Is an MBA relevant? Yet another perspective
A question that frequently pops up here is whether one should suspend a short yet thus far successful finance career for two years, and spend a load of cash on a top MBA program. In a recent discussion, a very insightful user provided 5 arguments against it: cost, lack of relevant skills taught, students already have what they are buying, no job guarantees and dubious effect on career progression.
This user typically comes with very good insights, and this one specifically motivated me to try and offer a different perspective on his arguments. Bear in mind that I do hold an MBA so my speech may be biased. But I honestly believe these opinions are path-agnostic. Here, I try to take a career-centric view, as opposed to the job-centric view that prevails (which is natural given WSO’s recruiting-heavy focus).
(1) The argument: “The cost. Opportunity cost + tuition will easily break 500k if you are leaving a relatively well paying job.”
My answer: Yes and no. First, as someone mentioned in the original thread, non-tuition expenses fall relative to life in finance, and remember that your own experience may create anchoring at values that aren’t necessarily near the average. But even if the math makes sense, that cost isn't always irrational, because lifetime decisions must be analyzed beyond the cycle. I'm sure many kids who decided to go for a MFE instead of an MBA, in the 2003-2006 era, when the industry created thousands of credit/ABS positions per quarter, regret it bitterly now. Maybe they are attending an MBA program as you read this. No matter how much you believe you have a great job in a great firm for which you will work forever, chances are that at some point you will get fired, your team will underperform, your market will stagnate, something you're short will climb 20-fold in your face, I don't know, some crazy shit will happen, life is hard. In that regard, an MBA is a partial insurance against unemployment, recession, industry shift, destructive innovation, et caetera. It is undeniable that your geographic/sector flexibility increases significantly when you have a top shelf MBA stamp in your resume. As in all insurance payments, the premium seems irrational, but the contingent event you are trying to get insurance against is really shitty, maybe more so than a car accident or a house fire, once you’re used to the good life.
(2) The argument: “Lack of actual skills. Very little in a MBA curriculum directly applies to high finance. Even targeted programs (Columbia's Heilbrunn, for instance) are largely inferior to top tier work experience. I would take a job at Baupost (or just a reputable value firm) over a MBA any day.”
My answer: No. First, I have trouble understanding what "high finance" is. Is that knowing how to integrate your Excel models with MATLAB so that your algos are plugged into valuation models? Is that being II-ranked, because in addition to having insomnia and sending tons of e-mail to clients, you also happened to get your targets right this year? Is that making more than 500k a year because your book became beautifully green after the December rally? Is that working for a prestigious firm and ignoring the dollars that all that prestige you brag about remove from your bonus and become partner surplus value? Those are things that only people in the first decade of their careers waste time over. Honestly, no matter how tangible the financial learning curve is in the first years, as time goes by, all knowledge of financial models and concepts become mere tools. Having a solid understanding of those tools continue to be important, but knowing people, understanding motivations and grasping concepts outside your comfort zone (such as the boring MBA core shit: Organizational Behavior and Marketing) become the differentiators. Money? Whatever. If you worked hard enough in your first decade, created a good network and by now people recognize your personal brand, you know that it will come your way eventually. Maybe 10M, maybe 100M, maybe 10B. But it will come.
(3) The argument: “People already in finance likely already have the requisite brand. The Ivy ugrad with a BB job does not really benefit from the prestige associated with a M7 MBA - he already has ticked the "smart enough" box.”
My answer: Mostly yes, I’ll give you that one. My only counterpoints are (a) not everyone in finance is a Ivy UG with a BB job - and I acknowledge you used the word likely - so it's not an absolute truth, (b) as I mentioned above, your permanence in finance forever is not a given, (c) I've had the opportunity to interviewing, report to, supervise, or otherwise work with Ivy UGs that are so imbecile that I have a hard time believing they possess the same number of chromosomes as myself. The “smart enough” box is *more often* ticked relative to the general population, not always.
(4) The argument: “No guarantee of a job on graduation. Wall Street is shrinking. If you already have a stable job in finance, you should really think hard before leaving it. Remember the joy of undergrad recruiting? Now you get to that again!”
My answer: Yes. No doubt about it. If any of you have a good job in a reputable institution you would want to work for after an MBA, don't leave it for an MBA unless you're sponsored, it makes no sense. An MBA is like priesthood or medical school; you only do it if you are absolutely sure that it is the right path, because the cost of being wrong here is indeed quite high. That being said, you should think about it more carefully once (a) you approach an old-for-MBA-young-for-EMBA age and (b) you realize that maybe your firm / sector / job is not that fantastic as it sounded 2 or 3 years out of college. That is because "stable job" and "Wall Street" in the same sentence sound really like an oxymoronic combination.
(5) The argument: “Doesn't really help career progression. While a few PE firms require MBAs for partner track, many do not. And I do not know of any banks that require it to be promoted to associate.”
My answer: Yes and no. What is career progression? Your first promotions, analyst to associate, then associate to VP sure require a shitload of work. But they're only the first 5 years of a 50+ year career. Same as (1). Think beyond the cycle.
Comments
The opportunity cost is
The opportunity cost is eliminated if you work while attending a part-time program. This isn't an option for everyone because quality part-time programs don't exist everywhere. But if you're in a major metropolitan area, chances are it is an option.
I will also add that even if
I will also add that even if you stay in finance, your ability to be an excellent analyst / associate doesn't necessarily make you Principal / Partner material. If you're in private equity for example, your knowledge needs to be a lot broader than building a bulletproof LBO model (although that is also very important) to add value on the board of a portfolio company. MBA is one way to have that strategic knowledge stamp on your resume.
Assuming you're good at the
Assuming you're good at the job it really has an negative impact on your resume. Lets take the view of the hiring manager.
Candidate 1. A to A promote in a prestigious bank.
