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READ: Return on investment with schools, skills and jobs by Prof. Jay Prag
Published on Friday, June 21, 2013
by Prof. Jay Prag
Inland Valley Daily Bulletin
In my last column I discussed the return on investment (ROI) in education and the difficulty in measuring the value of a college degree in dollar terms alone.
Soon after I wrote that column I visited family in my home state of Maryland. While I was there, I talked to my step-father, the lifelong machinist, and my nephew, the third generation farmer, and I was reminded of another reality check in the discussion about college degrees, education and jobs.
Education is not the same as a college degree.
Neither of these people has a college degree and yet they are, by any sensible standards, very highly educated. Indeed, my PhD in economics has given me none of their skill set. I am in awe of their knowledge and ability. As important as I think economics and business skills are, I couldn't begin to do what they know how to do and further, I cannot imagine the US without machinists, farmers and other highly skilled professional like them.
Both my step-father and my nephew are fully employed and successful.
It is skills that lead to success, not -- in their case -- college degrees. This is not news to anyone. Think about the variety of talented people that we all know: carpenters, musicians, chefs, machinists, farmers, entrepreneurs, doctors and lawyers. All of these are economically viable professions but not all of them require a college degree.
But consider what they do all need: training, perseverance and effort.
My step-father apprenticed for a decade after high school and honed his machinist skills for a lifetime after that. My nephew worked on the family farm with his grandfather and his father from the time he was 8.
Education is not the same as a college degree.
Both of them also work very hard. My nephew starts many days at 6 a.m. and ends work at 9 p.m. No overtime pay; it's just part of the job for a farmer. My step-father might have to redo a fitting 20 times to get it right and he just gets paid for the right one. It's the nature of a machinist's work.
I've watched master chefs and professional musicians; investment bankers and college professors.
They start with a set of skills taught to them for years at a college, an apprenticeship or by a skilled parent. They then hone those skills and practice them for many long hours. And after all of that, they are usually what we think of as successful.
So what's the lesson here? An old one; a clichéd one. In finance we say "time is money." But that's the secret of success in the workplace as well. Success takes time, period. Not "" or at least not always -- college degrees but skills and skills honed over years and years.
Our modern world allows for much instant gratification. But if the internet has speeded up our life in some ways, it hasn't changed this one reality: You can't develop a successful skill set overnight.
Furthermore, the online education craze that has yet to prove to be a good substitute, as traditional schooling does not change what it takes to acquire a skill. After the "school" part is over, honing and practicing still takes a long time.
The old lessons we need to instill in this new internet generation are patience and perseverance.
The old lessons we need to instill in this new internet generation are patience and perseverance. This then takes me back to the return on investment for a college education problem. It's all well and good to send a kid to college to get that part of education but if the kid thinks that's all there is to building a viable skill set, his college ROI will be very low. An educated but unmotivated person will not be successful. An educated, undisciplined person won't either, nor will an educated unpracticed person. College is not where you learn what you need to be successful. College is an early step in a long process that may make you successful if you stick with it.
Return on investment in finance is not just a metric for invested money; it is also a metric for business management.
Suppose I invest a million dollars in three different machine shops or farms, buying each of them a state of the art piece of equipment and asking in return a share of the additional profits that each of them earns. I will get in part the value created by the new machine and in part the value created by the work ethic and skill of the farmer or the machinist. The ROI for my million dollar investment will not be the same even though it's the same piece of equipment that was purchased.
And that's true of college education and students. A highly motivated student getting an engineering degree from Cal Poly Pomona will probably have a very high ROI. A slacker getting a similar set of skills from the much more expensive Harvey Mudd College will likely have a low ROI. The educational investment's return depends on the school and the student's major but also on the student's drive, tenacity, and work effort.
We need to remind policy makers of this and, too, instill this in the students in whom we are investing: the payoff for any education depends on the patience, persistence and fortitude of the person being educated.
Jay Prag is a clinical associate professor at the Peter F. Drucker and Masatoshi Ito School of Management at Claremont Graduate University. Prag also serves as academic director for the school's Executive Management Program, and can be heard weekly on "Inland Empire News Hour" on
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