Every year I look at the rising tuition for a top-tier MBA and get more and more shocked. I am a first-generation college student and did not grow up knowing about things like a “top-tier MBA” or having the expectation that this is a path I was supposed to take.

However, I am incredibly lucky in that I was able to attend one of the top schools in the world – MIT Sloan. Given this, people ask me about business school all the time. Should I go? Do I need an MBA? My answer is nuanced, complicated and is more focused on getting you to think more deeply about what you are trying to achieve, but I’ll attempt to walk you through my thinking…

Let’s first look at some of the trends from my school, MIT (MIT Tuition). Here is the approximate two-year tuition cost of an MBA over the past 20 years:

  • 2000: $47k
  • 2005: $77k
  • 2010: $98k
  • 2015: $128k
  • 2018: $142k
  • 2020: $154k

What the hell is happening!?

When I look up the tuition every year, I have a harder time recommending that people go get their MBA. Part of this is my guilt for suggesting someone take on hundreds of thousands of dollars of debt and part of this stems from thinking there may be better options.

The money equation (ROI) still works

A typical way to assess the “value” of an MBA is to focus on salaries.

Let’s say you have a job making $65k and you earn modest salary increases that raise your salary to $70k. This would mean by going to a full-time MBA you would be forgoing $135,000 in salary over two years. This type of analysis is fraught with flaws but stick with me.

Given that few people pay full sticker price, let us assume even a 50% tuition cost of $71,000 and living costs of $25,000 a year. Also, let us assume you are able to land an internship over the summer that pays you $25,000. This puts the opportunity costs at $135,000 and the real costs at $96,000. The traditional ROI analysis says that your investment is $231,000.

Next, analyze what you can make after graduation. Top-tier MBAs can usually find jobs paying them impressive salaries that can quickly offset this investment within five years. Let’s say that you make about $150k for 3 years after graduation. The incremental $240k (3 years x $80k more than the $70k you would have been making) covers your total investment. Then you are also looking at the intangible cost of the two-year educational process. There is obvious value in this, and I’ve always thought there was a lot of value in stepping outside of the working world – not to mention being exposed to new people, new ideas, new industries and new cultures.

ROI Analysis: Worth it ✔️

However, this logic can be flawed

Looking solely at salary is short-sighted. It makes a bold assumption that your sole goal for the rest of your career is to maximize every salary increase and promotion. This does not align with reality and increasingly, is harder to do as our business world becomes more fragmented and less dependent on full-time labor.

I am almost six years out from graduating from an MBA and I talk with my classmates often. Many are a bit lost – they have had had one or two promotions but have quickly realized they have no desire to be the CEO or even a senior executive. What was the rush? Priorities have changed – other things like health, family or kids have taken over importance. So the ROI analysis that many people do is deeply flawed.

Second, looking solely at money avoids a hard look at the underlying learning transformation you are paying for. Most people expect that they will undergo some amount of improvement in their ability, skills, and expertise over the two years. It is easy to look at the success of MBA graduates and assume that the MBA had some role in the process. However, the research on this is pretty damning. Professors Jeffrey Pfeffer and Christina Fong (who both work in business schools!) published an extensive review of the evidence in 2002 and found:

What data there are suggest that business schools are not very effective: Neither possessing an MBA degree nor grades earned in courses correlate with career success, results that question the effectiveness of schools in preparing their students. And, there is little evidence that business school research is influential on management practice, calling into question the professional relevance of management scholarship

In many ways, the types of people that go to top business schools are already incredibly driven and would likely reach the same levels of success with or without the degree and dare I say, perhaps in a shorter time. I often run the thought experiment of wondering where people I know would end up with or without an MBA. My hypothesis would be that If I were to run a simulation of a driven person’s career over the next 35 years, I would guess 55 times out of 100 you might be more successful getting an MBA and 45 times out of 100 it would have had little or no impact on your level of success.

Deeper Reflection: ❓

So how do you get ahead? Is there a better way?

A question that is really bothering me lately given the massive sticker price of an MBA:

Is there a better way to transform yourself with that $150k you intend to spend over two years? Why are we so tied to a 300+-year-old way of learning in classrooms?

Design Your Own: Tim Ferriss had always wanted to go to Stanford Graduate School of Business but challenged himself to think about alternate options. He decided to not pursue an MBA and instead use the money he would be spending on tuition to build a “Real World MBA.” He decided to take the money he put aside for tuition and use it to invest in startups. On his podcast, he talked about how he lost $50,000 in his first investment, but at least he had “skin in the game” as Nassim Taleb would say.

Online Intensive Programs: Another option I have seen emerge is Seth Godin’s altMBA – when you get accepted in the program, you become part of a global online learning community of driven and passionate people and focus on “shipping” 12 projects over 30 days. Tuition for this program? $3,500. That’s less than the deposit for many of these full-time MBA programs. I spoke with Cody Royle on my podcast about his experience with the altMBA and he said the best benefit was “not a credential…but a real-world transformation” that has enabled him to write multiple books, become a freelancer and become an influential sports coach who helps people with talent management. 20 years ago he would have gotten an MBA but now he took 30 days, $3,000 and bet on himself.

