Why Your Walkaway Number Is Lower Than You Think

"Here's a little something to

by antmavel (Senior Monkey, 98 Points) on 5/26/10 at 6:20am

"Here's a little something to get you started. It'll save you $100,000 and two years of your life. Something to think about".

I disagree with your point, I don't think an MBA is about 10 big lessons you can learn or about watching a few concepts only. On top of the general knowledge you are going to get there are additional aspects you need to integrate:
1) It's one of the only way to change/shift career and many companies have a specific entry levels for MBA grads
2) in some industries you don't have much choice, either you get it and you progress or you get out.
3) it helps you to build key relationship for your future career and that is worth a lot, the ability to call a former classmate to know more about their recruiting process a few years after you graduated is very valuable, the opportunity to meet with someone inside the school during your mba program and start together a company is also something happening

I do believe though that there is a lot of distinction to make between the programs, the tier and the impact an MBA can have...sometimes it's true that it's not worth $100k, especially right now where jobs are tough to get and often for a lower salary.
Finally if you plan to make $10m I don't think $100K is bad investment (1% only !) as the yield can be extremely good based on my remarks above.

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Question Edmund- What did it

by JohnnyCage (Senior Baboon, 210 Points) on 5/26/10 at 9:27am

Question Edmund- What did it take in your life for you to step away? I'm risk adverse by nature as are most people on this forum, so for me it would have to be 1) Health 2) Another job in waiting 3) Moving to a whole new area 4) An ominous fortelling from a 3 nipples fortune teller. Essentially it seems like the more you have invested in the salary (kids, house, doggies) the less realistic quitting becomes.

Did you ever consider remaining at your level e.g. VP and NOT kill yourself to move up the ranks? (I know you were a trader, so I guess this might not apply, but still a scenario I see)

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Very interesting. But I

by Marcus_Halberstram (Neanderthal, 2244 Points) on 5/26/10 at 10:13am

Very interesting. But I would, as you pointed out, argue that if you look at strictly finance professionals from HBS, the lifetime earnings number is probably several times $3.87 million. If you stick it out in the field, after your 3rd or 4th year as an MD you'll be pulling in $1+ million/year at a BB bank. If you happen to be on the buyside that number will be blown out of the water.

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Edmundo Braverman wrote: No

by CNB90 (Orangutan, 267 Points) on 5/26/10 at 10:39am

What happens there exactly? do people just lose their drive or what? - In my opinion, if I'm not aiming for MD and higher levels and devoting a good deal of my 20's and early 30's to career progression, I shouldn't pursue an MBA.

I wonder if this survery takes into count those who started their own firms/funds..

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CNB90 wrote: Edmundo

by Victor252 (Orangutan, 261 Points) on 5/26/10 at 11:11am

You say that now but try grinding away for fifteen years. I bet after five you'll be looking for an easy out. Once you have enough banked for retirement, and paid off any college/home debt, you'll probably want an easier job that let's you travel or have a personal life.

You don't need $10M to sit on a beach and drink beer. That's what retirement means to a lot of people.

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@edmundo--I agree with alot

by breakinginnew (Senior Baboon, 214 Points) on 5/26/10 at 11:25am

@edmundo--I agree with alot of your sentiments...however I think the businessweek table is a very bad reference.

From viewing the little methodology blurb at the bottom...not only do they use medians (which is fine for looking at income, but looking at median numbers and then producing an estimated career pay number from that won't even produce the right number if you compare it to the median of actual career pay.) Also more importantly this excludes stock + option compensation...which i imagine is most substantial at the higher ends of the dataset.

I think accurate data on the subject is going to be very hard to come by...though I would say that alot of people on here do think they are going to be multimillionaires and that isnt neccesarily a given just because you became a banker or went to HBS

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Schwarzman said the same

by Marcus_Halberstram (Neanderthal, 2244 Points) on 5/26/10 at 11:53am

Schwarzman said the same thing in the Chasing Money special about HBS. He said its unclear why, but those who don't go to get their MBAs just stall out by their late-20's.

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When it comes down to it, a

by Slacker23 (Senior Monkey, 79 Points) on 5/26/10 at 12:05pm

When it comes down to it, a lot of us are just as bad as the teenage girls who want to be famous actresses when they grow up. The only difference is that people here want to be like Lloyd Bankfein. Is it possible? Of course. Is it probable? Not really. The truth is that there are only so many open positions available for a whole sea of people applying. You can spend your life grinding and still never get to the top. If you retire with $4 million instead of $10, is that failure? It's important to remember that nothing in life comes without sacrifice. There comes a point in your career where you'll need to make sacrifices in your personal life in order to take the next step career-wise. If you spend 100% of your time working, then your career owns you (rather than the other way around).

