) in a vain attempt to opt out of the stress, higher education is in fact a wonder drug. A pill that extends life, makes you happier, healthier, and wealthier, and strengthens your relationships. America is the world’s premier manufacturer, producing the compound at a purity no other manufacturer can rival. No nation dominates any industry the way the U.S. dominates higher ed. Millions come to the U.S. to access this drug. In a rational world, we’d scale it. Instead, we sequester it behind ivy-covered walls and tuition that commands a gross margin of 90%+. And for centuries, we prescribed this cure-all exclusively to white men.
Despite a 6% increase in applications this year, there’s a narrative questioning the value of a college degree. I’m often asked, “Is college worth the price?” My answer: Mostly, yes. My hunch is that decades of news stories about for-profit scam schools, student loan debt, and income inequality have dinged the college brand, as those narratives speak to a sense of stagnation for people who once viewed universities as an onramp to a wealthy lifestyle. In a digital economy, where everyone has access to everything, there are more students applying to the top schools, giving the top schools access to better students, all of which creates an upward spiral of strength among the strong. Lower-tier schools, however, are struggling; since 2020, 64 colleges have either closed or merged. Meanwhile, the myth of “education always pays off” has been busted at tier-2 schools, many of which offer a Hyundai for a Mercedes price.
Luxury.edu
The strongest brands in the world — MIT, Apple, Hermès, the U.S. — are built on the artificial choking of supply via rejectionist admissions, premium pricing strategies, limited production, and rationing visas, respectively. My business intelligence firm, L2, advised nearly every luxury business. The firm was founded on a simple premise: Prestige brands trade at higher multiples of revenue due to increasing income inequality and their ability to manufacture scarcity. We sold the company in 2017 for 8x revenue. Mirroring our client base, we were disciplined about pricing and said no to many potential clients. My first consulting firm, Prophet, said yes to every client, and it sold for 2.8x revenue. It was the right decision at the time, as I didn’t have the capital to utter the sexiest word in the English language: no. Saying no is the correct strategy for a consulting firm or a luxury brand, but not for a university. Yet the top 2% of institutions have decided they are luxury brands, saying no to more than 90% of their applicants. When I applied to UCLA, the acceptance rate was 76%; last year, it was 9%.
Throughout the second half of the 20th century, higher education was the key that allowed remarkably unremarkable kids (e.g., me) to unlock America’s promise of upward mobility. Today higher ed is a bouncer at the entrance to an exclusive club, where wealthy kids and a cadre of freakishly remarkable 18-year-olds build lasting relationships and lucrative networks with elite peers, while obtaining certification that gives them access to the greatest wealth-generating vehicles in history: S&P 500 companies.
March of the Zombies
In my sophomore year at UCLA, I learned my limits were not my real limits (crew), realized I would not be a doctor (chemistry), became less insecure about my insecurities (psychology), fell in love for the first time, and developed resilience (heart broken). I’d like to think all these things would have happened whether or not I attended college. But they likely wouldn’t have happened in such a safe and joyous place.
But my sense is the college experience isn’t as appealing as it once was. The University of Michigan, for example, is a world-class institution that also provides students with the college experience. Except there’s something rotten in Ann Arbor. Michigan invested $250 million in DEI programs over the past decade. The result? More conflict, a “culture of grievance,” and a 33x increase in complaints involving race, religion, or national origin. Meanwhile, Michigan’s pro-Palestinian student assembly voted to withold $1.3 million in funding for student activities until the university divested from Israel. Two months into the fall semester, the same student assembly reversed course when they realized defunding ultimate frisbee made zero fucking sense. In response, pro-Palestinian activists accused the assembly members of complicity in genocide.
It may be this march of the zombies at elite schools that explains why Southern universities experienced a 30% jump in applicants from kids in the Northeast between 2018 and 2022. Georgia (48% acceptance rate), Clemson (51% acceptance rate), and Alabama (83% acceptance rate) aren’t elite schools, but Southern schools are generally less expensive and seen as less political. They’re also more likely to embrace the traditional college experience, i.e., football games, Greek life, and fun. State schools have registered an 82% increase in applications since 2019, as they offer a better value.
