Yes, the title is again a click-bait but what can I do? Those google ads has to be fed and the amount of hate out there for Prof G is still unabated. If you do not know what I am talking about, here is chapter 1 and chapter 2 of this series. In short, every year I write a post about Scott Galloway; every year I frame the title of that post as a critique to Scott and every year that post is the most read of the blog because people out there love to hate him.

Scott Galloway is known as ‘prof G’ because he, among other things, teaches at NYU. Since some years, he identified the education sector as one of the prime targets for disruptions. If you wonder why, here a nice picture:

Be Careful What You Wish For: Inflation Is Much Higher Than Advertised |  Seeking Alpha

Someone correctly pointed out that all red lines are related to sectors where there is a strong government involvement via regulation, while the blue lines represent sectors where the market is free to do its magic. Take ‘housing’: in many instances, the price of homes goes up because regulation dictates where, what and how much can be built in a certain area. Supply grows while the offer is capped, so prices go up. Unfortunately, not every issue can be solved in an easy way and by now we should know that markets cannot regulate themselves 100% (see the 2008 financial crisis or pineapple pizza).

The Education Issue

College tuition costs have exploded. Prog G describes the problem in the introduction of episode 119 of this podcast, The Prof G Show.

A college degree is necessary to access better-paid jobs, so teenagers relied more and more on debt to cover tuition, in the hope that future salaries will cover that debt and lead them to a bright future. By now you probably already know the story.

How did it happen?

If we take a single institution, like Harvard, the reason is simple (at least if you ask them). A degree from Harvard will give you access to any job opportunity and to a great network of people. The power of this network is directly related to its exclusivity: for example, the more people attend lessons, the less 1-to-1 access you can have to a teacher. High tuition means that Harvard can attract and retain the best professors, so it can offer you the best possible education, so you will be great at your job.

That is the brochure, now the reality.

Companies rely on third-party certification to validate job candidates. A fully internalized validation process would be too expensive for any company, so your degree becomes a proxy of how smart you are. Our society works on brand recognition and elite university built great brands. Those brands are validated by business school rankings and one of the ingredients of those is exclusivity: the more a university rejects candidates, the better it is for its ranking.

The winners

Galloway identifies winners and losers in the current system. The winners are university admin staff, with the university president at the forefront of the cohort. Administrative jobs grew at the same pace as tuitions but typically those jobs have very little accountability. Presidents earn salaries comparable to the CEO of a mid-sized firm but with a lot less skin in the game (you do not have to re-invent the wheel, it’s like becoming the CEO of Philip Morris BUT with the regulator on your side, customers will show up at your door by themselves).

Generalizations are bad and this phenomenon has similarities in the corporate world. There is a president that elevated their university brand and is worth their salary but you understand that once you get the top job, given the current regulatory environment, you can easily get your paycheck if you simply do not screw up.

Another group of winners is the managers of the university endowment fund. Given that the fund gains are rarely used to actually improve students circumstances (otherwise, tuitions would grow less than general inflation) the managers, like other admin staff, have to simply match the strategies of their peers and not be in the lowest return quintile…and if they happen to be, they can always use the otherwise valid excuse that it takes time for certain strategies to bear fruits (or buy private funds that will take a decade to be evaluated as an investment). All of this while pretending that they have a very particular set of skills and therefore demand an adequate salary.

The Losers

The first losers are obviously students. The point of higher education, other than satisfying your personal thirst for knowledge, is to have a fulfilling, and better-paid, job. In crude financial terms, higher ed is like an investment in an annuity: the tuition is the cost of the annuity and future salaries are the pay-out. In the last twenty+ years, the cost of the investment has grown way faster than the pay-outs: salaries have grown 4% while tuitions increased c7% on a yearly basis.

US Avg Hourly Earnings Private NFP

To be 100% fair the above graph considers all jobs, not exclusively jobs that require a college degree but the situation is not dramatically different. Obviously, if you manage to get into Harvard AND you get a job at McKinsey, your future will be fine (at least financially speaking): your salaries will easily repay the tuition. The issue is for the remaining 99% of students. While mid-tier university tuitions increased at the same pace as Harvard, salaries that graduates receive did not. The very dark side of the coin is represented by all non-STEM degrees: it will probably take a liberal arts graduate a couple of lives to repay their student debt.

