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College: Big Investment, Paltry Return (Research shows value is far less than previously thought)
Business Week ^ | 06/27/2010 | Francesca Di Meglio

Posted on 06/28/2010 12:29:50 PM PDT by SeekAndFind

If there's one truism that goes virtually unchallenged these days, it's that a college degree has great value. Beyond the great books, beyond the critical reasoning skills, and beyond the experience itself, there's another way that a college degree has value: Over the course of a working life, college graduates earn more than high school graduates. Over the past decade, research estimates have pegged that figure at $900,00, $1.2 million, and $1.6 million.

But new research suggests that the monetary value of a college degree may be vastly overblown. According to a study conducted by PayScale for Bloomberg Businessweek, the value of a college degree may be a lot closer to $400,000 over 30 years and varies wildly from school to school. According to the PayScale study, the number of schools that actually make good on the estimates of the earlier research is vanishingly small. There are only 17 schools in the study whose graduates can expect to recoup the cost of their education and out-earn a high school graduate by $1.2 million, including four where they can do so to the tune of $1.6 million. At more than 500 other schools, the return on investment, or ROI, is less—sometimes far less. College, says Al Lee, director of quantitative analysis at PayScale, "is not the million-dollar slam dunk people talk about."

The top of the list was dominated by elite private universities, with the Massachusetts Institute of Technology taking the top spot. Its net 30-year ROI of nearly $1.7 million makes it the most valuable undergraduate degree in the nation. The large number of MIT students who enter such high-paying fields as engineering and computer science certainly helped, but the school's advantages go well beyond that, says Melanie Parker, executive director for global education and career development at MIT.

(Excerpt) Read more at businessweek.com ...


TOPICS: Business/Economy; Culture/Society; News/Current Events
KEYWORDS: college; degree; return; value

1 posted on 06/28/2010 12:29:52 PM PDT by SeekAndFind
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To: SeekAndFind

The new research is based on self-reported compensation data collected through PayScale’s online pay comparison tools. PayScale examined pay reports from 1.4 million graduates of U.S. colleges and universities with no advanced degrees to calculate the ROI of each school. One reason the PayScale study resulted in a far lower estimate of the ROI on a college education is the way it calculated college costs. Instead of assuming everyone graduates in four years, as some do, PayScale used the actual number of years it takes students to graduate from each institution—4, 5, or 6 years. Another reason for PayScale’s far lower ROI estimate is that it accounts for the fact that many students never graduate—and go on to earn little more than a high school graduate. For them, the ROI on their college education is effectively zero.

Of the two, graduation rates had a far bigger impact on ROI. Of the 554 schools in the study, the net ROI—for graduates only—was $627,239. But once adjusted for the average six-year graduation rate of 58 percent, the average overall net ROI shrank by 37 percent, to $393,574. Schools with the worst graduation rates—at some schools, fewer than 20 percent of students graduated in six years— fared even worse in the PayScale analysis.


2 posted on 06/28/2010 12:30:38 PM PDT by SeekAndFind
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To: SeekAndFind

Also, While private schools dominated the top of the list, public schools proved to be far better value overall, at least for in-state students. Because of the lower costs paid by in-state students—$82,301 compared with $126,933 for out-of-state students at public institutions and $170,219 for students at private schools—they enjoyed the best net annualized ROI: 9.7 percent. The worst deal: paying out-of-state tuition at a public university. Doing so results in an average annualized net ROI of 8.4 percent. Private schools yielded a net annualized return of 9.1

One big conclusion that can be drawn from the PayScale data is that college—and college alone—may not be the great investment it was once thought to be


3 posted on 06/28/2010 12:32:13 PM PDT by SeekAndFind
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To: SeekAndFind

At least half of the college students I meet shouldn’t be there. They should be working or taking technical training courses.

The USA (and the FEDS) have over-invested in 4 year universities. That needs to end, and the higher-education bubble should be popped.

Rather, local communities (not the FEDS) should put money into 2 year technical/apprenticeship schools.


4 posted on 06/28/2010 12:34:26 PM PDT by PGR88
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To: SeekAndFind

It’s great for colleges - they get all that gummint grant money.


5 posted on 06/28/2010 12:37:22 PM PDT by P.O.E. ("Danger is My Beer" - Rev. Dr. Fred Lane)
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To: SeekAndFind
high-paying fields as engineering and computer science

Ah, not so much anymore.

6 posted on 06/28/2010 12:37:43 PM PDT by central_va (I won't be reconstructed, and I do not give a damn.)
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To: SeekAndFind

My daughter is half-way through her MBA. Great time to find this out!


