I wanted to check in with you two about your MBA pursuit and how that was going. Right now I’ve been brainstorming that avenue. For awhile I was thinking a home purchase, but now I’m leaning more on furthering my skills. I’m planning on fall of 09. I’ll have about 4 years work experience under my belt at that time and will have passed Level 2 (I better!). This is a tentative plan I have. I wanted to see the steps the two of you are taking now. I figure I’ll take the GMAT in a few months and try to qualify for early enrollment around October/November. Again, just wanted to touch base with the two of you to see how things were developing.
If things go according to plan, I’ll be starting MBA during the fall of 2010. To be honest, I haven’t done much in the way of MBA preparation aside from just reading up on the application process through a couple of books I bought on Amazon.com, and also studying for my GMAT’s in my spare time. It’s been a pretty loose commitment so far, though. Mostly I’m just focused on establishing a good reputation at my new job, but I’ll probably get around to doing the GMAT around the end of the year. What about you?
Just getting started. A relative whom inherited some money said they would gladly help me along. That in itself really got my wheels turning. I’m going to get cracking on the GMAT soon. Next I need to find a reputable program (Kaplan, Princton Review, etc. I’ll use the search function later). I’m going to get familiar with GMATClub.com so I don’t have to ask a million dumb questions. To be honest I doubt I can get into a top 10 like you are aspiring for, but I figure an MBA from a pretty good midwest school would help me along in the midwest region just fine. The one benefit of back office is the consistent hours that allows one plenty of study time after work.
hey KJH, here’s the GMAT prep thread that came up recently: http://www.analystforum.com/phorums/read.php?1,792469,792469#msg-792469 i am using the princeton review book - i think it is a good roadmap that teaches you what the GMAT is about and helps you form a study plan. i have been using this too. i’ve heard better reviews about this book than the kaplan one (including an opinion from someone who used to work at kaplan too) i admit that i haven’t been very hardcore about studying at all, but i think that once i make the mental commitment to take the test and determine a date when i want to get it done, i’ll go full-throttle at that point. right now, my plan is just to take my time, study whenever i can, and then decide when i want to take it once i’ve gotten through enough of the material to get a feel for the test.
I don’t think I’ll be able to consistently study until I have a deadline. Considering booking a date to help me with that… Numi, have you considered going abroad? My top choice is Insead; its quite a stretch, but I’m gonna try anyhow. The idea of spending a while in Singapore is extremely appealing, as well as the single year module.
numi, I was discussing the idea of the MBA with my wife last night and for someone already in your position (or mine, or hers) I can’t see the value. People often spend $100k and 2 years of their lives only to end up with a similar job to the one they left. Perhaps you can tell me why you want to go back to school and it will help me understand. I am sorry to jack your thread KJH, but I am sure you will get something out of this: The way I see it, here are the Pros/Cons (again this is not directed at everyone’s MBA value proposition, just for someone like numi who already has a very desirable job): Pros: - Learn a bit more (but honestly in your case you probably won’t have much to learn) - Make lots of contacts who are presumably also well-connected - Party like you are an undergrad again Cons: - Pay to be there plus give up employment for 2 years - I am going to estimate this costs you $500k to $1MM based on a $100k cost and 2 years of $200-400k in pay. - Really, that is all. How can you justify the cost when in all likelihood you will never be able to make it up over the course of a career? You are talking about $22MM in 40 years assuming an 8% annual return. Again, sorry to hijack, but for those who have already achieved some success, how do you justify it?
If you can go into top 10 schools, i don’t see why not. School is a good place to establsih network. You don’t really have a chance like that when your working.
Don’t be sorry. I’m curious myself. I feel an MBA is a good move since I’m young and wish to build my skills, but I also have a subpar job too. There is plenty of room for me to grow.
Just my opinion, but the only good reasons for BSchool are: -Changing industries (ie you work in finance but want to switch to marketing, or vice versa). It’s often difficult to make the switch between industries if you have no experience in the new one, but the MBA makes it much easier. -Moving to a position where an MBA is more or less a prerequisite. Some companies will only hire an MBA for a certain position, even if a non-MBA has the required skills and knowledge. In IBD, it used to be the case that you pretty much needed an MBA to progress past the analyst level, but it’s much less so now. If you go into an MBA program, make sure you have a very clear exit plan.
