No Debt MBA

At my business school, and I'm sure the rest of them out there, there are two particularly hot locations: San Francisco and New York. New York is a perennial favorite with MBAs and fortunately it has a plethora of banking jobs, a few consulting jobs and more to support them.  San Fran is close to Silicon Valley which is of renewed interest to MBAs these days.  Facebook and Google are two of the more coveted employers on campus.  San Fran also has a variety of other jobs in health care, consulting, finance and more - a more diversified location than New York.  Students who have a target location (particularly New Yorkers) talk about it frequently.  Asking about who's there or what their chances are or how to network better for the location.

But allow me to let you in on a little secret that MBAs don't talk about much.  Those locations and the others that business school students love, like London, Hong Kong, Boston or LA, are incredibly expensive.  You knew that.  High cost of living is no secret and people like to complain in that masochistic way about the price of rent or a meal out while saying there's no way they could live anywhere else.  However, the pay doesn't really change if you're in New York or in Detroit.  Think about that for a second.  Housing in particular is apt.  You know how far $150,000 doesn't go in New York and you know exactly how far it does go in Detroit.

It's common for pay not to fully adjust based on cost of living.  That's true across industries.  But many companies hiring MBAs specifically pay the same across all locations.  Consulting firms are a good example of this.  I've heard of a couple that have a policy of standard salaries across US locations.  The consultants in New York dream of buying condos while those in Dallas have a few acres and a pool.

The evenness of pay is partly an equality issue for companies with multiple locations but there's also a supply and demand issue at play.  Companies or branches in Detroit or Dallas know that to get top talent beyond the few people who have family in the area they will have to give an offer that is in the absolute sense comparable to a New York offer.  This then gives them a relative advantage over the more coveted cities after cost of living is factored in.

It's easier to get a job in a non-trendy city.  I can't tell you how hard Bain Texas, McKinsey Dallas, or Goldman's private wealth offices in Miami or Houston have been recruiting on campus.  McKinsey Dallas sent messages to anyone on campus who in some way was from Texas, whether they were interested in finance, marketing or anything else.  Target, in Minneapolis, is ambivalent about recruiting at top schools since their yield from interns to full time is so low - they can't convince anyone to live in their city long term.  The number of people who show up to a hedge fund's recruiting session who has offices in New York, San Fran and London versus one that's based out of Houston or another location in the South, is striking.

So if it's easier to get a job in a non-trendy location and you have much better standard of living once you land it, what's the catch?

1. You have to convince the company that you're actually interested in them and their location.  These guys know they're underdogs in recruiting and they really want to separate those who are really interested, who will definitely take an offer if it's given to them, and those who are using them as a safety for when their applications to other places come through.  So make sure you have a good story to tell and do your research - you need to be in that first bucket for the odds to be better than average.
2. You have to actually work for that company at that location.  This sounds stupid but for there to really be any value to taking an offer with a non-trendy company in a non-trendy location you have to be happy about it or at least okay with it.  Otherwise you'll just be miserable and bemoaning your awful life in boring, backwater Atlanta while you're friends are having a great time paying $20 per drink in New York.

For many business school students these two factors are actually prohibitive.  These are kids who have honed for decades their drive to be the "best", to go to the best schools, jobs, and so on.  It creates a powerful, self-reinforcing form of group think.  Because New York is where everyone says the action is, everyone wants a job in New York.

So you end up as one of over a hundred MBAs applying for one of four slots at every company in your target industry in either NYC or SF.  You fill out numerous applications because your shots of success with any one company are so low.  But each application you submit is lower quality because you don't have the time to devote to each, same for the interviews.  You end up exhausted, stressed and pressed to find differences in any of the opportunities you get because you haven't had time to get to know the company or its work.

Let me just say, if you can do it wholeheartedly, this is one area where it really pays to buck the trend.

Freakonomics has an interesting discussion on grade non-disclosure policies at top business schools.  They're spot on that students have a huge incentive to keep things the way they are and I agree with the hints that grade non-disclosure does not improve academic learning.  Honestly, my sense of the policy in practice is that it allows students to focus less on classes and more on "networking" if you get my drift.  Companies accept it because top business schools have already screened heavily for students that are smart and work hard. 

