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Charles Hugh Smith on Advice for Millennials: Low Cost Education and Where the Jobs Are!

Richard: Hi, this is FRA’s Roundtable Insight .. Today we have Charles Hugh Smith: He’s the author and leading global finance blogger and philosopher. He’s the author of several books on our economy and society including “A Radically Beneficial World: Automation, Technology and Creating Jobs for All”, “Resistance, Revolution, Liberation: A Model for Positive Change” and “The Nearly Free University and the Emerging Economy.” Also, most recently a book called “Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic.” His blog OfTwoMinds.com is one of CNBC’s Top Alternative Finance Sites. Welcome Charles!

Charles: Hey, thank you Richard! Well I’m really excited about today’s topic.

Richard: Yeah, today I thought we’d have an interesting topic to talk about in terms of what is on the minds of the Millennial Generation and what are their challenges? More specifically in the areas of jobs, education, housing and in just dealing with debt and overall work-life balance. To begin that, there was a recent article today, in the Bloomberg, that actually focused on Hong Kong in terms of what’s happening there with the Millennial Generation and there is a story with a focus on an individual there working very long hours and the real estate situation is quite extreme but it’s essentially symptomatic of most of the world and so what we’d like to do today is to first identify what those challenges are but more specifically to suggest solutions and ideas that while they may not work for everybody, in some cases, they would post really good solutions to some. So, you know what we can do is maybe begin with some topics on education and then go into jobs and then affordable housing and a lot of our discussion can be based on Charles’s books… his writings on the nearly free University, where the jobs are, how technology is affecting the job scene. So just wondering your initial thoughts Charles?

Charles: Well, this is a great topic Richard and for the article on Hong Kong I think what was a key takeaway for me was that many of the protesters are Millennials and the issues are not just legal about extradition and so on, they’re about what the Millennial Generation there feels hopeless about, which is having a middle-class life and that you can be working at you know a job that’s appropriate for a college-educated person like an accountant and all you can afford is a little tiny cubby hole in an apartment that’s been chopped up into six rooms and you’re working six or seven days a week.

So, I think the way that we can describe this and it’s a global problem as you say is social mobility has decayed around the world meaning that if you’re just starting out and you don’t have any huge you know advantages from family connections or family wealth, the ladder of social mobility has become very rickety and meaning that you can work really hard, you can study hard and still come up short because the number of elite jobs, that pay enough to get what we consider a middle-class life like you’d be able to buy a house, those jobs are the competition is so fierce that the meritocracy system that prevails around the world it’s actually failing us because the wealthy simply give their children a boost and ahead of everyone else and it there was actually a new book coming out called “The Meritocracy Trap”, that describes this that elite universities used to accept 30% of their applicants now it’s a you know sub ten percent, eight or nine percent. So, it’s just really hard to establish a middle-class life and this is what the Hong Kong Millennials were expressing that they realized that their parents lifestyle and security is completely out of reach for them and that’s the core problem and I think that we’re trying to address and come up with solutions for.

Richard: Okay, so let’s start with education. So, everybody knows it’s very high and costly and there’s an issue of accreditation that you’ve written a lot about, maybe cartelized industry sector and just the high availability of very low interest rate loans has been fueling that. So, what are some solutions here in terms of trying to lower the cost of education, lower the debt that students can get into but still get a good enough education for good jobs and you know being able to thrive in today’s society.

Charles: Well, that’s a great topic Richard and I think one of the key changes that’s occurring in the economy, that’s beneficial to Millennials who were willing to step out of the conventions, is corporations are realizing that a college diploma is not really a good indicator of productivity on the job and I think one of the vice presidents in Google recently wrote a book about this that Google used to follow you know used to only hire college grads and wanted your, you know, grade point average and all this kind of academic stuff and then they studied it and realized that those were not good indicators of productivity and talent in the job and so they started hiring people with no college diplomas or indeed no college at all and they were hiring them for their skill sets.