Right now my goal is to get a GMAT date on the calendar and then apply for a fall of '09 start. I’m also trying to squeeze in the CFP. I’ve been perusing gmatclub.com and already have CFP study materials. Family commitments have prevented me from starting any serious CFP studying yet (late August and beyond gets easier). The main thing for me is to just get the GMAT on the calendar so I’m forced to study and take it.
tobias Wrote: ------------------------------------------------------- > numi, I was discussing the idea of the MBA with my > wife last night and for someone already in your > position (or mine, or hers) I can’t see the value. > People often spend $100k and 2 years of their > lives only to end up with a similar job to the one > they left. Perhaps you can tell me why you want to > go back to school and it will help me understand. > > > I am sorry to jack your thread KJH, but I am sure > you will get something out of this: > > The way I see it, here are the Pros/Cons (again > this is not directed at everyone’s MBA value > proposition, just for someone like numi who > already has a very desirable job): > > Pros: > - Learn a bit more (but honestly in your case you > probably won’t have much to learn) > - Make lots of contacts who are presumably also > well-connected > - Party like you are an undergrad again > > Cons: > - Pay to be there plus give up employment for 2 > years - I am going to estimate this costs you > $500k to $1MM based on a $100k cost and 2 years of > $200-400k in pay. > - Really, that is all. How can you justify the > cost when in all likelihood you will never be able > to make it up over the course of a career? You are > talking about $22MM in 40 years assuming an 8% > annual return. > > Again, sorry to hijack, but for those who have > already achieved some success, how do you justify > it? Hi tobias – interesting analysis. I agree that going to business school has huge opportunity costs, and your list pretty much hits the nail on the head in the “cons” section. However, as far as my desire to go back to business school, it’s pretty much as follows: (1) I value the type of network I’d be able to build at business school (2) I think there are new things I could learn, and if nothing else, I could use a “two-year vacation” (3) For the most part, if I stay in private equity, most people at the VP level and above have MBA’s these days. Of course, there are certainly instances where people will get promoted to VP without having to have an MBA, but I just know that if I’m up against a candidate with similar qualifications, I don’t want the potential “lack of an MBA” be a reason why the other person gets the gig ahead of me. (4) It’s just the “way to go” – most people including myself do the 2-3 year stint in private equity before going back to business school. For all the reasons you mentioned, it’s not clear how much I’d learn in terms of technical knowledge at business school, but relationships and credentials do matter as far as private equity professionals go, i.e. it helps to know people who can help make deals happen, and credentials help give potential management teams confidence in partnering up with you. Your post is pretty much spot on in terms of the opportunities and money I’d be giving up in order to attend business school, but my thought is that an MBA would potentially facilitate my making up that money at a later point (for example, I believe it’s easier to make VP or principal in PE with an MBA than without). However, to be honest with you, I haven’t really evaluated business school in terms of “value proposition” – I just saw it as part of my career plan, much like how we all attend college. College sets us back by $150K, but we still go get our degrees because it’s a rite of passage and we expect it to pay off somehow in the future, either in terms of money or opportunities. As for the money I will be foregoing to attend business school, I fully expect to make it back at some point in the future. But even if somehow the MBA doesn’t get me on track with what I would have made if I just skipped b-school and kept working, I do value personal relationships and networks, and those are among the things that excite me most about business school. Anyway, that’s my story. What are your personal thoughts about business school? What are the reasons you’re choosing not to attend at this time, and do you see things changing for you in the future?
Numi, you really believe that if you go for an MBA (i.e. spend 2 years not working), you will make it to VP level FASTER? 
tobias Wrote: ------------------------------------------------------- > numi, I was discussing the idea of the MBA with my > wife last night and for someone already in your > position (or mine, or hers) I can’t see the value. > People often spend $100k and 2 years of their > lives only to end up with a similar job to the one > they left. Perhaps you can tell me why you want to > go back to school and it will help me understand. > > > I am sorry to jack your thread KJH, but I am sure > you will get something out of this: > > The way I see it, here are the Pros/Cons (again > this is not directed at everyone’s MBA value > proposition, just for someone like numi who > already has a very desirable job): > > Pros: > - Learn a bit more (but honestly in your case you > probably won’t have much to learn) > - Make lots of contacts who are presumably also > well-connected > - Party like you are an undergrad again > > Cons: > - Pay to be there plus give up employment for 2 > years - I am going to estimate this costs you > $500k to $1MM based on a $100k cost and 2 years of > $200-400k in pay. > - Really, that is all. How can you justify the > cost when in all likelihood you will never be able > to make it up over the course of a career? You are > talking about $22MM in 40 years assuming an 8% > annual return. > > Again, sorry to hijack, but for those who have > already achieved some success, how do you justify > it? Dude, where do you get $22mn from? It costs you, say, $750k to go to B-school. Say, you have 35 years remaining after B-school, and assuming you pay the $750k as a lump sum for simplicity… N=35, PV = -$750k, I/Y = 8, FV = 0, PMT = ? PMT -> 64k So, you can think of it as needing to earn at least $64k more a year for the remainder of your career. This is not unrealistic if doing an MBA opens up another level of the hierarchy. You probably have 30 years to make it up, so you need to earn an average of, say, $40k more per year (applying a discount to PV). Those numbers aren’t that scary.
Neud – an MBA might not necessarily get me to VP faster, but it’s more of a sure bet. Plus, if I decide to change companies later on, being recruited out of b-school helps. In either case, I’d be looking to make VP a year or two out of business school anyway if I stay in private equity, so unless I just totally fast track it without an MBA, I don’t think I’m losing much time by going to business school. akanska – I think the thought of going abroad is pretty neat, but I’m pretty sure I’ll stay here for my MBA. Business school apps are a beast so I am probably going to apply to just three or four schools and hope for the best.
