When is an MBA not worth it?

This is the first thread I've started (I think) so bear with me...

I'm a late 20's CFA charterholder who works in a FO job in asset management (global shop that manages >$100bn) and would like to have a go at HF. I like the people I work with and it's the type of shop in which people can make long term careers out of it, albeit not as (generally) well-remunerated as one would in HF, but I'm starting to get tired of long-only domestic equities, picking over a limited number of stocks. Perhaps it's to do with general market valuations.

I'd love to know peoples' thoughts: am I deluded and the grass is definitely not greener on the other side? Am I an idiot for giving up a career track that would probably make me more than comfortable financially? You can imagine the questions - it's like a third-life crisis of sorts. That said, I'd love to hear from those who went to b-school but found it wasn't nirvana...there may not be very many of them.

Apologies for the open-ended nature of my post; I'm ready for any crap thrown at me.

 

Thanks for the post. I'd be interested as well from those who thought the ROI wasn't worth it. It's super expensive, that's for sure, as this table from PoetsandQuants.com http://poetsandquants.com/2015/05/27/m7-business-schools-what-it-really…

School Lost Income Two-Year Tuition Fees & Living Expenses Bottom Line Stanford $160,000 $123,750 $75,120 $297,650 Harvard $160,000 $122,450 $74,350 $295,385 Wharton $160,000 $136,420 $58,664 $289,750 Booth $152,000 $127,960 $64,450 $282,523 Kellogg $146,000 $128,118 $57,908 $270,002 Columbia $148,000 $131,976 $67,808 $289,736 MIT $140,000 $131,500 $62,528 $274,660

Betsy Massar Come see me at my Q&A thread http://www.wallstreetoasis.com/forums/b-school-qa-w-betsy-massar-of-master-admissions Ask away!
 

I don't think this is quite the grass is greener on the other side problem. HF is obviously a step up if you want more freedom in your investment ideas and to step up the learning curve. Obviously this comes with much higher risk of the HF failing and closing shop.

I think this has less to do with the merits of an MBA and more to do with what you really want to do with your life and your appetite for risk and reward. If you ultimately decide that you think it's worth it, the MBA gives you the opportunity to get into that industry. However, you have to also realize that it is very difficult to get into HFs especially from a non-HF/PE background.

 

Thanks for your thoughts. I definitely agree with you and am aware of the difficulty of breaking into HFs (to add fuel to your fire, I'm not from the US either). I wouldn't be in the market in the first place if I were absolutely risk averse. But for me, it's about continuing to develop as an investor and that may mean seeing how other parts of the world work; as I alluded to in my initial post, currently I can feel myself somewhat stagnating mentally.

On the point above on comp, I'm already above that on base alone. So don't deny an MBA could be short term pain for perhaps long term gain.

 

I decided to pass on an M7 MBA as I was priced out by my mid twenties and would have had to forgo unvested carry. With that said, I have found PE recruiting to be much more difficult without a top MBA given the traditional recruiting structure of most firms. I think an MBA only makes sense for career switchers and careers that require a pretty standard progression (IB, corp finance, consulting, MF PE, etc.). In your case, plenty of HFs don't care about MBAs but given the limited # of seats it is difficult to break in. Looking back I definitely don't regret my decision although I think b-school would have been a great 2 year experience. Right Brady?

 

Just finished a M7 mba program so will weigh in. I will address two things: the OP's specific situation and the MBA at large. I will begin with the latter.

I think in general, there are 3 groups of people (they are obviously not mutually exclusive) for whom an MBA may not be worth it.

  1. You are making so much money that it doesn't make sense financially to go, a truly enviable position. As Betsy said in her post, the opportunity cost of going to b-school is pretty large. Aside from the tuition+fees, you are foregoing 2 years of lost income as well as 2 years of work experience. Of course, a scholarship or personal savings go a long way to alleviate the financial pain, but even if you were to go on a full scholarship, you are still missing out on at least $200K (assuming you make $100K/year, a conservative figure). You also will most certainly spend more on various discretionary items such as food and drinks, going out, travels, social events, etc. I spent WAY more during my time in b-school than I had intended, and I was one of the most frugal people in my class.

  2. You are pretty happy with your current job/industry and can advance without an MBA. If you are pretty confident that you want to stay at your company or industry and can see yourself progressing without one, no need to do the MBA (exception would be if your employer pays for a part-time or executive MBA while you're working).

