Double or quits

Two hundred thousand dollars is the new price of a young person’s time. On 22nd May the Thiel Foundation named its 2025 class of fellows and said each would receive $200,000 over two years, double what prior classes received.^{1Business WireThiel Foundation Announces 2025 Class of Thiel Fellows22 May 2025} The deal is unchanged: build something instead of sitting in a lecture hall. Peter Thiel, the foundation’s chairman, was as blunt as ever. He called higher education “the worst institution we have”, adding: “For these exceptional fellows, we are providing an alternative.”^{1Business WireThiel Foundation Announces 2025 Class of Thiel Fellows22 May 2025}

The timing makes commercial sense. AI has made building software far cheaper, and the evidence is piling up at Y Combinator, the startup school in San Francisco. At its winter Demo Day in March, Garry Tan, its boss, told CNBC that for about a quarter of the batch 95% of the code had been written by AI.^{3CNBC (via NBC New York)Y Combinator startups are fastest growing, most profitable in fund history because of AI15 Mar 2025} The batch as a whole was growing at 10% a week, and some firms were reaching as much as $10m in revenue with fewer than ten staff.^{3CNBC (via NBC New York)Y Combinator startups are fastest growing, most profitable in fund history because of AI15 Mar 2025} “You don’t have to raise as much,” Mr Tan said. “The capital goes much longer.”^{3CNBC (via NBC New York)Y Combinator startups are fastest growing, most profitable in fund history because of AI15 Mar 2025} YC itself invests $500,000 per company, and around 80% of the presenting startups were AI firms.^{3CNBC (via NBC New York)Y Combinator startups are fastest growing, most profitable in fund history because of AI15 Mar 2025}

Put those numbers together and the Thiel offer looks better than ever. If a teenager with a model subscription can do the work that once needed a team of 50 engineers, then $200,000 covers a long runway. Mr Thiel’s 290 previous fellows include the founders of Ethereum, Figma and Mercor.^{1Business WireThiel Foundation Announces 2025 Class of Thiel Fellows22 May 2025} Their projects, the foundation says, are worth “hundreds of billions of dollars”.^{1Business WireThiel Foundation Announces 2025 Class of Thiel Fellows22 May 2025} Few university endowments can boast a return like that on a cohort.

The students, however, are walking the other way. On the same day the National Student Clearinghouse reported that total enrolment in American colleges rose by 3.2% this spring, or 562,000 students, compared with a year earlier.^{2National Student Clearinghouse Research CenterCurrent Term Enrollment Estimates: Spring 202522 May 2025} Undergraduate numbers grew by 3.5%, to 15.3m.^{2National Student Clearinghouse Research CenterCurrent Term Enrollment Estimates: Spring 202522 May 2025} Plenty of young people have heard the pitch for skipping university. Most are declining it.

The case for the students starts with prices. Economists at the New York Fed updated their sums in April and still find that a bachelor’s degree returns about 12.5% a year for the median graduate, a rate “well above the threshold for a sound investment”, though a bit lower than their earlier estimates based on averages.^{4Liberty Street Economics, Federal Reserve Bank of New YorkIs College Still Worth It?16 Apr 2025} A fellowship is a lottery ticket with very good odds for a handful of people. A degree is a bond that pays out for almost everyone.

Age counts too. A study^{5National Bureau of Economic ResearchAge and High-Growth Entrepreneurship (Working Paper 24489)} by Pierre Azoulay and colleagues, using Census Bureau data on millions of founders, found that the mean age at founding of the fastest-growing one in 1,000 American startups was 45.^{6NBER DigestWhen It Comes to Entrepreneurs, Youth Isn't Everything27 Jun 2018} Industry experience roughly doubled the odds of reaching that tail.^{6NBER DigestWhen It Comes to Entrepreneurs, Youth Isn't Everything27 Jun 2018} AI writes code. It does not yet supply ten years of knowing which hospital administrator signs the purchase orders.

The AI boom also cuts against the young in a less obvious way. Mr Tan himself noted “a lot of anxiety in the job market, especially from young software engineers”.^{3CNBC (via NBC New York)Y Combinator startups are fastest growing, most profitable in fund history because of AI15 Mar 2025} If small teams can do more, the entry-level jobs that used to train future founders get scarcer. A degree may become less necessary for building a product and more necessary for getting the first job that teaches you what product to build.

Mr Thiel’s defenders would say that is exactly the point. If junior jobs are shrinking, the best way to learn is to build, and the cheapest time to fail is at 19, before a mortgage and children. The fellowship gives a few dozen people that chance with money they need not repay. We agree it is good value for that few. The trouble is the rhetoric. A programme that picks a few dozen people a year at most from a cohort of millions says almost nothing about what the millions should do.

The sensible reading of 22nd May is that both sides are pricing the same shift. Mr Thiel has raised his bid because talented teenagers can now build more for less. The students have reasoned that a credential is still worth having in a job market with fewer rungs at the bottom. Mr Thiel calls higher education the worst institution America has. Its customers, for now, seem to think it is the least bad.