Professors themselves are also part-losers. If you teach at a great university, your personal brand increases in value without a doubt; at the same time, universities need great professors to stay on top of the rankings. The other positive aspect for professors is that academic tenure is like financial independence…granted by other people money; on the other side, to reach this ‘no downside’ status you have to spend many years where you have an only downside but no upside. If you teach a very popular course, your salary will not increase. If you teach a scarcely attended class and have no tenure, you are fired. The added complication is that tenure is driven by the number and quality of publications you write, and ideally a recognized prized in your field. There is no correlation between being great at finding new solutions and being great at teaching how to find new solutions. Look at football: despite being the prevalent choice, great players are not great coaches.

The arc of this post

My brother is an industrial designer and he teaches in two private universities in Milan. He started years ago by teaching a class on how to draw objects on a computer (a bit more complicated than that but you get what I mean), his class was a glorified tutorial on how to use software. He acquired his knowledge doing his job, which is to create new objects. Part of the process is to express your idea in a digital form, among else to test it and produce it.

After everything I read and saw in the last two years, I can only wonder: what if he did that course on YouTube instead of getting the job at a private university? [tenure is not in the card for him so he does not have that long-term prize to aim for]

Being a professor gave him a third party certification and an audience while on YouTube he would have to build his own personal brand. But once he is on YouTube, then all the upside is for him (and Google…). He would have the possibility to increase his gains for every incremental viewer. What if he worked at the university for some years and then used that certification to move online?

For this particular skill, his students would be definitely better off paying for an online course than 100x more expensive university tuition. In the end, an employer is interested in your ability to use the software; actually, in that particular field, the majority of his students will end up freelancing, so the ‘certification value’ is zero: you know if you can design a virtual chair or not.

The university of the future

Every job requires a mix of creativity and technical skills. Technological advances push and make obsolete the latter. To play with my first pc I had to know MS-DOS language; now there is ‘no code’ software that makes even complex coding unnecessary, so you can jump straight at the creativity part. I do not think that there is any merit in spending $50k/year to acquire competencies that you can get online at a fraction of the cost. When an employer asks you if you know how to use Excel, they do not care if you learned it at Yale or in your bedroom, what they care if you do or not. A streamer can create content that makes the learning process more effective, by being more interactive or even fun. Not being part of a big organization with policies and rules can even make their job easier. Having ‘skin in the game’ will force the streamer to keep their material up to date, an incentive that a lot of teachers lack.

There are some notable exceptions, like Bloomberg in my field. I can show you how to use Bloomberg in a video but you would not get much out of it simply because to practice you need a 3k/month license. A university might buy a license and then allow all students to have access to it.

The creativity part is harder to assess. When I was a teenager I scoffed at those art universities because I thought they were an excuse to siphon money out of dreamy kids: if you wanted to be a musician either you had the talent or not, no school would teach you how to write the next Purple Rain. Later in my life, I realized the power that can be created by simply putting like-minded people in the same room. A university’s ultimate goal should be to teach critical thinking, or the principles to form a judgment in that way. The university should provide the ultimate toolbox to reply to questions like how many trees there are in London? Questions for which the path to the solution is more important than the solution itself. Campuses are a vital part of this process.

Another plus for universities is that they give you access to professor-professionals, i.e. teachers that have another job in the same field they teach. While at university they teach the ‘basics’ of the topic, in their other life they work on the cutting edge of the same thing. If you manage to pick their brain, you have access to a very exclusive type of education. Jeremy Schwartz started as an alum of professor Siegel at Wharton and is now Global CIO of Wisdomtree, a company that Siegel helped to transform into an ETF sponsor leader.

Why I wrote this post

I find this topic, the evolution of education, fascinating. As I said, education is in itself a sort of investment. The student-debt problem in the US is exacerbated by the fact that high school seniors do not compare the cost of their desired education with the average salary they will get at the end of the path (not that the current system provides them any help in this sense…).