  3. You want to transition into a career where an MBA is not going to help you. Before deciding whether to apply, you should look at the employment reports of the schools you are interested in and see if the companies you are targeting have hired from those schools. If not or they don't even post at the school, probably not a good sign. On-campus recruiting is by far the easiest way to get a job coming out of b-school, and the vast majority of OCR jobs are banking, consulting, marketing, general management, and at the top schools also add long-only mutual funds for equity or fixed income research. So yeah, although a lot of companies recruit MBA students, not all industries are represented. Even within finance, if you want to work at say a quant or macro hedge fund, or trading at a bulge bracket bank, an MBA is probably not a great idea. If you want to work in multi-asset strategies at say BlackRock or GSAM, an MBA will also not help you. You may need to lateral in or do a more specialized degree such as mfin/mfe. Keep in mind that an MBA is ultimately a GENERAL MANAGEMENT degree, not a masters in economics or finance.

Now about your specific situation.

You seem to be in a good spot. You have an enviable FO equity research job at a major mutual fund, CFA, good money, stable job, pretty good hours. Of course, any job will probably become mundane after some time, so it is human nature to seek something better, more exciting and glamorous. Given your skillset, a long-short hedge fund makes total sense. My advice though is twofold: try to lateral into a hedge fund first while simultaneously looking at M7 mba programs. If you could achieve your core career goals without an MBA, I think that's the preferred route. In my opinion, the reason you should look at M7 schools (especially HBS, Wharton, Columbia) is that those schools do have a decent amount of job postings from hedge funds, so you will get access that otherwise may have eluded you. It's still hard to land those jobs, but with your resume you will definitely be a contender. Just make sure you prep hard as hell with those stock pitches.

 

Thanks. I agree with you - the opportunity cost is massive (without being specific, your numbers are pretty conservative), and something I think about a little bit. I'm not sure what is typical in other offices of my shop but I don't think any past member of my team left to go to b-school.

If I were to lateral, I wouldn't bother with an MBA at all; I'm just a curious and inquisitive person when it comes to investing and trying to understand businesses.

Thanks again for your comments.

 

Down below, buried in the comments is something that was relevant for me and for many people I've seen over the years (and many years at that): jankynoname says

But again, the strongest reason to do an MBA for many people is non-financial. Those are two years that I wouldn't trade for anything, and I don't ever see a day where I'm going to regret doing it.

But as alman says, he's looking at it because he's interested and a curious person. I think with the personal financial investment, buying a "transformational" experience -- and that's what business school offers -- doesn't make a whole lot of sense. But I'm glad he raised the question.

Betsy Massar Come see me at my Q&A thread http://www.wallstreetoasis.com/forums/b-school-qa-w-betsy-massar-of-master-admissions Ask away!
 

I'm just at an polar opposite position of yours...

if you still want it, you like it enough.... so it's hard to say whether you should come out of not. But it's true that you can still earn good money in other opportunities - maybe a little less for a better quality of life.

 
dontbugme:
Hate the hours / culture but pay is good.

If you feel this way (it could be about any industry really) -- then you need to get out. Because it'll slowly kill you if you do not. You may not notice it day to day or even week to week, but over the years, it will eat away at you, causing potential chronic health problems down the road where all that money you earned doesn't pay for the tropical island you envisioned, but for the healthcare costs of therapy, prescriptions for chronic conditions, or even hospital care. Decades of high occupational dissatisfaction add up - think about all the "fuck I hate this" and "fuck I hate my boss/client/board" a million times over decades - and how it takes its toll on your mental health and your physical health. Your body eventually gives in, and it can happen sooner than you think.

This doesn't mean you need to find a "dream job" - but you also shouldn't use that as an excuse to stay in an environment that you hate (and for which the few or even only redeeming thing is the money). You are still better off looking to find a line of work where you like the culture, the lifestyle, people and where you share similar values and priorities as your colleagues.

You don't need to find a line of work you love, but at least it's got to be a place that you like.

Some folks may tell you to take a vacation, but in my view that may not be enough, because we take our problems with us.

Here's what I suggest:

  1. Start exploring other lines of work. Reconnect with your b-school classmates. Doesn't have to be folks who are in industries you're interested in. Just catch up with them via Skype, over drinks/coffee/dinner, and pick their brains, find out how they're doing re: work, family life, hobbies, interests, etc. Through this organic process you may uncover certain areas you'd like to explore more, and then from there, start reaching out to people in those industries.

