Is Your MBA Worth Millions In Lifetime Income?
Maria |
April 20, 2022

A recent study conducted by Preston Cooper, a research fellow at the Foundation for Research on Equal Opportunity, dives into the data on the net economic value of nearly 14,000 graduate programs at over 1400 universities in order to estimate the return on investment (ROI)—the increase in lifetime earnings minus the cost of attending school—for each degree.

The results might make you question whether or not an MBA degree is really worth it.

In this episode of Business Casual, John, Maria, and Caroline give their opinions on this approach to valuing MBAs and debunk some of the data in Cooper’s report. 

Episode Transcript

[00:00:07.270] – John

Hello, everyone. This is John Byrne with Poets and Quants welcome to Business Casual, our weekly podcast with my cohost Maria Wich-Vila and Caroline Diarte Edwards. We are going to talk about something that is always ever present on the minds of people who are thinking about getting an MBA degree. And that is is it worth it? And if it is worth it, how much is it worth? There is a new study out. It’s called Is Grad School Worth It? A Comprehensive Return on Investment Analysis. The primary author, Preston Cooper, is a research fellow at the Foundation for Research on Equal Opportunity. And he really dove into the data on the net economic value of nearly 14,000 graduate programs at over 1400 universities. We look at, obviously, the business school in this study. And what’s interesting about this is that he kind of defines the ROI of a graduate degree as the increase in lifetime earnings a student can expect from that degree, minus the direct and indirect cost of attending graduate school. And he even subtracts out what you would likely earn if you only had your undergraduate degree. So he’s discounting your total earnings on the basis of what you would have earned anyway if you didn’t have the MBA, as well as the cost of getting there.

[00:01:36.970] – John

And that would include tuition and fees as well as the opportunity costs. So what he found was kind of really surprising because he contends that the MBA overall has a negative return. Now, there are a whole bunch of graduate degrees with negative returns. And he also points out that it really is dependent on what school you go to. And it’s probably dependent on a bunch of other things like your location, what kind of career you have, a number of other factors that are going to impact these numbers. But ultimately, he basically concluded that the highest ROI from an MBA occurs at Wharton, where the return on investment median over a lifetime is over $3.2 million. And that’s after doing his subtraction of the cost of getting a degree and the subtraction of what you would have earned anyway if you went to just didn’t have your work in MBA. Maria, what do you think it is?

[00:02:40.730] – Maria

Okay. So I mean, first of all, God bless this guy for what he’s trying to do. He’s looking at tens of thousands of different graduate programs. I don’t even want to think about how many different data points he was looking at and trying to make sense of what is probably an incredibly messy data set. I do think that a lot of the conclusions, though, that he sort of asserts them with a certain amount of confidence that I don’t necessarily think they merit. But overall, I think there are some good points that he makes. So one of the things I liked about his methodology is that he looks at something called counterfactual earnings. And so the idea is that, yeah, like a master’s degree in engineering, you might make a lot of money. But if you got a bachelor’s degree in engineering, you probably would have still made a very similar amount of money, perhaps a little bit less, but not dramatically less. And so similarly, I think with MBA programs, as we have talked about before, if your career is strong enough that you get into a Stanford, a Harvard, a Wharton booth, any of these Kellogg, any of these, you were probably already on a career trajectory to have been making a lot of money anyway, for the most part.

[00:03:48.940] – Maria

And so there are people that I know who like, I think I’ve mentioned these people before. Like, some of the wealthiest people I know were people who went to elite colleges and then went into the finance industry and did really well and thought, oh my gosh, why am I even going to waste two years of my life on an MBA? And instead they spent those two years getting more experience in finance, and now they’re doing very well. So I agree with that aspect of the methodology. But there are certainly some odd results here. And it’s so funny when people try to estimate what is like the lifetime value for Wharton. I think he got something like 3 million. There was earlier, like a year ago, there was a pay scale study that I think, John, you might have reported on that was 8 million. So we’re not talking like a 10% Delta here. This is a pretty dramatic fluctuation. So I don’t know that his numbers are necessarily correct for the MBA. I think there are also some his thing about the dentistry being the highest paid one, I don’t know. I was like, let me see, what is this University of Colorado advanced dentistry program?

[00:04:57.600] – Maria

And I think that it’s like a two year program, a three year program, but you already have to have a dentistry degree, which is a four year degree on top of your bachelor’s degree, if I’m not mistaken. So, yes, technically, it is a quote unquote two year Masters, but you need a lot of education before that. And so it’s not the same as comparing it with like a two year Masters of Fine arts or Masters in playwriting or acting or something. Anyway, I think some of the overall takeaways are interesting. I think it’s a little bit strange that given the messiness of the data set, that he then tried to come up with such specific numbers to quantify his results. But they are what they are. And at least, again, at least I would have looked at that data set and been like, Nope. I would have noped out of there pretty quickly and not even tried. So good for him.

[00:05:47.360] – John

Yeah. Caroline, what’s your take?

[00:05:49.740] – Caroline

Well, it’s not surprising, right, that professional degrees have a much stronger showing in an examination of return on investment than master’s degrees in the arts, for example. I think that is not something that we would have anticipated differently. Right. But as Maria said, and it’s a bit like the ranking sometimes.

[00:06:10.840] – Maria

Right.

[00:06:11.190] – Caroline

I mean, you look at the list and you roll your eyes because at the end of the day, who is going to look at that list and say, oh, well, I’m going to turn down my offer from Harvard Business School because it’s a much lower in this list than some of the other schools. So that suggests that HBS is so far down the list, to me, undermines the credibility of the list. But I think there is a useful message in that going to a strong program is going to have a better return on investment than going to a program that is not as highly regarded and doesn’t attract such a strong community of students and give you the benefits of a fantastic network post MBA. I think that’s something that we all agree with, and that does come through as one of the sort of larger messages here. Something else that’s important to keep in mind is that people aren’t just going from our sister’s degrees to make more money. Right. And I think that’s increasingly true, actually, of the people going off to graduate school these days and including people going to business school.

