I am a high school dropout.
I figure dropping out of high school saved me about $200,000, and if you pay attention to what I did, it can save you $50,000 or more.
I went to a private high school in Mundelein, IL that I (not my parents) paid for. Tuition was a few thousand dollars each year.
I dropped out after sophomore year and went to college at 16, in 1994. I graduated 3 years later in 1997. My friends were starting their second year of college when I was starting my career. I made money, started a business and traveled the world before my friends graduated college in debt, with limited job prospects.
I was 20 when I started working at the Chicago Mercantile Exchange, and began trading full time about 18 months later.
Peter Thiel says “…what important truth do very few people agree with you on? To a first approximation, the correct answer is going to be a secret. Secrets are unpopular or unconventional truths. So if you come up with a good answer, that’s your secret.”
His point about secrets is that secrets are keys that can lead to successful ventures. A few secrets:
1. Zuckerberg believed coeds in colleges would find social networks valuable
2. Systrom believed people wanted an easy way to improve their photos
3. Page & Brin believed search would be more powerful if it ranked pages by links-back
4. Bezos believed the future of commerce was in the web with books as an entry point
Secrets are non-obvious truths that few other people see until they are introduced to them.
College is a big secret everyone is talking about. The trend right now is for rich guys to diss college. Peter Thiel is renowned for paying kids $100,000 not to attend college. A lot of other people, like my friend James Altucher, have written about how college is a scam.
At what price does college become “worth it”. It can be argued that it may never be worth it – you pay more money in than you can ever get back and end up in a black-hole-of-no-return. This is what happens to most people but there is another way. This is my secret to hacking college.
College is a bet. You are betting 5 years of your life and hundreds of thousands of dollars on an outcome that occurs after those 5 years. You have to have an expected outcome in order to know how much to bet. Five years is a lot of time and you shouldn’t bet 5 years and all that money on something that will not propel you forward.
The real question is one of cost versus value.
Benjamin Graham said and Buffett popularized: “Price is what you pay, value is what you get”
Graham is popular for inventing value investing: buying things intrinsically undervalued, which limits risk and improves probability of reward. The challenge with value investing is finding undervalued things – because these are non-obvious and hidden.
What if you had a formula that helped you find the secret value in college so you could graduate debt-free with many job offers? Kind of like value investing in your education?
That is what I did, and this is what you can do, too: unlock the secret value in college, propelling you ahead into an insanely successful career instead of convicting you to a life of slavery. Do you want to be a master of the universe or a slave to everyone?
Everything is a scam. Your car dealer, your coffee shop, the house you just bought, your job, taxes, blogs, facebook, google, stocks, commodities. All scams set up to take advantage of you.
But you are not a scam. You are an opportunity. Everything – all choices – flow through you and you have the power to choose your future. Choose to avoid scams and be successful.
Use the scam to your advantage; hack the system, and you can give yourself the best chance for success. This is how Buffett invests, how Thiel advises and how Altucher has rebuilt himself too many times – by following a value-based formula.
Most people get scammed by college because they are comfortable getting scammed by college. When you went to college how many of your friends said “I’m totally getting scammed right now”? None of them. Instead, they said “where can I get the cheapest slice of pizza tonight because I am literally dead broke paying my life savings to an institution that doesn’t guarantee I’ll have a way of earning it back when I graduate and I have a final exam tomorrow in Georgian Literature so I’ll see you later.” They may as well have said “I am learning to live a life of slavery
I graduated with no student loan debt and a full time job where all the money came straight back to me and not to student loans. My first job taught me the lessons in an industry that I then used to build my own business.
The financial freedom I gained allowed me to take more risks. I quit jobs and traveled the world more than once. I started trading from a home office when I was 22. I paid cash for my cars and never made a single car payment. I wasn’t wealthy, but I was free, and I’ve always lived below my means, enabling more freedom.
I almost got scammed by college but I figured it out just in time.
Scams are situations where you get taken advantage of. Why is college a scam? Where else in the world do you pay hundreds of thousands of dollars to read from books and listen to professors talk about topics irrelevant to making a living? Most people are getting taken advantage of.
Let’s look at the numbers:
2013 average college loan debt: $35,200 (and we all know people with much more)
Average starting salary of 2013’s graduating class: $44,928 (after tax and 401K your take home is ~$30,596)
US Gov’t Student Loan Interest Rate: up from 3.4-3.9%
Average graduate salaries: down 5.4% in 2013
Average Annual Tuition: up 5.4%
Tution and living costs at Harvard: $64,954/year
Tuition and living costs at University of Illinois: $29,594-$48,896/year
Tuition and living costs at #1 ranked Walla Walla Comm. College: $11,415-$17,976/year
At these prices, education is a major cost. If you attended University of Ilinois with in-state tuition you pay $30K/year. The average student graduates in 5 years, not 4, total cost is $150,000 + you have to remove the money you could have made if you were in a job for 5 years. Let’s call that $30,000/year for a whopping total college cost of $300,000 over 5 years. Wow. THREE HUNDRED THOUSAND DOLLARS for in-state cost of going to college.
