by Mr. Cheap

In this post I’m trying to get my arms around some VERY BIG concepts. Feel free to comment and disagree, but please realize that with 1,000 words to work with I can’t cover every perspective to the depth I might otherwise wish to. I’ll also acknowledge my bias towards formal education:  I have 9 years of post secondary and am in the middle of a PhD program.

Most people believe that education, or at least knowledge, is a good thing. Even those who seem to embrace ignorance believe they have a commitment to knowledge, just of a different nature.

Gradations of Knowledge

In my opinion there is massive differences in the value of various pieces of knowledge. How to make penicillin is far more valuable than knowing who won the 1957 World Series. Bad knowledge is also possible:

  • Magic crystals are a better treatment for breast cancer than modern medicine
  • Killing people by suicide will get me 72 perpetual virgins in the afterlife
  • There are such things as high yielding and safe investments.

are all examples of dangerous nonsense. Believing this sort of thing can get you killed or ruin your life. An education that results in the belief of dangerous nonsense is harmful. Even those who peddle dangerous nonsense will argue that there are gradations of knowledge (and that the information they’re selling is of higher quality than what you’d get elsewhere).

How to select an education that will result in the greatest increase in the VALUE of knowledge is therefore key, rather than just blindly pursuing “education”. The paradox of this is that when you’re seeking the education, you inherently don’t possess the knowledge to evaluate it, which is how people get sucked into dangerous nonsense.


Luckily, we’re all constantly self-educating (learning) simply by surviving another day on the planet. I have an uncle who can look at a couple interacting and read if they’re romantically interested in one another or not. This really impressed me when I was in my early 20’s. Now I realize that if you date enough and live long enough people can read this sort of interpersonal interaction easier than reading a book. I’m amazed at how clueless high school students are about this (a girl will almost be drooling over a guy and he won’t realize it).

While I was writing this post, Firefox crashed on me and I lost 700 words. I’ve learned to save more often in the future when I’m working on posts.

Experience is a dear teacher, but fools will learn at no other.
Benjamin Franklin

The problem with learning by experience is that it takes a long time. The value of an education is to learn the lessons of other people’s experiences faster than it would be take to go through those experiences yourself. I can learn the results and importance of Mendel’s pea pod work without actually breeding 29,000 pea plants.

Limits to Formal Education

The economic value of formal education has been shown. This doesn’t mean all education is a good investment. Scam trade schools are a particularly odious way to waste people’s time and money. While established university and colleges are businesses more than they acknowledge (how many businesses solicit donations from previous customers?), they also have to provide value to continue getting students in the future.

In my opinion, there are two valid reasons for paying for an education: to increase earning power or because you’re passionately interested in the subject. A minimum amount of passion is needed to get through an education (and to work in that field). People who can find an education that accomplishes both for them are particularly fortunate.

I think it’s valid to go into debt for an education that increases your earning power, but that studying something you’re passionate about should be done with money you’ve already earned. I’d happily use money I’d saved to pay for a child’s liberal arts education if they understood the limited impact it would have on their earning (and the massive impact it would probably have on their life). I’d be reluctant to go into debt for this and would discourage any young people from doing so.

Just because something increases your earning power doesn’t mean paying any price is worthwhile. If it’s possible to get a comparable education at a local school while living at home instead of a far more expensive education living away from home, the local school would obviously have the higher return on investment. Contrasting the cost and expected return needs to be done carefully by the potential student.

Like any investment, it’s important to investigate what you’re buying (the school and program). One heuristic would be an inverse correlation between the quality of education and the amount of advertising (when have you seen an ad for Harvard Law or MIT Engineering?). Another would be an inverse correlation between the cost and the value.


I love autodidacts and, like many bloggers, am myself one in terms of personal finance (I’ve never taken a business course and have only taken one economics course). Certainly autodidacts can learn much faster than from experience as they read books on the subject and teach themselves. It’s a great hobby and very occasionally makes a massive contribution to a field of knowledge (sometimes a change that only an outsider would be capable of making). There are a number of problems with this form of self-education.

It’s possible to spend massive amounts of time on incorrect or irrelevant information. Cranks can construct an elaborate, impenetrable field with their own vocabulary and with sufficient persistence ignore advice that what they’re doing is a nonsensical waste of time. During the dot-com boom a number of startup were created around ideas that anyone with a computer science background could have shown to be NP-complete (and therefore there is no known way to efficiently determine a solution).

On the flip side, it’s also often the case that autodidacts move from one thing that’s interesting to the next, and avoid learning a complicated, but fundamental, part of the field that’s important to progress to higher level understanding. This is a more enjoyable form of learning, but naturally tends towards a broad, shallow understanding of the field (think Cliff Clavin). It would be a VERY rare person who would be capable to teaching themselves advanced mathematics without someone providing a curriculum to ensure they had mastered all prerequisites.

I continually get annoyed when I read a writer making the blanket statement that education is good. I would agree with the statement generally, but I think it is more nuanced than it is typically presented.

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