The United States is deploying unprecedented capital to rebuild its industrial base. The CHIPS Act commits $52 billion to semiconductor manufacturing. The Infrastructure Investment and Jobs Act channels $864 billion through over 400 programs. The Inflation Reduction Act adds tens of billions more for clean energy and advanced manufacturing.
America is transitioning into a golden age of reindustrialization. A lot of money is flowing. Fabs are under construction. But the talent to staff them doesn't exist.
The semiconductor industry faces a projected shortage of 67,000 to 146,000 workers by 2029. Manufacturing needs 3.8 million workers by 2033 — half may go unfilled. Defense and aerospace require 28,000 to 32,000 new engineers and technicians annually; the pipeline delivers roughly 8,000.
The constraint on American reindustrialization isn't capital. It isn't software on old businesses. It's people.
Everyone knows this. And nearly everyone assumes the same solution: universities need to do better.
This assumption is wrong.
Universities are doing exactly what they're paid to do. The problem is that no one pays them to produce talent.
I know this because I was a board member of a university's foundation, trying to figure out how to fix the university.
The misdiagnosis
The standard critique goes like this: universities are out of touch, slow, bureaucratic, captured by faculty who care more about research than job outcomes.
Which is true.
This frames the problem as incompetence — fixable with better leadership, more funding, smarter programs.
Which is also true.
But what if universities aren't failing? What if they're performing optimally — just against an objective function that has nothing to do with talent development?
To understand why higher education can't produce the talent reindustrialization needs, stop asking what universities should do. Ask what they're actually paid to do.
The mechanism: follow the money
"Show me the incentive and I will show you the outcome." — Charlie Munger
American higher education runs on something we'll call the Trinity. Three interlocking institutions — the federal government, accrediting agencies, and state authorization bodies — determine which schools access federal student aid. Over $122 billion flows annually through Title IV programs. That's the lifeblood.
The Trinity is supposed to ensure educational quality. In practice, it ensures something else.
The federal government
The Department of Education administers Title IV funds — Pell Grants, federal loans, work-study. They are the capital allocators. Funds flow based on enrollment. Students enroll, aid follows. More students, more funding.
What ED does not do is set academic standards. It's prohibited by law from dictating what universities teach or how they measure success. Instead, ED focuses on financial compliance: solvency ratios, audit requirements, administrative capability.
"Gainful employment" rules do require some programs to prove graduates earn enough to repay loans. But these apply only to for-profit institutions and non-degree programs — because some stupid and selfish people in the past took advantage of veterans and desperate people. So, we can't complain about that.
Traditional degree programs at public and nonprofit universities are exempt. A university can produce graduates who earn less than high school diploma holders for a decade — and face zero consequences to its funding.
The federal government pays universities to enroll students. Not to produce student outcomes.
Accreditation
To access federal funds, institutions must be accredited. Accreditation is the gatekeeper.
Regional accreditors — the bodies overseeing most traditional universities — are governed by committees of university presidents. The system is peer review: universities evaluating universities. I like to call them the "cartel," because in many ways, they function as one.
Institutions are evaluated against their own mission statements. A university that defines its mission as "fostering intellectual inquiry" gets judged on intellectual inquiry — not on whether graduates get jobs, or are at minimum competent. It is purely relativist.
Example: A program can graduate students into 40% underemployment, and the accreditor's only question is: Did you assess critical thinking skills per your stated learning outcomes? Check the box, keep the funding. I'm simplifying of course, but in many ways this happens.
Also, review cycles run seven to ten years. Skill requirements evolve in months. Accreditation operates in decades.
The reason I call it a cartel? The people in accreditation are all buddies — education leaders at other universities who sit on each other's boards and review committees. They pat each other on the back, if you know what I mean. Allegedly.
State authorization
States grant legal permission to operate. Some impose outcome requirements — Texas mandates 60% employment for certain programs. Most don't. Arizona has none.
And "employment" is a low bar. Imagine going into $80k of debt just to be a barista in your local town for almost ten years.
There's no federal mandate requiring states to hold institutions accountable for talent outcomes. But I don't really blame the states here. Let competition between them rise.
The result
Federal money flows to accredited institutions. Accreditation is granted based on inputs and processes. States rarely demand outcomes.
No actor in this system pays universities to produce talent. They're paid to enroll students, maintain accreditation, and stay solvent. That's what they optimize for.
What universities actually optimize for
Once you see the incentive structure, university behavior stops looking irrational.
This will piss you off.
What's financially relevant:
- Enrollment volume. Federal aid flows per seat filled. Marketing, amenities, brand prestige — all serve enrollment growth.
- Accreditation compliance. Losing accreditation means losing Title IV eligibility. Institutional death. Resources flow toward whatever accreditors measure.
- Research and prestige. For major universities, grants and rankings drive faculty recruitment and student demand. Neither correlates with undergraduate talent outcomes.
What's financially irrelevant:
- Job placement rates. No funding tied to it. No accreditation requirement. No consequence for failure.
- Wage outcomes. A program can leave graduates earning below high school medians for a decade with no impact on revenue.
- Employer satisfaction. Employers aren't the customer. Students pay before they know if the education works.
- Alignment with labor demand. The semiconductor industry needs 67,000 workers. Universities have no financial reason to care.
Universities aren't failing at what they're paid to do. They're just succeeding at the wrong game.
Why this can't fix itself
The implication is quite uncomfortable: asking universities to produce elite industrial talent is asking them to optimize for metrics that don't affect their funding.
No rational institution does that.
Reform from within would require universities to voluntarily shrink enrollment in high-margin, low-outcome programs and redirect resources toward technical training that's more expensive to deliver and serves fewer students.
They won't. Not because administrators are evil (many are, but that's a story for another day). Because the incentive structure won't let them.
And do you really expect a professor or a school administrator to be an efficient capital allocator for the program?
The system is working as designed. And that design has nothing to do with producing the talent America needs.
The case for a new model
The United States has bet hundreds of billions on reindustrialization. That bet fails if the talent doesn't materialize. And the talent won't materialize from institutions that aren't paid to produce it.
The incentives are too entrenched for current institutions to reform.
What America needs is a deliberate talent development model — one built on different principles entirely. And it can only work outside of accreditation and Title IV funds.
- Employer-driven design. Curriculum shaped by the companies who will hire graduates, not by faculty committees insulated from labor markets.
- Outcome-based accountability. Institutions paid for job placement and wage outcomes, not enrollment volume. Bonus if the talent they place exceeds benchmarks.
- Speed to competency. Programs measured in months, not years. Training that matches the pace of industrial demand. Graduates when they hit competency benchmarks set by industry — not bureaucratic credits.
- Skin in the game. Providers who bear financial risk when graduates fail — not students holding debt for credentials that don't convert.
This isn't a tweak to the existing system. It's a replacement for it.
And I'm all here for it.
Next time you criticize universities, just remember: they're doing what they're paid to do. The question is who will build the institutions America actually needs — and whether we'll let them.
I'm not waiting for anyone's permission. So I'm building exactly this.
It's too consequential not to.