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Are We Better Off Pursuing Our Purpose or Passion – By Andy Gold

By Andy Gold

“Great minds have purposes, others have wishes” – Washington Irving

It is often said that you should pursue your passion in life, and success will come to you. Is this good advice, or are we better off telling people to seek their purpose? Is there really much of a difference between passion and purpose? Webster’s dictionary defines passion as “a strong feeling of enthusiasm or excitement for something or about doing something”, and purpose as “the reason why something is done or used: the aim or intention of something”. For me, passion is what you desire to do, and purpose is the delivery mode for why you do what you do.
When conducting a simple Google search with the phrase “ Is passion important in a career”, this query generated nearly 90 million results. Two varying perspectives on this issue come from Alan Watts, famed philosopher and educator, and Marc Cuban, self made billionaire, entrepreneur, owner of the Dallas mavericks, and shark on the TV show Shark Tank. Watts delivered a talk four decades ago, in which he posited the following questions. What do you desire in life? What would you like to do if money were no object? There are countless websites and video adaptations of this talk, and his lecture has conjured up many disparate responses. On the one hand, people think, how unrealistic was Watts to dream of a world where money is not an issue for people. Others hear the Watts talk and are inspired to think about their true desires in life. I suspect that after listening to this talk, no matter what your feelings about the topic, you will at some point begin to think about these questions. On the other side of the fence is Cuban, who wrote on his blog in 2012:
“I hear it all the time from people. “I’m passionate about it.” “I’m not going to quit, it’s my passion”. I hear it as advice to students and others “Follow your passion”. “Follow Your Passion” is easily the worst advice you could ever give or get. Why? Because everyone is passionate about something. We are born with it. Think about all the things you have been passionate about in your life. Think about all those passions that you considered making a career out of. Why were you not able to make a career or business out of any of those passions? If you have been successful, what was the key to the success? Was it the passion or the effort you put in to your job or company? If you really want to know where you destiny lies, look at where you apply your time…….. Don’t follow your passions, follow your effort”
Finding your purpose is not easy
As I have reflected on the views of Watts and Cuban, it struck me that both are on the same track, but looking at things through different lenses. What they both appear to be speaking about is discovering the crossroad between what your passion(s) in life might be, and how to share those ambitions with others. Purpose is the mechanism that allows us to execute our passion so we may realize a business or societal impact that we desire. Put another way, purpose (the intersection) is a distribution channel for one’s passion(s) in life. Effort (time), as Cuban pointed out will nudge us in the direction of our purpose, and it is through that process that success can best be attained.
In his book titled Start with Why, Simon Sinek framed the golden circle to explain the importance for leaders to start with, and explain why they do what they do, and work outward from the center of the circle (the why), toward how, and what. Sinek pointed out that most people could easily tell you what they do, and how they do it. These are either the passions in people’s lives, or where we spend a disproportionate amount of our time, typically what we do for a living. What separates exceptional leaders from the pack, according to Sinek, is being able to start with why. While I do not consider myself to be an exceptional leader, I do think I know why I do what I do. I think my purpose, my why, is to help make the world a better place. For example, although I am a dad, and passionate about it, being a father is not my purpose in life. However, being a good father (my passion) enables me to accomplish my purpose. I am confident that my two son’s, now young adults, have not only already made the world a better place, but will continue to do so throughout their lives. It just so happens that I am also an entrepreneur and educator, which further allow me to have a positive societal impact.
Confusing passion and purpose is problematic
I believe that many people are unhappy in their lives because they have either 1) lost connectivity with their true purpose, 2) have yet to discover what their purpose is, 3) lack professional passion because they are mired in a job they dislike, or are experiencing some combination of the three. As we increasingly engage with work we dislike (working longer hours than ever before), largely due to economic circumstances, and also allocate time to raising our children, we begin to lose ourselves in our careers and family, we begin to think that those prominent roles in our lives are our passion, and our purpose. When we confuse our passions with purpose, we drift. This is why Watts’s talk and the questions he raised are fun to think about. It allows us to dream, to imagine what our true purpose and desire in life might be. Having passion for what we do is certainly important, and should not be underrated. However, passion is a double-edged sword.
One can be passionate about something that can ultimately connect them with their purpose in life, and great things can happen. I call this achievable passion. Entrepreneurs that have attained success understand that having passion is good, but is not enough, it will never be enough. While passion keeps you going, you need more than that to navigate the challenging waters of entrepreneurship. Passion provides fuel that drives and nudges us in the general direction of our life purpose. However, passion can only get you so far in life. For example, I might be passionate about singing, but I am never going to win the popular television show(s) The Voice or American Idol.
Are you a passion or purpose maximizer?
Because passion is more common, and there is greater supply of it, people attach less value to it. Purpose on the other hand is far scarcer in life, and as a result is worth much more. One of the questions you should be asking yourself is; am I a purpose, or passion maximizer? Cuban, provided some insight to this question. How you spend your time is one way to answer this question. Do you spend a lot of time talking and thinking about what you are passionate about? Or, do you spend a lot of your time thinking about why you do what you do? As Sinek pointed out, in business as in life, the individuals that are able to articulate their purpose, their why, are more able to lead, and as such, achieve greater success in executing their passion.
Telling someone the importance of pursuing passion, on the surface sounds like sage and worthwhile advice, but is it? Passions are very important in life, but purpose is essential. A dispassionate person is still able to function in life, albeit in a miserable way. A person with no purpose ceases to exist at all.

Comfortably Numb

 By Andy Gold

As the New Year begins and we enter the fifth year of this economic malaise, it appears that people are beginning to adjust to this new realism.  While the economy has shown some signs of improvement, [i.e. fifteen months of consecutive job growth], the overall feeling among most individuals is that things might get better eventually, but there is no sense in expecting that to occur anytime soon.  No longer are folks waiting for a full blown, wide reaching recovery that never seems to materialize.  Instead, it is as though we have developed an immunity to the negative backdrop and have become comfortably numb with this new economic condition.

Twenty-two years ago, the rock band Pink Floyd came out with their legendary album titled “The Wall” on which one of the single tracks was “Comfortably Numb”.  Roger Waters, the bands bassist and lyricist of the song,  recalled that “the genesis of the song stemmed from an experience I had when I was injected with tranquilizers for stomach cramps by a doctor prior to playing a Pink Floyd show in Philadelphia during our 1977 tour”.  Waters recollected, “that was the longest two hours of my life.  Trying to do a show when you can hardly lift your arm.”  (Rolling, 2012)

In dealing with our economic hardship, or stomach cramps as Waters put it, a combination of years of bi-partisan political ineptitude coupled with the unexpected elongation of this economic downturn have both served  as the economic tranquilizer for society.  The longer the economic disorder lasts, the more accustomed, or immune we become to this condition, and it emerges as our new actuality.  The result is that we really do not feel better, but rather have become numb to all the economic chaos.

One prediction I feel comfortable making for this year is to expect more false promises and inaccurate accusations from both ends of the political spectrum.  We are about to get another injection of political maladroitness, as the 2012 presidential election process heats up.  However, the reaction this time around will be different because society has changed, and wishful thinking no longer feels reasonable.

A long-standing core attribute of American society and the beliefs of its citizens has been the notion that those who work hard can achieve success.  In addition, parents have felt hopeful that their children will have an opportunity to achieve greater economic prosperity and opportunity than their generation did.  It is because of this belief matrix that Americans have tended to be more accepting of rising rates of inequality over the past four decades or so.  Back in 2006, we began to see the signs of this belief system falling apart.  The Pew Research Center reported, “the idea that each generation of children will grow up to be better off than the one that preceded it has always been a part of the American dream” (Pew, 2006).  According to the 2006 Pew study, about half of the adults surveyed said that today’s children will grow up to be worse off than people are now.  More recently, in May of 2011, New York Life Insurance sponsored a similar study and found that “Just 41% of parents surveyed believe that children in the United States will have a better standard of living than their parents” (New York Life, 2011).

