Peter Thiel’s 4 Definitions of Higher Education

Tl;dr: According to Peter Thiel, most students approach higher education as a consumption product or like an investment while universities advertise it as insurance. It is however a never-ending tournament.

I have said that Peter Thiel was one of the most underrated thinkers in the Western world currently, and I’ll say it again. His ideas have depth, his analyses are to the point, and his capacity to predict a startup’s success can only be matched with that of Paul Graham, Y Combinator founder.

It is therefore not surprising that Peter Thiel has developed a model to think about education, outlining what it is, what it says it is, and what it is viewed as.

To contextualize Thiel’s views of universities, we need to understand his own educative track.

Peter Thiel’s Life in a Nutshell

Born in Germany to German parents, Thiel moved around extensively with his parents before eventually settling down in California.

After high school, he studied philosophy than law at Stanford. He subsequently went on to work for Wall Street, wrote speeches for politicians, and founded his hedge-fund before going on to set up and develop PayPal which he sold for $1.5 billion to eBay.

He subsequently invested in Facebook (which made him a billionaire), created the data-analysis firm Palantir, and invested in a myriad of other startups.

While these achievements are certainly impressive, the central narrative in Peter Thiel’s identity is other.

In the middle of his high school curriculum, one of Thiel’s classmates wrote into his yearbook a prediction of Thiel’s life.

He wrote that Thiel would get into Stanford to study philosophy, then go on to study law 4 years later and that he would just obtain every credential he wanted, on his way to the top.

And Thiel did.

The pinnacle of his life, the ultimate trophy he hadn’t gotten yet and that he desired above all else, was the Supreme Court clerkship.

Thiel worked hard, demonstrated his skills and value, and finally obtained an interview with two judges. Faced with a 50% chance to get in…he failed.

This failure was one of the most dramatic moments in Peter Thiel’s life.

He who had never failed at getting what he wanted (he had finished first of a math competition in the whole state of California as a child), had had a miss at what he desired the most.

This failure forced Thiel to take an honest look at his life.

He realized that up to then, his journey had been nothing but a big tournament. His identity was so wrapped up in constant competition that the drive (and satisfaction) to win had blinded him from the original raison d’être of the competition.

Thiel was a winner, and he enjoyed winning.

But he didn’t know the purpose of winning.

This revelation led him to consider that the tournaments he had participated in were a waste of time and actually delivered little value.

Investigating the insights of these tournaments, he came up with the conclusion that the educational system was an important part of them.

This exercise led him to four conceptualizations of higher education.

Thiel’s Conceptualization of Higher Education

1. University Is an Investment Product

For most people that contract a debt to attend an expensive college in the US, the UK, Australia, or New-Zealand, college is an investment decision.

While studying costs money, students consider that their diploma will enable them to find a high-paying job which in the end, will make them more money than if they hadn’t studied.

This reasoning explains students’ willingness to sign off astronomical loans at the bank.

University is understood as an investment that, while costly at the beginning, will end up paying off in the future with a good job and a high salary that could not have been obtained otherwise.

2. University Is a Four-Year Party (a Consumption Product)

It’s not rare in Europe to see students attending university only for the depraving and decadent parties that colleges give access to.

Two reasons explain this phenomenon.

First off, university is not nearly as difficult and time-consuming as it used to be. Before the Internet, students spent long days at the library, searching for, reading, and summarizing academic papers which are now available in Google Scholars in a fraction of a second, with the possibility to search keywords and benefit from all of the other technological tools that ensure a considerable gain of time.

Secondly, university is cheap in Europe, even free in certain countries. Students tend therefore to consider the importance of their academic curriculum less highly than if they had invested thousands of dollars into it.

For a significant part of Belgian students, I know for a fact that university is nothing but a five-year party.

3. It Is an Insurance Policy

The widening gaps of social-economic inequality and the increased risks to suddenly end up in poverty have led more and more people to seek an insurance against such a fate: higher education.

After the traumatic experience of my first university year in Belgium, I had sworn I wouldn’t step foot into them until I was told that education was an important insurance policy and that I’d be screwed without it (I have since learned to ignore those naysayers).

University, was I told, was the only path to a good middle-class job and overall comfortable life.

