Julian Dorey Podcast - #1 - College Part 1: COST

Episode Date: September 10, 2020

SOLO POD - College costs are out-of-control. We know this. But when did the system and its prices start to go wrong? And why did it happen?   Enough with the empty one-liners from politicians and social media posts alike. Let’s give it some real context. ~ YouTube FULL EPISODES: https://www.youtube.com/channel/UC0A-v_DL-h76F75xik8h03Q  YouTube CLIPS: https://www.youtube.com/channel/UChs-BsSX71a_leuqUk7vtDg  ~ Show Notes: https://www.trendifier.com/podcastnotes  TRENDIFIER Website: https://www.trendifier.com  Julian's Instagram: https://www.instagram.com/julianddorey  ~ Beat provided by: https://freebeats.io  Music Produced by White Hot Learn more about your ad choices. Visit podcastchoices.com/adchoices

Meet Tim's new Oreo Mocha Ice Caps with Oreo in every sip. Perfect for listening to the A-side, or B-side, or Bull-side. Order yours on the Tim's app today at participating restaurants in Canada for a limited time. And what's clear right out front is that the costs suck and they've gone through the roof. And you can make every argument around supply and demand as to why it's happened and not come up with a good one the reason i started this podcast is so simple it's so simple. It's so simple. It's because I have questions about shit around me just like you do. Just like every one of you.

This world we live in has more information flowing and access to more information and resources than at any point in human history. And this is a great thing. It's a great thing. But it's also a tough thing. Because there's a constant flow of ideas and opinions and topics and subject matters. Half the time we don't know where to start. And the other problem is, on topics that matter or topics that we do start to look at, we only ever get surface deep. We don't really consider the reason, logic, and evidence beneath them. Instead we accept 280 character opinions as creed. And 60 second cuts as law.

We listen to little stump speeches. And one liners. That get played over and over again. And assume that that's just how it is. And too often we don't dig deep and in fairness it's not everyone there's plenty of people who do dig deep but i see a lot of that content ignored and the thing is podcasting as opposed to and this is a vodcast too. It's on YouTube. But the audio aspect of this as opposed to YouTube-only content or long-written content, however you get your content where you have to sit down and focus with it. The difference here is I'm talking to you when you're on your commute,

when you're in your car, when you're doing chores around the house. It's like having a little conversation to think a little deeper. And I think it's a ripe opportunity to ask a lot of these questions and actually dig deep into them and not shy away from the things that get a little bit complicated. So this topic today is something that I sat down to research hoping to do one episode on it. And surprise, it's actually going to be one of three now because it is complicated it's something that we've kind of

taken the opinion on the surface and not really looked at what led to that opinion maybe being right or maybe not telling the whole story and i'm talking about college college is as american as apple pie when you think about it. We led and still lead the world in quality of higher education. And as a little preview, the final verdict on my opinion of college and this whole thing here is going to be that college is still very much important and a critical institution in America. But the reason I'm exploring it is because like any institution that gets too big, certain shit just gets out of control. Always happens. And I think it's pretty clear at this point that we have a serious fucking cost problem in college.

It should not take a small mortgage for an 18, 19, 20, 21-year-old to pay for education. I'm sorry. That's ridiculous. It's one thing if you are going to Harvard or one of the oldest, absolute most prestigious schools that's going to open up doors that you just can't deny. But if you're going to a decent state school where you're getting a good education

and getting the degree and bettering yourself, no, it shouldn't cost fucking 42 000 a year should be common sense and this has bothered me for a while and like all of you i've heard the same exact one-liners i guess the conversation really hit the mainstream when you heard Bernie Sanders get up there five years ago and go, college is way too expensive. We have to rein it in, maybe make it free. Education should be a right. And it's not like his point is wrong.

He raises a great point. I'm not so sure his solutions work. That's really a matter of opinion. But the conversation very quickly became, yeah, free college. And no one ever considered why we were where we were and what other more viable solutions might actually exist. So what I did is I sat down to research. And I started to try to find patterns. When did it get out of control?

Why? What caused it? How out of control is it? Let's put some real hard numbers behind it. So episode one here is going to focus on the cost itself. When did it really start running? Why? And how far has it come? I'm Julian Dory, and this is Trendifier. Let's go. This is one of the great questions in our culture. Where is the nuance? You're giving opinions and calling them facts.

You feel me? Everyone understands this, but few seem to do it. If you don't like the status quo, start asking questions. One of the first things they teach you in science class as a kid, I hope I remember this right, but I think it's right. Either way, the symbolism will be right. But one of the first things they teach you is that every flame starts with a spark. And it's a great example for everything that we encounter in life. Because you look at the biggest institutions, organizations, ideas, schools of thought, you name it.

