‘Business School Is A Waste…If You Want To Blow $100K, Go To Vegas’

by John A. Byrne on

A Stern MBA wishes he spent his tuition money in Vegas instead of on an MBA

A Stern MBA wishes he spent his tuition money in Vegas instead of on an MBA

“Business school is a waste of time and money. If you want to blow $100K, go to Vegas.”

That’s what one disgruntled Class of 2008 MBA alum from New York University’s Stern School of Business told Forbes when surveyed for the magazine’s latest return-on-investment ranking of the best business schools.

If the Stern alum wasn’t feeling the love, you can’t blame him. Like many of his classmates, he graduated just months before the Great Recession crashed into what was a booming economy. Many newly minted MBAs who headed for Wall Street found themselves out of jobs once Lehman Brothers imploded. Some even had to return their signing bonuses to the firms that put them out on the street.

SLOWER PAYBACK PERIODS & LESS PAY FOR MANY MBAS

Ultimately, the economic contagion that spread through the world economy impacted just about everyone–not merely Wall Street professionals or MBA holders. The enduring grip of the Great Recession took its toll on the historical payback of the degree. MBAs in the Class of 2008 found that it took more time than ever for the degree to earn out: three to five years for the 70 U.S. schools ranked by Forbes.

Besides the slower payback periods, the magazine noted that five-year gains attributed to the MBA also have fallen over the past decade. The average 5-year gain for grads at the top 25 schools was $118,000 a decade ago, but only $68,000 this year. “Five-year out salaries averaged $159,000 this year, but that represents an annual gain of only 1.8% since 2003, which was slower than the rate of inflation,” the magazine said.

And in a fair number of cases, median salaries actually went south. The biggest declines in reported median salary occurred at IMD. Five years after graduating with their MBAs, the Class of 2008 claimed annual salaries of $211,000, a $35,000 drop from the $247,000 pay reported by IMD’s Class of 2006 two years ago. MBA grads at Harvard Business School and Cornell University’s Johnson Graduate School of Management both saw their salaries fall by $25,000. At HBS, the Class of 2008 reported median pay of $205,000, down from $230,000 for the Class of 2006. At Johnson, the Class of 2008 reported median pay of $155,000, down from $180,000.

YET SOME SCHOOLS BUCKED THE TREND

For whatever reason–perhaps because of industry choice, geography, or the sample of alumni responses gathered by Forbes–some schools reported increases in median salary for the Class of 2008 over the class that graduated two years earlier. The biggest gain–$17,000–was reported by London Business School’s class which posted median salary five years after graduation of $214,000, up from $197,000 for the Class of 2006. Stanford MBAs also fared well, seeing a $16,000 jump in median salaries to $221,000 from $205,000.

Out of the 34 business schools in the world where the Class of 2008 made the most money, roughly a third–11 schools–bucked the trend. They included Italy’s SDA Bocconi, Michigan’s Ross, Georgetown University’s McDonough School, and UT-Texas at Austin McCombs School of Business. And despite the setback for some, MBA alums at 59 of 70 ranked U.S. schools and 22 of 24 ranked international schools are all in six-figures.

And although it was a Stern MBA who wished he gambled his tuition in Vegas, Stern grads did okay. The members of the Class of 2008 actually reported median salaries of $165,000, up $5,000 from the $160,000 median reported by the Class of 2006. You can bet they’re glad they spent their money on a prestige MBA.

(See the following page for a comparison of median salaries between the Classes of 2008 and 2006)

1 2 Next
  • alextakashi

    For INSEAD, you meant to say -$21,000.

  • observer

    Just wait for 2015 results, if it also declining then it is clear that the value of the degree is in decline, which I think it does.

  • JohnAByrne

    Absolutely. Thanks. Fixed that immediately.

