Has The MBA Become A Worthless Degree?

hacking_your_educationIs the MBA a worthless degree?

If you asked Dale Stephens, the 21-year-old author of Hacking Your Education, he would undoubtedly agree. In a highly provocative excerpt from the book recently published by The Wall Street Journal, Stephens forcefully declares that even if you were accepted into Harvard Business School, you should decline the offer.

Why? Stephens, who never attended school after the fifth grade and started UnCollege.org, says you should take the $174,400 it would cost to attend Harvard Business School and invest it in yourself. “Consider what you could do instead with that $174,400,” he writes. “The first step should be to move to a part of the country that supports your interests. If that’s film, move to Los Angeles. Technology, San Francisco. Oil, Houston. You could live decently in these cities for $3,000 per month. Over the course of two years, that still leaves you $100,000 to invest in yourself.”

Frankly, he is full of crap.

For one thing, a Harvard MBA does not cost $174,400. The annual tuition is $51,200 and it is severely discounted for at least half the students. In fact, Harvard’s average fellowship support per MBA student was $29,843 last year, essentially a 58.3% discount on that annual tuition. And the rest of the money one would need to get a degree can easily be borrowed at relatively low interest rates. It’s a similar story elsewhere.

THE MBA IS THE DEGREE THAT CYNICS AND PUBLICITY SEEKERS LOVE TO BASH

After a degree in law, the MBA has become the degree that cynics and publicity seekers love to bash. Yet, those three initials on a diploma are one of the most powerful and tried-and-true investments you could ever make in yourself. The vast majority of MBA graduates from the top 50 to 100 schools in the world double or triple their total pay thanks to the education they receive.

At Notre Dame’s Mendoza School, last year’s MBA graduates landed average salaries that exceeded their pre-MBA pay by 149%. At the University of Minnesota’s Carlson School, the increase was 132.2%, and at the University of North Carolina’s Kenan-Flagler Business School, it was 122.2%, And these numbers exclude starting bonuses and other bennies that are often handed out to MBAs when hired.

At Harvard Business School, three of every four graduates last year reported getting a median signing bonus of $20,000 and one in five (21%) had median “other guaranteed compensation” of $25,230. Harvard MBAs lucky enough to collect all three (base, sign-on bonus and guaranteed comp) earned first-year median pay of $170,230. Not bad for a “worthless degree.”

INTERESTED IN FILM, TECHNOLOGY OR OIL? AN MBA IS A GREAT WAY TO LAND AT A BRAND NAME FIRM

Interested in film? Go to UCLA’s Anderson School where the MBA recruiters include Fox Entertainment, NBCUniversal, Paramount Pictures, Sony, and Walt Disney. Those entertainment companies were among 148 firms that held recruitment events on UCLA’s campus last year, not to mention the 1,105 job opportunities on the school’s job boards.

What about technology? Among the biggest employers of MBAs are Apple, Google, Microsoft, Intel, Cisco, and Amazon.com. Each of those firms and many more in technology recruit at more than a dozen business schools each year.

What about oil? You should be thinking of going to the University of Texas  at Austin where Chevron, ConocoPhillips, ExxonMobil, and Hess are among the top employers of MBAs for both internships and full-time jobs.

MANY PRESTIGE JOBS ARE PRETTY MUCH UNAVAILABLE WITHOUT AN MBA DEGREE

And the truth is that for many of the very best companies, from McKinsey, Bain, Boston Consulting Group or Goldman Sachs, Morgan Stanley, or J.P. Morgan/Chase, you would be hard pressed to get even a chance to interview without an MBA degree. MBA jobs at those prestige employers, moreover, set young professionals up for the best and most compelling jobs later in one’s career.

The immediate benefits of the degree are obvious. But then there is the enduring value of the network you inherit once you graduate. The very best schools boast powerful alumni networks that open all kinds of closed doors, from tip offs to plum jobs that are not advertised, to seed capital for a startup idea, to potential customers for your business. That certainly beats a cold call to someone on LinkedIn.

The data shows that the full cost of an MBA degree from a top 25 U.S. school–including the loss of income from being in school for two years–can be completely recouped within 3.1 (at schools such as the University of Iowa and Michigan State) to 3.8 years (Carnegie Mellon University).

Finally, education also provides something of a safety net in good times and bad. The research shows that the more education you have, the more likely you are to earn more money in a career and the less likely you are to be unemployed.

Stephens may not need an MBA to get a book contract and put up a website, but he won’t be working at McKinsey, J.P. Morgan, Apple or Google anytime soon. A quality MBA program is a life-changing experience that builds self-confidence, communication skills, and a successful future. A worthless degree? I don’t think so.

  • Iown You

    There are exceptions. I know a VP that works for Xerox that only has a HS Diploma and never did a day in college. I’ve personally hired people without college degrees. But generally, that person needs good experience to overcome that obstacle.

  • Jimmy Thompson

    Actually, what he he did get it wrong. The cost isn’t $174,000 it’s $174,000 plus interest depending on the rate and term probably closer to $250,000. If you are not paying interest you are paying cash which means you have to add for the money your money could be earning you during that time. If you invested in something conservative like a rental house your $174,000 would probably earn you around $80,000 during the time you are in school using it to pay for an “education”. Making the true cost (after loss of projected earnings) about $254,000.

  • Jack Thompson

    In defense of colleges I do have to
    point out one very educated move on their part. They convinced
    employers to not even talk to an applicant if the applicant doesn’t
    have a degree listed on their resume. Of course, that makes it
    impossible for employers to see the incredible talent pool that
    doesn’t have degree. Very tricky. You have to hand it to them, very
    clever.

  • Jack Thomas

    Great point. Think about the list of people who either never attended, or, dropped out of college. John D. Rockefeller, Thomas Edison, Alexander Bell, Guglielmo Marconi, Michael Faraday, William Durant, Henry, Ford, neither of the Wright Brothers, David Murdock, Carl Linder Jr., Richard Branson, Bill Gates, Steve Jobs, Mark Zuckerberg. Face it College is a terrible business model and a worse service.