[00:07:23.960] – Caroline

There’s definitely a trend compared to ten or 20 years ago, people wanting to improve their education so that they can have a positive impact on the world even through going to business school rather than just going to business school to earn a bigger salary. And so people have greater choices, and that’s much more difficult to quantify. Right. I think that if you compare the career satisfaction of people who have graduated from some of these programs compared to people who haven’t gone to master’s degrees, I think the fact that coming out of a lot of these graduate school programs, you have doors that are open to you that otherwise would have stayed closed, and therefore you’re able to pursue something that you’re much more passionate about, whether or not that generates a higher financial return, that’s a very positive thing. Right. And anecdotally from my small sample of my network of people who I’ve seen who’ve gone to business school versus people who’ve gone into business because they’ve got a background in accounting or finance from the undergraduate degree. Often, as Maria said, they’ve done incredibly well financially also, but they haven’t been able to make the career switches that people who have gone to business school have been able to make.

[00:08:43.260] – Caroline

And that may have worked out very well for them.

[00:08:44.920] 

Right.

[00:08:45.100] – Caroline

They may have chosen the right path and stayed along those lines, and it’s worked out very well. But I think having the option to switch careers and choose a different path is incredibly valuable, and that’s not something that’s so easy to quantify.

[00:09:02.040] – John

Yeah, true. And in terms of weird results, both of you mentioned this briefly, but didn’t actually give the number. According to this analysis, the Harvard Business School MBA is actually worth less than a million dollars at $972,000. That compares to that Wharton degree where the authors estimate the value of well over 3 million. Kellogg is at 3 million, Chicago Booth is at 2.5, Columbia Business School at 2.6, MIT Sloan 2.6. And a little extra. There are MBAs from fairly prominent schools that are not necessarily in the top 25 that have negative returns. The author contends that the University of Texas in Dallas, if you get an MBA from there, you’re going to have a negative return of $62,863. How’s that for precision? Or if you get an MBA from Northeastern University, the more McKin Business School, the deficit that you’re going to experience will be $472,000, which is a pretty big negative number. While this is very interesting, to look at the numbers and the data like rankings, you need to take this with a really big grain of salt. Stanford, which is where Caroline’s husband went, is also surprisingly low, particularly because you just wouldn’t imagine, I mean, coming out of school.

[00:10:35.220] – John

Stanford MBAs tend to have some of the highest pay packages in the world. But this also contends that an MBA lifetime advantage from a Stanford MBA is only 2.1 million. Now, Maria referred to a pay scale study that we had actually paid for and sponsored at Bolton once, and the pay scale study showed that the lifetime return on Stanford MBA was 8.3, not 2.1%. But of course, that number did not discount the lifetime earnings by the cost of getting the degree, the opportunity cost of losing income for two years, nor the value that a person would have had on the basis of just her undergraduate degree. So there are adjustments to the numbers that would explain some of the differences, but not all of them. What other weird results do you see in here, Maria?

[00:11:29.430] – Maria

There were several that jumped out at me. One that I thought was kind of funny was that Duke University for Business appeared twice. So their Masters in Business Administration, the earnings at age 45 were predicted to be $228,000. But the Masters in International Business from Duke University was 347. And I don’t know if the Masters and Masters in International Business, if that means NBA with international focus, or I don’t know if that’s the Global Executive MBA at Fuqua, which in that case, that might be like older senior executives who are like, anyway, there’s just so many I was like, wait a minute, Duke has a Master’s in Business Administration and listed separately as a Masters in International Business with a pretty dramatic difference in that pay estimate. I’m not really sure. I tried to understand the methodology for predicting the future pay estimates, and I really don’t think that they are very sound. It looks to me like he just basically sort of slapped looked at what people were making immediately after business school and slapped a growth rate onto it. So for the Wharton number, for example, I think he estimated that at graduation it was something around 179,000.

[00:12:43.180] – Maria

And then by age 45, that number went up to 287,000, which because I’m an MBA, I calculated the compound annual growth rate, and that was about 3.2% of a growth rate per year, which doesn’t test it doesn’t pass the smell test. Right. Because that makes sense if you never get a promotion, if we assume that the average well, this year doesn’t count. But historically, inflation in the US has been roughly 2% a year. So he’s saying that these people are doing better than the average worker in terms of cost of living increases or pay increases. But most people don’t stay in the same job at the same level that they enter post MBA. So, yeah, they might be making if they were to stay, let’s say, as a manager level at Bain, that might be there after 15 years, that might be what they make. But they’re not going to stay at that level. Right. They’re either going to get promoted to higher and higher levels or they’ll be kicked out. So it’s this kind of odd. It doesn’t really take into account. I can see like perhaps if you’re a dentist, which is the dentistry being the highest one.

[00:13:59.740] – Maria

Okay. You start off as a dentist and you have your own practice, and maybe it grows a little from year to year to year. But in the business world, there are opportunities to really jump between manager level to director and then director to vice President or what have you. That is not a sort of 3% slope straight line for the most part.

[00:14:19.010] – John

Yeah. There’s no way that a Wharton MBA or an MBA from any school like that is going to have pay increases of only 3.1% a year into their mid 40s. It’s just not possible, given what the degree means and given the increased responsibilities at work and promotions, and these people are in organizations that are not bureaucratic and reward employees with 2% increases every year. The other thing that’s not adjusted for, of course, would be equity awards and probably bonuses as well. I mean, he’s really looking at base pay more than anything else because he has no database with which to extract the value of equity and award or even the value of a guaranteed bonus. Look, if you’re on Wall Street and you’re investment banking, your bonus often exceeds your salary. So there are a number of problems with the methodology and the calculations that get in the way. What is kind of interesting, though, overall, is that even though there’s quirks in the data, basically what he does show is that if you go to a brand name MBA program that has a great reputation and is ranked highly and is highly selective, you’re going to buy and large earn more than someone who goes to a second or third tier program.

