Greg Gottesman spoke about the student loan problem at TEDxSeattle on Sunday.
Greg Gottesman spoke about the student loan problem at TEDxSeattle on Sunday. Photo via TEDxSeattle.

When Greg Gottesman’s father went to the University of California-Berkeley decades ago, he paid $203 — for an entire school year.

Things have changed in absurd ways since then, as more and more graduates walk across the stage and into a mountain of debt.

It’s a massive problem and one that Gottesman, a Seattle venture capitalist and Managing Director at Madrona Venture Group, wants to do something about. It was the focus of his TEDxSeattle talk this afternoon, where Gottesman spoke about how two-thirds of students now graduate with loans to pay off, many for decades.

“Student loans kill entrepreneurship,” he said. “The best and brightest cannot afford to start new businesses.”

You can watch Gottesman’s talk below. He starts at the 05:40:00 mark. You can also check out the hashtag #TEDxSeattle on Twitter to see what people are talking about here.

Previously TEDxSeattle posts: Why you need to understand the roots of your foundersWhy the artist/geek hybrids will power the next generation

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  • @CascadeRam

    >> “Student loans kill entrepreneurship,” he said. “The best and brightest cannot afford to start new businesses

    This is absurd on two counts.

    1. First, his father paid low tuition fees and didn’t need student loans because the education was government-subsidized. Today, the problem is high tuition fees. 
    It is unclear why Gottesman is attacking student loans (a side-effect) instead of addressing the real problem (high tuition fees)

    2. Compared to past decades, there is a much bigger startup-craze today. Virtually every street corner in SV, Seattle etc. seems to have an incubator. Factory farms are hoping to use cookie-cutter methods to create new successful startups and these incubators are idealized in the media. One-app companies get huge funding (e.g. Color). VC returns are even worse than S&P500 returns, but they keep getting funded by pension funds etc. 

    A lack of startups isn’t the problem today. High unemployment among people who don’t have a college degree is a bigger problem. Implying that new startups should be created by cutting student loans is absurd.

    • greggottesman

      I agree 100% with both of your points actually. If you watch the talk (it’s pretty short), you will see that I say that tuition is the major culprit for higher student loans. I also don’t think every student should do a startup. But we know from surveys that graduates with large loan balances don’t participate in the economy in all the ways we would want, including starting small businesses which create most of the jobs in the US.

      • @CascadeRam

        Thanks for the clarification. If we are in “100% agreement” on both the points, it would seem like this GeekWire post didn’t correctly reflect your talk. I’ll try to listen to your entire talk later this week.

  • B Keller

    I would have expected a venture capitalist to have a better grasp of basic math. His calculation of $11k of taxes on a $45k income is grossly inaccurate. If your gross income is $45k you’re paying less than $5k in taxes with an effective tax rate of about 10%. Your marginal tax rate is 25%. The speaker should probably look up the difference before he goes back to teaching classes.

    Greg complains that grads with student loans aren’t as likely to be able to start their own businesses, or buy houses, or buy cars as people without student debt. Umm… of course not. If you can afford to pay your way through college and bypass student debt then you by definition have more money than your peers who are in debt and can’t afford these things.

    But my biggest problem with this talk is the implication that new grads should have some kind of innate right to start small businesses, and that the loans that they willfully signed up to take on are now responsible for impeding their dreams. Surely as a VC the speaker must know that most new businesses will fail within 5 years. He fails to make an case then for why federally subsidized student loans should bankroll the entrepreneurial gambles of a new college grad. If online degrees offer the same level of parity with brick-and-mortar institutions, as the speaker argues at the end of his talk, then shouldn’t those kids who are destined to start their own businesses forego the brick-and-mortar institutions and the loans which come with them in favor of online educations so that they can start their beloved companies? He cites “the next Bill Gates” – but lest we forget, Bill was a college dropout. He clearly didn’t need a traditional education in order to build a successful empire. Nor did Steve Jobs, or Mark Zuckerberg, or Sergey Brin, or Larry Page, etc…

    I do agree with the speaker that the bargain tuition offered to Greg’s father decades ago is no longer a cut-and-dry decision for today’s students in terms of the wages and benefits they can expect to see in return for a traditional college education. But instead of blaming student debt for the problem, I would have preferred a more responsible approach towards helping students decide which types of educational experiences to invest in based on their expected outcomes. For the same reason, we don’t blame credit card debt for our problems – we know enough to blame the source of the problem, which is spending beyond ones’ means. Why shouldn’t the same approach be taken when deciding to invest in education?

    • greggottesman

      I appreciate your interest in the topic. On the tax rate, if you include federal, state, local, and sales taxes, I think 25% is a fair estimate. I grant your point about students who need loans being less likely to buy things than those who didn’t need them. In talking with dozens of students with large loan balances, my sense is that living with this burden takes a psychological toll. Students with significant loans are less likely to take the kinds of risks that often make sense over the course of a career and over the course of a life (e.g., surveys show that those with significant loans are less likely to get married). I agree with you that grads shouldn’t have an innate right to start a new business. But why should starting a new business (whether that be a tech startup or more likely for most grads just a business in one’s hometown) be reserved for those who didn’t need to take out loans to go to college? We are in the early innings of this experiment of seeing what happens when so many students load up on incredible amounts of debt. Unless we make some changes (and, at a minimum, start a national debate about this issue), I don’t think we will like the final score.

  • Guest

    Author Michael Lewis 2012 Princeton commencement speech (13min) dovetails this topic.

    Excerpt from Lewis commencement speech:

    “People really don’t like to hear success explained away as luck — especially successful people. As they age, and succeed, people feel their success was somehow inevitable. They don’t want to acknowledge the role played by accident in their lives. There is a reason for this: the world does not want to acknowledge it either.

    I wrote a book about this, called “Moneyball.

    The “Moneyball” story has practical implications. If you use better data, you can find better values; there are always market inefficiencies to exploit, and so on. But it has a broader and less practical message: don’t be deceived by life’s outcomes. Life’s outcomes, while not entirely random, have a huge amount of luck baked into them. Above all, recognize that if you have had success, you have also had luck — and with luck comes obligation. You owe a debt, and not just to your Gods. You owe a debt to the unlucky

    You are the lucky few. Lucky in your parents, lucky in your country, lucky that a place like Princeton exists that can take in lucky people, introduce them to other lucky people, and increase their chances of becoming even luckier. Lucky that you live in the richest society the world has ever seen, in a time when no one actually expects you to sacrifice your interests to anything.”

  • Lewis Lin

    I gave this some thought, and I think this is where I appreciate CodeFellows’ unique transparency. Their $60k job guarantee sets expectations on a degree or certification’s ROI.

    Back in the day, where education was only $203 per year, we probably wouldn’t think twice about ROI. But today, I think students deserve to know what they’re going to get from a $100k higher education degree, whether it’s at a private or public university. If this expectation is more clearly stated, then they’d see that taking on student loans for traditional higher ed might not be worth it.

    Students and parents would then be more aggressive about alternate education paths, including the possibility of putting a portion of that $100k loan toward an entrepreneurial career.

    – Lewis

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