    The service (if you could call it that) is overpriced ill-conceived and impractical an investment of both time and money, and their “customer satisfaction” policy “if you don’t like it leave”. Used car dealers have better customer satisfaction policies than colleges.

    The first marketing plan colleges had was to market straight to the end user the high school grad. Naturally, the first marketing plan failed. So, they tried another. Instead of marketing to the prospective student they decided to use one of the better sales strategies know. Fear. They tried to scare parents into forcing their kids into going to college by telling parents that the only way kids could succeed in the new modern world would be with a college degree. That plan didn’t work very well because even though the sales pitch was frightening to parents, it was easy to see the pitch simply was not true. In spite of the colleges claims alert parents could see young people everywhere succeeding without college degrees.

    Which, brings us to the current, and most effective marketing plan. Colleges have made an end-run around both the prospective customer (the student), and the customer’s parent. Colleges have now gone straight to the employer. Colleges have temporarily convinced employers that people with degrees make the best employees. Although more and more employers are waking up everyday, this misconception still lives in the minds of many employers. Which in effect makes the degree a product rather than a service. What students are now paying for is not an “education” but rather a piece of paper, a degree. Much like a bus ticket, the bus ticket doesn’t make us any more qualified to ride the bus. But, we can’t get on without it. A degree doesn’t make us anymore qualified to do well in a job. But we can’t get on without it.

  • bacon artist

    Hate to say it, but the era of american large corporation hegemony may be over.
    And with that, the myth of the “American MBA” superman is dead.
    Companies all over the world are creating value in their own right as they get empowered with technology tools.

  • Iown You

    That’s a weak premise. It’s also inaccurate. There is a science to business, and a proper MBA program will and does provide that structure.

  • Iown You

    The flaw in that ridiculous rambling you posted, is that an MBA is a 2nd or 3rd degree for everyone who earns it, and plenty of them have skills, drive, and all the rest.

    Further, every case is different. I’ve known MBA’s who had Bachelor’s degrees in Engineering. Are you going to say that an engineer has no skills? Well, that would be nonsense because an engineering degree is damn hard to get and impossible to do without more skills than the average human being.

    All I see are a bunch of people who don’t have the ability to earn an MBA, angry because they see others achieving it. Contrary to popular belief, you do have to go to college for 6+ years to earn an MBA, and you do have to actually work for it. They don’t just hand them out as prizes during the annual sock hop.

  • Iown You

    “MBA’s are NOT educated people, and should not tout themselves as such.”

    To suggest that a person who has completed 6+ years of college is not educated, is a ridiculous generalization; one that, ironically, sounds quite uneducated.

  • Manuel Gonzalez

    This article reeks of prepubescent post-purchase validation rage. There are a select few MBA’s worth their ridiculous cost, but I’m sure you’re advertisers don’t want you to mention that.

  • Victor

    The mba degree from a prestigious school is good for the degree holder but harmful for the company who hires such person.

    Since MBA degreed executives became the norm some 40 years ago the competitiveness and profitábility of us companies has been dropping steadily while executive pay has been rising. This is proof the degree is harmful for business.

    Bob Lutz said “the massive opening of US style business schools in China is great news for US business”. I disagree as long as US companies are run by MBAs the Chinese hav. lot of negative catch up to do

  • Here here. A lot of opinions based on speculation. Opinions are a lot like…..

  • Intranet

    You can say that about almost any major. English majors, history majors, social studies, music majors, art majors, social work, etc etc all contribute NOTHING to the economy. They are all economically worthless. Really, almost all majors except engineering or non-theoretical natural science contributes NOTHING to the economy.

  • Joe

    Victor,
    I agree with you about learning through doing. The thing is, most MBA students of today are not going to Harvard, and many are working full-time at a company they intend to move up in while doing so. These individuals have the knowledge of working a position, the network of the MBA, and the additional business knowledge the coursework provides. An MBA with no work experience may only be superficially valuable, I would agree to this, but an MBA with work experience can be extremely powerful.

  • Joe

    Victor,
    MBA grads are certainly not the basis for the trade deficit. MBAs generally aren’t managing governments. MBAs are managing financially accomplished companies. Government enterprises are run by JDs, MDs, and others. The US has a large population base with a sense of entitlement who choose not to pursue education or employment. These individuals are hurting the economy, as they cost a lot but generate nothing. To blame MBA grads for the state of government (not the success of the business they run) is a very weird argument indeed.

  • Joe

    Ludovic Urbain certainly views him/herself as the MBA expert, despite having seemingly no first-hand experience with the subject. It’s interesting to spend so much time disliking something that wouldn’t have any impact on you – if you don’t like it, don’t get it. End of story.
    The MBA is an extremely useful credential to anyone who is pursuing a serious career in corporate America, and that will not soon change. All this talk about “top programs” is a little baffling though. It’s a common undergrad thing to revere certain programs and view them as the end-all of education.
    On that topic: a top 30 degree is fantastic in that it provides a powerful alumni network and does essentially guarantee a great career – to a point. It will make things easier, however, in the Fortune 100 world CEOs and VPs are by no means exclusive to these institutions. School is a small piece of your career. It opens doors and teaches best practices. AACSB accreditation is necessary, outside of that it all depends on the person. A self-starter with great decision-making and a history of calculated career moves will end up in a better spot than a top 10 with a sense of entitlement.

  • Victor

    Is the mba is such a valuable degree, howcome the us with more and “brighter” MBAs per thousand people than any other country las such a trade deficit, such badly managed governments, specially large cities,state and federal and how come the us middle class is worse of year after year and howcome us industry is every year less competive vs german, japanese and howcome the country is clearly managed far worse than germany or japan. The us now reminds me of pre hitler germany; full of creative but socially and ecnonmically pernicioos people but the country a mess. Now germany is full of “unimaginative” people but the country is a far better and more prosperous and competrtive place than tha us. MBAs are also creative but socially and economically pernicious for company and country. By the way, in germany and japan there are hardly any MBAs…

  • Evan Grantham-Brown

    Fascinating how the article gives no reason to believe the MBA teaches you anything–only that it puts you in a position to join the good ol’ boys network.

