23 Predictions for 2023

23 Predictions for 2023

They say that the more things change, the more they stay the same. At Stonks, we sure hope that’s not the case. After all, we strive to expand the “inner circle” of VC and build the simplest, fastest onramp to startup investing.

Though these predictions posts are often a product of December, better late than never. More, per Mike Ditka, “If you live in the past, you die in the past.”

With enough feedback, input, and/or hate mail, we may welI do a recap a year from now to see what’s what — the good, the bad, the ugly.

To form this list, we partnered with someone whose intellect is as deep as it is wide: Chris Truglio. Chris is a jack of all trades and master of many . Among other things, he is a serial founder, active angel Investor, venture partner, startup advisor, and (most importantly) good friend of Stonks. Chris loves partnering with VCs and founders alike, leaning on his front-line experience to help them achieve their goals, all while having a little fun.

Without further ado, Chris’ list!

Macroscopic / Meta Thoughts

1. Is it over before it even begins? "Forward looking" is the theme of 2023.

2023 will be more shock therapy than a breath of fresh air, but either way, key global narratives over the last two years have been dominated by headlines litigating the past and looking in the rear view. Gone are the days of "will this bull market last forever?" and "will covid end the world?". A recession is likely imminent by all definitions, and look for companies to focus their bull case narrative “in 12 - 18 months” and “starting in 2024."

With borrowing money no longer free (#RIP growth-at-all-costs), legitimate cost-benefit decisions across every industry will need to be made –  and putting more thought behind deploying capital than YOLOing FOMO will be constructive towards stabilizing the global economy in the long-term.

Venture Capital

2. Generative AI is the Next Bubble

ChatGPT is an incredible consumer-facing product milestone that will have wide-spread ripple effects across the entire private investment ecosystem. LPs will continue to ask “what about AI?” when reviewing their investment portfolios, and funds will feel the need to ride the “unprecedented opportunity” presented by the overarching AI theme.

Watch for numerous copycats in the generalist consumer generative AI (whoa, that’s a mouthful!) space to get head scratching amounts of funding without the existing sales, traction, or business plans to support ballooning valuations. Social Media generative AI is the most natural landing spot for this influx of capital, as the market for “companies big and small to fully automate their social media content” is a pain point that hits close to home with private investors alike.

Where there’s froth, there’s usually some fire, but winners in the space will focus on industry-application depth over conversational-consumer breadth. Generative AI for specific industry use cases, especially around reducing customer support overhead, automating help desk ticketing, and refining customer FAQs will reduce the time people spend waiting on queue or having to deal with less than perfect manually setup chatbot decision trees.

Bank on the back-office. AI will make significant strides in automating highly manual business processes, but expecting some algorithm to effectively change the entirety of your outbound sales operations is still years away.

3. 2022 layoffs were the tip of the iceberg.

Despite the numerous headlines of 2022, only 90,000 tech workers were laid-off in 2022. With over 5 million people working in tech, that represents less than 2% of the entire workforce.

2023 is unfortunately off to a blistering start. On one day in January alone, Amazon laid off 18,000 employees on top of 8,000 at Salesforce, with other smaller companies hopping on the “reduced overhead” train. Google’s continuing this trend into the back-half of January after recently announcing layoffs of 12,000 – marking a grim reality that employers of all sizes are reconsidering total headcount.

But is it enough?

18,000 is a lot of people, but with a global employee count over 1.5m (Q3 2022), Amazon’s layoffs only reflect a ~1% reduction in workforce. And Salesforce cutting headcount by 10%... why 10%? How did Salesforce come up with such a precise formula to determine that letting go of 10% of their employees is the optimal solution?

The growing consensus amongst tech leadership teams has converged into the following pattern:

  1. Company B leadership discusses if they need to do layoffs because Competitor A, and everyone else, is announcing layoffs.
  2. Board Members and Investors ask Company B leadership why the company hasn’t done layoffs yet and strongly recommends their stance to adjust to present day reality.
  3. Company B comes to “very tough decision” and announces 10 - 15% reduction of workforce.
  4. Company C leadership discusses if they need to do layoffs because Competitors A and B, and everyone else, is announcing layoffs.