I am curious to hear more about the idea that business school is no longer required. There seems to be some idea that a paradigm shift has occured in the financial services industry, but this seems pretty short sighted to me. I remember in 2005 / 2006 there were a ton of news stories about hot shot PE guys and bankers who were skipping b-school to continue working. Duh, we were still in an up cycle. I wonder how many of those people are still “skipping b-school” while they are out of a job. Anyway, my point is that I don’t think people should let the recent good times color their perceptions about the value of an MBA. We had a great run there, but I don’t see how that means the value of having an MBA will decrease in the future. If anything, the degree provides some level of stability and flexibility in down markets since you are theorhetically worth more to your employer. I’ve spoken to a lot of top 3 MBAs and they pretty much all say the same thing – the cost of the degree is not relevant over the course of your career. Most people – even those who were already very successful in their careers – saw large jumps in their compensation and were able to pay off the cash cost of the degree within 1-3 years. In terms of the opportunity cost, that’s a hard call. Having an MBA may open up the right opportunity that you were looking for (or didn’t even know you should be looking for) that would otherwise be closed to someone without an MBA. How much is that worth to you? It depends on the opportunity, but the answer could be “a lot.” I personally think it also has a lot of “social value” as well, but that’s probably a different topic altogether. A top MBA is basically a stamp of approval on your life… as lame as that sounds.
I agree. The knowledge one learns is great. But, it seems that more importantly the ‘stamp’ and relationships you develope are just as valuable. In any case I’m simply not putting off till tomorrow what can be done today. I’m going to tear into the GMAT books upon arrival and hopefully get into a good school during early admissions. As of right now I’m not decided on where to go as I need to find where I place with the GMAT. My GPA/Resume should be fine. “I personally think it also has a lot of “social value” as well, but that’s probably a different topic altogether. A top MBA is basically a stamp of approval on your life… as lame as that sounds.”
Not to mention someone like Numi will more than likely have their MBA paid for, if not by current employer, then by whoever gives him the summer internship if he winds up there. Plus an MBA just gives you a lot of tools to really analyze companies at a deeper level, which will always be useful.
Etienne Wrote: > Dude, where do you get $22mn from? It costs you, > say, $750k to go to B-school. Say, you have 35 > years remaining after B-school, and assuming you > pay the $750k as a lump sum for simplicity… > N=35, PV = -$750k, I/Y = 8, FV = 0, PMT = ? > PMT -> 64k My $22MM number was intended to represent what you could generate by retirement age by skipping B-school. I used 40 years and the higher $1MM opportunity cost. My point was that I will be able to retire fairly comfotably on what it would cost me to go to B-school. $1mm x (1.08)^40 = $21.72MM Using those assumptions the PMT goes up to $84k. Not that it matters. We will go with the $64k number. Either way I don’t think there is a chance in hell that the MBA will generate that much incremental earnings power.
I like the analysis going on here. One thing I’d add is that a top tier MBA may not get you to VP level faster, but it will give you more flexibility later on if you want to change firms, and certainly the credibility factor will increase your long-term income potential immensely. Case in point: A “star” co-worker of mine will likely be promoted to VP at my bank in the next year and he is of the age that bschool is an option (27/28 yrs). If he wants to stay here, it would make sense to skip bschool and stay on the fast track. However, if he ever has dreams of moving to another bank/hf/pe shop, his lack of a top 5 MBA will almost certainly kill his chances. Put simply, he went to an undergrad ranked between 25-50, and his lack of a top tier MBA will put him at a severe disadvantage if competing against someone with similar work experience who also has a top tier MBA and the requisite “stamp of approval”. As Numi has pointed out numerous times, work experience does matter most. However, when you’re switching jobs, how well you performed at your old job can sometimes take a backseat to external marks of accomplishment/distinguishment such as a top MBA. Also, consider what happens during an economic downturn: do you hire/fire candidate A with good work experience and nothing else or candidate B with good work experience and an MBA/CFA. Assuming skill set is roughly equal, candidate B has a HUGE advantage.
On the subject of compensation, here are some facts. The average starting salary for a top-10 MBA grad is $100-120k so all in maybe $150k on average. Here is a website that lists this info: http://www.mbagcf.com/schoolguide/SchoolGuideDetail.php?ID=151& Obviously, there will be many graduates that are better compensated, but there obviously aren’t enough to significantly skew the average well above the low 6 figures that even the poorly compensated top-10 grad would expect. The person in question is a big part of the cost/benefit analysis. If you are toiling in a back office job paying $60k a year, obviously the opportunity cost of attending is well worth it in the long-run. But my original question was posed to someone in numi’s position who is giving up a lot in the short run for some presumed long-term gain.