Is a Bachelor’s Degree a better investment than a BMW? At first glance, the answer seems to fall into the category of definite “no brainer.” An automobile, even as fine a product as that turned out by Bavarian Motor Works, does not directly qualify the owner for much other than picking up gullible girls or guys. It may impress a prospective employer, but also has the potential to work against employment. Does anyone really want to hire someone for an entry-level position if it appears that he or she doesn’t need the job, and (apparently) has the economic power – demonstrated by the purchase of an expensive car – to walk off the job if things don’t go according to plan? Possession of an expensive car might also be seen as financial foolishness, and thus a poor risk as a potential employee.
Of course, if one is applying for upper-level management positions, lack of an expensive, late-model automobile could suggest that the prospect is a failure – and who wants to hire a failure?
A Bachelor’s Degree, on the other hand, is frequently cited as a requirement for entry-level positions, even mid-level jobs. I have a relative, now getting close to retirement, who limited herself with a high school education. She worked for many years at a company (that, for obvious reasons, will remain nameless), and trained virtually all of the college-educated supervisors who were brought into the company. Being an incredible optimist as well as having more than a modicum of common sense, she figured that, since she trained these individuals, and often filled in for them when they took vacations or got themselves fired, she was qualified for a supervisory position. Inevitably, however, she was rejected … on the grounds that she did not have a Bachelor’s Degree, nevermind the overwhelming amount of actual experience that more than made up for a bit of sheepskin.
A college degree, then, can (in many cases) be directly linked to a specific job requirement. This, in turn, can mean increased income over the degree-holder’s working lifetime. The problem, however, is that neither a BMW nor a Bachelor’s Degree meet the qualifications of what it means for something to be an “investment.”
The trend in modern society, as it has been since the debacle of the Stock Market Crash of 1929, is to regard virtually every personal expenditure as an “investment.” This can, in part, be traced to people’s apparently unshakable conviction that it is always possible to get something for nothing. Then, as now, Wall Street is geared not toward genuine investment, but to speculation – specifically the “bigger fool” theory: pay a high price (or low, if you’re “lucky”) for a security, and wait for someone else to offer you an even higher price.
Similarly, if you think something is overvalued, you “sell short”: borrow shares, sell them, then buy them back and return them to the lender of the shares when the price falls.
This is not investment, but gambling. “True investment” consists of purchasing an asset that generates sufficient income to pay for the acquisition and maintenance within a reasonable period of time, and then continue to generate a reasonable rate of return to the owner in perpetuity (or the life of the asset, depending on the type of investment). Investment income is a return to an owner, the enjoyment of the “fruits of ownership” as one of the rights of private property is described. Investment income is usually the result of hard work, patience, and entrepreneurial ability applied consistently and, most frequently, in association with like-minded others with whom the investor has joined in order to gain the economic and social power of cooperation.
Speculation income, however, results from divesting one’s self of ownership in order to realize a one-time profit (hopefully). Often, as in the Enron scandals, speculation income comes from cheating someone else, either by convincing them to buy over-valued securities from you, or making promises or giving reports unsubstantiated by the facts. Investment is a cooperative activity in which, ideally, all participants benefit to a degree commensurate with their inputs and efforts, whether labor, capital, or entrepreneurship. Speculation is a “zero-sum” activity in which one person benefits only at the expense of another.
Thus, a BMW is, at best, a speculation, not an investment. Someone may buy a BMW in the expectation that the value of the car will increase and it can be sold at a profit – but that is, again, speculation. The BMW does not generate a cash income while the owner possesses it that the owner may use to pay for the car’s acquisition. The only hope an owner has to recoup the cost of the item is if he or she finds someone else willing to pay more than the owner did for the car.
A Bachelor’s Degree is somewhat better, but still not – strictly speaking – an investment. It does not in and of itself generate income (unless someone is paying the degree candidate to attend school!). Thus, while a degree holder has a reasonable expectation of increasing his or her income and thus his or her quality of life as the result of gaining a college degree, there is no automatic correlation between income and possession of the degree.