This initial wave of layoffs has been a proactive positioning exercise, not a reaction to existing economic conditions – and that’s because they haven’t arrived yet. Although threats of a recession have continued to intensify, the market as a whole has managed to stay relatively stable. Even if stock prices and pro forma projections have fallen off a cliff, current sales haven’t yet (and hopefully they don’t).

But if the market does take a turn for the worse, look for companies to initiate additional rounds of layoffs, and at an unfortunately deeper cut based on how badly their individual performance.

To be explicitly clear, I’d be ecstatic if further mass layoffs never materialized. Having someone’s life turn upside down in a moment’s notice and threaten their ability to provide for themselves and their families is just awful. I hope I’m wrong, but as executives look to weather a recessionary storm, continuing to reduce headcount is an unfortunately byproduct of any company’s fight for survival.

4. Africa is the next VC Frontier.

Africa has been quietly gaining momentum as part of the VC landscape. African startups raised $3.5 billion in H1 2022, up 130%+ from 2021. In absolute terms, that amount ($3.5B) represents only 1% of global VC funding during that same time period. Stonks has been hot on this trend for some time now.

With down rounds leading headlines elsewhere globally, Africa will continue to see strong growth & inflows of capital. Techstars opened its doors to Africa in 2022 (Lagos, Nigeria). Even as the global macro environment continues to retract, the future looks as bright as ever for Africa’s blossoming tech scene.

5. Seed-stage startups continue to surge.

For the sake of argument, let’s consider companies that have raised less than $1M and/or have a valuation roughly less than $15M as a “seed-stage startup”. Seed-stage startup valuations and deal sizes will continue to climb, while total deal value and count declines. Pre-revenue companies without any business model or path to profitability will struggle to raise capital in the face of a global market pullback, but for seed investors, many don’t have any other option.

Companies with strong early traction will be rewarded with massively-oversubscribed rounds and egged on by an echo chamber fueled by wishful thinking. That’s not to say it’s a bad thing, as investments at these earliest stages typically cover a five to ten year time-horizon. Companies raising funds now should theoretically benefit from a surging market just as they’re ready to exit.

Look for late-stage growth VC activity to fall off a cliff. Companies that raised in 2020 - 2022 will stubbornly run their company to the brink of bankruptcy rather than take considerably less money at a 60%+ haircut to their prior round (i.e. bull-market-top) valuation. Cash reserves for private growth stage companies that delay raising will be nearly depleted towards the end of 2023, and many will roll the dice in the debt markets than continue hoping to hit the equity jackpot.

6. Mega-deals pick up in Q3.

After strong growth & unit economics through the first two quarters of 2023, the “let’s see how you’re impacted by the recession” sentiment will turn into excitement as strong performers will continue to be rewarded. No one knows how long a potential recession may last, but late-stage investors can’t sit on the sidelines with dry powder forever. For better or worse, companies & investors alike will adjust to the new realities of the market in 2023 and feel confident that “the worst is behind us” and start pouring gas onto a waning fire like it’s 2019.

Will mega deals return positive venture-like gains over the coming 24-36 months? Or will they be a catastrophic misallocation of funds fueled by hopes that 2023 is a blip on the radar and the markets return to the not-so-normal, new-normal, of the last five years?

The answer is probably a little bit of both. Great companies & investors will continue to outperform, while other late-stage investments driven by dwindling fund horizon mandates will continue to agitate underperforming LPs.

Only time will tell.

7. A record number of unicorns go bankrupt.

How distorted has the unicorn wave of the past ten years become?

# of Unicorns (i.e. companies valued by private inventors at $1B+)

*In 2013, TechCrunch considered unicorns “US-based software companies started since 2003 and valued at/over $1B by public or private market investors”.

