Is getting an MBA worth it?
Is getting an MBA worth it? I get that question still, 18 years after completing my MBA, at least weekly.
I have mixed feelings about it. On one hand, I don’t see any value in looking backwards. Some people like to dwell on what alternative realities would have looked like. I think this is a waste of time. Until we can travel through time, I’ll spend my squishy processor cycles focused forward on decisions today that will impact my future. But based on my experience in the MBA program and after it, I am confident that if I could go back in time, I would have done things very differently.
I would not have gone to traditional business school at all. If Seth Godin’s AltMBA existed back in 2000 (I don’t think it did), I would have instantly signed up. I was a perfect fit back then. Going into b-school, I was a maverick. Passionate. Curious. I had 8 years of full-time work experience under my belt. I was already versed in multiple diverse and seemingly unrelated disciplines - fine art, philosophy, Japanese language, computer networking, and sales. What I didn’t understand was the nuts and bolts of “doing” business. In hindsight, I think there are three areas of business that should be covered in business school, in order of importance:
Purpose. Simon Sinek calls this your why. Why does a given business exist? What dent in the universe is it trying to create? Or does it not have a purpose? What is the difference between businesses with a why, and those without? Some businesses are playing the Finite Game, while others are playing the Infinite Game. What is the difference between the two? What is the relationship between why, the infinite game and innovation and doing right for one’s team, the community, society and the world? Why should we care? None of this was discussed in my business school. Not once.
Business ethics. There was zero mention of consideration for what is right or wrong in business as it relates to our planet, our society and our local community. It just wasn’t talked about, other than for about 2 minutes in the closing residential, where everyone had been drinking with one foot out the door. It’s not difficult to see why CEOs called before the US Congress, when asked about something that is clearly wrong, usually have one answer, “what we did was within the boundaries of the law.” That’s an incredibly low bar, and I believe resting on that bar is the result of business schools everywhere, including my alma mater, not focusing on ethics in any way.
The lifecycle of a business, from startup to demise. I was extremely interested in entrepreneurship and new venture management as I evaluated business schools. What I came to realize is that these subjects are being taught completely wrong - they are being taught as subjects, discreet processes that only specific types of people - “entrepreneurs” should use. And in my alma mater, those teaching entrepreneurship have never started and grown a company let alone worked within one. I learned more about entrepreneurship in one week at the American Management Association (AMA) than I did in three years of business school, from merely asking the AMA course facilitators if I could take to them during breaks and lunch times. Not once in my entire three years did a teacher mention, bring up or provide material on business cycles. I had to read Good to Great after b-school to get my head around it.
Nuts and bolts skills. Lastly, there’s concrete and objective math-y stuff like statistics, accounting and finance. And more subjective stuff like negotiation, strategy and marketing.
If I could do it all over again, I would either participate in Seth Godin’s AltMBA, and/or curate my own MBA equivalent with several hand picked courses from the American Management Association. I would supplement that with about 40-50 books that I think are masterclasses themselves on various topics, and I would reach out and find peers and mentors with similar life values who I could form deep and open relationships with.
The business school I selected
When I entered business school in 2000, the Graduate School of Management at the University of California, Irvine wasn’t named yet. It would be a couple more years before the big donor showed up and the school subsequently named after him. UCI wasn’t yet a heavy hitter school. UCLA and Berkeley were on a different level that UC Irvine hadn’t yet achieved; There was absolutely zero wow factor when you answered “UC Irvine” to someone asking where you went to business school. “Where’s Irvine?” was a common question I heard for years after graduating. Many of the students in my cohort would attempt to needlessly justify why they were at UC Irvine. “The company is paying for it,” or “Our company has a long relationship with UC Irvine.”
Two prices for the same MBA
So right from the start, you could feel a constant state of selling: Everyone from the teachers to the staff seemed to be on pins and needles when it came to justifying the value of the UC Irvine MBA. And rightfully so: For those of us who were paying for our own MBA, we paid through the nose. The Fully-Employed MBA for the class of 2003 cost $60,000 unburdened, meaning many ancillary expenses were extra. In fact, the first lecture we received wasn’t in a class at all. It was during orientation. The lecture was on opportunity cost.
