As I’ve just finished the final (?) exam of my adult life, it seemed an opportune time to reflect on the past 2 years and evaluate whether pursuing an MBA has been a worthwhile decision (for context, I’ve just completed a 21 month MBA at London Business School). This is really intended for people who are thinking about doing one, and is obviously coloured by my own unique set of experiences.
The 5 types of people who should do an MBA
- The aspiring consultant/banker: One of the most compelling reasons to do an MBA is that you want to give management consulting/i-banking a go, without having to start at the very junior level. For better or worse, consulting firms/I-banks have determined that top MBA programs are the ideal hunting ground for recruiting young, bright people with a bit of prior experience. The employment figures certainly bear this out (below) and consulting/i-banking continues to be a very popular route.
- Career breaker: The MBA is a great opportunity to kick-back for 2 years, without having to explain to any future recruiters why you took 2 years off. If you have the money, the MBA is a great time to travel, and form great friendships with a bunch of smart, talented, like-minded people and together share some very memorable experiences. This is the stuff you can’t put a price on, but that you ultimately may find very valuable.
- Region-hopper: For many, the opportunity to live overseas and experience another culture is a bucket-list item. Living in another country was certainly a big motivator for me, and living and working in London has been so valuable in many ways. The MBA helps make this a smoother process as finding a job from overseas is notoriously difficult (especially when it comes to the UK).
- Re-brander: We all know the psychological value that brands have — recruiters from top firms are no less subject to this effect — this is sometimes called “Pedigree”. An MBA from one of the top schools is a signal that the graduate has A) gone through a rigorous selection process and B) received a decent grounding in business fundamentals. If you come from a lesser well-known region, or a lesser well-known company, recruiters can struggle to get to grips with who/what you are if they have no frames of reference for your experiences. When it does work, an MBA helps to send the appropriate signal that you’re smart and competent. Now the MBA alone isn’t sufficient, but it can certainly help.
- Aspiring Corporate Bigwig: This is obviously heavily company and role dependent and I’m by no means an expert, but it does appear that certain corporate roles almost have the MBA as a pre-requisite for the job. If you think you’re in a company where an MBA gives you the edge if it came down to a battle between equally qualified people, then an MBA might be right for you.
Now none of these are mutually exclusive — you may be an aspiring consultant that happens to need re-branding, whilst hoping to live in another country for a good stretch of time. But hopefully, they paint a decent picture of what I view to be the most compelling reasons for doing one. (There is of course a corollary to the list above, which is the types of people who shouldn’t do an MBA. But I’m not going to be covering that here as that’s quite a long list.)
What about the value of the network?
I personally think the value of the network is only something I can answer 10/15/20 years down the road when the people I’ve gone to school with really start to do important things. For now, the value of the network isn’t something I think you can bank on. As for the alumni network, well it’s very hard to generalise as getting value of out of the network can be hit or miss and highly dependent on what you want to use the network for. Again, I don’t think it’s something you can bank on going into the MBA.
What about the educational value?
If you only wanted to learn about business, there are much cheaper and more efficient ways of getting to the knowledge you get in an MBA. There is very little you learn in an MBA that you couldn’t learn with practical experience + 20–30 great business books.
My story:
I was a consultant with a global strategy consulting firm for a bit over 3 years. I came into the program with the idea that I might like to go into the technology sector — however, I was soon disabused of the picture painted by many MBA programs, which is that you’re going to find it really easy getting relevant work experience and successfully hopping into another career. It was pretty tough trying to get into any of the big technology companies as my experience had mainly involved doing assignments for private equity firms in industries unrelated to tech.
Come internship season, I (understandably) failed at getting into any of the internship programs at the big tech companies, who it’s fair to say were mainly looking at business operations roles e.g., sales force efficiency, areas in which I had absolutely no experience.
Thankfully, I was able to find some relevant work experience at a private equity firm where my prior work experience was valued. I then spent most of my time working as I realised I was learning way more stuff in my internship than at school. In fact, I would say the past year and a half of working/studying has been the most productive period of professional and personal development of my life thus far. The opportunity to momentarily escape the all-consuming lifestyle of strategy consulting allowed me to reflect and pursue things I was curious about. It was like surfacing for air, surveying the surrounds, and resetting my bearings.
Luckily, I was able to secure a role at a technology-focused private equity firm. This was definitely a combination of skill and luck. Using time to build out my resume with relevant internships definitely helped me get my foot in the door as I would otherwise be a bit of an unknown quantity. However I don’t want to make it sound like anyone who wants a job on the buyside can get one — so a decent dollop of luck was also involved (e.g., hiring windows lined up, they were willing to sponsor my visa [which is very rare in the UK], I came across someone in the firm that actually responded to a cold email).
So it all ended up working out okay, and I have to say I’m happy I did it, but I’ll always wonder if there was a faster and cheaper way (see below) of getting to where I am. Knowing what I know now, I don’t think I would have done things any differently. As pointless as counterfactuals can sometimes be, I think I’ll always wonder:
“What else could I have done with that 2 years and £140k”?
And that is a question everyone thinking about an MBA should get to grips with when weighing up the options.
Other relevant tidbits of information:
Some (scary) numbers
Tallying up the financial outlay is a depressing task but it must be done. My MBA over the two years has cost:
- Tuition fees: c.£60k (although this has now been hiked up to £68k for new incoming students — Yikes!)
- Living expenses (rent, food, necessities): c.£60k
- Other outlay (school-related travel, and other entertainment): c.£10k [this number varies a lot depending on what you choose to do]
- Opportunity cost of not working: 2 years x post-tax salary+bonus
To put that in context in today’s exchange rates, a prospective student can expect to fork out somewhere in the range of
c.£140k = AUD $280k = USD $220k
And that’s before taking into account the opportunity cost of not working.
Some (reassuring?) numbers
It’s difficult (and inaccurate) to generalise about the career aspirations of those going into the MBA, but it’s instructive to look at the post-MBA career paths to get a sense of the job opportunities on offer.
- Strategy consulting continues to be a huge draw card with McKinsey, BCG, and Bain accounting for 64 of the c.400 graduates alone
- Finance has declined pretty steadily since the GFC, but still accounts for c.30% of post-MBA jobs — a decline likely driven by the drying up of Investment Banking jobs.
- Corporate is a bit of a catch-all and includes all sorts of opportunities which vary across industries, regions, and functions. The catch-all nature of the category obscures some very important differences such as those jobs which are a part of post-MBA grad programs (e.g., Amazon, MetLife, Samsung) and those which are recruited on a more ad-hoc basis depending on the graduate’s particular skill set and experience (e.g., Google).
Now comes the bit that a lot of people wait for — Pay:
On a high level then, 40% of the 2014 graduates who went into the “traditional” post-MBA exit options of either management consulting or investment banking ended up with a pre-tax first year package of
c.£110k = AUD $220k = USD $170k
This really does obscure a lot of important differences, but is instructive as an anchor given the number of people choosing one of these two particular career options.
Now once you factor in tax and other living expenses, it becomes pretty clear that payback is going to take quite some time for those who’ve taken on student debt, and that relatively speaking, an MBA remains an expensive option with a potentially long-tail of debt (in some cases as long as a decade).
It’s a truism around campus that if the vast majority of us were to do an NPV analysis on the MBA decision — it would come out negative… Which is to say, that if you’re going to do the MBA, be prepared to wait a long time for the payback.