Candidate 2. 3 year analyst stint and MBA from a top 10...
If you're in the business of making money, you go risk free. Risk free says... buy up the A to A promote.
Having hired/seen MBA students perform with limited finance experience, it's practically a no-brainer at this point. The market has changed, you'll choose the resume with the most relevant and immediate ground running experience. Don't care if you want to harvard and worked as a consultant... those days are pretty much dead.
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inkybinky: This isn't an
This isn't an option for everyone because quality part-time programs don't exist everywhere.
This isn't an option for everyone because quality part-time programs don't exist.
FTFY
- MVP
OP, good post that highlights
OP, good post that highlights the other side of things when considering a MBA.
Personally, I've always thought that a top MBA's value is in its:
1) Network
2) Ability to wipe the slate clean, such as getting another shot at OC
3) Adding more oomph to one's CV if they went to a non-target
Of those benefits, it's hard to quantify how much their real worth is so it's difficult to weigh it against opportunity costs and foregone wages. You never know what kind of value that network will net you in the future (30-40 year career) or how much of a role that brand name played in landing you that offer.
For those reasons, I think prospective MBA students should really take into consideration the long-term intangible benefits before deciding whether or not it's worth it to them.
YourAss: inkybinky: This
This isn't an option for everyone because quality part-time programs don't exist everywhere.
This isn't an option for everyone because quality part-time programs don't exist.
FTFY
Anyone think UCLA's part time MBA is worth a shot? Or is this pretty agreed upon - no part time MBA's are worth it...?
I have a really different
I have a really different option that you guys may feel interested
one of the guy i networked told me that the only MBA degree worth spending on is a Law degree
this trains your communication, presentation and report writing skills and these are the critical elements for you to climb up the corporate ladder,especially in IB where everyone is smart
And i personally think that taking a MBA program in a top school is for networking and makes your CV looks better if you are from non-target school
I don't think that holding a MBA proves that you have better finance knowledge than the others, as this is what I heard from my mentors as well
marketbeater: I have a really
I have a really different option that you guys may feel interested
one of the guy i networked told me that the only MBA degree worth spending on is a Law degree
this trains your communication, presentation and report writing skills and these are the critical elements for you to climb up the corporate ladder,especially in IB where everyone is smart
And i personally think that taking a MBA program in a top school is for networking and makes your CV looks better if you are from non-target school
I don't think that holding a MBA proves that you have better finance knowledge than the others, as this is what I heard from my mentors as well
This is interesting. Have some friends in law school and a lot of the classes sound pretty interesting. I have no interest in being a lawyer, but what are yalls thoughts on finance recruiting out of law school?
I was in corporate finance,
I was in corporate finance, wanted banking. Everyone I talked to said I was overqualified for an Analyst role, underqualified for Associate. My question, how do I bridge the gap? The Answer: Either spend some time in research or get an MBA. I looked at two year programs and couldn't handle the opportunity cost. Got accepted at a good business school the same day I got a research job offer. I did an NPV with expected salary etc... decided I could better leverage work experience than another piece of paper.
Ended up doing a part time MBA during second year of research, realized that while it doesn't add much, it does give you some prestiege, but also a new chance to go job hunting. It's kind of a reset button and lets you transfer jobs/industrys.
I think it's really dependent
I think it's really dependent upon each person's situation. For me an MBA has been the best decision hands down. I left the Marines and am now attending a decent (nothing too prestigious) school (not top 10 or even 20) and I now have summer offers at firms that I know I would never have had the chance to get in the door without going this route. However, I have my MBA paid for with Veteran benefits and receive a housing stipend, which completely alleviates the debt burden, that is such a huge factor for many. Additionally, I will admit that my military background seems to be the biggest interest in me during interviews, typically nothing gets asked about what I'm up to in B- School. The MBA has been great in learning technical skills and language and giving me the on campus recruiting and alumni connections to some firms and banks that otherwise would have been a pipe dream for me. In my case, an MBA has been the perfect catalyst in transitioning from the Marine Corps to the finance industry but it really is dependent upon an individual's situation and I don't think it's fair to say an MBA is worthless or is a must, as the value will differ from person to person.
anonanonanon: marketbeater:
I have a really different option that you guys may feel interested
one of the guy i networked told me that the only MBA degree worth spending on is a Law degree
this trains your communication, presentation and report writing skills and these are the critical elements for you to climb up the corporate ladder,especially in IB where everyone is smart
And i personally think that taking a MBA program in a top school is for networking and makes your CV looks better if you are from non-target school
I don't think that holding a MBA proves that you have better finance knowledge than the others, as this is what I heard from my mentors as well
This is interesting. Have some friends in law school and a lot of the classes sound pretty interesting. I have no interest in being a lawyer, but what are yalls thoughts on finance recruiting out of law school?
And to make things more interesting, he is a trader
SenhorFinance: In that
In that regard, an MBA is a partial insurance against unemployment, recession, industry shift, destructive innovation, et caetera.
I've always thought of it in this way. If for whatever reason finance isn't your thing after 5-10 years, the MBA is a pretty sturdy fall back in other sectors of business - say for becoming a CFO. I'd like to think a resume with the combination of finance experience with a MBA looks pretty damn good.
There is also something very
There is also something very critical : it's better to do a MBA early in your career when you'll sacrifice 2 years of relatively low earnings rather than have to do this at 35 or 40 years old when it's more difficult and will cost you more. Once you have your MBA, you can go forward, if this is useful then good for you, if not then the extra income, even if not massive, you'll get over the next 30 years will certainly make up for it...I would only think of 3 reasons for not doing a MBA :
1) you can't get into a top 10/15
2) you are on a fast path / promotion in your industry
3) high unemployment in your target industry meaning potentially no jobs after the MBA