“Should I get an MBA”

One question I get from time to time is from people considering getting an MBA, and whether it’s worth the investment. I’m going to try to generalize my answer here so it’s applicable to folks from a variety of different backgrounds/career goals, even though I wound up in technology.

First, to show my cards: I have an MBA from Duke. (They want us to call it the “Fuqua School of Business,” but no one knows what that is, so I just say Duke.) I went through the traditional full-time program and graduated in 2011. I am still paying off the debt, which was considerable, even though I got a sizable tuition discount. What I wound up doing after B-school (tech) is completely different than what I went in expecting to do (international development). I’ll speak to my personal experience later on.

The modern MBA was mostly designed to serve traditional, defined career tracks into management consulting and finance. If you want to do one of those things, then going to B-school is basically a foregone conclusion and you can stop reading here. If not, then I hope the rest of this post can offer you some value in weighing this big decision.

One thing to know right off the bat is that universities want you to attend their business school because they are a cash cow operation. There has been a giant proliferation of business schools in the last 20 years, mirroring the similar earlier trend with law schools. Both types of schools, and indeed many terminal Masters programs, are reliable generators of big tuition revenue. Overhead is low, classes are large, and most students are paying close to or full sticker price. That’s why the marketing behind even tier-2 or -3 programs is glossy and sophisticated – they’re a business, man!

There is nothing remotely standardized about the MBA curriculum. Besides some basic business-y concepts – the 4 Ps of marketing, SWOT analyses, IRR, WACC, DCF, etc. – what you learn is often up to you. I know folks who didn’t take a single accounting class in their MBA. Rather, what you get exposed to is a vocabulary and worldview that for many people (like me) is utterly, completely new. B-school made me think about companies differently, really demystified topics like finance, and opened my eyes to this whole world of corporate functions that I had no idea really existed. I had no idea what McKinsey actually did before business school (“Wait, so… that’s it??”), or what private equity was, or even who the people who did those sorts of things were. (That was pretty much the polar opposite of my tribe in college.) In a way, it also made me realize that there was nothing magic or mysterious about any of that stuff. I wasn’t really interested in doing that, but now I at least understood them.

While the content of many MBAs is probably pretty comparable, their value is not. The value of your MBA is almost entirely based on the institutional brand it’s affiliated with. This is where it’s important to weigh the value of the school’s brand versus your investment. If you get into a top-10 MBA program, sign the letter and go. Top 20? It’ll probably pay off, but you should have a plan in place. Outside of a top-25 program, you need to be very clear and honest with yourself about whether you can justify your investment of time and money in that program. Even crappy MBA programs will still often charge you $30-, $50- or even $70k per year, and you’ll probably need to borrow on top of that to live. What is the career trajectory you plan to move into that will let you pay off all that debt within, say, a decade? If you don’t have a very clear answer to that question, do not sign.

Money, the MBA, and money

Business school is really all about money. Get comfortable with that. No one goes to B-school and pays over a hundred grand for enlightenment alone – everyone is getting their MBA to make more money. There’s nothing wrong with that! Some people feel guilty or greedy admitting this. Leave those feelings at the door.

Here are a few tips about how to think about business school financially:

  • There are people who get a full or nearly-full ride to business school, but this post isn’t for them. Most of us will go deeply into debt to pay for the MBA. That being the case, you need to have in mind what kind of job – or at least what level of income – you’re targeting once you graduate. Going $100k into debt just to get a job that pays $20k a year more obviously doesn’t make sense. A good rule of thumb for many applicants is to aim to double your salary.
  • One big piece of advice I wish everyone knew is that you can ask a school that has admitted you for more money before accepting. Seriously. Write them a polite letter and just ask for a bigger grant, tuition waiver, or whatever. Say they’re your first choice and you are dying to attend and blah blah blah, but that you need more assistance to do so. No admissions department is going to rescind your offer because of a request like this, and it’s actually a pretty common ask. 3 of 4 schools I asked increased their assistance offer. It works. Ask.
  • Before you sign any loan request, go sit down with your school’s Financial Aid personnel and clarify in writing exactly how much you are borrowing for your degree. Take into account the school’s financial assistance package, if any, your living expenses, everything. Get to a number. Then figure out how much the monthly payments on that debt are going to cost you at 6%, 7% or 8% interest rates. Keep in mind that those monthly payments are the minimum that you’re signing up for over the next several years.

This can all be scary stuff. Debt is scary, but it can also be a tool. Putting yourself on a radically new career trajectory opens up new opportunities that can make that debt, which seems mind-bogglingly large when you’re making $40k/year, very manageable.

What MBA school is like

Every school is different. Most are small; some are large. Duke’s business school, at around 1,000 students, is one of the big ones.

