In the latest “Business Casual” episode, the trio of John Byrne, Maria Wich-Vila, and Caroline Diarte Edwards dives into the eye-catching employment statistics of Harvard Business School’s recent MBA grads. The median total compensation for these graduates has soared to over a quarter-million dollars annually, a remarkable figure that incorporates sign-on and performance bonuses. However, what truly stands out is the entrepreneurial zeal among the graduates; an unprecedented 17% have opted to launch their own ventures, significantly higher than historical norms.

Maria reflects on the surge in entrepreneurship, attributing it partly to Harvard’s enhanced focus on fostering startup skills through initiatives like a startup bootcamp for first-year students. She speculates that some graduates may have turned to entrepreneurship out of necessity, due to a cooler recruiting climate this year. Caroline adds that the allure of AI and its transformative potential could be another motivator, suggesting graduates might see AI as a unique opportunity while the corporate world stabilizes.

John, Maria, and Caroline agree that these trends might indicate a shift in the traditional MBA career trajectory, with more graduates choosing innovative paths over established roles. This episode provides invaluable insights for MBA hopefuls, shedding light on how business education is evolving to meet the challenges and opportunities of today’s dynamic economy.

Episode Transcript

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

[00:00:06] – John

Well, hello, everyone. This is John Byrne with Poets of Quants. Welcome to business Casual, our weekly podcast with my co-host, Caroline D. R. D. Edwards and Maria Wich-Vila. Now, finally, some employment reports are leaking out of the business schools. The first two, the University of Virginia’s Darden School was the first to report the results for its latest graduating class this year. Harvard followed up this week. There’s some interesting stats in both of these reports. You can read them with either a mixed opinion or you can read them in a very positive light, to be honest. Let’s start with Harvard, which has the latest numbers out. The median total comp for a Harvard MBA hit a new record, over a quarter of a million dollars a year. Now, that includes a sign-on bonus. It includes any anticipated year-end performance bonus for the MBAs. But that’s really good news, particularly in an uncertain economy. There’s also one very big surprise in the Harvard report. 17% of the graduating MBAs started their own business. That’s way above the historical norms at Harvard, which tend to be around 7% or 9%, which incidentally is higher than at most business schools, where it typically averages around 5.

[00:01:41] – John

Also surprising, 17% of the class went into early and stage startup companies. So that’s a third of the class basically walking away from the traditional MBA jobs in finance, consulting, and tech. Maria, you graduated out of Harvard. What do you make of these stats?

[00:02:02] – Maria

I think it’s a really interesting sign of things to come and the way that the economy is evolving and developing, for example, with AI’s ability to help people either start new businesses more easily or for folks to perhaps pursue entrepreneurial ideas more easily, thanks to AI. I also think that HBS and the Times I’ve left really has invested tremendously in a much more robust entrepreneurship curriculum. They have something now that is a startup boot camp for first-year students to at least experiment a little with how to build a business. These are things that did not exist when I was there. It seems to me that some of these early seeds that have been planted over the past several years are now starting to emerge in terms of the percentage of people who are starting their own companies. I was actually really surprised, though, to see 17%, and I can’t help but wonder a little if some of the 17% might be out of necessity. Perhaps some of these 17% did not originally intend to become entrepreneurs. Perhaps recruiting didn’t quite go the way that they had hoped, because that certainly seems to be at least the rumors that we’re hearing from all schools.

[00:03:17] – Maria

It has nothing to do with a school, any particular specific school, but just the recruiting appetite, rumor has it, was a little bit cooler this year. I wonder if some of those 17% might might have started companies because the options were not as strong as they might have been in previous years.

[00:03:37] – John

Yeah, I think that’s pretty good speculation. Caroline, do you assume the same, or do you think that the AI revolution has obsessed some graduates, and they were so eager to jump on the AI bandwagon that they weren’t going to go work for McKinsey or Goldman or Google?

[00:03:57] – Caroline

Yeah, I think it’s probably a combination. I think that we will likely see some weakness across other schools in traditional recruitment for 2025. And HBS has been able to compensate for that through having such vast numbers going into either launching their own venture or joining startup. So it’s really quite extraordinary, more than the third of the class, either starting their own company or joining a startup. And when you consider how large the HBS class is as well, that’s a huge number of people. I do think as well that AI is perhaps a once in a generation or perhaps once in a century moment where business will be revolutionized, and this is an incredible opportunity. I’m sure that there will be some wonderful companies that come out of the class of 2025. I’m sure a lot of those companies are AI driven or have a very heavy AI component to them. It’ll be interesting to see the crop of startups that come out of this particular class. But I think that a lot of the students see this as an extraordinary opportunity. And whereas in the past, a lot of MBA students, of course, had entrepreneurial ambitions but didn’t launch their company straight away because the traditional path be, Oh, you go and work for Golden Sacks, or you go and work for McKinsey, and you pay off your student loans, and then five years or 10 years later, then maybe you start your own company.