  • CurrenSee

    I love this site, tons of great info but I think it’s important that the author provide a bit of relevant currency fluctuations to be more fair to the international schools:
    Back in 2008 the USD was borderline worthless overseas, so depending on which exchange rate was used we can see why IMD had such a significant change from their starting base salary in 2008 to 5yrs later (assume the base salary was equivalent to 100k USD back in 2008, 5yrs later the exchange rates in USD terms fell off the map). The Swiss Franc fetched upwards of 1.20 per USD back in ’08, now it’s down to .90; so a 15% drop in USD-based salaries needs to be taken with a grain of salt given the USD has depreciated by upwards of 25% vs CHF in that same span. Take the British Pound, it fell from a peak of 2.08 in ’08 down to 1.60 now, also about a 25% decline; the EUR has fallen upwards of 15% from its peak in ’06. Taking currency into account, and considering the vast majority of grads from US schools stay in the US to earn USD’s, I think the comparison of an IMD, LBS & Insead becomes all the more interesting when comparing to the top US schools in terms of long-term earning potential.

    Also, for the sake of being thorough, look at how the USD fared between 2006 and 2008: Eur went from 120 to 160, GBP went from 175 to 2+, and the USD got slaughtered vs the Swiss Franc, from 130+ down to par over that 2yr span. So it should be no surprise that LBS salaries increased in ’08 over ’06 5yrs out, as the base salaries in ’06 were not even close to base salaries in 2008 in USD terms. That same concept can be extended to USD values in 2011 compared to 2013: the USD has actually improved by upwards of 10-20% vs major currencies over the past 2yrs, so simply looking at nominal USD values without normalizing for currency depreciation does not compare similar data points (and consider that the Swiss central bank actually intervened in 2011 because the CHF was skyrocketing vs USD as investors were discovering that toilet paper was more valuable than the greenback).
    I think the biggest question is where does the USD go from here? 5yrs from now will it be a worthless schilling or will it remain the world reserve currency? I would prefer to do more than just follow the advice written on the bottom of a USD, and use a bit more than mere faith to plan for my future.

  • Dennis Bennis

    You wrote “At HBS, the Class of 20008 reported median pay”.

  • Stanford GSB

    You went to the wrong school dude. Even if I could never tell a future employer that I had an MBA, and I went back to my previous job afterwards, I would still spend the $110k on tuition and sacrifice the $260k of foregone earnings. The enjoyment of the experience, the self-enrichment, and above-all the friendships made were worth that price alone, and the lifetime value of those far exceeds the cost. Much better than any trip to Vegas (of which there were several during the MBA, obviously…)

  • Jonathan Olsen

    Ironic that the ratings were all based on the medians but the headline quote is from one outlier grad. Sensation sells. Next time, let’s highlight the outliers in the top 4% of each B-school instead and what they are achieving five years out – I bet the results would be more surprising.

    To the MBA cynic, please remember: If you’re deep into a career path such as finance pre-MBA (perhaps too deep), Bschool might not boost your income, but it may save you from making the next whale trade or equivalent headline. When you are in a leadership position, your mistakes are 10X more expensive than your education, and can cost people their jobs or life savings. But with the right moves, you can also employ thousands of people and delight millions of customers as an entrepreneur, marketer, or financial whiz.

    As a metric, income alone is a short-sighted assessment of the value of an MBA program. It depends on your industry and your goals. Business education is about empowering you to be a better leader, it’s about supporting colleagues, and it’s about gaining a broader business world perspective. B-school influences your thinking over the arc of your 25+ year career, and so does your network.

    Finally, let’s not forget that the schools that admitted you are not responsible for your success, you are. It’s what you do with what you’ve learned. Go be the next alumni success story, build a company that lasts, or change the world. You will be much more than your salary 5 years out of Bschool.

    (PS. I went to NYU Stern, and like so many others, I loved it.)

  • Katrine Muench

    14 years out from Stern I have not only had the opportunity to work on lots of amazing and challenging new financial software projects with innovators from all parts but I also have 2 kids heading into high school and a very busy life. I was the first at my company to ask for part time flexible and bought my own cellphone to make it work and prove the naysayers wrong. Within 5 years I had 2 kids and a flexible schedule where getting the job done mattered and not just the physical space I was assigned to sit in. I would not have had the courage to risk loosing my job at each key transition without the Stern MBA

  • Socrates

    I say: why not do both?

  • Alchemical Reaction

    Write complete sentences.

Partner Sites: C-Change Media | Poets & Quants for Execs | Tipping the Scales | Poets & Quants for Undergrads