Proving Milton Friedman Wrong
Maria |
December 7, 2022

In this episode of Business Casual, our hosts John, Maria, and Caroline will discuss a report that ran in The New York Times with the headline, “Have the Anticapitalists Reached Harvard Business School?” 

If you’re wondering what HBS and other top business schools are doing to change the definition of capitalism, you have to listen in!

Episode Transcript

[00:00:07.210] – John

Well, hello everyone. This is John Byrne with Poets and Quants. Welcome to Business Casual, our weekly podcast with my co host Caroline Diarte Edwards and Maria Wich Vila. And today we want to talk about a story that appeared in The New York Times under the headline how the Anti-Capitalists reached Harvard Business School. Story basically said, social justice joins discounted cash flows on the syllabus as essential knowledge for aspiring corporate leaders. And what they mean by that is the greater emphasis on everything from climate change to prank social impact investing, to sustainability to diversity and inclusion. All topics that a new generation of people are very keen to discuss and get involved with. Now, there have been movements like this before. In the aftermath of some of the financial implosions that have occurred on Wall Street and elsewhere, schools rushed to put in courses on corporate ethics and social responsibility and governance and things like that. But ultimately, one might argue that what’s going on isn’t Anti-Capitalist at all, but it’s in the service of capitalism to benefit business. Maria, you went through one of these episodes when you were at Harvard Business School in the wake of the Enron disaster.

[00:01:38.080] – John

What do you make of it?

[00:01:39.570] – Maria

Yeah, so it’s interesting because when I was enrolling in business school, as you just mentioned, the Enron disaster happened. And for those of our listeners who may be on the younger side, enron was like the FTX of the early two thousands. And unfortunately, a very prominent Harvard Business School alumnus had been in charge of and oversaw a lot of that. And so the school got a lot of hate as a result. And so when I enrolled, they introduced a new course at the time called Leadership and Corporate Accountability. But really it was meant to be an ethics class to try to prevent the next Enron, at least a graduate from Harvard Business School, from being associated with the next Enron. And I was curious to see how they would do this. I thought, well, how do you even teach something like, quote, unquote, ethics? Isn’t that something that is perhaps morally, deeply ingrained in you? However, what was interesting about the class is that they basically taught how following a lot of these quote unquote ethical practices is in fact good for business. So, for example, we studied the Tylenol poisonings in the early 1980s.

[00:02:45.970] – Maria

A disgruntled worker, someone had put some cyanide into some of the Tylenol capsules and unfortunately, some people died from it. And from a purely capitalist perspective, you might say, well, that’s really sad, and I guess we’ll just sort of pay those people as some sort of a legal settlement. But in fact, Tylenol decided to do a national recall of every bottle that was on the shelves. It was hugely controversial, hugely expensive, perhaps overkill. However, the positive benefit they got from that, the goodwill that they received from the community, from consumers, you know, that ended up more than outweighing the initial cost. When people thought they were crazy for doing a recall, it more than ended up outweighing because now people know that they can trust Tylenol. And so that was one of the lessons that we learned where a case of doing the quote unquote right thing wasn’t simply good for your moral, internal, touchy feely ethical compass, but in fact was good for business. And so much of the course was around that. I mean, studies have shown all sorts of things, like, for example, that funds investment funds that are run by women or startups that have women in a significant leadership position, for example, often have higher returns than those that are only male dominated.

[00:04:02.220] – Maria

So lessons like that where you learn some of the right things to do, but you also learn, like, hey, this isn’t simply for your own internal benefit. But there are also you might also think about the capitalistic quote unquote benefits as well. I think that that’s kind of the focus for a lot of these courses.

[00:04:20.670] – John

Yeah, that’s definitely true. And some of this stuff is I’m not going to say it’s a fad, I hope it’s more than that, to be honest. But some of it is a reflection of the times that we’re in. Wharton is going to begin offering MBA majors in diversity, equity and inclusion next year and in environmental, social and governance factors for business. Yale apparently, according to the New York Times, has devoted nearly half of its core curriculum to ESG, which is sort of the acronym that’s often used to talk about social responsibility in business, social responsible investing. Harvard is lumping in more case studies on these topics as well as some courses. Caroline, what do you make of all this?

