People seem to get a kick out of seeing unexpected results in various David versus Goliath competitions. In a 2013 blind taste test, The Bold Italic, an online magazine based in San Francisco, found that Starbucks’ Medium Roast House Blend finished the worst of six packaged coffees. Even supermarket mainstay Folgers ranked higher.
Consumer Reports found similar results in the beer world with less expensive brews consistently beating out significantly more expensive, more heavily marketed rivals. In the Kelley Blue Book 2016 Best Resale Value Awards for vehicles, importantly measured by percentage versus dollars of retained value, there isn’t a single Rolls-Royce, Ferrari, Lamborghini, Mercedes or Aston Martin in the top 10 — and Toyota trucks take up three of those slots, including the first two.
Key ingredients for the big “ah ha” in these stories is that the losers are commonly the more or most expensive product and almost always the more prestigious and heavily-marketed option being tested.
Adding further to the surprise is that there seems to be consensus in the given area that “you get what you pay for” equating to a perfect correlation between price and quality. And isn’t that just the way the suppliers and marketers of the more opulent options want it? If you are in the diamond industry, for example, you want people to believe that the bigger and more expensive the rock, the better it is, and obviously the more you must love your bride-to-be. In other words, if you represent the expensive, solidly entrenched product, you want the association between price and quality of such products to be based on very squishy stuff — reputation, prestige, cost or a predictable critic’s proclamation of what is simply “best.”
The classic example of such a competition was the 1976 Judgment of Paris wine tasting, which some wine connoisseurs have dubbed the single most important event in the history of wine. In that blind tasting, French judges chose Napa Valley wines over the best of Bordeaux and Burgundy. It was a massive smack down — not of a mere product or company, but of an entire industry. The French were in shock, and it was revolutionary.
As a university president I have wondered what it might take for a Judgement of Paris type transformation in higher education. Higher education is ripe for it. It has the classic variations in price, reputation and prestige, track record, “flavor,” and overall quality. Further, it has the complexity that renders individual tastes that need to be an essential component of the decision.
Sending your child off to college and into the world is an exciting time for parents, but all too often good judgement gets lost in the hype. Taking on too much college debt and not saving enough for college combine to form one of the largest financial regrets reported by older Americans, according to a story by MarketWatch released in May. Families need to consider the following: Is the incredibly high cost of an Ivy or flagship state school really worth the money? Does the increased cost lead to greater likelihood of success for the student? Or are families drawn to expensive institutions in an attempt to keep up with the Joneses and for the bragging rights that the name-recognition affords?
In another MarketWatch study released in February, researchers could find no correlation between graduates’ average earnings and the prestige or rank of the institution, particularly for students studying science, mathematics, education, or technology. Further, there is some evidence that the single greatest contributor to graduate contentment years out of school is the lack of student loan debt — a far greater likelihood when attending less expensive schools.
These data support portions of Dale and Krueger’s groundbreaking study, which showed that, when GPA and test scores are held constant in comparison groups, there is virtually no difference in observed success between graduates of elite schools versus non-elite schools. Put another way, there is ample evidence that elite schools are good at collecting successful people; but there is little or no evidence that they have some extraordinary ability to produce them.
According to The Chronicle of Higher Education, tuition and fees at public institutions have increased by more than 350 percent since the 1970s, while pay for working- and middle-class households has stagnated. The cost of a public-college education 40 years ago was about 4 percent of the average family’s annual income. Today it is nearly 15 percent. A private-college education would have accounted for about 20 percent of a household’s median income in the ‘70s, while today it is 60 percent.
For many and probably most families, choosing a more affordable, non-flagship option for higher education is a win-win. Where can you find such schools? Often they appear in the form of smaller public institutions in non-metro areas. Students can earn a quality degree without overloading themselves with crippling student-loan debt, and parents can pay for their children’s education without breaking the bank or raiding their retirement accounts. Though luxury brands are often tempting, as we learned from our previous examples, affordable options are often just as good, if not better, than their more expensive counterparts.