    Still, there’s no denying it’s profitable.

  • victor

    Those who believe an MBA from a prestigious business school is good training are like the Church believing the Earth was the center of the World. 100% convinced yet 100% wrong but it “made sense” in terms of the story of the Bible. Besides, that belief had been passed on from previous generations. Many observations indicate the MBA. Germany and Japan have a fraction of the MBAs of the US and have not a single prestigious MBA school. The reason? German and Japanese management thinking (I would say, common sense) hold that it makes no sense to assign anyone to any job in a company without a thorough knowledge of the job.

    This why workers in the lower levels all must go through a detailed training process centered in learning by doing under the guidance of someone competent an with lots of experience.
    In the case so managers and executives the process is similar; learn by doing under the guidance of your boss plus rotation in several departments where you both learn the business in depth (labour relations, the technology, the market, the competitors, the socioeconomic environments in which the company operates, the processes, the culture, etc.) and prove in different settings you have what it takes.

    It is insane to believe you can get an engineer or anyone else into Harvard Business School, or any other, and have him emerge ready to manage anything. It is absurd to pretend that you can train people to be managers in a classroom discussing cases.

    Just as it would be absurd to believe you can train a surgeon, or any medical doctor, in a classroom discussing clinical cases that happened in some other places. No, it can not be done. The future surgeon or MD has to spend several years working under the guidance of another experience doctor The future doctor learns by direct observation of reality, by discussing the concrete reality and by gradually taking on real cases.

    Talking about cases is not reality, no matter how clever the discussion.

    The MBA is valuable, just like paper money is valuable; as long as people believe paper money is. Soon the MBA concept will collapse as more and more people become aware of how MBA-free Toyota, destroyed MBA-full GM. Mercedes Benz and other have done the same to US industry. Only military spending (government) keeps US industry alive.

  • All MBA’s all not created equal. You are assuming that an MBA degree costs $100K when many can be had for 20% of that price. That sort of blows a hole in the ROI argument…

  • rahul

    Your analogy is slightly wrong. MBAs are like the commentators or “experts” who profess they have an understanding of the game, and give their world view without knowing the fundamentals.And more often than not they are wrong about every thing about the game.
    The professional athlete is like the engineer, or a statisticians or an artist who knows his stuff, and is the reason why the commentators (or MBA) make their money.

  • Rahul

    Does it means that non- MBA students who attend University of Chicago dont get access to the University network? Or is the university network exclusive to an MBA? If I do a masters in law or masters in statistics from Chicago, will I not have access to a network? And does one really teach someone how to network? Networking is dependent on social skills, which will not be provided by a MBA degree. The only two skills relevant in business are – Problem solving and social skills. And you can get these skills by studying in any program of a top 20 University, not necessarily an MBA.

  • Rahul

    If MBAs are so smart then why are corporations failing or going bankrupt? Hold on..Harvard forgot to teach their MBAs that its people management and leadership that holds the key to success in business, and not a business degree. And in finance, its the understanding of numbers and concept of probability and risk, all in short supply in an MBA degree.

    I find it funny that people compare the return of an MBA with a pre-experience masters degree. Someone attending an MBA has 5-6 years of experience and after spending $100K plus a foregone opportunity cost of another $100-120K lands a job of $130-140K—a negative investment of $100k. And this person is being touted as the next big thing who will build businesses and corporations. Wonderful. After another 5 years the same person would be earning $250-300K, struggling with a mortgage, doing a 60 hour work week, with no time for family and working for someone who did not do a MBA but a masters in computer or quantitative finance, at the fraction of a cost of an MBA degree.

    But then do we expect someone who spent top $’s to do a worthless degree ever acknowledge the fact? No, and people who fall to the lure of the MBA join the club where everyone knows how worthless the degree is, but need to keep up the act for the world. Harvard admits 900 students a year, yet their list of notable MBA alumni does not cross 100, a number which covers all who passed out with an MBA since the program’s inception. But will Harvard associate itself with the majority of its MBA alumni which withered away?

  • Victor lopez

    Sure. The MBA is great. That is why MBA-managed US companies outperform German and Japanese companies (who do not really believe in the MBA) hands down.

    Toyota and Honda had to rescued in Japan by the Japanese government becsause of the onslaught of high quality GM and Ford cars.

    This why at Harvard they study Toyota´s Management System but Toyota has no need to study Harvard´s.

    As Bob Lutz said more or less: “If China is setting up dozens of US-style MBA schools, that is the best news coming out of China in many years.

    What the MBA class has done the US is destroy its industry by focusing on short term quick profits without really knowing in depth te companies they manage as they hop from one to the next ina matter of a few years. They do not know the culture, the techology, the employees, the products, the competition, etc.

    Funny how Germany and Japan with higher labour costs than the US outperform the US in almost any activity they comoete head-on, except colas, fast food and a few hight tech comnpanies still under the boost of their entrepreneur creators, most with no MBAs.

    The MBAs are taught to be quck buck artist who manage companies like high risk investment funds.

  • Martha

    So you need the GMAT to go to an MBA?

  • David Griffin

    Could have fooled me. Maybe this is only anecdotal but I just don’t see itworking out tlike that many of today’s MBA graduates. After earning an MBA in 2012 the career counselors at my school told me that your education added little value to your career aspirations but rather, 80% of careers today are found through nepotism, favoritism, networking and other forms of cronyism. A Bachelors and MBA left me (many others in my cohort as well) almost six figures in debt with a salary that turned out to be a fraction of the future earnings our alma mater stated (misrepresented) ought to be available.

  • JameBar

    it’s all about making that money isn’t that what its all about? These greedy pigs.

  • otto

    the value of the MBA degree is shown by the facts. The US is not competitive in many sectors of the economy in spite of its huge natural resources. No need to speak about how the US is managing its overall economy.