These reports reflect a sense that being able to achieve the American dream has become increasingly difficult.  Economic mobility is the ability to move up or down the economic ladder.  Economic mobility in the United States has narrowed considerably in recent decades as income inequality has increased.  A recent New York Times article about income inequality and the mobility gap in particular, eloquently addresses this topic. Jason DeParle (2011) points out that “While liberals often complain that the United States has unusually large income gaps, many conservatives have argued that the system is fair because mobility is especially high, too: everyone can climb the ladder.  Now the evidence suggests that America is not only less equal, but also less mobile” (DeParle, 2011).

There are many reasons for this diminishing rate of economic mobility.  Some point to unfair tax policies, while others point to the fact that college tuition costs are increasing at a faster rate than health insurance.  One fact however, that cannot be ignored is the unprecedented level of poverty that has emerged over the past 12 years. DeParle added, “One reason for the mobility gap may be the depth of American poverty, which leaves poor children starting especially far behind”.

The U.S. census bureau reported that as of the end of 2009, a record 44 million (14%)  Americans were in poverty, or 1 in 7.  The average class size of the courses I teach in college approximate 35 students, which means that at least five of those students are living in poverty. Of course, depending upon which school I am teaching at will affect this statistic.

As the presidential election process unfolds, you will certainly hear politicians from all stripes talk about this problem.  You will also hear politicians and others spending wasteful time and energy distorting the realities of this data.  Those in opposition to the incumbent will invariably try to paint a picture, which will imply that the poverty problem is due to his policies.  In these instances, one only needs to look at the graph above and you will see that at the end of 1999, the poverty rate stopped falling and has moved sharply higher over the subsequent ten years.  Within the domain of social science research, the observed patterns are not typically, what are of interest, but rather what can be infered from them.  Rather than talking about who is to blame for the untenable level of poverty today…attention, effort and debate needs to shift quickly toward the societal effects and inferences of poverty.  This will go a long way toward addressing the poverty problem, and will keep people interested and engaged in the political debate.  In my humble opinion, people want solutions, not finger pointing and anyone who sways from this path will lose the attention of the majority who have already become comfortably numb.


DeParle, J., (2012).  Looking for the American dream?  Move to Canada.  New York Times and MSNBC website.

New York Life Insurance Website (2011).

Pew Research Website (2006).

Rolling Stone Magazine website (2012).  U.S. Census Bureau website (2012).

U.S. Census Bureau website (2012).

The Economics of SAT Cheating

By Andy Gold

What do you say to your child who has just asked you to pay $3000 for someone else to stand-in and take the SAT exam on their behalf?  The recent SAT cheating scandal in an affluent suburb of New York City, sheds light on one subdivision of the rapidly growing cheating culture that has accelerated in recent decades. What remains both clear and unfortunate is that from an economic vantage point, some young people continue to feel that the benefits of cheating are equal to or greater than the costs  (Anderson, 2011, McCabe, 2009).  As it turns out, the reason the students involved in the recent case were caught was not that someone noticed a fake ID, but that the SAT scores for that cheating student were disproportionately higher than their overall GPA, and this raised a red flag (CBS news).

Cheating behavior is not limited to the field of education alone and this problem appears to be more widespread than people realize. Its impact is being felt in many dimensions of society. Insider trading scandals, performance-enhancing drugs in sports, office supply theft, accounting fraud, Ponzi schemes, conflict of interest in the medical profession and journalism scandals like the New York Times reporter Jayson Blair who fabricated stories. It is no wonder that this is where we find ourselves when we hear stories that appear to support research which demonstrates that a nexus is present between cheating behavior in high school and college, and this behavior carrying forward with these individuals into the professional workplace. Applebome (2011) reported about a student that was caught up in this scandal and recently arrested. It is alleged that this student accepted payment to take the ACT exam for someone else. He scored a 31 out of 36 and received $3,600. Where was this student when he was arrested? A senior at Tulane University majoring in business.

It is clear that the scheme that is currently in place to deal with and mitigate these incidents do not seem to be very effective.  Can economics provide additional insight into this issue, and can anything be done to fix the problem?  The recent scandal provides additional data which allows one to begin analyzing the economic question of how much a perfect SAT score is worth. In other words what is the market price for this service?  A perfect score on the SAT exam can be achieved in one of five ways. A student may have innate ability, work hard and self-study, pay for supplemental tutoring and preparation services, have a lucky day, or pay someone else to take the test on their behalf. None of the five options outlined insure a perfect score.

One might ask why a person may cheat even when they are able to afford paying a tutor or taking test-prep courses to increase their score. Tutors and test prep courses are not cheap. Highly qualified SAT tutors can cost $75-$750 per hour or more. Six years ago, in a 2005 Bloomberg article entitled “If Parents Fret, Do SAT Tutors Cost $685/Hour?, Cole (2005) explained “College-admissions anxiety is driving more parents and students into the arms of SAT coaches. University officials and high school counselors frown on the practice, saying it is overpriced and unnecessary. Yet demand is pushing up prices as globetrotting tutors command as much as $685 an hour”. The forces of relativity are strong. In many instances, our happiness is not measured by how much we have, or what college we get into, but rather how much we have and what college we get into as compared to those around us. In addition to the peer forces of relativity, the recent economic downturn has added to the SAT pressure in that students know high SAT scores can lead to scholarship opportunities.

Students may need 20 hours or more of tutoring ($1,500=$3,000) to prepare for the exam and tutoring is no guarantee of a high score on the actual test. Also, time scarcity has placed an increased emphasis on cheating behavior. In general, people feel like time has become increasingly scarce and the need has arisen to take shortcuts in order to complete certain tasks. Scoring well on the SAT exam appears to be no exception. In researching this question, it seems that the mean price paid for having someone else illegally take the SAT/ACT exam on your behalf is $2,352. In my internet research, the amount paid for such services ranged from $500-$4,000. On the surface, this amount may seem reasonable to some, out of financial reach to others and crazy to even consider by most. However, with the cost of legitimate tutoring and supplemental services rivaling the cost of paying someone else to take the exam for you, it is no wonder that some people opt for the easier option.

It is important to acknowledge that this issue concerns a narrow group of students and most students do not engage in such activity. The recent investigation on Long Island, NY has widened to more than 35 people from five schools, two public and three private. Nassau County officials had previously indicated that they were investigating three other schools and at least one other suspected test-taker (Anderson, 2011). In discussing the recent cheating scandal, Anderson (2011) reported that “at the hearing, representatives of the Educational Testing Service said that about 3,000 test scores were examined for irregularities each year — out of more than two million exams taken — and that of those, 1,000 were canceled, most after test-center supervisors reported irregularities, or because of large jumps from scores on previous tests. Suspected impersonations constituted about 150 of those canceled scores. About 700 people were turned away for questionable identification at test sites”.

Using this data, we can come up with a potential market size for SAT cheating. On the low-end multiplying 850 by $2,352, you come up with a two million dollar market. What economic effect has the recent scandal had on supply and demand for this service? For sure, one can imagine that in light of the recent disgrace and arrest of one of the test takers on Long Island, two economic developments have come to light. First is that the punishment for getting caught  paying someone to take the test are significantly less than the consequences of accepting and taking the test on someone’s behalf.  Dolmetsch (2011), a writer for Bloomberg Newsweek explained, “students who paid others to take the test were arrested today and face misdemeanor charges…whereas the student who took the test is being charged with first degree scheming to defraud, second-degree falsifying business and second-degree criminal impersonation and face as much as four years in prison if convicted”.

As a result, it is possible that the worst case scenario has unfolded within this market. If they didn’t already know, it is now clear that a test taker potentially faces jail time, whereas the student paying for such services faces a rather insignificant consequence if caught. Therefore, it is reasonable to infer that the supply of willing test takers has diminished (supply has shifted to the left) and the demand for such services has remained the same or increased (shift to the right). Students, who didn’t know about this option, now do and those that were concerned about paying someone may now realize that the probabilities of getting caught are low and the punishment is minimal. Depending on how much supply and demand has shifted will determine what the new market price is. If for example, demand for paying a person to take the SAT has increased  more significantly than the reduction in the supply of test takers, then not only will the quantity demanded be greater, but so will the cost of the service. If, on the other hand the shift in willing suppliers providing this service has decreased more than the demand increased, the price will be higher, but the quantity demanded will be less. While not a positive development, the economics of supply and demand for the market of paying someone to take the SAT exam seems to be well-formed and functioning.

