What If Business School Really Is All About The Money?

There are some unflattering stereotypes out there about MBAs. You’ve seen them on TV and in the movies: the megalomaniac millionaire, ranting and raving about how “greed is good”; the dead-eyed finance guy, cold-heartedly firing everyone on the shop floor; the slick Silicon Valley huckster, overflowing with ideas for useless apps. Even sympathetic journalism follows this line: when The Wall Street Journal, Forbes, or the Financial Times profile a Jobs, a Gates, or a Musk, they make clear these guys aren’t Mother Teresa. That’s part of what makes these figures admirable in the business world, or at least valuable to it. The MBA in the media is the guy who cares only about the bottom line—the company’s, and his. (And in these portrayals, the MBA is almost always a man.)

Contrast these media MBAs with the candidates admissions departments tell us they want. On any admissions website, you’ll find profile after profile of diverse, socially conscious leaders, developing businesses with strong double (or even triple) bottom lines. Never mind that the data on these very same sites says a substantial portion of the program’s graduates go into finance and consulting—you won’t see a single corporate raider or consultant specializing in “headcount reduction” in the marketing material. Essay prompts encourage applicants to describe “what matters most to you” and “your values,” as if the act of making money is somewhat gauche, and must be justified or talked around.

These contradictory narratives often cause our clients anxiety when it comes time to write their application. Most applicants know that presenting themselves as a ruthless money-making machine is bad, but most also don’t fit easily into the socially conscious mold advertised in schools’ mission statements. How does an applicant who aims to join an MBB consultancy or a PE outfit honestly connect their goals to social justice or even their own non-pecuniary interests? And what about the countless candidates for whom the honest answer to “why do you want to get an MBA” is quite simply “I need it to get promoted and make more money”?

What if it really is all about the money?

You’ve got it all backward

The short answer is: Yes, of course, MBA admissions is all about the money!

It’s just not about your money. Flip the problem around and look at it from the business school’s perspective. You can’t get that perspective by reading a bunch of school websites or interviews with admissions deans, by the way—an admissions department’s job is to attract more applicants so they can lower their acceptance rate (an important metric for rankings), not to give you a glimpse behind the curtain. Instead, think like… an MBA.

Here’s the case study: You’re the admissions dean at B-School X. You have 6,000 applicants and you have to assemble a class of 300 students out of that pool. Your business school is associated with a large, private university that has been around for a very long time. Your job is to create a portfolio of students that will lead to maximum long-term returns. That means people who can pay tuition, get a great job after graduation, donate as an alumnus, and—best-case scenario—install their name on the front of a university building one day. For a lower-ranked school, the tuition component is more important; for top-ranked schools, it’s sniffing out future high-dollar donors. Either way, it’s about the money.

There’s a strong network effect to admitting current and future wealth. The education from a top-5 school isn’t that different from a school ranked #75 – you can get a great introduction to finance or accounting at either place. But where are you more likely to find the seed money for your start-up? Where are you going to meet the person with connections to your dream financial services job? Admitting on the basis of current and future social and financial capital is a positive feedback loop, attracting better and better candidates who want to be associated with a stronger and stronger pool of alums. It’s a perfect example of Jim Collins’s flywheel theory (described in his classic management book Good to Great).

Beneath all the marketing and hype, business school (in the U.S., at least) is simply a business. A business in an industry where reputation matters, a business selling a positional good, but ultimately still a business. Admissions committee members are investors, looking for the applicants who have the most upside potential. Is that ethical? That’s for you to decide. But even if it’s wrong, understanding this fact sure helps you as an applicant parse the prompts and statements that admissions departments put out.

We can see that this is true with a simple test. Imagine two candidates: one who only cares about making money (with the goal of working in a particularly ruthless investment firm) and one who only cares about making the world a better place (with the goal of starting a penguin sanctuary in Patagonia). Both could benefit from the organizational skills an MBA teaches, but which candidate gets in? Well, what percentage of Patagonian penguin keepers have MBAs from elite schools? How about… private equity executives? No contest. Not even close. Actions speak louder than marketing—business schools do care about your bottom line potential.

On the gridiron

How do you prove that you are worth investing in with a selective MBA education? We like to think about candidate evaluation the same way investment bankers value companies, through a “football field analysis.” This technique examines a single company using different valuation methods and compares the results in a single chart (that ends up looking vaguely like an American football field). Studying the chart gives bankers a potential range of valuations for that company. The idea is to develop a multi-pronged approach to assessing future value that doesn’t all rely on one metric or calculation framework alone. In I-banking, these tried-and-true valuation methods include:

●  Comparable analysis, which asks “What have similar companies sold for in the past?” For an individual MBA applicant, this means asking “What did Michael Bloomberg, Meg Whitman, or Warren Buffet look like on paper when they applied to graduate school?” Or, more realistically, “When we admitted people who looked like this in the past, how did they do in recruiting?” For example, this guy says he wants to do VC/PE right after school—is that realistic if he has no prior background in investing? Or this Chinese immigrant who wants to own a P&L at a major U.S. manufacturing company in the next 3-5 years – is that realistic given the work sponsorship situation? By assessing how other people who look similar to the applicant have fared in the past, the admissions committee can infer potential success from the applicant they are evaluating.

