This past week, a co-worker of mine had her last day at work. She was leaving the company to attend business school. While I was happy for her, it got me thinking about my own experience applying to business school and my eventual decision not to attend. Many people I know have attended business school. I often tell people that I am the only one of my Princeton friends who did not get some sort of higher-level degree. It is absolutely true, no exceptions.
So you would think that someone like myself, ambitious and smart, would have done like my friends and gotten an MBA. But things for me were never that simple. So I decided to outline why I think someone contemplating going to business school should perhaps think twice about making a decision like this.
First off, let me give you a brief account of my own decision. I only applied to two MBA programs. Harvard and Stanford. These are two of the top four business schools and the hardest to get into (Penn and Northwestern being the other two). The chance of success is quite small. While this may seem crazy on my part I definitely had my reasons. Like most things, it came down to money.
At the time I applied to B-Schools I was already making six-figures. The average starting salary now for a Harvard MBA is $120,000. When I applied five years ago it was even less, averaging right about what I made. So just do the math. Attending a top-tier business school will cost you somewhere in the ballpark of $200,000 for two years. You add that to the opportunity cost of someone like me (lost salary) and now you are looking at something close to a cost of $400,000. Yikes! Now consider that on average, I could not expect to make more money upon graduation. How would I ever make up the $400,000 difference? The numbers get even worse at less prestigious universities. Their graduates can expect to earn less. So now you see why I did not apply to other schools.
So if I am not going to go to make more money, the only other reason I would go is to get a job I might otherwise not be able to get without an MBA. I have two potential career paths. I either want to start my own business or I want to be an executive at a large technology company. The goals are similar in that I want to be the boss at a high growth and exciting technology company. The paths are only different in the risk I'm willing to take to get there. Do I need an MBA to do either of these two things? Not really, but it would have made it slightly easier.
Starting my own business obviously does not require an MBA. However, getting one has two advantages. First, I would focus on classes in entrepreneurship. Even today, I'm not totally sure where I should start if I really wanted to start my own business. How would I go about making a business plan? How would I get funding? What are the pitfalls I should avoid? Second, it is all about the network. It is a very big reason to go get an MBA. The circle of friends and colleagues you will encounter will go well beyond your two years at school. These are the people you will count on to tell you of new opportunities or help you get your own business off the ground.
But when I looked at it, the benefits just did not outweigh the cost. If I was realistic, I thought I could get where I wanted to be without having to put everything on hold for two years. Here is a dirty little secret of the top MBA programs. Those who are most likely to attend are often the people who probably need it the least. It is a strange situation in that you have to show the schools why you need to attend their schools to achieve your goals but you have to be the type of person who can succeed given almost any circumstance. How is that for irony?
In any case, the bottom line is that you should not get an MBA if it does not actually make any financial sense to do it. Just do the math.
Lifetime incremental increase in salary > Cost of MBA + Lost Income
Keep in mind that it is the incremental increase you could not have gotten if you did not go get your MBA. If you did not get your degree, you would still get raises at your current profession. So you have to think of the total amount of money you could gain above and beyond what you would normally be able to do.
For completeness, here are some other reasons not to go get an MBA. These are actual reasons I have heard given.
- You don't know what else to do
- Everyone else you know, friends and family, have an advanced degree
- You are tired of working and just want a two year break
- Might as well, you don't have a job currently
- It is expected of you
- You want to move across the country and your parents will foot the bill for school
Hi Terrance, thanks for blogging. I worked for 5 years in Armonk, NY for a company that I will not name here. Coming from an engineering background and a track that I did not wholly enjoy once I started working, I decided to take a break for a couple of years and learn something about the business world. So last year, I moved cross country (a calculated risk to expand my horizons and see a strange land) and started taking information systems classes at UNR in in the school of business.ReplyDelete
Business school is not for everybody but I can honestly say that I have learned so much useful knowledge in broad business categories. I have met so many wonderful students and faculty members who have challenged and encouraged me. It was nice to have time to do academic things such as think, debate, research, write, read books (at least 2 per month), and leave the 9-5 world and explore new ideas and learn new things. I'm the kind of guy that needs motivation to learn, so the univ. environment works great for me.
Lastly, I wanted to comment on the prestigious universities. Why is it that you must attend one of the top b-schools to "make it?" I considered higher ranked schools but like you said the costs and admission competition put me off. I have found a great value in a state school here and my wife is the only one working right now but we are able to pay off our tuition without taking out any loans, scholarships, or grants and know I can leave here with no debt. I have found the level of education to be very good. I strongly believe you get what you put into education. A man can attend Stanford and get nothing out of it, and another man can attend a tier-3 state school and get a treasure trove out of it. In the end, I have faith that I am going to make it once I leave here. For me it's not the jobs or the money, but what I have learned here and the relationships that I have made that will determine whether or not my investment was worth it.
thanks for your thoughtful comment. I am a strong believer, like you, that you can get a great education no matter the name on the diploma. While I do think attending a prestigious university has some advantages, they do not outweigh what an individual student puts into it. People who are going to be successful are going to be successful and where they went to school probably has less to do than individual drive.
But for me, it was simply a matter of the odds and eventual payout. Like I said in my post, the probability of landing a high-paying job increases at the "better" schools. It is not impossible to land a job at Goldman Sachs or Google but your odds are better. The stats at the school bear that out.
But even with this, it still made no financial sense for me. I make too much money now. Further, in my current career path, there is very little stopping me to get where I want to go without an MBA so why would I get one? (I'm a director now, will in all likelihood make VP in the not too distant future)
Given what you said, I think you absolutely made the right choice for yourself. But for me, it just didn't make any sense.
You just named all the reasons my friends had given me on why they went to grad school; Of course for most, it was the "no job so why not...."ReplyDelete