ASPEN, Colo.—Tech investor Peter Thiel, who founded PayPal, told an Aspen Ideas Festival crowd Wednesday that while highly regarded institutions of higher education claim to benefit society as a whole, the ultimate worth of the degrees they confer is actually inextricably tied to deliberate, ruthlessly enforced exclusivity.

“What is the nature of the educational good?” Thiel said during an interview with David Bradley, the owner and chairman of Atlantic Media. “You could say that it's an investment good, where you're investing in the future, or a consumption good, a four-year party. I think that most parents and students think of college as an insurance policy, this ever more expensive insurance so that students don't fall through the growing cracks in our society.”

But to colleges, he continued,

It's not an insurance policy at all. It's a crazy tournament. It's a zero-sum tournament. If you were the president of Harvard or Stanford and you wanted to get a lynch mob of students, alumni, and faculty to come after you, what you should say is something like this: We live in this much larger, more global world. We offer this great education to everybody. So we're going to double or triple our enrollment over the next 15 to 20 years. And people would all be furious, because the value of the degree comes from massive exclusion. And what you're really running is something like a Studio 54 night club that's got an incredibly long line outside and a very small number of people let inside. It's branded as positive sum, everybody can learn, but the reality is that it is deeply zero sum.