“It’s Never Been Worse to Be Information Smart Than It Is Today”
– Gary Vaynerchuk at SXSW, 2014
Megan Parker is a the receptionist at a law firm with a bachelor’s degree and over $100,000 in student debt. Stories like Megan’s at this point are becoming cliche and cookie cutter: middle-class kid goes to good University attempting to realize economic earning potential, only to find it wasn’t everything they’d imagined and now they have a bunch of debt and fewer opportunities than they expected. You probably know someone that fits the bill.
These sorts of stories aren’t the norm, they’re still outliers, but they are extremes evidencing a broader trend: degrees seem to be less valuable than they once were.
Even as the rate of unemployment has improved gradually following the 2008 financial collapse, the numbers of people who are underemployed, settling for part-time jobs, or giving up looking all together aren’t counted.
Tracking those individuals in the U-61, which, in 2014 (six years after that Recession ended) was still in the double digits: 11.2%. To put that in perspective, that’s around 30 million people in the U.S. Or one in every ten people.
Could it be that we’re under-educated? That the jobs people are looking for require more education than they have right now?
The number of college graduates has been steadily climbing since the 1940s and is at an all time high. Why go to business school?
A paper published by the New York Federal Reserve sought to explain the phenomenon declaring “individuals just beginning their careers often need time to transition into the labor market.” Still, the percentage who are unemployed or “underemployed”—people like Megan, working as a runner and receptionist with an expensive college degree—has risen, particularly since the 2001 recession. Moreover, the quality of jobs held by the underemployed has declined with today’s recent graduates increasingly accepting low-wage jobs or working part-time.
An article in the Atlantic in April 2012 reported that “more than half of America’s recent college graduates are either unemployed or working in a job that doesn’t require a bachelor’s degree.”
Perhaps it’s that we’ve passed the point where a college degree is enough. Perhaps what is really needed is a graduate education? In 2014, the overall employment rate for recent law school grads fell for the sixth year in a row to 84.5 percent according to a report from the National Association for Law Placement. While the overall number of jobs increased, law school class graduation sizes are growing faster than the demand for the lawyers.
A lawyer that graduated in the early 2000’s said there were 30 New York-based firms doing on-campus recruitment. When she went back to speak at the campus ten years later, there were two. There were too many lawyers and not enough work. While the Dean’s Office was optimistic, the evidence indicates that even for individuals with an advanced degree that are able to get a job, the value of a degree is dropping.
In a 2012 study done by PayScale, which collects salary data from individuals with MBAs through online pay comparison tools, median salaries had stalled over the past four years and, more significantly, the value of the MBA over the course of a career has stalled.The supply of job-seekers being produced by colleges and universities is as at an all-time high (and so is their level of debt) and the demand from corporations and governments can’t keep up.
Why is this? Why is it that intelligent and hard-working people can’t find jobs?
While everyone can relate and recognize that there’s a shortage of jobs for highly credentialed individuals, no one seems to have a clear answer as to why that is. The glut of lawyers in the U.S. may be the most obvious example, but even professions like science, technology, engineering, and mathematics, which were long considered lock-ins for employment, are growing more competitive.
Jobs in almost all industries are becoming increasingly commoditized and competitive. This isn’t equally true across all industries, and those requiring higher levels of education are certainly better protected, but even law and engineering are significantly more competitive now than they were ten years ago. It makes sense for low-skill industries that are being affected by globalization and technology, but what about the highly educated ones?
The Cynefin Framework and Your Career
The Cynefin framework (pronounced Kih-neh-vihn) was developed by Dave Snowden after studying the management structure at IBM. It categorizes work and management into four separate domains: Simple, Complicated, Complex and Chaotic.
The “Simple” domain is one where the relationships between cause and effect are obvious; anyone can apply a best practice to solve a simple problem. It’s something that can be documented, like putting together an Ikea table or a set of legos.
