The-rapid-decline-of-a-Harvard-education
00:00:00.000 | Hello, everybody.
00:00:01.000 | It's Sam from Financial Samurai, and in this podcast, I'm going to talk about the rapid
00:00:05.840 | depreciation of a Harvard education and how private school grads can still save themselves.
00:00:12.280 | Funny topic, I know, but it's something that's a current event and I think everybody should
00:00:16.120 | be aware of, parents and alumni and non-elite private school education graduates as well.
00:00:24.300 | When I was applying to college in 1994, I thought only extremely smart people attended
00:00:28.920 | Ivy League schools.
00:00:30.160 | I'd heard stories about the rich buying their kids ways into the Ivy League, but I was unaware
00:00:36.240 | of the details.
00:00:37.580 | As a public high school kid with an OK SAT score, a 3.63 GPA, and unspectacular extracurricular
00:00:45.720 | activities, I didn't go to Rwanda and save a starving village from disease.
00:00:50.840 | I was a tennis team captain, for example.
00:00:53.560 | I decided to save myself, but really my parents, hundreds of dollars in application fees and
00:00:58.240 | apply to mostly local state schools like UVA, Mary Washington, and the College of William
00:01:03.660 | and Mary instead.
00:01:05.400 | Paying less than $3,000 a year in in-state tuition even back then felt like a steal.
00:01:11.360 | After graduating from William and Mary in 1999, I got a job in the International Equities
00:01:15.920 | Department at Goldman Sachs in New York City.
00:01:18.560 | That's where I got to interview hundreds of Ivy League and other elite private institution
00:01:22.720 | graduates as part of Goldman's consensus-driven interview process, where even the most junior
00:01:27.920 | members got to interview candidates.
00:01:30.940 | We ended up rejecting 98% of the candidates due to poor fit.
00:01:35.480 | It wasn't that they were not smart, because they were.
00:01:38.560 | We only wanted people we would feel comfortable sitting next to for 12-14 hours a day.
00:01:43.920 | It obviously helped if they had an international background, spoke multiple languages, and
00:01:48.640 | had a passion for the stock market.
00:01:51.320 | But we were mostly looking for great teammates, because everything is really learned on the
00:01:54.920 | job.
00:01:56.760 | Interviewing the majority of elite private college graduates made me realize they are
00:02:00.800 | no different from you and me.
00:02:03.080 | For the next 13 years, I'd compete with these folks on the ruthless battlegrounds
00:02:07.040 | of finance and smash them to bits like Hulk, most of the time because of my hunger.
00:02:12.400 | Coming from a non-target public school background with middle class parents who worked for the
00:02:16.960 | government, I wasn't going to squander my opportunity for financial independence.
00:02:21.720 | Today I am a small business owner with business owning friends, and what we've noticed is
00:02:27.880 | that there is a growing negativity towards those who attend or have already graduated
00:02:33.680 | from elite private schools.
00:02:36.200 | Don't get mad, just be aware of this trend against the 1%.
00:02:40.960 | We saw that with Occupy Wall Street movement during the financial crisis.
00:02:46.120 | We're seeing that now with politics, Jared Kushner's dad donating $2.5 million for
00:02:52.840 | his son to get into Harvard.
00:02:54.920 | There's this uproar and it's thanks to technology and the internet.
00:02:58.680 | So don't be upset if you're one of these alumni.
00:03:01.680 | Instead, listen with an open mind and pay attention as your future or your kid's future
00:03:06.160 | might depend on it.
00:03:07.720 | So this podcast will address why there is a growing negative perception about private
00:03:12.000 | university graduates, what we've learned from the Harvard Asian American Discrimination
00:03:17.520 | Lawsuit, what you can do to fight back against this negative perception, and the future of
00:03:23.600 | higher education.
00:03:25.840 | So one of the reasons why Harvard University fought so hard to keep its admissions process
00:03:30.320 | a secret was because it didn't want the world to judge it for how it picked winners
00:03:35.560 | and losers, because boy do they ever.
00:03:38.600 | Due to social media and the internet, they knew that the jury of public opinion would
00:03:42.400 | come down on them like a guillotine.
00:03:45.560 | Here are some interesting facts that we've learned so far from the Asian American Discrimination
00:03:49.800 | Lawsuit against Harvard.
