AI Wealth Truth (39): Why Higher Education Is Turning Into a High-Stakes Bet

I. The old story went like this: go to college, gain knowledge and skills, get a good job, live a good life. Education was the ladder of upward mobility. But this story is breaking down.

II. Let us look at the data:

III. Tuition is exploding. U.S. university tuition has risen more than 10x over the past 40 years. In China, MBA tuition has gone from tens of thousands to hundreds of thousands, or even more than a million. Education costs are rising far faster than wages.

IV. Credentials are depreciating. Forty years ago, a college degree was a scarce credential. Today, it is an entry ticket; even a master's may be baseline. When everyone has a degree, its competitive advantage disappears. You pay more money and get less advantage.

V. Employment is uncertain. Even graduating from a top school does not guarantee a relevant job. Many graduates work in fields unrelated to their majors. But student loans still must be repaid. You stake hundreds of thousands on an uncertain future.

VI. That is why higher education increasingly looks like a high-stakes bet.

VII. Let us use an economics framework to understand the value of education:

VIII. Human capital theory says: education increases your skills, makes you more productive, and lets you earn more. If this is true, education is an investment, and the return is higher income. But more and more evidence suggests this is only part of the story.

IX. Signaling theory says: education's main value is not teaching skills, but screening and signaling. A college degree tells employers: you could pass an entrance exam, finish four years of school, and have a certain level of cognition and self-discipline. Employers do not know whether you are truly capable, but a degree serves as a proxy. You spend four years and hundreds of thousands mainly to buy a "signal".

X. A key implication of signaling theory is: when the signal becomes widespread, it stops working. When everyone has a college degree, it can no longer screen. You need higher credentials (a master's, elite schools) to restore the signaling effect. This becomes an arms race with no winners.

XI. Who profits from this arms race?

XII. Universities profit. Tuition keeps rising, and universities' revenue keeps rising. Whether graduates find good jobs or not, tuition has already been collected. Universities' profits are decoupled from students' employment outcomes.

XIII. Lenders profit. Student loans are a good business. Especially government-backed student loans, which are almost risk-free. Whether students can repay is the students' problem, not the bank's. Risk is shifted onto students.

XIV. People who already have degrees profit. Raising the education bar protects the status of those who already have credentials. If you have an MBA, you do not want MBAs to become easier to obtain. Incumbents support raising the bar.

XV. Who bears the risk?

XVI. Students. They pay tuition up front (or borrow). They spend four years of time (opportunity cost). Then they face an uncertain job market. They are the ones staking the most in this bet.

XVII. In the AI era, this becomes even sharper.

XVIII. AI is replacing many knowledge jobs. The skills you spend four years learning may be replaced by AI before you graduate. Legal research, financial analysis, programming. These once "good majors" are all facing AI disruption. The future you are betting on may already be gone.

XIX. At the same time, learning itself is getting cheaper. Online courses, MOOCs, YouTube tutorials, AI tutoring. The cost of acquiring knowledge is approaching zero. The knowledge you bought for hundreds of thousands may be free.

XX. So what are you buying with tuition? Maybe just that piece of paper, that signal, that screening badge. You are not paying for knowledge. You are paying for the ticket.

XXI. How should you think about education as an investment?

XXII. 1. Calculate the true rate of return. How much will your income increase after graduation? After subtracting tuition, living costs, and opportunity costs, what is the return? If the return is lower than the mortgage rate, it may not be worth it. Evaluate education with an investor's mindset.

XXIII. 2. Choose the education with the strongest signal. If you are mainly buying a signal, choose the strongest one. The signal value of elite schools is far higher than ordinary schools. If you cannot attend an elite school, other paths may be more cost-effective. Mediocre education may be the worst investment.

XXIV. 3. Consider alternative paths. In some fields, work experience matters more than degrees. Technical certificates, portfolios, and project experience may be more valuable than a diploma. Not every career path requires a degree.

XXV. 4. Do not let sunk costs trap you. "I have already studied for two years" is not a reason to keep going. If you realize the direction is wrong, cut your losses in time. Past investment should not decide future choices.

XXVI. Higher education used to be a sure-win investment. Now it has become a high-stakes gamble. The upside is shrinking, and the stake is growing. Before you bet, be clear about what you are betting on, and what your odds are. In the AI era, knowledge itself is depreciating, and the value of signals is also being questioned. Perhaps in the future, the best proof of ability will not be degrees, but what you have built or done. But that future has not arrived yet. Right now, you still have to choose under the old rules.