  2. Spend your free time doing something active - doesn't have to be physically active, but active in the sense that you're learning something new. Learning for learning's sake. Take a cooking class. Or an improv class. Or get your pilot's license. Or learn a new language. Or join a jam band. Or growing a vegetable garden and other... herbs. Basically getting in the habit of learning for shits and giggles. Think of it spending your free time as a form of "active play" - like a kid, you're playing for the sake of it. It's not about trying to find your dream job or true calling, but simply finding some counterpoint to your job. Yes, it's hard if you're working crazy hours, which is why whatever little free time you have is even more precious. Maybe over time, this free time you're spending will actually re-energize you in a way that you don't leave your current career, because maybe the source of the dissatisfaction/hatred was misdirected. Maybe it's not the job, but the fact that you simply forgot how to live or have fun, and once you found that, you have a new perspective on the job you used to hate. Or, it will only shed more light on the fact that you do indeed hate your industry (it's not a good fit for you), which can then only re-energize you to get the hell out. Either way, you're covered.

Alex Chu www.mbaapply.com
 
bankerella:
Looking for early signs of a company in distress? The credit rating downgrade is not a warning; it's the final nail in the coffin. Instead, find out whether they are missing their 2/10 net 30 discounts. The return on that discount is way above most corporations' cost of capital. So if they're missing it, they're either morons or they have cash flow problems.

Interesting - how would one go about finding that out?

 
<span class=keyword_link><a href=/resources/skills/finance/going-concern>Going Concern</a></span>:
bankerella:
Looking for early signs of a company in distress? The credit rating downgrade is not a warning; it's the final nail in the coffin. Instead, find out whether they are missing their 2/10 net 30 discounts. The return on that discount is way above most corporations' cost of capital. So if they're missing it, they're either morons or they have cash flow problems.

Interesting - how would one go about finding that out?

Typically you go to back channels. That bit of data is far more valuable than many people know, and sometimes they'll let it drop for nothing.

 

Wait, do ppl actually go into MBA's expecting to learn? I thought everyone knew it was just a BS way to check a BS box to get into a BS industry for a BS job (albeit that pays well, thus the disregard for all the BS).

GBS
 
mbaer2012:

I start my MBA in the fall and I don't think i'm going to learn anything mind blowing from a class. I'm going for the networking, rebranding, and the job opportunities. I mean, what did you learn from undergrad that you used at your job? Does that mean you shouldn't go to undergrad?

No, but at undergrad, the opportunity cost is far lower. How much will someone pay a kid without a college degree on average?

 

Getting an MBA is just for the networking. By you paying $250,000 it's like you paying for a really nice country club membership.

Robert Clayton Dean: What is happening? Brill: I blew up the building. Robert Clayton Dean: Why? Brill: Because you made a phone call.
 

If you aren't learning, you're wasting your time. That applies to life generally, but especially if you're paying $250k to go to school. Finance is a competitive industry, and someone else will eat your lunch if you skate by doing the minimum. Sure you might have an associate job when you graduate, but what happens when eventually someone expects you to use your brain? Or does everyone here just already know everything there is to know about business?

I am wise because I know that I know nothing -Socrates
 

I love bankerella's posts. No idea why people bas her so much.

But yeah, look, you don't go to b-school for the classroom learning although I'm sure there are some interesting courses. As everyone else said, it's for the re-branding, exit opportunities, networking, and social experience. Whether or not that's worth the costs is a personal decision.

 
Connor:
HBS is only $107k for 2 years... There is no way you spent $250k, and seriously, what did you expect B-School was all about? Come on.

"What they teach you at Harvard Business School" gives a value of about $250k. They factor in the costs of living on campus or renting, books and textbooks, travel expenses, health insurance, utilities, tuition fees, cost of relocation, etc, but the author is married with 2 children, so that factors into it.

HBS gives a cost summary here, http://www.hbs.edu/mba/admissions/costsummary.html and if you're single you will expect to pay 174,400 for 2 years. Add the increase in the CPI/inflation and that will go up marginally also. For someone married and/or who has children, the costs will be over $200k. And that's assuming they don't have designer tastes.

 
Connor:
HBS is only $107k for 2 years... There is no way you spent $250k.

Durr, you're totally right. Don't know what I was thinking. Tuition is all that matters; our parents pay for the rest.

Oh wait, no. They don't.