7 posted on 06/28/2010 12:38:52 PM PDT by ilovesarah2012
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To: SeekAndFind

Hey, I paid for my own degrees, and now teach college history. I am paid well (even being paid to not teach this summer to complete a couple of writing projects), and am paid to study my area of interest since childhood, World War Two.

Be envious? Yes, you may. My hobby is my job.


8 posted on 06/28/2010 12:40:25 PM PDT by warchild9
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To: SeekAndFind

Once your nation is gutted, it’s true. An education doesn’t garner you what it used to. It sill expands your odds on finding employment and keeping it. It makes the jobless periods shorter. It elevates the types of jobs you are qualified to hold.

Anything you can do to increase your worth, is a positive.

Look, making the case that a high school education is the best road to travel these days, is a severely flawed argument IMO.


9 posted on 06/28/2010 12:42:57 PM PDT by DoughtyOne (06/15/2010 Obama's Shame-Wow address...)
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To: SeekAndFind
Big Investment, Paltry Return (Research shows value is far less than previously thought)

Thats because the rising cost of tuition has grown faster than the total compensation of any given degree carries, thereby reducing the return. Add to that University of Phoenix and the resulting zero value this "accredited" institution adds to your resume and overall compensation package and the data gets skewed even more.
10 posted on 06/28/2010 12:44:07 PM PDT by Thurston_Howell_III (Ahoy polloi... where did you come from, a scotch ad?)
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To: SeekAndFind
It could be that a diploma from Slippery State College is a waste of time and money but one from Harvard,Yale,MIT,CalTech...etc,etc are almost always a very smart investment.
11 posted on 06/28/2010 12:44:49 PM PDT by Gay State Conservative (Host The Beer Summit-->Win The Nobel Peace Prize!)
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To: ilovesarah2012

looks like this study is focused upon undergrad degrees only

the value of MBAs may also be overblown but in many specific cases there is a lot of personal financial and professional benefit (speaking from anecdotes about family and friends I have observed through the years)

generally I’d far rather see young people obtain a lot of “real world” effective working experience before even thinking about an MBA (and many do work first for a few years)..... when I’ve dealt in business with freshly-minted MBAs who don’t have serious and credible working experience, their attitudes and egos tend to overwhelm common sense..... but I’ll hope that would not be the case with YOUR daughter...... :^)


12 posted on 06/28/2010 12:46:39 PM PDT by Enchante ("The great enemy of clear language is insincerity." -- George Orwell --)
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To: SeekAndFind

The absolute iratating thing I see is college grads that can’t write a complete sentence. These are kids from private colleges that charge in excess of $50k/year tuition. Four years at $50k and you can’t write a complete sentence is troubling. All of them have the right opinions though.


13 posted on 06/28/2010 12:48:22 PM PDT by equalitybeforethelaw
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To: PGR88

‘Academics’ are dummied down beyond all recognition.


14 posted on 06/28/2010 12:51:27 PM PDT by SMARTY ("What luck for rulers that men do not think." Adolph Hitler)
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To: SeekAndFind

It all depends on what sort of degree you get and what you want to do with it. The market pays more for some degrees than for others. That’s reality.

A degree in philosophy may be a fine education, but the market doesn’t demand philosophers the way it demands other professions.

Many students pick a program they like knowing full well it doesn’t pay as well as others. It’s a choice they are free to make.


15 posted on 06/28/2010 12:52:14 PM PDT by bobjam
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To: SeekAndFind
What? I've always thought that a degree in Womyn’s Studies, Queer Theory, African Studies or Ancient Gaelic Folk Dance was a guaranteed road to riches. Now I find out that it's just prep for Domino's delivery or a government job. Who knew?
16 posted on 06/28/2010 12:57:37 PM PDT by JPG (Mr. Gore, or is it Mr. Stone or Mr. Woody? Whatever, you're under arrest.)
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To: SeekAndFind

Top Ten
1. MIT
2.Cal Tech
3. Harvard
4. Harvey Mudd
5. Dartmouth
6. Stanford
7. Princeton
8. Yale
9. Notre Dame
10. Penn


17 posted on 06/28/2010 12:58:44 PM PDT by Varda
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To: SeekAndFind
the Massachusetts Institute of Technology taking the top spot. Its net 30-year ROI of nearly $1.7 million makes it the most valuable undergraduate degree in the nation.

There's a big clue that income is more correlated with brains than education. Most people accepted into MIT would make far above average incomes even if they didn't go to college.