What about the majority of students who are honest or economically disadvantaged and cannot afford supplemental tutoring and preparation? This troubling consequence underscores how uneven the playing field can be, particularly within the education sector.  Research has documented that one of the core drivers behind the widening income gap is a lack of educational opportunities and resources available to those young students most in need.  Here, we see an additional problem whereby a group of young people with economical means, involved in unethical and illegal activity potentially taking an opportunity away from a deserving student that has tried her/his best.

I am not suggesting that an economically underprivileged student who is high achieving on their own merit will be crowded out of an opportunity to go to college. However, they may miss out on a chance to go to a specific college because of the cheating behavior of others, and as a consequence miss out on opportunities that may exist at that university. Most top-tier schools have unspoken quotas of numbers of students that they will accept from a particular high school. A deserving student can potentially be excluded from consideration because of the cheating behavior of others.

With the reforms made to the education system in recent decades, “never before have so many had so much reason to cheat. Students’ scores are now used to determine whether teachers and principals are good or bad, whether teachers should get a bonus or be fired, whether a school is a success or failure” (Winerip, 2011). In his book entitled “The Cheating Culture”, David Callanan documents in great detail the prevalence of unethical behavior, and what some of the key drivers are that contribute to it. Callanan added “A common assumption about academic dishonesty is that it’s the marginal students who mostly cheat. But research has found that cheating is also common among top students, and the reasons are obvious enough: Highly competitive students are extremely focused on success and worried about their grades — even tracking their GPA down to the fourth decimal point. Some of these students will do anything to bolster their performance, including cheat” (Callanan, 2011).

The factors that have cultivated the cheating culture within education have started to have a more systemic impact. Pressures to perform and achieve unrealistic goals in high school, spillover into college and ultimately individuals take this learned behavior into the workplace. This process helps to explain in part the flurry of ethics scandals that have evolved in the professional domain in recent decades.

It seems like we are fast approaching a tipping point where it will be extremely difficult to remedy this problem within our educational system. Clearly, a new approach is in order. One that provides an incentive system that fosters an environment of learning for the sake of adding value to society as opposed to the current system which fosters unrealistic outcomes that harm society. Is it time to say goodbye to the SAT?


Anderson, J. (2011). SAT cheating inquiry. New York Times. Retrieved from

Applebome, P. & Anderson, J. (2011). Exam cheating on Long Island hardly a secret. New York Times. Retrieved from

Cole, (2005). If Parents Fret, Do SAT Tutors Cost $685/Hour? Bloomberg Retrieved from

Callanan, D. (2011). The cheating culture web site. Retrieved from

CBS news.

DolmetschC. (2011). More Long Island students charged in test cheating scandal. Bloomberg Newsweek online. Retrieved from 

McCabe, D. L., & Bowers, W. J. (2009). The relationship between student cheating and college fraternity or sorority membership.4), 573-586. Retrieved from

SAT and ACT cheats face no penalty.

Winerip, M. (2011). PA. joins states facing a school cheating scandal. New York Times. Retrieved from

What Would Jesse Livermore Say?

By Andy Gold

On November 28, 1940, at the age of 63, Jesse Livermore had reached his breaking point. After years of suffering from depression and a career of making and losing fortunes, Livermore committed suicide. Years ago, I served as a technical market strategist for several Wall Street firms.  Early in my career, my mentor suggested that I read Livermore’s book entitled “Reminiscences of a Stock Operator”. While journalist Edwin Lefevre is given credit as the author, it is widely speculated that Livermore himself penned the classic book.  Livermore’s infamous trading sense led him to short sell the stock market prior to the 1929 crash, during which he amassed an estimated $100 million dollar fortune, only to lose it all shortly thereafter.

His life, and the experiences detailed in the book, underscores the effect of irrationality that circles the financial markets each day.  Even with his vast awareness and recognition that emotions drive irrational decision-making, Livermore himself succumbed numerous times to these forces, and ultimately the impact of these decisions contributed to his death.

I learned a lot from this book, but the most important lesson I took was discovering the concept of loss-aversion.  Livermore wrote, “Losing money is the least of my troubles.  A loss never troubles me after I take it.  I forget it overnight.  But being wrong – not taking the loss – that is what does the damage to the pocket book and to the soul”Adam Smith, who many consider to be the father of classical economics once wrote that “we suffer more when we fall from a better to a worse situation, than we ever enjoy when we rise from a worse to a better.

This insight has led to volumes of research among behavioral economists and psychologists in the area of loss aversion, the concept that individuals will go to great lengths to avoid incurring a loss.  Loss aversion is a powerful force and drives many poor decisions that we make. This principle is most blatant in the realm of trading stocks, bonds, derivatives and other financial instruments.  Rather than taking a loss when it first occurs (due to an aversion to loss), many investors will instead rationalize why it is ok to keep the investment position and may actually commit more money to it.

These emotional dynamics make technical analysis and behavioral finance so important.  Technical analysis provides three core insights for investors. First, it provides a quantifiable manner in which to measure the emotions of the market.  Second, is the general belief that a price chart of a financial asset or market (stock, bond, currency) reflects future expectations of how that asset or market will perform, and therefore a chart has predictive value.  Third, technical analysis does not believe in a rational market and instead assumes that individuals behave irrationally.  This approach contrasts sharply with a fundamental value investing strategy (see Graham and Dodd security analysis). This stratagem is largely predicated upon a detailed analysis of firm’s finances.  According to Graham and Dodd, a well-disciplined investor can determine a rough value for a company from all of its financial statements, make purchases when the market inevitably underprices some of them, earn a satisfactory return, and never be in real danger of permanent loss.

Technical market analysis was the predecessor to what is referred to today as behavioral finance (See Dr. Harvey Krow’s book entitled Stock Market Behavior: The Technical Approach to Understanding Wall Street).  Both disciplines assume that individuals, more often than not behave in a behavioral state of irrationality.  This dynamic occurs when one is both making and losing money. The investor making money is ultimately faced with the emotion of greed, and irrationally believes that the asset will never decrease in value. The investor losing money can be engulfed with fear and gradually becomes suffocated with loss aversion and as a result of not wanting to take a loss, ends up ultimately taking a greater loss.

One byproduct of irrational investor behavior is the formation of asset bubbles which occur from time to time, building at an accelerated pace, and all along creating a sense of invincibility.  Think of gold prices today, real estate in 2006, stocks in 1999, and so on. All of these periods have several things in common.  A widespread belief, almost arrogance that these investments are invincible, will continue to make money forever, and there is a void of any rational explanation to suggest otherwise. Very few ever see the reasons why bubbles are about to burst, until they burst. Then everyone can easily explain to you all the reasons why the bubble collapsed.

The old Wall Street adage to never confuse brains with a bull market is so true. Investors like to think of themselves as increasingly intelligent about their stock selections, particularly when the market is pulling everything up with it. You begin to convince yourself that you have things figured out, and as a result you take comfort in this notion and become complacent.  Asset prices tend to move in unison with the overall market trend.  For example, you may own a great quality stock, but if the market implodes, so will your stock.

In Burton Malkiel’s book A Random Walk Down Wall Street, the Princeton Professor theorized that “a blindfolded monkey throwing darts at a newspaper’s financial pages could select a portfolio that would do just as well as one carefully selected by experts.” As it turns out, the Wall Street Journal has conducted a dartboard contest for years measuring the performance of “experts” vs. people who randomly threw a dart at a dartboard holding a printout of stocks. The results have established a slight edge to the experts. However, over forty percent of the time, the dartboard portfolio has outperformed the experts.

