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Is It Worth Getting an MBA?
Beneficial for some but not all
Welcome! I'm Sarah Connor and this is my investing newsletter. You can subscribe by clicking on this handy little button:
I finished my MBA in 2008. I learned a few things but nothing I couldn't have learned by hitting the library. Ultimately, I don't think it was worth getting my MBA.
Over the years many people have asked me if they should do it. For those in the finance industry, I generally advise a lower cost, but highly rewarding, alternative - the CFA designation. The CFA designation requires more discipline to complete and is highly specialized, so it has a greater impact on one's career, assuming you work in finance. If finance isn't your thing, then consider similar pragmatic alternatives like Google Analytics Certification, new experiences or a library card.
I only recommend an MBA if someone lacks the business background to switch to the management side of their industry. For example, engineers, scientists and IT folks can fast track to management with the technical and management combo.
For those with a business undergrad and relevant business experience, I think the MBA is a huge waste of time and money, for a couple reasons:
Calibre of Students
There are hundreds of universities offering MBA programs. Students have a lot of choice, so many admissions departments are willing to accept less desirable candidates. After all, universities are a business and tuition is their source of revenue.
When I did my MBA about half my colleagues were of questionable intelligence and character. Many were also lazy. This detracted from my experience because half the reason to do an MBA is to immerse yourself in an intellectually inspiring environment.
How did these people survive? It was basically an unspoken rule that nobody would receive less than a 'B' for anything handed in. So these lackluster candidates were allowed to remain in the program. You have to fuck up pretty badly to fail out of an MBA program.
Nowadays, I see 'prestigious' MBA programs dropping the standardized GMAT test from the application process. In the past, the GMAT served as an objective way to assess and rank candidates. In contrast, the admissions process at many schools today is much more subjective and prone to bias. Essentially, if you have the money and a half decent background many programs will accept you.
Return on Investment
Perhaps most importantly, many MBA programs have a poor return on investment. This is not to say MBA programs won't help your career, but - unless you're going to a school like Harvard - in my opinion the boost is generally not worth the cost.
A full time MBA program can cost about $100,000. That figure doesn't include the lost income and lost experience from being out of the workforce for one or two years. It also doesn't include the risk that you graduate into an economic recession, making it potentially even harder to generate a proper return on the MBA. I remember in 2001 (during the tech wreck) newly-minted MBAs applying for call centre jobs.
For these reasons, I only suggest people do the MBA while continuing to work full time. This is what I did and it almost killed me. But I didn't go into debt and my career didn't fall behind.
Many people dream of a sudden career boost once their MBA is completed. Schools point to dubious ROI and payback period claims. However, the reality for most is more benign. Often, the 'returns' are no different than what you would have earned with simple work experience, without the hassle of going to school. Even if there were positive returns, you need to have a long-enough career runway to ensure you actually have enough time to earn your payback.
The actual boost from doing an MBA can vary. An engineer trying to transition into finance might experience a meaningful boost. However, a marketer trying to stretch his career will get a minimal return.
I think people need to ask themselves what else could they do with $100,000 to build wealth. That money could be invested or seed a business. It could be used to pay down a mortgage or to accelerate FIRE. Compare the returns for each to determine the best course of action.
Whether or not you do your MBA is not a black and white question. You truly have to evaluate whether the outcome - career boost, salary increase, education - will be what you expect. You also need to carefully consider the cost to achieve that outcome - financial, time, foregone opportunities.
When I did my MBA over a decade ago, I didn't know what I was getting into. Luckily, the cost wasn't outrageous (I received many transfer credits from my undergrad) and I did gain some knowledge. However, much of what I learned could have been obtained via books. Indeed, I have learned much more since completing my MBA, underscoring that learning isn't limited to formal in-class education.
Personally, I did not experience an obvious career boost from doing my MBA. In contrast, once I passed my CFA exams there was a noticeable uptick in calls from recruiters. Asset managers definitely took notice of the accomplishment and I was able to quickly advance in the wealth management industry. Moreover, I have regularly used the knowledge obtained from the CFA program during my career. All at about 1/3rd of the cost of an MBA. In my case, a lower cost pragmatic program proved far more beneficial. I presume the same would be true for many in other industries.
If you are thinking about getting your MBA, I suggest the following considerations:
Can your career advance without an MBA? If not, are the advancements worth the cost?
If you're doing it for the knowledge, can you gain the education of an MBA without actually forking out $100,000?
Would an MBA complement your current experience and education, or simply extend it? I.e. are you learning anything new?
What did the successful people in your desired industry do to achieve their success?
Are you young enough to accumulate the benefits of an MBA over a long career?