They all began usually with one person or no more than a few that thought of something one day and one thing led to another and so on and so on. So when you look at college, yes, it technically existed, I guess, in like the – maybe as far back as the 18th century. I'm not entirely sure on that, but technically higher education has been around for a long time. That said, there's a clear line in the sand that occurred. And it occurred at World War II. And in a lot of ways, when you look at the history of the United States,

you can draw the line at World War II and say before and after. Because the fact of the matter is, we entered that war after Pearl Harbor, and along with the allied forces we destroyed probably the greatest threats to humanity by sheer power evil and scale that have ever existed. And so when we won that war and when the United States really drove the bus that did it, our soldiers came home and America had an opportunity to cement itself as the preeminent world power. And one of the ways that any great country cements its status within the world, one of the core tenets to it taking its place among the powers to be, is its ability to educate its citizens. And in education, there is no higher form of that than higher education itself.

College education. And prior to World War II, college education was something that was pretty much reserved for the wealthiest in society. It's just true. It's a place that few people went and those who did were usually from a lot of means. And the idea as the veterans prepared to come home in 1945

and 1946 the idea that the US government had was built on the tenets of what America was all about life, liberty, and the pursuit of happiness and again their goal was to cement us

as a power player the power player, leader of the free world education is critical to that but the way they wanted to accomplish it was to change the entire game, the entire definition of who had access to education. They wanted to make college the ultimate pathway for people to get to the middle class, maybe from the lower class, or to move up in the middle class from the citizens of this country.

So what did they do? They created the GI Bill. And the GI Bill sounds familiar because it's still around today. And it gave a lot of other benefits. It was built for veterans, but it gave a lot of other benefits to veterans. But one of the core tenets and the one we're going to focus on that it had was it provided about $500 per semester for every veteran to attend an institution of higher education. And by 1956, 2.2 million veterans had taken advantage of it. And in this, they created what I call a lineage effect, meaning the veterans who went to college and all their fellow civilians around them who followed them there as a result of that competition and seeing what the other people do and trying to do as they do.

Everyone who got educated during that era wanted their kids to get educated. It created a cycle, a college education during this era. Because even if they didn't, they saw so many other people do it, and then they watched them take advantage of it after the fact, such that these people, the uneducated ones, I guess you would say in this situation, wanted their kids to go to college. So pretty soon, part of the American dream became built on going to college. It didn't take long. But another major thing happened that provides context to this whole situation, and it happened when the soldiers came home. Think about it. They were gone four or five years, whatever it was. They were away from their girlfriends, their wives, or maybe some of them were so young they didn't even have one when they left but when they all came home they were united and the single ones found

many of them found their mate and they made a lot of babies so what we had was the first major demographic movement. I don't know if you call it a movement, but period over the next 18 years after World War II from 1946 to 1964 that spawned what we now call and have called for a long time the baby boomers were the first in line to that lineage effect. And there were 76 million of them. Think of all the veterans who took advantage of a college education and all the civilians around them who followed them there over those 10 15 20 years after world war ii and now think of all the baby boomers slowly growing up and getting to age 18 and following in the footsteps or becoming the first generation in some cases to go to college and the demand that created you see what I'm doing here to start the argument, or to start the evidence, I should say.

It's Economics 101. Everything, including college, is based on supply and demand. And right now we're focused on demand. I call it supply and demand, but it's supply and demand. So let's look at the population sizes on college campuses over this time period. And let's start there.

In 1947, I guess you could say a year after veterans had really fully returned from either Europe or the Pacific, there were 2.3 million students enrolled that fall, 1947, on college campuses. By 1970, now think about it, the first baby boomers were born in 1946. So the first baby boomers at age 18 were going to college in 1964. So 1970 still represents

the front third or so of baby boomers. We're not even halfway through them. But in 1970, the fall college population was around 8.6 million. So it went from around 2.3 to 8.6 in 23 years. Now we mentioned out front, the U.S. population increased massively. Massively. Did I mention those numbers? I can't remember if I did, so let me state them twice just to be sure. But the U.S. population in 1946 was 141 million. In 2020, it's around 330 million.