Go to HBS, Connor.

No, seriously. Go apply to HBS. Get in. Rent your apartment. Move there ahead of time. Set up your apartment. Get health insurance. Fill your fridge twice a month. Buy necessary personal tech solutions. Pay dues to join the ten or twelve clubs you care about most. Go to some dinners; make some friends. Purchase your recruiting wardrobe. Go to Oktoberfest. Rent the gigantic costume for that theme party. Go on a trek. Go out and party once every few weeks or so. Climb a big mountain on some other continent. Fly out to see your family, your significant other, etc. Sign up to do the course with the global component that costs the extra $7k. Fly out on your own dime to see if that secret startup is as baller as you think it might be.

Of course, don't forget to pay your rent, power, phone, internet, dry cleaning, storage, parking, car, water/garbage, auto insurance bills. (You do pay those, right? Or do you currently live in a dorm?)

I'm now at December of the first year. You want me to keep going?

 
Connor:
HBS is only $107k for 2 years... There is no way you spent $250k, and seriously, what did you expect B-School was all about? Come on.

Did bankrella said she is from HBS.?...and she is right Tution+ living expenses +FV of your two year salary.=$250k

 

Haven't gone to B-school yet, but I would imagine there is a lot of value in the general knowledge and intuition you gain from those courses. That stuff may not be worthy of keeping in your notebooks (if possible to even write down), but I think it still matters.

 

I have several recent HBS alum buddies and they all swear by their experiences there. however they did note that they felt woefully under-trained in quant and finance, and (insert your favorite quant school here) can eat them for lunch.

The opportunity for travel is there for everyone, of course. thank you student loans!

where was the best trip you took OP?

 
keensetofpeepers:
I have several recent HBS alum buddies and they all swear by their experiences there. however they did note that they felt woefully under-trained in quant and finance, and (insert your favorite quant school here) can eat them for lunch.

The opportunity for travel is there for everyone, of course. thank you student loans!

where was the best trip you took OP?

Yup. B-school alums in general like their experience. But every single HBS student and alum I know have said unequivocally that it was the best 2 years of their lives. And this includes people who went to fun state schools for undergrad and had great social lives. Even compared to college, HBS was far more fun.

 

To be fair, i think it's completely dependent on your lifestyle. $250k is probably at the extreme end, but most people probably hover somewhere around $200-225k. Speaking to a friend who just finished his first year at HBS, he mentioned that he spent $20k on travel alone this past year. I think what drives that cost up is the fact that you're booking things super last minute at some prime travel times.

 
HerSerendipity:
To be fair, i think it's completely dependent on your lifestyle. $250k is probably at the extreme end, but most people probably hover somewhere around $200-225k. Speaking to a friend who just finished his first year at HBS, he mentioned that he spent $20k on travel alone this past year. I think what drives that cost up is the fact that you're booking things super last minute at some prime travel times.

$20K is actually average by HBS standards. A good friend also finished his first year there, and he spent around $40K on travels alone; this does not include going out and partying in boston.

 

Friend of a friend is in his summer internship post 1st year HBS. He said the first semester was tough, but it got a lot easier.

He's interning for a start up in logistics now...

 

Thanks for the post Bankerella, a few questions if you would please

Did you travel much while in school and if so how was that experience?

What would you say was the overall impact on what you are now able to pursue in a career - did you switch focuses, want to go deeper in finance, move to buyside, etc.

Did you meet the man of your dreams in school, and how was the dating/hookup scene in general?

Last what have been some 'non-expected' tracks your classmates have pursued post graduation? Have they gone to weird startups, started hedge funds, vineyards, etc.?

Cheers frgna

if you like it then you shoulda put a banana on it
 
frgna:
Thanks for the post Bankerella, a few questions if you would please

Did you travel much while in school and if so how was that experience?

I did a little traveling. Was fine; didn't love it; prefer traveling on my own or with 1-2 handpicked friends. The reason is that in a 5+ person group at a top school, at least one person will be a huge pussy. By "huge pussy" I mean that they will check one or more of the following boxes: chickenshit, germ-phobic, food-phobic, eats exclusively at American food/coffee franchises, can't go out without taking two hours to get dressed, etc.

frgna:
What would you say was the overall impact on what you are now able to pursue in a career - did you switch focuses, want to go deeper in finance, move to buyside, etc.

Hugely impactful. That was the point.

frgna:
Did you meet the man of your dreams in school, and how was the dating/hookup scene in general?

