Thursday, July 14, 2011

WCAM: Wagging the Dogma

West Coast Asset Management refers to its investment style as “entrepreneurial.” We bring a business owners sense of focus, opportunity and involvement to the art of investing. Therefore, when we heard about the recent enterprise of Peter Thiel, an original Facebook investor, PayPal co-founder and hedge fund manager, we were intrigued. Thiel’s foundation has launched a “Twenty under Twenty” fellowship that provides $100,000 over a two year period to winning applicants under the age of 20 to drop out of college in order to pursue entrepreneurial ideas. Peter Thiel is taking entrepreneurial investing to its literal extreme.

This program has touched a nerve in the halls of academia as opponents exclaim that it is an irresponsible assault on the virtues of higher education. On the flip side, Thiel and his supporters argue that the virtues of academia are out of step with our economy and that it is time to challenge the universal belief that higher education is a worthwhile investment at any cost. In fact, Thiel claims that we are now in the midst of an “education bubble,” similar to the dot com bubble and the housing bubble. Both sides have a point; the high cost of education is a prudent investment for most, but in the current economy, it may be the appropriate time to challenge the notion that it is a prudent investment for all. In order to draw headlines for his message, Thiel proclaims that his foundation is paying kids to drop out of college (the term he prefers to use is “stop out”). However, what is interesting to us as entrepreneurial investors, is that Thiel is applying the cornerstones of sound investment philosophy by awarding grants to a select number of exceptionally bright kids and then using the attention to shine a spotlight on the dogmas entrenched in higher education.