[In]Securities Guest Blog: Not Going Back to My Old School by Aegis Frumento Esq

March 12, 2020


Not Going Back to My Old School

American philosopher Eric Hoffer wrote a dozen books during his career. His best-known, The True Believer: Thoughts on the Nature of Mass Movements, was published in 1951. In it, Hoffer analyzed the nature of populist movements and of the people who join them. Hoffer was looking back on the experience of Germany under the Nazis, and that of Russia under the Bolsheviks. Although it has never been out of print, The True Believer was for many years considered a back-shelf classic. In the past few years, it has found renewed relevance.

And rightfully so. Its 125 numbered sections contain nuggets of pure gold. None of Hoffer's conclusions are surprising today, and most have since been validated through field research. But they were considered original in his day, and even now, to read his crisply stated points, to follow the logic of his own thinking without benefit of surveys and statistics, is to breathe spring air. Hoffer sheds light today on the underlying dynamics of both Trumpsters and Sandersnistas.

And that is the least interesting thing about Eric Hoffer. In 1951, 7% of the population had college degrees, but Hoffer was not one of them. Eric Hoffer was a laborer. He dug for gold, then became a migrant worker, and finally settled onto his life's work. That was being a longshoreman on the San Francisco docks. He did teach at Berkeley for a while after he retired, but soon quit and never considered himself an academic. See https://en.wikipedia.org/wiki/Eric_Hoffer.  

Hoffer's lack of a college degree didn't faze him. He educated himself by reading, haunting the public libraries of every town where he picked fruit. He was, in his words, autonomous, a self-made intellectual.

A confluence of events made me think of Eric Hoffer this week. The looming student loan debt and various plans to abate it has been a campaign topic, as have various plans to make college so affordable that everyone can get a college degree. So-called "deaths of despair," substance abuse, alcoholism and suicide, disproportionately claim white men without college degrees. See https://www.ft.com/content/6f2ed9b6-582e-11ea-a528-dd0f971febbc. And, almost all congressional districts in which a majority of the population lacks college degrees have Republican congressmen. See https://fivethirtyeight.com/features/white-voters-without-a-degree-remained-staunchly-republican-in-2018/. Small wonder that Democrats view having a college degree as a panacea. But they are not solving the right problem.

The problem is that, as if we were in a mass movement, we now objectify the degree rather than privilege of the education that it represents. The two do not necessarily go together. Eric Hoffer wanted the education and he got that on his own without spending a dime on tuition. He didn't have a college degree; as a longshoreman, he didn't need one, and he never cared that he didn't have one. More should follow his example. 

Remember that student debt is only a problem for those students who spend borrowed money but don't get the degree. According to recent statistics, of the country's 3.7 million high school graduates, about 70% go on to college. But only 60% of those go on to graduate. Every year, the country creates 1.5 million new college graduates, and 1.1 million new holders of soon-to-be-distressed student debt.

It's actually more than that. It is said, in college-sponsored surveys, that 1/3 of all jobs in the future will require a college degree. See, e.g., https://cew-7632.kxcdn.com/wp-content/uploads/2014/11/Recovery2020.ES_.Web_.pdf?mod=article_inline. But if you actually do the math, based on the Bureau of Labor Statistics projections of new jobs in the coming decade, you don't get there. https://www.bls.gov/ooh/most-new-jobs.htm. Looking at the top 20 occupations over the years 2018 to 2028, 5.6 million in total, only 20% of them (1.1 million) would require a college degree. That's 1.1 million jobs over a span of 10 years, as against 1.5 million college graduates being produced each year. Sure, employers will pick applicants with college degrees over those without. But that's not to say that the job actually requires having a college degree. In my experience, most of the work done in corporate America is well within the capacity of a competent high school graduate. Plenty of Sanders voters who might actually vote for Trump over Biden have a degree, the debt that goes with it, and a job that doesn't need it. See https://www.nytimes.com/2020/03/07/us/bernie-sanders-voters.html.

