Author: MIKE

Student’s don’t really see the dollars. They see tuition vaguely. I remember my first year of school, which I was paying for mostly myself, with the attitude of, ‘these are the books I need, I’ll just put them on the account or whatever’. I remember the vague feeling of a physics textbook costing a lot, but that was just what you did.

At the end of the year I thought I could sell them back to the bookstore but they would only give me five bucks for it. I was so mad. From then on I was like, books are five bucks. I’d share books with friends because now it was my money.

Mr. Money Mustache

There are a number of reasons student loans may have grown over time. Most problems are part-of-the-reason problems, and it’s a good frame to begin the diagnosis. Why the increase?

• It takes longer to work a hypothetical minimum wage job to pay for college. 14 hours a week in 1970, 35 hours a week in 2012.
• Tuition costs have risen due to more students, more staff, more admin., more perks.
• ‘Degree inflation’ has increased the ‘need’ to have a degree.

Though student loan debt passed $1.5T, the detailed picture may be slightly different. One-in-four borrowers owe less than $7,000 and a fair chunk of the highest bills come from graduate degree programs. The underwater-basketweaving story is mostly just that, a story.

However, many student enter a bad contract. Like MMM, they don’t have a clue until it’s too late.

These kinds of situations offer a chance to use friction as a dial. This shows up again and again. Mostly, people use heuristics to make good-enough decisions and as such sometimes an artificial nudge can help.

In the study, What are Student Borrowers Thinking?, the researchers found that the students aren’t thinking very much. Only about one in three students is accurate, plus or minus 10%, of their amounts of student loan debt. Only about half of all students are within five-thousand dollars of their freshman tuition.

The authors write, “There was ample evidence for a lack of knowledge about options for financing college.” Basically kids picked somewhere close by, that had a degree program they wanted, and offered some amount of financial aid.

Another factor was paying for living expenses using loans. Kids these days.

But this isn’t a sign of a weak generation. It’s an opportunity. What’s happened is that students have found some parts too easy and other parts too difficult. It’s too easy to borrow so much and know so little.

“This kind of thing is manna from heaven, but nobody knows how to do it on purpose. At least, I don’t.”

David Ogilvy

As Ogilvy noted, word-of-mouth is divine. It’s a moment when culture quiets, someone speaks, and ideas spread. At it’s best, word-of-mouth follows the rules of a dream. At it’s worst, word-of-mouth runs afoul.

Part-of-the-reason WOM wows is that it’s targeted. We think of Facebook as refined, but WOM is even better. Jonah Berger said in his Talk At Google: “If you don’t have a baby, no one is going to tell you about baby products. Word of mouth is like a searchlight that lurks through your social network to find the person that might be most interested in a particular product or idea.”

In his research for Contagious, Berger talks about the STEPPS to raise your batting average. There’s no guaranteed way to create a sensational idea, but there are things that make it a bit easier. 

For example, though Disney is a great brand, they could do better in the WOM game. They could follow the STEPPS for better WOM: social currency, triggered moments, emotion, public, practical value, and stories.

Berger’s book, in a sentence, might be, remind people to tell stories of helpful and meaningful things. 

This means Disney’s problem is this: “The problem with Walt Disney World is that we don’t go very often and there’s nothing in the environment to remind us that the product exists. When people come back they talk about it a lot but they don’t keep talking about it because there’s no trigger to remind them of the product.”

A great WOM product was the Zestimate. This Zillow feature arrived after Bill Gurley challenged the team: market without a budget. That challenge, co-founder Rich Barton said, “lit the creative juices of the team.”

When Zillow.com launched, the site crashed. People had to know. People told their friends. Barton hoped for this, “We figured it was so practical, and also voyeuristic, that word of mouth would carry it for a while.”

According to Berger’s STEPPS program, the Zestimate was great. It provided social currency in an era when new websites were cool. It was attached to an emotion, the largest asset for many people. It was public data and it offered a practical value. 

According to Zillow Talk, the Zestimate’s accuracy was 14% at launch. In 2019 it was within 1%. Barton would go on to use the same contagious ideas when he founded Glassdoor. 

When Walt Disney started to build his theme parks, he told the Imagineers that they had to include a Weenie. These were landmarks people could use to orient themselves. Move forward fifty years and that Weenie-spot is now a selfie-spot. Create someone where people can take a picture. That’s something worth talking about.