Affirmative Action
The whales of high-tuition prestige universities are international students. At NYU, they constitute 22% of our student body and likely half our cash flow, as they’re ineligible for financial aid. We claim we let them in for diversity. This is bullshit. International students are the least diverse cohort on Earth (i.e., they are the richest kids on campus). Letting in the daughter of a Taiwanese private equity billionaire isn’t helping diversity, but claiming it is illustrates just how far we’ve fallen from the original goal of affirmative action. Note: International Ph.D. students, whom we pay, are some of the most impressive young people on the planet.
In 1960, Harvard, Yale, and Princeton had a total of 15 Black students out of a combined enrollment of 3,000. That was a problem, and shifting to race-based admissions made sense. In 2024, 65% of students at Harvard identified as non-white; the Ivy League as whole now scores high in the U.S. News & World Report diversity index. This is a wonderful thing, as Black students, along with Asians, women, LQBTQ people, and folks from other groups, have historically been excluded from elite colleges. But at this point, the cost of race-based affirmative action outweighs the utility. Affirmative action should be based on one color: green. It’s poor kids who need a hand up. Identity politics have been weaponized by a DEI apparatus on campuses that doesn’t translate to progress, but student debt.
When the University of California system banned affirmative action in 1995, the number of Black and Latino first-year students plunged by nearly half at UCLA and UC Berkeley. But over time the numbers rebounded. By 2021, UCLA’s first-year class included more Black students — 346, or 7.6 % — than its 1995 class (259, or 7.3%). While the UC chancellors submitted an amicus brief supporting affirmative action at elite private schools, they achieved similar results by implementing an admission guarantee to top-performing students statewide, as well as an admissions process that factors in the location of an applicant’s home and high school.
Legacy
While the Supreme Court banned race-based admissions, affirmative action for the rich, aka legacy admissions, continues. (Not-so-fun-fact: Elite schools began using legacy admissions in the 1920s, along with standardized tests, interviews, and extracurricular activities, to keep out Jews.) Despite its ugly origins, more than half the schools in the U.S. continue to use legacy admissions, and 40% of students nationwide benefit from such preferences. At Harvard, legacies accounted for 36% of the class of 2022. Culture wars center the fight around race-based preferences, but elite universities are businesses, and the only color that really matters is (again) green. For loyal, wealthy customers the legacy advantage is remarkable.
Here’s the thing: I don’t have a problem with legacy admissions. When I was at Haas, there was a student who was obviously a legacy, i.e., their billionaire father donated to get them into business school. That’s a good thing, if the money is used to expand access for other students. My problem with higher education is that we’re whores who aren’t transparent about being whores.
Many faculty and administrators forgo higher-paying careers, as they believe in the mission. Most, like the rest of us, wake up every day and ask, “How can I increase my compensation while reducing my accountability?” They’ve found the answer in the LVMH strategy. Only hitch: College degrees aren’t Birkin bags, and higher ed is not only the best path to economic security, it will also shape the view of many, if not most, of the people running the world for the next century. (The last time I wrote about higher ed I received three cease and desist letters from universities we said were likely to perish.)
DEI, Ethics, Sustainability, Leadership, and near-anything with the word “Studies” in its title is no longer about helping people … but welfare for the overeducated. Here’s the dirty secret: Using AI, software, the abolishment of tenure, and higher standards for faculty, we could cut costs 30% and tuition (conservatively) in half. We wouldn’t need student debt bailouts, because kids wouldn’t need student loans.
Legacy Anxiety
Five states and a handful of elite schools recently banned legacy admissions. My Prof G Markets co-host Ed Elson believes the practice will be gone in a few years, as donations no longer guarantee acceptance. I disagree. Donating isn’t entirely transactional. When I gave to UCLA and UC Berkeley, the chancellors were explicit: A donation wouldn’t make it easier for my kid to get in; in fact, it likely makes it harder. And that’s fine. I donated to give an overdue nod to the Californian and American taxpayers who invested in me. I also donated out of ego (it wasn’t anonymous). Being a provider makes me feel masculine.
