There has been a lot of recent discussion on these forums as well as in the media regarding the value of an MBA. As a longtime member of the community and someone who recently made the decision to pursue an MBA, I thought I’d share some thoughts.
You can see my full background story here: "How I Got into Banking"
My Background
In summary, I went to a relatively unknown undergrad in New England where I received a degree in MIS. I went on to do two years of investment banking at an MM doing sell-side M&A. I then did two years of MM leveraged buyouts in a pre-MBA role before switching to a competitive MM leveraged buyouts shop in a partner track role (post-MBA role with no MBA).
Made the choice to pursue b-school
Despite the fact that I am on a partner track without having an MBA, I made the choice to pursue b-school. I’ll have six years of experience when I matriculate this fall. I am very happy in my current job and will likely pursue very similar opportunities upon graduating. I won’t be receiving any employer sponsorship nor have I been guaranteed a position when I graduate. I’ll be attending one of the MBA business schools">M7 schools (not H/S/W – they all rejected me).
Who an MBA makes sense for
First of all, I don’t think an MBA makes sense for everyone. It ultimately comes down to a combination of career path, adversity to risk, financial situation, geography, etc. There is no one-size fits all formula; you’ll need to decide for yourself if it is a good fit for you. There is also no hard and fast line for which MBA programs are worth it and which ones are not. For some people, only Harvard/Stanford/Wharton are worth it. For others, a top 50 program could be the boost they need to get on the right track. Ignore any discussion where people try to value an individual school without regard to the applicant’s individual circumstances.
Many people cite the cost of an MBA, combined with the opportunity cost, as the single biggest reason that it is “not worth it.” For me, the cost was never a consideration, though the total cost of attending will likely exceed seven figures (opportunity cost included). I like to believe that I have very modest expenses in life relative to my income. I don’t enjoy expensive dinners, don’t drink more than a few drinks when I go out, and I have no interest in a fancy car/boat/yacht. I’ve saved all of my annual bonuses without ever having to pass up an opportunity due to money. For me, the biggest inhibitor of maximizing my happiness has always been a lack of time, not money.
A chance to take some time off
Wealth alone doesn’t bring happiness; it just enables us to afford experiences and things that make us happy. While the cost of an MBA is very high, I view it as an opportunity to have unforgettable experiences while I’m young without negatively impacting my career. Without including the five vacations (week+ long) that I’ve taken in the nearly six years I’ve been working, I haven’t had more than two straight weeks off since high school! This summer I will take advantage of my nearly three months off before school to build my language skills in Latin America, explore cities in Europe I’ve never been to, and visit friends and family in the U.S. that I haven’t spent time with in years since I live in a different city. And the best part is that employers won’t view it as a “hole in my employment history” as it is generally accepted to take time off before starting an MBA program. I don’t think I will have another opportunity like this for the rest of my career unless I lose my job or retire.
What I can learn in B-school
Money aside, I also place a lot of value the learning aspect of business school. Given I have an MIS degree, everything I know about finance has been learned on the job. While I am rapidly reaching the point where intricate accounting / finance knowledge is not required to be successful in my job, I do encounter situations where I have no idea what my CFO is trying to explain to me. Things such as utilizing standard costing come intuitively to my peers who studied accounting, but require extra effort for me to understand. There is also a whole world of finance that I have never been exposed to (derivatives, hedging, heck the entire stock market) that I feel will improve my ability to perform my job. This is an often overlooked part of business school that I think people should take into consideration when thinking about applying.
Even if you completely negate the learning aspect of an MBA, the intangibles alone are reason enough for me to get an MBA. These intangibles come in many forms: (1) credibility, (2) network, (3) executive presence, (4) risk mitigation, and (5) option value.
Credibility
The combination of attending undergrad at a university few on Wall Street have heard of and working at small institutions, there is nothing in my bio that gives me credibility. Sure, I can eventually earn respect through performance and results, but often times a lack of credibility can prevent my ever being given that shot. I’m constantly meeting with people that judge my credibility. Current and prospective executives of investments, bankers, lenders, and down the line when I am more senior, limited partners. For me and many others, attending a top tier MBA will enable me to gain this credibility.
Network
This is the one intangible benefit of an MBA program that people latch onto, and rightfully so. I can’t begin to count how many times I’ve seen senior professionals tap into their alumni network to learn more about a particularly industry, transaction, or opportunity. Furthermore, if you’re looking to change jobs, having a network of people that are willing to take your call and assist you is invaluable.
