This piece appeared in the Atlantic this week. I’ve been thinking about the economic value of an undergraduate college degree here in the US. This article seems to hit at not the earning potential gap, which seems to be intact, but instead the wealth gap which in many ways reflects consumer spending habits, and with it consumer debt. What do you think?
The College Wealth Premium Has Collapsed
Is college worth it? As the cost of American higher education soars, inequality widens, and wages stagnate, millions of Millennials and Gen Zers have asked themselves that question. The answer, at least from economists, has remained a resounding yes. One study found that college graduates earn nearly twice as much as their peers without a college degree.
But what if those earnings are no longer translating into financial security and long-term prosperity? A new study by researchers at the Federal Reserve Bank of St. Louis suggests that might be the case. College still boosts graduates’ earnings, but it does little for their wealth.
The paper, by William R. Emmons, Ana H. Kent, and Lowell R. Ricketts, is an exercise in pulling apart averages. As a general point, college graduates earn more and are worth more than people without college degrees. And, as a general point, the college earnings and wealth premiums—meaning how much more a person with a college diploma makes and owns than an otherwise similar person—are large. But upon close examination, terrifying generational and demographic trends emerge.
The college earnings premium has proved durable and considerable overall. White people born in the middle of the century got more of an earnings boost for attending college than white people born in the 1980s—but the boost for both groups was big. (“People” is close-enough shorthand here; the authors use a more technical household comparison.) And black people born in the ’80s got a similar income bump to black people born in the ’40s and ’50s.
But the wealth premium has collapsed precipitously over the past 50 years. White graduates born in the ’30s were worth 247 percent more than their non-college-educated peers; white people born in the ’80s were worth just 42 percent more. Among black families, the wealth premium sat at more than 500 percent for those born in the ’30s and fell to zero—yes, zero—for those born in the ’70s and ’80s.
Notably, the study corrects for the fact that households tend to accumulate wealth as they age; the issue is not that members of the Greatest Generation and Boomers have had more time to let their homes appreciate and their money sit in the stock market. They were always on a different wealth trajectory than their kids and grandkids.
The authors cite a few reasons this might be the case. The first has to do with asset prices. Older generations were able to buy houses and stocks when prices were low, then saw the value of those assets rise. Recent generations have faced high housing prices and have found themselves unable to buy their way into the stock market. Therefore, they have not been able to take advantage of the recent run-up in asset values. “The three oldest cohorts we studied generally have experienced fortuitous asset price fluctuations,” the authors write.
The second potential factor involves Wall Street’s financial engineering. Younger folks have come of age during an era of consumer debt, with banks more than happy to load customers up with credit cards, car loans, and so on. Those debts then get subtracted from the value of families’ assets when determining their net worth, helping to explain the Millennials’ crummy wealth accumulation. “The leveraging of college-graduate balance sheets over time is entirely consistent with the progressive weakening of their overall financial positions that we identified—even while the college and postgraduate income premiums remained intact,” the authors write.
Finally—most obvious, and perhaps most important—is the cost of college and graduate school itself. The price of consumer goods has increased by a factor of four since the late 1970s. College costs have increased by a factor of 14, the study notes. More and more students have taken out heavy debt burdens to be able to go to school, burdens that then eat away at their earnings, month after month, for years on end. That has forced millions of Millennials to delay life milestones, including getting married, having children, and owning a home, for years, if not for decades, if not forever.
Even if going to college is still important for young people’s earnings and employment, it is less of a clear economic boon than it was 30 years ago. In it way, the paper makes a powerful argument for making college a public good, low-cost or even free for everyone. The spiraling cost of higher education is choking Millennial families, and more young people would be able to go to college—and get the full financial benefit of getting a degree—if they were able to do it for the same price as their parents paid.
Before writing the first chapter of Harry Potter, J. K. Rowling planned for seven years at Hogwarts. Harry Potter is one of the most read books of all-time.
Before creating the first Stars Wars movie in the 1970s, George Lucas planned for at least six films and started at episode four, rather than episode one. Almost 40 years later, the entire world continues to be excited with the release of a new Star Wars film. This would not be possible if Lucas hadn’t thoughtfully and largely planned ahead.