“Complicated” occurs when the relationship between cause and effect requires analysis and investigation. Operating in the complicated domain requires investigation and the application of expert knowledge. It’s something that requires thinking and consideration, but getting it done can be handled by utilizing existing expertise. Think of it like buying a franchise Subway Sandwich store: you need to think about how to run it, but there’s existing knowledge about how to run a Subway store it effectively.
The “Complex” domain is where the relationships between cause and effect are only clear in retrospect. The problem is solved by testing new solutions and seeing the reaction. It’s an emergent practice. This is the field that startups and entrepreneurial departments of larger businesses spend most of their time in.
When no relationship exists between cause and effect, you’re in the “Chaotic” domain. We must act in spite of the heightened difficulties to develop novel practices.
Because of the advances in technology and globalization, the average business today confronts far more Chaotic and Complex situations now than they did 100 years ago. As the systems in our modern world have grown more complex than the systems that existed in the past, connecting cause and effect is more difficult.
On an average day for an American worker, he’s much more likely to confront a complex problem than that same worker may have been a century ago. In the early twentieth century, most people were operating in the Simple domain, employed in agricultural and industrial positions.
Over the course of the 20th century, we’ve shifted the workforce counter-clockwise around the Cynefin graph. The rise of credentialism was the result of a need to train people to operate within the Complicated domain. In a world where the solution can be found by using existing expertise, it made a lot of sense to develop a system for evaluating people based on their knowledge and expertise.
Where we now find ourselves is with machines in the process of taking over the Simple domain. As machines drive workers out of Simple jobs and into Complicated jobs, globalization has dramatically expanded the competition for those same Complicated jobs.
Meanwhile, work is moving yet again. The move from Simple to Complicated that was a hallmark of the twentieth century is being outpaced by a move from Complicated to Complex and Chaotic.
Just as demand is moving from Complicated to Complex, the supply for Complicated work is increasing.
To get a credential that proves you are effective at operating in the Complicated domain is missing the point. Acquiring credentials to prove you’re better at operating in the Complicated and Simple domains is increasingly a race to the bottom.
Why Go To Business School?
One of the roots of credentialism can be traced back to 150 years ago when Horace Mann started the Common School. The purpose of the common school was to teach students how to follow directions. In an industrial economy, we needed to train children to do what they were told and sit still and listen to instructions and say them back to us. At the time, competence was, culturally and economically, in demand. We needed kids to go work in factories. Our whole educational system is built on the back of this premise.
A small business owner (an IT company in the midwest) whom I interviewed related to me his current dilemma. His felt like his business was awash with opportunity. He believed that a new marketing campaign could bring in customers from a neighboring city, and he saw new opportunities to improve internal processes to deliver more value, at a lower cost, to existing customers.
There isn’t a best practice for “run a new marketing campaign.” There are plenty of books on marketing and courses that would all be helpful, but at the end of the day someone has to sit down and think about marketing principles, the specific capabilities of the business, and the market, and then start implementing those. They have to operate in a more Complex and sometimes Chaotic environment.
Would it be better to run a direct mail campaign using first-class postage to make the letter stand out when someone received it, or to use a cheaper option and save money on the mail to invest in getting a graphic designer to design the postcard?
Or maybe they shouldn’t do a postcard. Maybe instead of a postcard, they should just do a typed, written letter in a very personal voice to make people feel comfortable with the company.
Or would that be unprofessional? Is it more important to use a more professional, corporate voice to establish a higher level of trust with their customers?
Or perhaps a direct mail campaign was entirely the wrong approach. Perhaps he should hire a salesperson in the neighboring town that already had relationships with companies there to call on them. But a salesperson would be more expensive than a marketing campaign, and it would take time for the new prospects to become paying customers. Did the business have enough cash flow to support the salesperson while he was landing clients?
Perhaps that wasn’t it at all. Perhaps the real issue was that IT was overly competitive in their area, and they should take their staff and pivot into a different industry and customer segment entirely.
