Tuesday, December 29, 2015

For the Benefit of Bernie

Everyone's favorite member of Doc Emmett Brown's Hair Club for Men is back:

And he he's been tweeting:

You have families out there paying 6, 8, 10 percent on student debt but you can refinance your homes at 3 percent. What sense is that?

"What sense is that?" That's a fair question.

For the benefit of Bernie:

1. something pledged as security for repayment of a loan, to be forfeited in the event of a default.
synonyms: security, surety, guarantee, guaranty, insurance, indemnity, indemnification; backing
"she put up her house as collateral for the loan" 
2. something that you don't have with a student loan.

1. a possibility of harm or damage against which something is insured. the possibility of financial loss.
"project finance is essentially an exercise in risk management" 
2. a primary component of student loans.

And that's how it makes sense.


When I first posted that, I was chided for belittling the candidate. And (I was told) Bernie understands the economics of it perfectly well. The problem with the responses of Bernie's supporters is that they appear to be projecting. They assume he understands the economics and they fill in the copious blanks to explain what he really means. This is apparently defined as what they think he means, such as that he's approaching this from the perspective of the people and not the banks. But communication is the candidate's job, and I remain unconvinced that these eloquent expressions of 'real' meaning are contained in Bernie's message.

Perhaps the medium is the problem. After all, you're not going to say much that's profound on Twitter.

Then again... naaaah.... it's still his job to demonstrate his competence. And since I'm an equal-opportunity critic, I find that my guilt remains disengaged. As this is the worst selection of Presidential candidates ever presented, disregarding party entirely, I see no reason to hold back on Bernie's account.

Sanders' tweet borders on pandering in that it ignores the fact that the bankers' perspective is reasonable. "Where's the sense...?" he asks. The sense is obvious, not merely from a profit-making perspective, but from the perspective of keeping the lending institutions solvent so that loans can continue to be made. This is every bit as much in the interest of the public as the banks.

The Real Problem

One thing that would make the loans less risky, and therefore cheaper, is if fewer people defaulted. But often people take on loans to pay for an education that is either not completed (sometimes due to the fact that they're uninterested or unsuited for academics) or because the returns on that investment are non-existent. This last is in direct opposition to what they were promised by people who sell education for a living.

More higher education does not solve either of these problems, and neither does "free" education (in reality, spreading the costs to others). You're still paying for formal education of people who either do not really want it, or will not benefit from it. Taking them out of the system entirely, however, would reduce the economic strain on the system.

A Better Society

One commenter noted that the existing system is not good social policy. "In effect," he says, "you’re purposefully holding the population back from bettering society and themselves." And let's ignore for a moment the hubris required to set one's self up as the arbiter of what makes another human being "better".

If we were to stay on-topic -- Bernie's tweet about interest rates -- and we took "the existing system" to mean the banking system charging more interest for more risk, then this isn't true in the slightest. Increased risk means loss, and in order to be sustainable, this loss must be covered by redistribution among those who did not forfeit. This is exactly what higher interest rates do. You don't get to magically dispel the costs by pretending they don't exist or by hiding them in the bookkeeping. There is no "holding back" involved in making those real costs visible.

If instead we took "the existing system" to mean the concept of you paying for that which is valuable to you, then I don't think that's true, either. Even when we look at it through Socialist eyes and proclaim that "Society" will pay for that which is valuable to the collective, we find that "more higher education" is a terribly unsatisfactory goal. Yet it is the simplistic goal of those socialists who overwhelmingly populate academia.

It is the common trope of those who sell education for a living that you must have their product to be successful, regardless of how you define success. We should approach this claim with the same skepticism with which we approach the claims of anyone who sells anything. While Learning is a wondrous and powerful thing, Education salesmen reflexively conflate "learning" with "college". This is a dangerous fallacy. While there may always be a benefit to the former (and I see no need to argue against it), there is not always a benefit to the latter. There are many paths to learning that don't involve buying their specific product.