The principle is simple: Don’t just plant a tree, plant an orchard.
How different might Harry Potter have been if Rowling started the book without any intentions or plans beyond the first book? It may have just been a book about a boy who went to school and killed a bad guy. Perhaps, at the conclusion of that story, Rowling might or might not have decided to write a sequel.
Yet, by “beginning with the end in mind,” Rowling was able to direct and position the first book much differently. The first book, although amazing in itself, was a means to an end, clearly leading the reader to the next book.
Not only that but by having a long-term objective, Rowling was able to create a much bigger story. She was able to foreshadow to things the reader wouldn’t learn about for sometimes several years!
But she planted those seeds early and thoughtfully, and as a result, each book was a continuation of the next, rather than several disconnected and random stories.
Similarly, consider how different Star Wars would have been had Lucas created one film, without planning what would come next, or before! Vader may have just been “the bad guy,” not Luke’s father.
Very Few People Live like This
You are the writer of your own narrative. Yet, how often do you plan each year based on what you intend to do during the next year or the one after that?
What if, like Rowling, you were living this year based on what you intend to do in 1, 3, and 5 years from now?
It’s all in the setup.
Goals are means, not ends.
Everything you do is positioning. Are you positioning yourself to do AMAZING things in 1, 3, or 5 years from now?
I can already hear your mental wheels spinning.
But you can’t plan for the future! The real world isn’t Hogwarts!
Obviously, the world is changing fast. You can’t plan for everything. Hence, Tony Robbins has said, “Stay committed to your decisions, but stay flexible in your approach.”
After setting his goals in several areas of his life (e.g., health, spirituality, finances, relationships, service, etc.), and for 1, 3, 5, and 25 years out, Assaraf’s mentor asked him, “Are you interested in achieving these goals, or are you committed?” to which Assaraf responded, “What’s the difference?”
His mentor responded:
“If you’re interested, you come up with stories, excuses, reasons, and circumstances about why you can’t or why you won’t. If you’re committed, those go out the window. You just do whatever it takes.”
Clearly, Assaraf’s life probably isn’t exactly how he planned it to be when he set those goals in 1982 at the age of 19. However, I’m confident those goals propelled him to where he is today.
He was playing and planning a much bigger game than most people and writing a much different story.
The Science Doesn’t Lie
If psychological science has found anything in the past 30 years, it’s that people with high self-efficacy and an internal locus of control radically outperform others.
Self-efficacy = your belief in your own ability to achieve your goals. Think “confidence.”
Internal locus of control = a belief that you, not external circumstances, determine the outcomes of your life.
External locus of control = a belief that factors outside of you determine the outcomes of your life.
The majority of the population have low self-efficacy and an external locus of control. According to several research studies, people with these two traits:
Reverse everything on that list for people with high self-efficacy and an internal locus of control.
Living a Consciously Designed Life
“The best way to predict your future is to create it.” — Abraham Lincoln
Pulling it all together, here’s how it works:
You must believe YOU ARE IN CONTROL of what happens to you (i.e., internal locus of control)
You must believe in YOUR OWN ABILITY to make things happen (i.e., self-efficacy/confidence)
You must believe you, and only you, are RESPONSIBLE for the choices you make
You must have HOPE that what you seek will come about.
According to psychology’s Hope Theory, hope reflects your perceptions regarding your capacity to:
clearly conceptualize goals
develop the specific strategies to reach those goals (i.e., pathways thinking)
initiate and sustain the motivation for using those strategies (i.e., agency thinking).
From a spiritual perspective, hope is far more than wishful thinking. It’s a sense of confidence, even assurance, that what you seek is a foregone conclusion — what Tony Robbins calls, “Resolve.”
“Resolve means it’s done,” said Robbins. “It’s done inside your heart, therefore it’s done in the real world.” Hence, Ralph Waldo Emerson famously said, “Once you make a decision, the universe conspires to make it happen.”
Few people make committed decisions. Instead, they state preferences such as, “I’d like to be healthier and happier.”
To quote Assaraf’s mentor, “Are you interested or committed?