[00:05:39] – Caroline

And HBS notes in their blog about their careers data this year that 50% of HBS alumni are entrepreneurs at some point in their career. So it is a very entrepreneurial community, and it’s a similar number, I know, for INSEAD. But what has happened is that rather than waiting to start the company, they’re doing straight away. So it’s basically pulled the point forward earlier in time when they’re going to actually launch their company, they’re going to get straight out of business school rather than waiting for a few years. And I think that’s largely driven by the moment in time of the opportunity that we have right now, as well as the incredible resources that Maria mentioned, that HBS has this fantastic ecosystem for budding entrepreneurs, and that makes it much more feasible to to actually work on developing your business idea and secure funding and get it off the ground straight out of the gate when you graduate, which is incredible testament to the quality of the education and the resources that you get when you’re at HBS.

[00:06:50] – John

True enough. The other interesting thing is technology overtook consulting as a preferred choice for these graduates. In what It’s interesting about that is that you know that number was fueled by the startups, both existing and new, created by Harvard MBAs right out of school because the tech industry has been downsizing pretty severely over the past year. But now, it’s the second-highest career choice among Harvard MBAs, 22% of them. That’s 6 percentage points higher than the previous year when in technology. Consulting gained back some ground after falling seven percentage points from 23 to 24. But that’s a surprise in terms of the increase in technology in the year when all the big firms that tend to hire MBAs have been unloading employees in large numbers. Other interesting thing is if you just take a high-level view of the report, again, you have to come back and conclude that, man, an MBA, yes, it is Harvard, I understand, but an MBA still has incredible value because even in an uncertain economy, even in an economy where consulting hires fell and tech, really tech hiring among traditional tech companies went way down, the Harvard MBAs were able to achieve the highest median total comp ever, 232,800.

[00:08:33] – John

That’s up a little over 5% from last year. Of course, that’s a number that does include signing bonuses and anticipated performance bonuses. But also the job offer rate three years after graduation was 90%, and that’s up from 85% a year earlier. The demand for MBAs still seems to be quite good. Now, I think Maria, in our pre-call, you raised an interesting point wondering if all these people who are going into startups have their compensation in this overall median number because typically when an MBA joins a startup, the salaries aren’t all that high. What happens is you make it up with equity, either in stock options or restricted stock. Is that what you think is also going on around here? Or how do you explain the median total compensation hitting a new record?

[00:09:37] – Maria

Yeah, I have no idea. I’m not entirely sure how you can have compensation hit a new record while having such a high percentage of people joining startups unless they are joining incredibly well-capitalized Series C startups, which I guess technically might still be startups, but if they’re already pretty advanced in terms of their revenues and their financing. But it doesn’t sound like they’re joining a four-person company out of the proverbial garage in Palo Alto. It would have to be a fairly well-established startup for that to happen. One other Something that I found really interesting when I was looking at this, comparing it to the Darden report. About 21% of the HBS class went into consulting. That’s not quite half, but 37% of the class went into consulting at Darden. If you that up to 40, it’s almost twice as many percentage of people at Darden going into consulting. But when you look more at the numbers, there’s a much higher percentage of students at HBS going directly into industry. For example, healthcare, 6% versus 3% at Darden. Manufacturing, 5% versus roughly half that percentage at Darden, media, 3% of the class going into media, with at Darden, only one person going into media.

[00:10:58] – Maria

Retail and consumer products seems to be the one place where Darden tends to look like it does better than HBS. Then it’s almost flipped, like 3% in going into retail and about 4% going into consumer goods and about half that for HBS. It’s just really interesting. Again, Caroline and I talk to our clients every day and told Blue in the face about the idea of fit and how you really need to dig into every business school to find out which ones are going to be best set up to help you achieve your goals. I think that these little nuances, it’s really interesting, but I think The big takeaway for me from this was a dramatically lower percentage of people at HBS go into consulting, and it seems like a lot more of them are just choosing an industry and entering it directly as compared to perhaps some other business schools.

[00:11:45] – John

Yeah. How do you explain that, Caroline? Why would Darden have almost twice the percentage of Harvard and going into consulting? Both are case study schools, and consulting firms love case study schools because they make the graduates learn how to think on their feet, and they’re very responsive, and you just learn to get up and talk and try to add value. That’s really helpful for a consulting training. But why almost double?

