In this presentation, the speaker outlines why the education sector, despite being heavily regulated and bureaucratic, offers attractive investment opportunities for patient investors. He explains that decision‑makers in schools are risk‑averse, and that federal financial‑aid programs create a massive, but tightly controlled, pool of capital. Technology firms like CampusLogic, backed by the ASU Draper Accelerator, can streamline the paper‑based aid process, delivering high value with low technical barriers but significant regulatory navigation. The speaker stresses the responsibility of lenders to fully disclose loan risks, drawing parallels to the sub‑prime mortgage crisis, and highlights that student loans are a long‑term liability that cannot be easily defaulted on. He argues that education yields one of the highest returns on investment for individuals and governments, citing his own experience of receiving Pell Grants and the rapid tax‑payback to the government. Income‑sharing agreements are presented as a private‑investor alternative to government funding. The importance of degree completion for loan repayment and government ROI is emphasized, noting that non‑completion leads to losses for the public sector. Overall, the talk paints education as a durable, high‑ROI market with unique challenges stemming from regulation, entrenched best practices, and the need for responsible borrowing.
Chapters
Here's the problem with consumer. Now I'll tell you something really funny. This slide, I gave another talk on industrial investing, I used the exact same slide. I just changed the title and then obviously a little bit of the content. This is the same movie that happens in every sector. And these sectors are difficult to crack, but once you crack, it's difficult for them to kick you out. So it's a great area for you to invest in if you're the right age group, if you're patient. So we can go through some of that. Decision makers are not paid to take risks. So this shouldn't be viewed as, well, all schools are like that, right? Obviously some schools are not. Just generally speaking, if you compare a school versus a Fortune 500 company in the IT space, right, the chief information officer oftentimes is pretty conservative, right? Whatever works they don't want to change. Right? Heavily regulated. So we're talking about education is one of the largest regulated industries. Accreditation, financial aid. When you take money from the federal government, it's great because it's a huge pool of money, but at the same time, over the years they have a lot of best practices, they call it, to make sure we're not cheating the government. Right? And when you have these processes, so far they're mostly based on paper. In fact, the first company that ASU Draper Accelerator backed, Campus Logic, they are making the financial aid process more efficient. Is this rocket science? No. But is it something that would generate a lot of value? Definitely yes. And it's beyond just, oh, right now we collect forms, let's put it online. It actually addresses a deeper issue. When we— and it gets actually philosophical, right? When you loan someone money, you actually have the responsibility of telling the person all the risks associated with the loan, right? The most common belief is this: I'm loaning you money, right? I could do no wrong, right? Like, how could I be wrong? I'm lending you the money to go to school. The reality is that we've seen in the subprime mortgage crisis, when you loan someone money irresponsibly, you're actually hurting that person. Right? Mm-hm. Now that I explained it to you, it makes sense, but you walk out of this classroom, many people sort of don't realize you have a responsibility when you loan students money to make proper disclosures about how much they need, right? So be a responsible borrower, don't overborrow, right? Also be aware the financial consequences. Right, because student loan is one of those things that it doesn't go away, you can't default, right? It's not like housing you could just foreclose, that stays with you, right? So all of those things, if you don't have a computer or you don't have an iPhone or an app, can you do it? Yes, absolutely. But having technology makes it that much easier, makes it that much— More efficient. more user-friendly for students, right, who this day and age, who wants to read a 20-page document from the U.S. financial aid office, right? But just show me a simple letter or a screen, an app, how much I need and what it looks like in 20 years or 5 years when I graduate, right? So those are the things where Is this rocket science? No. Is your technology barrier to entry? Maybe a little bit. But how much value it creates, it's tremendous, right? In my mind, it's low-hanging fruit. No technology barrier to entry, but probably you have to deal with regulatory bodies, right, government. Okay, so there's no free lunch, right? So it's an interesting area for you to look into. Good news is— did I mention it here? Oh, maybe I didn't. Education is one of the highest ROI investments one can make, both from an individual basis or a country, from a government perspective. I'll give you an example. I— so I went to college at $500 a semester at University of Texas. I was on Pell Grant, basically this is for U.S. government for low-income students. So I was on that for 4 years, I think it cost the government $10,000. I think I paid that much taxes in one quarter. So the government makes so much money from me, it's beyond belief. I think their payback cycle was like 3 months, and I'm not done yet, right? So it's a great investment. I'm even thinking, Government shouldn't be in the business of funding students. It should be some sort of investor-based, right? If the investor knows that, hey, I could back this guy, I give him $10,000, get an education, and he pays me— don't pay government taxes, pay me taxes, 5%. That's a great investment, right? So the reason why I bring this up, There's actually an area called income sharing we'll talk about. Is that fundamentally when you discover something that's win-win, there is a business model. It's not like you're— if education is one of those things you put in a dollar and you get 50 cents out, then it's a sick ecosystem. This is a healthy ecosystem. It's very meaningful. Another story I told you guys earlier, You know, people before our generation, like they, people actually risked their lives for better education. My grandparents moved to Taiwan so my parents could have better education. My parents moved to the US so I could have better education. I'm not about to move somewhere else so my kids can have better education, right? But it is important enough, I as an individual, I do a lot, so my— kids will have better education. So it's one of those things, it's a sector, it won't go away, you know it won't go away, right? But it's also a sector, it's so important, right, that the government typically gets involved, right? When the government gets involved, it gets a little bit dicey, all the conventional logic doesn't work all the time, right? So even if you have a payout of 3 months, 100 times payout, if— when the government is involved, private investors sometimes have to navigate the landscape a little bit more. Oh yeah, I did mention it, loan payback cycle for customers. So it takes students a long time to realize They have money back. When I was talking to ASU, one of the challenges they observe, higher ed in the U.S., is this. So when I presented to you my example of 4 years on U.S. government aid is a great payback, so I kind of cheated a little bit. You know why? Because I finished my degree. Imagine if I didn't finish my degree, what would happen? Right? So what they did was they did a study. If you took government aid, you didn't finish, the outcome is worse. Right? So then the government loses everything. So that's actually where they lose a lot of their money. So you actually see some of the movement in the public school. So borrow responsibly. If you try to borrow money, make sure you have a plan to pay it back. And one of the more solid plans is to finish your degree so you could get a job and pay it back. And that's the point about loan payback cycle. If you don't finish, like if you drag it out, it could become painful. But if you bite the bullet, 4 years, right? So there are a lot of— so I'm not advocating what's right, what's wrong, I'm just advocating— pointing out that there are actually quite a bit of details and subtleties in this industry that makes it more difficult than it looks. Entrenched best practices, this is a euphemism for bureaucracy. So when you have something good, you work with any school, they will have internal processes. This is no different from any enterprise, but in education I think they take it to a different level. But there are schools like ASU and their peers, they are more forward-thinking, they move fast. Right.