    With far fewer natural resources and of millions crowded in minuscule geographical areas (compared to the US) both japan and Germany do a far better job in business and government. Interestingly in both countries they essentially have no MBA-issuing schools and managers are developed by slow hands on training rotating around the company.

    The inferiority of US style-MBA dominated numbers-oriented management was thoroughly demonstrated when Toyota took over the management of a 4500 employee former GM factory in the US. Under GM and its MBAs the plant was one of the worst in quality, productivity, labour relations and profitavility. With the very same employees and same union, “impossible people” according to GM managers, in a matter of months turned that plant into the best aoutomotive plant in the whole US, not just GM! and matched quality and productivity of Toyota factories in Japan.

    This happened in 1984. GM could have learned how Toyota manages but I guess they asked themselves; “who won the War?”, “Who wins the Nobel prizes on economics?”, “Where are Harvard Business School, Stanford, Sloan, etc., located?” Ante they answered themselves, the problem can not be us we have the most advanced management in the World… We all know how that ended.

    The whole of the US looks right now in 2013 like GM in 1984.

    Germany, pre-Hitler was also full of Nobel Prizes, artsists, musicianas, financiers, etc., yet the country went down the tubes. I am afraid that management of a company or a country requires collective intelligence not a few bright individuals at the top with no sense of belonging to the culture of the company, the country and so on. The MBA is the ultimate detachment of managers from employees, (of politicians from the electorate). Everything is reduced to numbers and to ROI.

    I believe things will get awfully ugly in the US before they get better.

  • jkh

    The fact that we have business schools is proof that business is far more than what you have stated. MBA’s are far simply more informed and aware. Most engineers will remain engineers forever if they never get an MBA to teach them business skills. It is easy for someone without an MBA to denounce the MBA just like it is easy for a couch potato to yell and scream at their television about what a professional athlete did wrong. Put the couch potato in the game and they quickly learn to respect what that pro athlete is able to accomplish. A MBA is a foot in the door for many jobs, and you do not truly use all that you have learned immediately a time will come when what you have learned will be needed.

  • jkh

    A self made man does not exist. Every man was made by a woman, and a man therefor that man can never be self made.

  • Jah Fizz

    Obviously, we are talking about the top ten MBA schools. You know, the ones worth attending…. Not Devry…..

  • John “CEO”

    Couldn’t of said it better myself. Good job! Well said..

  • EdwinHewittCFA

    I think the MBA gets bashed because people walk away with an MBA and suddenly think that they are educated or have gone through some academic trial by fire. The fact is an MBA is 2 things: A networking degree; and a signal/heuristic for employers to use in their candidate search. Better the school, stronger the signal.

    If you want further empirical proof, look no further than above and below comments. You are not hearing about it being some grand transformative education, but simply a return on investment (i.e., pay x, get y/access to y). MBA’s are NOT educated people, and should not tout themselves as such.

    If you want true rigor go to a stateside medical school or a solid American law school. Just as stated up and down on this blog: an MBA is a $100k key to unlock a $160k job. Bush, Jr. was denied *every* law school (UT basically laughed him out of the building – and he was from Texas!) in the US, but Harvard Business School – MBA welcomed him with open and energetic arms.

  • Leo

    Me, and my peers don’t call law degrees, MBAs, and other such degrees useless because they are not good investments, but because they do not add anything to anything.

    There are no real skills, there is no real contribution to the economy, no real knowledge, no production, research or meaningful service in these professions. They do not contribute in any way, they only suck resources out of our economy, and precious time out of everyone’s lives. They are useless and parasitic. These are basically degrees for people that are both incompetent and bored, yet feel entitled, and need some sort of job, preferably with a lot of status and money. It’s economically short sighted and unsustainable.

    But we have such wealth at the moment that we can afford it (for the moment).

    But they are demonstrably, economically worthless. Sure they pay well at the moment, but it’s basically a “degree bubble” or “profession bubble”, and it will burst.

  • anon

    Basically.

  • intelligent

    If you provide books of mba to a good high school student , i am pretty sure he will be able to learn all that stuff in few months ….
    1.people in HR are falsely made to believe that MBA’s are better than high school students
    2. People in HR are not willing to risk there jobs by higring people without degree
    3. Govt always want degrees for its jobs because govt runs universities
    4.Noone want to go out of the box or want to change the system and everyone wants to follow it like Sheep .

  • nedm

    MBA’s are pretty weak as a concept as it is neither a social science nor a hard science. It has no real theorists or real theories and frankly takes bits and pieces of other subjects, mixes it up and calls it business.

    MBA’s are weak because undergraduate business programs are themselves quite weak. MBA’s cannot work well in government because they have not studied it and frankly you cannot have a spirit to create a business just because you have a MBA.

  • Bilbo Baggins

    You can always tell someone who has a MBA. Highly defensive and love to hear themselves act like a tough person. According to a study a few years ago which examined 40 years of data an MBA doesn’t do much. Oh and that study was done by a business school. Fact is that people who get MBA’s are so focused on gettiing into a good schools and then surviving that they miss out on what makes real business leaders, instincts and gut feelings. MBA’s are for people who don’t have the skills, the drive, and the talent to make it without that diploma on their wall for all to see. People get MBA’s for the diploma. Steve Jobs didn’t get an MBA and he changed the world of buisness unlike anyone in recent history, except maybe Sam Walton… Who didn’t have an MBA…. Oh and bill gates, who doesn’t have an MBA either. You guys are right some people need an MBA, but its because they don’t have the vision to be great on their own they need a way to get a foot in the door and they don’t think outside the box.

  • This was one of my biggest debates coming out of undergraduate school. I graduated with a BA in writing arts and was highly considering going to grad school ad taking part in a MBA program, but the cost versus gain was not adding up for me. If I had majored in business or something like that, I would have definitely gone, but as a writer, it seemed a bit frivolous.

  • Jimmy

    Sure but they demonstrate that, when you have a potential, you do not necesarily need a degree to exploit it. Self made man still exist 🙂

  • Andrew

    Hear, Hear! Amen. Bravo.

