Does business school cost too much? Is it really worth it?
Ask the dean of the most expensive MBA program in the world and not surprisingly you’ll hear a strong argument for why Stanford is worth every penny of the record $185,054 estimated cost of its two-year, full-time MBA program.
Garth Saloner, dean of Stanford Graduate Business School since September of 2009, argues that MBAs can easily recoup the costs in hefty starting salaries, generous bonuses and a boost in lifetime earnings. But Saloner maintains that not every aspect of an MBA education can be quantified, and the intangibles can amount to a life-changing experience.
Obviously, not many people need to be convinced of the worth of a Stanford MBA. Last year, 6,716 applicants vied for just 398 seats in the entering class, and Stanford turned down 93% of them. Those successful MBA candidates can expect to land some of the world’s best-paying jobs for any newly minted graduates. The average base salary for a member of the Class of 2012 was $129,652, not including starting bonuses that averaged $23,865 or other guaranteed compensation averaging $66,363.
Nonetheless, in a wide-ranging interview with Poets&Quants, Saloner mounts a vigorous defense for the value of an MBA, explains why he doesn’t think MBAs should start businesses at Stanford, goes into how the school teaches ethics, and reveals what Stanford looks for in a successful applicant. As Saloner puts it, in a rather elegant South African accent that betrays his roots, Stanford is “a place where you come to grow, change and innovate and become a big part of the solution to the world’s problems.”
Poets&Quants: The average student debt for a Stanford 2012 MBA was $79,049. With arguably fewer job prospects than before the recession, how would you make the case for an MBA education today?
It’s very easy if you just look at what happens to our students’ starting salaries. Seventy-nine thousand dollars sounds like a big number, but if you think about the change in starting salary, the bonus and what that does to your career earnings, I think it is easy to justify. We always do well in return-on-investment listings. Forbes does an analysis of this, and we are always on top.
The second point is this is going to change who you are and what you’re capable of doing. I just think that’s something that’s hard to put a number on.
Time magazine ran a story about startup schools, which promise to give aspiring entrepreneurs specialized training and mentorship for a fraction of the cost of an MBA—one program charges $20,000. Entrepreneur David Cancel of HubSpot has also said hefty debt can make students more risk adverse and limit their willingness to gamble on a new venture. How would you defend the value of a Stanford MBA?
I think the education we provide here in entrepreneurship is invaluable. All of the entrepreneurship classes are taught by combinations of tenure-line faculty and practitioners, so you’re getting an enormous amount of learning in a condensed course about how to do entrepreneurship successfully and what kind of pitfalls to avoid, with lots of data around what has worked and what hasn’t worked.
I think going out and trying to figure this out yourself one startup at a time is actually a really expensive way to do it. Most startups fail. We talk about the culture of accepting failure in Silicon Valley, but it’s very painful if you’re the person who’s failing.