So when I was explaining the demographics and the baby boomers as the 76 million strong generation, they were the first major piece to growing our population at an exponential rate and the reason i say this is because whenever you're looking at populations you have to put context into it so yeah there's 2.3 million students in fall 1947 on college campuses and in 1970 there's 8.6 but again there's also more u.s citizens and they skew younger because the 76 million strong baby boomer generation was by far the biggest generation that had ever happened in the history of america so yes demand is way up, but the potential population to drive that demand is also way up. To be clear, I'm not going to cherry pick this though and say that that is then fine and that demand didn't really go up. It did. It. By 1970, it was 8.6. We can all do math. That's way higher. That's way more real estate you need to supply for people, a lot more professors, many more considerations to take into a budget if you're a college, not to mention there needed to be more colleges, period, to support this. But it didn't stop there either. By 1980, this number was around 12.1 million.

And again, the baby boomers, the last baby boomers to go onto college campus for the first time happened in around 1982. So 1980 represents almost the entire baby boom, college boom, pun intended. And 1980 is a year I want you to remember because what you're going to see – I talked about patterns out front, and this is a pattern. We're going to get to cost in a little bit, but when I went through and did the research, yeah, the spark happened right post the institution of college as we know it. How big it is, and how much it costs, and how it got here. 1980 is a critical year. Besides just the overall population, though, the other question we need to consider is what percentage of those eligible as the years went on were actually going to college education data

org measured from 1960 to 2017 the percentage of recent high school graduates to enroll in college. In 1960, that percentage was 45.1. I think it's reasonable to say without knowing the data, because that was the first year of data, that this number is significantly higher than it was in 1946. The number increased more by 1980 and it stood at about 49.3 percent so that's about an eight or nine percent increase from 60 to 80 from 80 to 2017 it increased from 49% to around 67%. So this paints the picture that we have seen a consistent increase in the percentage of the population attending college each fall.

To review where we're at, because we've really looked at demand. We know that attendance is way up. We know that the percentage of the population who could be attending is also way up. And furthermore, as a result of points one and two there, we can also reasonably determine that degrees earned are way up in total across society. Keep that in mind because it relates to a concept called scarcity, which we will discuss later. But now let's get to the cost. Let's really dig into this. And these numbers are pretty crazy.

So again, we go back to the NCES for this data. And what they did is they measured the cost of college as a weighted average through 2016-2017. This means that it includes four-year colleges and two-year colleges and takes the average across all of them to provide an annual price of what the cost was for college that's tuition fees you name it all this all the expenses that go with it room and board all that very important to note though, that they measure this in real dollars.

Meaning, all the numbers I give you are based off of 2017 dollar worths. So it is comparing apples to apples. What I want to point out right away, is that

in 1963-1964, that school year, to be clear, that is the last year before the first baby boomers came onto campus. The cost of college was $9,818 in 2017 dollars in 1980 almost all the baby boomers have come through now the average cost of college in 2017 dollars had fallen to

$8,687 so over a 17 year period give or take the cost of college went down around 10%. And to remind you, the population on college campuses went way the fuck up. I gave you the 1970 number. I can tell you the mid 60s numbers were in the 6 to 7 million on campus handle. In 1980, it was at 12.1 million. So roughly, the number of students at college doubled, and the price went down 9, 10, 11 percent. Now look, we know where this argument's heading.

We know that, I'm going to tell you, the cost of college is ridiculous on an average basis. I mean, it's fairly obvious. What I'm not going to do is cherry pick things on the other side of that hypothesis that shouldn't make sense. And to me, the cost of education going down 9 or 10% when the demand by a population basis literally doubles makes no sense. That probably shouldn't have happened. That said,

possible explanations for that could be the economics of the times so think about it the 60s spawned the hippie movement and vietnam which wasn't exactly popular that went into the 70s then in the second half of the 70s we had the oil crisis and we had a recession. But keep that in mind because guess what? We have had recessions since 1980. And if a recession is what drove the price to be controlled and to even go down for colleges, it certainly didn't do that post-1980. So, where are the costs today? That's what everyone wants to know. In 2016-2017, that cost was up to $23,061, an increase of 165.4%. That's a lot.

It's a lot. And in the same way that I said the price going down from 63 to 80 didn't really make sense, the price going up 165% on an adjusted for inflation dollar basis from 1980 to today doesn't seem to make sense either. So what about when we put this into context of the cost of other things though? The best friend of figuring out why something happened is comparison for similar type trends across similar type ideas. So let's look at the CPI, the Consumer Price Index, and its increase since the 80s through roughly the modern day. How does that stack up next to college? According to inflationdata.com, from 1985 to 2011, the Consumer Price Index increased by about 114%. By the way, the consumer price index measures the costs of products and goods and services. I mean that's the best way to put it.

It's not a perfect definition, but it's basically what we're paying for the things we buy in a basic economy. In that time, college costs, according to this data, went up 498%. Now let me play devil's advocate for a second. Let's say these numbers are bullshit because I got to be honest with you. When've looked at cpi numbers and and some things related to that and i've looked at different time periods of college i've seen some variances so i don't want to trust that on the surface what i will say though is every number i have looked at has seen a significant difference between the percentage increase Increase of CPI. Or something like it. And the percentage increase of college.