Both technical analysis and behavioral finance provide individuals with an ability to identify patterns of human behavior that uncover opportunities for profits. Sentiment can be measured in many ways, and for the purposes of this article should be used as a contrary indicator.  That is to say that when everyone is bullish, it is a good time to become defensive and when everyone is negative, one should consider buying the market.  The tools we can use to gauge these sentiment swings, when used properly can mitigate the impact of our reliance on hoping that things will get better and thus avoid falling prey to loss aversion.  This counter-intuitive strategy does not make sense to many, but its record of accomplishment as a predictive tool is strong.  One quantitative measure is the level of put and call option buying activity.  Call options are derivative products that allow someone to speculate that the underlying asset will rise in value. A put option provides a person with a chance to make money on the asset losing value.  In general, a high put/call ratio implies a strong degree of fear has taken hold and these readings tend to occur at or near a market bottom and prior to an advance.  A low put/call ratio implies a disproportionate level of call buying activity, which tends to occur after significant moves higher in the market.  Why is this so?  The only way the put call ratio will decline, would be because there is greater call buying (a bet that the asset will rise in value) activity.  Why would an investor desire to bet that asset prices would rise? A stronger stock market will sway individuals to begin to shift their mindset away from fear of falling asset prices toward fear of missing the next move up.

The key of course, is to buy when no one else wants to, and this occurs when investor sentiment has reached an extreme. When the put/call ratio is extremely high (over 85%), you will feel like the hardest thing to do is to commit money to the market. This should be confirmation that doing exactly that is the right thing to do.  Markets never look good before they are about to rise and always look invincible prior to collapse

All of these points, brings me to the conclusion of may article.  Talk to your friends, or conduct a survey about what direction people think the value of gold is headed and you will get a consistent response.  Most people will tell you that gold is going up.  Not only will people be able to tell you which direction gold is headed in, but they will be able to provide you with an ample amount of explanation for why they believe this to be the case.  People will ignore the fact that in 2002, gold was approximately $300 per ounce. Five years later in 2007, gold had doubled in value reaching $600 per ounce. Since then, Gold has tripled in value to stand at $1,800 per ounce.  This type of accelerated move in a market does not occur often and all of the pieces are falling into place for a sharp decline in gold prices as a result.

People will tell you that such an accelerated rise is justified for various reasons, all of which sound highly rational and easy to understand.  Some will also explain monetary policy to you and illustrate how the United States has been forced, and will continue to be forced to borrow large sums of money, and additionally will print money, which devalues the dollar and makes gold worth that much more. Some will even explain how the prospects for QE3 (quantitative easing) will further devalue the dollar and in turn yield even higher commodity prices (inflation), gold in particular.

What the consensus will struggle with is giving you any rational explanation that would lead to a conclusion that gold prices will collapse.  Sentiment toward gold is extremely positive and therefore, we have in my opinion the three critical ingredients of a market bubble in gold. First, very few seem concerned with the accelerated rise in price that has occurred and will view any pullback in gold prices as a buying opportunity.  Second, is a consensus view that gold has nowhere to go but higher.  Third, any person who thinks that gold prices are going to decline (not many these days) will be ridiculed, thought of as being misinformed and frankly considered by most to be not very intelligent.

So what can we learn from recent history and asset bubbles? During the period of 2005-2007, real estate was considered to be invulnerable and a “no brainer” investment.  Television was barraged with TV shows about how to make money in real estate. People quit good paying jobs to flip houses. Buyers of real estate were forced to compete with other buyers in the marketplace and bid against one another driving home prices above the original asking price. Anyone who did not have a real estate investment was considered naïve and was missing the greatest opportunity to make money in a long while. Speculators were buying and selling condominiums for a profit before they had even been built.

Today with gold, we are seeing many of the same behavioral characteristics that we saw unfold in the real estate market. In fact, these similarities are so blatant and in our field of vision, yet just like with the real estate bubble, we are choosing to ignore these warnings.  TV commercials and infomercials abound about making money in gold. Speculators have become increasingly leveraged to gold. No rational explanation appears obvious that could explain a sudden drop in gold prices. There is a feeling of invincibility in owning gold, as was the case only a few years ago in real estate. Are our memories so short that we forget about the lessons of history, or do our irrational emotions get the better of us and convince us that this time is different?

Does this mean that gold is going lower? In my view, the easy money has been made in gold and the next big opportunity to make money in gold will be on the way down, not up from here.  Greed is firmly taking hold in the gold market, and this emotion will unfortunately lead many to lose money. As Jessie Livermore once said when describing the financial markets, “The game does not change and neither does human nature”.

Is Honesty the Best Policy?

 Is Honesty the Best Policy?

By Andy Gold

In a recent non-scientific poll that I conducted on Linkedin, I posed the following statement; “Students who plagiarize, are more likely to commit unethical acts in the workplace”.  Respondents were provided with a standard five-point Likert scale ranging from strongly disagree to strongly agree. Among the sample of 74 respondents eighty-six percent agreed, or strongly agreed with this statement.

Whether or not this statement outlined in the poll is true does not matter. Perceptions are really the key determinant that drives individual behavior, and the fact that survey participants believe that it is true implies a strong perception (in the minds of the sample) that some degree of causality exists between plagiarism in college and ethical misconduct in the workplace. Obviously, this would be of minor consequence if plagiarism and academic misconduct were limited in scale. However, most research in this area suggests otherwise.

Dating back to the 1960s, an abundant amount of research has been performed on dishonesty in general, and academic dishonesty in particular. Generally, most individuals like to self-perceive themselves as being honest.  The problem lies not in people wanting to be honest, but rather how people define dishonesty.  Over the past thirty-years or so, the lines have blurred somewhat on defining what actually constitutes dishonest behavior.

Bem (1967) first introduced self-perception theory (SPT) as an alternative to the theory of cognitive dissonance.  SPT suggests that individuals take notice of their own behavior within varying contextual conditions and compare this behavior with that of others.  This process allows people to define their behavior in a manner, which reflects either a positive or a negative self-perception.  In general, individuals will more readily perform and repeat an activity that has a positive external effect resulting in a positive update to a person’s self-perception.  Conversely,  individuals are less likely to repeat an activity that would require a negative update to a person’s self-perception, such as academic cheating (Chun-Hua & Ling-Yu, 2007).  Despite what appears to be a desire to want to behave honestly, this theory conflicts with the reality of the world today.

Many consider the work of Bowers (1964) to be the first comprehensive investigation into academic dishonesty among college-aged students. In this survey based study, nearly five-thousand college students at one-hundred schools participated and provided answers to questionnaires, which yielded a substantial data pool. Bowers revealed that administration officials and students severely underestimated the level of misconduct. More than fifty percent of the survey participants reported having engaged in some form of cheating. This paper is extremely useful in providing researchers with a baseline of comparison to track the scope of dishonesty among college students over the past fifty-years.

A follow-up study in 1997 found that eighty-four percent of undergraduate business students reported having cheated over the past year (McCabe & Trevino, 1997). The authors confirmed the original findings in the Bowers (1964) study, and demonstrated the prevalence of academic dishonesty over subsequent decades.  McCabe, Butterfield, and Trevino (2006) illustrated how the problem of cheating has expanded into the graduate level of education and that business students cheat at a higher rate than do other graduate students involved in different disciplines.  The authors found that fifty-seven percent of business students engaged in academic dishonesty, as compared to non-business majors who reported a rate of cheating of forty-seven percent.

McCabe et al, provides insight that is helpful in explaining and establishing a nexus between ethical misconduct at the college level, and dishonest behavior within the workplace. As a result, and in light of the financial scandals that have erupted in recent decades,  a myriad of  research has attempted to explain the general erosion of ethical standards within the academic setting and how this problem has spilled over into the workplace environment.

Bowers is one of the few researchers to go one level deeper and determine if high school cheating behavior, led to academic dishonesty in college. Bowers found that 64% of students who reported cheating in high school also reported cheating in college and that 67% of students who did not cheat in high school did not cheat in college (Harding, Passow, Carpenter & Finelli, 2003). In the absence of academic misconduct enforcement mechanisms, or alternative methods to encourage honest behavior, the trends that Bowers identified decades ago, and still exist today will not abate.