[00:12:18] – Caroline

Well, I think that HBS grads are equally as attractive to the likes of McKinsey Bain and BCG as Darden grads. But I think the HBS aren’t perhaps as focused on going into consulting as graduates from some other schools. I’m always impressed by the number of graduates from HBS going into fields like private equity venture capital, hedge funds. It’s extraordinary numbers. I suspect that many HBS students are targeting those fields instead of going into firms like McKinsey Bain or BCG, as they are often more attractive and offer even more compensation than the top consulting firms. Perhaps also when we look at this breakdown by industry, does that include people joining startups and starting their own venture in those industries? That could also boost the number of students going into specific industries because perhaps they’re joining a startup that is in health care with an AI platform or something like that. So some of the entrepreneurial students may be included in that industrial background, that sector background breakdown. And so that might boost some of the numbers for some of those individual industries.

[00:13:56] – John

True. I’m also going to speculate that I bet you Harvard gets more McKinsey, Bain, and BCG consultants and analysts in its class than Darden does, and that many of them just don’t want to go back to consulting. They want to try something new, and so they might be more inclined not to even recruit in consulting than a Darden MBA. That’s just my speculation, I think. Because after all, if you think about them, I’ll use the term magic companies, meaning companies that have prestige and pay a lot of money to people. Mckinsey Bain, BCG, are at the top. I’m going to just assume that Harvard gets more of them than pretty much any other school. Nci, incidentally, does extremely well with the MBB recruits as well. In fact, many of them are sponsored and then go back to the firms at NCI, as you know, Caroline. But I’m thinking that may be part of the reason why there’s such a gap between the percentages in consulting at Darden and Harvard. The other thing about the Darden report is that the offer rate three months after graduation, job offers, was actually hit a real 10-year low at Darden, and yet it was roughly equal to the Harvard number of 90%.

[00:15:21] – John

So it’s not a disaster. In fact, it’s only down less than three percentage points from the previous year, although at 90. 2%, it’s down quite a bit from the 97. 5% rate in 2022. I think that’s just a reflection of the fact that searches are taking longer Some firms, if they don’t basically recruit MBAs by the boatload and they recruit off cycle, the three-month deadline for reporting may not suit those hires. But overall, even at Darden, while there was no record compensation, compensation held steady, remained at 175 for the median base salary, and median signing bonus was $30,000, which has been true for five years running. There was no decline in compensation at all, and the pay is still very, very good besides the record number at Harvard Business School. So all in all, these are the two first reports. And I think given how uncertain the economy is, they tell us a lot about the resilience of the MBA and the graduates of these two schools. We’ll see how the rest of the market reports its news on this year’s graduates and whether that holds up. And meantime, we recently ran a story on McKinsey, and McKinsey told us that Their hiring will increase by 12% in this year.

[00:17:03] – John

That’s got to be good news because usually the way McKinsey goes, Bain, BCG, and the other consulting firms go, too. We’ve been anticipating that adoption of AI throughout industry globally will initially require more consulting help. I think that that bodes pretty well for the coming year. And that’s great news. Any other thoughts about the Darden or the Harvard reports?

[00:17:36] – Caroline

Just to add on consulting, that one thing we didn’t factor in is the HBS class is more than double the size of the Darden class. So in fact, they do have more graduates going into consulting than Darden if you look at just the sheer volume of students. So it’s a smaller percentage of the class, but it’s actually more graduates going into consulting from HBS than from Darden.

[00:18:00] – John

Right. Good point. I want to turn to something that really outrages me. I wrote a commentary on this for Poets and Quants, and it’s about an undergraduate business student at Babson College. She’s a first-gen student in her family. She’s from Texas. A few days before the Thanksgiving Day break, she went to Logan Airport in Boston to board a plane to go see her family after a first semester of college. When she arrived at Logan, she was detained by immigration officials. She was shackled and then deported to Honduras. Now, she came to this country when I believe she was three years old. She’s 19 now. I should also point out that she was deported even though a federal court judge Basically said that she should not be deported. Here the government actually defied a federal court order and putting her on a plane and sending her back to Honduras. I just think that this is just insane. For one thing, we’re not talking about anyone who’s committed a crime. She wasn’t hiding, she wasn’t committing any crime. She wasn’t headed home to Texas to avoid deportation. She was going there to visit her family for a holiday.

[00:19:37] – John

The judge issued basically an order, barring her removal for 72 hours. The government completely ignored it and deported her anyway. Now, Caroline, I know you share my outrage about this. What do you make of this? I mean, why would a government be so cruel and so inhumane to do this to a first-gen college student, 19 years old, just trying to visit her family? Her dad is a tailor, incidentally, who actually makes her clothes for her, her professional clothes. I mean, seriously?

