3 years ago I wrote my Diploma Thesis. For 5 years I worked on being eligible to graduate as a master/diploma of computer science. It was a huge effort with constant work for 5 whole years. Weekends of studying, programming, pushing bits and bytes on paper.
Eventually I succeeded. I graduated with distinction.
And never used my degree.
3 years later I sit down with Dan Andrews to talk about education. He helps people building lifestyle businesses and has a strong opinion about degrees. One statement was particularly interesting.
“See your degree as an investment. What is the ROI?”
~Dan Andrews. See your degree as an investment. What is the ROI? Dan Andrews @tropicalMBA quoted in http://tillcarlos.com/sunk-cost by @till_carlos tweet it
In my 5 years at university, I never heard anyone mention the return on investment of his degree.
Of course nobody talked about that.
Nobody knows it. Your degree is/will be of highly perceived value. But it is a sunk cost. Why? Because you never get the investment back. Let’s break it down.
Why a degree is of perceived value
Every trade consists of two goods being exchanged. Although there might be more complex definitions, this is my simple one. A good can be in any form from physical, non-tangible, spiritual, emotional or monetary.
Everyone attaches a different value to something.
For the seller, it comes down to this. “Perceived value is the value a customer assigns your product based on what he believes he is getting out of it” (Thanks swellstrategies.com for that definition). The university (or the school system in general) helps you assign a value to the good of “learning 5 years in college”.
How do they help you put a value tag on your effort?
“You need something on your own.”
or
“With this degree you can easily level up to get a PhD”
or
“Look, son. I want you to get the best education possible”
or
“This is your credential to advance with in your career, get the next job or start with an internship”
You know how these things sound. When you have your degree in hands you know how good it feels.
You cannot buy this feeling.
Neither can you buy anything else with that degree. When it comes down to using it, the perceived value snaps back. Your future employer might have a total different view on things. Your degree can play an insignificant role in the application process.
Your next employer does not care
In the last years I hired dozens of programmers online and offline. And I talked to enough business owners to get this list of priorities when it comes down to employing.
- Has done the job before
- Attitude, morale, loyalty, commitment
I removed the degree from my requirements list after having been proven wrong by my ex-partner Marco Raddatz. As he quit is uni at one point, we both had a natural bias on that topic. Yet, he proved a consistent better results by not taking the degree for an important factor. Touché!
Now, back to your degree. Why is it that you assign such a high value on it, while others do not?
It’s called the IKEA effect.
In a study conducted in 2011, three researchers found out, that customers value their self-assembled products much higher. Even half-assembled products had a higher value than products that came ready-made. Thanks, Qaalfa Dibeehi, for your article in beyondphilosophy.
Walking in the wrong direction
Sunk cost are the cost of an investment that cannot be recovered. They are independent of any event that may occur in the future. The psychological background: you keep pursuing it. See this example of a man having walked in the wrong direction in the desert.
“Why don’t you turn around?”
he got asked by a stranger.
“I have already made it that far. I can’t possibly give up my progress!”
This is sunk cost. An investment without return. And you don’t know whether it would pay back even if you completed it.
Of course, you are not lost in the desert. You are more likely enjoying your time at college. The time where the student loan or the parents pay for expenses. The time in which an inexpensive lifestyle is normal. You got the orders, you fulfill. No need for a grand vision or courage to complete them.
I have heard enough people looking back, saying “that was the best time of my life”.
None of these were entrepreneurs.
Entrepreneurs calculate the ROI constantly. It is part of our job. For our topic the question is still open. What is the ROI of your degree?
The Sunk cost of expensive ink on paper
A short thought experiment. Imagine you have a degree. You want to apply in another country where you cannot use it. You cannot even name it, as people would not understand you. Now, you mainly have a nice piece of paper.
For you, this piece of paper is a proof of an ancient time that you have accomplished something. You have found the way through a curriculum of 3, 5 or even more times. You have burned all your energy in weeks of exams preparation. You have worked extremely hard.
How would you apply for a job?
To employers, only three questions are important. I already gave my experience earlier, but now I looked at other employers. Bernard Marr (twitter) boiled it down to this list.
- Why should we hire you?
- What can you do for us that other candidates can’t?
- What are your key strengths and weaknesses?
None of these questions include you. You as in, you are an awesome person. It comes down to this one thing.
The most important thing for your boss is: How much can you be of help?
The most important thing for your boss is: How much can you be of help? http://tillcarlos.com/sunk-cost @till_carlos tweet it
A degree only helps you to prove that you can do it. If you can prove it in a different way, you have successfully hacked the system. Example: if a job as a database specialist for a certain product module is required – you can outscore every PhD if you have worked with exactly that submodule – and you can prove it.
Another good use for a degree: filtering. For employers who have floods of applicants coming in, they are good off sorting them by degree. They can’t go any wrong with it as there are enough people in the pool anyway.
This filter can be circumvented by using relationships. Most jobs (I have heard over 50%) get found through knowing people anyway. If you want to have that job, look for people in that company or related.
So, what is the return on investment then? Self-confidence, proof, and filtering. Apart from that: sunk cost.
What I got told… and you probably, too
People told me: “That is a good solution. You will have something, even if you drop out of college”. After high school I did an apprenticeship for 2 years where I learned programming. However, that was not an academic degree. It was not the thing I thought I needed.
People told me that it was merely a bachelor. I should need a bit more. Especially from academics I heard that it’s the holy grail. Something that would ensure me a high salary and a job any time.
I got told that a higher degree is stable.
Did you hear the same? What did people tell you? In the course of shooting the YourOwnWayOut.com documentary I came across many successful people who were told the exact same thing. Were you?
How you can deal with it (and still win big)
There is one way out of being desperate while studying. See the process as the ROI, not the degree. If you start enjoying the learning process and see how you grow – the time is not wasted.
The mindset is key.
This still brings me to the conclusion: if you are aiming at the degree, you have already lost. Your ROI will be diminishing in comparison of the huge efforts you will put into it.
5 years of daily hard work.
Other people have started billion dollar businesses in this time. My time studying brought me to the point where I am now, and I am grateful for that. However, the time that I put in to get the degree itself is what the title said: sunk cost.
What is your (perceived) return on your time studying? Let me know. till@tillcarlos.com
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