[00:16:03.990] – John

And that’s pretty universal across the entire data set, no matter what industry a person enters. And it goes to why I think, Caroline, there is this obsession with getting into an NCR London business school in SSA Paris, an ISC in Spain, or Harvard, Stanford, Wharton, Columbia, Northwestern, Chicago. It’s understandable, right. I mean, there is this obsession that all of you deal with because every time you get a client, what do they tell you? I want to go to Harvard, Stanford Ward, right?

[00:16:40.740] – Caroline

Yeah. Vast majority of people that we work with are applying to the very top schools. I think whilst this exercise was interesting to me, it’s probably more useful to look at the data on the class that’s graduating and the salaries that they’re getting, the employers that they’re going to. I think that’s more useful to help candidates understand what their options are going to be post MBA, because it seems that there are so many assumptions that are made in this data. Just looking at two years post MBA and then extrapolating out how that evolves over time, it’s impossible. Right. Unfortunately, there is no good data that’s going to tell us actually how the graduate careers and salaries evolve over the long term. And I think the assumptions in this are flawed. So to me, it’s more useful to look at the actual data that is reliable, which is where people are going when they graduate from the school, which employers they’re going to, how much they’re making, if that’s something that is critical to you and see whether people are going into positions that really excite you and it’s going to enable you to land the type of job that you’re looking for post MBA.

[00:18:05.320] – Caroline

So I think those career statistics are much more useful for decision making purposes than this particular study.

[00:18:12.560] – John

True. The other thing here is can you really say that if you get a Wharton degree, your lifetime earnings are going to be an excess of 3 million more than they would otherwise be? I think an MBA, even for an elite institution, gives you an advantage right out of the gate and maybe a lifetime advantage in the sense that you have a networking, a group of networking colleagues that you can confer with who might see opportunities and bring them to your attention. But there comes a point in everyone’s career where where you went to school really doesn’t matter. What matters is what you deliver at work, what’s your performances. And that is almost not accounting for it all here because it can’t be right. It’s an intangible thing that can’t really be measured. Now, you might say that the selectivity process at really good Ivy League and prestige schools is such that they can identify people early who have the most potential and are probably more ambitious and more willing to work really hard to earn these large sums of money. And that I think there’s definitely some truth in that because, as I was mentioning before, he does seem to show that if you go to an elite institution, you’re going to do better than if you don’t.

[00:19:37.060] – John

So his study overall found that while 8% of master’s degrees overall offer a return above 1 million, that share rises to 41% for people who go to Ivy League or comparable universities. So clearly, Brand seems to matter. Or maybe it’s the selection process. Maybe it’s people like Caroline at NCAAW making sure that when she was ahead of admissions, she only entered people who she really believed had the great potential to have a successful life and a successful professional life and a career. So there is that as well. Okay. I’m going to just say it’s fun to look at this, and there may be some value here in saying, hey, in setting expectations. So if, in fact, you go to a second tier or third tier school and you look at the numbers and they’re well below what the numbers are for a top 25 or top 50 school, I think it’s probably helpful for you to know that, in fact, overall, not necessarily for you, the return may not be nearly as high. Last words on this, Maria.

[00:20:54.010] – Maria

A couple. So first of all, as you were saying a second ago, I think there’s a difference between correlation versus causality. Right. As we’ve said before, the reason that these elite schools, even with the law school results. Right. Oh, Columbia, Harvard, they’re the highest paid. Well, they probably accepted the strongest students in the beginning of the pipeline. And so those people then when they graduate, they work really hard and they grasp things more quickly or whatever it is you need to be to be a good lawyer. So I think just don’t confuse correlation with causality. And also my husband and I were sort of laughing at the because if you look at the chart, it has dentistry, but then it has several law schools. Like at age 45, you’re making a lot of money. If you went to Columbia Law School or Harvard Law School and we were laughing and it was like, yeah, but then you’d have to be a lawyer. I’m like, you know, I’m good because to be able to to admit be making that level of money in law and to be having to do it, it’s not just the hours of work.

[00:22:00.380] – Maria

I think the work is also itself pretty tedious.

[00:22:03.270] – John

It’s the numbing nature of the work.

[00:22:06.750] – Maria

Exactly. I’m fine with not looking at people drilling holes in people’s mouths and giving them fake teeth and not being a lawyer at Crevasse at age 45.

[00:22:20.590] – John

Doing people and trying to take advantage of situations and technicalities. Yes. Caroline, last words.

[00:22:27.450] – Caroline

Well, I think it is a very good point that you don’t have to go to Harvard or Stanford or Walton to do well in life.

[00:22:35.680] – Maria

Right.

[00:22:36.410] – Caroline

I don’t know if any studies have been done looking at business schools. But certainly there have been studies done looking at College graduates and, for example, people who are admitted to Ivy League schools but chose not to go and went to other schools. And what those studies have shown is that it’s not necessarily going to that school that drives your future career success and salary. It’s who you are as an individual. Right. I think they say that to the class coming in at Harvard that you would be successful in life regardless.

[00:23:15.020] 

Right.

[00:23:15.240] – Caroline

They’re well aware of the fact that they’re picking people who are going to achieve great things regardless of the school. So I do think people over index the impact of going to a top undergraduate school and sometimes also the case with the graduate school. But Nevertheless, I think there’s a lot of value in the options that it gives you and being able to choose your career path and define your future in a way that you might not be able to if you haven’t gone to business school and have all those opportunities that suddenly open up for you. So to me, it’s more about being able to define your own version of success and being able to access opportunities and open doors that might otherwise have been closed rather than necessarily making vast amounts of money.

