You might recall that a few months ago, my wife and I had dinner with two of her close friends and their husbands – a plastic surgeon and a lawyer. The conversation revolved around the plastic surgeon’s son Ross who was contemplating entering an MBA program, and whether this was a good career move (see my blog post from 1/19/2012 entitled WHY PEOPLE GO INTO AN MBA PROGRAM).
Well, I am pleased to report that we had dinner with the two couples again last weekend and we barely had our napkins in our laps before the plastic surgeon was firing away. “Well, Don,” he started, “Ross starts his MBA at Northwestern in a few weeks thanks to your comments at our last dinner. But you know what?” (He didn’t wait for an answer). “A close friend of mine told me two things I’d like your reaction to – first, he said the MBA was a dying degree; and second, he said besides that it had a negative ROI, i.e., it wasn’t worth getting from an economic standpoint.”
“How long do I have to answer,” I asked. “Until the hors d’oeuvres arrive or the main course?” Everyone laughed in a sympathetic ‘Hope you can answer those loaded questions’ way.
“Let me address the ‘dying’ degree first,” I began. “Here’s a macro perspective for you. In 1960, about 5,000 MBAs were awarded; in 2000, about 100,000 and this year nearly 160,000 will receive an MBA. Further, 300,000 people will be enrolled in MBA programs this year. More people are seeking an MBA than any other graduate field. As a reference point, the number of MBAs awarded last year was 3x the number of undergraduate engineering degrees. Hardly the statistics of the dying….”
“Now does this mean there are never any hiccups? Absolutely not. About every 10 years, there have been slowdowns/declines in the growth of graduate management education. There’s a famous Wall Street Journal article in 1985 that reported that perhaps 25% of business schools would have to close because of low application rates. In the mid-1990s, there was a New York Times article with the headline ‘Business Schools Hit Hard Times Amid Doubt Over Value of MBA (No, I’m not answering your 2nd question yet). In 2005, Business Week reported a drop of 30% in applications to MBA programs since 1998. And so forth. So I won't argue that there have been some high profile negative reports but it's like the stock market -- you can focus on the few crashes or look at the long term picture.”
I buttered a slice of bread to let all that sink in and then continued. “As for ROI, Forbes reported just last year that the ‘investment’ one makes in an MBA (including tuition and forgone salary) is typically paid back in less than 4 years. One of the reasons for the rapid payback is that MBA graduates often receive starting salaries 50% higher than their salary prior to enrolling in their MBA program. Not exactly what I’d call either negative ROI or a bad investment.”
The plastic surgeon had a rather dazed look on his face but I didn’t miss a beat. “You know, Richard, if I could paraphrase Mark Twain ‘The rumors of the death of the MBA have been greatly exaggerated’.
When the bill came, I was about to reach for it when the plastic surgeon’s wife said, “Richard, you owe Don dinner for making him answer all those silly questions.”
Speaking of a good ROI, that steak dinner was a pretty nice return on my one hour reading investment….