Executive Presence
The vast majority of junior professionals lack the ability to articulate their thoughts in a structured, cohesive, and concise manor. Their opinions are often discounted or ignored due to this fact alone. When someone delivers an opinion with confidence and conviction, they come across and knowledgeable and intelligent. B-school is an opportunity for people to develop this soft skill through frequent interactions with others when there is no pre-determined seniority. Executive presence is not only valuable on the job, but one of the defining characteristics of leadership.
Risk Mitigation
Things change in life, particularly in the financial services industry. Private Equity appears to be contracting as many established firms are unsuccessful fundraising. I work at a relatively small firm where the departure or incapacitation of a couple individuals could force us to wind up the fund. There are many factors outside of my control that could force me to find a new job despite how well I perform. Opportunities are few and far between at the post-MBA level and I would be at a serious disadvantage without one. I have yet to read a job description for a PE professional that didn’t state “top-tier MBA required” or at least “preferred.” I view the MBA as risk mitigation in the event that I find myself in such a situation.
Option Value
Many people go into MBA programs after only three to five years on the job. Usually they’ve only worked in one type of job their whole career, be it M&A, consulting, logistics, you name it. These career paths often build a very specific skillset and do not give you exposure to alternative career paths. While I’ve had the good fortune of getting exposure to a wide variety of companies, I don’t know the first thing about product management, marketing, etc. An MBA gives you broad exposure to and dare I say a rough skillset in each of these categories. This exposure will not only bolster my ability to work in PE but also widen my options through developing a broad skillset in the event PE doesn’t work out.
Some people tell me I’m crazy; that I may come out of business school with a worse job than before. The reality is that there are a ridiculous number of ways to make money. I see it every day. Some guy starts designing pet t-shirts in his garage and within five years he is making $10mm a year profit. Every single product you consume was manufactured somewhere, distributed by someone else, whose systems are managed by a third party that uses software developed by another group. The opportunities are ENDLESS to either improve on existing business models or even create a whole new market yourself. The key is to develop your knowledge/skills as much as possible and be willing to take a risk.
I like to believe that I am a pretty self-aware individual. My thoughts have continued to evolve as I’ve progressed through my career and I recognize that they will continue to change. I’m not entirely sure if I will feel the same way about obtaining an MBA after completing the program or even ten years from now. What I do know is that the window to gain acceptance to top programs is very narrow and it is “now or never.” The majority of applicants that are admitted to the top programs are in their twenties and 2-6 years into their career (broadly – most seem to be 3-5 years). I will likely never have the same opportunities available to me in the future if I postpone the decision. That is one risk that I’m not willing to take.
Mod Note (Andy): Throwback Thursday - This was originally posted January 2013
Very well said, CompBanker.
SBed before even reading it...
You are my hero. I want to be you in 6-7 years.
+1 for excellence. I can relate to much of this minus the successful career part since I graduated in May. Working on that one though!
Did you ever give any thought to part-time? I work in Chicago, and did my undergrad at UChicago, so I've been considering applying to the part-time program at Booth in a few years (I don't see myself being able to afford it otherwise).
Also, does anyone know how part-time vs full-time looks when it comes to post-MBA recruiting?
To answer your second question: The purpose of the part-time programs is for people to attend while continuing to work. As such, you aren't expected to be looking for a job and prospective employers aren't going to give you the same consideration because you're already employed. If your company is paying for it, you'll be locked up for the next two to three years anyways. Also, it is generally known that the part-time programs are easier to get into and therefore don't offer the same degree of credibility that the full-time programs do.
However, it doesn't make much sense to say that employers won't give part-time students the same consideration (at least those who aren't locked into a tuition agreement). Employers always prefer already-employed candidates far more than they do the unemployed. It would be no different here.
In fact, it takes considerablly more time management skills, responsibility, organization, and dedication to complete a part-time program in a reasonable amount of time while working full-time (even more so while enrolled in the CFA curriculum as I am). That actually signals a higher level of competence and work ethic. It's just plain harder.
Thanks for the reply. However, I have one question about the credibility. I know that they are easier to get into, but why should that make them less "credible"? I feel like they might be easier to get into because far less people apply for the part-time, and far less people are willing to do nights/weekends on top of work. If you have the same faculty and same courses in both situations, why would one experience be more credible than the other?
Basically part-time recruiting is the same as full time recruiting in that you get similar companies...You're invited to the same on-campus information sessions. However, full time students get first priority and some companies look very specifically for full timers.
You basically have to be very pro-active in your job search in part time recruiting. The careers office isn't very helpful and tends to see you as a second class citizen. They'll prioritize the needs of the recruiter over yours instead of trying to "help" you the way the full time students get. Its doable to get the same offers as the full timers but you have to make an extra effort to find your own opportunities.