One unconventional approach and potential solution could be to abolish grading systems in college.  Instead, a formal method of pass/fail, or alternatively, professors can provide students with a written appraisal of the students overall performance in the course. Instituting such a policy might alleviate pressure from students to cheat in order to keep up with those around them. Brown University for example, has a grading policy which states “In most courses a student may, in consultation with the advisor, elect to be graded on a basis of either Satisfactory/No Credit or A,B,C/No Credit” (
guidelines/acad_regs/index.html#grading).  If only a small number of schools adopt this policy, then no real progress can be made. If most implement such a policy, then there might be a decreasing tendency in college to cheat.

Rather than worrying about how your grades are relative to your classmates, or worrying that a bad grade might affect your ability to get a job, students might take more time with their work, and perhaps absorb concepts at a deeper level. Employers will gain from such a system as well. If it is true that cheating behavior in school carries forward with the individual into the workplace, employers will benefit from a new pool of college graduates who will have had a reduced incentive to cheat on schoolwork in college, and therefore be less likely to behave unethically in the workplace. Furthermore, employers will have an opportunity to meet with applicants who might be a great fit for the firm, that otherwise might have been overlooked due to GPA standards. Rather than relying on GPA to filter applicants, employers will be required to meet more applicants face to face and gain a better sense of what value the college graduate will bring to the firm. While this process may seem inefficient and more costly, over the long-term, I believe that it would result in reduced turnover, and potentially lower rates of ethical misconduct in the workplace.

Are We Running Out Of Time?

Are we running out of Time?

By Andy Gold

Albert Einstein once said, “The only reason for time is so that everything doesn’t happen at once”.  Today, it certainly feels as though we do not have enough time in the day, and this condition has spilled over into many facets of our lives. From taking shortcuts with schoolwork, rushing through work assignments, and texting while driving, time scarcity is influencing more than ever how we make decisions, and is even forcing many to compromise ethical boundaries.

Time has always been present, but when you really think about it, time does not really exist.  Rather it is a result of invention, designed to quantify and better control our lives.  There are disparate views on who created the concept of time, and many civilizations are responsible for developing tools that enabled us to measure time in various increments.  Economists long ago articulated that time, like all resources is scarce.  Time can be a great equalizer, as we all have twenty-four hours in a day to get things done.

One of the greatest challenges facing modern day citizens is to find time for themselves. An acute sense of anxiety over time scarcity is clearly a prevalent concern today. The reasons are numerous that help explain why we feel increasing anxious about time. Economic forces that require us to allocate more of our available time toward work rather than leisure create a sense of heightened time scarcity.  

Some suggest that time scarcity correlates with an increased availability of technology and media resources. This contingency argues that forty-years ago time was much more abundant while access to technology and media sources was scarce. Today, the exact opposite condition exists; time has become increasingly scarce as access to technology has become abundant, and its availability is immediate.

In some of the courses that I teach, I provide students with an opportunity for extra credit with an assignment I call “unplugged”. The assignment is of course voluntary and involves foregoing the use of cell phones and computers for a 48-hour period. The mere discussion of this extra credit assignment generates enormous anxiety among the students who cannot even begin to fathom being disconnected from their technology for two days. It is as though certain forms of technology are becoming part of our physical being. The assignment requires students to keep a log about how deprivation from these technology appliances makes them feel. Very few students ever take me up on this offer, and of course they all ask how I would possibly know if they did not use their devices. I in turn tell them that I would have no way of knowing if they were lying to me. I jokingly tell them that if they opted to take advantage of my offer and mislead me, then they would have to live the rest of their lives knowing they cheated Professor Gold.

In the early 1980’s, when I was studying at the State University of New York at Oswego, I recall taking an introductory computer-programming course entitled “Beginner’s All-purpose Symbolic Instruction Code”, or BASIC.  One day, in class the professor began talking about the home computer, and what we thought its future purposes might be. One student mentioned to be able to play games, another student suggested that it would help us to solve mathematical calculations. When I think back on that day, what seems silly and ironic to me now was that we were struggling to figure out ways to keep computers busy.  Today of course, we have seen a complete role reversal in our relationship with technology, which does an excellent job of keeping us busy. We see this phenomenon in all elements of life.

As an educator, while I strongly advocate the use of technology as a learning tool, I also see how it serves as a distraction to so many students. Whether you have classroom rules that limit the use of personal technology during class time, students still sneak their smart phones under their desks to text, Google, Facebook and tweet. Of course, students do not believe that these distractions take away from their ability to absorb the material being presented, and they remain confident that they can easily multi-task. A recent study performed at The Ohio State University on the effects of Facebook use on academic performance, found that high levels of Facebook use negatively correlated with GPA’s. Despite these results, the students were in a semi-state of denial, as 79% of the Facebook users did not believe active use of Facebook had an adverse effect on their academic performance.

Technology most certainly affords us much greater efficiencies.  It provides a context, which enables us to interact with others around the world in real time, thereby making the world a smaller place and many would argue increasingly homogenous.  Within the domain of education, technology has so much to offer, but if not controlled in certain ways can have debilitating effects. 

On the positive side is the use of technology as a learning instrument.  Instructors are able to integrate technology into the classroom with youtube videos providing students with a window into distant cultures and being able to hear first hand from leading business, political and social leaders. Many colleges and universities have crucial departments dedicated to cultivating the effective delivery of instructional technology. For example, one application of these services provide students with an opportunity to attend college through distance learning modes, whereas these students may not be able to advance their education otherwise. A supplemental form of instructional technology targets helping students who take courses online or at satellite campuses.  Applications like and provide robust tutoring services in different formats. Sal Khan, the founder of, a free online instructional institution, offers over 2,400 videos on a myriad of topics ranging from algebra to venture capital. Khan explains that online video tutoring provides learners with the ability to study and learn in privacy, avoid the perceived potential embarrassment of asking questions in front of others, and students can pause and replay explanations to ensure the concepts are understood. provides students with live tutoring services on a wide range of academic subjects. Clearly, these applications are significant and illustrate the crucial importance, benefit, and function of technology in our lives.  Additional benefits of instructional technology provide instructors with a myriad of resources like Blackboard that enable the centralization and standardization of organizing and delivering content to students.

However, on the negative side, when students are in class and use smartphone’s to get answers to questions, while efficient, many students do not fully understand the concepts that they are being questioned about. Part of the critical thinking process is learning about how to figure out answers to questions. In going through this thought process, we are able to adopt, deeper and richer understandings of concepts and from there build upon this knowledge to innovate and advance theories and ideas. Without thinking critically about topics and instead just Googling the answer, one must wonder if we are doing ourselves a disservice.

As more time is spent using technology for non-productive purposes, the ability for individuals to remain focused on important tasks, like work, reading, writing, and social interaction diminishes. As work becomes a distraction to the more enjoyable non-productive uses of technology, individuals will become distracted, unable to pay attention to important things, and the quality and standards for work produced will decrease.

Technology is our friend, but it is important now more than ever to monitor our relationship with technology to assure it is not completely taking over our lives and time. The old saying that time waits for no one, could be in the process of being replaced with technology has taken all of our time, so there is no longer a need to consider waiting.


Do You Suffer From Money Illusion?

Do You Suffer From Money Illusion?
By Andy Gold

Webster’s defines an illusion as “something that deceives by producing a false or misleading impression of reality”. Years ago, I was enthralled in watching the TV show “Mind Freak”, starring illusionist extraordinaire Chriss Angel. I enjoyed the show for many reasons, but like all good illusionists, I think what drew me toward the show was trying to figure out how Angel was able to accomplish some outlandish tasks. I experienced a form of cognitive dissonance nearly each time he performed his art. On the one hand, my rational side knew what I had just seen was not possible (i.e. walking on water), yet, my irrational being struggled to figure out how he had accomplished this objective. Ultimately, I would attempt to narrow my dissonance by either researching the stunt on the internet, or simply justifying why, what had been performed simply was not attainable in reality. I would conclude that it was a TV stunt, and that if I were there live to observe such a feat, I would have witnessed his trickery.

