The Real ROI On The MBA Degree
ApplicantLab |
May 1, 2025

In the latest episode of “Business Casual” with John Byrne, Maria Wich-Vila, and Caroline Diarte Edwards, the trio delves into the multifaceted ROI of an MBA. While most discussions center around salary increases, this episode broadens the conversation to explore the degree’s lasting impact beyond financial gains. Caroline emphasizes that despite recent narratives questioning the MBA’s value, the cyclical nature of the job market and historical trends affirm the MBA’s enduring relevance.

A key takeaway is the MBA’s rapid financial return. Caroline shares compelling data: MBA graduates often recoup their investment within three to four years, with starting salaries significantly higher than those with only a bachelor’s degree. However, the benefits aren’t limited to monetary aspects. The ability of MBA graduates to adapt and pivot in their careers is a standout advantage, particularly vital in today’s fast-evolving economy shaped by technologies like AI. This adaptability enables graduates to explore diverse career paths and make significant career shifts even years after graduation.

The discussion also highlights the often-overlooked emotional and personal returns. MBA graduates frequently report higher job satisfaction, attributed to the flexibility and opportunities the degree provides. If they’re unhappy, they possess the tools and networks to transition to positions better aligned with their passions and goals. For prospective students weighing the value of an MBA, these benefits underscore the degree’s holistic impact on both career and personal growth.

Episode Transcript

Note: This transcript was generated by AI and may contain minor inaccuracies.

[00:00:06] – John

Well, hello, everyone. This is John Verne with Poets & Quants. Welcome to business Casual, our weekly podcast with my co-host, Maria Wigfila and Caroline Diorke-Edwards. We want to talk about the ROI on an MBA. We’ve mentioned what the return is financially over many episodes. You all know that we an MBA is a no-brainer degree to get. But recently, Caroline did a piece on the ROI that took a broader perspective of what you really get when you earn the degree. It’s not just a starting salary that we’re all obsessed about and that we read about constantly in employment reports. It goes to emotional benefits, it goes to your horizons, it goes to the friends that you make. In many cases, for many people, it is something of a to a comfortable life. Now, Caroline, your main points in your most recent article were what?

[00:01:09] – Caroline

Well, we decided to look at this because there have been a flurry of articles over the past few months questioning the value of an MBA. As we’ve discussed, there was this Economist article that looked at the drop in employment rates for graduates coming out in 2024 and questioning whether the MBA is still a valuable degree. And as someone who’s been in the industry for a few decades, it’s quite frustrating because you get a new generation of journalists who jump on the latest trend and think that this is a long term permanent shift And of course, it’s not. The recruitment market is cyclical, and I’m sure it will go up again. And we’ve seen it go down in the past, and it’s always gone up again. And you can see that trend very clearly, that the recruitment cycle is correlated with the economic cycle, and that has been the case for decades, and I don’t see why that would change. So we wanted to look at actually what should candidates should be considering when they consider the value of the MBA and what it will do for them. And so, of course, it’s important to consider the financial impact.

[00:02:20] – Caroline

And from the numbers that we have, the financial return on investment is very strong. So on average, MBA graduates earn a salary of when they graduate from top programs. It’s higher than that, $150,000 to 175, 180,000, based salary, plus, of course, bonuses and stock options and so on. And that is considerably higher than the average salary for someone who holds just a bachelor’s degree. So the data that we have says that the median starting salary for an MBA graduate is 1. 75 times that of someone at the same age who holds just a bachelor’s degree. So there’s significant salary uplift. And of course, that compounds over time. So when you look at average lifetime earnings, the benefits are tremendous. And typically, MBA graduates, from the data that is reported in the surveys that we have, most graduates see a return on their investment within three to four years. So that’s a pretty fast payback, I think, considering the size of the investment, which is up to about $200,000 for a top MBA program. So I think that payback period is pretty impressive. But then, of course, there’s a lot of factors, as you mentioned, beyond the financial return on investment.

[00:03:52] – Caroline

And I think that sometimes those factors are overlooked. And something that I think is very important today, considering considering the huge transformation that the economy is undergoing, in particular because of artificial intelligence, is that the MBA gives you career adaptability, which you don’t necessarily get from another type of graduate school degree. So Fortuna, we also work with candidates applying to law school. And I’ve had some discussions recently with candidates who are considering doing an MBA versus going to law school. And there is some flexibility if you go to law school, right? You can go and work in-house, you can be a council at a company, you can go and work for big law, you can go and work, do nonprofit or policy work. In the past, people might have gone into government jobs. I’m not sure. That’s so appealing these days. But the options are somewhat narrower than if you have an MBA. The MBA is a fantastic springboard to a lot of different careers when you come out of school. It’s also that continues as your career progresses. It enables you to pivot later on. It enables you to change careers, not just immediately when you graduate, but you can change careers further down the line.