One-Year MBAs: Business schools are not oblivious to the shifts happening in the market and many have added one-year MBA options in the last year. This includes schools like Cornell, Babson, Northwestern, Bryant and Miami. However, business schools are not completely ready to disrupt themselves and are charging much higher fees for the one year program – at Northwestern, the one-year program tuition is $103,316 versus $149,742 for each year in the two-year program.

Skill-Specific Programs: Georgia Tech has a one-year business analytics program that can be completed for less than $10,000 online through edX – not to mention the immediate usefulness of the skills, this seems like a steal for your effort.

Screw it, just travel: Finally, a lot of the value I found in the two-year MBA was putting myself in a different environment and pushing myself out of my comfort zone. Could you take one year off and travel through the world, potentially work in some different industries, learn languages, develop skills for less than you would spend on tuition? One of my close friends did that for a mere $24,000. He could have kept going for six years for the full sticker price of a top-tier MBA.

So challenge yourself – how could you design your own “top-tier” MBA experience?

Is the MBA still relevant?

Judging by the high placement rates of top-tier MBA graduates, I would judge that the MBA is still relevant. As long as people want to hire graduates of the school and as long as people keep attending, it will continue to remain relevant.

However, the top-tier MBA seems shakier than ever. It faces two risks, an increasingly homogeneous customer and a disconnect from the skills needed in our economy.

As tuition continues to skyrocket, it seems that demand is largely inelastic when it comes to two parts of the population:

  1. people who are working for companies that will sponsor their attendance (consulting firms and investment banks) and
  2. rich people and international elites

For these people one could argue that the current prices are way too low and that schools could double or triple the price and they would still attend.

This is the biggest risk of business school because one of the biggest secrets of these elite schools is that most non-sponsored student do not pay sticker price.

This is why I tell people to apply. On the off chance that you end up getting a full-ride? Then definitely go.

However, this fact is not well known and increasingly the MBA is attracting a certain type of student that knows how to jump through hoops and perform in a certain way rather than attractive a diverse set people people and a diverse set of background and experiences.

I grew up fearing debt and no one in my life really cared what schools I went to. The program I attended at MIT had a generous fellowship at the time, but if I were to do the same program today, I would pay at least three to four times more out of my pocket. In only eight years, I would likely have to take another $75,000 of debt. Just writing that sentence terrifies me a bit.

The second risk MBA’s face is an increasing disconnect between the real skills and experiences that enable people to thrive in today’s world. Top-tier MBAs are highly dependent on a symbiotic relationship with powerful, high-paying employers. As Godin stated when he launched the altMBA in 2015:

This is a small-group process that works online, designed to help people move from here to there—to stand up and become the leaders and the game changers they want to be.

I originally wrote this in 2017 and now in 2020 it seems that this gap has continued to widen with more and more cohort-based online courses like the altMBA filling the gap as well as other emerging alternatives like On Deck and even just “creating in public” on twitter as a way to enter a new industry.

The MBA may unintentionally help people make a transformation in their life, but the “job to be done” of the MBA is to groom students to work at a select group of finance, consulting, Fortune 500 companies and now, tech companies.

This is a job it does exceptionally well, but as technology and digital platforms continue to shape our economy and as creativity, experiments, original thinking and building a diversity of skills become more important, we may see many more options like the altMBA emerge to “disrupt” the top-tier MBA.

Do I regret it? (and some exercises to do before you go)

Short answer – no. I’ve written about some of the benefits I’ve gotten from an MBA – but they may not be what you would expect (full article here: Should You Go To Business School? The Only Reason That Matters):

  • Lifelong friends
  • Global perspective
  • Taking a step out from the working world
  • Contagious optimism / Overcoming self-limiting beliefs
  • Thinking like a leader
  • No-risk learning lab

These are not the conventional benefits you think about – because a lot of them are specific to me and were unexpected. With anything, I think you need to expect similarly. These type of experiences also have the confirmation bias effect of making it really hard to regret going to business school.

Some exercises I usually have people do when I chat with them about going to business school:

  • Write down 25 ways you could get what you expect from business school now for $25,000 or less. If, after you write this list, you still want to go to business school, you should go.
  • Write down what you want to do for work after business school. Now brainstorm at least one alternative to make that career shift without going to business school.
  • Brainstorm five ways you could grapple with the insecurity of having an MBA-sized hole in your identity? Where does this insecurity come from? Is there a way to grapple with that insecurity directly?

I always give the rather worthless advice of “go to business school if you want to go to business school.” I’ve found that most people already have their mind made up – they are just looking for reassurance for what they have already decided!




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