I have not yet had the opportunity to see Angel perform live, however I still remain interested in illusions and their effects. The social sciences and the field of economics in particular have danced around a certain form of illusion. The term money illusion, crafted by John Maynard Keynes, is grounded in the belief that people like to view money in nominal, as opposed to real terms. Like many debatable topics, economists are split on whether or not people suffer from money illusion. Either, people think, process and make decisions rationally, or people are subject to what Keynes referred to as animal spirits, a tendency to process information irrationally.

This is perhaps best illustrated in something we all hold near and dear to ourselves. The income we derive from whatever job we perform is something that we naturally prefer to increase over- time. We desire this occurrence for many reasons, most notable the belief that increasing wages will allow us to pay for and accumulate more stuff. This is why, when the inflation rate is say 3 percent, and our boss gives us a 2 percent raise, we may feel satisfied. After all, in nominal (today’s) terms, our wage has increased, and consequently we feel wealthier. However, when the inflation rate is negative (deflation thankfully does not occur often), a person will feel upset when asked to take a pay cut. This is because money illusion is at play. At the 3 percent inflation level, we are worse off, despite a 2 percent wage increase. However, with a negative rate of inflation of say 3 percent, we are still better off with a 2 percent pay reduction.

As it turns out, and as most of us have learned over recent decades, the illusion of nominal wage increases has failed to keep up with the cost of living. This process has taken a long-time to unfold, and gradually its effects, are being felt by most of us. After all, as you were receiving pay increases each year, if those increases failed to keep up with the rate of inflation, then you were becoming worse off and the firm or employer was better off. Taxes aside, this is a major reason why there exists such a vast distance in wealth accumulation between the top wage earners and everyone else.

For a while this was tolerable as people suffering from money illusion felt wealthier as other assets they held (real estate, stocks etc), increased in value. However, the nominal dollars earned were still not enough to allow for the accumulation of more possessions, and the rapidly increasing cost of education, health insurance, food, and many other critical needs began to make people feel like they were slipping economically. For a while, this was still bearable, as people learned that they could work longer hours, get multiple jobs, use credit cards, and take out second mortgages to fund the personal household budget deficit.

In his 1930 article entitled “Economic Possibilities for our Grandchildren”, Keynes discusses his belief that our never-ending desire for acquiring more things would subside. He wrote:

“Now it is true that the needs of human beings may seem to be insatiable. But they fall into two classes –those needs which are absolute in the sense that we feel them whatever the situation of our fellow human beings may be, and those which are relative in the sense that we feel them only if their satisfaction lifts us above, makes us feel superior to, our fellows. Needs of the second class, those which satisfy the desire for superiority, may indeed be insatiable; for the higher the general level, the higher still are they. But this is not so true of the absolute needs-a point may soon be reached, much sooner perhaps than we are all of us aware of, when these needs are satisfied in the sense that we prefer to devote our further energies to non-economic purposes”.

Keynes incorrectly forecasted that as time went by, and we had acquired all of the absolute things we desired, we would opt for a life of leisure rather than work. How wrong this was. Today, it almost seems silly to think that relative needs, and our desire to outdo our neighbors would ever be satisfied. One critical question that defines the economy today, is to think about what happens when a person is exhausting all their credit and savings, has lost value in their other assets, has figured out a way to nearly work 24 hours a day, and yet this still is not enough to meet the relative needs we possess? This is when we begin to understand that we have been suffering from, and living under a cloud of money illusion for some time. You do not need to be an economist to understand that your money is not keeping up with the real cost of living.

Whether you are a fan of George W. Bush and his policies or not, one thing appears to be clear. The financial costs incurred during his tenure as President, do not appear to have been fully realized until recently. Perhaps the costs of his policy decisions are worth it, perhaps they are not. Perhaps President Obama has compounded the situation by spending more, or maybe, as many argue, in the absence of such additional stimulus, we might have ended up in a depression. That political/economic debate is a very different discussion that many have written about at length. Like unaccounted for government expenditures, households are now being forced to realize that the cost of using credit and working longer hours to make-up for cash flow shortfalls related to money illusion are starting to catch up with us in recent years. Money illusion can be a painful misstep. It causes you to feel wealthier than you actually are, and when this realization converts to a reality, you find yourself in an economic mess.

A multitude of previously adopted approaches exists, on how best to tackle this enormous issue. On the one hand, there is a strong argument put forward that we must now pay the price for our money illusion, in the form of steep cuts in both government and household expenditures, albeit most of the attention is on the government spending side. This is the equivalent of a household cancelling their cable TV, cell phone service, eating less, dropping out of college, cancelling their health insurance policy, selling their car, using public transportation, keeping the thermostat at 80 degrees in the summer and 50 degrees in the winter, and so on. For many, these sacrifices sound far too familiar, because this process is well under way. The agonizing and elongated process of the consumer credit bubble continuing to unwind, has hit a wide range and disparate segment of society. Those who advocate steep, and immediate spending cuts with no increase in revenue, believe that additional spending today is placing an unfair burden on future generations. The context of this position is such that, further reckless government spending, is unfair to future generations. What about reckless household spending? Is this not also, placing unfair burdens on people in the future. Instead, what is implicitly argued is that the government needs to cut spending, while you and I do not. After all, consumer spending, represents approximately 70 percent of GDP, therefore a call to halt its effect, some argue, could have catastrophic economic consequences. Why then doesn’t this contingency also argue that cutting government spending severely would also have serious negative economic penalties for society?

While I am in no way, shape, or form an expert on tax policy, I do find some appeal in the progressive consumption tax. Because many interpret the impact of this system as a punitive one for those who spend lavishly, it never seems to gain traction. The spirit of this tax system is to discourage excessive spending and reward saving, and investment, and that concept frightens many people who worry that in the absence or reduction of consumer spending, the economy would falter. However, the progressive tax would not prohibit spending in any manner an individual desired. The tax liability one incurred from the progressive tax is predicated on how much you spend. The result for consumers of luxury goods would be that you would have a larger tax liability. This predicament causes many, to argue forcefully that if you tax luxury goods spending, it will kill jobs and the economy. Perhaps this is true, however, as is the case for many individuals, can we just continue spending money we do not have? In addition, for those who do have a surplus of money, by providing greater incentives for investment needs, rather than the pursuit of relative needs, maybe this would result in an increase in employment.

Of course, the progressive consumption tax would theoretically be dynamic in nature, and implemented over time, so individuals and businesses had time to adjust. During weaker economic periods, the tax could be adjusted lower to encourage more spending and the simulative effects that go along with this condition. During stronger economic cycles, it could be adjusted higher to foster increased levels of savings.

This is not the first time the government has incurred large percentages of debt relative to the Gross Domestic Product (GDP). In the mid 1940’s, there was a debt to GDP ratio of approximately 120 percent, as compared with 97 percent today. The difference back then was a willingness to cut spending and increase tax revenue substantially to pay for the debt incurred from the depression and World War II. This simply is not the case, in today’s divisive political landscape.

Others believe that reducing spending and increasing revenue is a more pragmatic and balanced approach. This is the equivalent of a household making some of the cuts above, but getting a second or third job to allow them to eat, or attend college. As the case with the first option, this approach of spending cuts and revenue increases is not original. Most recently, in the 1990’s, the republican led congress in partnership with President Clinton deployed this strategy with great success, resulting in substantial job gains, elimination of the budget deficit, and a reduction in the national debt. Whom you choose to give the credit to depends on your political stripes, but I for one think both stakeholders are to be commended.

A third group, believes that neither approach is appropriate given today’s shaky economic climate, and there should be an increase in spending, and either higher taxes to pay for it or continued borrowing, and/or printing money to pay for it. This contingency feels that while a time may come for option one or two discussed above, today is not the day. This cohort believes that spending cuts will derail the economic recovery and cause a double dip recession, or worse. While a valid position to some degree, and worth thinking about, it appears that this option has the weakest contingency of support.