  • Jcarringon

    Mate, how many people go on to become Mersers Gates and Zukcerberg and Ellison and Richard Branson? They are an exception and quite exceptional.

  • Jimmy

    John your arguments only stands when it comes to huge companies. You want to be the Manager of a strategic entity of a company as Google, HSBC or US Airways ? An MBA from a top tier school will surely help you. You want to be an entrepreneur or work in a small company, the demonstration is more complicated… And when you know the cases of Misters Gates, Zuckerberg or Jobs… all drop off from school, you can have some doubts about the mandatory point of having an MBA if you wish to create your own company.

  • I think we agree: I don’t care who that kid is, and even if he’s full of it, the fact remains: you can do much better than spending time in school, if you’re actually good – and if you’re not, nothing can save you anyway.

  • My point exactly. Most likely in a ponzi scheme.

  • True, but one point that he isn’t being transparent about is the role that the Thiel Fellowship has played in “where he is in life”. What he has been given (a big check and world class mentorship) is actually better than a full ride to Harvard; yet, he poses as “self made” and is telling other young kids that they can do it to. This would be a fine message if he had, in fact done that (like Zuckerberg or Michael Dell), but he hasn’t. I think his entire platform is dishonest. He has a great opportunity and I hope that he milks it for all that it is worth, but he is an outlier and should at least be honest and present himself as such rather than a blueprint for ditching college. If he had not gotten the Thiel his life would most likely be nowhere near comparable to what a student a Harvard or even Iowa State (hell tech school if the student is learning how to code) could reasonably expect after earning their degree.

  • All those companies you cited will hire anyone who shows their smarts and getting a top school degree is one way of achieving that no doubt.

    I just said it’s neither the optimal nor everyone’s best choice.

  • I honestly believe you will have far more financial security by becoming independent than by obtaining a paper other people recognize for purely cultural reasons.

    I honestly believe that in 5 or 7 years you can make big contributions to your field and complete assignments that will outshine any degree.

    I also think that for truly exceptional people, college will only slow them down.

    And lastly, some people just prefer being independent to walking the standard path, I’m one of them and I think those people should have more support than they currently do.

  • Distance MBA Ahmedabad

    For working professionals one option is distance Education where they do not need to attend lectures.

  • Workinman

    Get off it man, sounds like a case of sour grapes for you.

    My personal story says otherwise and there were a LOT of people in my program that were in similar circumstances. Mckinsey, Bain, BCG, Deloitte, AT Kearney, JP Morgan, Citibank M&A, Goldman Sachs are not going to hire you unless you got in with top grades out of undergrad. The next shot only comes after MBA unless you’re well connected up the wazoo. People at top 15 schools regularly exit with high salaries that set them on a career path that sees wealth multiply.

    These companies hire your piece of paper because it says, you did well with your career and key people recommended you, you’re smart and scored well on the GMAT, you interview well and got into that top program. You sat for a year in classes with similar bright people and brilliant professors. You are hired for who you were before the program, and for the fact that you ARE in the program.

  • AnalyzeThat

    Your reasoning is flawless for somebody who is trying to create the next huge innovation or trying to start their own business.

    I can play the question game.

    Do you honestly believe that your method is a lower risk method to financial security than going to college?

    Do you honestly believe that skipping undergrad/grad school is the best way to get an engineering job at a F500 company or a consultant position at a top management consulting firm?

    You have to take into account each individuals long term goals. Mine is to work in consulting or at a F500 company, and you can’t honesty believe that studying at home or trying things out in the real world with a high school degree is the best way to accomplish that goal.

  • Workinman

    Doing a MBA has a degree of risk associated with it. No doubt. But I can only tell my story

    10 years ago, I was a poor immigrant and gas station attendant with nothing to my name and no family support. 6 years ago, I was an undergraduate from a decent school starting a job at 50K. I worked my butt off did some great things in the company and got to 75K in four years. I then noticed that anyone getting further either had an advanced business degree, designation or came from outside.

    I killed my GMAT, got great recommendations, quit and went to a top 10 program that took me more for my life story and strong academics. Today, I have an offer that will net me annual comp over 160K. I’m going to out earn my bosses two levels up, but all I can do is feel thankful for the opportunities that came my way.

    Moral of story, don’t disrespect the top MBA and call it worthless unless you’ve walked in those shoes.

  • teamwiess

    I think this is a great post. I am a statistician who started managing folks solely because I was good at my job as a statistician, not because I was a good manager. I was emblematic of the engineer problem. So I decided to get an MBA from Chicago due to the fact that I had done my grad work in statistics there and they understood the connection between quant skills and leadership. Notice that is a conditional statement. I don’t think traditionally Chicago would be thought of as high on the list for leadership skills but for people like me, it definitely was the right place. The ROI on my investment has been phenomenal. But could there have been other routes for me to take to achieve the same things? Absolutely. But the MBA program I chose consolidated skill transfer, credentials, and a great network in one place.

    Beyond the skills I gained, the network was the most obvious advantage but also don’t discount the credential dimension. Not talking an MBA in general but an MBA from a top school does still open doors. The very fact you have it says “something” to others. Not sure what. Again, there are other routes to get there and conditional on what you are trying to do, skipping the two years of hard work in your field would be the wrong decision.

    In short, or not so short, I think the MBA has proliferated too much but it still has legs for certain people. Strangely enough, I have seen the biggest benefits (outside of those folks who are going into finance) accrue to people like the poster above and myself. Non-traditional types.

  • Your last paragraph should be framed. I agree whole-heartedly.