[00:05:13.050] – Caroline

It’s interesting that Maria references the Enron case because that definitely spurred a sea change at business schools. I actually lived through the whole experience having worked at Arthur Anderson before I went to business school. So I lived through the implosion of the firm in 2002 and had firsthand experience. It was quite a fascinating it was like the Chinese curse may you live at interesting times. It was a fascinating experience to have just before heading off to business school. And then when I got to business school in 2003, INSEAD had reinforced the ethics curriculum and I very well remember, as Maria does, the ethics classes. And in fact, the professor that I had for ethics at INSEAD had also taught ethics to Erroberto at Stanford because he had that time of going back and forth between INSEAD and Stanford. It did start some time ago and the schools, I think, are very conscious of their responsibility and fearful of the consequences of cases like Enron where alumni can be held up as examples of the way not to do things. And it does have very bad PR consequences for schools and the MBA in general.

[00:06:42.410] – Caroline

And then when I started working at admissions at INSEAD in 2005. So nearly 18 years ago now. And I’ve definitely seen a big evolution in the interest that candidates have in having a positive social impact. Right? So 20 years ago, it didn’t come up so much. It was starting, but it wasn’t something 1520 years ago. It wasn’t something that people wrote so much about in their applications. If it was, it might not be sort of core to their career interest or to their story. But that has changed dramatically over the past few years and I’ve seen really huge change. And I think that’s one of the biggest changes that we’ve seen in the interests of candidates over that period, that they are much more committed to having a positive social impact than the previous generation and that it’s very common to read that in an application. And I don’t think that they’re just sort of saying that because they think it sounds good. I’m sure some of them are. But I do think that it’s genuinely heartfelt for many of these students. And so the schools have had to respond. And as this article in the New York Times described, the schools have really ramped up dramatically the number of courses and electives that correspond to those to ESG and respond to the interests of students in those areas.

[00:08:18.040] – Caroline

So as you say, I think it’s very positive. We have a lot of issues to deal with as a society and particularly the environment. We’re really on the brink here. So the more that we raise a generation of future business leaders who have a social conscience and environmental conscience, I think so much better.

[00:08:39.520] – John

Yeah, that’s true. And you’re right. I mean, there’s been a significant demand from actually both the faculty and students to rethinking the obligation of the corporation to society. And some of this is the result of overreaching by companies and illegal activities and motives where profit exceeded every other goal in the company, exceeding the need to be a responsible member of society, being responsible to your employees, your customers and your suppliers. And money does get in the way. And let’s face it, a lot of the people who practice these very capitalistic movements in the world I know in Europe, they often refer to America’s capitalist system as jungle capitalism for how aggressive and market oriented it is. But many of the people who actually propagate these practices are MBAs in the world of work. You know, all that said, how anti capitalist is it to treat your workers with respect, to follow the rule of law, to care for the environment and care for less privileged people on the face of the earth? I don’t see that as an anti capitalist thing. I see it very much as a factor of a well functioning business that understands it has obligations that extend to those who are not merely shareholders.

[00:10:18.190] – John

And shouldn’t we all think that way?

[00:10:19.780] – Maria

Maria well, I like to think we should all think that way. But technically speaking, those things that you just mentioned are not part of traditional capitalism, right? Traditional capitalism is maximize shareholder value and if paying my employees well or giving them sick days and all that stuff, that literally flies in the face. Yeah, we can say, well, in the long term your employees are all going to hate you and then they’ll all quit. But in the immediate short term, especially in a world in which stock prices are driven based on quarterly results, strictly speaking, from a purely capitalist perspective, I as a peer capitalist should maximize my firm and therefore my shareholders financial success in the next quarter. And so these longer term investments in things like the environment and what have you don’t fit the definition of capitalism. Now, I don’t think that it’s necessarily Anti-Capitalistic to suggest otherwise. I just think that we need a reimagining of what the term capitalism refers to. And the basic thing is looking at things from a more longterm perspective. So even the most coldhearted person who says, well, I should treat my employees like garbage because they need me as they need me and if they don’t like it they can go somewhere else, that’s great.

