We're all fans of education. I can admit that I'm a kind of an educational snob based on my own experience in pursuing advanced degrees. As a result, it's always been a foregone conclusion that my kids would also be heading to college to pursue similar academic pursuits, possibly including advanced degrees.
A big reason why so many parents think and act this way is that we want to do our best to ensure that our kids have the best shot possible at a satisfying and independent life. Everyone knows that the more education someone attains, the higher the chances are that they will earn a healthy standard of living. We know, for example, that someone who earns a PhD will earn substantially more on average than someone who stops after graduating high school. The floor for what someone can earn becomes much higher for someone the more education they get. We also know that higher levels of education correlate to lower unemployment, better health, and longer lives. All of those sound like great things for our children.
But there's a wrinkle here that we're not talking about, and that's the decrease in variability or the standard deviation that exists when you get more education. This can actually put limits on the ceiling of how much someone can earn in their career. There is no doubt that the floor and the average moves up as you get more education, but the ceiling comes down as well. The more education you get, the lower your ceiling becomes relative to someone who pursues less education. It's why you rarely if ever see a billionaire who has a PhD. In fact, many of the household names we know today--like Larry Ellison, Bill Gates, and Mark Zuckerberg--never even finished college. How can this be?
The point is that there is a catch when it comes to pursuing higher and higher levels of education. You become more specialized over time. Whether you are pursuing medicine, engineering, or computer science, the more time you spend hitting the books, the narrower your field becomes. That means when it comes to landing a job with your PhD in hand, you'll probably be looking at a professorship or working in a lab as a high-level researcher. Those kinds of jobs can pay really well--but they won't make you a billionaire. You may have raised your floor to the point where you don't have to worry about working for a low hourly wage, but you've also greatly minimized your chances at landing making the kind of money that's possible from, say, starting a company.
For those of us who stop earlier in our educational career, the potential salary floor is lower. You might be looking at hourly wages or maybe a good mid-level management position at the end of a long career. That's certainly a recipe for a good life.
The interesting thing is that your ceiling of possibilities is also, on average, much higher than the person who pursues their PhD. That's because without that high floor beneath them, folks with less education are more likely to pursue an option like starting a business that could, in time, be worth millions--or even billions. These people tend to be more entrepreneurial.
The lesson here is that if one of your kids tells you they're dropping out of college to go start a business, don't have the knee-jerk reaction of telling them to get their butts back in class. Maybe, just maybe, if they have the right idea and market to sustain it, they could have found a course of action that going back to school could never provide. You might ever consider taking that college fund and making an investment in their business.
In other words, they might have just found their path to raising their potential earnings ceiling to a whole new level.