  • Articles like this are always good at getting your attention. Obviously, the title caught my eye. But surprise, surprise…the same faulty argument is presented. Not only in regards to MBA-bashing, but the criticism of college overall. This faulty argument usually is based on the following assumptions:

    1) the money spent on a degree is best invested elsewhere
    2) the ROI of a degree is not good
    3) the coursework needed to earn the degree does not reflect or prepare you for the working world
    4) Many wildly successful people did not earn a degree

    All of these points a are full of holes. I’ll quickly point out some of them. In regards to #1, it is much easier to obtain funding for higher education than it is for anything else just about. An 18 year-old from a low income family can get tens of thousands of dollars for education with no credit history, collateral or co-signers. They just need to fill out a form. Try doing that for anything else…even something as simple as a department store credit card. Good luck with that!

    In regards to #2, the notion of “success” is very subjective; not to mention the vast differences in college tuition rates across the board. Are you a success or a failure if you spent $40,000 on your bachelor degree and managed to obtain a job paying $35,000/year? What if you spent $120,000 and found a job paying $60,000/year? What if in both cases, you quit work so that you can stay home and take care of your children…a sick parent…work in the Peace Corps? The truth is, personal “ROI” is a whole lot more than money money spent vs. money earned. It incorporates other non-monetary factors such as quality of life and your sense of self-worth.

    With #3, I actually don’t disagree with this. But I also don’t agree that high school studies prepare you for work either. Yet people would never suggest that we stop making high school compulsory. School should not be all about job preparation. It should be about the exposure to knowledge and the foundation of concepts. Yes, there should be some vocational work thrown in. But the needs of the job market are constantly changing. So there is no point in expecting colleges to train for particular job tasks.

    #4 – You will always have exceptions to the rule. Success is hardly ever just blind luck. If you dig deeper into the stories of these successful college dropouts; you’ll find that each one of them had access to some amazing resource outside of college. Whether it’s their brilliant intelligence; or their parent’s money; a job that put them into first hand contact with the right people and opportunities; all of the above or something else that gave them a leg up. Other than that, if you are working part-time at a grocery store to pay the bills, how exactly are you going to become the next Bill Gates? I’m not saying it can’t happen. But I am saying that the odds are stacked against you vs. if you go to college and earn a degree. Thus giving an employer a basis to hire you so that you can get to the next level.

    I find that most of these MBA/degree detractors are not speaking to the masses. Their message is geared towards people in comfortable positions in life who are looking to make their pretty nice lives even better. If you are low or working class, an MBA degree can be a game changer, and any college degree can be essential. The exception would be if you have access to a family business, are in the military, or in a full-time position that provides a sustainable life and that you didn’t need college to obtain. But that’s not everyone out there…not even close!

  • 2cents

    Mr. Stephens view point is right but frustrating narrow-minded for someone who is supposed to be a leading mind for the next generation. The cost of any higher education is prohibitive to certain courses of action yes – $100-$200K in debt will certainly limit your career choices, and if you already have a company you want to start or you want to go into coding, the last thing you need is to do is to pursue an MBA. His argument is predicated on the notion that our current education system is antiquated to force a one-size-fits-all mentality, something which clearly won’t co-exist in the world of decentralization.

    What an MBA does do is offer a centralized career accelerator from my current position. There really only are two arguments for getting an MBA in my book – one is that your company pretty much requires it for you to climb the ranks and will pay for you, and the other is that you have a specific end-goal, and business school is a two year path to a place that would otherwise take you 7+ years to get to.

    At the same time, John your response seems equally narrow-minded. Brand name isn’t the focus of his spiel, it’s more on company creation and innovation. You would’ve been better off pointing out the need for capital to develop many of these ideas. He’s trying to force the point of a minority but growing group of people who understand their is a value in non-classical education. While kudos to him to getting where he is at such a young age, he is certainly idealistically challenged and focuses on the short-run ramifications of restrictive debt, something which led me to attend state school for undergrad instead of a prestigious private school. His point really is if you want to be a leader, innovator, mover-and-shaker, etc., all the things that b-schools claim to develop, you are better off being debt free and going at it yourself. As a business founder, I believe him to be right in that way. With that said, I’m still going to business school for the formal training, the substantial built in network and yes, the label.

  • I understand what you mean.
    You have already decided that spending 5 years in school to learn engineering was worth it.
    It makes sense that spending another two years to learn business sounds good to you.

    I believe those first five years are not a good investment, and consequently, those two years in MBA aren’t a good investment either.

    In 5 or 7 years, you can become excellent (way beyond degree level) at anything, if you want it.

    In 5 or 7 years, you can build your own business and become self sustaining, answering to yourself only.

    Do you really believe your 5 or 7 years in school are worth anything close to those two possible objectives ? I don’t.

    And networking, life experiences ? do you seriously believe those gained in school come close to those gained working, in contact with the real world ?

  • Well if he’s 21, he may not even be out of Harvard yet.
    Second, just out of Harvard first year brings you nowhere.
    Third, in my humble opinion, creating your own wealth by yourself is a good step forward that people usually take much later in life.

  • I couldn’t have said it better myself!! He doesn’t even mention about the networking aspect of it.

  • Muhammad Naseer Akhtar

    In developing countries story is quite strange: in poor countries or underdeveloped countries/developing countries MBA is considered something else apart from its real sense or purpose. MBA in these countries to me is UNDER-DEVELOPED MBA. Students are those who are not able to get admission some where else. And the teachers who teach MBA are those have never done or established or took part in any business before. In reality both MBA students and teachers are incapable of handling MBA in its real sense.

    These students after graduation look for some clerk level job. Both these teachers and students alike have deteriorated the image of MBA. The third party is Universities and Institutions in these countries offering MBA. They do not look for quality students they just need quantity of students as many as they can. I know a private affiliated college that enrolled 1000 MBA students in one year having just 10 class rooms in small building. How on earth its possible for such a small college to run this mega degree program????????????

    There is no doubt that MBA is degree that matters a lot and in many people’s lives.

  • Andrew

    What school are you planning to attend Michele? In other words, have you taken the GMAT and are you looking at the top schools? Don’t bother with the MBA and all the debt if you cannot manage a top school. Plan on doing the MBA at a decent school only if your company is willing to sponsor your education. Don’t get into serious debt chasing the MBA for a six figure salary. Those are usually only for the folks graduating from the top schools. By a top school – ideally you want to be in the top 10 or 15. The lowest you want to go down to is about 20 or so in the rankings. Anything further down and you might be not get those “plum” mba jobs; even a top school does not guarantee those these days.