Still, Ed has a point about why many people donate. Last year saw a 2% drop in private donations to universities, despite the strong economy and the market hitting new highs. The $1.5 billion that might otherwise have gone toward donations is likely up for grabs, as parental admissions anxiety is closely correlated with the size of your bank account. Such anxiety will likely supersize the emerging college admission consulting complex. Soon it won’t be an advantage to hire a consultant, but a disadvantage if you don’t.
I’m not suggesting we shouldn’t have elite schools that have exceptionally high standards. But embracing a for-profit business model more suited for Panerai than a public service, unnecessarily restricting supply for money and ego, is just plain wrong. We have the pill, the miracle drug. Any university that has an endowment over a billion that’s not expanding its freshman class faster than the population should lose its tax-free status, as they are no longer a place of learning, but a hedge fund offering classes. And schools should be on the hook for 50% of bad debt from student loans. I can’t imagine the economic stress levied across American households who don’t have a spare $250k lying around. It should be noted that many schools (e.g., ASU, Purdue, the University of Illinois system) offer free tuition to students who meet minimum academic requirements. Also, 17 states provide tuition-free vocational programs via community colleges.
If grief is love’s souvenir, then anxiety is love’s tax. I never cared much about anything until I had boys. But now, I’m anxious all the time, despite having the funds for my boys’ education. We’ve lost the script. The leadership and faculty of elite universities have morphed from public servants to Birkin bags. Whether you’re a stressed kid in high school, a family saving for college, an anxious parent, a college grad/dropout struggling with student debt that’s difficult to discharge in bankruptcy, or someone being asked to bail out someone who had opportunities not afforded to you … we’re all paying the price.
Life is so rich,
P.S. NYU finance professor Aswath Damodaran returned to Prof G Markets this week to discuss the road ahead for some of the “fallen angels,” including Nike, Starbucks, Estée Lauder, Boeing, and Intel, and shared his thinking, as an investor, about the upcoming election. Listen here on Apple podcasts or here on Spotify.
P.P.S. Section has announced new speakers at its AI:ROI Conference — including ServiceNow’s global head of AI and General Catalyst’s managing director. This is a great opportunity to get into the heads of AI investors and leaders. Register free.
Propuesta para Profgalloway.
Hola, encantada de saludarte.
Quería escribirte porque me ha parecido interesante comentar contigo la posibilidad de que Profgalloway aparezca cada mes en periódicos digitales como noticia para posicionar en los primeros lugares de internet, es decir, con artículos reales dentro del periódico que no se marcan como publicidad y que no se borran.
La noticia es publicada por más de cuarenta periódicos de gran autoridad para mejorar el posicionamiento de tu web y la reputación.
¿Podrías facilitarme un teléfono para ofrecerte un mes gratuito?
Gracias.
Elitism is anti American, that is how my brain regenerates this. And yes, most foreign countries would love the United States to develop royalty so they’d look democratic by comparison to the United States. Can I say that?
I object to your commentary on pro-Palestinian students contributing to institutional rot at UMich. You seem to think that falling in love and being broken-hearted is a key part of going to college. Yet you are dismissive of students who express political viewpoints. I don’t care how misguided these kids are (and I don’t think they are misguided in opposing the mass killing of civilians). Shouldn’t we be encouraging students to formulate arguments, to organize themselves, and to challenge institutional leadership? These kids aren’t the zombies. The zombies are the dumb kids from the northeast who come to southern universities like mine to watch football and to get half-assed business degrees.
Great post Scott! Your comment around the elite schools only being interested in one color (green) really resonates. I’ve often said that elite schools with massive endowments like Harvard are really just hedge funds with a fundraising arm called a university attached. Perhaps a policy that limits the tax deductibility to a ratio of endowment per student should be implemented to force these universities to either to start paying taxes on their endowment or expand their student population.
