The MBA Myth
Many students assume that the MBA, or Masters in Business Administration, is to a career in business what the MD is to a career in medicine or the LLD is to a career in law. This idea is a myth.
An MBA is aimed at developing the knowledge and skills that an individual needs to manage corporations and other organizations, but the MBA is not the only way to obtain a good job or to be a success in business. The MBA offers the student a background in topics as traditional as financial accounting or managerial economics and as specialized as competitive strategy or entrepreneurial development, but the same could be said of the on-the-job experience gained in a good work environment. In fact, when it comes to developing interpersonal skills and business ethics, you might learn more from working than from going to school.
So, in planning for a business career, consider the following:
It’s Rare for Corporate Leaders to have been Business Majors as Undergraduates. MBA Schools prefer economics majors to undergraduate business majors, mainly because they are looking for leaders, not students who already have been trained in specific techniques. Liberal arts colleges produce less than 10% of the nation’s BAs, but a recent study reports that liberal arts colleges produce 60% of the CEOs of the nation’s leading firms and 95% of the CEOs of the 20 biggest banks. Occidental’s economics courses do a good job of preparing students who are interested in a career in business, and they do so within the liberal arts tradition.
An MBA might not be worth your time. The cost of an MBA includes more than tuition and the other academic bills you’d normally think of. The cost also includes the income and learning you give up by not working for the two years it takes to get the MBA. If tuition is $60,000 a year and the lost salary is $70,000 a year, the cost of getting an MBA is $260,000 plus the value of whatever on-the-job learning you miss by not working. What sort of income stream equals a current expenditure of $260,000? Depending on the discount rate, you’d have to increase your earning power by at least $50,000 a year for your earning career to come out ahead. (Of course, starting salaries from top MBA schools average over $140,000!) Unless you can be sure your salary will go up by more than $50,000 a year, getting an MBA may not help your lifetime earning power.
You shouldn’t plan on getting an MBA directly out of Oxy. About ninety-nine percent of MBA students get substantial work experience before returning to school. Why? There are at least three reasons. First, it’s almost impossible to get into a top-notch MBA program without some good work experience under your belt. Second, students with experience tend to learn more from an MBA education than do “fresh-outs." Finally, firms hiring MBAs usually prefer applicants with previous work experience. As a result, even if you were to get in to your first choice graduate program directly out of Oxy, I’d advise you to plan on working for a couple of years before going to business school.
An Â鶹ƵµÀeconomics major should aim for a “top ten" business school. Given the high cost of getting an MBA, it makes sense to attend graduate school only if you’ll get an education that is worth more to you than the on-the-job learning and earning you’ll give up. Generally speaking, Occidental graduates (especially those with good grades and a solid internship) should consider going to a full-time MBA program only if it’s in the top ten in the country. While different people have different lists, the schools in my top ten are Harvard, Stanford, Northwestern (Kellogg), Penn (Wharton), Dartmouth (Tuck), Chicago, MIT (Sloan), UCLA (Anderson), Columbia, and Michigan (in about that order). Many schools not in the top ten are still excellent places to attend, especially part-time (to learn skills) while you continue to work.
So, if you’ve been out of school a few years, if you think you can handle more responsibility than your current job, and if you can get into a top-ten graduate program, then an MBA is for you. If not, head to the career center, get the best possible job you can, and reread this article in a year or two!