This is the only non-softball question you asked and probably the only one you actually want to know the answer to. B-school's not really where you meet the man of your dreams, though a few do in every class. I wasn't one of those people.

I suppose I would call the dating/hookup scene pretty liquid with low transaction costs. As long as you don't mind things getting weird and incestuous with your close classmates.

frgna:
Last what have been some 'non-expected' tracks your classmates have pursued post graduation? Have they gone to weird startups, started hedge funds, vineyards, etc.?

Every class at a top MBA program has some people that go off and do some amazing, iconic, weird, cool things. But if I get really specific here, it'll out me to somebody somewhere. Would prefer not to do that.

 

Bankerella, did you know anyone from your class who actually regretted going to b-school? Just curious since i have yet to meet a single person who regretted going to a top MBA program. They all rave about how fucking awesome it was.

Also it seems like most relationships get broken up in b-school. They call that "black october" or something. I guess when there are so many alpha accomplished attractive people in one setting, fireworks are bound to fly. Pretty intense stuff. My best friend met his gf in the first week of school. Meeting girls in b-school definitely seem easier than trying to meet girls at bars/clubs, the vast majority of whom I have nothing in common with.

 
Brady4MVP:
Bankerella, did you know anyone from your class who actually regretted going to b-school? Just curious since i have yet to meet a single person who regretted going to a top MBA program. They all rave about how fucking awesome it was.

Also it seems like most relationships get broken up in b-school. They call that "black october" or something. I guess when there are so many alpha accomplished attractive people in one setting, fireworks are bound to fly. Pretty intense stuff. My best friend met his gf in the first week of school. Meeting girls in b-school definitely seem easier than trying to meet girls at bars/clubs, the vast majority of whom I have nothing in common with.

Hmm, I don't know... but I definitely know some people who SHOULD regret getting an MBA.

Example. Girl and guy meet in first semester, they're shacked up/married/committed a year later. The girl doesn't do too well in second year recruiting. Says, "I just didn't see what I was looking for," or "I didn't really hit the recruiting cycle." Bitch, please. You're in b-school; how do you miss the recruiting cycle? Guy gets into PE. Girl moves with him, "continuing the job search" in the new city.

A year later she's a full-time stay-at-home housewife with a 20-hour-a-week startup making stuffed animals, jewelry, or travel reservations. The startup website costs the guy $10k and usually brings in $4k in its first year. Most of her customers are her classmates who either feel sorry for her or want to keep in touch with the guy.

A year after that she's pregnant. Because she has to be. Because otherwise, she's just a top MBA who sells four stuffed animals a week on the internet. But once you're a mom, the story changes to "This top MBA could have had a career in banking or PE but sacrificed it all to spend more time with her child; get off her back, she's an angel, here's a soft-focus photograph of her nuzzling her adorable son Greggie's cheek."

Does she regret the MBA? Nope.

But what do you think of the husband's situation here? Is he more of a baller because he turned a chick with a top MBA into a housewife? Or is he a schmuck for starting up a relationship with a woman who takes her foot off the gas pedal the moment he commits?

 
mrcrassic:
How can you even get $250K in student loans? I thought the max was $125K.

There's a limit to government loans but not private. I'm not an expert on this, but the average loans for wharton students this past year was $175K for both years. I'm pretty sure there are people who take out $200K+. HBS used to have a deal with Citigroup student loans whereby their students could take out $250K at a special discounted rate. I don't think they do that anymore. If you read Philip Delves Broughton's book on his experience at HBS he talks about the excessive spending and lavish lifestyle of his classmates: frequent weekend trips, showing up to school in a porsche, benz, or BMW, going out to the nicest Boston restaurants and clubs.

 
mrcrassic:
How can you even get $250K in student loans? I thought the max was $125K.

Hahahahahahahahaahaaaah. Ahahahahahaha. Oh, geez, you're killing me. Haha. Ha. Ha. Hm. Okay. Now I'm ready to answer this question.

Stafford loans have limits. Federal direct plus (at the low low price of 7.9% per annum) is limited only by the cost of attendance, which can be further increased by the student's request if they have more expenses than the budget allows for. Isn't that a sweet deal?

Yeah. My student loan payment is considerably bigger than most new homeowners' mortgage payments.

 

I think B-School is over-priced but it is a necessary evil. Remember that the only reason prices keep rising is because people are still willing to pay them.