Ending race-based affirmative action has consistently led to a drop in enrollment for Black student enrollment, Scott’s cited exception notwithstanding. And while DEI programs if poorly implemented can lead to a more divided or hostile environment, it’s also worth noting that the backlash to DEI is not an indication that diversity and inclusion programs are to blame, but rather an indicator that in some cases, white men tend to object to any programs (no matter how positive or constructive) that seek to lift up marginalized groups. In such cases, the problem isn’t with the DEI program, it’s with the large numbers of white people trying to reinforce their status and dampen the improvement in the status of others. One example is how some men on the right reacted defensively to the Me Too movement by branding its female supporters as “feminazis”. Were the women speaking out against discrimination and sexual assault to blame for the negative feelings such men were experiencing? Or does the accountability sit with the men who simply couldn’t cope with the idea that women were finally calling them out on their BS behavior? Can DEI programs go off the rails? Of course. But sometimes, the issue is that to many privileged white men used to doing and getting whatever they want, equality feels like oppression.
Another great post Scott!
I think about this a lot – how, yet another source of our competitive advantage and creation of wealth, or better yet – value, is being stacked in favor of the few versus being spread out to raise all boats. There are ways being offered and access is relatively easy, as is getting started at a much lower cost.
We sent both of our guys to local JCs after high school because they hadn’t exactly cracked the code while there. They had to figure some shit out, and since their boys, they’re going to do that in their own time. I’m happy to report that they have, finally. They both got into UCs, but unfortunately it wasn’t Cal or UCLA, so I know that their going to have to work harder and be as good as possible because they’re starting on a lower rung of ladder.
But that’s okay because working hard and accomplishing meaningful things ultimately contributes more to your well being than a fat check. If you accomplish the former, a fat check can amplify, but not guarantee your happiness.
Amazingly truthful commentary as usual, nice work !
Fact: Recent Burning Glass data show 52% of one year college grads are underemployed.
This is a ROI business decision cuz colleges are businesses and there is shitty product and good product. Not all escalators go up anymore. Many go sideways or down.
My kids go to an Ivy+ school and the career support is as bad as the college counseling in their high school.
You are on your own/ caveat emptor…
A college degree is important and valuable for many. But it’s striking how the case for that has pretty much devolved to it being a credential and social networking, as opposed to “you’ll learn and learn to think”. Based on what we observe these days and the suffusion of Critical Theory tenets into everything, it’s not hard to see why.
Right on ! St Mary’s college in Winona mn is offering 4 years tuition free ….. if a parent is a teacher or applicant attends a catholic high school .with more girls attending college your boys will have an advantage since many girls want to attend schools with plenty of boys on campus.
If the Palestinian students get their wish and Israel ceases to exist and war erupts in Europe/Middle East and Putin aggressively overcomes His neighbors I can imagine we will reinstate the draft and it will include women also. Careful for one wishes for.
Scott – as a side not to this excellent article, please take a look at the “needs” based funds available for tuition. Having two kids in this exact process I am struck by how the “needs” based scholarships completely marginalize the middle class. Universities are incredibly expensive – and if the combine household income is above $200K (which is subsistence level in CA) there is vertually ZERO economic aid. Each college is utilizes a calculator to estimate the aid available – and many ask for the value of your home. Should you have done the right thing and scraped and saved to own your own home – well the Universities want to know – as the more equity you have, the less they will offer you in “needs” based support. Maybe I should have just bought that JetSki after all.
In the years since the US govt mandated (elite) colleges admit a diverse student body in order to get govt research funds, many new admitees come with preprogrammed agendas. That is part of why there was a rise in antiIsrael/antisemitic/Islamophobia encampments on many elite campuses this past spring.
Such a thoughtful and compelling analysis. As always your observations help me calibrate and validate my own. Thank you for your uncommon insight and candor. 😊🙏
Good article. Education is important.
I did an MBA without doing an undergraduate degree. I got in as a mature student that had made it to middle management. It was worth every cent.
