Firstly, Thiel argues that society suffers when high-caliber people go through elite colleges and take positions at conservative organizations in old industries. He implies that society would be better served if more of these people went off to do startups or other cutting-edge organizations.
My rebuttal to this is: lots of elite college-trained people are going to startups. There is no system barrier between highly-trained (if somewhat conservatively thinking) people and cutting edge stuff. In fact, some of the most elite MBA programs are taking note of the interest among their students and creating programming specifically to help them enter that realm [1].
Also, what's wrong with highly trained people going into management consulting and investment banking? If talent gravitates toward these industries, it's not because peoples' training made them useless for any other purpose, but rather because of standard economics: people have a right to want to get paid.
Furthermore, I'd argue that Thiel is mistakenly conflating lack of sexiness with social damage. General Motors and JP Morgan are not startups, and few starry-eyed undergrads would dream of a mid-tier leadership role in such an organization over founding their own billion dollar company. But what's wrong with having competent and well-trained leaders in charge of these companies? They might not show up on the covers of popular entrepreneurship magazines, and they might not be the first do something sexy and innovative, but these sorts of companies do deliver a tremendous amount of growth and innovation to the economy. GM's size and distribution clout makes it as viable and worthy a source of innovation as, say, Tesla, and there's nothing wrong with training people to lead those productive if boring machines.
Secondly, on the topic of Obama's push for more higher education, I believe Thiel brings to the argument a Silicon Valley/disruptive innovation-centered view on what is actually a different problem. Thiel argues that talent is best allocated to new industries because they are the ones that produce "black-swan" type economic innovations. This may be true, but I think it fails to discuss a more systemic issue.
As few as fifteen years ago, American manufacturing represented a significantly larger portion of the economy, with a hiring demand to match [1]. As recently as two or three decades ago, a high school-educated person could live comfortably and securely on a manufacturing salary. Our economy is currently dealing with a decline of well-paying work for relatively low-skilled labor. We're transitioning from a work-based economy to a service economy where intellectual skills are most valuable.
The economic study establishment sees this. Obama sees this. Cast in this light, the spike in college tuitions is not the irrational bubble that Thiel attempts to portray, but rather a natural and unavoidable consequence of millions of people suddenly realizing that their futures depend on skills that until now only private colleges have been able to give them. Economically, subsidizing higher education is a natural response. Culturally, placing higher value on higher-tier educations is a natural consequence given the fact that simply having a degree is no longer by itself a marker of intellectual exceptionality. Hence the spike in demand for prestige.
The only way this country is going to transmute the legacy of its fantastic economic power from the twentieth century into correspondingly fantastic economic power in the twenty-first century is by successfully making a transition to a knowledge economy. People know this, and they're reacting en mass. Money is being poured by the bucketload into higher education. Radical experiments are taking place in education technology. Traditional institutions are rethinking themselves. This change is already in progress, and it's clear the solution is more focus on education rather than less.
[1] http://fortune.com/2015/01/03/business-school-startups-entre...
[2] http://www.usitc.gov/research_and_analysis/documents/Pierce%...