So, I think that the core advice I would have is focus on building skills not acquiring credentials because credentials only go so far and they are depreciating in today’s world because employers realize they’re not really good indicators of how productive you’re going to be on the job. So, I would say build your social capital skills like your ability to work with people, management skills, project management skills and in specific you know specialized skills in database management and data mining and the kind of topics that you’re interested in that use digital technology. That’s the solution, don’t even worry about getting a college diploma unless you can afford to do so and of course, the way to do that is go to Community College for the first couple of years if you can and then use the remote learning as much as possible at institutions that offer that and offer huge discounts for that so that you can get a diploma more or less digitally.

Richard: Yes, I would agree with that. In some cases, like a doctor or a lawyer you might need a jurisdiction based you know accredited education with a specific degree so that might be required but, in many cases, not. So, as you mentioned you can study online, there’s lots of internet-based courses, there’s the concept of distance learning and also, the areas to study I would suggest as being engineering, software and business. Those three areas in particular because engineering really gives you the know-how, the how to solve a problem, how to approach solving a problem so that’s quite beneficial in any job, any sector. Then there’s the software aspect, I just read something today about Goldman Sachs how they’re ready and willing to hire coders but that’s a key skill for the future especially given today the Internet is at the application layer so it’s all about inventing and coming up with new apps, the so-called app on anything in ordering services, products, whatever so software is a key skill. Then there’s business, of course, Business Administration whether it be from an MBA but you know how to set up a business, how to conduct business, understanding business drivers. So, I would emphasize those three skill sets. Your thoughts?

Charles: Yeah, I agree Richard and I think we were just before we started recording that you also have some apprentices, essentially they’re called interns, but you know the apprenticeship system it’s often limited to the building trades or perhaps cooking or these kinds of things but actually it works very well in higher-level skill sets and managerial situations. There’s really no better learning situation than the workplace and so if you can get in and find a mentor who’s willing to give you experience in the real world then you can really start seeing what the skill sets that employers want and what I think the criticism that I’ve heard from people, recent college graduates, even in the stem you know science, technology, engineering and math is that the employers wanted skills that they didn’t learn in the classroom, that it
was all well and good but they day ended up not using whatever they learned in college in four years. They learned they basically had to relearn whatever they were going to use on the job on the job so this is the problem with sitting in a classroom or even remotely spending four year of your life you may not be learning what employers really want.

So, I would say the most important thing is to network with actual employers in the field you’re interested in, on day one, don’t start after four years of college or five or six years. That’s what you do on day one and then you tailor your education to what the employers actually want and so we know that one of the deficiencies in our educational system is employers, large employers like famously IBM, used to spend enormous amounts of time and money training their employees and now you know that the general model is you poach your employees from some other corporation right so there’s very little on-site training. Everybody wants you to be able to do the work from day one and they don’t want to train you so you’re going to have to do that part yourself but if you do that part yourself and you manage your own education then you’re going to be well situated.

Richard: Yeah, exactly I can’t emphasize enough this concept and the value of an internship or apprenticeship type program. Europe does it a lot more than in North America, especially in Germany I’ve seen rates as much as 70 percent compared to only 10 percent in North America for apprenticeship approaches. So, it’s quite powerful, low cost and can provide longevity of employment in that sector for that company and that’s something I do personally as well. This sort of leads into our discussion on jobs whereby internship can be coupled with the nature of the job so I have some Millennials working for me as interns that I manage as best I can using an millennial approach. So, they like to work remote, they like to communicate using Whatsapp type of tools with email, with an occasional coffee and they are very happy in that type of model and likely to stay on for a longer period of time.

Charles: Yeah, let’s talk about that model of work and I think it does work well for the Millennial
Generation but also frankly Gen X and Gen Z I think anybody that’s grown up with technology is going to be comfortable with just working digitally and I want to mention that you know the limitations of depending on education, you know higher education, like I was talking to a friend who was consulting with students in a well-respected MBA program in a university on the East Coast and he was appalled to discover
that the students weren’t really interested in learning entrepreneurial skills, they were just trying to get an A.