The last 10 years have produced 30x the number of unicorns, and even that number is skewed.

Unicorns were so rare that TechCrunch considered the entirety of software companies throughout a 10 year period, both private and public. Today, unicorns are so common the criteria has shifted to current, private companies valued at $1B+ at the time of reporting. Factoring in the entirety of new private software companies being valued at/above $1B at some point over the last 10 years, the actual number is likely closer to 1,500+.

In all fairness, technology companies have dominated the global ecosystem over the last 10 years, with developments making exponential improvement year-over-year. “Technology” is now table stakes, where any new company is inherently expected to have some differentiating technological aspect to it, alongside legacy players making massive investments into their own technology & systems as well.

With that understanding, 2023 is going to be a record year of reckoning for undeserving unicorns – companies that should have never been valued at $1B to begin with, burning through cash – unable to find either investors willingly throwing away more money, or potential suitors in an acquisition. While raising at 100x ARR was fun while it lasted, it will consequently expose a large number of private companies that never should have been there to begin with.

The below chart in the context of today’s valuation-crazed private markets…wild.

8. First-time VC funds hit a thirteen-year low.

2023 is going to be tough sledding for first-time VC fund managers looking to embark on their own journey. Risk-averse LPs, who make up the backbone of the funding-behind-the-funding within Venture Capital, will politely forgo investing in unproven VC firms and theses. As existing funds fail to turn unrealized paper gains into realized cash distributions, LP risk appetite for the unknown will come to a screeching halt.

VC as a whole has become increasingly commoditized as of late. In the face of uncertainty, on top of existing funds that are increasingly underperforming, LPs will flock to the traditional methodologies offered by disciplined Private Equity managers who are gearing up for a flurry of cash-flow based turnaround stories. 2023 will be a record year for Private Equity funding, as LPs reallocate their alternatives strategy from VC → PE.

With 93 new VC firms open for business in 2022 (the slowest start since 2010), 2023 will prove even more grim as potential LPs holdout further to “see how the economy shakes out before committing."

9. Back to the blockchain.

Before crypto devolved into a pump & dump shitcoin narrative over the last 24 months, a more promising technological breakthrough existed with the potential to redefine how everyday transactions are recorded across various industries

With the FTX implosion and the full effects of crypto contagion still unraveling, 2023 will be marked at the year where the blockchain started to make strides towards legitimacy – with real companies building enterprise-grade products to set the foundation for what digital records of ownership look like for future decades.

Just for Fun: A screenshot from my Coinbase Wallet App in November 2021 (Yes, that’s $5 Trillion with a T).

Did I try to cash out?   Yes, immediately. Nothing greedy, just an attempt to convert $50k of Tiger King Coin into Ethereum.

What did I actually get?   $500 burnt in gas fees and absolutely nothing. Poof. Shades of FTX, Gemini, and Genesis…

Big Tech

10. Microsoft buys Notion.

Microsoft—so hot right now.

How much does Microsoft love ChatGPT? Enough to invest $10B (reportedly) into parent company OpenAI – in addition to potentially integrating ChatGPT into perennial laggard search engine Bing. Microsoft is clearly on the offensive and they’ll look to continue building momentum and directly competing with Google/G Suite by purchasing Notion.

OneNote is fine, but extremely limited when compared directly to Notion. For those who aren’t familiar, Notion is all the rage right now (spreadsheets, within spreadsheets, within spreadsheets). It’s an extremely powerful tool that can be used across every facet of your personal and professional life.

OneNotion – I can see it now. Imagine taking the endless integrating power of Notion and allowing those Notion databases (spreadsheets) to actually reference full Excel spreadsheets. Companies already use Notion in part for some of their own website pages… why not directly embed a ChatGPT bot and have escalated customer support issues flow directly through to Microsoft Teams?

The possibilities, defensibility, and long-term upside of a Microsoft and Notion marriage are endless.