But the truth is, if "Society" were to truly operate in its best interests rather than according to the dictates of those who have placed themselves in positions of influence, we would find that less education would be more valuable to the collective. The academicians get it wrong in a big way, and that's why we see stories like this: Why a BA is Now a Ticket to A Job in a Coffee Shop. More and more, college degrees are "required" by lazy HR managers for jobs that actually require no college-level skills. Lower level workers are thereby frozen out of jobs that they are skilled enough to do. These are the people who have placed no stress on the system, have cost society nothing, and who would immediately be productive were they allowed to be. But they are forced out of jobs and onto welfare roles by those who made the self-fulfilling prophecy. College grads who were promised success if they only pursued a diploma are disgruntled to find that this now earns them minimum wage. The Socialists peddling education as a panacea have done little but inflate the cost of higher education while devaluing the diploma and costing society untold billions of dollars in wasted effort and lost opportunity costs.

For decades now, we have let the socialist elite dictate that what makes a person "better" in their eyes should be universally applied to all. Their mistake has raised the cost of education to unsustainable levels. Now these socialists hope to improve the mess they created by decreeing that it should continue at the cost of all. Would it not be better for the collective itself to act to set both the cost and the value of an education rather than depend on the flawed premises of those who peddle the product? There is a mechanism for this, and it's called the Free Market. When it is subverted, as it has been; ruin is the result, as we have experienced.

A Mo' Better Society

Arguably, a better society arises when people are not shamed into pursuing goals which are not their own and when the rest of us bother to appreciate people for more than their social status as measured in years of formal education. Personally, I would find this trend, which began when I was very small, to smack of snobbery were it not now so prevalent due to the result of decades of indoctrination. It is this institutionalized snobbery that prevents us from examining the premise more closely.

Success is personal, and covers a broad spectrum. We don't even have to go to high-profile examples of mega-successful high-school grads and college dropouts like Bill Gates & Paul Allen (Microsoft), Steve Jobs (Apple), Larry Ellison (Oracle), Oprah Winfrey (Oprah), Michael Dell (Dell Computers), Mark Zuckerberg (Facebook), Jack Taylor (Enterprise Rent-a-Car), Dustin Moskovitz (Facebook), Peter Thiel (PayPal), Matt Mullenweg (WordPress), Arash Ferdowsi (DropBox), Ty Warner (Beanie Babies), Aaron Levie (Box), Elizabeth Holmes (Theranos), Stacey Ferreira (MySocialCloud.com), David Karp (Tumblr), Pete Cashmore (Mashable), Daniel Ek (Spotify), Danielle Morrill (Twilio), Jeffrey Kalmikoff (Threadless), Sahil Lavingia (Pinterest), Zach Sims (Codecademy), Ben Milne (Dwolla), David Neeleman (JetBlue Airways), Susan Lyne (AOL), Evan Williams (Blogger), Gabe Newell (Microsoft, Valve), John Mackey (Whole Foods), or Sophia Amoruso (Nasty Gal).

Consider instead the small business entrepreneur who lives just a quarter of a mile from me. He owns car washes, a convenience store, office complexes, strip malls, storage units, a recycling business... all on a high school education. And, he started with nothing but personal drive and a desire to try anything that might make a legitimate profit without regard to whether it was "beneath" him. Or the electrician, apprenticed to his dad, who earns more than a university professor. Or my plumber, who I'm very happy to report makes more than my doctor, since my plumber makes house calls. Or the guy who a couple of decades ago used to fill my furnace's kerosene tank on short notice on cold winter days, who now lives in a three-story mansion. He started out pumping gas. These are not random examples; they're friends and relatives who will recognize themselves here. These folks got the education that they needed to succeed. But "education" doesn't necessarily mean college or university, and it doesn't mean debt. They focused on their interests and put them to work.

The point here is not that you are going to have a wonderful life if you don't go to college; but that you can... just as you can be miserable and broke with a college degree, serving up candied coffee at Starbucks.

When we push people into the system when they are uninterested or unsuited, we run the very real risk of turning successes into failures. Paying for those failures does not prevent them. The comfortably well-off folks above could easily have been dejected college drop-outs if they had bought into the proposition that this expense defined their chances of success.

And the mega-rich who did drop out...? They did so because they were bright enough to reject the proposition outright.

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