However, I would say that (so far) students here are fairly diligent in their studies, just not as thorough or obsessive as they would be if their knowledge was graded. So MBAs learn something, just less than they otherwise would.  Not sure if this is necessarily bad given how busy we already are; something would have to be given up for extra study time.  For many this might be late nights at the bar for sure, but for some other students in my classes it would be time with their kids, church, volunteering, or exercising.  For me, I'd spend less quality time with my SO and less time cooking and exercising.  However, my sense is that for the former group this effect will only become more pronounced and the effects of grade non-disclosure become negative.

Thoughts?

I didn't have a consultant when I applied to business school.  That's true unless you count a couple key family members and friends who spent time reading my essays and providing feedback.  That advice was free, useful, and not at all professional.  No one who helped me had any experience with business school; they were just willing to help and proofread my essays into a semblance of a cohesive story.  I'm pretty sure I hadn't even heard of admissions consultants when I began applying to business schools.  However,there seems to be a growing sense that an admissions consultant is becoming a standard component of applying to business school. 

If estimates of the use of admissions consultants are correct, more than 4,500 applicants to Harvard (roughly half) paid for advice and counsel to help them make the best case possible. - Poets and Quants

The number of companies and inviduals offering the service also seems to be on the rise.

Exact numbers are hard to come by, but there probably are as many as 300 firms with more than 500 MBA admissions consultants around the world. Overall, consulting to MBA clients alone is a business with annual revenues of at least $35 million worldwide.  - Poets and Quants

I didn't have a consultant when I applied to business school.  In fact, I didn't pay for much of anything that wasn't required (like the application fee and the GMAT) beyond a few used books to prep for the GMAT.  My application expenses came out around $500 or slightly under.  I also applied to only one school.

But if I had used a consulting service I could have paid up to $4,400 for a comprehensive package just to support my application to my single school.  For those applying to more schools, a seven school package might cost $9,250.  with that you could apply to all of the "top 5" business schools.  Though I poked around several consultants' websites I couldn't find a single package that had a price tag of more than $10,000.  Apparently even determined MBA applicants are price sensitive and won't cross the five-figure mark.  However, a seven school package from Sanford Kreisberg, a well-known consultant who specializes in Harvard Business School, would cost $19,700.  He charges $2,800 per school.

This seems like a crazy amount of money to me.  Just a single school package could have increased my application cost by as much as a factor of ten, from $500 to $5,000.  If you're going to be paying for degree with $50k+ tuition for two years in an area with little or no financial aid, do you really have that kind of money to spare? Of course it's easy for me to question the value of consultants since I already got into the school of my choice without help.  But as a prospective candidate I might imagine that the decision is not as clear cut if you're desperate to get into the school of your choice or if you are very serious about getting into a top-tier school.  Knowing that there are admissions consultants out there and that many of your competitors are using them could put tremendous pressure on you to pony up the cash just to make sure that you have a fair shot at your dream.

But do these companies deliver?  In looking around I've seen success rates as high as 97% verified by an independent auditing group to no track record at all.  The nature of the service probably means that most people wouldn't want their purchase to be known and accurate data will be hard to come by and verify.  Call me naive, but I can't imagine that a consulting service adds that much to their clients' existing resumes, skills, and scores.  The presentation of information already set in stone by the time the application is started seems like all you can really consult on.  I have to wonder how many of those clients would have gotten in on their own efforts or just used the consulting service like a high-priced and neurotic babysitter for their business school applications.

Do you think admissions consultants provide a valuable service?  Anyone use one? Would you pay for one if you were trying to get into a top program?

If you're reading this in an RSS reader you may have to click through to see the graphs.  Email me or leave a comment if this is an issue for you so I can debug 

Poets and Quants just posted some data on the long-term salaries and earnings of MBAs by school.  Conveniently, seven of the top eight school by 20 year earnings were the "top 5" schools I've called out.   So one might guess that there's a relationship between a school's rank and its students' earnings, which would be logical.

But I'm less concerned about rankings and more interested in return on investment.  So I threw together some quick graphs that look at earnings against cost per year of the program and average student loan debt at graduation.  Do you see any trends?

I thought we had a great discussion about women in blogging and management last week and I loved hearing everyone's opinions in the comments.  I'm hoping we can expand on that discussion with today's post.

