What is the True Opportunity Cost of Business School?

This is not just another tirade on why you should not go to business school. I believe there are many great universities to receive your MBA and from which to start your new career. Many of my closest friends are going or have gone to business school. The fact that you are reading this story right now means you are either in business school or seriously contemplating applying for one. Instead of viewing business school from the typical pros and cons perspective, one of my friends recently challenged me in thinking about business school in terms of opportunity costs. Here is my non-scientific analysis of business school and the great opportunity cost that lies before those deciding whether to apply.

The Smaller Paycheck

The Wall Street Journal made a case against business school in January 2013 saying that getting your MBA did not necessarily lead to “financial success.” This is like saying going to a top culinary school does not make you the next Tom Colicchio. Not rocket science here, but the article does go onto stating some drivers for why the prestige of the MBA has decreased over the last 5-10 years:

  • Weak economic climate
  • Diversity of b-school programs (think part-time MBAs, Executive MBA programs, and online programs)
  • Evolving corporate needs
  • Perceived value of the MBA

Ok, so part of the argument here is about supply and demand. More people getting their MBAs because there is more flexibility in MBA programs overall means the club lets you come in with jeans and sneakers now. Fine, let’s assume that’s true which means competition post-graduation is tougher resulting in lower MBA salaries.

Mariana Zanetti in her self-published book “The MBA Bubble” speaks about the MBA as if it were the sub-prime mortgage crisis in 2009. It sounds like the whole MBA thing just didn’t work out for her, so this is her lashing out against the system. The WSJ article and Zanetti’s book shows that external factors are forcing MBA students to settle for lower than expected salaries. The perceived value of the MBA, however, is a much more personal perspective and each person has their story for why getting a graduate business degree just didn’t make sense for them.

The Startup Education vs. the MBA

As I mentioned earlier, listing out pros and cons of going to business school may work in your specific scenario, and finding the difference between the two columns can lead you to a decision. Usually the cost of business school is…well, the cost. Most students go in debt and forego two years of a salary. In return, you get a once-in-a-lifetime experience to learn a new skill set, build your professional network, and switch careers.

Instead of the cost being a “cash” value, what if the true cost is something intangible?

With the rise of tech startups and entrepreneurship being an acceptable career option, we are seeing a shift in the way the new workforce is choosing tech over Wall Street:

Seduced by the culture and mission at places such as Google Inc. and LinkedIn Corp. , business-school graduates are even accepting somewhat lower pay for what they perceive as more meaningful work—once unthinkable among a group known for chasing profits.

Another strong argument can be made for avoiding business school altogether and doing your own startup. You can “learn by doing” which gives you an experience that business schools can only fabricate in the classroom. One of my favorite discussions on Hacker News is MBA vs. Startup: Which should I choose? User TomOfTTB summarizes the argument for doing a startup over the MBA:

If you’re interested in working at startups, you’ll learn more through your own startup. If you’re interested in working at a big company, an MBA is worth more.

The Opportunity Cost of Business School is Travel

To further explore the “cost” of business school, the opportunity to travel cannot be overlooked. If you believe entrepreneurship is not the reason why you should forego an MBA, here are some reasons why travel can be just as tempting to not sink $100K into your MBA:

1) You can still take a break from your job.

Traveling around the world means you are not working (hopefully). Many people see business school as a way to “take time off” and traveling is exactly that. Being able to break from your 9 to 5 and not eat lunch at your desk is a truly liberating experience.

2) Traveling cost less than you think it does.

You can backpack through most parts of Asia living off of $50 a day; less than that if you tough it out in a 16-bed hostel. Sure, the airfare to get from one place to another can add up, but taking other forms of transit like bus and train can drastically reduce the costs associated with living and experiencing different cultures.

3) Meeting people from all walks of life.

Most people you’ll meet will probably be Australians and students from the U.K. on their gap year. You’ll quickly realize that you have more in common with a retired 75-year old Japanese watch salesman than you think you do (he wanted to improve his English and I wanted to eat authentic Japanese food). The network you build at business school is important, but the diversity of people you will meet while traveling is something you cannot replicate at the weekly 1st-year mixers on campus.

4) Remembering where you came from.

Traveling has this very sobering affect on you when you see real families trying to make a living in a developing country. If you were brought up from humble beginnings and worked hard to get to where you are today, sometimes it gets easy to forget those moments of struggle and hardship. Seeing that hardship occur every single day, even as a backpacker, makes you remember those times when you relied on your immediate family for everything. You start to gain an appreciation for the small conveniences in your already frugal journey such as a shower with hot water.

5) There is no goal, path, or degree.

For those who are on a career trajectory and have filled out their annual PDPs, traveling is a huge slap in the face. There is no ultimate goal to work towards and no promotion in sight. The journey is the journey. I just realized at one point I needed to go…and went. No specific path or idea of tourist attractions I wanted to see, I just needed to move. Once you grasp this concept of traveling to just experience, your mind will be blown to the freedom you have to pick yourself and go and do anything you want to do.

Traveling is just one awesome experience you will give up if you go to business school. What other alternatives have you considered outside of business school?