MBA – Invaluable experience or incredibly overrated?

Monkeys - I decided to write a blog about MBA life. My main goal is to create a transparent view of the MBA. Please refer to the end of this post for further information, background, credentials and objective for this blog. My low post count does not allow a link to a website yet. PM me if interested - I will put it up later.

Let me know what you think. Feel free to ask questions or leave comments.

MBA – Invaluable experience or incredibly overrated?
There is hardly any graduate degree which value is debated as much as the MBA. Tuition fees are increasing with an alarming percentage each year, while starting salaries are proportionately lagging behind. Inevitably a point will be reached in which the (opportunity) cost of an MBA exceeds the net present value of it. Business schools, admission consultants and vocal MBA students aim to convince prospective students that it will be their best investment in life. Silicon Valley, self-made millionaires and your former employer claim it is a waste of money. So who is right?

The answer may not be as clear cut as either party pretends it is. Proponents of the MBA often cite a combination of the five reasons that will be discussed in this article as valid reasons to get an MBA. This article aims to provide a transparent view whether these reasons are accurate and provide a short action plan on how to move forward.

1. NETWORK
Among top MBA students, the network is often cited as the number one reason to obtain an MBA. Being surrounded by the most diverse and talented crowd in the world should provide any MBA student with an invaluable network.

The bond created between MBA students is incredible and unparalleled. I noticed this during on-campus recruitment. While some of us had gotten offers, others hadn’t. The empathy I felt towards any of my classmates that struck out of on campus recruitment was strong, comparable to the empathy I would feel towards a close friend I had known for 10 years. The whole class felt an urge to help our fellow classmates and was prepared to go above and beyond for them.

While most MBA students at top 10 schools are talented and accomplished, their student body is not necessarily more successful than an analyst class at a well-established firm. It is, however, more diverse. I am a student at an M7 (non H/S) and have friends across all of the M7. The majority of the students are incredibly accomplished, and I am sure this holds true across top 10 / 15 schools too. However, I would argue that any analyst class at a top investment bank or management consultancy firm or tech giant is equally, if not more, accomplished. I am not discrediting the talent of business school students, but be prepared that you are not suddenly surrounded by noble prize winners or unicorn-founders only.

**The alumni network is mostly useful through direct connections. The response rate through an introduction of a school alum that we know in common is close to 100%. The response rate of cold-call e-mails to alums is around 50%. **I often see schools citing a response rate of close to 100% when reaching out to alums. I would argue these numbers only hold true when you have a connection in common. The response rate drops drastically without a common connection. There are more nuances to these numbers which I will elaborate on in a future post.

Takeaway
(1) Get outside of your comfort zone and make valuable connections. It is the last time in your career in which you have a safe zone to practice.
(2) Use the extensive alumni network that you have access to. Don’t be afraid to ask for help.

2. ON CAMPUS RECRUITMENT

A close runner-up for attending a top MBA program is the on campus recruitment. It is a convenient way to select firms that you are certain will hire MBA students for that year.

On campus recruitment does not guarantee a first-round interview at a top investment bank or management consulting firm. Most prospective students are fully aware that on campus recruitment does not entitle them to a job offer or second round interview. However, I was shocked by the application-to-interview conversion rate. It is often cited that a top MBA gives you a ‘shot’ at the top firms. This is far from a guarantee, even with extensive networking. On campus recruiters are very popular and only a select number of interview invites are handed out.

The offer rate for investment banking BB or MBB / tier 2 MC firms is NOT 100%, nor is it close to that number. The consensus on internet forums nowadays is that “everyone who wants to do banking or consulting will get an offer”. I am uncertain whether this was the case a couple of years ago, whether the numbers are largely inflated or whether they are just outright inaccurate. On campus recruitment for first years is over, and there are many students – both in banking and consulting – who do not hold an offer at the moment. The number of students holding an offer in banking is still relatively high, but it is far from 100%.

Takeaway
(1) Network, network, network. Quality over quantity.
(2) Have a parallel path. No really, have a parallel path.

3. OFF CAMPUS RECRUITMENT

Not all firms come to all campuses. Not all industries recruit on campus. How attractive is off-campus recruitment?

Off-campus recruitment is often overlooked and underrated. Be aware that a big part of off-campus recruitment happens later in the year – by the time you may have accepted your IB/MC offer. There are many opportunities available both for MBA students and for non-MBA students. Private equity firms, hedge funds, tech-startups and other less traditional firms often do not recruit on campus, either because they have other effective means to recruit students (PE / HF) or because they do not know their hiring needs far in advance. Many attractive opportunities become available later throughout the year, when a part of the student population already signed an offer at a IB / MC firm.

Takeaway
(1) Research off-campus opportunities before committing to anything. There are valuable opportunities out there.
(2) Not getting a banking or consulting offer is not the end of the world.

4. ACADEMIC VALUE

Even though academic value is often not the number one reason why students obtain an MBA, it often is the core center of a business school.

You will be taught by many accomplished and well-connected professors, but they often teach basic concepts. Use them for more than just ‘learning’. Most M7 schools have many top professors connected to their business school. I would argue that I could have learned 90% of their concepts while reading a textbook at the local Starbucks. Initially I was quite disappointed by this. However, realize that many of these professors are well-connected and prepared to help you out when you want to apply the concepts learned in business school in the real world.

Takeaway
(1) Use professors for more than teaching the concepts in class.
(2) Many top schools have grade non-disclosure. Do not waste time studying (too much) for classes that will not be beneficial for achieving your goal.

5. A TWO YEAR BREAK

But wait. Isn’t business school a two-year vacation break?!

Business School is more intense than you will expect. Unless you are sponsored with a return offer, you will be busy balancing recruiting, academics and a social life. This mainly relates to the first semester. You are getting accustomed to being back in school. Recruiting kicks off only a month after your MBA starts. You need to make 100 new connections and want to be perceived as a social person – first impressions matter after all. It can certainly be overwhelming. While it is an amazing experience, it is time-consuming and can hardly be considered a vacation. The students who received an offer after the first semester can technically (indeed) take a one-and-a-half-year break. However, did you really make a $200,000 investment merely to ‘take a break’. Many students are motivated and will find creative ways to stay busy, either by founding companies, re-recruiting or make a social impact on society.

Takeaway
(1) Enjoy your two years and have a blast. At the same time, treat your business school as an investment in a company. Put in effort to get the most out of it.

It is impossible to tell whether business school is the right move for you. One thing that is often overlooked is whether you have (cheaper) alternatives available to achieve the same result. For example, off-campus opportunities are available to both MBA and non-MBA students. Combine this with extensive networking, and you may save yourself $200,000.

Nonetheless, my MBA experience has been amazing. I would not want to trade it for the world. Were there better (cheaper) alternatives available to achieve my goals? Maybe. It is too early to forecast the exact value of my MBA in my life. Time will tell. Just keep your eyes open and have a healthy sense of skepticism.

Aaron is an MBA student at an M7 school, was admitted to 5/7 schools he applied to and holds an offer to go to the buy-side. He noticed that the majority of information on internet fora, and even information spread around by admission committees and other MBA students regarding an MBA is often incorrect, misleading or biased. His blog aims to create a transparent and objective view of the MBA and everything around it. Aaron has used big data across a large sample of business school students to support his findings, supplemented by experiences by current and former MBA students at top business schools. Aaron chooses to remain anonymous for objectivity and transparency purposes.