So, if it’s really important to learn what it really takes to be an entrepreneur or to help an entrepreneur run their business and it’s not a skill set that I think comes through an MBA, which is basically tailored for corporate America and so very few people emerge from an MBA program with actual entrepreneurial skill sets so I would throw that out there too that, you know, entrepreneurial is like a buzz word but it’s really getting down to brass tacks and being able to run a business and keep it afloat until it can scale up and you know all this kind of stuff. It’s a specific skill set and it requires a lot of human capital, a lot of ability to manage projects, budgets, people and so I would encourage people to try to work with entrepreneurs who have been successful and learn the ropes of that and then once you do that then your attractiveness to employers goes up considerably as well as your opportunities.

Richard: And also closely associated with entrepreneurialism is innovation so where there’s
a small burgeoning company there may be elements of innovation involved in terms of some new technology, the use of robotics process automation, intelligent automation, software engineering, you know, for enhancement of services so that actually goes together with entrepreneurialism. Your thoughts?

Charles: Yes, exactly because innovation is another buzzword but it’s implementing the innovation that’s the tough part, right, it’s scaling innovation these are the difficult things. Having the good idea is one thing but getting it into the real world and creating value in the real world that’s the tough part. You know we were talking about remote work and I think that this is really the leverage in the digital economy is that productive people can work largely remotely from anywhere on earth and so and with teleconferencing and all the other communication tool as you mentioned it’s like face to face is like really not necessary and that’s a corporate structure that’s spreading or within corporations it can be divisional where people may be answerable to you know the division head in Amsterdam but they live in Singapore or something so this is the new model and it works really well, I think, because if you’re in a workplace, a physical workplace, there’s a lot of managerial issues that come up, whereas in a remote work world all we care about is you understand the task, you understand the timeline, you get the work done and then you submit it. It’s like, you know, it’s a very clean, less emotionally cumbersome process and I want to mention I’m the same thing that I was just reading a post from a Millennial who was leaving San Francisco Bay Area because of the high expense and you know impossible housing cost and so on and he said in his experience he’s never known a corporate employer to turn down a productive employee who wants to work remotely. So, what he was saying is if you have a couple of years’ experience and you have a track record of being reliable and producing value then no one’s going to turn you down if you say look I want to work mostly remotely and that frees you up to live anywhere you want.

Richard: And that doesn’t necessarily mean living in the middle of nowhere. I myself have a lot of my work decentralized I could go in the office but much more efficient operating out of a millennial café, just
sitting there and doing the actual work, taking conference calls. This particular cafe doesn’t have any music in the background so I’m able to take conference calls as well so it could be there in the middle of the city or it could be in small towns across the country or different countries so remote could mean anything. Your thoughts?

Charles: Yeah and Richard I think that one of the key topics we wanted to talk about was housing in the Hong Kong Millennials profiled in this article we’re referencing I mentioned the impossibility of owning an apartment, a flat in in Hong Kong and, of course, that’s an issue in Vancouver tremendous you know it’s impossible, there many cities in Australia, many cities in the Bay and in the U.S. as well. So, I think the asymmetry here is you can’t earn enough in a big city to buy a house when housing is 11, 12, 15, 20 times your income so you’re going to have to find a cheaper place to live and the weighted working remotely enables that and so we were discussing, before we started recording, the idea that there’s a lot of much cheaper towns and small cities in North America that are starting to get a café scene, starting to get a tech scene, starting to get some nightlife and yet you can still buy a house in these places for under a hundred thousand or if you were going to move to a little more develop place maybe two hundred, you know two hundred and fifty thousand, which is affordable on much less of money then then these out of reach places. So, I think that’s the ultimate solution to housing is find a place that you enjoy living and that you can afford to own a house without working yourself to death.

Richard: Absolutely and this doesn’t necessarily have to be in the middle of nowhere. There is that possibility though for some that may like that in terms of buying 100 acres for hundred fifty thousand, two hundred thousand living on that land but you know far away from the city but at the same time you can pick smaller cities perhaps like Austin, Texas, we were talking about before, is a burgeoning community and lots of Millennials live there, very affordable housing. Your thoughts?