11. It’s Amazon Prime Time.

Amazon quietly opened its first movie theater in Culver City, CA in December, with plans to spend $1 billion annually to push Amazon Studio productions into theaters. But Amazon is obsessed with growth and they have a knack for meeting consumer demand before it exists.

Amazon will see strong early traction at the Culver Theater, and quickly realize how broken the existing film distribution model is within the existing infrastructure.

Introducing: Amazon Prime Time

Amazon execs will get frustrated with how slow and expensive rolling out their content is to existing brick & mortar facilities and make the logical move to get immediate national distribution by buying an existing movie chain. The prospect of spending $1B vs buying an existing chain for $1 - $2B is almost a no-brainer, as Amazon.

Amazon Prime Time will become a state-of-the-art viewing experience, with a dedicated entrance and seating area for Prime members. Implementing their existing AmazonGo technology, Prime moviegoers can easily walk into their dedicated concession area, take as much as they want while skipping the logjam register line – never having to miss a minute of previews / screen time again.
Prime Video is technically free, bundled with the laundry list of other Prime benefits, so the majority of their revenue will come from concessions, while still allowing non-Prime members to purchase tickets at the door (while also incentivizing them to sign up for Prime on-site at a discount. Brilliant). Historically, 20 - 35% of movie theater revenue comes from concessions, whereas the other 80 - 65% is through direct ticket sales. By giving free access to movies Prime members can already watch at home, Amazon flips the script and reports 95% of Prime Time revenue from concessions, with the other 5% from non-Prime member ticket sales.

12. ByteDance is forced to sell TikTok.

Pressure to ban TikTok intensifies by presidential hopefuls from both sides, for no other reason than it polls well with moderate parents who still don’t fully comprehend what TikTok is. China hardline rhetoric continues to build as we move closer to 2024, and in an attempt to boost the Democrat’s chances at securing the White House in 2024, Biden lays down an unprecedented ultimatum that TikTok will be banned unless its core operations are moved outside Chinese borders.

Despite the US economy plunging into a recession, demand for TikTok’s public market debut ($TTOK) spreads like wildfire, with the analyst community echoing “this will be the biggest offering ever,” fetching $30B+

But the core issue behind any ban is where the story gets interesting. As bankers start to look further into the deal, TikTok has a difficult time meeting specific, yet vague, demands by the US gov’t on how they’ll address security concerns over their Chinese-based IP.
All heil the White Knight of Privacy: Apple. On the cusp of TikTok’s IPO implosion, Apple acquires TikTok and vaults itself into rankings of social media’s elite. The AI-generated suggested albums/memories from Apple have made dramatic improvements over the years – and now they have a fully-integrated distribution platform to capture the remaining TikTok holdouts (Hi Mom & Dad!) while creating a content flywheel behemoth. In seamlessly delivering iPhone generated short-form videos from Photos to TikTok, Apple now has an asset in TikTok that caters to both professional creators & personal audiences alike.

13. Drop the "Zuck." Mark Zuckerberg spins-off into the Metaverse.

$META is a tale of two realities – one an extremely profitable, cash-flowing conglomerate, the other, a standalone cash-burning alternate universe.

2022 was an important maturation point for Zuckerberg and Facebook, with a 13% headcount reduction marking the social media giant’s first layoffs in its 18-year history of existence. This move may have abated activist investors temporarily, but with 2022 cash flow down ~60% from last year, Meta has serious issues heading into 2023 by dumping money into a Metaverse project that increasingly alienates investors by the day.

Meta’s greatest tailwind is the hopes of an outright TikTok ban, as Facebook/Instagram would be the greatest direct beneficiary from such a crippling blow to social media’s competitive landscape. But TikTok has become so entrenched into the fabric of US social media that if a ban morphs from a threat into reality, it’s hard to see how TikTok doesn’t resolve those issues to remain operational in the US.

