Land of the Free, Home of the Idiot

testscoresForgive the suggestion, but it seems we may have reached an era in history where finding the village idiot may not be so difficult. Bloomberg reported that this year’s SAT scores were lower than they’ve been in some years. The SAT is a globally recognized collegiate admissions exam that tests a student’s critical reading, mathematics and writing abilities. This year’s students earned an average score of 1,490 out of the possible 2,400 points that the exam has to offer (800 per section). 

The two traditional sections, critical reading and mathematics, averaged 495 and 511 respectively. The writing section was an addition to the test in 2005 in an effort to assess a student’s ability to read and respond to a prompt in an analytical fashion. This section received the lowest average score since its conception: 484. The ACT, which is another (more popular) collegiate admissions exam, had average scores that remained relatively stable when compared to previous years. While the ACT exam tests what a student has learned in high school, or their ability to recall information, the SAT is more of a test of reasoning, logic and verbal skills. 

These statistics reveal much about the current nature of education in the United States. Regardless of beliefs regarding traditional education versus common core, American students are not learning. They are not learning to think critically, logically or rationally, and it doesn’t take any explanation to understand how this is becoming a dangerous phenomenon. A student, in order to learn, must be open to the learning process. It may not be a matter of which educational tactic is best, but rather teaching a student who is attentive and willing to put in the necessary hours to truly learn. As a biology student with aspirations of attending medical school, I know that for every hour spent in class, I require two hours studying outside of class. It’s not always enjoyable and it is certainly detrimental to an exciting social life, but it is what’s necessary for greatness. There seems to be a problem with high school students where academic mediocrity is not only acceptable but even encouraged among one’s peers. 

The economic impact of academic mediocrity could be severe. While SAT/ACT scores are not the defining terms of wisdom and knowledge, they do serve as a window into the relative level of learning. As these individuals look toward college, one can only hope that there is an exponential increase in their capacity to learn. Coming out of a four-year college course with a degree, sizeable debt and lackluster grades, does no good for the student, the school or the U.S. economy. College usually requires a loan which is not only a risk for the student, but also for the school and the bank if the student were ever to default on that loan. The average debt a college student has after graduating is around $35,000. At approximately 5.00% interest, paying $200 per month, it would take 27 years to pay off this college debt. Between car payments, rent/mortgage, numerous bills and food, paying $200 per month for a loan is a significant burden. Statistically, higher education improves your chance of getting a better job; competitive grades translate into competitive salaries. 

So what does this mean with regard to investments?

Playing the stock market and investing in commodities or precious metals takes a large amount of intelligence and an even larger appetite for risk. Low math scores and even lower critical thinking scores on cumulative, analytical tests like SAT/ACT do not translate well into smart investing. I would argue that aside from being a risk-taker, a knowledge of mathematics and an understanding of how to analyze the market are the two characteristics that identify a smart investor. An investor must constantly learn, and must be flexible as the market ebbs and flows. Being an unwilling learner, satiated by mediocrity, is a surefire way to be a bad investor. The individual benefits from wise investing, and then so does the economy. More wisely invested money in the market leads to an increase in cash flow into everyone’s pocket.

Recall that the SAT test is more of a test of reasoning and logical thinking; both being essential for smart investing. But as our nation’s students’ SAT test scores continue to decline, we must all be wary of poor investment strategies, and banks must be cautious with their loan processes in order to maintain a relatively healthy market and a robust economy. Evaluating risk-reward is an essential part of the individual investor’s method. Being able to analyze the market on your own cognition, instead of following the masses, will often lead to money-making opportunities. However, the investor sometimes fails and has to go back to the drawing board. Analytics and the ability to rationalize are key cognitive abilities in learning from failure. A steady decline in these test scores not only poses the threat of creating a nation of fools, but one of poor investors and consistent failures.

Tyler is a college student and writer with a passion for precious metals, finance and the free market. You can follow him on twitter @t_marp