Charles: Right and the tier of towns or smaller cities below Austin, say for instance a lot of people favor Asheville, North Carolina, it has access to some larger cities. Bend, Oregon is a favorite place because of its proximity to, you know, outdoor activities and I just looked up those populations before we started recording and Bend used to have like 36,000 people 20 years ago now it’s got 95,000 and Asheville used to have 70,000 now it’s 95,000. So, these areas are growing rapidly because of the amenities and the cultural scene and there’s still room to grow because they’re relatively small compared to, you know, these huge urban areas and, you know, we you mentioned the idea that it’s even possible and I know some people that are pursuing this model is they actually want like a farm or a rural household and there’s a model in Japan called “Half-Farmer, Half X” and that’s been around a while and the idea of there and mostly Millennials or maybe younger Gen X types is that you take your digital skills, you know, in graphic design or coding or marketing and you work part-time and then you live in the countryside where housing is incredibly cheap and so you only have to work halftime to either rent a really big farmhouse or buy the land and so that’s another model.

Richard: And, a sector of that that makes sense is in the whole development of applications or apps, you
know the APP, for everything or anything. There’s an app now that goes on your cell phone for just about any service but continuously being developed for new services, new innovative services. So that can be applied, you know, the software scale that I mentioned you can use that in those areas, as you mentioned, remote areas, smaller communities and do that development to develop apps.

Charles: Right and speaking of that, you know, those of us outside these specific industries tend to forget that virtually every industry in North America and any other developed country is all being revolutionized digitally. So, you could take a sort of old company say producing chemicals or iron or steel products and you say well that’s an old technology they don’t need but actually those companies are also undergoing tremendous digitization of a CNC machining that’s run by software, that they’re using new tools and apps, you know, all software to rationalize their accounting, to rationalize their supply chain so in other words there’s just practically an unlimited number of software jobs within industries that you wouldn’t think of as high-tech but of course all these old industries require high tech skills as they upgrade their own companies into, you know, the modern economy. So, even old industries have a lot of opportunities.

Richard: Exactly. And the whole idea of low skill, low education required manufacturing jobs are gone. Yeah, you really need to know at minimum three different areas and that’s software engineering, intelligent automation and robotics process automation. Those three areas are just completely revolutionizing the manufacturing sector.

Charles: Right right! And one of the examples that is close to home for me is my niece’s
husband is a welder, he’s especially welder meaning, he has accreditations for various special kinds of welding and of course, there are welding machines and these welding machines are getting, you know, smarter if you want to use that term but there’s a lot of custom jobs where there’s only the welding job is literally one item for say a custom home or replacing a railing or this kind of thing. So, there’s a need there for the trade craft skills, you know, which there’s typically a shortage of those skills and then there’s the other skill set of being able to program the robot to do the part of the job that the robot is best able to do and then whatever the robot can’t do the human takes care of. So, this interface between robot software and the technical skills, that’s another growth opportunity, I think.

Richard: And also think global. So, I myself have done work, lived and worked, overseas in Singapore, Kuala Lumpur, Jakarta, Dubai, Istanbul and in Sydney, Australia, all over Malaysia for two years altogether Indonesia one year and a lot of the work I did had to do with setting up Internet infrastructure, basically in many parts of the world, so I was fortunate to ride that whole internet revolution but yeah think globally and some basic industries also will work in developing markets like Burma, Myanmar. If you just take rental car agency that’ll work there, anything that works in the developed world will work in these emerging markets.

Charles: Yeah, I think you’re so right. Actually, I would have loved to have been your assistant during all your globe trial. All those sound really fun but you know a friend of mine just returned, he lives part time in China in Suzhou, and he was marveling at the way that China is more advanced than the U.S. in many ways, for instance, everybody uses their cell phone apps to pay for everything from tolls on the highway to you know sharing meals to the (Inaudible 27:58), you know, uber type taxi service and so on and so again if you can acquire the skills to apply that kind of technology to existing industries there’s just a lot of opportunity there like I can see that will come to the U.S. with time and it’s just who gets there first.

Richard: Another big area of growth is in ESG/CSR. So, that stands for Environment Social and Governance and CSR Corporate Social Responsibility. So, what this means is how a lot of companies getting into these areas where they’re promoting a very strong corporate social responsibility program towards socially responsible investing or practices within their organization. There’s a lot of international standards where companies can measure themselves to towards this and what it’s characterized by our ESG factor so things like what they’re doing in the environment, social type of things, activities and overall corporate governance. Your thoughts?

