Whether higher education is really a bubble or not I don’t know. The often irrational belief some people have in the value of a degree is one sign, though. It’s not that the degree isn’t valuable—it mostly is. What I’m talking about has more to do with the underlying motivation, the quality of reason, which leads some people to rashly apply and obtain degrees.
At lower-tier institutions, there are scores of people who don’t belong in business school, don’t belong in law school (and many, many that do). Yet even with all the media criticism of higher ed and the recent arm-waving at prospective students—entreaties to do a little research, a little soul-searching and a lot of self-assessment—the uniformed continue to wander into these programs in search of security only to leave devastated with the lack of jobs or the return on investment. What they paid for was more than what it was worth.
Jonah Lehrer recently wrote in Wired about the persistence of bubbles, why they are inevitable, why we can never seem to learn from them, if they can be prevented, and why they are like tulips in the early 1630s. His conclusions might be helpful to keep in mind during a consideration of the motivations for applying to business or law school.
Recent bubbles in finance, housing, and the first dot-coms, Lehrer writes, resemble the hysteria that surrounded tulips after their introduction to the Netherlands by way of the Ottoman Empire in the 1630s. An explosion of tulip lust. Everyone wanted the tulips, tulips in white, orange, yellow, whatever. Then, speculation started when gardeners peddled in the winter months what only bloomed for a few weeks in the spring. A futures market was created, and in a few years, the price of a single tulip bulb skyrocketed to “10 times the salary of a skilled craftsman.” When the tulip bubble burst in 1637, prices declined—some rare bulbs more than 99 percent—and speculators had a bunch of futures contracts they couldn’t get rid of. A tulip was merely a tulip again.
What lies behind this type of frenzy over an ordinary flower? Surely, there must be some reason why people don’t seem to be able to learn from past mistakes. Lehrer saw some answers in research by neuroscientist Read Montague.
Why are we so dumb? To better understand the source of our compulsive speculation, Read Montague, a neuroscientist now at Virginia Tech, has begun investigating the formation of bubbles from the perspective of the brain. He argues that the urge to speculate is rooted in our mental software. In particular, bubbles seem to depend on a unique human talent called “fictive learning,” which is the ability to learn from hypothetical scenarios and counterfactual questions. In other words, people don’t just learn from mistakes they’ve actually made, they’re able to learn from mistakes they might have made, if only they’d done something different.
The problem is when fictive learning goes awry, it seems. Regret, for instance, is one of those times. When what-if? becomes If-only. Now, I might be wrong in applying this research to the intentions of applicants in the putative bubble of higher ed, but i think it's worth exploring. I’m sure that more than a few past law school applicants, deep in counterfactual thought, said to themselves something along the lines of: If only I hadn’t majored in philosophy in undergrad. If I had majored in econ or computer science, well, I’d probably be sitting in my palace right now and not this two-room shanty, subsisting on rice and beans. If I had a second shot at things, I would study something that interests me, leads to an interesting job, provides financial security. Wait, studying and practicing law provides all that. And lawyers make tons of money. So, law school? Uhh, law school!
Of course, the reality is that most law grads aren’t making big bucks and the number of lawyering jobs has plummeted. And yet, in 2010, law schools experienced a record number of applicants. Were people only seeing successes while staying blind to failures?
MBA candidates, though, are probably less likely to act out of regret. Social comparison might be more apt an influencer for wanting to get an MBA, even when the situation doesn’t call for it. Montague is currently exploring that as well, according to Lehrer. It’s called the “country club effect.”
“This is what happens when you’re sitting around with your friends at the country club, and they’re all talking about how much money they’re making in the market,” Montague told me. “That casual conversation is going to change the way you think about investing.” In a series of ongoing experiments, Montague has studied what happens when people compete against each other in an investment game. While the subjects are making decisions about the stock market, Montague monitors their brain activity in two different fMRI machines. The first thing Montague discovered is that making more money than someone else is extremely pleasurable. When subjects “win” the investment game, Montague observes a large increase in activity in the striatum, a brain area typically associated with the processing of pleasurable rewards. (Montague refers to this as “cocaine brain,” as the striatum is also associated with the euphoric high of illicit drugs.) Unfortunately, this same urge to outperform others can also lead people to take reckless risks.
Going to business school, or law school, is right for a lot of people, if it’s for the right reasons. For many, it’s not the right move, and I suspect that Montague’s research sheds a little light on the underlying motivations of many who apply unwisely.
Keeping yourself from reacting to social comparisons, or engaging in counterfactual thinking, is of course not a possibility. What is a possibility is learning to be conscious of the fact that your decisions—potentially reckless decisions, particularly—are rooted in very basic neurological processes. So remember to ask yourself: Did the decision you made arise out of good, solid reasons or more impetuous motivations?
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