[00:11:30.540] – Maria

But in the long term you’re not going to be able to hire people to come work for you or at least not good people. You’re not going to have employee loyalty. People are not going to give their best. Same thing with the environment. A lot of people like to treat the environment as sort of this invisible, this sort of externality like oh, why should I care about it? But the fact is you can maximize profits in the short term, but if you don’t have a functioning planet ecologically in the next 20 to 30 years or maybe you should have worried about it beforehand. So I think what we can do is we can educate people to the idea that you might not think that in the short term these things matter and maybe they don’t. But in the long term your company is going to suffer. And from that perspective in the long term you are damaging your shareholder value and therefore you should reexamine how you look at these topics.

[00:12:19.030] – John

And all of this harks back to the famous economist Milton Friedman who once said there is one and only one social responsibility of business and it’s to earn a profit. Because if you don’t earn a profit you basically can’t employ people and you can’t produce goods and services that are that may be ultimately helpful to society. But I think that people are tired of the freedom and definition and they’re tired of shareholder privacy. And this younger generation wants more out of business than just the need to make profits and satisfy investors. Even though many of these MBAs go up as investment bankers, they go into private equity and venture capital and put pressure on management to do just that make more money for themselves. Caroline that is really true, isn’t it?

[00:13:13.800] – Caroline

Yes, it is. It’s also true that they’ve invested a huge amount of money in their business school education and so many graduates feel compelled to take the highest salary that they can command when they graduate, right, to pay off those debts. So that’s also part of their decision making. So for sure the majority of graduates are not heading off into positions that are primarily ESG driven. Right. But nevertheless, I think it’s not such a minority interest as it was 1015 20 years ago. It’s much more core to the debate at business school than it used to be and hopefully that will stick in the minds of that new generation of graduates going into finance and private equity and consulting and so on. I think that will have an impact in the longer term. But of course, as Maria mentioned, so many businesses are driven by the quarterly results and short term thinking. And that is a huge tension in this arena because, as she said, the issues such as relating to the environment and so on, it’s a long term question. And in the long term, we’re all much better off doing the right thing.

[00:14:43.590] – Caroline

But in the short term, in the next quarter, if you’re trying to maximize profits and shareholder return then doing the right thing for the environment is probably not in your immediate interest. So that’s a huge tension in business that we’re grappling with and I don’t think anyone has really figured out the answer there. Unfortunately.

[00:15:07.480] – John

The other noteworthy thing about this is that this is filtered into admissions because how many applicants who apply to business school actually make a point in saying that they’ve been involved in an organization or maybe they’ve founded one that serves some social purpose of social good? And we generally in admissions consider that to be a real positive in a person’s applicant profile. In fact, if you don’t have an extra where you show that you’re concerned about someone other than yourself, I think that that’s a real red flag for many admission officers. So a lot of this thinking is very much reflected in some of the decisions that admission officers are making at the schools and that applicants are rising to out of their own personal interests. Yes, but also out of their personal self interest to get into business school. Am I over exaggerating this?

[00:16:06.480] – Caroline

I was just going to say that INSEAD, for example, is definitely taking that into account and that is a shift in their admissions policy, right? So over the last couple of years they have decided to look at whether the candidate has had a positive impact in some way. Not just achieve great things for their own benefit, but have they in some capacity. And it could be, as you say, it could be in their extracurriculars or it could be in their day job or it could be in their family or there’s so many different ways they could do that. But they are explicitly looking for students who have had a positive impact, and that is a change and that is not unique to in CED. And some schools actually have questions in their application that relate to what positive impact you’ve had trying to tease out those stories from the candidates. So I think it’s definitely something that has changed over the past few years.

[00:17:06.000] – John

Yes, true. And Murray, I’m sure you see this in some of your clients and folks who make use of applicant lab.

[00:17:14.370] – Maria

I do. However, I have a slightly more cynical take. I think that some people will only do the tutoring of the needy and working for the homeless shelter because they know it will benefit their business school application and not because it comes from a place of genuine interest. And in fact, I think it’s gone a little too far where now I see people sometimes applying with a career vision, let’s say that is, I’ve been working in private equity for the past five years, but now I want to do sustainable impact investing. And I’m like, but you’ve never done it? Like no. Like, people feel there’s this kind of rumor out there that you have to be you have to be this amazing do gooder to get into business school when I don’t necessarily think that’s true. I think someone who has been very as long as they’re not overtly evil, someone who has been extraordinarily accomplished, will still get into business school even if they haven’t done a ton of community service. But I think it’s got you know, sometimes it leads to people being a little bit disingenuous in what they choose to do or what they write about in their applications.