00:03:52.000 | The overall acceptance rate is about 5.9%.
00:03:56.360 | But if you're a legacy, in other words, if one or two parents went to Harvard, the acceptance
00:04:03.040 | rate is 33.6%.
00:04:06.680 | If you are a child of donors and not legacy, your acceptance rate goes to 40%.
00:04:13.600 | And if you are both legacy and your parents are donors, the acceptance rate is above 70%.
00:04:20.520 | So think about these statistics for a bit.
00:04:22.600 | You are simply born into a family where one of your parents or grandparents, I think,
00:04:27.680 | went to Harvard, you have a five times greater chance of getting to the university than someone
00:04:32.440 | who has no legacy status.
00:04:35.120 | One can argue legacy admissions help create a stronger university culture.
00:04:39.120 | I believe that.
00:04:41.000 | And there should be some preference.
00:04:42.660 | But a 5x preference seems quite excessive.
00:04:46.080 | Meanwhile, if you donate money to Harvard, which already has the world's largest university
00:04:50.600 | endowment at over $35 billion, your child's acceptance rate goes up by 7x the average
00:04:57.480 | admissions rate.
00:04:59.480 | Based on conversations I've had with a Harvard undergraduate and business school alum who
00:05:03.640 | also was on their fundraising committee for a couple years, between 2000 and 2010, you
00:05:08.520 | could probably donate between 250 to 500,000 and effectively help give your child a 7x
00:05:14.680 | advantage.
00:05:15.680 | Today, he says the donation figure is in the millions.
00:05:19.320 | Now imagine you are a legacy candidate whose parents are also rich enough to donate millions
00:05:23.400 | of dollars to Harvard.
00:05:25.480 | You've got a 12x greater chance of getting to Harvard than some smart kid with great
00:05:31.240 | extracurricular activities whose parents are simply not as rich or connected enough to
00:05:35.920 | help.
00:05:36.920 | You are practically a shoe-in guarantee.
00:05:40.200 | In other words, this is not a meritocracy by any means.
00:05:44.100 | This is affirmative action for the rich.
00:05:48.160 | So nobody likes a rigged game.
00:05:51.220 | If you are competing one-on-one against your friend and he's cheating because he's got
00:05:54.800 | a cheat code, and you find out, you're going to be pissed off.
00:05:58.440 | So it's no surprise that there is a growing negativity against Harvard and other schools
00:06:04.620 | that practice this type of admissions criteria.
00:06:08.520 | Now we should accept that Harvard and other private institutions have the right to craft
00:06:13.400 | their classes however they see fit.
00:06:15.040 | This is one of the benefits of not accepting government assistance and being private.
00:06:20.180 | After all, we have the right to apply to wherever we want as well.
00:06:23.480 | However, Harvard and other private institutions should at least acknowledge they use race,
00:06:29.240 | legacy, money, and athletics as determinant factors in their subjective crafting of an
00:06:34.560 | incoming class.
00:06:36.320 | They should own their subjectivity with pride.
00:06:38.560 | They should say, "Yes, we do discriminate against people based on whatever criteria
00:06:43.360 | we choose is the right criteria."
00:06:45.720 | Instead, they just say, "No, no, we don't.
00:06:49.980 | Everything is quite objective," which we all know is false, which is another reason
00:06:54.180 | why the public, who is not stupid, is going to have a negative perception on these universities
00:07:02.700 | and their graduates.
00:07:04.460 | But the real fallout may rain on those private university graduates who actually have no
00:07:08.800 | legacy connections and no donor parents.
00:07:12.580 | So in terms of no legacy students, it's about 67%.
00:07:18.080 | So the majority who simply got in due to merit.
00:07:23.100 | As the reputations of private universities decline with the wider understanding of how
00:07:27.020 | the system works, many of its graduates may be unfairly lumped with those graduates who
00:07:31.980 | received massive non-merit-based advantages.
00:07:35.860 | Therefore, the one solution is to clearly state on your resume or job application, "Not
00:07:42.660 | a legacy or a donor graduate."
00:07:46.060 | By clearly stating, you got no help from what society hates most about the aristocracy,
00:07:51.740 | you distinguish yourself and enhance your accomplishment.