[00:24:12.150] – John

Well said. Well, there you have it. So if you want to check out this article and see how much your MBA is supposedly valued at, go to Poets and Quants. See Calculating the value of your MBA. Is a Wharton MBA really worth $3.2 million? Whether you think it’s just total BS or not, it’s fun reading. Maria and Caroline, thank you once again for great discussion. This is John Byrne with Poets and Quants. You’ve been listening to Business Casual our weekly podcast.

Business School News | General | P&Q Podcast "Business Casual"
Is Your MBA Worth Millions In Lifetime Income?
Maria |
April 20, 2022

[00:00:00] John Byrne: Well hello everyone, this is John Byrne with Poets and Quants, welcome to Business Casual, our weekly podcast with my co-hosts Maria Wich-Vila and Caroline Diarte Edwards. Today we have a special guest, Heidi Hillis from Fortuna Admissions. She is based in Australia, is a senior expert coach for Fortuna, and has three degrees, all from Stanford, a BA in English literature, that’s my degree, an MA in Russian studies, and an MBA from the Graduate School of Business. And we have Heidi here to discuss some really fascinating research. Here’s what Fortuna did. They dug into the last Two class profiles of the Stanford Graduate School of Business.

That’s the class of ‘23 and the class of ‘24. They looked up all these folks on LinkedIn to identify a little bit more about their backgrounds, including their former employers and their places of undergraduate education to come up with an incredible analysis. Heidi, welcome.

[00:00:46] Heidi Hillis: Thank you. I’m glad to be here.

[00:00:48] John Byrne: Heidi, what is, what are the big takeaways from your deep dive discovery?

[00:00:54] Heidi Hillis: It’s hard to know even where to start. I think there’s a quite a few interesting kind of trends that we’ve seen that have taken place over the years. We were mentioning before the call that traditionally there hadn’t been, 10 years ago, if you’d looked, you wouldn’t have seen so many tech companies represented, but now there’s a big presence of tech companies who are feeding a lot of these MBA programs in Stanford in particular.

I think that the thing that was really interesting was, looking, not just at where the companies that were feeding the students, the applicants to Stanford. When they were working there, when they were applying, but actually the paths that they took prior to their current job.

So how many people were working, if you look at McKinsey, for example, or Bain and BCG, those are obviously companies that feed a lot of applicants to the program, but we found 20%, which seemed to be normal of, the class came from consulting, but if you actually look into the numbers in their background, You would see that actually 37 percent of these two classes had worked at McKinsey sometime prior, or actually in consulting, so it was, it’s The kind of the patterns that are behind, what you would normally see in terms of what Stanford tells us.

So you get a sense of the paths that people have taken. And so that’s something that was really interesting to see.

[00:02:16] John Byrne: Absolutely. And of course, this is this analysis goes so far beyond what any applicant would learn by simply looking at the class profile that the school up because, this level of detail is never available to people.

[00:02:33] Heidi Hillis: No, and yeah, for example, you could see that, Stanford will say that they have around, each year around 50 percent of applicants are international, which is a great statistic and gives you lots of hope if you are an international student. But when you dig into the numbers, you actually understand that.

75 percent of the people who get into Stanford actually went to a U. S. University. So even if you’re international, it does have does seem to have kind of an advantage of having been educated in the U. S. That seems to be something that they look for. However, I think. The concentration of universities in the U.

S. that are feeding to Stanford is something also that, if you’re looking at it, you might find a little bit dis, disconcerting. There’s a few programs that are really, obviously the top. Programs as you would expect places like Harvard, Stanford, Yale, the Ivies but if you look at the international universities very diverse from all over the world, really lots of people from different places, which is also really interesting.

[00:03:38] John Byrne: Yeah I tell you, one of the things that struck me in the data is how consistent it is. 10 years ago, we did the same exercise at Stanford and a bunch of other. Schools from Harvard and Dartmouth and Columbia and talk and a few others and back 10 years ago, we found that 25. 2 percent of the class of 2013 were from Ivy League colleges.

And the Ivy League 8 schools, not including Stanford. And if you included Stanford, it would have been 32. 6%. So now, let’s move forward to your data. And in 23, 30. 7 percent went to Ivy League schools, even above the 25. 2. And in 24, 27. 9 percent went to Ivy League schools. So it looks like Stanford has gotten even a little bit more elitist than it was.

Yeah,

[00:04:41] Heidi Hillis: It’s, it is it’s what the data says, right? Obviously, this is a sample. We have 80 percent of the two classes. So we don’t know where those other people went. And that might skew the data a little bit in another direction. But it is, if you look at there’s 15 schools, that include the Ivy’s and then you have UC Berkeley and obviously Stanford that really are contributing, 49 percent of the class of 23, 47. 3 percent of the class of 24. So that is a pretty heavy concentration and But, if you actually look into the data, you see a lot of people also, each of these is actually an individual story.

You see a lot of people who come from other schools as well. So it’s not like you have to give up hope if you come from a different school. I see a lot of individual stories that, from the whole range of U. S. schools that really are feeding into Stanford. So I think what the data doesn’t also tell you, unfortunately, is how many of these Of people from these backgrounds are actually applying.

So

[00:05:39] John Byrne: good point.

[00:05:40] Heidi Hillis: It’s it’s hard to know. And sometimes I think people this is. A path that a lot of people who go to these schools plan to take from the very beginning. So I would see, it would be interesting to know that I don’t know that we will ever find that out. But, um, that’s something to keep in mind as well.

