If You Want to Work On a Startup, Avoid College Loans

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Joining a startup team is an amazing, wild, incredibly worthwhile experience. You get to work on a growing project, see real, tangible products of your work on an innovative, risk-taking team, and you are forced to grow your skills daily in order to succeed. It's an experience I would encourage almost any young person to take if the opportunity presented itself.

It can also be relatively costly.

If you're lucky and get in early enough, you'll probably get equity, but the equity isn't really worth much unless there's an exit. You'll get a salary, but it will probably be much lower than taking a job at Megafaceless Corp, LLC. in Manhattan, or some government bureaucracy in DC. And there's a good chance that you will be living in a place like the Bay Area, Austin, or Boston, all of which have crazy expensive costs of living.

That isn't to say that it doesn't pay off in satisfaction, long-term options, or even financially depending on the way you take that experience.It's simply to say that taking a job at a startup as a young person when there are other options in more traditional roles at more traditional companies is something that can be relatively costly. Lots of entrepreneurial young people would kill for the opportunity to be part of a growing, innovative team doing work that is the direct consequence of their day-to-day actions. When you work at a large organization, it's a lot harder to see the consequences of your hard work.

In Office Space, Peter Gibbons, the apathetic protagonist caught in an ennui-inspiring job for the drab Initech corporation notes this exact sentiment:

Peter Gibbons: The thing is, Bob, it's not that I'm lazy, it's that I just don't care.
Bob Porter: Don't... don't care?
Peter Gibbons: It's a problem of motivation, all right? Now if I work my ass off and Initech ships a few extra units, I don't see another dime, so where's the motivation?

To see the real consequences of shipping a few more units, to stay up at night to make sure you can compile all your code because you want to launch a new site on the next day, to travel across the country to make a sale that can bring thousands in for the company, and to see all this happening because you are working hard is something that brings motivation itself.

So why wouldn't you take a job that allows you that kind of motivation, flow, and productivity?

Student debt would be one reason.

Young people are presented statistics and testimonials while growing up, getting ready to apply to college, and throughout college about how a college degree is worth X payoff and taking out loans makes sense to get that degree to achieve X payoff. Making that extra chunk of money associated with a degree (which is a dubious statement based on broad generalizations about opportunity costs, but that can be ignored for now) may be a great motivation to take out loans if all you are concerned about is making more money, but if you are concerned about more than just making money and instead care about the opportunity and freedom to pursue your goals like working on a startup or launching your own venture (something itself that is very costly), then you should think twice before signing off on those student loans.

If you have $45,000 in student loans for a generic degree from a liberal arts college that can help you get past the HR lady at a nonprofit or a corporation you are kind of interested in that will pay you $40,000 or $50,000  your first year but can't afford to pursue that startup that will pay you less but help you come alive, then your student loans haven't meaningfully opened up options for you. For what you are trying to achieve from your professional life and your education, taking on student debt has actually made your life more difficult and stymied your ability to meet those goals.

To imagine it another way, taking out a loan (n) to buy a large pickup truck may open up plenty of options for moving things around, helping people with their stuff, launching a lawn care, carpentry, or plumbing business. You could crunch numbers about how all these things can provide a payoff that is n+1, making it financially worthwhile for people to take out loans to get pickup trucks. But this example is patently absurd because we recognize that not everybody is going to need a pickup truck to achieve their goals. Even more, purchasing that pickup truck and being forced to pay off the loan for it shuts out options that would have otherwise been available, like driving long distances economically. If your goal was to go on a road trip, start your own delivery service, or even become an Uber driver in your spare time, the advice that you needed to take out a loan for a pickup truck actually undermines your goals.

The Wall Street Journal ran a piece today noting some empirical observations that back up this claim that student debt makes it harder to launch or get involved in new business ventures:

In the study, published last year, researchers looked at student debt across the U.S. by ZIP Code and compared it with small-business formation in those areas. Between 2000 and 2010, a one-standard-deviation increase in student debt in a ZIP Code led to an average 25% reduction in the number of very small businesses, those with one to five employees.

Even if you aren't looking to start this business, getting involved in a venture with a low starting salary is something that you can only do if you have the freedom from debt to do so. Isaac Morehouse puts it well:

the lower your wage requirements, the more flexibility you have early on to explore and test and find work you love. Keep that in mind with each step. Ask whether your present decisions are limiting your future options in a way you might regret.

So next time somebody harangues you about how you just need to take out more loans to finish your degree, ask yourself if doing so is going to open the right doors for you. Opening more doors isn't always a good thing. And it rarely comes without closing others.

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