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The Declining Value of the MBA

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Among the high-powered analysts and hedge-fund superstars, obtaining an MBA is losing its attraction. Even degrees from the most prestigious schools like Harvard and Wharton are viewed as a waste of time and money if the student could be earning hundreds of thousands of dollars a year as a stock analyst or millions as a hedge fund manager.

At funds that manage $1 billion to $3 billion, people with just a few years of finance experience will make $337,000 this year, Mr. Zoia says, and those with five to nine years of experience will average $830,000, up 6 percent from last year. These estimates include analysts and researchers but not portfolio traders, who can make much more because they sometimes share in profits.

This seems obvious. If you’re making six or seven figures a year, taking time off of your job for a two-year full-time program is a bad move financially. If that program is expensive, the loss is even greater. In fact, such a move would be seen by future employers as poor financial decision. I can understand why the MBA would be overlooked for a job in which financial analysis is a component. In many cases it shows a poor grasp of cost-benefit analysis.

Not everyone is making six figures when they decide to enroll in a business school graduate program. Also, for someone switching careers or considering entrepreneurship, the MBA can be a gateway. While the article contains some good points for those in high-performance finance careers, there are millions of other perspectives out there.

Just like all college degrees, MBAs are more common. This commoditization causes devaluation. Having a masters degree in business once set someone apart from the crowd, but now it is the crowd. If your goal is to set yourself apart from other people, say, in competition for a career, there are other ways to stand out. According to the article, having a superior stock trading record is a surefire way to rake in big bucks.

Before deciding to undertake any graduate or postgraduate degree — particularly if it involves leaving salary on the table — figure out what your goals are. If your goal is to finish life with the most money, more school (particularly business school) may not be the best option. If lifelong education is part of your personal mission, go for it. If you want a degree only for its potential boost in income, you may have to look at the latest data to determine if your chosen industry perceives the degree as the asset you are hoping it is.

Updated September 19, 2007 and originally published September 18, 2007. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

{ 9 comments… read them below or add one }

avatar Bob

this begs the question: If the “commoditization causes devaluation” with an MBA, then what about all the poor saps sitting with a Bachelors Degree in business? (I won’t answer) ;)

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avatar Kurt

I’ll ignore the first comment’s misuse of “beg the question.”

One thing to keep in mind is that many people tend to take time off from a high-pressure industry (investment banking, for instance) purely for the sake of relaxing. Going to business school provides air cover.

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avatar Brian

This is absolutely happening across the corporate world as well.

In my recent job search, I flat out asked many of the finance managers how different they would look at me if I had an MBA. Most answered that they would not hire me for a higher position, but may throw an extra $5k to the salary offer. $5k is nothing if you go to a Harvard or Northwestern that charges upwards of $100k for tuition.

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avatar Matt

I completely agree that if you’re going to stop working to get a business degree you really need to know why you’re doing it. The time value of money really comes to play when you’re taking 2 years off and spending in some cases as much as $100K per year on schooling that may never repay itself.

With that said and MBA will set you apart from the crowd to some extent and having one will never be a detriment. I’ve been contemplating getting a Executive MBA which is tailored to allow you to continue working.

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avatar Tyler

What about getting an MBA while working full time? There are many night programs out there that are very worthwhile and people should consider them if seriously interested. I myself am thinking about it since I am currently going for my bachelors in business while working full time.

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avatar guinness416

“Going to business school provides air cover.” Yeah it’s anecdotal, but this sounds right among people I know. Hard chargers often find themselves needing a break after a decade or so.

I don’t have an MBA, but I see a lot of colleges and grads extolling the value of the networking opportunities, contacts, etc. Any truth to that, I wonder? There’s also the issue of how an MBA from, say, University of Toronto is viewed versus one from Cowboy College. One other point I’ve heard acquaintances with MBAs mention is the fact that apparently going straight into an MBA after a primary degree is becoming more common – which significantly decreases the quality of the program when a lot of students have no experience to bring to the discussions or group work.

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avatar Toby

Thanks for pointing out this article. It’s very timely as I am considering my options to get into financial analysis. I was considering a pricey MBA program with specific concentration in Financial Analysis. Even with my company’s tuition reimbursement, I would still be paying about $30k-50k out-of-pocket.

I’ve also been considering going the personal MBA route (http://personalmba.com/manifesto/) combined with work towards a CFA designation. A lot of work, but a lot cheaper and way more focused on what I want to be doing going forward.

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avatar cindy@staged4more

i think guinness416 brought out a very good point. i have many friends went straight to grad school (some even at harvard) and had obviously no work experiences to contribute. my friends pretty much sat on the bench and do leg work because they had no real life experiences to contribute to case studies and group projects.

i am a small business owner and definitely have thought about going back for a mba to elevate my company. but a) there are very little programs for small businesses b) it’s very expensive to not take work to study whether it’s part time or full time school, i will still take have to take time away from working c) i honestly feel that i am learning more on my own in the field than going to school. i went to a very decent undergrad school, while i network a lot and know many well to do individuals, it really has not contributed much to my current work.

that’s my 2 cents,
cindy

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avatar Patrick

I think you hit the jackpot when you likened an MBA to a commodity. College degrees in general have almost become commodities. However, they are still necessary in many cases.

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