The day the TikTok ban is announced, Meta shares will jump 15%. And shortly after when it’s announced that TikTok will spin-off from Chinese parent company ByteDance, Meta will crater down 25%+. In a last-ditch effort to convey their focus on present-day social media trends, Meta makes a bid for BeReal that sends investors into a frenzy for trying to overpay for an asset with zero path to profitability, let alone revenue generation.

Even though Zuck technically controls his own destiny with more than 55% of the company’s voting shares, pressure from the public markets will force his hand. Zuckerberg announced that the Metaverse division is officially spinning off from Facebook (along with $10B off the company’s balance sheet), giving investors the clarity they’ve been begging for from the advertising giant.

14. Twitter will be fine.

The media grasps at every potential storyline possible to make Twitter sound like it’s about to collapse. Elon Musk isn’t some trust-fund baby who accidentally got way in over his head – he’s as shrewd an operator as anyone in the history of business, period. He’s tackling some of the most complex challenges in human history on, under, and above ground, with a recurring pattern of delivering exceptional user experiences Musk is more likely to lose $25B from Tesla getting crushed in the public markets than he is to crap out on his personal investment from the Twitter deal.

Despite a buyout at a near market-peak valuation of $44B, Musk’s changes during his brief tenure as Chief Twit would likely already yield a positive return on his investment.

  1. Adios advertisers – Prior to the takeover, Twitter hauled in $5.2B of revenue in 2021, with $4.5B of that coming from advertising. At worst, let’s assume that Twitter’s advertising revenue decreases by 50% in perpetuity, because companies distrust Musk more than they care about their paid conversion metrics on the platform. (Revenue down $2.25B).
  2. Headcount & OpEx Reduction – With Twitter “losing $3M per day”, Musk came into San Francisco swinging harder than Barry Bonds in 2001, with headcount reducing from 7,500 to around 2,700 between layoffs and voluntary resignations. Factor in additional budget cuts in unnecessary spend, and Twitter brings itself to cash flow neutral. (Expenses down $1.0B)
  3. Twitter Blue – The ultimate pay-to-play. With a monthly price tag at $8/month, Twitter Blue is the first of many potential innovative revenue streams that will be the core of reshaping the Twitter turnaround story. Of the 368M monthly active users, assume only 10% (3.7M) opt-into the paid verification feature. This more than makes up for the loss in advertising revenue, ushering in a fresh revenue stream for Twitter to continue iterating upon. $96 Annual Revenue/Customer * 3.7M Blue Checks. (Revenue up $3.5B)

These changes alone would result in a net profit increase of $2.25B

Any press is good for social media – Twitter/Musk reported the highest number of daily active users (259M) in the history of the company since Musk took over. When the time is right, Twitter will re-enter the upswinging public markets in early 2025 with steady (and positive) cash flows, growing revenue, and as engaged a user base as ever.

Markets & Economy

15. M&A activity skyrockets.

Regardless if Twitter exits successfully or not, the extraordinary headcount reduction is a thought experiment that has Private Equity smelling blood in the water. On a personal note, I’ve always wondered “how many employees do some of these tech companies actually need?”. We’re about to find out.

Private Equity is notorious for running lean, efficient deals with a high-probability to achieve at/above their target return. Overstaffed tech companies are the perfect untapped market in the face of a recession – high margins (90%+), repeatable recurring revenue (ARR), and often have comfortable, growing headcount in anticipation of a growth market.

Tech companies dragging their feet too long to avoid raising venture funding at lower valuations will end up in a cash crunch quicker than they realized. At this point, venture will no longer be an available option and in the face of bankruptcy, Private Equity will sweep in to buy supermajority control before righting the ship and efficiently executing the way tech executives, who have only operated in a growth environment, are unable to.

16. US unemployment exceeds 6.0% by year’s end.

With bubbles bursting across public and private markets, only Wall Street and Silicon Valley have felt the brunt of this pullback. Despite these corrections, Main Street has largely yet to be impacted to the same degree as their white-collar counterparts.