The resolution to this serious problem is well beyond the scope of my capabilities. However, I do recognize that right now there is a heightened level of cynicism from all sides, toward all proposals. According to Webster’s, a cynic is “a person who believes that only selfishness motivates human actions and who disbelieves in or minimizes selfless acts or disinterested points of view”. Right now, there appears to be undo attention being focused on the costs of debt to society, with little focus on the value of certain expenditures, and their social impact. As an educator, I naturally value, and hold dear the importance of education, not only to the recipient, but also to society. Therefore, I always default to thinking about what the social effects of further cuts in education will have. Where do you come down on this debate? The writer Oscar Wilde once famously wrote….. ”What is a cynic? A man who knows the price of everything and the value of nothing.” – Oscar Wilde, Lady Windermere’s Fan, 1892.

Are We Cheating Ourselves?

Are We Cheating Ourselves?

By Andy Gold

Often, it is said that college students live in a bubble, and that is the way it is supposed to be.  However, we know that what defines a traditional college experience varies greatly from student to student.  Many students leave home, and travel to remote campus communities and immerse themselves in, what parents hope will be a four-year journey of academic and social exploration.  Other students are parents themselves, and working two or more jobs while attending college.  As an adjunct business professor at four New York metro area colleges, I have had the benefit of working with an extremely diverse group of students.  I believe that this experience has made me a better person, and instructor.

While doing some research, I recently came across two articles that caught my attention.  The first one, entitled “The Default Major: Skating Through B-School”, appeared in the New York Times in April of this year, and the other from the Los Angeles Times, “College, too easy for its own good” was published in June (Glenn, 2011; Arum & Roksa, 2011).  Both articles bring to light, and address several disconcerting developments within the domain of higher education.

There is an abundant array of research, published over the past decade, which provides support for the claims made in these recent articles, as well as additional reasons for educators and students to be concerned.  Glenn (2011) points out several potential contributory sources that he suggests have made business school easier.  First is the notion that students decide to major in business by default, rather than because of some intellectual curiosity.  Much of this process begins in high school.  I know first-hand, that in the case of my children (now both attending college), that it was often asked of them during their last two years of high school what they wanted to study in college.  The college application process and post-secondary institutions at-large reinforce this dynamic, by segmenting their organizations into specific sub-colleges within the university structure.  High school students applying to such institutions are commonly asked what academic major the student intends to pursue.

This inevitably leads high school students making relative comparisons to one another.  The concept of relativism, grounded in the fact that we as individuals are not happy with what we have, but rather what we have as compared to those around us.  As a result, students who are not fully aware about what majoring in business entails become more focused on business school rankings, rather than what the curriculum is about.  This way, the high school student can make a relative comparison of the school they are attending, and sadly, this misguided process ultimately drives the college decision-making process for many students and parents.

This is not to say, that some students in high school know for sure what they want to study and as a result, attending the appropriate university or college is an important consideration.  Evidence however supports the point that most students do not know what they want to study when entering college.  The National Association of Colleges and Employers (NACE), have conducted research in this area and concluded that approximately 70 percent of college students will change their major at least once.

A second interesting conclusion from this article is the belief that students, rather than focusing on learning, are becoming increasingly “bottom line focused” on grades.  The notion of students becoming progressively disengaged in learning, and instead are doing whatever is required to achieve high grade-point averages, while an alarming accusation,  is in many ways understandable.  As the cost of education has risen excessively in recent decades, and pressure has mounted to select academic majors that can provide higher income opportunities, students have, in many cases opted to major in business, if for no other reason than the expectation that their income opportunity will be greater.

The recent college-aged population bubble, a byproduct of the Baby Boomers, whose children began entering college in recent decades, created increased demand for college and as a result, contributed in part to tuition increases.  This dynamic would be tolerable if wage increases were equal to or greater than the inflation rate of college tuition.  However, this is not the case and in many circumstances, this population bubble is contributing directly to this negative effect.  The abundance of college graduates have started to flood the labor market at a time when the global economy is weak, unemployment is high, and foreign students with college degrees are willing to accept jobs at a lower wage.  Nearly half of all recent college graduates are either frictionally unemployed, or working in jobs that do not require a college degree.

The unemployment rate for recent college graduates is the highest in 35 years, with estimates ranging from 12-18 percent.

What you end up with is increased financial obligations required to obtain a degree, at a time of downward pressure on labor rates.  Is this trend sustainable, or are we about to see the bubble burst?  Several factors have started to form the groundwork for the demand for education to shift to the left (indicating a reduction in demand).  First, is the simple fact that with tuition costs so high, and with little signs of this trend abating, fewer students will be able to afford to attend college.  Second, as the debate over federal, state and local budgets rages on, education is clearly one target that many have eyed for further cuts.  Third, as the default rates on student loans continues to rise, and tax payers are on the hook for these loans, there will be political pressure to reduce the amount of lending and to increase the requirements of students looking to obtain loans.

An equally alarming trend within the field of education directly related to the issues discussed already is a movement toward rapidly increasing academic dishonesty, particularly among students majoring in business.  This dynamic should be of great concern, as most data suggests that individuals, who behave unethically in the context of their educational experiences, carry this behavior with them into the workplace environment.  Mccabe (2008) concluded that students engaged in the study of business cheat at a significantly higher rate than do students studying other disciplines.  Many have hypothesized what the causes for this trend may be.  Some suggest its derivation comes from the advent of technology and the ease by which students can plagiarize.  Others suggest that relativism plays a significant role.  The non-cheating student observes the cheating student being rewarded with higher grades, and not being punished.  As a result, the non-cheater begins to feel that they are at a competitive disadvantage to the cheater and therefore must engage in academic dishonesty in order to keep up.

Arum and Roksa address a different aspect of this problem.  In their article which questions whether or not college is getting too easy for students, the authors introduce the specter that not only has college costs reached an excess, but the skills the students are acquiring by attending college are lacking, due in part to an overall lapse in academic standards and requirements.  This combination of weaker skills and standards may also be contributing to the increasing trend of academic dishonesty.  Students looking for shortcuts and feeling pressure to retain high grade-point averages will be more likely to bend rules.  Furthermore, as technology has become more abundant, it has made time scarcer.  Many students spend more time on social networking, then studying.  A study performed at Ohio State University showed that active Facebook users had lower GPA’s than non-active Facebook users.  One of the more interesting findings from this study indicates that the active Facebook users do not believe that spending time on social networking as opposed to schoolwork has any effect on grades.  It is as though an entire generation of students is in a state of denial (Duberstein, A., Karpinski, A., 2010).

With this generation of students experiencing a real-time sense of connectivity with technology, new issues related to cheating have surfaced.  Students are becoming increasingly distracted and unable to focus on a single task as they try to manage the digital flow of information constantly influencing them.  As suggested in the Ohio State study referenced above, many students believe that they are capable of multi-tasking.  Is it possible to listen to a professor lecture, and absorb the material being taught, while at the same time, Googling information about a celebrity, responding to  a Facebook wall postings, reading tweets, and texting friends? Perhaps it is, but the evidence suggests otherwise.  In response to this new culture of students, educators have, in many ways been forced to become entertainers of sorts, providing more simulative teaching methods to compete with the distracted mindset of many of today’s students.  Some teachers have adopted the philosophy of; if you cannot beat them, join them.  This pool of instructors has attempted to integrate social media into course curriculum, and in so doing feel that they are better able to reach their students.  Others have taken the approach that topics can only be covered on a surface level, because too much detail is beyond the scope and attention capabilities of many young people.  Ask most college students to read a twelve-page article from some business journal and the task for many seems insurmountable.  Last semester, I gave my students an article to read that happened to be written by one of my favorite authors, Malcolm Gladwell.  The article entitled “The Talent Myth”, is in my opinion required reading for any business student (Gladwell, 2002).  Some read it, others complained about its length.  I found that when we discussed the article in class, even those who had not read it, were engaged in the content provided by Gladwell.  Arum and Roksa state that:

In a typical semester, 50% of students did not take a single course requiring more than 20 pages of writing, 32% did not have any classes that required reading more than 40 pages per week, and 36% reported studying alone five or fewer hours per week.  Not surprisingly, given such a widespread lack of academic rigor, about a third of students failed to demonstrate significant gains in critical thinking, complex reasoning and writing ability (as measured by the Collegiate Learning Assessment) during their four years of college.