  • Andrew

    “He’s 21 and much further in life than he would’ve been if he had gone to Harvard”

    And you make this statement based on what?

  • Anonymous

    He’d be way further in life with a Harvard degree. If he hadn’t lucked out with a Thiel fellowship, where would he be??

  • TA

    Im an engineer as well I have to agree with you. This article is more generic about all the MBA’s in the world. Its always been known just any MBA is not good enough and thats the truth . But if you re an engineer and you have a couple years of work behind you and go to a top 10 business school you should be solid.

    The most innovative companies like amazon,intel , google facebook etc hire many many MBA’s so these losers who are talking about “real skills for real jobs”…can shut up….I have a friend at MIT who owns a ” real’ tech start up (by real i mean a solid eletronics company and not anothe social media junkie entrepreneur ) that makes high end customized micro processors for differnet hi frequency trading firms. He was telling me his company has 15 people – 5 engineers 4 lawyers and 6 MBA’s. That is how a balanced company works…..The naysayers are just haters sitting on a keyboard bitching about some silly credit suisse -ex mba – crazy banker kinda sociopath….reality is majority of people in business schools are high end achievers who need the exposure and platform to jump to the next level .

    Another thing to keep in mind for people still in college is if you study economics or finance or accounting in college and then get an MBA later your MBA essentially overwrites your college education. Basically your college degree is worthless and the MBA is your bona fide degree and its value is lesser. But if you can suck it up for 3 years and get an engineering or science degree in college it is a huge huge benefit when you get in and out of an MBA program

  • jawnpace

    Student loan interest rates aren’t as low you might think, given the current low rate environment:
    Grad Plus loan = 7.9%
    Stafford Loans = 6.8%
    Make my 160K in debt seem pretty daunting…

  • Whenever I hear this argument, the importance of having the right network is either excluded or not provided within the proper context. An MBA is just one way to such a network, though certainly not the only way. My problem with these types of assertions is that they tend either come from waspy types who are able to leverage their families’ networks to achieve success (and thus, don’t necessarily need the degree), street hustlers who were able to buy their way into the right networks with the cash they made from selling drugs (Jay-Z, Russell Simmons), or people who’ve received special privileges to get where they are and then turn around and try to convince young kids everywhere that they can do the same. For instance, this author is a recipient of the Thiel Fellowship, where you get a $100,000 check to “pursue your passions”. Who WOULDN’T skip college with that kind of opportunity? Also, how many of the kids who will read this book ever get that opportunity? Very few. It is disingenuous to suggest that they should not receive a formal education–and more importantly–the network that comes with it (I’m still milking my undergrad network; and that was just at a state school) when your entire platform has been funded by a tres’ generous grant that you did not have to generate.

    Is an MBA necessary? Certainly not. It is not even relevant to what most people are working to accomplish; but it is a legitimate path into certain networks for people who don’t have their daddy’s rolodex, drug money or a $100,000 grant to dip into; and even some of folks who do have access to 1 or more of those things still choose to get it for their own reasons.

    Another thing about a lot of the folks who make their living on such ideas is that most of them (especially the olderones) were obscure snake oil salesmen prior to making headlines with a racy confrontational title and then proceeding to “teach” something that they had yet to accomplish for themselves prior to going on world tour trying to charge others to let them teach them how to do it.

  • southerndemnut

    So what is the advice for the 95% of the rest of the people that are not going to go to Harvard, even if they want to?
    I think if you are between 25-28 and can get over a 700 GMAT and plan to get into finance or consulting chasing those top MBAs are good because those industries value those names. It is like a clique. But for many who have dreams where the school’s name is not necessarily going to amount to much or those that HBS rejects a different philosophy may apply.

    What is interesting, is that the true innovators in this country, like Steve Jobs, Bill Gates, do not even have college degrees, and many others have non business degrees. Not saying business degrees are worthless just that the edge can’t be bought with paper, but by having an idea, the tenacity and determination to run with it, and the ability to manage around any obstacle.

  • cg11

    I agree with points from both sides, but it is imperative to note that Mr. Byrne’s career relies heavily on interest in pursuing MBA degrees.

  • AnalyzeThat

    I find this whole response incredibly ignorant. I’ll talk specifically on my experience. I am an engineer, looking to transition to management consulting. Right after undergrad, I had interviews with the top consulting firms. I did not get past the first round of interviews, mostly because of my lack of business acumen. Since then, I have done my own personal reading in combination with free online courses, to learn about ‘business administration’. I have learned a ton in this time alone, specifically pertaining to finance and strategy.

    Finance is more complex than it first appears and is not necessarily straightforward.

    Strategy not only helps you make high level decisions for a company, but also helps you analytically convince others that your decision will maximize performance. Who cares if your decision is the best if nobody implements it?

    I will be heading to a top business school and will be going deep into debt for it. I absolute expect to learn a ton and have no doubts that it is the absolute best decision for me.

    The point is: (1) you definitely learn much more than “sell more, don’t spend too much” at business school, and (2) that knowledge translates to real performance that a company will benefit from, not just a “piece of paper”.

    I’m not going to judge you for either not going to business school or not going to a good one, but do not speak on topics with such confidence that you know little about.

    (None of this even touches on the networking and life experiences one receives at school)

  • 2cents

    well… i hope not

  • Cost of living is there regardless of whether one is working or in an MBA it shouldn’t be counted. Opportunity cost should be counted, as well as ancillary expenses like books.

    But you’re right, that the value varies by school and by individual student. It’s an investment and the individual has to calculate the expected return for him or herself.

  • Profound, but then, you already had valuable education and the MBA was more icing than cake.

    Even if the world changed you’d still have extremely valuable skills.

    That is not true of an MBA (the paper, not your approach).

  • I believe that guy’s talk is very important as it convinces others to take a chance.

