Investing In Education

Does it pay to hold reasonable expectations? Not always, but it is a place to begin. The important question is the negative one. Does it cost to hold unreasonable expectations?

First, let us note there is a class of unreasonable expectations that turn out well. Steve Jobs, Steve Wozniak, and Ron Wayne starting Apple was not reasonable. There were strong competitors who, had they been a little more agile, could have and likely would have crushed them. Edwin Land invented the Polaroid camera. It had to achieve the same result as a century old technology and do it in a very small space, under any conditions. Henry Ford competed with horses and virtually no road infrastructure. Alexander Graham Bell tried to sell his telephone technology and found no takers. Good that they were not reasonable people.

Exceptions do not make unreasonable expectation right although the few that turn out right are spectacular.

Investments, life plans, and education probably will do better to fit inside the reasonable expectation model. They matter and when they don’t work the downside is difficult to live with.

Investments in publicly traded companies tend to earn around 10% before fees over long periods. Bonds less. Unreasonable returns can happen in shorter terms, but the next short term may wipe out the win from the first. If you need the money some day far off, the short run doesn’t matter. Play the long game.

Life plans might better follow the same idea. Health is good. Lower stress is helpful. Strong relationships add great value. They may not make the world work for any one person, but that is the tendency. Staying in shape, a good marriage and a job you understand and can do, work. Again not for sure, but tendencies matter.

Education is becoming a problem for many. Does vast student debt to acquire a degree that adds little to income or even to employability make sense. It would not be economically reasonable to enroll in such a course.

To examine the problem try examining what 30-year-olds experience. Looking back, do they see their educational indebtedness as a reasonable investment? The ones with marketable degrees likely do. Doctors, lawyers, some MBAs, some teachers. I suspect having a masters degree from Harvard in some fields is a great start, but a degree in women’s or native studies or even political science may not provide enough extra cash flow to comfortably liquidate the debt.

Young people must learn about the investment of time and money.  Especially the investment of borrowed money.  Education is an investment and despite its many non-economic advantages, it must pay its way. Else the life plan fails for too much stress.

Canada faces a shortage of skilled tradespeople. Maybe I am being needlessly pragmatic, but I think a plumber or mechanic or stonemason with a good income has more prestige than an unemployed arts graduate who is heading back to community college to take marketing or something else useful.

Think investment, think risk, think time and money invested. Think reasonable predictability. Avoid confirmation bias.

The world needs poets and artists and people who understand native culture. The world would work better if the poets and artists and native studies experts who were not deeply in debt.

Know what the downside looks like before you decide the upside is attractive. No outcome is worth it if you cannot afford the bill.

Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario.  In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.

Please be in touch if I can help you.  don@moneyfyi.com  866-285-7772

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