[00:05:17] – Caroline

And in an era of uncertainty and rapid change, that ability to shift gears and reinvent yourself is incredibly valuable. The other thing that is important to take into account is that MBAs, on average, compared to other professionals, report higher job satisfaction. And I think that that’s a factor of the fact that they can make a change. If they’re not happy, they have options. There are doors that are open to them. If they find themselves in a job that they’re not passionate about, they don’t like the conditions, they don’t like the boss, they’re not crazy about the work they’re doing, they have options, and they’re less likely to get stuck in a career rut than other professionals. And so that is really something that’s very important to consider, that it can impact not just the financial returns and the quality of your career, but your overall life happiness and satisfaction. If you are able to pursue a career that is something that you find rewarding, and what you find rewarding might change over time, but you have the opportunity to reinvent yourself, to try something different and to take a risk that you might not otherwise have taken because the MBA and the network that you have is a great safety net so that you have the ability to take a risk that you might not otherwise have taken.

[00:06:43] – Caroline

So I think there are lots of factors that play into the benefits of an MBA.

[00:06:48] – John

True. Maria, you agree?

[00:06:50] – Maria

Absolutely. I think that the MBA serves as a very useful shorthand and a signal to the market that you have a certain base set of interdisciplinary general management skills. Even if you specialize in your MBA program, as many people do, the core foundations are essentially the same from program to program. So at a minimum, you’re signaling to the market that you have a certain base set of skills. And as Caroline was saying, it’s a set of skills that is so flexible. Leadership and management and knowing how does operations and marketing and financial management, how do all of those pieces work together? I mean, that’s something that you could apply, whether you’re trying to manage a Fortune 500 company, or you’re trying to run the parent-teacher association at your kid’s school. I mean, any group of individuals coming together with a shared purpose is probably going to need things like organization, marketing, finance and all of those skills. And so I think that’s part of why people with MBAs are able to make these jumps and these pivots, because it is a very useful shorthand. And I think the other thing is, again, and Caroline was bringing this up, this idea of only looking at it from the short term.

[00:08:02] – Maria

If you look at it from the short term, the immediate ROI, sure, we can put together a spreadsheet and we can try to look at percentages and returns on investment. But I think that the benefit of the MBA really becomes very apparent to you once you’re out for decades afterwards. Because it’s not just… It’s often a cliché to say, Oh, your career is a marathon and not a sprint. But it truly is a marathon and not a sprint. If you’re judging people in a marathon based on just their first 100-yard dash time at the very beginning of the race, then yeah, there may not be a lot of differentiation. You might not be able to tell the difference, and you might say, Well, I’m not really sure if this is worth it. But if you’re talking about a marathon, on the other hand, I think that these benefits compound over time. Even if you do end up specializing, let’s say you work in the financial aspect of a company or the marketing aspect of a company, again, that broad-based general management core helps you interact with your fellow senior executives. It helps you understand their perspectives a lot better.

[00:09:01] – Maria

And so not only are you able to perhaps pivot functions yourself, but even if that’s not interesting to you, having a core understanding of how those other functions operate and what their priorities are and how do they think allows you to communicate with them and thus collaborate with them in a much more efficient and effective way. And I think that that’s another reason why you see MBAs tend to rise to senior management roles, even if they might not be the best functional expert within their department. Those interdisciplinary communication and strategic thinking skills, I think that’s where things really do start to pay off in the long term.

[00:09:36] – John

Yeah, definitely. Now, my interest in this actually is always consistent because I am an onabash supporter of the MBA and believe it is a no-brainer investment, even though you look at those tuition rates and you might raise your eyebrows and say, How am I going to pay for that? We’ve talked about that and how much money is available through scholarships and all that. But what recently got my interest was I read a post on Reddit. Now, I am not a Reddit lover. There’s a lot of garbage on Reddit, but sometimes there are people who go on Reddit and they actually speak the truth. I think this guy did. He is someone who went to a T25 MBA program. He currently works for a second-tier consulting firm. We’re thinking, Okay, Accenture, Deloitte, one of those, not MBB. He had been at a nonprofit as a writer, $60,000 before getting his MBA. He says he comes from a lower middle class family, a divorced couple. His mother was a teacher. He goes in, he gets this MBA, and he immediately gets a job that pays him nearly $200,000 out of the gate. Here’s what he says about the whole experience.