Charles: Yeah, interesting that there’s the overlap, if you will, of the social consequences of corporate and government policies sort of, you know, the interplay or the overlap of those sectors which we tend to think of as being separate but which are of course in terms of public policy and environmental impact directly related. You know, one of the topics that you mentioned that you’ve gotten some questions on was like debt and the so-called ‘Fire Phenomenon’, which is financial independence retire early and I don’t claim to have any expertise in this but I’ve noticed that it tends to be the Millennial Generation, which is extremely motivated and interested in the financial independence retire early concept. Have you noticed this too?

Richard: Yeah, the concept of a bleisure in terms of combining business and leisure so traveling the world but at the same time doing work. So, whatever that could mean in terms of maybe consulting work, consulting projects, you know, but at the same time fitting in the travel experience as well to different sites of the world.

Charles: Yeah, that’s a great concept. I think a lot of, again these are just generalizations but, I think that the idea that a college degree was so important so essential that it was worth taking on $100,000 worth of debt I think that idea is becoming increasingly discredited or at least questioned and so for those people who already have that tremendous debt load that is a problem right because you’re going to have to, despite various claims that it’s all going to be paid off or you can default on it and so on, all those things are either speculative or they’re consequential. So, it does complicate life to have a large student loan debt and it’s a burden that it’s better to sort of grasp the nettle and figure out some way to pay it down or pay it off and one avenue that I’ve heard of and I don’t know how available it is but some government agencies have figured out a way to reduce your debt if you work there X number of years so that’s one avenue or the other one is to figure out a way to make enough money and live cheaply enough in these kind of cheaper living areas that we’ve talked about so that you can just kind of pound down that student loan debt and free yourself of that, you know, within a limited number of years of work and just get rid of that. And that kind of fits in with the with the fire concept, which is live really frugally and save 40 percent or more of your salary and that’s one way to eliminate the student loan debt from your life and get rid of it so you can move on.

Richard: Now a related question from a Millennial friend is “should I get
a free education in Germany, Sweden, Denmark, Norway, Austria, Greece, or France not free but very low, Czech Republic and instead of paying lots to educational institutions in the U.S. or Canada that may rank lower in quality.” So, what are your thoughts on that approach?

Charles: Well you know you’re a Globetrotter more than I but I would say that’s a fantastic idea if you can figure out some way to do that like, in other words, get the proper visas or that whatever you know the paperwork you’d need that would be a wonderful option and it would also provide you an education in international living you know you’d have a wonderful experience living in another country and of course, you’d probably need to ramp up your language skills in order to do that because, you know, international programs maybe taught in English but you know maybe not everything so that might be a very attractive option if you are on the way towards fluency in a language other than English. Would you agree with that?

Richard: Oh, absolutely yeah and actually even teaching English itself I’ve seen a lot of jobs internationally, China, everywhere where that’s an opportunity as well to live and work overseas is basically to be an English instructor in different countries.

Charles: Yeah and it’s interesting. That’s a great question because the countries that I’m
most familiar with would be Japan and France where I’ve spent time and a little bit of China and in Japan they’re very interested in attracting more foreign students. Now I don’t know the fee structure and of course Japanese is not a particularly easy language to learn but there may be opportunities in
European countries as well where they’re actually seeking some, you know, overseas or international students as an asset to their university system.

Richard: Another growth area that we haven’t touched upon but that leverages of what we mentioned on software, intelligent automation and robotics process automation is in the whole area of
agriculture and so lots of opportunity here internationally, you know, given the rise of population in the movement towards higher foods requiring higher water content or more protein and also just that the trade triumphs as well, you know, so opportunities for agriculture especially in South America as the Chinese shift towards sourcing more of their soybeans and weeds and all agricultural commodities versus North America so lots of opportunity there but even in North America lots of opportunity and medicinal so I just visited my friend’s farm for cannabis he’s growing 17 acres in a very remote area of Vermont all fully legal but you know strictly for the purpose of medicine. Your thoughts?