[00:05:56] John Byrne: Yeah. And that’s a fair point. Because how reflective are these results of the applicant pool reflective of an elitist attitude probably a combination of if I had to guess, but, it is what it is, and these institutions obviously are great filters, so you come from McKinsey, Bain, BCG, and you go to Harvard or Stanford or Penn, and you pass through a fine filter, and it makes you less of a admissions risk than if you went to, frankly, the University of Kentucky and worked for a company that no one knows of.

That’s just the reality of elite MBA admissions, right?

[00:06:40] Heidi Hillis: Yeah. And so you will see that the people who are not going, you’ll see a lot of the people who you would, the profiles that you would expect, the Harvard undergrad that then goes to Goldman that then was working at a PE firm.

That’s a really typical profile that you’ll see. But you’ll also see some really, unique and interesting ones, which I think, Okay. Helps you understand that if you don’t have that path, you also have a real chance at these schools, and maybe even more of a chance, again, not knowing, how many of those Goldman P.

E. Harvard grads are applying. So I’m thinking of the guy that I saw who he went to UPenn undergrad, studied engineering, started out a kind of pretty typical path working in private equity, but then made a big pivot to work for go to Poland where he was working in a real estate investment firm and the head coach of the Polish lacrosse team.

So you have really interesting profiles like that, that you can see that. aren’t necessarily taking that typical path. And sometimes that really does help you stand out.

[00:07:42] John Byrne: True. Maria, what surprised you most about the data?

[00:07:48] Maria Wich-Vila: Wow. I think we already covered, the, one of the biggest ones was the number, the percentage of people who would had some sort of either their undergraduate or graduate education within the United States.

Intuitively, I had felt that was true. And sometimes when I try to, give some honest, tough love to applicants from certain countries, and they’ll say, oh, but Maria, I think you’re being a little too pessimistic. After all, X percent of the applicants at these schools are international, and Y percent are from a certain geography internationally.

I’ll say yes, but that doesn’t mean that they’re all Solely from that area. A lot of them are, do have significant international educational experiences. I think another, speaking of the international piece the percentage of people who had significant international work experience as well was something else that really jumped out at me.

Because it would signal to me that Stanford really does value this global perspective both within probably its domestic applicants and also its international applicants. So I thought that was also a really interesting piece of data that jumped out at me.

[00:08:52] John Byrne: Now remind me what percentage was that?

[00:08:56] Heidi Hillis: People who are international

[00:08:58] John Byrne: who have had international work experience.

[00:09:01] Heidi Hillis: I think it was 30%.

[00:09:02] Caroline Diarte Edwards: Yeah. Yeah. Yeah, it’s pretty

[00:09:04] John Byrne: impressive.

[00:09:04] Caroline Diarte Edwards: 30%, which I was thrilled to see. As well as coming from in Seattle and Europe. Obviously the international schools put a heavy emphasis on international experience and I hadn’t fully appreciated that. A school like Stanford would also.

really value that to the same extent. And it’s great to see that candidates are making the effort to get outside of the U. S. and get international experience because I think you gain so much from that exposure. And you bring more to the classroom if you’ve got that experience. I know that both Maria and Heidi.

I’ve worked outside of the home countries as well. Pre MBA and I think that you just have so much more to contribute to the whole experience. And it was great to see that 30%.

[00:09:50] John Byrne: What else struck you, Caroline?

[00:09:53] Caroline Diarte Edwards: We talked about the concentration of academic institutions, and I was also surprised about the concentration in employers.

So while there is a very long list of employers where the students have worked pre MBA when you dig into the career paths that they’ve taken there is some interesting concentration. Heidi had noted that the reports that There are 26 companies that account for nearly one third of the class in terms of where they were working right before Stanford.

But when you look at their whole career history, those same 26 companies represent over 60 percent of the class. So that is, yeah, that’s quite extraordinary that so many of the class have experience of working at quite a short list of companies.

[00:10:46] Heidi Hillis: I think that’s reflective of, if you really think about it, you have a lot of these companies.

You’re talking about the Goldmans and the Morgan Stanley and McKinsey that have really large programs that recruit out of undergrad that are really training grounds for. A lot of people that then on to do, work in industry or go on to work for in finance in particular, a lot of people starting out at some of these bulge bracket banks and then going into.

Private equity or smaller firms. So the diversity within finance in terms of where they were working prior to MBA is quite large compared to consulting because there just aren’t as many consulting firms, but a lot of people in financing, a lot of different firms, but they, a lot of them really do start out in these training programs, these analyst programs that are so big and popular.

[00:11:34] John Byrne: Yeah, true. And looking back, I did this exercise as well. The feeder companies to Stanford 10 years ago in the class of 2023, 22. 8 percent from McKinsey, Bain, BCG, and your data, 22. 5 percent work there. Incredible consistency over a 10 year period. When you look at the top six employers 10 years ago, they were McKinsey, BCG, Bain, Goldman, Morgan Stanley, and JP.

Morgan Chase. They accounted alone for 34 percent of all the students in the class of 20, 2013 at Stanford. In your data for 23 and 24 they account for 29. 8%, just a few percentage points less. So remarkable consistency. And I think you’re right, Heidi, this is a function of the fact that these firms bring in a lot of people who are analysts and actually expect them after 3 to 5 years to go to a top MBA school.

So there’s a good number of them in the applicant pool to choose from and let’s face it, they’re terrific candidates.

[00:12:46] Heidi Hillis: Yeah. I think another pool of really terrific candidates that you see, and I don’t know what the 2013 data was saying, but is the US military, which is really, I think, again, something that I felt having worked with lots of military candidates myself, understand that, Yeah, intuitively, I would have expected, but to see it in the data is actually really interesting.

You just see Stanford in particular, I think, is really looking for leadership potential, and it’s so hard to show that as an analyst, as a consultant, but as in the military, these people have such incredible leadership experience that it really helps them to stand out.

[00:13:23] John Byrne: Yeah. And let’s tell people what the data shows.