[00:10:54] – John

He says, Sometimes I feel guilty admitting this, but the MBA is basically a cheat code, the getting rich, and hardly anyone talks about it in plain terms. The MBA is the world’s least well-kept secret to bagging a lucrative job. I love that. Yes, there’s a lot of misinformation out there. There are online programs and degree mills that are fine if you like your current role and just want to check the box credential to move up. But those programs aren’t great for career pivots. That said, and now he’s talking about the Reddit sub that’s focused on the MBA, is obsessed with M7. But here’s what he says, The T15 is amazing. The T20 is great. The T25 is still great. Even T50 can be great. Here’s why. The median Individual salary in America is $40,000. Out of undergrad, I made $30,000 working at a nonprofit. I didn’t have much career guidance. My family was lower middle class, divorced parents, mom was a teacher. The MBA gave me a second one chance to make it big. These days, MBA programs treat the GMAT and GRE equally, and the GRE is much easier than the LSAT or the MCAT.

[00:12:10] – John

If you’re smart and willing to put in a decent, not insane amount of time, it’s not hard to score high enough for a T50. Even if you take the GMAT, it’s still way easier than law or med school. Now, he says, Even T50 MBAs have strong placement into six-figure jobs, often local companies or regional Fortune 500 firms. If you get into a T25 or T30, you can land T2 or T3 consulting firms, which this sub weirdly looks down upon, even though they still pay $200,000 out of your MBA program. Or you can go into banking or companies like Amazon. I got into a T25 after working hard, getting promoted at the nonprofit, doing well on the JRE. I landed a T2 consulting firm. My dream job, yes, not MBB, I know, but I started making close to 200 grand out of school. That money changed my life. I think that that story is so resonant with so many people I know we always talk about the most prestigious schools here, more often than not the M7. But it is true, don’t you think that a T25, even a T50, can get you where you want to go?

[00:13:28] – John

Maria?

[00:13:29] – Maria

Absolutely. Absolutely. I think that I really thank you for bringing this post to our attention because I think that this person’s maturity level, first of all, it’s not a surprise that they have been successful in their career in consulting because they clearly have a very mature perspective and outlook. I’m sure that that reflects also in their work product, which would probably account for why they are doing so well post-graduation. But this is absolutely true. I mean, you need to think about, what do I want out of this experience. And if that is, I want to get a job, let’s say, in something like consulting, earning $200,000 a year, there are many, many, many, many programs that can help you get there. And so the obsession with eliteness is, I guess, understandable from a psychology, psychological perspective. But it’s also, unfortunately, I think, pretty damaging because I think it makes people not seriously consider options and avenues that would have been amazing for them. To talk about maybe not the school, specifically, but the idea of the tier 2 or the boutique consulting firm, yeah, it might not have as fancy of a name, but probably pretty good compensation and also maybe better work-life balance, the ability to be a big fish in a small pond and really shine.

[00:14:45] – Maria

Maybe there’s a little bit less cutthroat, sharp, elbowed competitiveness. I’m not sure. But if you think about things from a holistic work-life balance or satisfaction with your career level, I suspect that, who knows, probably working at the T2s might actually be more enjoyable while still providing high levels of financial compensation. I think you have to go into this process with a very pragmatic idea of why am I even doing this? What is the outcome that I’m looking for? And is it true that I have to go to an M7, top 10, et cetera, school to achieve that outcome? In many cases, the answer is no. Yes, there might be a couple of private equity or VC-type jobs that might only be primarily open to from the very tippy-tippy top schools. But I think that that’s changing, first of all. I remember quite some time ago, we had, I believe, John, we brought on to the podcast someone who worked in HR and recruiting, I believe it was for Bain. Some of these consultants, even the MBB firms have started recruiting from a broader swath of schools. Companies are seeing that talent is diversified and talent has expanded across multiple different institutions.

[00:15:59] – Maria

I I definitely applaud this poster for their insight and for their mature outlook.

[00:16:06] – John

Yeah. And Carlyn, I’m sure you’ve seen candidates that you’ve counseled who got into an M7, but because another school agreed to give them a full ride on their MBA, they went elsewhere at a school that was lower ranked, right?