There's a fascinating OpEd piece in the The New York Times that analyzes how women differ from men as doctors and how our increasing percentage of women med school students impacts our supply of doctors long term.  I encourage you to read it since the author is much more articulate than I will be in summarizing and it frames the discussion and problem quite well that I'm mentally digging through here.

Essentially, there is a limited amount of funds for residencies, creating a bottle neck and limiting the number of doctors we can field.  Women are applying for these in record numbers since they're attending medical school in record numbers.  Women now compose 48% of medical school graduates, but the American Medical Association has survey data indicating they work, on average, 4.5 hours less per week and see fewer patients than their male peers.   So as we move towards a more gender balanced field of doctors we are likely seeing doctors work less.  The OpEd rightly points out that this is a big problem since we face major doctor shortages in key areas.  This problem is compounded since women disproportionately enter many of the areas of shortage and in addition to working fewer hours they are also more likely to work part time and take a leave of absence.

So assuming we can't significantly change the number of doctors created each year, which the OpEd suggests is a fair assumption since residencies are federally funded and we all know about the budget deficit, and we need more patient services than we have, we have to ask if doctors can be used more efficiently or if they can be more productive.  And since we're facing this shortage it begs a question around if training women doctors is the most efficient usage of our limited training resources since the productivity of women doctors is significantly lower than male doctors.

Please note that I am not advocating any changes to how professional schools or medical schools select their students.  I think the more voices and diversity across all metrics we can get in these professions, representing different points of view, the more productive and effective the profession will be.  However, I do think this area is deserving of examination and discussion since it's the only way we can work to develop ideas to improve the situation.

I've heard similar sentiments before.  I have a friend that attended Princeton who in private confided that he wished the school would go back to being all male and thought the institution would have more impact that way - the female students were not nearly as professional minded as the male students and their career services office found that a large percentage of them did not work full time more than a few years out from graduation.  I have a female friend from Texas who resented her female classmates to some extent because, as she put it, they were in college to get their MRS (Mrs.) not a degree for real career or profession.

We have, as a society, have come a long way in the inclusion of women and we still have a long way to go when it comes to some areas (glass ceiling anyone?). Certainly bringing women into the workforce has created a major increase in economic productivity and has brought new ideas and methodologies to market.  However, these sentiments above are less than three years old and have some basis in fact as the survey data from the American Medical Association shows.  So here's the question: if women are making up a larger and larger percentage (though still not 50% in many cases) of students at our professional schools but aren't as productive as men are we losing out economically as a society?

The number of spots in residency programs is limited by the federal government and the number of students who can attend top programs in business and law is limited as well.  I would guess that business and law school graduates have similar trends to medical school graduates with women leaving the work force at a higher rate or contributing at a lower rate (time-wise) than men.  In this context what is the best way to allocate our limited educational resources?  How do we account for the wide standard deviation in productivity within a gender?  There are plenty of women who are more productive than the average man in their profession and there are plenty of men who are less productive than the average woman, eliminating hard and fast rules.  How can we encourage women to be more economically productive and meet their needs for work life balance in a cost-effective way? We also need to note that commitment to family and work life balance isn't limited to women.  We're also seeing more stay at home dads or fathers adapting their work schedules to spend more time with their children just not in nearly the same numbers or to the same degree as women.

I think this will be constant and growing issue over the next decade.  Baby boomers with more traditional demographics are retiring or will be soon and so the new demographic with more women will become a larger force and more prominent.  We're also, as previously mentioned, seeing more women attending top professional programs.  This Wall Street Journal article puts the Harvard Business School class of 2013 at 39% women and Wharton's at 45% which is an enormous gain from ten, much less twenty, years ago though still not the 50% that would be truly representative.  I, personally, am a little worried that women's continued interest in work life balance and significant deviation from men in the number of hours and years they are willing to work might reverse some of these gains.  Why would Wharton, Princeton, or any other school or company continue to select women if they spend less time in the workplace?  There is public sentiment to support inclusion of women, but I don't know if it's enough to overcome either women's own preferences in how they work or other societal pressures on them to be the primary caregiver to their children.  Do you think that the workplace values the contribution of women enough to adapt to their needs?

Okay, wow, that's a lot isn't it?  I certainly can't wrap my head around all the implications, but I would love to hear your thoughts.