There's almost always some article going around on Facebook about the "best colleges for ROI" or "the best majors for ROI." These usually don't get to me too much despite being entirely grounded in the wrong logic of "investing" in something that is almost entirely signaling and can't really be compared to investing in stocks or a house or some tangible good. A recent one from Forbes called "The Grateful Grads Index," featuring the top 50 colleges for "Return On Investment" keeps popping up, though.
This one kind of got to me.
Why? Because it implies that these graduates had better be grateful to the institution they attended for their success (assuming ROI on college is a good measure of success). It robs them of much of their own agency in becoming the successes they are and attributes it to the institution. It says, "You are successful because you went to [Stanford/Yale/Penn/Michigan/Harvard/MIT]. You should express gratitude." It implies that they were nothings, nobodies, no chance at success until their institutions came along and made them into the Sergey Brins and Elon Musks that they now are.
That's all ridiculous.
College Is Primarily Signaling, not Human Capital
For what are the graduates supposed to be grateful? If it is some kind of knowledge or skills the universities endowed upon them, then this is a fundamentally flawed assumption. The assumption isn't rare, either. Grads enter as a ragtag group of college freshmen and come out an early version of their later-successful selves. It's no surprise that this is an assumption, either. Colleges repeat this in all of their recruitment and marketing material. "This is where you'll learn the skills to equip you for a successful life," some quote from some alumnus says on the brochure. Commencement speakers proclaim that it was only by attending their institution that they got to where they are today. Politicians and their followers announce loudly that "more education" is what is needed to improve the economy, despite most young people admitting that what they learned in college is not useful in their jobs.
This is because college is not about learning knowledge, gaining skills, or becoming a more well-rounded person. It's about signaling. The benefits of going to college aren't skill or knowledge-related, they're entirely about showing employers that you are a minimally viable candidate for their HR people to look at your application.
It's doubtful that Elon Musk gained some special set of knowledge and skills by attending Penn -- but he might have gained a signal that made it easier for him to access the groups he needed to access. The professors at elite schools don't have access to some unique set of human knowledge or pedagogical techniques that makes it that their graduates are more likely to earn more over their careers than people who went to elite schools. The facilities don't magically make elite students earn more when they are 35.
(In fact, if we are looking at teaching and pedagogy, instructors at elite research universities are probably worse than instructors at private, liberal arts colleges. A prof at a top tier school must work on grant applications, papers for conferences and journals, do research constantly -- teaching is a side-project, if that.)
The idea that grads should be grateful for some kind of human capital that the schools enabled them to develop simply isn't a good idea. Hard working, intelligent, ambitious people will gain the knowledge and skills they need for their careers wherever they are -- there's nothing unique about college in endowing human capital.
Grateful for the Signal?
Okay, so the graduates don't need to be grateful for the schools giving them some kind of human capital, but what about the signal? Surely, Elon Musk's Wharton degree helped him get a job that led him to X.com and PayPal, right? Surely going to an elite institution will help your overall earnings in your lifetime, right?
It's hard to say about specific cases like Musk and others, but when we look at the earnings of people with similar backgrounds who do and do not go to elite institutions, we find that the results are essentially the same. It doesn't matter what the institution the person went to was, their earnings would have been just the same if they went to a less-elite institution.
So, the difference between the elite and non-elite signal is essentially negligible for high-achieving students. What can explain so many high-earners going to such few schools?
One possible answer is that these schools create a sense of path dependency that drive graduates to specific fields with disproportionately high salaries (usually also with other costs associated).
Take my own school, the University of Pennsylvania, for example. Every year, more than half of all graduates go to consulting or banking jobs. Others go to graduate school, professional school, work for the government, or go to Teach For America. Is it possible that these are the desired career paths of all of these students? Possibly. But what is also likely is that graduates feel like they have to go to high-status careers in high-status locations to justify their time at an expensive, elite school. In my own time there, I heard people refer to doing work outside of these fields as "a waste of an Ivy League degree," or "something you could get with a degree from anywhere." I witnessed young people who matriculated as freshmen with the desire to go into science, art, entrepreneurship, and other fields and slowly become focused on landing a high status internship with a consulting firm or the federal government.
This is path dependency. There are different cultural and social factors that go into the decision to follow a certain track from your school. There are different paths for different schools. At Northeastern elite schools, the pressure is on to go into consulting or banking. At schools like Stanford and Michigan, the pressure is on to go work at massive tech companies. At other schools, the pressure sits for law school, teaching, working for the government, or other traditional paths.
Bill Deresiewicz talks about his own experience watching this happen in his book Excellent Sheep. A Yale professor, Deresiewicz watches students who come in excited to learn about English slowly turn to a myopic focus on a career track they don't want to follow. Andrew Yang, of Venture for America, recounts a similar path during his time at Brown in his book Smart People Should Build Things. In Zero to One, Peter Thiel calls higher education "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."
It is possible these schools actually make people want to pursue high-salaried jobs, but at what cost to the individuals themselves?
OBVIOUS SELECTION BIAS
The linked US News article above makes obvious the most likely thing operating in the background here -- ambitious, hard-working, intelligent young people will be successful no matter where they go to school. Elite schools just tend to attract more of them. There's a selection bias for elite schools -- the types of people who apply to them and get in are people who are likely to be successful no matter where they went to college or what path they pursue in life. This helps schools keep up the facade that they are the ones creating successful people and helps these young people stay focused on meeting certain expectations.
Meanwhile, there are more people who aren't as hard-working, ambitious, or intelligent at less-exclusive schools. This doesn't mean that these schools make people less-successful, it just means that the average student attending them was already less likely to succeed later in life.
The same goes for the college dropout, too. There are some insanely successful college dropouts who left because they felt dissatisfied with school, had better opportunities presented to them, or felt they could provide themselves with same or better opportunities for a fraction of the price. Then there are those who dropped out because they would rather eat cheetos all day. There are simply more people in the latter category. That doesn't mean that dropping out makes you want to sit around and eat cheetos every day.
In the end, the biggest contributing factor to success for a (non-)graduate isn't where they want to college but their ability to work hard, be ambitious, and live out the life that they design for themselves.