College is a Stock Option
Recently I came across Professor Andrew Lo's MIT OCW videos on Finance theory on youtube. In the video talking about stock options, he used the analogy of thinking of higher education as a option, or a call option to be exact. You paid tuition as premium. At the end of the 4 years, the degree may earn you a job with a good starting salary, just as the value of the option become as the stock price hit the strike price. The most you can lose is the tuition aka option premium.
This is a pretty compelling point to counter the catch all "College is a scam" trend that is floating around social media nowadays. College is an option but not a guarantee, you can lose your premium if you don't pick the right stock. You will also need to put extra effort in college, as compare to an option.
| Aspect | Higher Education | Stock Options |
|---|---|---|
| Investment | Tuition, time, and effort to gain knowledge, skills, and credentials. | The premium paid to acquire the option. |
| Potential Benefit | Higher lifetime earnings, career mobility, and personal growth. | Unlimited profit if the stock price moves favorably. |
| Risk | Losing tuition and time if the education is not leveraged effectively. | Loss of the premium if the stock price doesn’t move favorably. |
| Effort Required | Active participation (studying, internships, networking) to realize the benefits. | None after purchase; value depends solely on market movements. |
