One Thing

Tyler Cowen, economist and author of Stubborn Attachments, argues that “sustainable economic growth” is the one thing we should focus on in our societies to achieve maximum human well-being.

On Wall Street, companies are measured quarterly by one thing: Earnings Per Share, which serves as a proxy for overall financial health. 

While he was the CEO of Paypal, Peter Thiel would only speak to employees about the one thing most critical for them to accomplish.   

Of course, economies, companies, and people are more complex than one thing. However, the success of each complex system may be maximally enhanced by focusing on one thing, and one thing alone. 

This raises an intriguing idea: in every complex domain of human activity, is there one thing we could focus on that would yield maximum success? 

In higher education, I believe the answer is yes. 

Follow the Money

To find it, we have to uncover the primary role that higher education plays in American society. Of course, we’re going to completely ignore mission statements, mottos, and other forms of university “cheap tawk“. We’ll just follow the money, which, according to The National Center for Education Statistics, goes here: 

  • Research: ~$40 billion
  • Other Stuff (Radio Stations, Sports Facilities, etc.): ~$40 billion
  • Hospitals:  ~$50 billion
  • Students: ~$192 billion

As we would suspect, higher ed has an important role to play in basic scientific research, training doctors and nurses, and developing future NPR correspondents and NFL athletes. However, if you follow the money, the primary “job” of higher education is teaching students. 

So, why do students go to college?

Since 1973, the Higher Education Research Institute at UCLA has been surveying millions of incoming college freshmen. Unlike most surveys, this one is not “cheap tawk” because the respondents are enrolled students putting their money (and OK, their parents money also) where their mouth is. 

The most recent survey shows that the #1 reason students go to college is to “get a better job” (85% of students say this reason is “very important”). Unsurprisingly, in 2nd place comes “learning more about things that interest me” (84% of students say this is “very important”). Finally, a majority of students say that “making more money” really matters (73% say this reason is “very important”). 

Follow the money. 

Higher education primarily serves students. Students pursue a higher education because they want to get a well paying job that overlaps with their personal interests.  

It Sounds So Simple…

Today, students have only one way to try and quickly and easily identify a school to meet their goals: school rankings. Several prominent news organizations, such as U.S News and World Report, Forbes, and The Wall Street Journal, rank colleges and universities to try and simplify the selection process. Unfortunately, the school ranking system is broken and confusing. For example:

  • Which ranking is the “best” or the most “trustworthy”?
  • How do you compare rankings from different sources?
    • For example, my alma mater, Penn State University, is ranked 59th, 121st, and 125th respectively according to the sources above. That’s over 60 rankings different between U.S. News and the WSJ.
  • Why do factors used in these ranking such as “alumni giving” or “financial resources” matter to students?
  • What if a student is interested in attending the best program, not the best school?
    • For example, a student might be interested in the best computer science program. Unfortunately, you can’t find a comprehensive ranking of these specific programs.

Outside of rankings, students (and parents) are left with anecdotes, marketing brochures, and “advice” from friends and family based on their own biases or favorite college football team.

Today, it seems that there is no solution to help students understand where they can obtain a cost-effective education to get a better paying job.

But, that doesn’t mean a solution doesn’t exist…

Common Sense

The solution is common sense.

Students say they want a “better job” and want to “make more money”. So, a student’s starting salary after graduation is probably very important! For example, if a student studies computer science at Penn State and makes $50,000 when they graduate, that is probably better than studying at Ohio State and making $40,000. Common sense. 

If students want to “make more money”, then it’s also true that they need to spend less money in the first place. For example, paying $100,000 for a bachelor’s degree at Penn State is better than paying $125,000 for the same degree at Ohio State. Common sense. 

Finally, the more money a student can make over time, the better off they will be. For example, spending 4 years getting a bachelor’s degree at Penn State is better than spending 5 years at Ohio State, because it maximizes a students lifetime earnings. Common sense. 

Higher Ed’s “One Thing”

By using common sense, we know we can help students the most by telling them three simple things: their likely starting salary after graduation, the cost of school, and the time they’ll spend in school. For any school or program, if we take these three data points, we can estimate their earnings over time. 

So, why don’t we? 

Let’s borrow from Wall Street, and put a new “S” in Earnings Per Share:

Earnings Per Student.

Let’s define Earnings Per Student as the amount of money a student can make in a 10-year period, starting with their first day of school, minus their tuition, and using only their salary within 6 months after graduation for the remaining years. 

For example, if a bachelor’s degree in computer science at Penn State takes 4 years to obtain, costs $100,000 in tuition, and has an average graduate starting salary of $50,000, then the EPS for this program is:

  • 6 years x $50,000 – $100,000 = $200,000

We could also calculate the average Earnings Per Student for the entire school by taking the weighted average of students in different programs. For example, if the EPS for computer science majors was $200,000, for English majors $150,000, and there were 10 students in each major, the EPS for Penn State would be $175,000. 

Of course, EPS is not meant to be a precise estimate of the actual earnings of a student over a 10 year period. The purpose of EPS is to provide a directionally accurate means of comparing schools and programs. 

It’s directionally accurate to say that a student’s salary at graduation indicates the degree to which employers value the knowledge, skills, and tools a student has learned, as well as the market signal of their intelligence that comes with the degree itself.

It’s a truism to say that the less time in school, the better for the student: they will have more time to earn money! Of course, this assumes that the EPS doesn’t change when you shorten the program length. This provides an interesting opportunity for schools to experiment with the tradeoff between program length and quality, in order to optimize the starting salary of a student. 

Finally, it’s also a truism that the lower the cost of education, the more of a student’s 10 year earnings will be available for themselves and their families. 

Earnings Per Student is the “one thing”.


We’ve seen that EPS would help students obtain their most important goal: a better, higher paying job. But, there are additional benefits we would foster by focusing on EPS:

  • Shorter educational programs
  • Career paths instead of “majors” (think Software Engineering or Web Marketing vs. “Computer Science” or “Business”)
  • Less expensive educational programs
  • Career services to ensure that the maximum number of students find high paying jobs shortly after college (if a student doesn’t have a job in 6 months, that’s $0 EPS). 
  • Early detection of low-value educational programs that waste student’s time and money. 

It’s possible to think of many ways to make Earnings per Student more sophisticated or accurate. However, if we are trying to help students achieve what they say they want to achieve, there may be no “one thing” better to measure and improve than EPS.

If you can think of one, let me know…  

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Micah is the author of Rethink the MBA. He works and lives in Silicon Valley.