Last year I had a headhunter ask me if I was interested in pursuing an MBA. It’s always stuck in the back of my mind, but I’ve never really analyzed why I would even entertain such a decision. Due to the current state of costs associated with a “Top 10 MBA” I’ve personally decided that pursuing an MBA is not for me. Also, I don’t think I’m the MBA type. Let me elaborate. Like any major decision in life it’s worth gaining some perspective. I spoke to people at both Booth and Kellogg. I ended up doing a comparative analysis and have jotted down the pros and cons of doing an MBA.
- Put me into debt at about $150k (that includes living expenses and NPV had it invested that money elsewhere)
- Takes two years away from learning real-life business value
- Gain a safety-net for life (see explanation later)
- Acquire a high paying job
- Attain a highly connected network of like-minded individuals
The way I see it, the MBA “business” is much like how Wall Street operates today. It deals with large money sums on largely based assumptions created by a cyclical instrument for self-driven market exploitation. If the assumption continues to be that a person can acquire a $125k+ job after school, then the business schools can continue to charge an absorbant amount of money. I see some fallacies in this assumption. There is risk in this concept, and the business schools do nothing to reduce this risk; in fact, they exploit it.
I see an MBA as a safety net, as it provides a lifetime of business verification. It’s like stamp of approval that you see on an e-commerce website that says “Signed by VeriSign”. What it effectively does is reduce risk of a purchaser (in this case, an employer) who would then sell you out.
I’m not alone in this endeavor. A graduate of Wharton put together a study about the NPV of a top MBA program:
Assume that the Graduate Management Admissions council is correct and that an MBA engenders a 35% salary increase. Also assume that the $115K salary is correct. If one were to take into account the changes in marginal tax rates, the years of lost income, et cetera, the change in Net Present Value for your ten years after business school would be -$53,000. This figure is primarily driven by the fact that the student loan repayments for such a hefty sum would have to be a staggering, non-tax deductible $1,500/ month (assuming a 10 year repayment period). Put into more simplistic terms, if one were to leave an $85K/year job today for the hope of getting a $115K/year job two years from now, your net yearly take-home pay (after loan repayments) will be actually be lower than if you simply stay put for the first several years. You won’t even break even until about twelve years from now.
Source: http://mbacaveatemptor.blogspot.com/2005/06/wharton-grads-caveat-emptor-for.html (unfortunately his full explanation is now missing)
My conclusion is that I would realistically do an MBA for the following reasons:
- The price went down. I would estimate that instead of $150k, it would have to be about $60k.
- My current business network is insufficient for my career goals
- I wanted to invest in a “Safety Net”
Today, none of these are applicable to me. So for now an MBA is not in my plan. Lastly, let’s throw some humor in it: