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  Why an MBA is NOT Worth the Investment

Aug 1st

Why an MBA is NOT Worth the Investment

Reading, Personal, Interview, Career Management, Success, Thought leadership

Having been a headhunter for top positions from executive level and below, I can honestly and sincerely tell you, most companies nowadays don't care about an MBA degree at all. The only degrees/certifications that matter are directly tied to the role at hand for that industry. For example:

  • PHD/Master's in a specific scientific/technical craft for a scientific, medical, mathematical, quantitative, statistical role, etc.
  • MD to function as a Doctor
  • JD to function as a lawyer
  • PharmD to function as a pharmacist
  • RN to function as a nurse
  • CPA to be an accountant, CFP for financial advisors, etc.
Before everyone freaks out and decries this post, hear me out. Here is Why an MBA is NOT Worth the Investment. 

Most modern higher education programs, especially MBAs, don't bear the financial fruit people are used to in the past. This is a simple case of supply and demand. MBA graduate numbers are going through the roof, with no guarantee that those graduates are more or less qualified. Reason being that NOTHING compensates for hands-on expertise and likability. Some candidates highlight the fact that their MBA degree somehow should afford them higher pay or special leadership roles. My clients never accepted that argument because they'd rather take someone with 3 more years of that expertise, and proven leadership track record than to take someone with a newly minted degree with less experience who is unlikable to boot.

If you ask any hiring manager, 
Real World Experience + Likability > MBA

The cost of acquiring an MBA grossly outstrips the salary gains projected from the acquisition of the degree. On a purely financial level, the return on investment (ROI), simply isn't there. 

 Here's the breakdown why: The cost of your average no-name MBA degree is a minimum of $100k (tuition, books, living cost while you're not working, rent, food, water, etc.). Unless you have a trust fund/rich relatives, scholarship, or your company paying for your education, you're fully liable for this amount.

Bear in mind, this $100k price tag is POST taxes. In which case, you'll need to make at least $200k cumulatively to pay for this cost - assuming your income tax rate is 40%+ (which it will be if you're to make 100k post-taxes), and that you have minimal expenses and no existing debt obligations. If your job currently pays $75k, you're only making about $45k or less after taxes. To accumulate $100k, you'd need to work at least 2 years without spending a single cent.

If you factor in your living costs, you may need 5 years to save up enough for your MBA. Since you're allocating $100k for the degree, you won't be able to put that money down for a house, an interest bearing stock/mutual fund, nor any other income-producing asset. If you calculate the gains in the real estate market and financial markets savvy investors can obtain, you're saying "no thanks" to all the potential riches to be made in those arenas while you diligently save for this massive cash outflow.

Opportunity cost is a real thing. If you spend your $100k acquiring a degree, you no longer have that money to allocate towards income-producing assets!

For those above reasons, (mostly the fact that not a lot of people have $100k cash sitting around), paying cash for an MBA is not an option. So why not take a loan? Certainly, there are plenty of schools, financial institutions, eager to offer debt. That's the exact trap of this whole MBA system. Easy debt has landed many an American in hot water whether for a degree or for an over-valued house. For every article lauding the benefits of this degree, there are 5 more proving that there was no substantial income increase from the achievement of this non-technical degree. 

Despite these hard financial facts, let's say you proceed to now take out the loan for $100k to complete your degree for the next 2-3 years. Once you graduate, you'll need to pay back this loan with POST TAX dollars. Again, you'll have to earn $2 for each $1 of debt you're paying back (income tax 101, federal + state + city). Sure, there's a tax write-off on your interest portion of your loan, but as you come closer to paying off your debt, that interest percentage will dwindle, and those tax write-offs are minimal for the last few years of paying off your student loans. Add in any remaining student debt from your undergraduate degree, and you can say goodbye to actual earned income!

What if you're actively working and your MBA is a part-time commitment? The costs are still astronomically high, and you won't qualify for financial support if you're making a decent salary - Double whammy! You have to pay full price, especially if you're doing well. Not to mention the stress and emotional toll an extra degree takes on you while juggling a career. Is that quantifiable? Certainly. The decrease in quality of life, and time spent with friends/family is something you'll also have to factor.

Lastly, there is absolutely no guarantee you'll be automatically hired for a higher-paying job just because "MBA" gets tacked onto your name. You still need to impress potential employers, network, and job search like everyone else. If your MBA program doesn't have a strong career department, your $100k investment will quickly lose even more ground the longer you stayed unemployed. No recruiter/hiring manager is excited by someone who has a fancy degree but not enough real life experience that is relevant to the specific job role at hand. 

It is not a future employer's job to pay for your investment for yourself. If they choose to hire you, it doesn't mean they have to offer you 6-figures because you have student loans and bills to pay. They will pay fair market value for someone with your experience, which will be dictated by what other offers you have in the pipeline. Again, the same rules apply, and you'll need to work hard to assemble a group of companies and leverage offers off one another. 

TIP: In certain industries, mostly consulting and finance, MBAs are important to your value. However, in those roles, your company will most likely pay for your to obtain this degree, so why pay for it yourself when some of your peers are having this cost accounted for by others?

If you're in transition, an MBA especially needs to be deeply thought out. Have you truly tried to transition without an MBA? My personal thought is $100k is a lot to gamble for any type of future payout whether it's a higher-paying job, or successfully transitioning to another industry. I would personally try to get a job without necessarily having to fork out $100k of my own hard-earned money.

This opinion is just my two cents, and I'm sure everyone has different views. I hope this helps in your decision-making process!

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