[00:18:14.230] – Maria

I would be fascinated to know, and I’m sure this would be like the alumni records people as they track alumni after they graduate, not to give them more work to do, but if they were to track people based on what they wrote in their applications. And the people who say like, yes, I have been doing financial literacy in my spare time, so now I want to leave Goldman Sachs and INSEAD launch a financial literacy social enterprise, like, do they actually do it? Do they continue with volunteering after they graduate from business school? Do they ever go back? That’s just my own little that’s my slightly cynical take on it. However, my non cynical take is, look, even if somebody does something good like tutoring an underprivileged child, even if they do it for the wrong reasons, hopefully it at least exposes them a little bit to something positive. It puts a little spark like the Grinch. We’re approaching Christmas season, so like, approaching a little thing for the Grinch’s heart in the longer term. And my non cynical take on this is that my hope is that with this current generation, with these schools offering more emphasis on things like ESG, that as people go out into the business world, yeah, maybe they’re going, to go into consulting and banking and what have you, but as they rise through the ranks, that they will keep these lessons in mind, and then when they get into positions of power, they will be able to start to affect some of this change.

[00:19:36.260] – Maria

Because I feel like if all of the business school graduates end up joining the environmental nonprofit, it’ll just be a marginalization of those people because the narrative is just going to be like, well, you’re just a bunch of whining hippie. And in terms of actually implementing changes, I mean, I think one of the things that’s been really interesting is seeing over the past couple of years when, for example, when certain environmental regulations were rolled back, I believe some major corporations said, you know what? We don’t care. We’re still going to go, even though under a certain president that we have some environmental regulations. I think some companies said, look, even though technically, legally, we no longer have to abide by some of these decarbonisation goals that we had, but we’re still going to do that. We are still going to continue to try to hire diverse candidates and give people from different backgrounds a chance, et cetera, et cetera. So I am cautiously optimistic that as long as the companies start doing it and start sticking to their guns on that. And so if today’s graduates, maybe, yeah, they do go to banking for a few years, but maybe 20 years from now when they’re the MD of that bank, they can then say, you know what, guys?

[00:20:45.960] – Maria

Here’s how we’re going to change our recruiting process, and here’s how we’re going to change it. So I also think that if all of those folks were to go to join nonprofits and social enterprises that no change would ever happen. I’m cautiously optimistic that the students of today will eventually hold onto these lessons, even if they don’t immediately apply them, that at least when they get into positions of power, they at least keep them in mind.

[00:21:10.800] – John

Yeah, look, no question about it. Exposure to these topics is a good and positive thing. And you’re right. Even if people aren’t going to go and immediately do good in the world, in the sense that they’re doing things that maybe don’t have a profit motive, it’s still important for them to see the implications of the decisions that are made in business on a regular basis are good and bad. There’s one sentence in the story in the New York Times which I think is pretty interesting because I think it does sum up this topic quite well. It says many of the students taking courses about challenging capitalism aren’t letting those big classroom questions overtake the ambitions that landed them in business school in the first place. I think we can all agree with that. But at the same time, it’s a positive that these schools are understanding their need to educate future leaders about ESG initiatives, about social, the important climate change and its impact on business, about diversity, inclusion. All the topics that a lot of people are very much concerned about these days. And the fact that the schools are responding to these demands for increased exposure to these topics, I think, is a really positive outcome.

[00:22:37.230] – John

All right, then. This is John Byrne with Poets and Quants. You’ve been listening to Business Casual with my co hosts Caroline Diarte Edwards and Maria Wich Vila. Thank you, Maria and Caroline, for your contribution today and for all of you out there. Thanks for listening.

The Economist Dis on MBAs: Is the Degree Still Worth It?
Business School News | General | P&Q Podcast "Business Casual"
Proving Milton Friedman Wrong
Maria |
December 7, 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!