In addition, it is quite difficult from a time standpoint to fully commit yourself to recruiting/job applications when you are working FT and going to school already.
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For what it's worth, I'm considering part-time MBA at Booth too and recently had a conversation about this with a colleague:
1) It's the same MBA so the signaling value is there 2) You miss out on OCR but the best jobs in the HF world (excluding a few notable exceptions) don't come though OCR 3) It REALLY cut down the total cost (including opportunity), especially if your firm sponsors half it
Your colleague is wrong on the first point. It is technically the same MBA, but the signaling value to those who matter is radically different because they know that booth full-time is SIGNIFICANTLY more selective than part-time. It's not even close.
You don't get access to summer internship recruiting but do get access to full-time recruiting after 1 year, provided that your firm signs a waiver (assuming you're being sponsored). Making any type of career transition with booth PT will be immensely difficult though, even with OCR.
Yes, it is cheaper if your company pays for a part of it. Ultimately it boils down to whether or not you want to switch job/industry or not. If yes, do a full-time mba.
agreed. about to start my 3rd quarter.
+1
I hope this means you have more time to post on WSO. Your insight never falls short of efficacious.
+1 on this
Great article - very well written and logical.
Except for one thing. If you value your time far more than your money, why are you on this career path? Does the presitige of an elite job and high pay make you feel good? Do you simply love the work itself?
I'm not asking to be critical, but because it's an issue I struggle with personally.
As for the work, I genuinely do enjoy some of the work I do. I enjoy learning new things, particularly how things work. A significant element of my job is to learn as much as I possibly can when evaluating investment opportunities. While there are certainly mundane elements of the job and not every company is exciting, I've been able to learn about hundreds of different companies and industries just six years into my career. There are very, very few career paths that give this sort of exposure.
I also like a lot of the people that I work with. I've purposely made "culture" and "fit" my number 1 & 2 criteria when looking at job opportunities. I've avoided the NYC atmosphere where big egos and rude behavior is commonplace. Our office culture is truly fun and laid back, yet we still manage to produce good returns and make a ton of money. Imagine that?
Can you please tell me where you work? I'm also trying to get away from the NYC atmosphere (been doing banking for two years now). PM is totally fine if you do not want to share publicly.
What city/region are you in?
instant classic, thanks comp!
+1; Great post!
Ditto. All of the reasons why I would go back to b-school, even after having had success in the financial services industry.
Awesome viewpoint. It goes to show: while you can find a lot of advice and insight on these boards--evaluate your own situation! There is no silver bullet for success! Have patience, make moves for the right decisions, and keep your head on your shoulders. Thanks CompBanker!
well done. +1. you and I could be friends compbanker. good luck
Instant classic. Thank you for sharing your rationale. I too like to live the simpler life and often eschew expensive/fancy things, so I've been thinking a lot lately about work-life balance post-MBA (I'm still applying/interviewing). I think you hit the nail on the head when you said that money is nothing except a conduit to pursue the experiences (not things) that make us happy. Hopefully we'll end up at the same place as I'd love to attend school with someone with such a down-to-earth perspective.
Real talk. Literally millions of ways to make a buck. Knowing and understanding that and knowing and understanding what truly makes you happy will set you up for a good life.
have my babies
Amazing story! How much are accounting principles used in PE and IB though? I'd never have thought standard costing etc would be relevant to a banker
Great write up. I definitely agree with having its efficacy evaluated on a case by case basis. Personally, short of hitting a career plateau where the MBA would be paid for and a job waiting on the other side, or having my ~300k held in escrow to be returned within 6 months of graduation if no job was found- I wouldn't do it. But again, that's just a personal choice and I certainly understand why people would feel otherwise. I'm not really into career roulette and the MBA is the biggest spin of that wheel I can think of. Also, I have ZERO interest in climbing a corporate ladder and would much rather start a business as a "end goal" (which is much easier with that money still in pocket, and certainly doesn't require an MBA). Anyway, best of luck to you.
I will now depart with a quote: "The (insert top MBA) guys have mad swagger. They frequently wear their class jackets to (insert city) bars, strutting and acting like they own the joint. They just ooze success, confidence, swagger, basically attributes of alpha males."
I liked this paragraph. I'm not even close to being as experienced as you, but I think a big problem with a lot of the finance guys I see aspiring to make that kind of money is that they become overly attached to their PE gigs. Going off to B-school because it's something you want to do and knowing that you may not get back into PE shows that you have the versatility and risk appetite on top of six years of strong experience.
Very well written with meaningful and personal wisdom sprinkled in. Good luck in B-school!
From my point of view, it seems that you have carefully considered your options and chosen the opportunity that suits you best. This was a well written article and well thought out decision. Congrats and good luck!