US unemployment is still at levels we haven’t seen since the Jets won the Super Bowl in 1969. The Fed will use whatever means necessary to get inflation under control, and rising interest rates alone won’t be enough. Broad-based unemployment will climb at an alarming rate throughout the year, and Q3 – Q4 will mark peak unemployment rate acceleration in Q3 after the summer is plagued by a surprise decrease in consumer spending as the “pent-up covid demand” narrative evolves into consumer spending fatigue.

But there is a silver lining.

Although markets might be significantly more turbulent, the intensity, and duration, of a recession would hopefully look more like the Dot-com Bubble of the late 1990’s, rather than the Great Recession from 2007 – 2009. There’s a major difference between an overheated market vs the threat of destabilizing an entire financial system. This time feels like the former and although it will be painful, it won’t be permanent.

Side note – in the face of companies aggressively cutting costs, the demand for remote work marches on. Companies will abide, but not how local employees are expecting. If a company adapts their needs to support a remote workforce, why does that workforce need to be based in the US when candidates can be sourced globally at the fraction of the cost?

Be careful what you wish for.

17. US IPOs surge.

After going ballistic in 2021, IPO markets were colder than the crypto winter in 2022. Despite a recessionary environment, increased IPO activity in 2023 will be driven by necessity more than opportunity – with the caveat that activity will be driven by real companies with actual business models. The SPAC-a-daddle-doos of yesterday will continue to fade like a distant memory.

Late-stage private companies will see valuation haircuts in excess of 50% – regardless of raising private or public. When faced with this reality, leadership teams will buck the trend of staying private for longer, while injecting some much needed liquidity and discipline. The silver linings will be twofold in this shift: early employees with equity that isn’t underwater will have welcomed  liquidity, while management teams are held accountable by public markets.

Execute with a path to near-term profitability, or face the consequences.

18. Home prices drop precipitously (i.e. -20% YoY) by year’s end.

Housing markets are one of the last shoes to drop during a recession. The overall narrative behind the housing market looks bleak:

  • The number of homes sold continued to drop throughout 2022, reaching its lowest* monthly level since 2010 (*excluding temporary covid low in May 2020).
  • Inventory continues to build, as new sellers enter the market and compete with existing inventory – with both anchored to the unattainable asking prices from the last 2 years
  • As interest rates continue to rise, mortgage rates continue to rise. Prospective home buyers simply can't afford monthly payments what they used to be at current price levels.

Time is the enemy for prospective sellers who don't have the luxury of holding onto a second mortgage and are forced to come to terms of settling at current market rates.

19. Interest rates stay at 5%+ through the end of 2023.

Consensus amongst analysts is growing that 2023 might begin to see rate cuts towards the end of this year. But want doesn’t get. The risk here is the overwhelming sentiment that if 2023 goes into a recession, it will be short lived. No one knows how long a potential recession may last, but given how wildly hot the market has been in recent years, a recession needs time to cut deep enough to return the market to sustainable equilibrium. Near-zero interest rates aren’t the norm and we’re not going back there for the foreseeable future.

After a strong holiday season, inflation will overstay its welcome continuing into 2023 and stubbornly refuse to go away. If there is any possibility of a rate cut, it won’t be at nearly the rate interest rates went up, and overall it won’t get rates below 5.0%.

20. Consumer bankruptcies skyrocket.

The combination of long-term inflation, rising interest rates, prolonged unemployment, and record credit card debt is a recipe for disaster. Humans are predictable and easily get set in their ways, especially when their ways are excessively comfortable.

Americans have decreased savings at an alarming rate, and the rainy day funds will run dry as they realize their credit card balances are beginning to spiral out of control.

No money down.


Buy now, pay later!

We’ve bought. A lot. Now what happens when it’s time to pay?

3 Bonus Predictions (because 23 Predictions for 2023 makes sense)

21. Top Gun: Maverick wins Picture of the Year.

And the Academy Award goes to…

Outside of the Marvel Universe, movie theaters have failed to regain any semblance of their pre-pandemic levels, until now.

