How a Billionaire’s Fellowship Spread Skepticism About College’s Value

EdSurge Podcast

How a Billionaire’s Fellowship Spread Skepticism About College’s Value

By Jeffrey R. Young     Dec 12, 2023

How a Billionaire’s Fellowship Spread Skepticism About College’s Value
Peter Thiel started his unusual fellowship program 13 years ago, paying grants to young people who agreed to forgo college for at least two years to work on a company or world-changing project.

This article is part of the guide: Doubting College: A Podcast Series.

The year was 2010, and Michael Gibson found himself on the first day of a research job at a hedge fund run by the controversial billionaire Peter Thiel. Gibson had little experience in finance. His major had been philosophy, and he had nearly completed a Ph.D. in it at Oxford University. At the time he was working as a freelance tech journalist.

Through some friends, he had recently wound up at a party for a utopian organization called the Seasteading Institute, which helps people start alternative societies out in the ocean, free from the laws of any nation. It’s a cause that Thiel has long championed, and a friend there tipped Gibson off that the libertarian billionaire was looking for a researcher at his fund. And when Gibson interviewed for the job with Thiel soon after, the two of them hit it off.

"And we didn't even talk finance. We talked philosophy,” Gibson remembers. He said they bonded over a shared interest in the French philosopher René Girard. By the end of the interview, Thiel asked him to help him teach a class at Stanford Law School on philosophy and technology, and he hired him as an analyst at his fund.

As he started his first day, Gibson remembers sitting in a trading room at the firm and thinking to himself, “What am I doing here?”

But early in that first day on the job, a colleague came to his desk with an urgent assignment.

The day before, Thiel and some employees had come up with an idea for a new kind of fellowship for young people, that they were calling an “anti-Rhodes Scholarship.” Instead of paying money to support people to go to college, this program would pay people to forgo college and instead jump right into building an ambitious company or organization.

The catch was, Thiel wanted to announce the program the very next day — at a previously scheduled on-stage interview he was doing at the influential TechCrunch Disrupt conference.

Thiel had long been looking for a way to blow up higher education. Even since he was a student at Stanford University, he had been criticizing colleges for, as he saw it, breeding conformity. And back in 1998 he had even co-written a book complaining about how, in his view, multiculturalism was leading to group-think, and how he wanted to “reverse the tragic disintegration of American universities and restore true academic excellence.”

Now that he was among one of the richest people in the world, thanks to co-founding PayPal and being an early investor in Facebook, he wanted to use those resources to weigh in.

At first, he looked into starting his own university through his foundation, Gibson writes in his book, “Paper Belt on Fire: How Renegade Investors Sparked a Revolt Against the University.” That idea of building a new university had fizzled, though, after Thiel concluded that colleges were too regulated to make the kind of changes he wanted within the traditional systems.

So he had decided to try his subversive fellowship instead. And Gibson says that he and others from Thiel’s organization were still working out the details right up until the moment the billionaire went on stage to announce it.

They settled on calling it the “20 Under 20 Thiel Fellowship,” (later renamed to the Thiel Fellowship) and they decided they’d dole out $100,000 grants to young adults in exchange for them agreeing to not go to college for at least two years.

Thiel was trying to change the public conversation about higher education, and at the time, 13 years ago, even practices like gap years were pretty uncommon. As Sarah Lacy, the tech columnist who was interviewing Thiel during the announcement said, this was every parent’s nightmare, to give children money not to do the stable thing and go to college. But as Facebook’s founder Mark Zuckerberg has famously said, Thiel wanted to “move fast and break things” in the name of innovation. And to him, college was one of those “things” well worth breaking in the interest of moving faster.

This week on the EdSurge Podcast, we’re looking at the rise and impact of the Thiel Fellowship. The program is still going, still paying $100,000 each to 20 young people a year not to go to college. But these days hardly anyone talks about it. And that’s because by now it’s not that controversial to question the value of college.

In fact, these days skepticism of higher education is rising. The number of young people who say a college degree is very important has fallen to 41 percent from 74 percent in the past 10 years. And families across many income brackets are more open to waiting on college or skipping it altogether.

So we’ve been wondering: What happened to the public belief in college? And how is that impacting the choices young people are making about what to do after high school?