They neglected to include the opportunity costs in their investment calculations. Every hour studying for a degree could instead be spent earning money and gaining valuable experience. In the case of Bill Gates, the opportunity cost for finishing college turned out to be $53 billion.

18 posted on 06/28/2010 1:01:51 PM PDT by Reeses (Sowcialist: a voter bought with food stamps)
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To: warchild9

How’d you make it past the Marxist goal-tenders on the dissertation committee?


19 posted on 06/28/2010 1:02:02 PM PDT by Oratam
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To: warchild9
Hey, I paid for my own degrees, and now teach college history. I am paid well (even being paid to not teach this summer to complete a couple of writing projects), and am paid to study my area of interest since childhood, World War Two.

Sorry to offend, but that's part of the problem:
Students and taxpayers are paying for your hobby while you punch the "publish or perish" ticket.

Meanwhile, every year we get more law school grads who will find work as buyers and office managers, more engineers who will toil as technicians, and more teaching school grads who know ideology better than their subject matter.

Higher education is now an industry that feeds off the public rather than serving to improve citizenship and the economy.

(Besides, we actually need technicians and buyers, we sometimes need office managers, and you know what they say about lawyers.)

20 posted on 06/28/2010 1:03:26 PM PDT by norton
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To: SeekAndFind
As a stewardess in the private yachting industry with nothing but a high school diploma, she says she earned triple what she's making now in her administrative support job in Winston-Salem.

I'll bet she did. For some reason, I have a feeling that job wouldn't be nearly as profitable for a forty year old with some sags.

This article hammers around the primary point. Some college degrees are profitable; some aren't. As to the value of the degree by institution, tried to get into Harvard or MIT lately? Students graduating from these top schools usually have IQs bordering on the genius level AND they're highly motivated and competitive. A person doesn't slack through high school, wake up two days before term starts and go register for classes at MIT.

It's popular now to think everyone is equally capable when it's not true. MIT runs a hard core curriculum for the same reason an NFL training camp runs drills that would just about kill the average person. If you aren't already in top form, you aren't getting on the field or in the classroom. Part of it's preparation and part of it's genetics.

Steve Jobs, Bill Gates, and Michael Dell are all billionaires and all dropped out of college. The lesson is NOT that dropping out of college will put you on the road to being a billionaire. The lesson is that those three guys are probably smarter than you, had drive, and developed a plan that worked.

If they redid this study and normalized by IQ level rather than by college, they would find somewhat different results. Students with the IQ of the standard MIT student would probably perform as well, even if they went to a less prestigious college. MIT doesn't just teach well. They select people that are already prepared for success.

While it would be far more difficult, a more revealing study would be to do comparisons of students from similar backgrounds and IQs, and compare their income levels based on whether or not they graduated from college and what major they studied. This would allow an apples and apples comparison, rather than taking the 150 IQ son of a politically connected millionaire who went to MIT and comparing him with the 105 IQ son of a warehouse worker who went to Philadelphia University.

21 posted on 06/28/2010 1:06:32 PM PDT by Richard Kimball (We're all criminals. They just haven't figured out what some of us have done yet.)
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To: central_va
high-paying fields as engineering and computer science

Ah, not so much anymore.


AS someone who is in the IT field, I know for a fact that the average salary of those in this field have remained stagnant for years. And at a time like this when people with comparable skills from overseas can actually come via an H1B visa, the downward pull in the salary scale continues unabated.

In my company for instance, most projects are now hiring temp/contract workers who do the work for several months and then move on ( and when the need is there, the company either maintains the same contractors or hires new ones ).

The only ones in IT who can command a premium are those with very specific combination of technical and business knowledge. Otherwise, it's still tough going at a time like this.
22 posted on 06/28/2010 1:06:56 PM PDT by SeekAndFind
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To: equalitybeforethelaw
The absolute iratating thing I see is college grads that can’t write a complete sentence.

I feel the same way about people who can't spell irritating.

23 posted on 06/28/2010 1:09:51 PM PDT by Richard Kimball (We're all criminals. They just haven't figured out what some of us have done yet.)
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To: norton

I love it when Freepers who don’t know me make assumptions.

A private foundation pays my salary. I won my position through a process of interviews and reviews of my publications—that took almost two friggin’ years. That’s why I get to play at being a historian.

Let’s restate: the money that pays my mortgage was voluntarily handed to my school by a wealthy individual long ago, and then it was handed to me, because of my school’s reputation, and then MY reputation. (If it weren’t for creepy internet stalkers, I’d get more specific.)