The college degree has become an inflated social marker, one that parents go broke to ensure their children get and children go deep into debt to say they have. https://www.nytimes.com/2019/08/30/opinion/sunday/college-tuition.html. All this because they've come to believe the degree is itself the ticket to success, forget the education behind it. Yet a recent study shows that far too many colleges expect less than 60% of their enrollees to graduate.  https://www.nytimes.com/interactive/2019/05/23/opinion/sunday/college-graduation-rates-ranking.html Isn't it fraudulent to enroll students and to charge them tens of thousands of dollars in tuition and fees when you predict that they won't graduate? I think a better solution to the student debt problem is simply to shut down colleges that can't graduate 70%+ of their students. 

Sounds elitist, right? Wouldn't that deprive students of the opportunity to receive an education? No, it wouldn't. Do you really think that, in Eric Hoffer's day when only 7% of the population had college degrees, that 93% of the country were dullards?

You don't need to go to college to get an education. Eric Hoffer didn't, and he was hardly alone. The parchment is not the education, it's just a paper that says you have it. Today, getting an education without going to college is easier than ever. Online classes have been around for a while. I first encountered iTunes University maybe 15 years ago. Hundreds of college course lectures had been recorded that I could download to my iPod and listen to whenever and as many times as I pleased. Yale had 36 courses online, covering everything from English to philosophy to economics to basic science, a full liberal arts curriculum. If you went to Yale, a full course load would only be 32 courses. Through iTunes University, without spending a dime, I imbibed most of the content a Yale degree. The typical Yale graduate, within a few weeks after graduation, would not have remembered the material any better than I do today. We're even.

Except that I got the education for free. What I missed were the beer parties and the football games, the piece of paper and the high-end connections. And that begs the question, what are your really paying for?  An elite school that charges tens of thousands of dollars a year for a fancy diploma and the old school tie might be worth it.  But to spend that much to attend a college whose parchment is generic and whose connections are no better off than you are is a waste. Better to save your money, get your education online, and your social life at the local pub.

And here's some news. Employers don't really give a damn about the diploma either; they care about the education, and the diploma is the only way they've got to decide if you have it. So, the real education problem is not financial, but technical. It is how to honor online coursework with the same kind of official degree that one gets on campus. I'm not the first to see this. See https://www.nytimes.com/2015/03/08/upshot/true-reform-in-higher-education-when-online-degrees-are-seen-as-official.html.  

That's where the coronavirus epidemic comes in. As of this writing, many of the country's major universities have canceled classes and are requiring students to attend online. All of New York City's law schools are requiring their students to attend classes online. No more lecture halls, seminar rooms, or student lounges. No one's going back to their old school. This may - - I hope will - - be the event that pulls back the curtain and allows all of us, and especially students and employers, to see that online classwork is every bit as valid as in-class learning. When even those getting degrees from Harvard, Columbia, NYU, Stanford, Ohio State, and many more will have fulfilled perhaps a whole semester of class work on line, off-campus learning will not be so easily denigrated again. That should open the door to inexpensive certificated off-campus learning for everyone who wants it. 
Eric Hoffer would have loved it. 


Aegis J. Frumento

380 Lexington Avenue
New York, NY 10168

Aegis Frumento is a partner of Stern Tannenbaum & Bell, and co-heads the firm's Financial Markets Practice. Mr. Frumento represents persons and businesses in all aspects of commercial, corporate and securities matters and dispute resolution (including trials and arbitrations); SEC and FINRA regulated firms and persons on regulatory compliance issues and in SEC and FINRA enforcement investigations and proceedings; and senior executives of public corporations personal securities law and corporate governance matters.  Mr. Frumento also represents clients in forming and registering broker-dealers and registered investment advisers, in developing compliance policies, procedures and controls, and in adopting proper disclosure documents. Those now include industry professionals looking to adapt blockchain technologies to finance and financial market enterprises.

Prior to joining the firm, Mr. Frumento was a managing director of Citigroup and Morgan Stanley, a partner and the head of the financial markets group of Duane Morris LLP, and the managing partner of Singer Frumento LLP.

He graduated from Harvard College in 1976 and New York University School of Law in 1979. Mr. Frumento is a frequent author and speaker on securities law issues, and is often quoted in the media on current securities law developments.

NOTE: The views expressed in this Guest Blog are those of the author and do not necessarily reflect those of BrokeAndBroker.com Blog.

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