Charles: Great topic Richard because a friend of mine just mentioned that he was investing in a farm in the U.S. that was organic but it was automating many of the processes in the sense, say for instance, they were using drone technology to monitor the relative moisture levels in the soil, you know, so that they could turn on the drip irrigation at the right time to conserve water and feed the plants. There’s a sort of optimal levels of water and so again this is all high-tech stuff right I mean you’re talking about drone technology, imaging technology, database management and so on. So, yeah it’s really phenomenal how every industry is being revolutionized and what excites me about this is the model that you and I are describing, which is working remotely and flex work. This is what we need for, you know, sort of the life balance that we talked about and it this book I mentioned “The Meritocracy Trap”, the author goes on about how even if you’re earning, you know, large sums of money but if you’re working yourself to death you know on call, you’re taking work home, you know, you’ve got 24/7 connectivity, you have no time for your spouse or your children this is not living it’s simply not worth it. The goal and I think Millennials in
general realize this and they want live-work balance and so I think the key is find a way to live to work remotely, if at all possible, that aligns the income you can make in a normal workload, not a
crazy seven days a week, you know, 3,000 hours billing 2400 hours etc. No, have a reasonable lifestyle that makes a reasonable amount of money but live somewhere where that can be leveraged into a middle-class lifestyle.

Richard: And I think along with all of this goes as well some of your principles from the books that you’ve written is a movement towards decentralization so you know more local type economy, as well, and I would say also are more and more limited government. So, government is not the answer bigger government is not the answer it’s entrepreneurialism, the fostering of innovation and to do that there needs to be also a whole regulatory review process to eliminate duplicate regulations and also to address this whole concept of regulatory capture whereby you have large organizations, large companies that may do lots of lobbying with governments in order to lessen the teeth of regulations and also making it more difficult for a small entrance to go into that sector. So, that that needs to be addressed this whole regulatory capture phenomenon that that’s just taken over many different sectors and so in doing so that would foster massive innovation and massive entrepreneurial in many sectors. Your thoughts?

Charles: Yeah, absolutely Richard and this is one reason why it’s worth looking at smaller cities or counties with various cities in them because the large urban areas tend to be heavily regulated to where starting a business is simply unaffordable if you’re going to, you know, follow all the regulations and these regulations if they have to do with work safety fine, if they have to do with transparency fine, if they have to do with accountability that’s all great but most of the complexity you’re talking about the regulatory complexity serves no purpose it’s not protecting anybody from harm it’s simply burdening people that are trying to be productive.

So, I think you’re absolutely right when you’re going to look for a place that you want to live or work a place that is actually welcoming to enterprise and innovation in government as opposed to places where they give a lot of (inaudible 41:11) to that and so there’s a lot of (inaudible 41:14) given to things like one-stop permits and so on but it’s like you really have to explore that it when the rubber hits the road do they really expedite you know enterprise related stuff or is it just fancy talk because if they are willing to expedite enterprise stuff and they are interested in innovation in government as well as the private sector then that’s a place you’re going to be really comfortable with because the costs will be low and you’re going to have more opportunity.

Richard: Well, we’ve covered a lot of ground here. What are your final thoughts or can you give us a distinct summary?

Charles: Wow that’s a tough one but I think I would say, based on my own books and attempts to answer a lot of emails I get from Millennials is, don’t be afraid of trying something different, you know, the conventional thing of going to big cities that’s kind of a dead end because you cannot make enough money to have a nice life there and have any lifestyle balance. So, explore even if it takes a couple years of your life explore other options and be willing to experiment out there and that’s the only way to find something that hasn’t been exploited or that hasn’t been so overcrowded that there’s no opportunity there and the costs are just unaffordable. You’re going to have to experiment.

Richard: Yeah and I would say strive for fiscal prudence, continue learning, be very adaptive, take risk, think outside the box and also think globally.

Charles: That’s great advice. I think we should write that down.

Richard: Okay great we’ll end it there. How can our listeners learn more about your work Charles?

Charles: Yeah, visit me at OfTwoMinds.com. There’s lots free chapters of all my most recent books and huge archives on all the topics that Richard and I have discussed today.

Richard: Great. Thank you very much Charles.

Charles: Thank you

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.