"The illegal we do immediately; the unconstitutional takes a little longer."
 

Um whoa. I wanna do an MBA. I'm going to have to deal with 2 more years of douchey dick/sex jokes and passive-aggressive getting hit-on from immature/pretentious/dumb/socially-retarded fratty guys???

Dear. Lord. Fuck. Me. SIDEWAYS.

Although I'm sure the guys at HBS aren't dumb...so that's a huge plus in my book.

 

Most of my female classmates are pretty happy with the quality of guys, so I don't think you have anything to worry about. Are there pretentious fratty douchebags? Absolutely (rugby club, i'm looking at you bros). But those guys are in the minority. Most guys are smart, driven, accomplished professionals who for the most part have done some really interesting cool stuff (hence, whey they got into a top b-school in the first place). For women, there is probably no better place to meet a potential husband than a top b-school due to the skewed ratio (although this is improving for us guys) and the very high quality of men. Many of my female classmates have said explicitly that they want to meet a husband in school because this is the only time when they will be surrounded by so many top-notch guys in one setting. So yes, you will have plenty to choose from once you're in b-school. Assuming you're reasonably good looking and in shape, it will be like shooting fish in a barrel.

 

I'm not suggesting it's worth $250k to go sell stuffed animals, but it sounds more fun then being in banking or consulting forever. But I do think I and the rest of society benefit from people willing to work 80+ hours a week indefinitely. So kudos.

 

Tech post-MBA is cool. Selling shit on the internet isn't tech though. I think you got to be retarded to get an HBS MBA and do that (unless obviously you do all of this for fun and are loaded anyhow).

 
bankerella:

Instead, find out whether they are missing their 2/10 net 30 discounts. The return on that discount is way above most corporations' cost of capital. So if they're missing it, they're either morons or they have cash flow problems.

Could somebody please explain what this means? I know that a "net 30" refers to a payment due in 30 days, but I don't understand the thought process
 

I think about this a lot - I'm an ex-banker / capital markets with an Ivy undergrad now working in a corp dev associate role currently reaching the do or die late 20s in terms of MBA. Additional complicating factors for me are I am married, live in a location without a ton of bschool options (Texas) and have a spouse who also works a professional / higher income job here. I think I am ultimately going to come down on the "no" side of the MBA due to opportunity cost / geographic issues.

 

I'm probably in the camp that thinks the MBA was not a great investment from strictly an ROI perspective. I went to a good (top 5) program, but was making $150k when I went in, so the total cost was probably closer to a half mil. I'm now doing much better, but it's difficult to dis-aggregate how much of the bump in total comp was from the MBA and how much would have occurred naturally due to additional experience, getting the CFA etc. I do still think that in the out years, the MBA can lead to drastically different financial outcomes. In my previous role I probably would have capped out around $400k all-in, whereas now can see a clear path to $700-800+ with lots of upside scenarios much higher than that. My guess is the ROI will be positive, maybe something like 10% by the time I am late in my career.

But again, the strongest reason to do an MBA for many people is non-financial. Those are two years that I wouldn't trade for anything, and I don't ever see a day where I'm going to regret doing it. It's also a tremendous opportunity for career changers, although that doesn't necessarily sound like the situation OP finds himself in.

 

This is from a previous post of mine, but here are my two cents on why someone should get an MBA:

  1. You want to switch careers and move into one that has a strong MBA OCR presence (consulting, banking, marketing, gen mgmt, etc.)
  2. You have absolutely no business skills (i.e. you were a musician, actor, etc, etc) and want to transition into the business world
  3. You're in an industry in which moving up requires an MBA (PE, consulting)
  4. You want a two-year vacation

I don't think you fall into any of these categories. And frankly, I don't think an MBA would add much at all in terms of how HFs view you.

 

The reasons why people go back for an MBA that have been listed in this thread (and in countless others) hasn't changed in 20-30 years. When I was applying in 1998, it was the same deal -- non-biz folks, career switchers into finance(IB and buyside) and consulting, rich foreigners, employer sponsored, or looking for a 2-year vacation.

What has changed though is the cost. Big time.

Consider this:

LATE 1990s: - typical pre-MBA comp was around $40-60K; only kids getting close to $100K were IB/buyside; emerging mkts comp was equivalent to US minimum wage - tuition was $50K total; add in living expenses, and all-in around $90-100K cash/loans - post-MBA comp around $100-120K at top schools (IB/buyside: $70-90K base + yr end bonus).