Since we’re considered an “elite” school, the students in my classes have to earn their way in, and work to stay. In my pre-history college career, though, about half or so of my fellow students should have put in another year of high school, if you know what I mean.


24 posted on 06/28/2010 1:10:22 PM PDT by warchild9 (Remember Bad News Bears and "assumptions?")
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To: Enchante

I think my daughter is very level-headed. She worked part-time during undergrad in the university office, then was a bookkeeper for a year. She just started a new customer service job. Not what she was hoping for, but it will do for now. More work experience never hurts. The pay is decent and the benefits are excellent, especially for these days. Of course, eventually she has to start paying back student loans. She went to a private Christian university, which I am happy about. However, she could have done much better financially at an in-state university. Time will tell, I guess.


25 posted on 06/28/2010 1:12:12 PM PDT by ilovesarah2012
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To: Oratam

It might surprise you to note that graduate school educators pretty much mirror the general population: 20% on the right, 20% on the left, and the rest don’t care. At least at my school.

I several advantages going into jury:
1. I had lots of numbers concerning my dissertation topic—historians loathe numbers and it made me look smarter than I am;
2. My training was thorough and I knew my subject;
3. God gifted me with writing talent;
4. I was older than most candidates, and could communicate with the jurists one-to-one.

I’d never go through the process again...


26 posted on 06/28/2010 1:16:09 PM PDT by warchild9
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To: warchild9

Did you make the decision to enter a PhD program ‘late’ in life?


27 posted on 06/28/2010 1:23:08 PM PDT by Oratam
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To: warchild9
It's not your fault if someone else's life sucks. As a firefighter (talk about a dream job) I frequently run into people that are jealous. In my sideline job as a sports and event (college dance teams) photographer, more people are jealous of me. Nobody came to me and said, "Please, please, please come and apply with our fire department" and nobody begged me to spend several years doing photography for free while I developed my skills to the point someone would pay me. I knew what I wanted to do and did it.

You did the same. Good for you. I have a nephew in the Corps of Cadets at Texas A&M who is majoring in history. He's visiting the European WWII battlefields this summer. Revision of history is a terrible thing. Good people who do their best to make sure the true stories of valor, cowardice, compassion and cruelty are remembered accurately are of great value.

28 posted on 06/28/2010 1:26:09 PM PDT by Richard Kimball (We're all criminals. They just haven't figured out what some of us have done yet.)
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To: SeekAndFind
Another reason for PayScale’s far lower ROI estimate is that it accounts for the fact that many students never graduate—and go on to earn little more than a high school graduate. For them, the ROI on their college education is effectively zero.

Gee, so if you don't graduate, you don't get the value inherent in a college education? Shocking! /s

Your major and your work ethic will ultimately determine whether college works for you. Of course you can't just show up for awhile and think you will magically make more money. But to imply that obtaining a worthwile degree from an accredited University is of nominal value is just flat out wrong.
29 posted on 06/28/2010 1:27:27 PM PDT by VegasCowboy ("...he wore his gun outside his pants, for all the honest world to feel.")
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To: warchild9
"even being paid to not teach this summer"

If you have a farm, make sure that while you're not teaching, you're also not farming.

That way you can make even more! ;-)

30 posted on 06/28/2010 1:28:14 PM PDT by who_would_fardels_bear (These fragments I have shored against my ruins)
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To: SeekAndFind
Does anyone go to college to get an education? Or are we just there for a job?

I guess I really messed up when I approached college as an opportunity to learn...

31 posted on 06/28/2010 1:30:19 PM PDT by Senator_Blutarski
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To: Oratam

Yeah, I had fought my way to lower-middle management in Big Pharma, and was losing my way in the midst of the corruption and general nastiness (although I am pretty good at corporate political warfare). My wife, noting the 1000 or so military books on my shelves recommended I do something I might enjoy, like study military history professionally. And I listen to She Who Knows All.

I had to start over, and retained my position to pay the bills until near the end, but it was worth it. I was awarded my PhD when in my 40’s. (My daddy earned his MA in history at 57. His specialty is the Banana Wars—he’s a career Marine.)


32 posted on 06/28/2010 1:31:26 PM PDT by warchild9
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To: who_would_fardels_bear

What’s best, if that if I can get these last two books finished before the end of the year, I’m finally on tenure track! Yipee!

That’s academic heaven, let me tell you.


33 posted on 06/28/2010 1:33:28 PM PDT by warchild9
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To: Thurston_Howell_III
"the rising cost of tuition has grown faster than the total compensation of any given degree"

But you HAVE to go to college right out of high school! Oh, and back in 2006 you HAD to buy a house before it becomes completely out of reach.

