Education as a Way of Signaling

Tis the season for recruiting, interviewing, and hiring around my office. And I am reading the resumes and cover letters of these fresh-faced, over-eager, handshake harder-than-it-needs-to-be, discount power-suit wearing and too-much-gel-in-their-hairdo yuppies who use big words and timelessly lame phrases such as, "I can go anywhere and do anything" or "I know I would be an asset, and not a liability, to your company," I wonder why we are hiring these people who know absolutely NOTHING about what we do here, or the real working world at all.

In general, universities - especially top universities - do not teach job skills. Technical colleges do a much better job at teaching skills. So what exactly makes companies hire from universities where the students know how to derive mathematical proofs and can analyze Shakespeare, when they do not do ANY of those things that you learn in college in the actual workforce? Simple - education is a way of signaling.

Signaling is a specific concept: It is the idea that you are trying to communicate to someone, and make them really believe you're telling the truth. Since we all know that everyone is self-interested, we cannot trust what people say, but what they do. Signaling is whatever method you find to show your commitment to what you're saying.

Think of it in more simple terms: Companies want to hire smart people. They can then teach smart people the job skills they will need to perform the job well. Okay, so how do you find smart people? EVERYONE you interview will proclaim they are smart. Even the highschool dropouts can claim that they dropped out because they were bored with the curriculum because it was too easy. So if you can't trust what candidates SAY, then observe what they DO. Specifically, do they put their money where their mouth is?

Smart people, who realize they are smarter than the average dumbskull, will apply to college and pay lots of money in tuition, in exchange for nothing but a degree. They will - for the most part - not learn technical skills. But at the end of the 4 year program, they can emerge and apply for jobs and say, "Look at me! I really AM smart! I KNEW I was smart, and so I spent all this money and time and went to college because I knew it would pay off for me in the end." And the prospective employer realizes that nobody knows the candidate better than the candidate themselves, and if they were willing to invest in themselves, it must be because they believe they are smart.

The REALLY smart people go on to graduate programs and get fancy "signals" called "MBAs". MBAs do not learn anything in an MBA program. It is purely networking. Some of the top MBA programs do not even issue grades to their students. It is entirely "pass/fail". Which means that it really doesn't matter how well you learned anything, because an MBA is merely a signal.

Now that you know that signals are ways of committing to something, which you cannot back out of and which depends on other people's responses, you will see signaling everywhere. What is an expensive engagement ring, really, but an irreversible signal of a potential husband's intentions? And when companies spend billions on advertising a product that is purchased repeatedly (such as Mr. Clean's Magic Erasers) you'll realize that they must really believe their product will sell well - repeatedly! - or else they wouldn't be able to recoup their investment.

Anyone else out there seen any signaling recently?