5. You are MOTIVATED, even when life is difficult.
your belief that specific behaviors will actually facilitate the outcomes you desire
your belief in your own abilityto successfully execute the behaviors requisite to achieving your goals
If you don’t truly value the goal, you won’t be motivated. If you don’t believe you have an effective means of achieving your goal, you won’t be motivated. If you don’t expect yourself to do what it takes, you won’t be motivated.
This theory is known as “Expectancy Theory,” and it highlights that what you expect to happen often does. Hence the term, “self-fulfilling prophecy.”
Interestingly, there is a related concept known as “The Pygmalion Effect,”which shows that what other people expect of you in large measure determines how well you do.
You have to ‘Be’ the right kind of person first, then you must ‘Do’ the right thingsbefore you can expect to ‘Have.’” — Zig Ziglar
Living a consciously designed life is completely possible.
Perhaps the most fundamental decision any person can ever make is this one:
You can choose to believe that the people who succeed, like Michael Jordan, for example, were born to become what they did
Or, you can choose to believe that at some point, they chose to become what they did
That is the most fundamental decision you can make about life as a human being. It is what some would call a “watershed issue” — whichever side of the equation you pick will put you down a course that will influence all of your other decisions, mindsets, and beliefs.
Do you believe you can choose what you become?
Or do you believe your course is set for you at birth?
Do you “discover” yourself or do you “create” yourself?
Whichever perspective you choose, your brain will go about finding any and all information it can to support that bias. As Dan Sullivan has said, “Your eyes can only see and your ears can only hear what your brain is looking for.”Psychologists call this “selective attention.”
What you focus on expands.
You see what you believe is real — and then it becomes real for you in a self-fulfilling prophecy. As Dr. Stephen Covey said, “You see the world, not as it is, but as you’ve been conditioned to see it.”
Making this shift starts by recognizing that for quite a while, you’ve been going through the motions. Your thoughts, beliefs, attitudes, behaviors, and even desires are the product of your environment.
Thanks to a global world that makes information abundant, it isn’t hard to become exposed to other ways of life. However, you must realize quickly that most of the information online is complete trash. Which is why Basecamp Founder, Jason Fried, has said, “I’m pretty oblivious to a lot of things intentionally. I don’t want to be influenced that much.”
Once you begin upgrading your mindset and environment, and once your priorities and goals are clear — then you don’t want to be swayed or distracted by most of the low-level information out there.
A key strategy for making any jump is to, “Assume the feeling of your wish fulfilled,” meaning, you assume the posture, attitude, and emotions of the people operating at the higher level.
You affirm to yourself who you are and then operate from that affirmation. This may sound like “acting as if,” and it actually is.
But it’s important to realize that we are always “acting” in a role. All of life is acting. In every situation, you are assuming a character. You’re playing a role based on the other people around you. In some situations, your role may be an employee, while in others it may be a parent, or child, or friend.
In all cases, you are acting a part.
You can change your role.
You can change the stage.
You can choose to be different. But it must start in your state of being. Rather than operating subconsciously as the majority of people do, you must make a conscious decision about who you intend to be and where you intend to go. You must then BEHAVE from that decision. When you act from that decision, then you create the outcomes you are seeking. You will become the person you intend to be, rather than the person your circumstances led you to be.
Conclusion: Humility and Awe
“My dreams are my dress rehearsals for my future.” — David Copperfield
Does everything in life go exactly how you plan it? Of course not.
Here’s the principle: Expect great things to happen, be happy even when they don’t.
“Expect everything and attach to nothing!” — Carrie Campbell
However, just because things don’t go exactly according to plan doesn’t mean you aren’t in control. It is your decisions, not your conditions, which determine your destiny.
When you take up the responsibility to live your life according to design rather than the default, you will constantly be humbled and in awe. You’ll be blown away as you watch life unfold as you saw it in your head — as your physical world conforms itself to your thoughts.
You absolutely can live your life how Rowling wrote Harry Potter and how Lucas wrote Star Wars.
You can dream and live BIG.
You can live by design.
Your world can continue to expand.
But you must think further ahead. 2019 shouldn’t be viewed in isolation. It’s an obvious continuation of 2018.