(Continued from previous post)
In summary, I still see the value of the traditional MBA for myself and for a significant portion of other MBA candidates and holders. The network I am building, the forced effort I am exerting to study, test and develop skills, and the salary bump all make the value of my MBA have a high NPV.
The Horizon Value
The next eleven months spell the culmination of my graduate work. I will be working on my concentration coursework in Finance and Strategy, evaluating my career path, talking with industry leaders in target employment sectors and balancing work and family time. Additionally, I've bought a number of supplementary reading materials to augment my studies at school. All of this is geared toward maximizing my growth potential in the outer years, as I get farther away from my degree award date.
I expect a large bump to come once I switch positions with my current company or transition to a new employer and industry. The large bump will take care of the my MBA investment, but the sustainable returns will be based on growing my compensation five, 10 and 20 years from now. I will have the benefit of coming out of the program as an experienced professional since I've been working full-time as well. The best indicator for future career growth is a history of increasing responsibility and challenge. The same litmus test can be applied to MBA programs.
A number of MBA candidates struggle through their core requirement classes, which constitutes 50% of the program, with a singular focus: "I can't wait to get to my concentration work, because then it all becomes much easier." This is disconcerting. This degrades the value of the MBA. This shortchanges candidates on their growth potential in the outer years.
While it does take some time for most candidates to readjust to the challenge of the classroom setting and time management, coursework needs to be increasing in difficulty, challenge and content. To choose otherwise does not maximize the value of the investment. Our goal as MBA students is to develop the tools that accelerate and sustain growth: that only occurs when chosen courses are increasingly more challenging and dense.
This is what separates the Movers and Shakers from the Riders. When I sit down to interview candidates, I am interested in someone that has routinely demonstrated the ability to set higher standards for herself. I expect nothing less of myself. I'm excited for the challenges this year's coursework will bring.
Friday, January 11, 2008
Monday, January 7, 2008
The Countdown Begins: Eleven Months
Using the posting frequency of late, that means I've only got five more posts left before the end of school. That's with a simple average. If I degrade my posting frequency at the same rate that has taken place over the last six months, it's more likely I'll post only three more times. I'll make that my goal. Under promise, over deliver.
Since the last post I have completed another two classes and gone through the final significant break before the mad dash to the finish. I resume coursework tomorrow.
A summary is in order, and in the spirit of the new year, I'll look back and provide a glimpse of the future.
The Past Year
The Value of the MBA, Revisited
The score was about six to four in my favor: 66.6% of the classes were well worth the funds, time and energy while 33.3% could not fill a 50-page "how-to" tome. I have reasonable expectations that this average will improve over the next 12 courses because I am in charge of the classes and professors with which I complete my degree. I'd lay odds that the ending tally with be at least a 75-25 split.
The question then becomes "Is it worth it?" This is a question that is explored ad nauseum - see my friend Josh Kaufman's website the Personal MBA for additional information - and it is popular to disparage the MBA's value. When you consider that a Harvard MBA will run about $75,000 for tuition, books and fees (excluding opportunity costs, room & board, etc.), the MBA student declares that she is okay with the $18,750 going toward the sup-par 25%. Most opponents of the MBA argue that the last sentence is beside the point: instead, why pay $75,000 in the first place for a degree that has dubious results?
Now keep in mind that I have the confirmation bias present because I am personally invested in the success of the MBA; however, I'm going to attempt to present a cogent argument in support of the MBA with the qualification that my argument only supports 20% of the current MBA candidate and graduate population. MBA dilution has occurred due to the presence of the other 80%.
I'm going to divide the percentiles above into two groups: The 20-percenters I will call "Movers and Shakers" and the 80-percenters will be called "Riders." Rather than focus specifically on the Movers and Shakers group in the context of the MBA realm alone, let's expand this group to be 20% of industry professionals and leaders. The remaining 80% finds itself standing on the shoulders of the Movers and Shakers.
