Attention high school graduates with dreams of becoming a doctor: That’s a bad idea. Instead, become a plumber. You’ll make more money.

If you think that sounds crazy, that’s because it is. But that’s precisely the message noted investor and Libertarian Peter Thiel intoned on CBS 60 Minutes Sunday. It was only the latest blast against college degrees from Thiel, who sees education as a liability rather than an asset.

Thiel made this statement based on a 2011 calculation by Boston University economist Laurence Kotlikoff, which found that plumbers make more money than doctors, under very specific circumstances. Thiel, in particular, seems hell bent on pressing the issue in the face of all evidence that college is essential to economic success. By many key economic and health measures of well being — average lifetime earnings, average salary, average unemployment rates, average life expectancy — a college degree makes a significant difference.

Thiel’s basic message is simple. We’re in a massive college bubble. Getting a four-year degree is wildly overrated. There are many lucrative jobs for people who don’t get four-year degrees. Graduate degrees, he implies, may be an even worse idea. Rather than rely on a credential, we should pursue degrees in the school of hard knocks, start a business and make a million dollars. Or fail, then try to start another one and another one. And even if you don’t want to be an entrepreneur, there are many high paying vocations that don’t require a college degree.

For his part, Thiel argues that the people who succeed would have done so regardless of whether they went to college or not. I find that argument ludicrous, all the more so looking at the paths taken by some of the people in his own Thiel 20 Fellowship program, a widely publicized offer to pay young people $100,000 not to go to college and to instead pursue an entrepreneurial idea.

First, I tracked down Kotlikoff and asked him if he broadly agreed with what Thiel was saying. The answer is: It depends. His calculation used a complicated and powerful piece of software that he has helped develop and which predicts both earnings power and available income to spend over the course of a lifetime. He presupposed that the doctors went to elite institutions for undergraduate and graduate degrees and then worked in a lower-paying medical specialty such as pediatrics or general practice. And he assumed the doctors financed their entire education without scholarships or other assistance. The calculations also did not take into account the far greater likelihood that a plumber could be unemployed or injured on the job, either of which could prove catastrophic to his or her earning power.

Likewise, if the medical school grad had worked in a higher paying specialty, they would have obliterated the earning power of even the highest paid plumber (it doesn’t take many years with earnings of over $200,000 per year to catch up). Kotlikoff makes the valid point that progressive taxes, opportunity costs and Social Security all favor the plumber over the doctor. But even according to his findings, those doctors out-earned by plumbers represent a very small fraction of the medical profession.

Let’s take apart some other aspects of his argument. Thiel also argues the college students are incurring so much debt to gain their degrees that paying off the debt is a crippling burden that takes a huge chunk out of lifetime earnings. He states that college can cost as much as $250,0000, implying that the amount is the debt load all students must bear. But, according to the Project on Student Debt, the average college debt for the class of 2010 was $25,000. That’s nothing to sneeze at, but it’s hardly a crippling burden. To put that into perspective, the average amount financed for a new car purchased is $26,000 according to Experian Automotive statistics as reported by Bankrate.com. Even more important — and something conveniently not discussed by Thiel — the average earning power of college graduates has climbed steadily while the average earning power of those without college degrees has dropped precipitously. There is a lifetime of earnings to account for. University of Toronto‘s Martin Prosperity Institute calculated that, on average, bachelor’s degree holders earn $17,037 more per year than high school diploma holders.

So, while you might get lucky with that startup, the law of averages says that if you don’t go to college, you’ll probably end up significantly poorer. What was fascinating to me is that some of the young entrepreneurs Thiel bankrolled clearly benefited from partial college educations. It’s hard to imagine that the founder of the biofuels startup who was a Harvard pre-med before taking a Thiel Fellowship would have gained access to the resources he needed or been exposed to the mentorship of professors and the institutional creativity had he chosen not to go to college at all.

This is the reality: college is a formative place where creativity and ideas that turn into great companies thrive. It’s a giant R&D lab, a spectacular Petrie dish not just for scientists but for anyone who wants to learn more about the world and how to better navigate life after college. If you don’t believe that, then pick a profession that doesn’t require a degree and take your chances. You might have a nice solid life as a plumber. But the averages say, you’ll always be keeping up with the college grads.

Wadhwa is a fellow at the Rock Center for Corporate Governance at Stanford University and is affiliated with several other universities. Read more about Vivek Wadhwa’s affiliations.