As an educator who prides himself on the depth and quality of instruction that I provide to my students, I was bothered by the notion that perhaps I was not doing enough, or even worse, doing things incorrectly.  I found myself quickly rationalizing why I was the exception to the rule, or why their findings were incorrect.  I began to think that one could interpret their conclusions differently, and paint an alternate picture all together by simply rephrasing a few words.  By stating proudly that at least half the students surveyed take a course that requires 20 or more pages of writing, nearly 70% have taken classes that require reading more than 40 pages per week, and seven out of ten college students surveyed spend their time studying more than five hours per week.  When I thought of things in this light, it suggested that many students are challenging themselves, and I felt better.

The truth, I believe is somewhere in between.  Arum and Roksa (2011) are correct that many students do not apply themselves as much as they are capable, however the evidence they present is compelling to the point that one must recognize that a major shift within higher education has taken place.  They are equally correct in their explanation that some institutions addicted to the higher tuition rates may have a tendency to be more accepting of mediocrity for fear of losing the tuition dollars.  In many ways, what the articles presented here suggest, is that many colleges and universities are more concerned with who they can attract to attend their school, as opposed to who is actually attending.  As Arum and Roksa (2011) point out, higher education has pivoted in recent decades away from a student-centered learning obsession toward one that instead focuses much energy and resources on “things like admission yields, graduation rates, faculty research productivity, pharmaceutical patents, deluxe dormitory rooms, elaborate student centers and state-of-the-art athletic facilities complete with luxury boxes”.

All of these forces converging simultaneously will be most problematic on one particular front, if left unchecked.  The income gap, at its widest point since the late 1920’s is largely a function of a failure to make an effective and firm long-term commitment to education.  The stark difference in resources available to students who need them the most is alarming.  Conceptually, most people understand that poorer neighborhoods have worse schools than wealthy areas.  Many people share this understanding, and desire to have that societal imbalance corrected.  However, when asked to pay for its repair, a different response is triggered.  When one compares academic resources available to students in lower socio-economic areas with those in wealthier districts, it is easy to see how high a barrier many lower socio-economic individuals face when trying to better themselves.  Add on top of that the fact that PELL grants have not only failed to keep up with the rate of inflation, but have fallen dramatically short of the rate of tuition increases.

The scale and scope of this issue is vast.  It is almost too overwhelming to try to figure out.  In the recent budget deal struck last spring, an additional $1 billion was taken out of the Department of Education’s budget.  Is it wrong to advocate for greater equity in the educational system? I am so proud and ispired of all of my students, and in particular, those students who struggle each day to overcome the economic barriers that have presented themselves. As long as they can make the effort, I can do the same and advocate on their behalf.  Maybe, if enough of us speak-out on this issue, perhaps we can make a small difference…. “one voice can change a room, one room can change a city, one city can change a state, one state can change a nation”.  Where did I hear that before?



 Arum & Roksa, 2011. Retrived from:,0,1981136.story

Duberstein, A., Karpinski, A., 2010. Retrieved from:

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McCabe, D. L., & Bowers, W. J. (2009). The relationship between student cheating and college fraternity or sorority membership. NASPA Journal (National Association of Student Personnel Administrators, Inc.), 46(4), 573-586. Retrieved from

McCabe, D. L., Butterfield, K. D., & Trevino, L. K. (2006). Academic dishonesty in graduate business programs: Prevalence, causes, and proposed action. Academy of Management Learning & Education, 5(3), 294-305. doi:10.1207/S15327019EB1103_2

McCabe, D. L., & Trevino, L. K. (1997). Individual and contextual influences on academic dishonesty: A multi-campus investigation. Research in Higher Education, 38(3), 379-396. Retrieved from

McCabe, D. L., & Trevino, L. (1993). Academic dishonesty: Honor codes and other contextual influences. Journal of Higher Education, 64(5), 522-538. doi:10.2307/2959991

Is College Worth It?

Is College Worth It?
By Andy Gold

If you type into Google the words “is college worth it”, you will get approximately 450,000,000 results.  Classical economics teaches us that an action should only be taken if its benefits are equal to or greater than its costs.  As debt loads mount, and financial aid becomes increasingly scarce due in part to budgetary constraints, it is reasonable to think about why this question comes up so often.  Put another way; has the opportunity cost of attending college become so large, that we now have reached a tipping point?

As an educator, and a passionate believer in the value of education, I firmly want to believe the answer to this question is no, even though the sad state of our economic reality is such that many are starting to feel otherwise.  Virtually all statistical data suggest that college graduates are better off economically than non-college graduates are, and college graduates earn significantly more than non-graduates do.

 However, the real question becomes whether or not starting salary wages for college graduates, and subsequent wage growth will keep up with, and enable graduates to service their loans and have a decent quality of life.  In general, beginning in the early 1980’s, the inflation rate of tuition moved ahead of the national rate of inflation (CPI).  Since then, average tuition costs have increased at a rate of roughly two times that of the inflation rate.  In many years, this meant that tuition was rising by 8 percent per year, with a 3-4 percent inflation rate.  At that rate, college tuition would double every nine years.  That means that a child born today would pay 200 percent more in tuition costs when they are ready to enter college.  Compounding this issue is the fact that wages are stagnant.  Last year alone, tuition rates once again increased, however starting salaries for college graduates fell by 2% from the previous year. 

In a nation as great as ours, which has always prided itself on its educational system, this question should not have to be raised.  Are we headed backwards as a nation?  Are we saying, indirectly that even if you want to go to college, this may not be a feasible financial option, as doing so might require you to bankrupt your future?

Certainly, tuition increases is partially attributable to a general increase in university costs, demographic population shifts, and the need for updated facilities.  Ironically, one of the key drivers that helps explain this disproportionate rise in tuition stems from wider and greater availability of student loans in recent decades, and a general lowering of standards by which loans are approved. 

Last year, student loan debt exceeded credit card debt for the first time.  According to the Federal Reserve’s statistical release, G.19 Consumer Credit, the seasonally adjusted revolving credit totaled $826.5 billion as of June 2010.  As much as 98% of revolving credit is credit card debt.  Student loan debt outstanding totaled at least $830 billion as of June 2010, with roughly $665 billion in federal education loans and $168 billion in private student loans.  The default rate among borrowers continues to rise, in part because of the sustained high rate of unemployment as well as the total amount of student loan debt per student.  The lifetime default rate ranges from 14-26 percent depending upon the number of years into the loan repayment period you are analyzing.  The National Center for Education Statistics at the US Department of Education recently reported that, in aggregate, 70 percent of all undergraduate and graduate students in the United States have taken out student loans, with an average debt per student of $47,503.  Factoring in graduate degrees into this formula skews the data somewhat due to the substantially higher cost of obtaining a graduate degree.
On the horizon, the specter of increased difficulties in being able to attend college is real.  We are at a crossroad, which requires us to make a decision about how we want to move forward as a country.  In a sense, we are all shareholders in our great nation.  The question is what kind of a shareholder do we want to be?  Do we want to have a short-term mindset, as many in business do, driven by our self-interest in what we perceive to be best for us today?  Shareholders of many firms demand profits and dividends (i.e. the equivalent of budget cuts and tax decreases) over the short term at any cost, even when this cost involves the termination of employees (i.e. the equivalent of fewer being able to afford a college education).  Alternatively, are we prepared to adopt a longer-term view, and incur costs today that may not yield dividends for some time to come?  I for one am focused on the long-term.



Hi. This blog is designed to post information on several topics related to the college courses I teach. These topics and areas of research include, International Business, Cultural Issues, Behavioral Economics, Social Entrepreneurship, Corporate Social Responsibility and Sustainability.