This is the first episode of a podcast series we’re calling Doubting College. And we’re starting with a deep dive into the story of the Thiel Fellowship and its impact, because whether you’ve heard of it or not, it played a role in bringing a hyper-skeptical critique of college into the mainstream of American discourse.

Listen to the episode on Apple Podcasts, Overcast, Spotify or wherever you listen to podcasts, or use the player on this page. Or read a partial transcript, edited for clarity, below.

So why was Thiel in such a hurry to create and announce the Thiel Fellowship? After all, he had been complaining about higher ed for decades at that point. Why was he so bent on announcing it then, even before he really had time to build it?

It turns out, Thiel wanted to time the news to correspond with a Hollywood movie that was scheduled to be released that very weekend. That movie, which everyone in Silicon Valley and in the culture at large was talking about, was “The Social Network,” depicting the contentious creation of Facebook.

Thiel barely appears as a character in the movie — his scene is less than a minute long. But he comes across as the embodiment of soulless financing. And as brief as his appearance is, he sets in motion the central conflict of the movie, which is Zuckerberg cutting his best friend out of Facebook's founding.

So perhaps Thiel was looking to reframe the pretty negative portrayal of himself and other venture capitalists in the film. In the story of his fellowship, billionaires are like Robin Hood handing out money to underdogs to make the world better. Or maybe he just wanted to capitalize on the attention the movie brought his way, since at the time he was far less well known, and some say he was looking to raise his profile.

But Thiel probably would have done something with his fame and fortune to fight higher education. Because as he’s said publicly many times, he feels the higher education system has what he sees as an irrational following, like a religion. And he often uses the word “corrupt” to describe college.

“If you get into the right college, you'll be saved. If you don't, you're in trouble,” he said seven years ago at an event hosted by Bloomberg. “As I've said, colleges are as corrupt as the Catholic Church was 500 years ago. They're sort of charging people more and more. It's the system of indulgences. You have this priestly or professorial class that doesn't do very much work, and then you basically tell people that if you get a diploma, you're saved, otherwise you go to hell, you go to Yale or you go to jail. … I think we need to push back on this idea.”

Plenty of big-name experts have pushed back against the idea of the Thiel Fellowship.

Larry Summers, the economist who has served as U.S. Treasury Secretary and is a former president of Harvard University, later called the Thiel Fellowship “the single most misdirected bit of philanthropy in this decade.

The editor of Slate magazine at the time, Jacob Weisberg, called it a “nasty idea.” He wrote: “Thiel’s program is premised on the idea that America suffers from a deficiency of entrepreneurship. In fact, we may be on the verge of the opposite, a world in which too many weak ideas find funding and every kid dreams of being the next Mark Zuckerberg. This threatens to turn the risk-taking startup model into a white boy’s version of the NBA, diverting a generation of young people from the love of knowledge for its own sake and respect for middle-class values.”

To the leaders of the Thiel Fellowship, these takedowns were simply proof that they were on the right track. After all, they were trying to take down the accepted system, and they didn’t expect that system to cheer them on.

But as I talked to Gibson and Danielle Strachman, who was hired early on to help design and run the Thiel Fellowship, I realized that for them, the complaints about higher ed were less ideological and more practical. They don’t object to the idea of a humanistic education — in fact they know they’re products of it. They just don’t think it is working for students as advertised.

“How to live, how to love, how to become a better person, how to think for yourself. I think college isn't a place to do this anymore, or maybe it never was,” Gibson told EdSurge. “I know they advertise these things, but I would hold them accountable for false advertising, because show me the evidence that just because you get an A in some course where you discuss some novels, now suddenly you have a richer understanding of the problems of life. I don't think so. So they haven't offered much evidence that they do these things.”

The Thiel Fellowship is based on the premise that when it comes to innovation, age really matters. And its creators believe that to get world-changing ideas out there, the younger the innovator, the better.

“One of the sad facts of life, I think, is that we do have a window in our lives when we are more creative,” says Gibson. “You look across all sorts of fields. It could be mathematics, it could be chess, it could be novel writing, and it could be science. But there is a time period in people's lives where they tend to be more creative than others.”

He points to research by Benjamin Jones, a professor of innovation and strategy at Northwestern University, who looked at patent filings and the ages when people won accolades like the Nobel Prize over the years. “And what Jones found was that over time,” Gibson says, “is that all [the age of when the key discovery was made] increased because universities got slower at getting people to the frontier of knowledge.”