[00:16:20] – Caroline

Yeah, that does sometimes happen. I would say more often it’s the other way around because a lot of our clients are targeting the top schools. But nevertheless, if you come from a background where, like this particular case, he was earning a pretty low salary MBA, so very low ability to save. From a background where he’s very unlikely to have any financial support from his family. If you can get into a strong program where you get a scholarship, that is a very compelling proposition. And what I really like about this story as well is that it brings up how the MBA is a second chance for someone at their career. And as he describes, he wasn’t someone who was born with a silver spoon in his mouth. He wasn’t someone who had parents who were pushing him towards a fast track business career and finding him in terms of his and all of that good stuff. But often candidates who are on this Harvard, Stanford, Wharton track from an early age. They’ve often come from backgrounds where the family has been guiding them for some time. It’s very true that the MBA can be a great opportunity for someone who doesn’t come from that background to get a second chance at starting their career.

[00:17:50] – Caroline

It’s a wonderful platform, as we were saying, for reinventing yourself and for getting access to opportunities that would certainly be closed otherwise. It’s a wonderful story that he tells about where he came from and where he’s now heading.

[00:18:07] – John

Yeah, it’s really true. I somewhat relate to this, in part because I’m a first-gen college grad, and my parents were working class people, and higher education made a very big difference in my life. It totally transformed my trajectory. If I have any regret, it’s not getting an MBA. I should have been smart enough to know that the MBA would have been a good thing for me, even as a writer and a journalist, frankly. I knew a bunch of journalists who had gone to Harvard Business School and decided they wanted to still maintain a career as a writer. I love the way he concludes his post. He says, I feel weird sometimes saying it out loud, but a decent MBA done right is straight up the easiest way to break into high pay, solid career path with good work-life balance. If you didn’t get it right, for the first time, the MBA gives you another shot. It did for me. I think it’s just so really cool. I love, of course, and I’m sure you two do as well, someone out there affirming the value of a degree we know is so beneficial and so valuable for so many people.

[00:19:18] – John

There you have it. There’s the ROI on the MBA. Forget the naysayers, forget Elon Musk, who was one of the original naysayers about the MBA, even though many of his executives at Tesla and elsewhere have MBAs, I might add, it’s worth it. You don’t have to go to an M7 to see the rewards. All right, this is John Byrne with Poets and Quants. Thanks for listening.

P&Q Podcast "Business Casual"
The Real ROI On The MBA Degree
ApplicantLab |
May 1, 2025

Video transcript, for you skimmers out there: 

I love the fact that they. Report on this metric, right? The salary percentage increase, I think is an incredibly valuable metric because there are so many business schools out there that are great for so many people. And at the end of the day, these programs are in fact able to do what a lot of business school applicants are hoping for.

They are in fact able to provide a real change in the trajectory of someone’s career. They are, in fact, able to help people leapfrog. Into a higher career stratum than they would’ve otherwise been able to be in. So from that perspective, I love the fact that the FT reports on the salary percentage increase.

So valuable. I think it helps, when sometimes I talk to people at the beginning of the business school journey, I will frequently hear something like, well, it’s M seven or bust, you know, it’s Harvard, Stanford, Wharton, or bust.

And I’m often like, look, slow your roll, man. There are so many programs out there that are going to get you. They might not be the first ones that you think [00:01:00] of, but wow, does that even matter? I mean, whew. Look at some of these numbers. $170,000. That is nothing to sneeze at, especially if it’s one and a half times more than what you were making before business school.

I mean, wow. , That is life changing. , And these schools can really change people’s lives. And I think it’s important to have this metric available because I think it helps open people’s eyes. To, To be a little bit more open-minded. , And I think that’s wonderful.

Where my little quibble is. Is that I believe this is an important metric to report upon. However, I do not believe that it is a metric that should have significant amount of weight in the rankings because if we think about what is the purpose of a ranking, it is meant to be some sort of a representation of relative quality.

Now rankings. The entire concept of them is flawed the entire, for me, the entire concept of an ordinal ranking is ridiculous. Like school versus two versus four, versus seven versus six . You know, like, there, there’s sort of [00:02:00] these tiny miniature marginal differences. I think that school rankings should instead be in buckets.

Like, here is the top bucket, and then here is the also very good, but just underneath the top bucket, the next bucket. Um, but no one, no one listens to me. Uh, but so anyway, to the extent that a ranking. Is intended to be some sort of a measure of a program’s quality. I don’t think that this metric is one that should be included in the weighting.