[00:20:16] – Caroline

Yeah, it clearly makes no sense, right? She is a hard-working young woman, first-generation college student who’s gone into one of the top business schools in the country. So no one is safer for having her having left the country. In fact, probably the country is worse off without her. And I am the mother of a 19-year-old Lety and a college student myself. So I find it extremely chilling, to say the least. I think the cruelty is the point. I think that they are looking to scare people, and they actually quite like these stories. It serves a purpose. So it’s really, I don’t know what to say about It’s absolutely horrific. And it’s also terrifying that it’s illegal, right? They’re completely ignoring the courts. I hope that one day this young woman is able to get back to the US or continue her life productively in another country. But in the meantime, it’s absolutely heartbreaking and really horrific.

[00:21:21] – John

Yeah, very true. Maria, your thoughts?

[00:21:25] – Maria

Yeah. I think there’s just been so much propaganda. There’s really no way to put it, around illegal immigrants. I mean, even that terminology makes it sound like they are committing a bodily type of crime when in fact, in many cases, it’s simply an error of paperwork, no different than, I don’t know, not paying a speeding ticket on time. I mean, maybe it’s a little more serious than that, but very frequently, a lot of these cases come down to papers being shuffled. It’s not that these are criminal. Like, calling them illegal immigrants paints them all as criminals. I just think even that, that’s been the rallying cry. Like, well, they’re breaking the law, so they should be kicked out of the country. But what we’re seeing more and more recently is that even immigrants who are completely following the law or who have the right to stay here, the judge in this case said that she had the right to stay in the country. There are people, at least out here in California, who are showing up to their green card hearings and being arrested at the green card hearings. I mean, how many more rules do you want them to follow?

[00:22:28] – Maria

We just want them to follow the They’re literally following the rules. If they weren’t following the rules, they wouldn’t be going to the green card hearing in the first place. To arrest them there, it’s the height of hypocrisy. It really does show that it was never about following the rules. Look, I’ll tell you, when my family members who are immigrants immigrated here, we did follow the rules. Yeah, it took my cousin 13 years to get his green card. So yes, does it anger us when we see some people getting into the country and skipping the line? Of course it does. But even for us, I would never… All of these things that are happening, it really is, I think Caroline hit the nail on the head, the cruelty is the point. This is red meat for the amygdalas of people who love to put a barrier between them and other people for, quote, unquote, white Americans to readily forget that when their own ancestors were immigrants, that the process to immigrate 100 years ago was extremely different than it is today. You basically, you show up, do you have tuberculosis? No. Okay, welcome to America.

[00:23:38] – Maria

That’s not quite how it was, but it was basically like that’s what it was. Now it’s 15 years and $20,000 of lawyer’s fee is a minimum. I don’t know. When we start seeing these people who are, in fact, following the rules, also, I mean, even if she had broken the rules, she was handcuffed and slept on the floor in a jail before they deported her. I mean, how is that even… That’s got to break some constitutional right to cruel and unusual punishment. I don’t know. It’s just it really is laying bare that I don’t think this ever really was about, Well, we just want to make sure that people’s paperwork is in order. I think it’s just making it very obvious that it’s much, much uglier at its core.

[00:24:26] – John

Indeed. Well, we wish her the best, and I hope that somehow she’s able to come back and complete her education. It’s just it is really horrifying to think that this 19-year-old woman would have chains around her ankles, handcuffs on her wrist, and then be pushed on a plane and deported to a country she hadn’t been in for over a dozen years. It’s just like, come on, come on.

[00:24:57] – Caroline

And may I just add that at At the same time, Trump has also pardoned the former President of Honduras, who is in jail for drug trafficking.

[00:25:07] – John

And not only trafficking, how many… Was it tons of pounds of cocaine was he responsible for bringing into the United States? I mean, an ungodly amount for the conviction.

[00:25:23] – Maria

And that’s one of the rationales used for the big crackdown to begin with, right? This narrative that these toddlers crossing the Rio Grande are all smuggling in fentanyl. Like, Oh, we have to crack down on them because they’re bringing in drugs. And literally, this guy was found guilty in an American court of law for being responsible for smuggling God knows how much cocaine and like, oh, well, but him, whatever. We’ll pardon him. Again, like Caroline, that’s a great point. It just lays bare. It is never about- The hypocrisy is- The hypocrisy is, yeah. It was never about the stated claims.

[00:26:01] – John

People, get ready to vote. Okay? We got a lot of time to help make a difference here. Anyway, this is John Burn with Port-a-Quant. Thanks for listening.