In those early days soon after Thiel announced the fellowship, organizers weren’t getting that many takers for their idea.

“We got 400 applications the first year,” says Strachman, who had previously founded a project-based charter school called Innovations Academy. “We had to go out onto campuses and tell people about the program and get the word out there. And I remember we went to Waterloo, and we did this, ‘have coffee and bagels with the Thiel Foundation’ thing. Only four or five people showed up for it.”

But Strachman and Gibson say they came to view themselves as talent scouts for innovative thinkers. And just like in sports, talent scouts aren’t measured by how many people they see play. They just need to find a few standouts — maybe even just one future star.

“One of the people who showed up for bagels was Vitalik Buterin,” Strachman remembers.

You may not know that name, but in the tech world, he’s now a big deal. He co-founded the blockchain system called Ethereum, which allows what are known as smart contracts. Lots of people see this as a world-changing idea. And he wrote the white paper for it around the time of that bagel meetup for the Thiel Fellowship. He was 19 years old at the time.

He was granted a Thiel Fellowship, and he’s one of their proudest recruits.

Of course, the fellowship picks only 20 people a year. So it’s hardly making a dent as far as creating an alternative to college.

That’s one reason that after running the Thiel Fellowship for about five years, Strachman and Gibson decided to strike out on their own, on a project they hoped would expand on the mission.

They founded a venture capital firm called the 1517 Fund. They only back companies led by college dropouts and people who never studied in higher ed. And keeping with the theme that higher ed has become a kind of corrupt religion, it’s named after the year that Martin Luther nailed his 95 theses to the door of Castle Church in Germany to protest corruption in the Catholic Church.

Part of their fund’s model is to give out small grants of $1,000 each to help young people get started on a project. And they can give out far more of those than those big checks cut by the Thiel Fellowship.

So how is the Thiel Fellowship doing at its mission to launch big new ideas?

A columnist for Bloomberg who is himself a venture capitalist, Aaron Brown recently did an analysis of the 271 people who have received a Thiel Fellowship since the program began.

And it turns out 11 of them have gone on to start companies now valued at more than a billion dollars, making them what are called unicorns in the industry. He sees that as a pretty remarkable record for finding unicorns.

“It’s not like colleges aren’t trying” to encourage their students to start companies through various programs, Brown says. “None of those have been anywhere near as successful as just giving these kids $100,000 and just sending them out to the world.”

But even if as a program for 20 of the most self-starting people each year, the Thiel Fellowship beats higher education, does that really prove Peter Thiel’s argument that somehow college is broken?

Millions of students in the U.S. go to college each year — more than 4 million graduated in 2021 alone. And studies show that the majority of the students who graduate from college end up economically much better off than those who don’t go to college.

“Basically, the average earnings of an American with a college degree are about 75 percent higher than the earnings of that person's peer who has only a high school diploma,” says Ben Wildavsky, author of the new book “The Career Arts: Making the Most of College, Credentials, and Connections.

And he argues that there’s a danger in Thiel’s argument.

“I think we have to mend it, not end it,” Wildavsky says. “I think you don't want to say college is imperfect, it's not working. For some people it's overrated. So let's just walk away. I think that would be crazy.”

But Strachman counters that as the cost of college increases, colleges aren’t living up to that promise of economic opportunity.

What I hear from people is, “I came out saddled in debt, and I'm actually worse off than when I went and now I can get a job, but I could have got the same job four years ago,” she says. “Or what I also hear on the economic mobility side is, and now I want to go get that internship, but the internship isn't paid. And so the student who is from a more well-to-do family can get that internship, while the student who can't has to go and work at that entry-level position that they could have had four years previously anyways.”

This debate about the value of college, and growing doubts, may stem from bigger questions that go back to the founding of this country, and about the American Dream that anyone can pull themselves up by their bootstraps.

“The Thiel Fellowship and all the sort of fuss that surrounded it was just an early indication of this skepticism about degrees that in some sense had been around for a while,” Wildavsky says. “I think that Americans have always had a really strong practical streak. And we have, on the one hand, the documented improvements in high school and then college graduation rates that document the economic benefits that come with that. But we also have had a persistent sense of all that book learning may just be too excessive for what people really need. They need practical career skills. They need savvy, they need know-how, and Peter Thiel's fellowship was sort of the extreme example of that.”

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