How to Hack College Rule #1: Reduce the amount of time you spend in college. This will reduce room & board and tuition. If you went to U of IL in-state for 3 years instead of 5 you’d save about $60,000. SIXTY THOUSAND DOLLARS! If you attend Harvard I just saved you $130K. If the average graduate finishes with $35K in debt, they could wipe out the debt and have $25K extra in their pocket plus the money they make in the lucrative job I’m going to show you how to get. The way to reduce your time in college is by cramming in more hours per semester. I was taking over 21 credit hours per semester. Next, you attend school year round. No summer jobs, no internships. Finish fast. When you graduate with a degree in a trade, you don’t have to worry about interning anywhere. People will give you job offers all over the place. Take lots of hours each term and go to school year round. This will make you finish college up to 2 years early.
Would you rather have a couple hundred grand in your pocket and show your date a good time in style, or would you rather take her to Buca-di-Bepo and split entrees and the bill? Either could be fun, but at least you’d have more choices if you had a lucrative job and didn’t have enormous debt after college.
How to Hack College Rule #2: What really matters to people is the focus of your degree and where you graduated, not where you went to school all 5 years. When was the last time someone asked you “well, I see you graduated from Stanford but where did you go the other 4 years?” Never. No one cares. Start your education going to a less expensive school, finish your prereq’s, and if you must go somewhere that “looks better” on your resume, transfer there for the last few terms so you can get the degree from that school. Is it risky? Not as risky as spending $130K on two years of basic college courses, frat parties and coeds. When you transfer into your graduating school, finish fast. Finish as fast as you can to limit the expense. Walla Walla is $17K out of state. Much better than $30K or $65K/year! Two years at WW saves you easily $26K. Go somewhere inexpensive the first 2 years, live at home if you have to, and save the extra cost of living expense and tuition expense. Many schools look favorably towards transfer students and make it easy for students to transfer in.
I spoke to Christine Mascolo , Harvard’s Director of Transfer Admissions. Harvard looks favorably on transfer students. They look for students with a sincere concentrated focus combined with other interests outside the classroom showing how they can contribute to the community while pursuing their academic passions. Though Harvard only accepts a small number of transfer students per year, transferring into a good school is not only possible, but a solid option that can save you a ton of money.
If you are average and you graduate today you will have $35,200 in student loans.
A $35,200 loan at the current gov’t rate of 3.9% is $355/month in loan payments for 10 years. That’s a lot of money! This means that before you have a job, you are in the hole $355 per month! But wait, it’s worse. 10 years is 120 months. You will pay 120 payments of $355. This is $42,600 you are paying, not $35,200.
Before you get a job, you owe almost $43,000 for your “education”, and these payments won’t stop if you lose your job. What are you willing to bet 5 years of your life and $43,000 on? Don’t you want to bet it on the best possible outcome?
Since you got an average job out of college, maybe you make $44K/year, you take home about $30,000 in cash. After rent, groceries, a few dates every month, car payments and costs…you have nothing left. This isn’t to mention what happens if something goes wrong – accident, health problem, job loss, etc.
It’s no wonder that the average US Household credit card debt is $15,325 – people use debt to supplement income, and it’s only getting worse.
And that’s “average”. We all have friends that graduated from a good school and have over $100,000 in student loan debt on top of mortgages of $150K+ and more than $15K credit card debt. This is not freedom. This is slavery. This is the scam.
Tuitions are increasing faster than just about any other cost in the U.S. The return on the S&P 500 index is about 4.8% per year for the prior 10 years versus an average annual tuition increase of 5.42%. Forget what the S&P 500 is. Tuitions are going up super fast and you can’t keep up.
But there are still opportunities.
Get to the light at the end of the tunnel. You can tan yourself in the sun while your friends get morbidly pale in the darkness of their slavery dungeon.
How To Hack college Rule #3: You may love Georgian Literature, but you have to study a trade in college. Georgian Literature is essentially useless. No one will pay you for your review of Defoe. A trade is anything that trains you for a specific type of career after college: finance, accounting, programming, engineering, environmental geology, law, medicine, nursing, etc. These majors will get you a job after college, and your grades hardly matter. I don’t care if you say “but I’m passionate about Georgian Literature”. Study academics as a minor. Your job at college is to learn how to create value or prepare to get a job after college: minimize cost and maximize return.
A friend just graduated from Univ of Colorado with his bachelor’s in computer science and his first job is a programmer at Apple making over $100,000. He had multiple job offers in several cities. His future is set for life and I am totally jealous. Win.
My younger cousin graduated from Saint Louis University recently with a degree in nursing and a great offer from a local hospital. She went straight from graduating into a great job while some of her friends struggled to find any kind of job. She can go to any city and be employed quickly. Her friends can’t. Win.