You see, the cost of a UC Irvine Graduate School of Management MBA wasn’t $60,000 for everyone. You could get the same MBA, taught by the same teachers, with the same textbooks, the exact same curriculum, with the exact same international residential, for $22,998, and it would only take two years. This program was taught during the day at the exact same time as most undergrad classes. The MBA students were directly injected into the program from their respective undergrad programs. No work experience, except for the occasional person putting themselves through school working nights and weekends.
Looking at opportunity cost
My program, however, was the Fully-Employed MBA. Most of the students in my cohort were working for companies in Southern California doing business-y stuff. Disney, Boeing, Toshiba, Taco Bell (headquarters, not the drive-through). We were to take the exact same classes from the same teachers with the same curriculum in the evenings and on weekends, for three years instead of two. The orientation teacher, eager to tell us how valuable this was to us, explained the business concept of opportunity cost. “You have the opportunity to continue building your careers! The Fully-Employed MBA gives you the opportunity to earn an MBA without interrupting your income!”
It was sort of true. Many of us were fully-employed professionals in one area of business or another, most with 5-10 years of career experience, working full-time, and most of us were already supporting families. I am definitely not complaining. I believe I only made it into business school because one of their most influential professors wrote a very compelling recommendation letter to the admissions director. It was just one sentence: “Let him in.” I didn’t have the standard-issue undergraduate degree in economics, and I didn’t have a great GPA. I had to take the GMAT three times just to get within the range to be considered.
And I was hustling. I was working so hard to make ends meet, and I lined up everything, through hard work and some good luck, to have the time and resources to start, focus on and finish the MBA. Was the $37,002 + one year of my life premium worth it? I won’t stop to think about that, because I don’t believe in wasting time looking at what-ifs of the past when I can be comparing and analyzing what-ifs for the future.
Calculating the value of an MBA, B-School style
Then there’s the business school way of answering the question: What is the Net Present Value (NPV) of the MBA Program? NPV is the value of future cash earned in today’s dollars, less the cost of the investment. To measure the pure financial value of the MBA, I take the $60,000 cost of the MBA and I determine the discounted rate of future income that I would attribute to having an MBA. I looked at some basic stats of average income of UC Irvine undergrads and UC Irvine Fully-Employed MBA grads, and it appears that having an MBA, on average, results in an annual income about $50,000 higher than the income of an undergrad without an MBA. Now, nothing’s perfect, so I just decided to plug in $40,000 in “extra” income for 10 years, then $60,000 in extra income for the next 20 years.
I won’t run the calculations here because you can do it at this web site. It turns out the NPV of my MBA, assuming my level up income projection is correct, is $707,912.36.
Not bad. It looks like the professors and staff had a point about opportunity cost. An extra $700K is probably worth $60K and three years of my time, especially since I got married, bought a home, gained experience and some notable resumé line items at the same time.
Some final thoughts on the question
All of the above points aside, we are now 18 months through a global pandemic. At the beginning of the pandemic, Japan closed all public schools across the country, so my two boys were at home. I saw this as an opportunity, and I reached out to the best teachers I could find around the globe, personally curating an A-team of incredible people to help my children keep learning, growing and developing. What did I learn? One hour of focused education produces better than 8-10 hours sitting in classes with a talking head. And quality, one-on-one mentoring and training has a compounding effect. I won’t get into it in detail here, but the bottom line result is that my oldest child blitzed through three years of public education in just six months with the right coach and teacher.
There’s no excuse for an MBA to be three years. Not even two. In fact, just the fact that an MBA program requires a 2-3 year commitment demonstrates that the degree and education itself is based in old industrial era education thinking and hasn’t evolved in decades. It’s a grand waste of time.
What’s worse is that the same argument about opportunity cost has been extended in a usurious fashion to extract the maximum amount of money possible from education’s customers. How is the $60,000 MBA I completed in 2003 worth $106,515 in 2021? That’s a 77% increase. Does the Paul Merage School of Business need to keep building more buildings - adding more overhead - in a world that has the technology to operate without them? Or are the academics leading the school as equally fixated on Milton Friedman’s theory of profits above all else that they’re seeking the maximum reservation price of an MBA at the expense of accessibility and throwing innovation in education and value out the door?
Does the Paul Merage School of Business even know its own why?