I believe that more educated women makes for a better society. The hand that rocks the cradle is a better decision maker and teacher. Most women aren’t striving to be a CEO, they usually end up as senior managers in their prime of their career, if they are really lucky.
Another great article !!!!
What a pleasure to read !
Thank you, & keep them coming !!
In your last paragraph, you forgot to mention the teachers of these kids and, especially, their parents!
The best “back-door” to Elite colleges is to be the child of a professor. I read that they have the highest acceptance rate.
Scott you are the best. I am a Ucla grad and admission was probably around 20% in 2000. So sad to see it go down to 9%. I am with you. I don’t like the stress it causes families. Financially or if your kid is going to make it when she/he doesn’t get into a great school. I am a small business owner so I definitely see the value in saving your money and not going to college. Most of the small business owners in my area probably didn’t even graduate high school and they do just fine. If a kid aspires to be a small business owner, than college in my mind is optional. However, if you want to work for a bigger company it is extremely difficult without a good college degree. Just tough and sad college is so expensive. On a side note, you are a personal hero of mine and grateful you exist on this planet. Sincerely.
Nice post Scott.
Scott, when I attended UCLA, some time before you did, the cost was ridiculously low, AND I got a scholarship. So five years (I got an extra year during my final year in high school) probably cost less than a used car. As I recall, the campus population was pretty diverse, and the education was damn good. A “public” institution operated the way a public operation should. You’re absolutely right about the transition of such institutions to luxury items–just look at the salaries now paid to university presidents. Why are parents being charged so much for the services of useless
executives? The degradation of the entire system is a disgrace.
Prof G,
I have enjoyed your thoughts for years. While I don’t always agree, I appreciate your logic and insights.
To prove your point about cost, check out BYU Pathways that offers low cost education like you suggest.
It is possible if you are willing to see other people as people instead of objects.
Scott
BYU is a bargain, even for non-Mormons (who pay double). The downside ( or upside, depending), of course, is an education heavily tinged with LDS theology and culture. (I speak as a BYU undergraduate dropout.) It’s always something.
Hi Scott,
I always appreciate your thoughts on the world of college admissions/education. I am an IEC in the Bay Area where the anxiety you mention runs high. By and large, kids graduating from high schools in my area will be just fine – no matter where they go – since they come from upper middle class homes with educated parents who have a network of friends/contacts to help launch them. And yet, mom and dad feel they just won’t be successful unless they graduate from a “top school” (when I ask what they mean by that, the answer is usually, “the hardest one they can get into.” Hence, the stress kids feel when mom and dad have the “race to the top”mentality.
Re costs: I am seeing pushback in the past couple of years, even among the parents that can afford $250K+ for their kids degree. They are shocked at the all-in prices.
Go where you can be happy, meet interesting people, challenge yourself, explore different academic disciplines and outside the classroom options.
Go Bruins! Class of 1981
PS. BTW Georgia admit rate for non resident students is now 28%. Not quite so easy to gain admission from the NE these days.
I’ve enjoyed your blog and other emissions(!) for years, and learned a lot, but have found it to pull me in even more as I have a son that is about the same age as your eldest and you express many of the anxieties I’m feeling all of the fucking time. “I never cared much about anything until I had boys. But now, I’m anxious all the time, despite having the funds for my boys’ education.” That is precisely me, except you have for like an order magnitude difference in the “funds” part, I’ll let you figure out if the 10 is on top or underneath the division line. I just want my son to get out there and learn things and experience life even though he stumbles, but to do so with anything resembling a good school requires him to sacrifice his life and sanity on the alter of Higher Education during the most important development years of his life. We live in a prominent college town with a fantastic university and he needs to perform perfectly (which he will not) to have a chance to get in there.
It’s just insane – we need to educate kids in multiple different arenas and let them fail, not produce ubermen that have master quantum mechanics, three sports, and become first chair in two instruments before they are 19!
I’m an engineer, I build shit and fix things, and it stresses the crap out of me not being able to do anything about it.