00:07:54.760 | You may feel that highlighting you're not a legacy and not a donor might come across
00:07:58.180 | as too forward, and it will, especially if the hiring manager comes from a private university
00:08:03.060 | whose parents did donate and did go to such a university.
00:08:07.420 | And this is why you must do your background checks on your interviewers before making
00:08:11.480 | your case, and when you state it, you just must state it as a matter of fact and not
00:08:17.660 | flower it with opinion and a lot of subjectivity.
00:08:21.740 | The vast majority, vast vast majority of parents will not have donated hundreds of thousands,
00:08:26.340 | let alone millions to buy their kids way into an elite university.
00:08:30.620 | They don't even have the means, right?
00:08:32.380 | Nobody has those type of means except a very few.
00:08:34.600 | Just look at the statistics.
00:08:36.740 | Even only 40% of Americans have a two-year college degree or more, less than 5% of all
00:08:42.060 | Americans will have attended elite private school universities.
00:08:45.620 | The reality is it's probably less than 1%.
00:08:48.580 | In other words, a super majority is on your side, so don't be afraid to stand up for
00:08:53.540 | meritocracy.
00:08:56.060 | The gatekeepers agree.
00:08:58.340 | Who are the gatekeepers?
00:08:59.340 | Well, they are the employers.
00:09:01.980 | As a small business owner, I want to hire the most collaborative, smartest, efficient,
00:09:06.100 | and hungriest person available.
00:09:08.060 | I don't really care where they went to college.
00:09:10.340 | All I care about is their attitude and willingness to learn and get things done, and whether they're
00:09:15.340 | going to be a prima donna and pain in my butt, or are they going to do and say what they
00:09:21.340 | say they're going to do and stay hungry and keep on hustling.
00:09:24.380 | If I can find an Ivy League graduate with such attributes who got in 100% due to merit,
00:09:29.620 | I'm going to hire this type of person all day long, all else being equal.
00:09:34.180 | But if I can't, because the person is unwilling or cannot say they aren't a legacy donor,
00:09:38.940 | then I'm going to have to do a thorough search.
00:09:42.240 | More thorough search.
00:09:43.240 | I've spoken to a couple friends who both employ over 100 people, and one friend, who
00:09:48.300 | is a public CEO, who employs over 3,000 people about the Harvard lawsuit.
00:09:53.220 | They all actively welcome graduates of elite private universities to declare they are not
00:09:58.140 | legacy or donors.
00:10:00.380 | Two went to public university, so therefore they are biased just like me, and while one
00:10:04.860 | went to an elite private university and doesn't think he got in due to money or connections.
00:10:10.540 | Old money industries like banking, private equity, venture capital, money management,
00:10:15.020 | and management consulting are filled with elite private school alumni who will continue
00:10:19.480 | to have their biases, so tread carefully.
00:10:22.760 | But new money industries like tech and biotech are extremely focused on meritocracy, because
00:10:28.540 | after all, they must create something new and hustle and strive to get ahead, whereas
00:10:34.940 | the big guys, the old establishments, it really is like old money in your neighborhood.
00:10:39.820 | People who are just living off trust funds and generational wealth thanks to their grandparents.
00:10:45.220 | But over time, I'm confident old money industries will slowly remove their biases as well, starting
00:10:51.520 | by casting a wider recruiting net beyond specific private universities.
00:10:57.040 | One of the end goals of going to college is to get a good job as possible, so if the gatekeepers
00:11:01.360 | are changing the way they hire, you best believe universities will change the way they accept
00:11:05.600 | students as well.
00:11:07.860 | The internet democratizes knowledge and access.
00:11:10.480 | I've said this before and I'll say it again and forever.
00:11:13.240 | Therefore over the long term, college degrees will be devalued.
00:11:16.840 | Elite private university degrees will be no exception.
00:11:20.800 | Nobody wants to help the rich and powerful get more rich and powerful anymore because
00:11:25.440 | people have a better understanding of how the system works.
00:11:28.640 | We've had an incredible recovery in the bull market for almost 10 years now, and as a result,
00:11:34.160 | the rich have gotten way richer and the disgruntlement, the anger is starting to fester, starting to
00:11:41.080 | build against these folks.