Great insight. I'm definitely re-reading this when I'm at that point!
Thanks for the great post CompBanker!
I was wondering if anyone has insight on the value of an MBA outside of high finance (PE/HF/IBD). Is an MBA much more valuable for those looking to move up in corporate finance for instance as it is a prerequisite to reach the VP level? Or are most of the guys moving up the ladder doing evening MBAs and less emphasis is placed on the prestige of the institution?
A top-tier MBA makes you a more viable candidate in almost any industry.
Background: I work in the defense sector as a software engineer. I'm also a infantry officer in the Army National Guard. I have a BS Computer Science.
You have a solid chance of making O-6/Colonel with the following: - Infantry branch (while they may account for about 1/9th of junior officers, they represent over 50% of those who are Colonels and higher) - Engineering/Science degree (US Cyber Command is rapidly expanding) - Excellent reviews - Required professional military education
A MBA from the likes of Harvard, Stanford, Yale would be that extra push to make a "star" possible.
Yeah, but only if your goal is to stay in the military. If that is the case, then I think a formal business education will increase frustration as one rises in rank and has to tote the company line. There are no reformers above the company grade ranks. Someone who goes to HBS to make general will spend 26 years of a career to get there and earn a salary comparable to what his or her classmates will make 1 year out of HBS. In the end, it seems like a dumb choice to me, unless you're just looking for 2 years off.
Great post. Thanks!
This post raises a more general question in my mind. Why on earth is a "gap" on your resume such a scary thing for potential employers? Are we really enmeshed in that much of a mind-numbed machine that if you decide to get off the hamster wheel for a minute and actually look around people think you are tainted goods regardless of the rest of your resume's strength? "Oh you decided to travel to Europe for a few months, learn a programming language, and ice climb in Chile after doing 5 years in elite finance? And you decided to do it all by yourself without some institution telling you it was ok and charging you $200K for the privilege? Ha! Good luck pal."
Seems bizarre to me when I really think about it.
...yes.
Employers simply want to make sure their employees are 100% focused. There is nothing inherently wrong with having extracurricular activities but if you are interested in these extracurricular activities enough to take serious time off and pause your career, then there is the possibility that you may be do it again, which means there is the possibility that you're not 100% focused on your job. You may say that taking a 3-month sabbatical to see Europe was a one-time thing but how do I know that after having your horizons expanded by seeing the wonders of Europe, you're not now secretly wondering about what your might find in South America or Asia?
Focused = enslaved.
Your outlook is ridiculously similar to mine.
Question-- as for taking off time before going for MBA, how much time can you do? Is taking a year off conceivable? For example, I want to do something like hike the AT, which takes 6 months.
after reading this i may have to change my vote for monkey/member of the year
Thank you for your reply. Your job sounds incredible.
In addition to your list I would like to add: things you can learn from your fellows: as you've said most of them are experts in their field. So if you do have some kind of marketing class, why not learn from someone who has been in this profession for several years with substantial knwoledge?
CompBanker: Could you give us a brief (or detailled) story of your application? Why do you think that M7 school took you and what do you think are they looking for?
Thank you very much!
I hope this works out for you well Compbanker. I remember you mentioning an interest gaining more experience abroad(dating girls from overseas; general lack of foreign exposure in MM PE). Respect for expanding your horizons. You'll definitely be a more interesting guy coming back.
I'm actually in the reverse situation (spent quite some time traveling/living/working overseas, now working on my professional credentials back in the States), so if you have any questions re: maximizing your time overseas and making the most of those three months, PM it up. Best of luck.
Compbanker,
Given the research you have done, would you consider two years of reputable experience to be not enough prior to b school?
Thanks,
Paul
Could you explain why it would have been a mistake for you to attend b-school after only 2 years in banking?
I'm considering doing that, though for different reasons compared to you.
I'm a Europe-based analyst at a US BB and would like to find a job in the US (I have a master's degree from a European uni).
I tried the internal transfer move and was unsuccessful at it. I'm thinking it might be the right time for an MBA but I'm a bit concerned about how attractive my application would be with only 2 years of experience and whether this would really help me achieve my goal.
Great post. My personal view has recently been that MBAs are for people that want to APPEAR like they know something (very important for investment bankers, consultants, investors, corporate executives, or people that world in a capacity where the results of their efforts or quality of their advice cannot be judged empirically). It has been my preference to focus on producing, not on merely trying to impress people. The true value of the MBA is that most in the business world believe whatever they are told when the reality is that the emperor has no cloths.
I think this can be applied to any sort of branding of pedigree. Sad, but true. Time to prestige whore it up!