Link to article on Washington Post’s website

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  • http://www.facebook.com/caleb.harbert Caleb Harbert

    **Disclaimer** I’m a student that just left Purdue’s Mechanical Engineering program to go after a company I started in High School to pay for school but ended up growing to where by my senior year I had a choice of finishing my degree and sacrificing a major amount of growth and earnings for a degree that gives me an initial income of around $60K and plateaus without future education of mid $100k or dropout and run a company that has 7 full time employees with their billable hours being $40/hr/employee on average. To do a financial analysis for this earnings difference a job that pays $60k a year pays a salary of $30/hr to the employee, so each employee grosses me 33% more than I could working for an initial engineering firm.**

    Your argument is valid to an extent but is missing a huge part of what Thiels message is going for. College degrees are becoming more and more diluted and useless and are not leading to a significant earnings difference for current graduates and teach you things that aren’t necessary for you to become successful at your job. The data that everyone uses is developed from our parents generation and older and doesn’t show the realities of now. Back in the 1940′s-1990′s there was a minority of the general population with Bachelor’s and above so the middle class was generally composed of these individuals and they differentiated themselves by getting a degree and the degree stood as a symbol that they were smarter than the average man. Now with a larger percentage of the population getting a business this or liberal art’s that, how are they differentiating themselves? By spending even more to get another degree or a Master’s or a professional degree and then in turn lowering the earnings potential of those degrees. It’s a simple supply and demand model. The more supply of Bachelor’s degrees and above and with a stagnating amount of positions that truly need these degrees earning potential goes down due to the companies being able to hire some one else cheaper who will work harder because they can’t get a job. A trend to prove this is look at MBA’s or J.D.’s earning power. In our parents day with those degrees you were the elite and the sky’s the limit and made significant amounts of income and were living the American dream. Now almost everyone I know is getting an MBA or a J.D. ect., so they are raising the bar of what is required to distinguish yourself and now PhD’s or multiple Master’s or whatever is going to be required. Then with all this going on and everyone going more and more in-debt to become better than the competition that’s when the education bubble becomes like the housing bubble.

    Then once you’ve acquired all this debt and acronym’s what are you really worth execution wise? Companies are figuring this out slowly and are more held back by the older generations still valuing these degrees than the employers like myself that know I can teach the people with work ethic and smarts the skills I need for their assigned tasks. With this they are enabled to make higher incomes due to the fact that their value proposition is worth it not that I should have to pay them more just because they have fancy degrees.

    And to confront the Doctor Argument that Thiel brought up, I agree. My friends who are becoming doctors and getting these extremely difficult and time consuming degrees are intelligent and hardworking enough to do anything they put their minds to. With this said if we analyze their opportunity cost getting a job/starting a company and achieving income for the 10+ years they went to school along with the fact that one of my friends who had to take out loans(like most med students) just had a $200,000 in debt party because, and I quote “what’s another few thousand in debt more now?”. If my friend ended up not taking on this much debt and taking a similar path to myself, he could be on a potential income generation path of millions of dollars per year by the time he’s 28-30 and while also having this massive income generating entity that will be independent of him(hopefully if executed right) and also a massive asset that can be sold.

    Then the safe route to retirement is also a sham as our current economic climate has proven to everyone close to retirement age. It’s a countless number of my parents friends that can’t retire like they were planning that went the route of getting a bachelor’s in the 60′s and 70′s. Yet their whole retirements are in a market that they have no control over and their whole value is what they can do with their time for a company not what. My own father exemplifies this very case and argued with me tooth and nail till this year over getting my degree. When he could tangibly see the results of building a company for yourself that you own than working his nine to five “career” that he planned on retiring from at 60-65 and now can’t for see a potential retirement other than death, he’s finally come around and seen the error. My dad has two bachelor’s and a masters in science so then you can’t argue education with him.

    And to conclude this argument I’ll quote Robert Frost’s The Road Not Taken

    Two roads diverged in a wood, and I—I took the one less traveled by,And that has made all the difference. 20

    On a personal side, currently out of all my friends who were able to land decent engineering positions are being paid only around $50,000 a year(not the approximate $60,000 we were told when we started school in 2008 which is 16.7% less than promised) and are now being required to work more than the typical 40 hours a week. Then there are my friends who are living with their parents who have applied everywhere and can’t seem to land a decent job without making less than that. And yet everyone says engineering degrees are in major demand but then explain my friends(To void the argument of them being underqualified, my friends got into graduate engineering programs or had to work to put themselves through school and couldn’t do the typical internships that are offered). And these are the engineering friends, my liberal arts friends are even worse off. Last I checked with most, they are either trying to get a law degree or working at the local Starbucks. Yet most of the people I know who didn’t go to school either started their own company or went to work for their parents company(and their parents aren’t college grads for the most part) and earn more and have a better future than the average college graduate friends.