These are all the questions keeping business owners awake at night; solutions to them are in demand.
When he held a round of one-on-one meetings with his team and asked them what they wanted, he offered them the opportunity to work on the marketing campaign or improving internal processes.
The best response he got? They asked for a company credit card.
This is the essence of credential-based thinking, which has trained us to believe that once we get a certain degree, we’ve put in our time.
And that worked for many people for the majority of the 20th century. If you got a good degree in the 20th century, you certainly learned some on the job, but you weren’t required to take ownership or start new initiatives in the way you are today.
What’s valuable isn’t implementing best practices or good practices, but the work of understanding the Complex and Chaotic of the systems and how to operate within them: entrepreneurship.
Entrepreneurship is, in the word of Jean Baptiste Say, the ability to “shift economic resources out of an area of lower and into an area of higher productivity and greater yield.” It’s the only non-commodifiable skillset.
As the demand for work continues to shift around the Cynefin diagram, it’s more in demand than ever before. And you know what happens to resources with high demand?
They become more profitable.
As work shifted from Simple to Complicated over the course of the twentieth century, credentials became more valuable and more profitable. A host of studies showing how much more someone with a college degree earned over the past century corroborate this.
But just because something has been true in the past does not mean it will be true in the future.
Markets move. Demand shifts. Just as demand shifted from Simple to Complicated over the course of the twentieth century, we’re now in the middle of a shift from Complicated to Complex.
Imagine for a moment you were this business owner deciding between two applications:
Applicant 1: Well-credentialed. Harvard MBA.
Applicant 2: No Credentials. Dropped out of college to learn web development and graphic design from free online courses. Has relationships with business owners in the neighboring city because he started a Sunday brunch for local business owners to network. Has a small side business where he markets and sells a course for learning to skateboard.
This is overly simplified, but illustrative. No business owner looking to grow his business would think twice about the decision.
This is not to say what comes with a degree or set of credentials can’t be valuable. Harvard MBAs are not going to be begging for jobs in the near future. If you graduate from Wharton, you’ll almost certainly still have plenty of six figure jobs offers. But as many MBAs have told me, you aren’t paying $100k for credentials, you’re paying $100k for a network and social status. And depending on your goals, maybe it’s worth dropping $100k for that, but that’s what you’re getting.
I was speaking with the founder of a software company at a startup event last year. Walking to the after party, she paused to make sure no one was nearby, and leaned in to whisper, “I have a MBA.”
“Yea, I don’t really talk about it. We got turned down for funding twice because both my cofounder and I have MBAs.”
Is she an outlier or is her case an early indicator of what is only getting more scarce and valuable and what’s going to become a commodity over the next few decades?
The cost of credentials is rising. Tuition is getting more and more expensive at the same time as the value of the degree is falling. In a world where competence was scarce and information was opaque, credentials were valuable. In a world where competence is abundant and information is increasingly transparent, they care what you’ve done. In a Complex world, track records, relationships and skill sets – not credentials – reign supreme.
How will you invest?
Last Updated on July 30, 2019 by Taylor Pearson
I can relate 100% to the “I have an MBA” whisperer 😀
Great post again, Taylor!
Taylor Pearson says
More than a few people can relate I suspect.
Jeff Doehler says
Great read Taylor. I’ve been reading your posts for awhile, but only recently subscribed to your newsletter; now I’m wondering why it took me so long!
Your commentary on how employees at the IT company were stuck in job-based thinking made me think of Linchpin, by Seth Godin. Employers need people who are willing to speak up and take risks. Unfortunately, as you mentioned, this isn’t something that schools usually prepare us for.
Taylor Pearson says
I grok Seth’s stuff as well. Linchpin was probably his best book for me. If you haven’t checked out his startup school podcast on iTunes, it’s a gold mine.