Maverick’s triumphant return to the big screen exceeded all expectations, and had all the timeless elements of a motion picture for audiences young & old. Look for Top Gun: Maverick to be cemented in history as the first movie to capture both Best Picture and Top Grossing film in the same year since Titanic (1998).

22. Daylight Savings Time is canceled in 2023 and promptly reinstated in 2024.

In March 2022, the Senate unanimously (yes, unanimously) voted in favor of the Sunshine Protection Act, however, the bi-partisan bill oddly stalled in the House and has since become an afterthought. When clocks spring forward in March, Politicians on both sides will bring the bill to light as they search for easy victories to proudly present to their constituents. The result – March 2023 will be the “last time Americans are forced to endure the dangers resulting from Daylight Savings Time.”

Reversing a law from 1918 originally enacted to give farmers more daylight for harvesting crops at the end of World War I makes sense in theory – electronic lighting is universally available. You’ll hear more about the data & studies conducted supporting this change, specifically around the week immediately following Daylight Savings – where traffic accidents, workplace injuries, and even medical errors all increase. This is an outrage, why haven’t we done this already???

Although there’s evidence, some stronger than others, supporting these claims, there’s no empirical evidence on what the effects will be if we don’t adjust the clocks. If Daylight Savings were to permanently disappear, winter mornings could become unbearably dangerous and the season overall depressing. For the entirety of December and January, the sun wouldn’t rise until after 8am. Woof.
When the drawbacks of morning darkness and seasonal depression are measured over months (not loosely over one week), the data will paint a different picture – changing the clocks is actually good for American society. Yes, there are unavoidable reactions resulting from changing our clocks, but those events are during a concentrated time period and relatively minimal when compared with the cumulative negative trends of starting every day in the dark. After mountains of data is released and the 2024 Presidential Election in the rear view, the Senate will vote to repeal the Sunshine Protection Act, and we’ll be falling back as usual in November 2024.

23. The US Department of Education standardizes college rankings.

From the recent Varsity Blues admissions scandal to unsustainably ballooning student debt, the US college system needs serious change.

Since 1983, US News & World Report has become the most influential source for college rankings. These ranking systems were helpful during the printed magazine era’s of the 1980s - early 2000s, but have since devolved into creating “perverse incentives” where colleges inflate self-reported statistics to climb the ranks. When Columbia dropped by 16 slots from #2 to #18 after getting caught inflating its numbers, it highlighted how arbitrary and meaningless the rankings themselves truly are. Columbia abruptly went from “elite” to “great” because of reasons having nothing to do with the quality of education.

With over 4,300 higher education (i.e. colleges and universities) across the country, the collegiate rankings industry has wildly profited off the participation-trophy mentality of the last decade by creating irrelevant rankings and mindless criteria that distort the intrinsic value of higher education (looking at you, Reefer Madness). Imagine if $250k mortgages were given as freely to 18-year olds as they were for college – at least with mortgage repayments you’re building in equity in something you can resell on the open market one day.

A quieter recent trend will continue building momentum in 2023 – challenging the college rankings status quo. Since November 2022, the country’s most prestigious Law Schools (Harvard, Yale, Berkeley, Stanford, etc.) have announced they are no longer participating in the US News & World Report Law School Rankings, citing how profoundly flawed the ranking system has become. Earlier this month, Harvard Medical School followed suit, and it’s easy to see the entirety of Harvard’s undergraduate and graduate programs taking a unified stance.
So where does the US government get involved? According to Nerdwallet, 92% of the $1.75 Trillion in outstanding student loans are owned by the US Department of Education. Student loans need greater accountability before being issued blindly, and formalizing specific criteria behind these approvals is the next starting point. As colleges opt-out from traditional ranking providers in troves, the Dept of Education will concurrently create a quantitative data structure that can be used to objectively rank colleges going forward.

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