The strata within the Movers and Shakers is diverse. Some individuals have doctorates while others are college or, even worse, high school drop outs. There are visionaries, managers, creatives, quants and all types represented. Different learning styles are represented and different foibles play vice to members. At the end of the day, a single template does not apply to the entire group.
Riders on the other hand, capitalize on the Movers and Shakers work. Schools of thought are dispersed by Riders once introduced by Movers and Shakers. It's the symbiotic relationship of the alpha and beta group dynamic: alpha members innovate while beta members propagate.
Group members choose their own path and at times they create it. And once a path is forged there will be followers. The path that enabled one person to be successful with enable others. As more and more people tread the path, its value will decrease, scarcity being what it is.
I need to summarize before this metaphor gets out of hand. For the longest time, getting a high school diploma was a mark of success. Then government mandated education came along through the 12th grade and scarcity shifted to the undergraduate degree in higher education. Undergraduate work is still a market indicator for employment but not as scarce. Less than 20% of the working population has a graduate degree and it is the scarcer for resource. It is the stronger market indicator. And people naturally see it as more valuable.
The graduate degree is not nearly as valuable as it once was, but it is valuable nonetheless. But it is not valuable to everyone. In the same way that it made more sense for Mr. Gates to drop out of Harvard because the opportunity costs were too high to stay in school, the opportunity costs with the MBA are too great for a certain strata of Movers and Shakers. But that doesn't disparage the value of the MBA for the entire population. For some people, the MBA makes absolute sense because of yields on a scale that are negligible to others.
And I absolutely agree that the value of the MBA will continue to decrease as long as supply continues to come on the market. That is beside the point. The MBA still holds value today. The time value of money may indicate that it is the optimum choice.
Take Student A who saddles the fence between being a Mover and Shaker and being a Rider. This person is content to settle somewhere in middle management. They are currently making a respectable salary and they know that they will eventually get to a higher salary. If they can append the salary to a sooner date, however, they stand the chance of a better life earlier.
Student A is going to work part-time and thinks that she can accelerate her career five years. Her initial investment will be a lump sum of $75,000. At graduation she will jump her salary $25,000. We'll assume a discount rate of 10% on the money she could have invested. So here is the breakdown:
Lump Sum: $-75,000
Discount Rate: 10%
Payment Periods: 7 (2 years in school)
FCF, Years 3-7: $25,000
The Net Present Value of this decision comes out to +$3,020.
Pursuing her MBA makes sense for Student A, UNLESS she can increase her opportunity cost of capital, or find a project that yields a higher net present value. But for a large proportion of the population, they can't. A select few can. Many just aren't in a position to do so because they either don't know how, have other personal circumstances, can't commit unless their money is on the line or a myriad of other reasons. The MBA is a viable vehicle and it works and makes sense for them.
I have my reasons for why I started my program. Thus far they have panned out. When I have the benefit to employ some hindsight bias, I may question whether the MBA really bumped my career/salary as much as I hoped it would. For a segment of people, it will bump their salary and they will have a positive NPV. I hope to be one of those.
(Reflection continued in next post)
Since the last post I have completed another two classes and gone through the final significant break before the mad dash to the finish. I resume coursework tomorrow.
A summary is in order, and in the spirit of the new year, I'll look back and provide a glimpse of the future.
The Past Year
The Value of the MBA, Revisited
The score was about six to four in my favor: 66.6% of the classes were well worth the funds, time and energy while 33.3% could not fill a 50-page "how-to" tome. I have reasonable expectations that this average will improve over the next 12 courses because I am in charge of the classes and professors with which I complete my degree. I'd lay odds that the ending tally with be at least a 75-25 split.
The question then becomes "Is it worth it?" This is a question that is explored ad nauseum - see my friend Josh Kaufman's website the Personal MBA for additional information - and it is popular to disparage the MBA's value. When you consider that a Harvard MBA will run about $75,000 for tuition, books and fees (excluding opportunity costs, room & board, etc.), the MBA student declares that she is okay with the $18,750 going toward the sup-par 25%. Most opponents of the MBA argue that the last sentence is beside the point: instead, why pay $75,000 in the first place for a degree that has dubious results?