Many of your posts and comments hit, but this one hits hard.
I’m from and live in Ireland. We took the highly progressive and forward thinking approach in the 1990s to abolish college tuition fees. We made 3rd level education free. I’m from what could be classed as a working class family, we weren’t broke but certainly not wealthy. Just got by. If we had to pay college tuition none of us (myself and two of my 3 brothers) would’ve been able to attend college (certainly not on a security man’s (our dad’s) wage). Our country made the bold decision to make it free. As a result we saw a rapid growth in well educated, ambitious and hard working graduates who were able to find well paying highly skilled jobs in the burgeoning IT and pharmaceutical industries that were beginning to emerge in Ireland at that time. As a result we all have good jobs, experienced upward mobility at a pace we wouldn’t have been able to fathom a few years earlier. Now we have one of the highest rates of college educated workers in the EU. American companies choose Ireland for taxes mainly, but a significant pull factor for them is the availability of well educated workers. Free college education no doubt accelerated Irelands incredible economic success in the last 30 years. We’re all better off as a result. We weren’t as wealthy when we done this. But we still did. We saw the bigger picture. The US can absolutely and should make at least some high quality college education free.
My grandchildren are going through this stress, that is nothing compared to their parents, my kids (in their 50’s.) and the anxiety starts at pre-school. All this seems so unnecessary. I agree with Ireland’s path making post high school/higher education free to all. It would help balance income inequity and save our middle class. thank you for your attention and sensitivity to this problem.
Thank you for all the insight/data/analysis.
It will take time, but I am optimistic things will get better (another 50 years?). The trajectory is headed in the right direction. Google/Khan Academy/other vehicles will make it easier, over time for learning to become ubiquitous. Not to mention AI.
But I completely agree with your theses. Learning today is not equally available to all.
Has your son thought about studying overseas? I didn’t study overseas, unfortunately, but I keep reading that you can avoid the U.S. campus climate and pay less in tuition.
Also, if he’s rejected by Ivy schools, please make sure he isn’t going to be the rich asshole in a public school who wants to create his own patch of Ivy and torment the lessers around him. There was a rich girl like that who made life hell for me in my public college days, and a lot of people tend to make sure the hurt goes on when you run into someone like that.
Try Ireland. Some excellent universities and colleges here. Much less expensive than the US or UK. It’s basically €1000. Yes one thousand euro a year give or take. And the quality of education is as good as any Ivy League or top US or Oxbridge university. Granted non EU citizens do pay a lot more but still a hell of a lot less. It’s worth consideration. Many US companies have their EMEA HQs in Ireland too so no shortage of jobs.
If your student can handle being in another country, give it a try. One of my daughters went to college in France (Sciences Po) and graduate school in the UK (London School of Economics). She received an excellent education, now has friends all over the world, and the cost was similar to that of our public university. No regrets.
Love it Scott. All that being said, only incentives or disincentives will recalibrate the merry go round. As long as people agree that Harvard is Armani and Southern Conehead U is Old Navy, the culture will not change. Like any other evil, they only change if inertia moves the needle.
Having come out of the legal world, the biases in favor of the Armani’s is ludicrous at the 300 attorney plus firms. I believe they would love to have their first year worker bees who know nothing but receive salaries of $200K+ to receive what their worth, but they got too much money and well paying clients to care.
Great piece, Scott. The artificial exclusivity behind college anxiety will be replaced by bountiful opportunity for those students who have the confidence to learn more on their own and the resilience to stick with it, independent of the college where they begin and the color of their skin. Stamina is a strategy and character is a condition. These are the most learnable skills this next generation needs. For supporting them, I created Leaderly.
And now, let’s talk about the corruption of the Corporate Football Playoff system (aka major college football).
Also, while the value of a college education, both in terms of earning potential and, less quantitatively, the development of critical thinking skills, retains a clear ROI, the difference in value between the Ivy-plus schools and the solid state universities is less clear (and as you note, depending on the career).