Woe to those idiots who recently bought their children a condo to live in while going to college, expecting the increase in equity to pay for tuition.

Underwater twice over!

34 posted on 06/28/2010 1:33:50 PM PDT by who_would_fardels_bear (These fragments I have shored against my ruins)
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To: Richard Kimball

My friend’s son just passed his firefighter’s exams in Kentucky. I respect you guys, but don’t envy you.

And I’ll bet the trajectory of your photographer’s career roughly matches mine as a writer. The beginning is full of some long, lonely years, wouldn’t you say?


35 posted on 06/28/2010 1:36:44 PM PDT by warchild9
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To: SeekAndFind

I’m a computer scientist and am grateful to hold a degree which has value. There’s no doubt that I earn A LOT more money as a computer scientist than I otherwise would. So in my case, the college degree has been unquestionably worth the investment.

P.S. I take a bit of exception to categorizing computer science as under the IT umbrella. It’s a bit like referring to an EE major as an EET major.


36 posted on 06/28/2010 1:46:25 PM PDT by mbs6
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To: central_va

The company I recently retired from pays its freshly minted petroleum engineers $80k per annum.


37 posted on 06/28/2010 1:49:52 PM PDT by SVTCobra03 (You can never have enough friends, horsepower or ammunition.)
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To: ilovesarah2012
My daughter is half-way through her MBA

That degree is an absolute waste without experience.

38 posted on 06/28/2010 2:06:59 PM PDT by Centurion2000 (If I don't like you, it's most likely your culture or your ideology that pissed me off.)
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To: Senator_Blutarski
I guess I really messed up when I approached college as an opportunity to learn...

Your screen name does not coincide with that comment.

39 posted on 06/28/2010 2:07:31 PM PDT by Richard Kimball (We're all criminals. They just haven't figured out what some of us have done yet.)
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To: SeekAndFind

College ceased to be valuable when they started adding remedial courses.

They convey negative knowledge...They suck good sense out of your head.


40 posted on 06/28/2010 2:29:46 PM PDT by TASMANIANRED (Liberals are educated above their level of intelligence.. Thanks Sr. Angelica)
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To: SeekAndFind

bookmark


41 posted on 06/28/2010 2:30:25 PM PDT by Puddleglum ("due to the record harvest, rationing will continue as usual")
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To: Centurion2000

She has some experience and is working now.


42 posted on 06/28/2010 2:33:44 PM PDT by ilovesarah2012
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To: Reeses

MIT educations are so valuable that they give a ton of their course materials away for free online. Seriously.


43 posted on 06/29/2010 6:33:50 AM PDT by sbMKE
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To: mbs6
I take a bit of exception to categorizing computer science as under the IT umbrella. It’s a bit like referring to an EE major as an EET major.

I can understand this. Smart Computer Science graduates and undergrads are in demand to work on such high tech stuff as Parallel Processing algorithms, New and improved operating systems, search algorithms, etc.

But you gotta understand -- In practice, people who do the above are only a few percentage of Computer Science graduates. The vast majority are employed doing the most common stuff -- applications programming and software development for specific business applications.

I have been in this industry long enough to know that in times like these ( especially now ), companies in these industries are VERY SPECIFIC regarding what they demand you know. It isn't good enough to be a great computer scientist.

For instance, one company wants you to be experienced using the SYBASE RDBMS ( nope, being a great database theorist or even Oracle developer isn't going to cut it ). THEY WANT SOMEONE WITH PRODUCT SPECIFIC KNOWLEDGE.

Hence, recruiters today continually ask questions like -- Do you have experience in Hibernate, Python, SAP, COGNOS, or this or that SPECIFIC product. Companies just don't want to spend the time to let you get up to speed on these languages/technologies.

But being good in a specific product isn't enough today. Recruiters also continue harping on INDUSTRY SPECIFIC experience. In New York City, you gotta have for instance FIXED INCOME or DERIVATIVES or HIGH FREQUENCY TRADING experience ( nope, financial experience is not good enough, you must have THAT specific experience ). Do you know the industry specific FIX PROTOCOL ? ( if you do, go ahead of the line. If not, sorry, we don't want to hear from you ).

This is the reality of the times my friend. And I am afraid the jobs for the "pure" Computer Scientists are few and far between compared to the so-called "technicians".
44 posted on 07/01/2010 9:21:20 AM PDT by SeekAndFind
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