This type of analysis is why you find so many people from finance, consulting, and other “traditional” industries in MBA classes—they are proven successes with recruiters, and serve as a hedge against higher-risk admits. The take-home here is that, if you understand the DNA of a “successful MBA,” you will be in a better position to identify your own strengths—whatever they may be—and describe them in a way that is compelling to admissions committees. Note: We are NOT suggesting that you should say you want to become a management consultant if that’s not truly what you want, nor are we suggesting that you’re doomed in MBA admissions if you don’t want to become a management consultant. This form of evaluation favors more traditional candidates, but as we’ll see below there are lots of other ways admissions committees look at the problem.

●  LBO/Takeover analysis, which asks “What have other companies taken over by other investment firms been valued at?” This is a good paradigm for raw, unproven talents. This is especially relevant for nontraditional candidates with no business experience (e.g. military,
former teachers/TFA, Peace Corp Volunteers, doctors, PhD academics, etc.) With the right management team and guidance from a private equity owner, what could this company achieve in 3-7 years? Or, with an MBA from our school, what could this applicant achieve in 3-7 years? (Conveniently, the typical holding period of a PE investment is similar to an applicant’s short- term post-MBA career horizon.)

After an LBO, the new owners strip out costs and make operations lean and much more appealing to buyers. When an elite B-school takes on a young professional, they polish the rough edges and expose the student to valuable ideas and people. PE firms also value a company by the synergies that they already have in their portfolio. If they already have an oil field service company, they have the infrastructure (IT systems, HR, technical expertise, etc.) to more easily acquire another. B-schools seek similar synergies between class members, and are more willing to take risks on non-traditional applicants who fit with the unique advantages of
their program. In some ways this lens is the exact opposite of the comparable analysis—instead of focusing on strengths, the adcom is looking at your gaps and saying “oh, that’s stuff we can fix or burnish until it shines, and then this person’s value (i.e., their long-term career and alumnus potential) will go up.”

●  DCF (Discounted Cash Flow analysis), which asks “What is the present value of a company’s future profitability?” For an applicant, this means estimating future success based on what we know at this present time. This type of analysis works in favor of candidates who already have a very good sense of their entire future career arc, for example, those with family businesses, political connections, a patent in an exciting emerging field, or a business idea that has already found success in the market. The adcom doesn’t need to make comparisons or guess at future potential—they simply project forward and decide if they’re interested in wherever the applicant’s career is going.

This exercise shows only a few of the many different ways there are to evaluate potential. You can use these ideas to help get your application unstuck if you’re stuck, or to brainstorm your overall admissions case. In our experience, every candidate has some valuation method under which they are a high-potential applicant—it’s simply a matter of finding the right frame and making a compelling case for yourself.

The third option

So if it’s all about the money, why all the fuss about social values? We presented two extreme examples above, a penguin keeper and a PE-bound financier, but that was actually an incomplete comparison. In the world of MBA admissions, there’s a third type of candidate in play: the one who wants to both make money and save the world. Think of the guy with a big idea for an innovative medical technology company that could cure cancer, or the gal who wants to lead Chevron’s transition to 100% renewable energy by 2040. Let’s put this third character next to our finance person… assuming both appear to have the same high earning potential, who does the adcom go with? It’s easy—the guy who is going to save the world and make money, every time. At the margins, the reputational benefits of associating the university with someone who looks likely to help a lot of people could make it worth accepting that guy even if he had slightly lower earning potential.

At a highly competitive U.S. business school like Harvard, Stanford, or Wharton, the admissions dean could fill the class five times over with just this third category of candidate alone. Therefore, to earn admission at the elite MBA level you simply must demonstrate potential for success on every possible bottom line (double, triple, quadruple—as many as you can imagine). The applicant pool is simply too talented for you to neglect any angle.

We find that most people actually are interested in doing both well and good—they just don’t always think about it that way. It helps to consider first why you make money the way that you do. If you’re in finance—why did you pick that, and not another lucrative field like energy or big law? Why did finance seem more fulfilling? Another useful heuristic is to consider what changes you would like to see in your industry to make it more moral and socially beneficial. How could you bring about those changes in your future career? Just remember that doing good is not good enough. If the admissions committee has asked a question about your long-term goals or values, focus on getting them excited about your ideas, but keep the dollar signs in the back of their head. The adcom is not an expert in your specific field, so this often doesn’t take much, just a hint of how your idea fills a market gap or seizes upon a unique window of opportunity. Show the adcom why YOU are the person who is best qualified and best positioned to lead the change you want to see.

Generating irrational exuberance

Your ability to sell your career as both lucrative and fulfilling is part of the “test” that an MBA application presents. Both admissions committee members and investors are people, not calculators. If the history of corporate finance has taught us anything, it’s that narratives can be incredibly powerful. Tesla, with less than 1.5 percent of U.S. automotive market share, recently became the most valuable car company in the world based almost entirely on brand equity and their speculative narrative about future success.

It’s all about the money—but your ability to make money depends on your ability to tell a good story about your future prospects. Understanding that will help you speak in a sort of “code,” answering both the touchy-feely prompt in front of you, and the hard-nosed “future success” assessment that is implicit in every MBA application. The key is to convince the adcom that YOU are the one stock that they just can’t pass up and absolutely must have in their portfolio.

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Alex is the Managing Director of Systems & Content at Admissionado, a top admissions consultancy. Since graduating from Columbia University in 2013, he has worked with hundreds of MBA applicants on thousands of essays, helping his students maximize their MBA potential. From his base in New York City, he has written a wide variety of education-related reports, case studies, and articles, many of which can be found on Admissionado’s website and Amazon store.