00:11:44.240 | More people will be empowered to create their own fortunes through entrepreneurship or freelancing.
00:11:51.320 | The rich and powerful are clinging on to elite education as the last bastion of the aristocracy,
00:11:57.640 | while the commoners are using battering rams to break down the gates.
00:12:01.440 | So if you are or will be an alumnus of Harvard or other similar institution, I encourage
00:12:07.800 | you to do the following.
00:12:09.360 | 1.
00:12:10.360 | Don't voluntarily tell anybody where you went to college.
00:12:13.600 | If people ask, talk about the state or city where you went to school and then quickly
00:12:16.920 | change the topic.
00:12:18.480 | It's so funny here in the San Francisco Bay Area, you know when someone went to Stanford
00:12:23.080 | because they'll tell you in the first two sentences.
00:12:25.760 | 2.
00:12:26.840 | Stay humble.
00:12:27.960 | Instead of talking about your wins, discuss your struggles.
00:12:31.400 | 3.
00:12:32.640 | Build your giving resume.
00:12:34.280 | That includes time and money, and hopefully time.
00:12:37.880 | Eventually people will find out about you, and if they realize you've received all this
00:12:41.840 | help while you've done little to nothing to give back, you'll be skewered.
00:12:46.320 | Besides, helping other people is the greatest gift on earth.
00:12:49.600 | 4.
00:12:50.600 | Stop working at companies that create useless products or take advantage of minimum wage
00:12:54.320 | laborers.
00:12:55.320 | Don't let your education and family wealth go to waste.
00:12:59.080 | If you're oblivious, you'll know once you see your company being questioned on the news
00:13:03.940 | about their labor practices.
00:13:06.320 | And then finally, let your kids earn their way through life.
00:13:09.960 | One of the worst things you can do is take away your kids' sense of pride and accomplishment
00:13:14.040 | by giving them everything.
00:13:15.960 | Let your kids deserve what they've earned.
00:13:19.160 | Nobody, let me be clear, nobody should blame parents for giving their kids every advantage
00:13:24.080 | possible to get ahead.
00:13:25.980 | And no kid should be blamed for receiving every advantage possible either.
00:13:30.640 | We're all trying to do our best here.
00:13:32.400 | It's a competitive world.
00:13:34.080 | Let's just not fool ourselves into thinking there aren't extreme biases in the system
00:13:38.760 | that put the majority of people at a competitive disadvantage.
00:13:42.640 | We will never be a true meritocracy.
00:13:46.240 | We will have different definitions of what is fair and what is not fair.
00:13:51.400 | But at least we can take steps to help even the playing field by fighting for our beliefs.
00:13:57.440 | Ignore the uprising at your own peril.
00:14:01.180 | This is really important, especially if you're a parent.
00:14:03.560 | And I'm thinking out loud here as a parent, am I willing to spend a million dollars on
00:14:08.480 | a private school education when this is happening in the future?
00:14:13.800 | I don't know.
00:14:14.800 | I could see a huge uprising in 10, 20 years where people say, you know what, we've had
00:14:19.980 | enough of this aristocracy and this unfair rigged system.
00:14:25.560 | No more.
00:14:26.560 | Let's bar people from such institutions.
00:14:28.120 | It could be extreme, but you can see that happening as people see the rich, the widening
00:14:34.880 | wealth gap just continue to get wider.
00:14:37.520 | I think there's a good chance this this uprising will happen.
00:14:42.320 | I've personally decided to keep some insurance, which is to keep Financial Samurai running
00:14:47.600 | until my little boy grows up and tells me he wants nothing to do with running a location
00:14:52.040 | independent small business that gives you all the freedom in the world.
00:14:56.840 | That's gonna be interesting conversation.
00:14:58.980 | And even when he tells me, I hope he doesn't.
00:15:01.800 | But even when he tells me, I don't want all the freedom in the world to be my own boss
00:15:06.580 | and to make my own rules.
00:15:09.640 | I think just in case he changes his mind and faces the harsh realities of the world, I'm
00:15:14.720 | going to keep Financial Samurai going for as long as possible.
00:15:19.520 | Maybe one day he'll thank me and maybe I'll one day continue to have something to do and
00:15:25.160 | talk about long into the future.