Another friend graduated from Univ of Colorado with an english degree. She moved back to her parents’ house in Maine and is working at a restaurant as a server. This is after 5 years out-of-state tuition + living expenses totaling around $125,000 + financial aid. I’m sure she’s academically enriched, but she’s in the financial and opportunistic hole. Loss.
When I was in school I worked on weekends at a company and started an outdoor sports product business from my apartment. People saved 20-30% off retail prices on outdoor gear by mail-ordering through me. I would take a 10% margin on all orders and had no inventory risk. The more orders I got, the more money I kept.
I limited my living costs – my room was in a 6-bedroom Queen Anne style house on the Missoula Historic register – 227 S Third Street West, Missoula, MT. Everyone else paid around $300/month and I paid $186/month for the smallest room. I budgeted carefully and spent less than $100/month on groceries. I ate a lot of peanut butter, granola and apples but I had dreadlocks at the time so it was appropriate. There was even a little money left over.
How To Hack College Rule #4: Be entrepreneurial by learning how to help people. You are around a totally unique demographic. Facebook started as a college-based product. Would Facebook have ever started if not for its founder attending college? It’s a great market. What do these people need? Be creative. Start something on your own. Maybe it will grow and make you wealthy, maybe not, but it will teach you real keys to success. Go to the entrepreneurship center at your college. I was the Graduate Teaching Fellow at the Lundquist Center for Entrepreneurship while in graduate school at the University of Oregon. Not only did that fellowship pay for my graduate business education, I also worked with aspiring entrepreneurs and founded a company through a relationship that began there.
The secret of real education is learning how to create value. If you can do that, you will be secure and free for life. Most of college is like tourism: fun experience but it’s all about YOU. This is not the way the world works. No one cares about your mind opening experience. They care what you can do for them. You have to learn how to help people: you must learn how to create value. This is another reason for negativity towards college: college is self-centered rather than value centered.
Another friend of mine is a lifeguard in San Diego. She started a jewelry company in college and people love it, but she doesn’t see the opportunity. I beg her to focus on her business over her job. Here’s why:
1. She is young – No family, no rent, no overhead
2. She has customers – Lots of customers! Stores want to carry her products and the products sell. I am jealous. Everyone in business would kill for this problem. Give your customers what they want! If they want to buy, you sell!
3. It’s scalable – At her “job” she is stuck making an hourly wage. No matter what, she can only make that wage. Her jewelry income is theoretically unlimited: if she markets herself more she could get into big stores and create a million dollar company very quickly. Look at what Sara Blakely did with Spanx or what Charlie Chanaratsopon did with his concept Charming Charlie. Why not you? Why not her?
4. It’s dependable – She won’t fire herself
5. It creates value – It brings pleasure to lots of people and I personally love it
6. It’s valuable – If she stuck with it she could sell the company in a couple years for a lot of money and never have to work again. Then she could go surf in Fiji and be a lifeguard for fun rather than as a slave
7. It’s a real education – she’ll learn more about building something than school can teach; she could skip school
When you are in college it’s a great time to start a business. You have facilities, a customer demographic, time to experiment, and limited overhead.
How To Hack College Rule #5: limit your expenses. This includes tuition, but also rent and other living expenses. With my little company I was paying rent with enough left to eat at Tipu’s Tiger and drink Chai Lattes at Second Thoughts a few times each week. I bought a VW bus with summer job money (before I knew enough to go to school year round) for about $3,500 and had no car payments. I traveled and lived in it on weekends so I didn’t have any camp site fees or hotel fees and my friends LOVED traveling all over the West Coast in my house on wheels (it had red chili pepper lights inside; we looked like a glowing red spaceship zooming down the highway). I was going through college fast, earning money, learning valuable business skills, and still having fun.
Thiel’s definition is that secrets are about value – something you know that others don’t see, but can help a lot of people. His interest as an investor is of course to create a return on the secrets of the founders he invests in.
The secrets I’ve shared with you follow Peter’s model:
A. you save a ton of money – reduce risk
B. they help you make a ton of money in the future – increase return
C. they are non-obvious – limited visibility
D. improves the economy – the more people that follow this advice, the better our economy becomes
E. long-term value – it creates value that compounds returns over time
F. it’s scalable – anyone can do this if they want
After I did this my younger sister used the same secrets and finished college faster than me. Today, she is a very successful litigation lawyer in Maryland.
If you compress your college career into fewer years, start at the least expensive school and transfer, study a trade, be entrepreneurial, and limit your expenses, you will save at least $50,000. You will graduate with more job opportunities and more years of income. You could probably make $100-$200K additional income in those extra years.
We haven’t even touched on fellowships, scholarships or other hacks that reduce the amount you would pay to your college.
In the meantime, what would you do with $50,000 extra, or more, in your life? Before you go to college, you should think about this. If you follow this advice I’d love to have dinner and hear your story. I’ll even pick up the dinner tab.