The alternative was unemployment, poverty, and misery.

And so, like millions of other students, I eventually went on to have a degree.

The insurance policy scheme is actually how universities present themselves nowadays. They are said to offer a safety net against the risk of falling into society’s cracks that, as time goes on, widens and swallows more and more people into a whirlwind of debt, disease, and misery.

If the chances to be poor without a university degree increase in time, then the number of people seeking insurance against this risk will de facto increase as well. The increase in tuition fees only reflects (1) the number of people that seek admission and (2) the price they are willing to pay to be admitted.

This has led the value of the university diploma to increase proportionally to the value students estimate the diplomas are worth.

The reason why Ivy League universities are asking $40 000 USD to their students nowadays, is because students are made to believe it is a fair price to pay.

4. It’s a Tournament

Thiel concludes by defining education as what he really sees: a giant tournament.

“Higher education is the place where people who had big plans in high school get stuck in fierce rivalries with equally smart peers over conventional careers like management consulting and investment banking.”

The reality of universities is that it is the exact opposite of an insurance policy: it is a zero-sum game tournament. There is a limited number of seats on the train to salvation and students are made to compete with each other for a ticket.

What really matters ultimately, is not what program to study or the skills you have the chance to develop.

What matters is to get into the best schools. That’s what you will be recognized for.

And as the ranking of the school decreases, so does the coverage of the insurance policy.

Consequences 

Every means imaginable to enter the best universities are used by students and their parents, including cheating, getting into porn to finance the cost of tuition fees, and borrowing (which led to an enormous mountain of $1.7 trillion of debt).

The need to enter university and the competition to do so imposes enormous pressures on the middle class that subsequently sign off loans which even in the case of personal bankruptcy, will have to be repaid.

These observations have led Peter Thiel to compare the current Ivy League to the Catholic Church of the 15th century: no intellectual diversity, professors don’t do much for the development of their field and the believers (the students) buy their way to redemption through absolvences illustrated by the expensive tuition fees.

What Is Higher Education’s Purpose

What is the purpose of education? Has anyone even ever explained to their students why they go to school?

The purpose of education is (was?) to teach skills with which one will be able to produce something of value.

From that point of view, a government should maximize both the quality of its universities and the number of students that attend it to enable as much value to be produced as possible.

Unfortunately, this is not the case in practice, quite the opposite.

The value of a diploma is currently inversely proportional to the number of people that have it. The idea is to award the best diplomas to the best people, as the value of the diploma embodies the value of the people that have it.

Should more people obtain the diploma, its value will eventually decrease.

Quality and quantity is a zero-sum game.

Thiel illustrates this example saying that should we start giving Stanford diplomas to everybody, the most violent protesters would be the current owners of Stanford diplomas.

This effect renders universities exclusionary by nature, similar to nightclubs.

The best universities have the lowest number of students inside, and the longest line outside.

The Bottom Line

There is a remarkable number of institutions whose purpose has been forgotten, and that now exist solely for their own sake.

The education system is one of them.

Pressured by the need to conform and save ourselves, we dedicate our lives to achieve the best results within the frame of possibilities we are given.

Such as a guinea pig running in its wheel, we seek strategies that will allow us to run as fast as possible without questioning (1) why we got into the wheel in the first place, (2) if there isn’t another path, another frame, another road leading to fulfillment.

I went to university because I was told that good jobs were reserved for those that made the effort to study. University, was I told, was an IQ test. Having no university diploma meant that no one would ever hire me.

The underlying message of this statement is quite violent. It implies that your economic value as an individual is equal to the university education you get. It also implies that the only way to live is to get a job.

Both of these statements are false.

Far from teaching skills and knowledge, universities teach thinking methods and cognitive frameworks. Instead of empowering individuality, creativity, and originality, they break anomalies and format thinking processes.

Higher education is not the insurance policy it is sold. It is the road leading to endless competition, a never-ending tournament, a rat race.

The only way not to be a part of it is to step aside, think, and reflect.

The only way not to be a part of it is to seek yourself your own way to wealth, health, and happiness.

Your own road to salvation.

Picture credits: Photo by Giammarco Boscaro on Unsplash