Since the 80s. So to play devil's advocate. Let's say that the CPI. Increased by 114. Like I said. 115. But. College costs only increased 200%.

40% of what they're saying it increased. That difference is still ridiculous. It still leads to serious buying power problems for the average American to pay for higher education and when you really put this into context you look at statistics that show different class buying powers over that time and somebody who does a great job of this is stephen pinker he's a psychologist out of harvard i think i guess one of the most famous in the world I think he's brilliant But in his recent book from 2018

Enlightenment Now He measures Every class of society Around the world On a scale of 0% to 100 Versus the wage increases Over time And I think his data is from 1988 to 2008.

And this has been a trend that exists over the last two, three, four decades according to him, and the chart that he showed was 88 to 2008. But the x-axis represents all the classes of world society. So 0% on the left side is like the indigenous peoples who don't trade in money and live in the mountains, which exist in some places around the world. And the 100% are the billionaires. When it comes to rich countries like the US, like France, like the UK, like Germany, the lower middle class, which is always the biggest percentage of the population, exists around the 80 to 85th percentile in the context of their ranking in the world. And on this particular chart, and I will provide it in the show notes, what we see, my hand on the camera is way above my head, but what we see is on the left side, after the zero percenters, wage growth is way up here. Growing like crazy.

And then when we get to about 75%, it starts a swan dive. And by the time it's at 80%, which is where our lower middle class exists in rich countries, it literally goes negative on an inflation-adjusted basis. And it stays negative until about 85%, and then it starts to turn positive and head straight up through the upper classes what this means is that the middle class of the u.s and specifically the lower middle class which is literally the main target of the post-world war gi bill movement towards education has seen their buying power in the economy, in not just the US economy but the global economy, fall since the lower class who even though their wages have risen you know they're still the lower class and they don't have a lot of buying power the lower middle class and the lower class of the united states have way less of an ability to pay for college whether that be the parents or the kids who are trying to go.

And so I mentioned the recessions that could have led to the price decreases heading into 1980 earlier. What about our recession since then? What's happened to the price of college in the context of say i don't know the most recent one where the banks almost blew up the whole fucking world the great recession in 0809 in 2009 the cost of college according to the nces was around 19 300 by 2016 2017 it was over 23 000 it was an increase of 19.51 so after the great recession on an inflation adjusted basis the cost of education went up around 20 we'll dig into why that happened more in our next episodes. But as a preview, what happened in the wake of the recession is states lost a ton of money because they were all exposed to all the bad bonds and the housing market and because of this they cut funding to colleges left and right states still fund colleges but they funded them a lot more prior to the great recession so colleges unlike

everyone else who just took a hit colleges said fuck that and they jacked up the prices so even as there was one of the greatest wealth losses in the history of this country arguably the second greatest behind the great depression even as that happened people had to shell out more just to go to college so we covered the demand and we covered the cost that eventually came out of it

and what we know is that the cost since 1980 has been the big movement so what about the supply And what we know is that the cost since 1980 has been the big movement. So what about the supply? Maybe if like the supply of colleges has only stayed the same or gone down, you know, this makes sense. A lot more faculty has to be hired, more real estate bought at colleges, etc., etc. Nope. The supply has gone up. To be clear, in 1980, there were 3,231 total four- and two-year colleges.

Title IV degree-granting colleges, meaning they can accept federal aid. By 2017, that number was at 4,360. That's an increase of just under 35%. Now, while that's not quite an increase of the population, again, the population from 1980 to 2017 went from 12.1 to 19.7, which I think is like 65%. So there was a 65% increase in demand with only a 35% increase in supply. However, there also have been colleges closing prior to 2017. We peaked at over 4,700 colleges in 2012-2013. So in a span of four years, around 400 colleges had to shutter because they didn't even have demand,

which leads one to believe that the supply is plenty high enough or too high to sponsor or cover the demand. And yet, in this time period, demand up 65% just roll numbers by population on campuses and supply up 35% just roll numbers by population of total colleges. In this time period, costs have gone up 165%. To put that into context, if you are an in-state student going to a public four-year college, you are still paying on average over $25,000 a year. That is a six-figure education for four years. You might live down the fucking street, you are paying over 100k this is according to a link i'll provide value penguin.com um it's got a bunch of backslashes too but it goes through public two years public four years in state public four years out of state and private four year by the way if you're out of state you're paying over 40 g's a year and my god if you decide to go to private school over 50

god forbid you do a five-year degree that's a sizable mortgage at a private university crazy crazy so the first thing i want to ask before we move on to the next episodes is could there be another logic a little bit beyond the supply and demand to explain this? And one of the things I look at with any kind of brand, any kind of product, anything that people want in a marketplace is a concept that frankly is often ignored and it's the idea of scarcity so best example not the best example but a example an example last year i think i saw a number there's like or there were maybe 8,400 Ferraris produced. Now Ferraris are viewed as some of the best cars in the world. You know, the fucking hood costs more than a lot of homes in America. And they sell for exorbitant prices.