How many out of us military academies,

[00:13:28] Heidi Hillis: In all in total, we had, 20 over the two years. So that’s in the two classes that we found. So that’s, a pretty large number. And they come from all the different academies, right? So you’ll find them from different, not academies, in the army, navy and the marines.

So you’ll see that. And you also see quite a few, in the data we’ll, we see a lot from the Israeli military as well, but that’s actually a little bit difficult to because every Israeli does go into the military. So it’s they have that in their background. Any Israeli candidate would have Israeli military background as well, but again, that’s.

Place that people can really highlight their leadership. So you had eight people from who had been, who were Israeli and obviously had military experience where they were able to demonstrate significant impact and leadership prior to MBA.

[00:14:18] John Byrne: Yeah. In fact, 10 years ago, roughly 2%. of the class went to either West Point or the U.

S. Naval Academy. Good number of people actually from the military. Maria, any other observations?

[00:14:34] Maria Wich-Vila: Yeah, I was also surprised at the fact that within those top employers And when we look at the tech companies, it was Google and Facebook and Meta with a pretty large showing. Google was actually the fourth largest employer after the MBBs and, but then, I was expecting there to be an equal distribution amongst those famous large cap technology companies.

So I, I would have expected even representation amongst Google, Meta, Microsoft, Apple, Nvidia, Amazon, et cetera. And yet. Apple and Amazon only had one or two people each versus Google at 25. So I thought that was really fascinating and it makes me wonder if perhaps it’s a function of maybe Google and Meta might give their younger talent more opportunities to lead impactful projects, perhaps.

I’m just guessing here, but maybe Apple and Amazon perhaps are more hierarchical. And maybe don’t give their younger talent so many opportunities, but I was really surprised by that. I would have expected a much more even distribution amongst the those famous those famous tech companies.

[00:15:40] John Byrne: Yeah. You’re right. And I crunched the numbers on the percentages and Google took three and a half percent of the two classes and that’s better than Goldman, Morgan Stanley, JP Morgan Chase. Facebook had 2. 7 percent and Microsoft at 1. 5, and I was shocked at Amazon because, Amazon is widely known as the largest single recruiter of MBAs in the past five years.

At one point, they were recruiting a thousand MBAs a year, but in, in one sense, maybe Amazon quite doesn’t really have the prestige. For Stanford MBAs who might rather work elsewhere, I think that might be is, you look at the employment reports at a lot of the other schools and Amazon is number one at a number of schools and very low percentage of people from Amazon going to Stanford.

We don’t know, of course, how many. Leaving Stanford and going back to Amazon, but it can’t be that many.

[00:16:41] Heidi Hillis: I wonder if there’s something about just a proximity effect here. You have the plate, like the meta and Google just being so close to Stanford, maybe it just, attracts more people applying because they.

They’re almost on campus and maybe, just being Amazon all over the world and different places could be not attracting as many. I don’t know.

[00:17:03] John Byrne: Yeah, true. The other thing, the analysis shows, and this is what you also gather from the more public class profile is really the remarkable diversity of talent that a school like Stanford can attract year after year.

It is, it blows you away, really. The quality and the diversity of people despite the concentration of undergraduate degree holders or company employers, it’s it’s really mind boggling, isn’t it?

[00:17:33] Heidi Hillis: Yeah, they come from everywhere and really interesting paths and even the people I think that, have those kind of typical paths, you see a lot of diversity within them as well.

So I think, even if you’re coming from a Goldman or a McKinsey having lived in another country or gone to done a fellowship abroad or running a non profit on the side. These things are actually what helped them to stand out. But you do see some really interesting, I think, profiles, too, of people who’ve just done, you get a sense of what it would be like to be in the Stanford classroom.

People from really unique and different backgrounds. People who come from all different countries and lawyers, doctors people who have run, nonprofits in developing countries people running large programs for places like Heineken or Amazon too. But, it’s a real diversity of backgrounds.

[00:18:27] John Byrne: Now, Heidi, I wonder if one is an applicant. Is this discouraging to read and here’s why if I’m not from Harvard, Stanford, Penn, Columbia, Brown, Cornell, Dartmouth, and if I didn’t work for McKinsey, Bain, BCG, Goldman, Google am I at a disadvantage and should I even try? Some people look at the data and come away with that conclusion.

[00:18:52] Heidi Hillis: I think it’s a reality check for a lot of people. I think it’s just, it’s really, it just helps people understand, what it, the difficulty of this, why it’s so competitive, but I think that there is, again, behind the kind of the percentages, you do look at these individual profiles and I would get, I would actually take a lot of hope from it if I were looking, as an applicant, because especially if you are.

Maybe a little bit more of a big fish or small fish in a bigger pond or big fish in a smaller pond you go to Rice or you go to Purdue or, and you do really well, those are the people who, they’re definitely looking for that diversity of background as well as the international.

I think that’s really neat. think that, instead of looking at the data and saying, why not, why I shouldn’t even apply, it’s why not me look at these other profiles of people who have taken really unique paths that that do get in. So I think it is actually a Kind of a mix of both, it is a reality check for a lot of people, but it’s actually, there is so much diversity in the data as well.

I think also one thing that we haven’t really covered is about is just the prevalence of social impact in, that’s really taken hold of the class. I don’t, again, going back to your 2013 analysis, I’m not sure how easy it was to tell that, but a lot of you can see reflected in the both the types of organizations people are working for, but also their titles and the kinds of work that they’re doing that that there’s a huge 40 percent of the class of the two classes had some kind of social impact in their background.

Whether that’s, running their own nonprofit on the side or volunteering or. Running trans transformational kind of programs within companies that are, either in finance or consulting or in industry. That’s a big trend. I think that people can take heart from as well.