It's kind of like the whole Fight Club materialism philosophy, where we become defined by the things we own.

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I have a family member that

by MCGILLIAN (Senior Chimp, 29 Points) on 5/26/10 at 12:44pm

I have a family member that was part of a successful MBO that allowed him to make about $4-5 million, he lives a very comfortable life, ie travel wherever and whenever he wants, new car every couple years, membership at top 50 golf course. I would think my number is around $10mm as well but when I think of the life that this person has. The difference btw 5 and 10 might not be that huge.

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1) Not all HBS MBAs are

by ideating (King Kong, 1584 Points) on 5/26/10 at 1:04pm

1) Not all HBS MBAs are created equal. I have met, worked with, interviewed, informational interviewed quite a few who were quite mediocre. Yes, there are a certain percentage who are pretty ridiculous but there are also a significant number who are going to top out at 200k as director of marketing for a trucking company in Ohio.

2) You don't simply stop earning when you "retire" at 40.

3) Your expense base will be significantly lower in whatever location you choose to retire (unless you plan on staying in NYC).

4) Anyone see the irony in a bunch of prospective monkeys standing firm on 10MM when they're longshots to even get a first round analyst interview?

5) A lot of HBS MBAs with the path to make multi-millions simply choose not to for personal reasons i.e. being a woman and having kids.

6) Anyone who tries to do an MBA evaluation based on a DCF of future earnings is an idiot. Citing arguments like "100k discounted into the future could buy you a house in Costa Rica" either a) is grasping at straws or b) is naive enough to think the analysis is meaningful in any way.

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There are a few problems I

by JulesWinnfield (Senior Chimp, 24 Points) on 5/26/10 at 4:55pm

There are a few problems I have with this study:

Only cash compensation is considered (read the fine print). A massive amount of wealth and large chunk of compensation can be earned through stock and stock options. Many C-suite and higher-ups have a relatively low base salary, and a majority of their compensation comes through incentive-based stock options and grants.

They assume a 20-year career. I would expect many MBAs to work longer than that, at least in some capacity.

Only 23,000 MBAs were sampled, which means only about 100 to 300 actual salaries per school were used in the study, which is stated in the fine print below the study. Although this sample could result in an accurate estimate, I would think people in the higher paying (which I assume to mean busier) jobs probably would not take/have the time to complete the MBA survey.

Also keep in mind that while those cash compensation figures are pre-tax, they are also pre-investment. It is not hard to find a near-riskless asset to hold or savings account or CD with a decent interest rate in which to deposit savings. Savings today can be significantly more 20 years down the road.

While this study is interesting to take a look at, I question how much water it holds. I will not be using this study as a factor in my decision whether to attend graduate B-school.

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The main problem here is that

by brisbane (Gorilla, 703 Points) on 5/27/10 at 4:36am

The main problem here is that career earnings =/= walkaway number. If anything, this study shows that one's walkaway number is way higher -- after all, if these are MBAs working until they're 50, they weren't exactly "walking away," right? Retiring at 50 sounds about right for someone in the upper end of the upper tax bracket, but I wouldn't call it walking away. Leaving at 30, 35, 40? Sure.

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... not everybody goes to

by dagro (Senior Orangutan, 454 Points) on 5/28/10 at 6:40am

... not everybody goes to work for mbb and bb. and even less work for pe and hf. the majority go do marketing for gm and walmart, and stuff.. some do gov't, others charity. the median graduate apparently has a dead-end job.

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Going into Finance to retire

by streetn (Monkey, 55 Points) on 5/30/10 at 11:53am

Going into Finance to retire early is a very contracting idea;

To be able to make sufficient money to retire early in this industry you will need incredible hard work, talent and a decent amount of luck(I think we can all agree on this?)

After working this hard you will become bored out of your mind and depressed when you retire early.

all the people I know that were ambitious and hard-working during their working life are miserable and depressed in their retirement.

Of course if your idea of retirement is getting a teaching job as a finance prof or working for the govt or charity, then that is likely a sound plan, but those ppl that have a chance of realizing the 10mm own beach in thailand dream will be bored and depressed once they realize it, the irony of life.

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