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When they get to the real world, they'll learn that no one else cares about CS theory. No one else cares about whether P=NP. They just want the billing system to run, the accounting ledgers to add up, and the reports to look pretty, with colourful graphs that show the wiggly line going upward. If you do what the rest of the world needs, you get paid; if you don't, you don't.
Of course sometimes knowing about N=NP, big O notation, etc. is exactly what you need to get the job done.
I've encountered my fair share of fresh CS graduates who think they know everything and are terrible at their job. The thing is I've also encountered my fair share of non-graduates who've been working in the industry for years and think they know everything and are terrible at their job. I think a lot of this has to do with the person - rather than whether they come from an academic or industry background.
Universities are largely in the business of training grad students to become professors; any other education they provide is mostly just incidental.
Back when I was at uni I remember being taught tons of purely "academic" content. People I knew who were working in industry told me I'd never use it in the real world. Silly things like object orientation, virtual machines and garbage collection.
I certainly don't think a university education provides you will all of the skills needed to do the job. I'm actually glad that they don't since I don't think universities should be in the job of just vocational education. They do provide a bunch of useful skills though. IMHO as ever ;-)
In reply to Re^3: Worst blog post ever on teaching programming