So if you’re working if you feel like you’re in an organization where you’re not getting the leadership that you. can use to highlight your potential for Stanford, that’s definitely a place you can go is working for in volunteer capacity for a non profit or on the board of a of some kind of foundation.

Those are the kinds of places that you can highlight your potential

[00:21:00] John Byrne: true. And I know we have a overrepresented part of every applicant pool at an elite business school are software engineers from India. And I wonder in your analysis, how many of them did you find from like the IITs?

[00:21:18] Heidi Hillis: That’s a good question. The IITs, it was again, it was one of these you have about 50 percent of classes internet, so 25 percent of the class. was educated outside of the US. The IITs are going to be up there. Let’s see from India, 2. 1 percent of the class came from India. So probably, I don’t know offhand exactly how many of those were IITs, but

[00:21:43] John Byrne: I’ve had a lot of them.

[00:21:45] Heidi Hillis: Yeah, probably a lot of them. Although I think, that’s the other thing is that people who come, to work with me from India, they feel like if they haven’t gone to IIT, then that’s going to be a disadvantage. But I think, you’ll find that there are, there’s representation of other universities as well.

Definitely.

[00:22:00] Caroline Diarte Edwards: Yeah, I was just looking at the list of undergrad institutions. And for example, you’ve got Osmania University from Hyderabad. So it is not, it’s not all IIT. Okay.

[00:22:12] John Byrne: Yeah, exactly. And Caroline, 1 of the things about the institutions that are really represented here and that I don’t really see unless I missed it.

I didn’t see a Cambridge or an Oxford. Two of the best five universities in the world. And I wonder if that’s just a function of fewer people in the applicant pool or what? What do you think that could be about?

[00:22:36] Caroline Diarte Edwards: I had a look through the uk Institutions and you have got cambridge in there.

I think I also noticed. Bristol university there are a few different universities. So i’m aston university, which is not it’s not on a par with Oxford or Cambridge. So I think that speaks to the point that Heidi made that you don’t have to have been to an elite school to get into Stanford.

Aston is a good solid university, nothing wrong with Aston, but it’s not it’s not one of the top UK universities. So there’s definitely some interesting variety in the educational backgrounds of the students going to Stanford. And

[00:23:16] John Byrne: then, yeah, it is if you’re a big fish in a small pond, like Afton, you’ll you could still stand out in the pool.

[00:23:26] Heidi Hillis: Absolutely. There’s a lot of really interesting background, you have look hard on blue and you have Miami University and some really smaller universities abroad. I think. Again, it’s really, if you look at that, it does give you hope because it’s really what you do afterwards and if you, obviously, if you come from one of these schools, you probably want to be in the top, 5 percent of the graduating class, you want to show that you have the GPA that can support an academic background that they feel comfortable that you’ll be able to compete academically, but, and maybe that’s what you’re Offset by the, the GMA or the scores, you don’t know, we don’t have those on here.

But, um, the path post university really becomes much more important in those cases. What you’ve done since then where you’ve, how you’ve risen from starting at a entry level position to, running a division or heading a country group or something like that.

[00:24:21] John Byrne: And as far as Cordon Bleu goes, every good business program needs a Cordon Bleu, for God’s sake, right?

You want to eat well at those NBA parties, don’t you?

[00:24:32] Heidi Hillis: Absolutely.

[00:24:35] John Byrne: Maria, I’m sure that was true at Harvard.

[00:24:38] Maria Wich-Vila: I wasn’t the one doing the cooking but I certainly, I was certainly a member of the wine and cuisine society where I happily participated in the eating and consuming a part of that.

But to, to the point that we were just recently talking about. regarding being a big fish in a small pond. Not only have I seen it personally with applicants that I’ve worked with who did not attend these elite universities, but even many years ago, I attended a, an admissions conference where Kirsten Moss, who was the former head of admissions at Stanford, she actually told stories about how they’ve accepted people who even attended community college.

But within the context of that community college, they had really moved mountains. And she said that one of the things that they look for is, Within the context and the opportunities that you’ve been given, how much impact have you had? So maybe you don’t have an opportunity to go to Yale or MIT or IIT for your undergraduate, but whatever opportunity you have been given, have you grabbed that opportunity and really made the most of it and really driven change?

So she specifically called out, I believe, I believe there were two students that year at the GSB who had both started their educations, their higher educations at community college. Anything is possible. It really is about finding the people who, wherever they go, they jump in and make an impact.

[00:25:55] Heidi Hillis: Yeah, I think that to that point, I think it can almost be a more difficult if you’ve gone to Harvard and then worked at one of these, gone on one of these paths because we know that there’s, that’s an overrepresented pool in the applicant pool to stand out among those to have had that, that pedigree sometimes can be a disadvantage, right?

If you haven’t done as much as you should have with that, or if you started at that high level to show that level of progress over the course of your career is actually a little bit more difficult. Okay. And coming from a community college and rising to, a country level manager in some places is actually puts you at a significant advantage, I would say.

[00:26:31] Maria Wich-Vila: Because it’s hard for those people, it’s hard for those people to stand out, but also I think some of them go on autopilot, right? I think some people are on this kind of achievement, elite achievement treadmill, where they’re not even really thinking about what do I want to do with my life?

They’re always reaching for whatever that next, what’s the best college to go to? It’s Harvard Princeton. Yeah. Okay. Now that I’m here, what’s the best employer to work for? It’s McKinsey, Bain, BCG and without actually perhaps stopping to think about what is my passion? What impact do I want to make in the world?

And so I feel sometimes those autopilot candidates, I feel a little bit bad for them because they’re doing everything quote unquote and yet sometimes when you speak with them, that passion just isn’t there. And I do think that may ultimately harm them in the very, very elite business school.