So let's just say, there's all different Ferraris, but let's just say the average Ferrari sold for $300,000. If this year, instead of 8,400 Ferraris, the company instead produced, I don't know, 30,000 of them? Hypothetically, shouldn't the cost go down? Yeah. Again, scarcity is the third frontier of supply and demand, but it is still literally explained by supply and demand. Higher the supply, demand stays the same, lower the price. Higher the demand, supply stays the same, higher the price. So looking at college, just going through things we've already gone through what about the concept of scarcity in context of the numbers we've given

well for one thing we looked at the percentage of recent high school grads that's gone way up from 1980 1980, it was 49%. Today, it's roughly 67%. And what that points to is more degrees being given out. Yes, demand's up, but more degrees are being given out on a percentage basis of society to say nothing of mathematical numbers. So does a degree mean less? Maybe. It certainly means less at some colleges. I mean there's a saying at this point, and frankly it's true, that unless you go to like an Ivy League or Stanford or something like that, the only thing college really helps you with is the first job Then no one really gives a fuck where you went And I'll second that And that's not based on data

That's based on opinion and experience I could be wrong about that If you want to argue it, I'm open to it But the more degrees that are given out The less one degree means And yet the way more we're paying for it Something there doesn't add up Secondly And yet the way more we're paying for it. Something there doesn't add up. Secondly, the supply.

Supply needs to keep up with demand to control price at a similar level. I think they called that equilibrium. I hope I'm right about that. I'm definitely right about that. Right? I'm right. That's right. Yeah, equilibrium. right about that right i'm right that's right yeah equilibrium so technically if we're looking

at the raw percentages that we just talked about three minutes ago 35 increase in supply is not as much as around 65 increase in demand okay if that told the whole story and i don't think it does because again we've had to see colleges close because they don't have enough demand over the last five, six years. But if it did tell the whole story on the surface, that delta of 65% against 35%, nothing about that solves for a 165% increase between it. Again, it's not making a resource that's significantly more scarce. Because technically, if demand goes up past supply, things get more scarce. Because more people want it, and therefore less people can have it because of the price control. But it has to go up in context one to the other.

165% I'll say it for now, I don't know, the 50th time doesn't make sense on the surface. So over the past 30-40 years we have seen Three things happen right away On one side of the argument Number one The US population is way up Number two The college attendance is way up And number three Because of numbers one and two

The demand is way up However, on the other side The supply is way up And also the degrees Are way up. However, on the other side, the supply is way up and also the degrees are way up. So the degrees make the power of a degree less scarce, meaning you are now relying on the literal value of, I got an education, regardless of what it actually unlocks for you to earn in the world, you are relying on that as your value. I don't know if that's enough. Maybe it is. Maybe in the utopitarian – I don't think that's a word, but hopefully you get what I mean. In the utopitarian view of college is like higher knowledge and higher power, maybe that is enough. But when people are taking out mortgages to go to school and the middle class is falling behind like an avalanche, I mean it's just not slowing down.

They're getting more and more fucked every year. Then at what point does this just not make sense? In order for us to talk about different ideas, and again, I don't know how many ideas of solutions I'm going to present, but in order for us to start the conversations in the proper context to come to potential solutions, we need to figure out just how deep and widespread the problem is. And what's clear right out front is that the costs suck, and they've gone through the roof. And you can make every argument around supply and demand as to why it's happened and not come up with a good one. So some arguments you're going to have out front nonetheless are going to be, but how much more do college graduates make in wages

right out of college? Or how much can they make over the course of their life in wages compared to people who don't go to college? Or how screwed are you if you don't get a degree? And these are all valid points that we will dig into in episode three but before then we got to dig into what's what's the quote when the chicken comes home to roost well i guess we got to dig into the chicken that's roosting this whole thing, something that's grown to a centerpiece of, frankly, societal issues over the last two decades in particularly, directly correlated with the massive increase in cost. And that is the student debt crisis. I'm Julian Dorey.

And this is Trendafire. Catch you later, guys.