Jeff Doehler says
I listened to it last year, but I think I’m going to do it again now that I’ve read Linchpin and have more experience to apply to what he teaches! Thanks for the recommendation though. What other books of his do you think are worth reading? I can’t decide between reading Tribes or Purple Cow next.
Taylor Pearson says
Linchpin was far and away my favorite. After that, probably the Dip. Depends on where you’re coming from though.
Jeff Doehler says
Ok, awesome. I’ll check out the Dip, thanks Taylor.
Alex T. says
This is why I did not go in for a second semester of high school my senior year, it’s all low level learn how to follow instructions stuff. Considering that’s what most of school is, I mastered that “skill” a long time ago and I couldn’t stand it any longer, I needed an actual challenge.
Now I’m facing the possibility of going to a local college, but when I hear that even Harvard graduates are paying for a status symbol that gets you connections, what is a community college going to get me? Nowhere?
I’m at the point where it looks like I’d be better off pursuing my own projects and taking online courses while taking a retail job to pay the bills in the meantime. I really cannot see any other way in which I can stand out from what is a very crowded marketplace.
Great post, Taylor
Taylor Pearson says
Thanks Alex, cool to hear how you’re thinking about this stuff and best of luck/congrats. I was not so brave at your age.
Mark Robinson says
You cant ignore the value trust me I just finished JR college and now almost done with BS in Cyber Security. This is a great article but you have to factor in things like the cost of the college degree. If you go to a public college like I did its considerably cheaper and I can tell you almost every class mate I had asked me if I was looking for work as the places they worked at were hiring and these were jobs were not being found on indeed or monster. In fact I just finished a short term contract and the company is thinking of asking me back when they have more funding next year and the starting wages are around 65K
Taylor Pearson says
Thanks for the comment and sharing your experience. I totally agree and perhaps should go back and add some caveats. “On average” college and particularly JD/MBA programs are overvalued but there’s definitely exception to that.
I’ve been thinking lately about the investing mantra “a great company at the wrong price is a bad investment”
If you could get a liberal arts degree for 5 grand/year, I would tell everyone to go do that as it’s probably a great formative experience. At 40 grand/year, not so much.
Louie Dinh says
This is a very astute analysis on the trend that will most likely define the 21st century. However, I have a feeling that you cannot just jump into building skills in the complex domain. If we consider the Dreyfus model of skills acquisition, responding competently to complex situation requires at least one be “Proficient” in that domain. Thus, you must still progress through mastering Simple and Complicated (corresponding with Novice and Competent levels of skill), problems before grappling with the Complex.
The current education system is extremely inefficient for getting from 0 to Competent. This can probably be streamlined from the current 16 year investment down to ~5. However, my guess is that investing in the complex domain requires pushing through the education system rather than jumping off halfway and then diving head first into complexity. Trying to run before you can walk is a fool’s errand IMHO.
Taylor Pearson says
Good point. It’s definitely easy to look back when you did go through and say it was a mistake because you don’t know what you miss out on. I definitely know people that have been screened out of opportunities for not having a degree.
That being said, it’s a personal decision as much as anything. I didn’t really know about other opportunities outside of getting a college degree going into college and I didn’t have to take on a bunch of debt to get through so it actually worked out pretty good for me.
Graduate school I would have had to take out a lot of debt and I’d seen other opportunities to go work with companies where I could get paid to build more valuable skills instead of paying to learn less valuable ones.
Overall point I wanted to get at though is that the trend is clear: degrees are getting more expensive and less valuable. Whether it’s too expensive and/or not valuable enough for your particular situation is obviously personal.
Where you are in your trajectory, opportunity cost, etc. are all important factors.
Derrick Williams says
Great thoughts here Taylor. I think you are spot on. There’s no more “tell me what to do jobs” we’re in the conceptual age as Pink suggests. We have to start at an earlier age encouraging kids to think beyond instructional learning.