Business school is often compared to undergrad, but where everyone can drink and has more money to throw around. Think toga parties and, again, lots of drinking. It is not in any way like the “real grad school” that folks in non-professional schools go through. Particularly in the first year, there is a lot of pressure, almost entirely self-imposed. Your grades really do not matter (seriously, only a few big consultancies even care to ask for transcripts), but with that many go-getters all in one place, everyone gets stressed.

At a big place like Duke, there was a lot of herd mentality, particularly when it came to job season. The consultancy and finance people all have summer internships and jobs lined up early on in the year; for most of us, the job search comes much later, which creates a lot of anxiety that can lead people to take the path of least resistance. (There was a joke at Duke that Deloitte was hiring any warm body that came to interview, which sorta rings true. They hired something like 18% of my class.)

There can be a lot of pressure to spend money. Group ski trips are a big thing. School excursions to places like New York or Silicon Valley are popular, because they involve company tours and interviews and stuff like that, and those are not free. Chances are good that you’ll wind up spending a little more than you expect to.

Does an MBA make sense for someone in tech?

Honestly, I don’t know. Maybe.

Where an MBA probably makes the most sense for someone interested in tech is for a career switcher. Amazon famously hires tons of MBAs – I know a few – and most other large tech companies do too, for largely the same reasons as non-tech companies: they’re mostly pretty smart and competent people. The schools often also serve as a feeder, giving students access to alumni and hiring managers inside those companies who connect them with opportunities.

For someone interested in starting their own business or working at a startup, an MBA makes much less sense. Why do either of those things with a big monthly debt payment hanging over your head?

If you want to get into tech, some schools are better than others. Duke, for example, has very little exposure to tech. Stanford or Berkeley are probably better. But you can still make it work. Which brings me to…

My experience at Duke

Okay, I promised I’d get to this.

As I’ve written about before, I worked in international development before coming to tech. I was a Peace Corps volunteer in Cameroon and then a program manager for a bunch of USAID projects in Vietnam, Kenya and South Sudan. I didn’t make a ton of money, but liked the work, and was pretty sure I wanted to keep doing that.

So in 2009, I quit my job and went into Duke’s full-time MBA program. I made a bunch of friends and generally had a good time – but the insularity of Duke really got to me. I was one of the few people who’d lived in the area prior to coming to school, so had to balance my non-Duke social circle with the new Duke one. Like I said before, the first year was really eye-opening in many ways. I felt like I brought in a much more global, non-corporate perspective than most, but also realized I had a lot more to learn about the business world than I’d realized.

Over the summer, I applied totally randomly to an internship program at IBM at their RTP campus in the System X division (blade servers!). I interviewed, got it, and got my first taste of working in tech. Over that summer, I actually got another job offer that nearly caused me to drop out of school. An industry colleague needed someone to run a big global health contractor’s project operation in West Africa. I nearly did it… but decided that I was already in the hole from my first year at B-school, and that it would be dumb to take on that debt and not get my degree.

My second year at Duke was more fun, because I could pick more of the classes I wanted to take. I actually lined up a post-graduation job over the winter break – for another global health contractor, focusing on West Africa! – and merrily went off to study abroad in Rotterdam in the early spring. Lo and behold, I got back and… poof. The job I’d lined up had evaporated in a re-org. “Just wait,” I was told, “when we’re done with this, we’ll get you in then.”

But a few months later, the re-org was still underway, no job had materialized, and graduation came and went. So instead of waiting and hoping, I got back in touch with my old colleagues from IBM. I knew I could always go back to development, but this could be my one chance to try out a new career track. Why not give it a shot? It took some time, but eventually I found an opportunity in product marketing that seemed like a great fit. It was for this company that IBM had just acquired, called Coremetrics, which sold a web analytics platform. Sounded interesting. Away we went. That product marketing gig turned into product management, and a promotion, and later Demandware and now SAS.

At this point in my career, my MBA is basically a non-factor. Sort of like your undergrad degree, no one really cares where you got your MBA – or even that you have one – more than a year or two out of school. The degree’s value is mostly consumed in the first job you take and diminishes quickly thereafter. So keep that in mind when thinking about the long-term payoffs to your investment.

The cost was pretty heavy, but at the end of the day, business school was worth it for me. I wound up on a different track than I’d expected, but I wouldn’t have gotten here without an MBA. Yes, “if I knew then what I know now” I might’ve been able to get that first gig without the degree… but without the degree, I would never have known about it, and I might never have gotten the opportunity at all. (You can’t disprove counterfactuals.) So yes, it was worth it, for me, in my situation. Yours might be different. Good luck.

P.S. Oh – and for god’s sake, don’t donate money to your business school after you graduate. Assuming you paid a market rate for the degree, that’s just ridiculous.

 

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