Startups, College, and Blue-Collar Ideas of Risk

At the start of this year I left my gig at Yahoo! (before the meltdown) to go off on my own. Most people who have taken “the plunge” (I’ve taken it once before) are met with a series of doubts and feelings of disbelief from family and close friends. ”But what will you do for money!? What about healthcare?!” Yada, Yada, Yada.

The point of this rant(ish) piece is to highlight some very backwards ways of thinking about Startups, Risk, and College in the traditional middle class sense.

Coming from blue-collar past, I’ve realized that a lot of my friends and family come from union-type vocations and upbringings that essentially rely on an employer to provide for them. Sell your labor during the day, take home a paycheck at the end of the week, and hope you don’t get laid off or go on strike.

Who wants that? Well, I guess a lot of us. But it’s boring ride where your earnings are capped, and the only excitement comes from the occasional fear of whether you’ll need to look for a job other then the one you’ve held for 20 years. But other than that, it’s safe. Work for the postal service, utility company, or take up some other trade, and you’ll get by.

So that “money” question you might get asked when you think about joining a startup? It’s rooted in fear and the general idea of not having some sort of safety net. I think those safety-concerned folks hedge their bets to such a degree that they ultimately hurt themselves. And do you know what is generally viewed as the safest bet of all? Education. One or many degrees will become safety nets for life.

Wrong!

So that blue-collar crew I was just profiling — an education for them, specifically a college education, is the ticket out of the paycheck-to-paycheck, debt-ridden hell that defines the class. Work hard, get a degree, get a good job somewhere, and you’ll be alright.

Those same people who advocated that you keep your job and play it safe also suggest that you take what is actually a massive gamble at the age of 18: taking out student loans to get a college education. But this is pitched as an “investment.”

Whenever I talk to some high school student about college, I wish I could impress on them the insanity of big student loans. You might be taking out 6-digit unforgivable chunk of cash, hoping you can pay it back alongside your regular living expenses post-college. That’s not easy (watch that clip).

So let’s compare that to joining a startup. Let’s say you make $100k / year at your current job, and you leave to join a startup where you need to go half salary, either funded by the startup, or by freelance work to keep you afloat. You aren’t saving any cash, but you can afford living expenses at 0% margin.

At the startup, you are getting a real-world education that no business school can provide, and the only cost is opportunity cost. For the sake of argument, your startup didn’t do so well, and after 4 years your loss in opportunity cost is $200-250k, but you owe $0 to anyone for your time.

Bachelor’s degrees, Master’s degrees, etc: They don’t entitle you to anything, and you generally acquire them at the cost of tens of thousands in debt. You gave up 2-6 years of your life learning at a fantastically slow rate, only to find an exit where you:

  • Owe some loan shark of a company like Sallie Mae $20-250k (depending on the degree(s))
  • Potentially have the same loss in opportunity cost
  • Need to go find a job, because it turns out degrees aren’t tickets for jobs
  • Have no practical experience anyway, so people will hire you at a minimal salary if and when you do find a job

The point is: College is one of the biggest gambles you’ll ever take, and the risk involved in joining a startup is laughable compared to it. Next time you think about quitting your job and going back to school, join a startup instead. And if you didn’t go to school yet — put some serious thought into how much of a financial setbeck you really want when your 4 years are up.

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  • Gavin Flood

    Great article, pretty much summed up my entire feeling towards college. Though I do attend college in Ireland (where it’s quite a bit cheaper than America) I regret it immensely. Everything I’ve learned about programming I’ve learned online and from real-world work. High school students should be advised to avoid college unless it is a true necessity.

  • Andrew D Dixon

    If you get into a PhD program, they’ll pay you to go to school. I made $20k per year to get a masters as Vanderbilt (I left because my thesis advisor wouldn’t let me take a position as CTO of a student run startup). I also cashed out of the housing bubble when I left Nashville.

    Now, when I talk to VCs or other advisors about my startup, they’ll tell me I should have stayed for the PhD because that will increase the valuation of my company. I guess the point is that there’s a flip side to this coin. You can get an education and have other people pay you for your studies. Just keep hustling and you’ll eventually hit something as long as you don’t give up.

    I do whole heartedly agree that putting yourself 6 figures into debt for a bachelor’s degree is a bad deal.

  • http://twitter.com/_kennyk_ Kenny Katzgrau

    Thanks for the thoughts :) In terms of valuation, the other (real) way to give it a boost is to get users, paying customers or both. That’s what the business is supposed to do anyway.

    I think of myself as someone who hustles, but I wonder if I was saddled with 6 figures if I’d be so bogged down I couldn’t (or wouldn’t care about) hustling anymore.

    And then there’s stuff like this in the news: http://finance.yahoo.com/news/even-a-phd-couldn-t-keep-this-man-off-food-stamps.html

  • http://twitter.com/_kennyk_ Kenny Katzgrau

    True. I don’t regret it mainly because it’s still just a stamp of approval from someplace. It’s like a checkbox people need to checkoff when assessing credibility. Saying you didn’t go to college makes people think “Uh, oh …” in the back of their heads.

  • weberwithoneb

    I don’t agree that advising kids to skip undergrad is the answer. Not sure about you guys, but my high school teachers were mostly mediocre and I went to an expensive private school. During the summer of my Junior year of college, I helped T.A. mathematics at a public high school and I saw what a complete disaster it was. Instead of having a credentialed teacher, my class of 50+ kids was taught by the football coach. This was in the South Bay Area, California, where the district is _relatively_ well-funded.

    If we tell kids to skip college, then we need to completely reform high school education. Most people just aren’t prepared at 18, in the US at least.

    A better solution is to advise high school students to attend state universities, two year community colleges, or recognized trade schools. These are way cheaper and kids should not be ashamed to attend them.

  • http://twitter.com/_kennyk_ Kenny Katzgrau

    Thanks for the comments!

    I definitely wouldn’t advise skipping undergrad — I just wanted to point out how risky the idea of taking out big loans for it is, and how in contrast, joining a startup is a much less risky idea (but again, how that is completely at odds with middle class thinking, where most of us come from).