By DAVID HUNDEYIN
The 2015 movie “The Big Short” tells the true story of Steve Eisman, a Wall Street fund manager who becomes aware of an opportunity to profit heavily by shorting the US housing market. Wanting to investigate it for himself, he takes a trip to South Florida where he discovers a hyperinflated local housing market, unscrupulous mortgage brokers and clueless mortgage borrowers. It turns out that due to relaxed regulatory compliance and corporate greed, banks are issuing mortgage loans to pretty much anyone who wants them, even giving out so-called NINJA (No Income No Job or Assets) loans worth hundreds of thousands of dollars against all common sense.
What really makes his mind up for him is when he meets a stripper who informs him mid-dance that she is paying mortgages on five houses she “owns.” He immediately buys $50 million worth of shorts against the housing market with a potential 20-1 payout. The reasoning is simple – there is a housing asset bubble caused by an oversupply of easy credit and willing takers with a steep deficit of borrowers who can actually pay back their loans. Sooner or later, the bubble will pop and the whole house of cards comes crashing down – which happened in 2008, netting Eisman over $1 billion in profits.
This incidence of heavy investment going into an asset class without reliable evidence that said assets are valued correctly underpins every market bubble, from the Dutch tulip bubble in the 1630s to the dotcom bubble at the turn of the millennium. We may not realise it, but it also underpins the bubble we have created around higher education in Nigeria. Like the pre-2008 financial credit rating agencies who kept giving worthless mortgage-backed securities AAA ratings, the highest rate for creditworthy, investment-grade assets -. Nigerians continue to regard certain university programmess very highly, even though their objective value – determined by job market outcomes – is practically nil.
Educational investment as a bubble: The curious example of law
In 2008, I started a programme of study that many Nigerians – most notably my parents – thought of as borderline insane. Whenever I met other Nigerians on campus and I got the “what are you studying?” question, I got used to the almost pitying looks that followed my answer – Creative Writing and Media, Culture & Society. Apparently, it was almost unthinkable that Nigerian parents would make the 3-year investment worth circa £50,000 for a foreign degree if it were not Engineering, Business, something Science-y or Law. Especially law. Nigerian parents love to send their children to school in Nigeria and beyond to study law, and I had several Nigerian acquaintances studying law at Hull University.
After three years studying a difficult LLB programme, many returned to Nigeria to make a wonderful legal career for themselves. Only after Law school and NYSC though, which cumulatively swallowed a further two years, but no matter – those fantastic jobs at elite law firms like Banwo & Ighodalo and Falana & Falana Chambers would make the time and money invested, hard work, sacrifice, paying dues and all that worth it!
The jobs, however, did not materialise.
It wasn’t that the big boys weren’t hiring. It was that there was such an oversupply of qualified lawyers competing for a tiny number of spaces that getting a good entry level legal job became like getting into NASA. In an employers’ market, the few who did get into the much-coveted spots at elite law firms found themselves burning both ends of the candle, working from dark to dark for a salary often less than $450/month. Those who did not make it into these spots found themselves unemployed, underemployed and ridiculously underpaid.
A good friend of mine with an LLB and LLM found himself working at a mid-sized law firm in Abuja for a king’s ransom of N40,000/month. Eventually he and his partner packed up and moved to China to teach English for two years, where they saved up money for an eventual move to Canada earlier this year. Any lawyer practicing in Nigeria who graduated at any point within the last 15 years probably has similar stories, and yet as you read this, naïve teenagers and pushy parents all over the country are still putting down “law” on JAMB forms.
Like the pre-2008 U.S. housing market, there is no evidence that the asset in question (a Law degree) offers value commensurate to its rating and perceived desirability, but investors (students and their parents) keep putting their time, money and energy into it anyway. Even worse, unlike a stock market bubble which at least goes away after it pops, it seems as if the penny is not about to drop with Nigerians on the subject of investing in overvalued degree programmes like law.
The LLB and LLM basket clearly has too many holes to successfully fetch water anytime soon, but the tap above it is still rushing, pouring out tens of thousands of new law graduates every year for no reason at all, adding to the existing number of unemployed and depressed ones.
Short the bubble and try something new
Like Eisman in “The Big Short” who famously stated that his investment strategy was based on “a willingness to call bulls**t” on irrational asset valuations and go against conventional market wisdom, one way to make a significant short term dent in Nigeria’s long term unemployment problem is for Nigerians to become ruthlessly pragmatic and data-driven about what their education choices represent. Law is the most obvious and egregious example, but there are several other conventional university programmes that remain significantly overvalued in Nigerian consciousness.
Medicine is another example of an overvalued study program, consuming anything from 7 to 12 years of a Nigerian student’s life just to be qualified to practise as a junior doctor. I know a doctor who got into Medical School at 18 and completed his first degree at 29 – 11 years later. For reference, in the 11 years since I entered university to study my “unconventional” programme in 2008, I have worked across several jobs, founded two businesses and grown a significant portfolio of local and international work.
The doctor by contrast, is only now qualified to start his career at the lowest possible rung, and getting even a house placement and a job afterward will be extremely difficult. If he decides to move abroad, he then faces the prospect of further expensive, difficult examinations to enable him practise– exams that must be passed within a limited number of tries with no guarantee of success. From a numbers point of view, can one really justify the years and money invested in that medical degree when compared to the left-field route I took?
This of course does not mean that avoiding Law and Medicine in favour of Creative Writing will necessarily result in similar results to mine. It just means that when making the most important investment decision of a young adult’s life – post-secondary education – students and their parents must first of all analyse the job market to make an informed decision about what to fill in on that JAMB form. In a world where companies like IBM, Apple and Facebook have removed university degrees from their list of recruitment requirements, it also means that Nigerians must focus now on practical skills over high-sounding degree certificates.
In the job market of today, a 19 year-old with an SSCE certificate, an online nano-degree in Python and six months of remote experience as a developer will be significantly more employable and better remunerated than a 31 year-old with an LLB and an LLM who spent seven years acquiring these qualifications across university and Law School. Some companies like Siemens in Germany even offer apprenticeship programmes to teenagers, which take them straight from high school into paid work, awarding the equivalent of a degree certificate afterward.
Unlike Steve Eisman, we may not make $1 billion for recognising that the world has changed and “calling bulls***t” on the false valuations Nigeria currently gives to certain types of education. Like Eisman though, we will at least be in a position to benefit from rapid change instead of being consumed by it.