You focus on MBAs and Lawyers and bring up great points but there’s also a large segment of people going to graduate school in the liberal arts and amassing large debt. Most PhDs in the liberal arts are being funneled into this mythical idea of teaching at a university in which I think is unethical. Why are these schools accepting more graduate students than potential opportunities than so-called jobs? Most of these students have no idea of the entrepreneurial opportunities they have due to being brainwashed into thinking that a nice tenure track position will be awaiting them once graduating graduate school.
Graduate school is toxic and serves as a big ponzee system. It’s job security for PhDs to teach aspiring graduate students very narrow subject knowledge to compete for limited jobs.
Instead of teaching a wide range of entrepreneurial skills they only teach them how to be little-clones to go out to and reproduce more of the same. Most graduate students have no clue of what they want to accomplish after receiving an advanced degree as a great deal of them enter graduate school due to a lack of a planning during their time as undergraduates.
When you ask them about their plans after graduating they reply: “I’m thinking about teaching at a university” which is an automatic reply. They amass $70,000 to $100,000 in student loan debt only to discover landing a teaching gig is like winning the lottery.
Only 1 in 4 PhDs find tenure track positions not to count the 12 years of school that delays wage earning (most full time graduate students make $15,000 a year along with borrowing $15,000 of student loan debt each year while in graduate school). The universities have an endless supply of high-skilled knowledge workers who they can pay dirt cheap as adjuncts.
It is morally unethical for tenure track professors to brainwash students into their graduate classes to benefit themselves and maintain job security. It’s like leading sheep to the slaughterhouse. Graduate school is a ponzee system for universities to teach more of the same stuff they taught in undergraduate classes only throwing in big complicated words to place in articles that no one reads.
I see liberal arts just as or even more problematic.
Keep up the great work Taylor by opening minds.
Taylor Pearson says
Wow. Thanks for the insight into the PhD side of things. Really interesting to hear what the numbers and scripts look like.
I’m read The Organization Man right now that has some fascinating insights along the same lines
Appreciate the support as always 🙂
Derrick Williams says
Thanks Taylor. I also bought the Fourth Economy.
It seems to me that we have lost track of the purpose for “higher education.” Notice that the description does not imply “higher job education” or “higher earnings education.” It is a means of learning at a more advanced level. If a certain degree lends itself to guaranteed employment or higher earnings, then all the better. Educators have definitely promoted the idea that more education leads to job opportunities.
Having earned (and I do mean “earned”) two degrees, I can personally attest to their value.
I experienced the ability to meet professionals and peers of excellence, which elevated my professional abilities. Because the job market at the time of graduation was almost non-existent, I was proud of the fact that I had worked 2 to 3 jobs during my entire time in school and graduated in three years to pay for my education.
I worked hard, learned much, and eventually achieved my professional goals. I worked my way from bottom to top, jobs wise. Oh…and I graduated with two music performance degrees. Not everyone should go to college, but everyone who wants to attend college should go…but for the right reasons.
Leon L says
Hey Taylor, I am a long time reader and silent supporter of your work! I thought it is about time to let you know that I admire you and what you do. Especially this article is very interesting and relevant in my opinion.
I am sitting in my apartment in Singapore right now, sipping on a gin & tonic, waiting for the clubs to open, so me and my roomies can go out. Life is great here in Singapore, however alcohol is expensive. So… Leon get to the point, well, I recently got an assignment from one of my courses, since I am in business school, to write an essay on the value of business education in the world today. So the first thing that bolted into my head was this article and your name. You really started a paradigm change for me when it comes to education, so I just want you to know that. I also want you to know that I greatly appreciate what you do and hope that you keep doing what you’re doing. I will let you know if I get an A for my paper and I look forward to your upcoming work! Keep rocking that keyboard dude!
Taylor Pearson says
Thanks for the kind words. You made my day :).
Hope you enjoyed the gin and tonic and drop me an email (https://taylorpearson.me/) to let me know what the professor said. I’m curious if s/he will agree…