The Silicon Valley tycoon who’s paying young people to skip college

After two years at Yale, Dan Friedman made the kind of decision that drives parents bonkers. He dropped out.

“I loved school; I had a great time,” he says. But the Silicon Valley tycoon Peter Thiel—the co-founder of PayPal and now a venture capitalist—chose Friedman for a two-year, $100,000 fellowship that requires young people to skip college and develop a tech business instead, under the guidance of Thiel’s team.

Two years later, Friedman’s business, Thinkful Inc., a New York City company that offers customizable technical training, has 10 full-time employees and has raised $1 million in venture capital, some from Thiel’s venture fund.

The fellowship is intended to encourage bright young people like Friedman to take a risk on their entrepreneurial ideas and avoid racking up student debt. Thiel, who nabbed two degrees from Stanford before forging his career in tech, has rankled some in the academic world for his high-profile skepticism of the worth of a college degree.

Friedman says he’ll recruit college graduates to work at Thinkful and certainly sees a value in a college diploma. (Grads from elite universities like Stanford in many ways dominate the tech world, despite the hoopla over luminary college dropouts like Bill Gates and Mark Zuckerberg.) But Friedman says he doesn’t feel like he missed out on a Yale degree at all.

“It was life-changing,” Friedman said. “If I looked at an alternative world, where (the Thiel Fellowship) didn’t exist, I most likely would have stayed in school and would be in my first job now.

Another Ivy Leaguer, 20-year-old Zach Hamed, decided to forgo his senior year at Harvard to start his Thiel Fellowship this fall, where he hopes to design a suite of software tools  to help primary and secondary school teachers.

Getting his parents’ blessing to take the Thiel Fellowship was not an easy sell.

“It was an interesting process,” Hamed said. But “they understand I can always go back” to college.

Mike Gibson, the vice president of grants for the Thiel Foundation who helps select and mentor the approximately 20 fellows each year, says that the foundation looks for young adults who are not only intelligent, but also are willing to break some of the traditional rules of success. “We love contrarians,” Gibson said.

The Thiel application process in some ways resembles the hyperselective crucible of Ivy League admissions. The foundation considers applicants’ grades, test scores and activities, but also looks for entrepreneurial chops. Have applicants started their own businesses? Created nonprofits? Invented something?

As part of the application, the students are asked what they believe is true that the rest of world believes is false, he said.

“It’s very interesting to see how they answer that,” Gibson said.

It makes sense that a fellowship with such a contrarian premise—that promising young people would be better served by skipping college—values applicants who are also willing to challenge accepted wisdom.

But some experts argue that the fellowship is sending a false message about the value of a college degree, which on average nets workers $1 million more in lifetime earnings than just a high school diploma.

Anthony Carnevale, the director of Georgetown University’s Center on Education and the Workforce, is a vocal critic of the Thiel Fellowship—or, more specifically, the message it sends to teens as they consider college and their futures.

For most people, a college degree or some form of secondary education is vital to thrive in today’s economy, Carnevale said. Simply giving a kid $100,000 “is like giving that kid a basketball and a hoop, and hoping that kid is the next Michael Jordan or LeBron James,” he said.

“He’s giving bad advice to other people’s children,” Carnevale said. “It’s irresponsible behavior.”

The Thiel Foundation says it is not suggesting all young people should forgo college.

"We've never said everyone should leave school," Gibson said.

But a college degree, he said, may not be necessary or even helpful for excellence in every field. For young adults who want to start a company, "perhaps the best they can do is start now."

"The main message the fellowship wants to send to young adults is that, if you have the passion and you have a dream, you should pursue it," Gibson said. "College might be an obstacle to that for some of them—but not all of them."

The average college graduate who took on loans to help pay for school finishes with about $26,000 in debt. This leads some bright young adults to land boring but steady jobs instead of taking risks on their business ideas, Gibson said.

"Our fellows are superstars," Gibson said. And if they succeed in their plans, they could go on to create companies and wealth for a lot of people—jobs, income and products that make other people's lives better, he said.

Not everyone in the academic world thinks Thiel’s message is irresponsible. James Wagner, the president of Emory University in Atlanta, sees some value in what Thiel is doing.

“Although I am an enormous fan of the merits of higher education for preparing the mind and honing the character for life success, I realized that just as there are many forms of construction that can be used to build a house, there are many ways to prepare for a career calling,” said Wagner in an email to Yahoo News.

Perhaps, Wagner said, universities need to consider how they can better retain and cater to young entrepreneurs on campus.

For his part, Friedman isn’t rushing back to Yale.

“Nope. Not anytime soon,” Friedman said. “I got more than enough on my plate right now.”

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