    And for many people, taking a chance is the difference between a boring cogwheel life and an exciting engineer life.

    I know I wouldn’t trade my freedom for any false security the MBA / standard track can offer.

    I also know that’s a matter of ideals and preferences.

    Lastly, it’s a very good thing he says it, because it often happens that people who would be much happier pursuing such a career are pushed towards the standard track, and that’s just sad.

  • Kevin

    The MBA has become so prostituted and re-manufactured that it is hard to take seriously, it is a revenue source for most universities. Ranking and the likes of GMAC ( who would certify pretty much anything after awhile) make huge money on it. John Byrne has done very well spinning the degree while at Businessweek and now he still works it. The FT rankings are suspicious and the tuitions are ridiculous. I attended a Hult presentation and I can honestly say that they are seriously embellishing their program yet the FT ranks them, it is a degree mill program.

    A one year MBA is just a hyphenated BA with an M attached. An MBA to be real should be two years of full time with students having work experience, otherwise it is a joke. Unfortunately no one wants to attend for two years and schools are adjusting the risk factor to one year. It needs to better regulated by a dependable and honest body or association. Programs cheat constantly to get ranked higher or just to get ranked, it is all a game and has seriously devalued the degree.

  • MBARoadWarrior

    Yea, but some of his points don’t make fiscal sense. To say you can invest 174K in yourself assumes you have it. One would be dreaming that a bank would lend someone 174K to “invest” in themselves. So for many school is a way to be able to invest in themselves. Sure this 21 year old seems to be doing well for himself. To say you an go to San Francisco on a dollar and a dream and make it is misleading. Some may, many won’t. If it were truly that easy everyone would do it.

  • Jeff820

    an MBA is worthless if you just coast through it, putting in no effort in the process. I graduated from a top 5 engineering school, and I can say confidently that my mba has been more valuable. People who have not gone through the process, or went through the mba process half baked, don’t really understand that it’s not just a piece of paper. In reality, it’s a process of self reflection, discovering your passion and gaining confidence in becoming an authentic leader. Yes, you can coast through business school much easier than engineering, but the degree is valued in the market place and you can’t simply think of an MBA from an ROI perspective.

  • jmco

    Not worthless but way too spread out. MBA programs need to get back to and focus on simply administering business. Boring for sure but, needed more than ever. Not being the financier, marketer, designer, engineer, or 20 other things many programs seem to think the MBA should be. MBAs need to be way, way more humble too. Just because you administer business does not mean you ARE business. Just because you got your MBA from a top school does not mean you actually deserve that high salary! Show some ethics and EARN you income over decades of focus and being humble.

  • You could also take a real degree that teaches you real skills.
    The problem with MBA is that unless some company wants to hire your piece of paper, it is mostly worthless.
    Business is “sell more, don’t spend too much”, it doesn’t take 5 years to understand and never will.

  • I think you’re missing his point, and a very valid one at that.

    He’s 21 and much further in life than he would’ve been if he had gone to Harvard.

    And please, don’t tell me that people with degrees working for companies (and not self) have any experience of the real world – that would be delusional.

  • GHG

    Hi John, you are probably honest but I can’t help thinking that MBA consultants/experts/gatekeepers would NEVER tell you that an MBA has lost value… I decided not to go, will see if I was right. Cheers

  • Evan

    Some good points on both sides. My takeaway: if you’re systematic, get an MBA; if you’re entrepreneurial consider other options. Dale Stephens is obviously an entrepreneurial thinker – he’s started a web community and wrote a book by age 21 – wouldn’t you expect him to advise In The way aligned with his personality?

  • steve

    It’s odd reading comments like “because lots of them have MBAs from non-top-30”. My undergrad is in Computer Science and my MBA certainly isn’t from a top 20 or 30 school that’s for sure but I got a huge skills boost getting an MBA and it has certainly helped when pitching an MBA as part of a technical team. It’s an old adage for sure but it’s not necessarily where you get the degree from it’s what you do with it that counts (before I get flamed – I am under no illusion that the top 20 schools definitely open doors that my MBA wouldn’t).

  • ok so now I am thinking it’s a waste of time. I’ve been debating going back to school for this degree. A single mom of one can’t afford to make this decision and find myself working in the same type of positions.

  • because lots of them have MBAs from non-top-30 (or others would argue, non-top-20) programs. ranking is vital to getting good jobs / good salaries.

  • So why is there so many College Graduates including MBA’s unable to find work or are working at service industry jobs to make ends meet?

  • Josh

    Huge different between an MBA at a top 20 schools vs. an MBA at some silly school. A top 20 MBA can land those 100k plus jobs and put someone on a serious career path. It’s absolutely true that top companies will not look beyond the big schools for MBA grads. Dale Stevens is delusional…21yr old kid with no real life experience telling people what is worth and not worth doing.

  • @Bar710 — your point about cost comparisons is a critical one, and I wish more people realized this. There’s a widespread belief among people who can’t bothered to do a Google search that somehow the Top-10 schools carry an outrageously high sticker price that the rest of the private schools don’t — this spawns all types of myths about what people attend what schools. When the higher ed bubble pops (and the pins pricking the balloon are being put there by platforms like Udacity, Coursera, EdX, etc., which will eventually evolve into more certificate-based credentialing) the institutions that survive will be the public schools that provide excellent bang for the buck, as well as the top private schools. Others will have to adjust their cost model or they will go under.

  • Bar710

    John, I agree with most of what you say in this article but its misleading to say a Harvard MBA (a majority of top MBA’s for that matter) doesn’t cost $174K. You’re right the annual tuition is $51,200, but are we simply going to ignore the cost of living, books, and overall opportunity cost? An MBA can be a very good investment but it can also be a horrible mistake. Let’s face it, most MBA students aren’t attending top 20 schools. Just look at some of the employment rates at the lower tier schools like Santa Clara, or even Pepperdine. These schools carry costs similar to those of top tier schools. In these cases, I think Dale Stephens has a point.