Admissions because business schools want people who are passionate because at the end of the day, in order to do hard things, you’re going to need passion at some point to get you through those low periods. And so I think that’s something business schools look for. And I do think that sometimes these.

These kind of autopilot candidates might sometimes be at a disadvantage.

[00:27:29] Heidi Hillis: Yeah, I think that, to that point look in the data, when you look at it, you see so many people who’ve gone to McKinsey, Bain, Weasley, or Goldman, but then there’s a, you see a lot of success for people who’ve actually pivoted.

So those pivots that are post The second or third job really do show you that, if you’re if you get a candidate who’s coming from, still at McKinsey, okay, that’s fine. They have to be the top 5 percent of McKinsey, like they have to be going to get so many McKinsey applicants that the only the, you can look at the data in a couple ways.

One is, oh, my God, they took 12 people from McKinsey and the others. Oh, my God, they only took 12 people from McKinsey, right? That’s So if you want to be one of those 12, you have to be the top 12 in the world, right? Whereas if you’ve gone to McKinsey and then done an externship at a health care startup and then moved on to be a product manager at for health at Google, that kind of a path is definitely showing a little bit more, maybe risk taking, maybe ability to follow your passions.

So I think that. When I see candidates who come to me, for example, and they’re like, not thinking about applying now, but maybe in a year or two, I say, look for an externship, maybe think about pivoting out of one of these places and looking for some operational experience.

And because you see in the data that works.

[00:28:42] Maria Wich-Vila: And they’re doing themselves a service not only in terms of enhancing their admissions chances, but even just in terms of determining, what do I want to do with my career? If I do eventually want to go into industry, what functional role do I want to have?

What industry do I want to work in? So it’s, it actually benefits them in the long term to do that as well, even if they don’t go to business school. I think those secondments and externships and second job, post consulting jobs are extremely valuable. Totally agree with you.

[00:29:06] Caroline Diarte Edwards: And I’m sure they also bring more to the classroom as well.

I would think that’s also why Stanford is selecting some of those candidates, because not only have they worked at McKinsey, but they’ve also led a non profit in Africa or worked in private equity or whatever it is. So they have much more breadth that they can bring to the classroom. And I think that It’s seen as a very valuable contribution

[00:29:29] John Byrne: in Heidi.

Did you see that? The majority of the candidates to examined actually did work in more than one place, right?

[00:29:37] Heidi Hillis: Yes, most of them did. There were very few that, you see working at one place. And I would say that those are people that would have really risen through the ranks.

Someone who’s worked at Walmart and become, started in, I don’t know, in one state, but then to become a regional manager and things like that really are going to onto a global role. The people who have stayed at one place really have shown significant career progression within that.

And then the other people I think you do see a lot of movement. The big. The most typical would be from investment banking to private equity and then you do find in finance, there’s a little bit less kind of movement into other industries. You see a lot of people staying within finance, but within finance.

Yeah. Yeah. The other industries, especially consulting or other, tech, people are really moving into other places and it’s becoming, it is a little bit difficult. We have these categories that we’ve talked about, for example, healthcare, but it’s hard to categorize some of these companies.

Are they healthcare? Are they tech? There’s a lot of overlap. And so everything’s a little bit of tech in something nowadays. So whether it’s finance and fintech or education and ed tech or health care and health tech, these are all merging and combining. It’s hard to categorize them.

[00:30:53] John Byrne: So looking at the data here I wonder if you’ve seen your old classmates in the sense that these new people are very much like the people you went to school with at Stanford. I

[00:31:05] Heidi Hillis: put this out and it’s really interesting to a lot of my classmates downloaded the report and read it. And a lot of them came back and said, oh, boy, I would never get in now.

It’s these people are super impressive. I think that you see a lot of. It’s just become more and more competitive. And I think that with more information and more people every year applying, it is becoming really difficult. I think that you do see a lot of, I am encouraged by the diversity part of it that you see still Stanford.

I feel like they do take risks on some really interesting profiles and candidates that maybe some other schools are less likely to do. And so that’s what does give me. A lot of hope when I get some kind of really nontraditional candidate who wants to, their dream school is Stanford. I feel like, I say all the time, there’s a 6 percent chance.

You’re going to get in, but there’s 100 percent chance. You won’t get in if you don’t apply. So you’ve got to, you got to give it a go. And that’s, the attitude that we take to it.

[00:32:04] John Byrne: Indeed. So for all of you out there read Heidi’s article on our site, it’s called who gets in and why exclusive research.

Into Stanford GSB and I’ll tell you one conclusion I have about this is that, man, if you really want to get into Stanford, you need a Sherpa, and and Heidi would be a great Sherpa for you because the, just the profiles of these folks, where they’ve been, what they’ve done, what they’ve accomplished in their early lives is so remarkable that To compete against, in this pool for a spot in the class you need every possible advantage you can get.

And and having an expert guide you through this trip probably would be a really big advantage. So Heidi, thank you for sharing your insights with us and the research, the very cool research.

[00:33:01] Heidi Hillis: Thank you

[00:33:03] John Byrne: and for all of you out there. Good luck. And if you want to go to Stanford, you got to check out this report.

Okay. It will inspire you to up your game, even if you are from Harvard, Stanford, Wharton, or wherever McKinsey, Bain, BCG, Goldman, Google, you want to look at this report and you want to really think about. What it will really take to get in. I think it will inspire you, motivate you to really put your best foot forward.

Thanks for listening. This is John Byrne with Poets& Quants.

Maria

New around here? I’m an HBS graduate and a proud member (and former Board Member) of AIGAC. I considered opening a high-end boutique admissions consulting firm, but I wanted to make high-quality admissions advice accessible to all, so I “scaled myself” by creating ApplicantLab. ApplicantLab provides the SAME advice as high-end consultants at a much more affordable price. Read our rave reviews on GMATClub, and check out our free trial (no credit card required) today!