Look, again, . Life-changing levels of improvements in salary. But when I look at, okay, so these were the top five programs by the salary percentage increase, but now when I look at it by the weighted salary, right, the top five US programs, by weighted salary, it’s not entirely accurate to say that.

Well, these programs, you start with people who have lower incoming salaries and they end up in the same place as the other programs. The numbers do not [00:03:00] really, , the numbers would tell a slightly different story. So if you look at the weighted salary a few years out for the top five programs by salary,

we’re talking about a $70,000 a year difference, roughly 240 a year versus 170 a year. That’s about a 40% difference, which I don’t think is a small, you know, if we were talking 5%, even 10%, I’d be like, yeah, 10%, that’s nothing. It’s, you know, nothing but 40% I do think is a pretty, I think it’s a pretty significant difference, uh, that is worth noting.

And so. Your point about like, well, they were letting in the people who were already on a, you know, if you were making, let’s see if we can, if we figure out, okay, so if we take this, these numbers, then we can sort of back into what’s an implied pre MBA salary, you know, that would indicate maybe something in the mid sixties before MBA versus, you know, one 10 something, [00:04:00] 1, 1 10, 1 15, for these other programs.

I get your argument. Your argument is like, look, these people were already clearly high achievers prior to business school, and so, mm-hmm. Is it not true then that the business school, like they would’ve continued to be high achievers And in fact, this is true, some of the most successful, financially successful people I know skipped business school altogether and they didn’t need it.

, However, I think GMAC often does, polls or surveys of MBA graduates, and I think the vast majority of them, at a minimum say that they’re glad that they went to business school, that they do feel that it was worth, their time. So. How much of this is,, nature versus nurture.

We, we will never know. , But I would gently push back on the fact that I, because these numbers essentially to the extent that they’re lower than say these numbers, it effectively penalizes thes e schools in this ranking. And for that reason, I don’t think that it should be part of the ranking because you’re penalizing a school for letting in more successful people.

But there’s a benefit. [00:05:00] To attending. Like, first of all, if you are a more successful person, think of the opportunity cost that you’re giving up. So the fact that these schools are able to lure away people to give up two years of their salary, in order to go to business school in the first place, I think is a pretty good indicator of the desirability or the perceived desirability of those programs.

Also, I do think that there is merit to thinking about like, who are my peers going to be in a business school? and. If a school is attracting people who were more successful prior to business school, I actually think that that is an indicator of the quality of the school, not only because it shows the people that are willing to give up those two years of salary, but also think about who the peer group is once someone is in the school.

Right? That means that if you are attending one of these schools. This percentage isn’t as high, but you’re surrounded by people who, prior to business school, were already achieving on a different level. And also after they graduate, they continue to achieve on a different level. True. The slope is not as sharp.

Right. But the.

[00:06:00] Result is a larger number. So I think that this implies that perhaps at the school itself, you might be surrounded by people who are driven. some people might say more competitive, which might not be everyone’s cup of tea, but people who are more driven and also after they graduate, they continue to be driven.

And so I think that also implies something pretty powerful about the ultimate benefit of the network because business school isn’t just the two years you go there and it’s not just that first job you get out of school or that third job you have five years out of school.

it’s also who’s your network gonna be and, and who are you gonna call 10, 15, 20 years after graduation? To invest in your company or to partner with your company or to start a company with. so I do think that there is value to attending a school and to have your peers during school and after school be people who were, for lack of a better term, high performers.

[00:07:00] I don’t think that this should be punished because I do think that this does yield a better business school. Experience and a better result in the long term. And so my quibble, again, I love this metric. I think this is an amazing metric to provide, but my quibble is that this should not be given honestly, any weight at all, and certainly not the high level of weight that it’s given, because again, you’re punishing the schools that, you know, you’re basically indicating that I, what I would say is an indication of quality.

An indirect indication of quality, but an indication of quality all the same. You’re basically punishing the schools that have sort of higher quality, quote unquote, coming in. And, and that to me is. Counterintuitive and kind of wrong. And so that’s why I continue to think that this should not be, uh, reported upon.

Absolutely. Tell us. It’s important. I think it’s great to know. I love using this information, but I don’t think it should be used in terms of like, let’s figure out which programs are the , [00:08:00] quote unquote highest quality programs. But what do you think? What did I miss? let me know. Thanks.

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