Now keep in mind that I have the confirmation bias present because I am personally invested in the success of the MBA; however, I'm going to attempt to present a cogent argument in support of the MBA with the qualification that my argument only supports 20% of the current MBA candidate and graduate population. MBA dilution has occurred due to the presence of the other 80%.
I'm going to divide the percentiles above into two groups: The 20-percenters I will call "Movers and Shakers" and the 80-percenters will be called "Riders." Rather than focus specifically on the Movers and Shakers group in the context of the MBA realm alone, let's expand this group to be 20% of industry professionals and leaders. The remaining 80% finds itself standing on the shoulders of the Movers and Shakers.
The strata within the Movers and Shakers is diverse. Some individuals have doctorates while others are college or, even worse, high school drop outs. There are visionaries, managers, creatives, quants and all types represented. Different learning styles are represented and different foibles play vice to members. At the end of the day, a single template does not apply to the entire group.
Riders on the other hand, capitalize on the Movers and Shakers work. Schools of thought are dispersed by Riders once introduced by Movers and Shakers. It's the symbiotic relationship of the alpha and beta group dynamic: alpha members innovate while beta members propagate.
Group members choose their own path and at times they create it. And once a path is forged there will be followers. The path that enabled one person to be successful with enable others. As more and more people tread the path, its value will decrease, scarcity being what it is.
I need to summarize before this metaphor gets out of hand. For the longest time, getting a high school diploma was a mark of success. Then government mandated education came along through the 12th grade and scarcity shifted to the undergraduate degree in higher education. Undergraduate work is still a market indicator for employment but not as scarce. Less than 20% of the working population has a graduate degree and it is the scarcer for resource. It is the stronger market indicator. And people naturally see it as more valuable.
The graduate degree is not nearly as valuable as it once was, but it is valuable nonetheless. But it is not valuable to everyone. In the same way that it made more sense for Mr. Gates to drop out of Harvard because the opportunity costs were too high to stay in school, the opportunity costs with the MBA are too great for a certain strata of Movers and Shakers. But that doesn't disparage the value of the MBA for the entire population. For some people, the MBA makes absolute sense because of yields on a scale that are negligible to others.
And I absolutely agree that the value of the MBA will continue to decrease as long as supply continues to come on the market. That is beside the point. The MBA still holds value today. The time value of money may indicate that it is the optimum choice.
Take Student A who saddles the fence between being a Mover and Shaker and being a Rider. This person is content to settle somewhere in middle management. They are currently making a respectable salary and they know that they will eventually get to a higher salary. If they can append the salary to a sooner date, however, they stand the chance of a better life earlier.
Student A is going to work part-time and thinks that she can accelerate her career five years. Her initial investment will be a lump sum of $75,000. At graduation she will jump her salary $25,000. We'll assume a discount rate of 10% on the money she could have invested. So here is the breakdown:
Lump Sum: $-75,000
Discount Rate: 10%
Payment Periods: 7 (2 years in school)
FCF, Years 3-7: $25,000
The Net Present Value of this decision comes out to +$3,020.
Pursuing her MBA makes sense for Student A, UNLESS she can increase her opportunity cost of capital, or find a project that yields a higher net present value. But for a large proportion of the population, they can't. A select few can. Many just aren't in a position to do so because they either don't know how, have other personal circumstances, can't commit unless their money is on the line or a myriad of other reasons. The MBA is a viable vehicle and it works and makes sense for them.
I have my reasons for why I started my program. Thus far they have panned out. When I have the benefit to employ some hindsight bias, I may question whether the MBA really bumped my career/salary as much as I hoped it would. For a segment of people, it will bump their salary and they will have a positive NPV. I hope to be one of those.
(Reflection continued in next post)
Subscribe to:
Posts (Atom)
