A cool $6.5 million…
That’s how much a Chinese billionaire paid a college consultant who gamed the system to get his daughter – since expelled – into Stanford University.
Since I’m a holder of two Stanford degrees, all this leaves me scratching my head.
On the one hand, I am a proud Stanford graduate.
On the other, I’d be hard-pressed to justify paying $6.5 million for the privilege.
America’s Top Colleges: Playgrounds for the Rich
I’m a kid from an immigrant family in Pittsburgh…
So it was a heady experience to have as classmates future Silicon Valley billionaires, Olympic gold medalists, “Top Gun” Navy pilots, world champion figure skaters, future Miss Americas, the children of Supreme Court justices, and the future CEOs of Intel and Apple.
But here’s a reality check…
Most of my classmates at Stanford were neither spoiled rich kids nor world-class academic talents.
We were mostly just smart and hardworking students, each with a compelling enough personal story to catch the eye of a 20-something admissions officer for the 15 minutes she reviewed our application.
Still, it’s hard to argue that places like Stanford aren’t a playground for the rich.
Today, the kids of former tech rivals Bill Gates and Steve Jobs both attend Stanford. It’s where former first daughter Chelsea Clinton earned her degree. Stanford dropouts Tiger Woods and Google founders Larry Page and Sergey Brin also haven’t fared too poorly.
But the reality is, the children of billionaires occupied a different world than most of us mere mortals.
Consider the example of my friend who has a son at Stanford…
His son now lives in Facebook founder Mark Zuckerberg’s former house in Palo Alto and views his Stanford degree as a “side project” alongside his portfolio of business ventures.
My friend proudly told me that he expects his son to be a billionaire by the time he’s 27. What’s the source of his enormous confidence in his son? My friend is already a billionaire himself.
All this reminds me of a quote from football coach Barry Switzer: “Some people are born on third base and go through life thinking they hit a triple.”
Why a Stanford Degree Isn’t Worth $6.5 Million
Let’s conduct a thought experiment.
Say I grew up in Pittsburgh and my last name wasn’t Vardy but Carnegie or Mellon. When I turned 18, my parents gave me a choice.
“Nicholas, we can (magically) get you into Stanford… Or we can give you a trust fund worth $6.5 million. It’s your choice.”
Now, a Stanford degree is nice… but no kid on the planet would forgo $6.5 million.
But imagine for a moment that I was wise beyond my years and invested my trust fund into an S&P 500 index fund.
With the S&P 500 returning 10% per year, by the time I turned 40 my trust fund would be worth just under $53 million.
And $53 million buys you a lot of financial security in my old Pittsburgh neighborhood. That’s a pretty high bar for most Stanford grads to compete with.
The Perils of Winning the Lottery
Still, chances are I wouldn’t have been as smart as my idealized self.
I have a friend who inherited a multimillion-dollar trust fund at the age of 18. But thanks to a combination of shady brokers, bad investments and misdirected generosity toward ungrateful relatives, he blew through all his money by the time he was 25.
In his mid-40s today, he is living paycheck to paycheck.
People who come into a large amount of money overnight tend to blow through it very quickly. Statistics show 70% of lottery winners end up broke. A third go on to declare bankruptcy.
Chances are I’d have done the same with my $6.5 million.
The College Bubble
Silicon Valley billionaire Peter Thiel believes that college is a waste of both time and money.
His Thiel Fellowship actually pays some kids $100,000 to drop out of college and launch startups.
Yet there is an air of hypocrisy about Thiel’s efforts.
First, Thiel holds two Stanford degrees. He is doling out his money to kids who drop out of MIT and Yale – not your local community college.
Second, you may be okay with investing in a startup run by a Harvard dropout. But you’d be less enthusiastic if you learned that your cardiac surgeon was a college dropout as well.
Don’t forget that the world needs doctors, lawyers, engineers and scientists more than it does social media wunderkinder.
Paying $6.5 million to get into Stanford is absurd. And, yes, it just might be the world’s worst investment.
That kind of exaggerated price tag reflects both the psychology of China’s new rich and the chutzpah of corrupt U.S. college consultants.
But if anyone ever offers you millions not to go to a fancy college, remember the words of Jim Rohn: “If you win a million dollars in the lottery, you’d best become a millionaire. Because then you get to keep the money.”