Years ago, I was a bit lost working-wise and started tinkering about an MBA. As part of the introductory package, INSEAD provided stats on students salary before and after the MBA. I was already gaining their advertised median post-grad salary, so I declined the offer. I am still not sure it was the right decision, I would have definitely benefitted the advice of other, smarter people…but at least I had in front of me some facts.

Is the current university system worth 50k/year if you do not manage to get into a top program? I think we are at the point where costs grew so much that alternatives like a professional certificate combined with…a sabbatical for a world tour (with 50 grand you can do a grand tour but then I also realised no one is going to give you a loan for that so…) might make sense.

In this article, published more than a year ago so some ‘prophecies’ feel a bit cringy, prof G illustrated his vision for the future of education.

“I’ll have 170 kids in my brand-strategy class in the fall. We charge them $7,000 per student. That’s $1.2 million that we get for 12 nights of me in a classroom. $100,000 a night. The gross margins on that offering are somewhere between 92 and 96 points”.

No sector has been able to sustain such high margins for a long period of time. I am not sure in which form but changes will come.

What all of this has to do with me?

If you publish content online, ads and subscriptions are probably the most immediate way to monetize it. Becoming a known subject expert can also generate a second revenue channel.

Think about your cv. On one side, you want to include all the great projects and results you achieved in the past. On the other, you want to be succinct enough so that the person reading it would not fall asleep or toss it after 15 seconds. It is a very hard balance to strike correctly. In a multi-facet field like mine, Corporate Treasury, it is very hard to emphasize the same skills that the reader is really looking for. I have been in so many interviews that I can consider myself as a real subject expert.

The standard suggested solution is to tailor your cv to the specific job ad you are applying to. Great in theory, way less in practice. Finding a job is a job in itself. If you are doing it while you have a job, the only way to approach it is to increase your productivity, and tailoring your cv each time is the contrary of that. Plus there are some very specific skills, like ISDA contract negotiation to mention one, that might be really important for an employer and an attention killer for another: usually, neither of them lists this particular skill, even when desired, in the job ad.

At first, I thought I could not participate in this nascent ‘knowledge sharing’ movement. I am involved in interesting projects but they are usually solutions that solve propriety issues of the firm I am working for. To talk about them, I would need my firm approval…and that’s a path I do not wish to go through. What about those solutions that I created but then my firm did not use for whatever internal reason? Definitely, I cannot share them, even if I believe in them and think would be helpful for others.

What if I write a post on the principles to negotiate ISDA contracts? I realized there are subjects generic enough that cannot be considered specifically linked to my employer but still interesting for the right audience. If done well, I can (ideally!) drive employers towards me instead of me chasing them.

It’s like planting small seeds that hopefully one day will grow and bear fruits. Millions Thousands are already doing it, I do not consider myself a genius here because I wrote this down but I agree with them, this is the way to go.

There is another, albeit fringe, possible angle. I have worked and interviewed for some mid-size companies. Typically they have non-complex Treasury issues, 90% of the time I would say self-inflicted: they never invested in a Treasury Management System or a proper Group-wide accounting software, so in a world that is afraid of the consequences of AI, they cannot even tell the CFO how much the company spent the month before. But the company owner is rich enough to have complex financial issues himself: hedge funds, venture funds, you name it, they own it. One day your father gives you the keys to a factory that produces toilet paper, the next Goldman Sachs sells you some Facebook shares pre-IPO. While he/she might consider his assets and the company assets as the same thing (the company uses a bank for FX trades because the same bank gave the owner the mortgage on his boat), they never consider using the same person or team to deal with both. A treasurer deals with the company while a private banker deals with the family. I can do both. For sure my interests, as a company employee, are more aligned than the private banker one. But this is stuff that you do not even consider during an interview and if you are lucky, you get there after YEARS of collaboration.

Would that rich dude ever read my blog? Probably not. But at least now the probability is not 0. It is a good form of serendipity that I am looking forward to cultivate.

What I am reading now:

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