NOW: - typical pre-MBA comp closer to $100K now, and IB/buyside it's not unusual for $200K+ all-in pre-MBA especially on the buyside; only emerging mkt making close to US min wage is India; China, Russia, Brazil, etc are paying close to US/Euro salaries, if not more in some cases - tuition is $130-150K total; add in living expenses, and all-in around $200-250K in cash/loans - post-MBA comp around $120K or so at top schools (IB/buyside: $100K+ base + yr end bonus).

So what you see here is basically this:

Pre-MBA comp has essentially DOUBLED in 15 years Tuition/total costs has MORE THAN DOUBLED (tuition alone has almost tripled) Post-MBA nominal comp has gone up modestly (or flat in real terms)

So the hard cost, and opportunity costs have basically skyrocketed in the last 15-20 years, while the benefits (financial, career opportunities both short- and long-term) have essentially remained more or less the same (or at best improved marginally).

Of course as an admissions consultant I would love if the MBA were a no-brainer in terms of ROI, but the price tag associated with going to b-school right now is really hard to stomach. I mean, yes, doing an MBA can be very helpful to get that consulting or banking job, or even if you're so hard up to get that buyside job (or joining a tech firm, which quite a few folks back in the dot-com mania of the late 1990s were already doing). But are you really willing to pay $200k+ (plus opportunity cost) just to get a job that for the most part is really "just a job"?

These jobs for most people aren't "dream jobs" - they're good jobs, even great jobs - but how much are you willing to pay to get access to it? Again, the buyside isn't what it used to be -- there's an oversupply of money chasing too few deals (the glory days are over as the sector matures) compared to say even 10 years ago.

From my standpoint, getting an MBA for $100K all-in when I went in the late 1990s I felt was already incredibly expensive, but something I could still stomach (one could say it was a no-brainer, because for most people their comp would more or less double no matter what, given how low their pre-MBA salaries were at that time across the board). But if I were in my 20s today, I'm not sure if I would want to take on a $200K+ nut, plus opportunity cost. Again it's a highly personal decision and obviously my clients feel it's worth it. But we all have different preferences I guess.

TD; LR: Paying $100K all-in for an MBA may be worth it to get access to that "great job". But $200K+? I dunno man. That could be used to fund a business I am passionate about, a downpayment on a nice home, or a Ferrari/McLaren. At the end of the day for most people, these business type of jobs are not some sort of calling or dream - they're just jobs.

Alex Chu www.mbaapply.com
 

Alex, thanks for your honesty in writing this post. It certainly took courage since as an admissions consultant you have an economic incentive to see more applicants.

There is no doubt that post-MBA compensation has not caught up to inflation and tuition increases. The tuition hikes are downright ridiculous and maddening. Has quality of teaching, career services, and other resources, improved? No. And the extra tuition and fees certainly don't cover student travels. Much of this rise has gone towards paying useless and overbloated deans and administrative staff. They add pretty much no value to the school or to the quality of student experience.

However, to play devil's advocate, if a non-business person wants to break into banking or consulting, b-school is unfortunately the only way. If an ex-military or TFA person gets a job at a BB or MBB and makes around $200K all-in first year, I would say that's a significant improvement from their pre-mba role and is well worth the investment. Ultimately, those jobs will open up more doors, give you transferable business skills, and set you up nicely for the rest of your professional trajectory.

Companies though are beginning to have second thoughts. MBB, BB, and even PE firms are beginning to do a lot more internal promotions rather than kicking out associates for b-school. I know of a few people in their early 30's who already made partner at MBB because they never went back to school.

FWIW, I thoroughly enjoyed my MBA experience and would do it over again if I could. But I really needed an MBA because I did not study business or econ in college and I did not work in a traditional business field before school (i.e., banking, pe, hedge funds, consulting, corporate strategy). So the MBA added a lot of beef to my resume and gave me access to jobs that otherwise would not have been a possibility. Overall it really depends on one's personal situation, his risk tolerance, and long-term goals.

 

I don't think you'd regret going, but how sensitive are you to a loan payment. Let's say you make your current pay, how would you feel coughing up 1000+ dollars after tax a month for a loan ? If that hurts then it may not be for you.

disclosure: my employer paid over $140k of my MBA (without any commitments - true story), and it helped me make a transition to the sell-side and ultimately a top HF.

 

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