Well, I don't really want to make this post about myself personally, but riverripper in pointing out that most of those assumptions do not apply to me.
I did want to comment on the relationship between money, education and work. Obviously, it would be great if everyone could make big piles of money working brief hours doing something that they love and taking lots of vacation. The dream was busted for me when I realized in jr. high that I probably wasn't ever going to be point guard for the Lakers.
I think by-and-large, college graduates and people getting MBAs are smart and thoughtful. It would be silly to commit to an MBA without first considering the alternatives. To do this, you have to consider the costs (actual, opportunity cost, personal, social, whatever is important for you) and then decide whether it is worth it. A key factor that edwarise ignores is that there are not absolute calculations for this - it must be based on estimates, projections and assumptions. Nobody knows what the value of a Stanford MBA is to each individual, but almost everyone will agree that it is worth the cost (just to reinforce, cost means all costs). Will you have a better quality of life in 10 years if you instead take the $160k and 2 years and launch a start-up? Maybe. What about if you bet on commodity futures? Maybe. How about the lottery? Maybe. But most people will look at the Stanford MBA and conclude that with the given risk and reward (very low risk, very high reward), it would be a smart investment of their time and money. If your name is Lebron James, playing basketball might be a better use of your time than getting a Stanford MBA (all costs considered); for the other 99.9999999% of the people, the alternatives do not measure up.
MBA students, being thoughtful people (and somewhat risk adverse) make the same sort of calculation when deciding what type of job they want to take. For many people, the calculation begins with the big pile of debt they have to start paying down when they graduate. I think the jobs that interest MBA students most are the ones that offer the best combination of good pay and valuable experience. As a result, it is no surprise that jobs with the top consulting firms and banks top the list of most desirable MBA destinations year after year, along with the best rotational management programs and firms in hot industries. People do not necessarily take these jobs because they are planning to build careers in banking or consulting, but rather because it gives them a comfortable start financially and makes them highly marketable if/when they decide to make a different work/pay/lifestyle decision 2-5 years down the road. If your dream job is to be a marketing manager and a chic authority on fashion at a luxury goods brand, it still makes sense to cut your teeth with McKinsey for three years where you can gain tons of experience and stabilize your situation financially. Many people are not comfortable diving into an entry level position that doesn't allow them to meet there financial obligations, even if it leads to their dream job.
Again, MBA students, for the most part, do not make career decisions willy-nilly, and most take a long-term look at their futures. Nobody takes a banking job because their dream in life is to work 80 hours a week and make $300k per year (well, not many people); however, a lot of people take a look at all the alternatives and after running through some Monte-Carlo simulations in their heads, decide that banking is the best way to achieve their goals. Sure, some entrepreneurs will be making a lot more money than bankers 5 years out, but it's crazy to look at outliers in various fields and compare them to average participants in others. The clear and simple bottom line is that from the risk/reward standpoint of graduates of top business schools, a job in banking (and related finance fields) is the most well-beaten path to a top paying job in the short, medium, and even long terms. Sure, many associates do not make it to MD, but more follow that route (or hop over to more lucrative positions with private equity and hedge funds) than rise to CEO or become mega-successful entrepreneurs. For the given amount of risk, banking probably provides the greatest reward, by a large margin (everyone's calculation will be different - perhaps some are sensational entrepreneurs, or maybe others are world class golfers, who knows).
Sorry to break this to you, but living in Palo Alto is just as expensive as living in San Francisco. Some people will be happy making $200k 5 years after graduation, others will not. Let's do some quick math here...$200k salary, $120k after taxes, about $10k per month take home. Mortgage on a $1.5mm house (about the average in Palo Alto) $7-9k depending on your down payment (which ain't gonna be much given that salary), $1-3k for student loans depending on how much you took out, car payment, 401k contribution, paying for that 7 weeks of vacation you plan to take. Hmm, even if you never eat out, don't have any kids and opt for basic cable, the numbers don't quite work out. Well, maybe you're the type of person that doesn't need to own a house to be happy, have a nice car, kids or a wine cellar; fine. But if you want to live in Palo Alto, or San Francisco, or any other with top notch amenities where only 10% of the population can afford the average priced house, you'll need a salary in the top 10%. If you're happy living in Peoria or Toledo (sorry people), then your needs are considerably smaller.
Again, banking is not for everyone, but it's silly to dismiss it out of hand as a dumb or illogical choice. Some of the most anal-retentive bean counters out there (I'm talking about MBA students) make the choice every year to go into banking, while a further multiple wishes that they could have those jobs. Take edwarise's example of someone making $1mm+ in his field (whatever that is). Is it common, is it easy to achieve, do many people get there (apparently, even with all of his success, edwarise doesn't even make 1/4 that amount). Compare with the average bulge-bracket investment bank. You don't need to be an MD to make $1mm+ per year; that's a typical level (I wanted to really emphasize, typical, not some outlier, not a one-off, not some random guy you heard about, but rather a very normal level) of compensation for people about 6 years out (at the transition from VP to SVP/director at most banks). Compensation isn't everything, but $1mm is a nice whole number that we can put our minds around - let's say that will allow you to be comfortable in most big cities. With your freshly printed MBA degree (and relying on nothing else like an NFL career or adoption by Donald Trump), what's the best way to achieve this level of comfort? Start your own business? Risky, very very risky. Joining an existing start-up? Still very risky; let's not forget that you might spend years in these two situations and end up with bubkas. Management track in a traditional big company? Very low risk, but the chances of achieving this level of comfort ($1mm annual compensation in today's dollars) is pretty slim; not to mention probably at least 15 years away. Consulting or consulting then management? Low risk, and pretty good chances of reaching 'financial comfort'; not hard to see why this is an extremely popular choice, but longer time-frame and higher likelihood of not getting there when compared with banking. Finally, banking. Low risk (assuming you can land the job), and considering the alternatives a very good shot at reaching 'financial comfort'. In fact there's probably a greater chance of realizing 'a whole-lotta-financial-comfort' (say $5mm+ per year) at a bank than 'financial comfort' at most other positions. And people that reach the SVP/Director level aren't putting in 80 hours a week typically, more like 50 and they are taking their vacation time (things vary, of course); the SVP/directors in our office are almost always gone by 6-6:30PM, virtually every day. It's a pretty good combination of work/pay/play that can be reasonably achieved.
Certainly, there are more ways to look at things. Maybe you're the type of person that really values doing their own thing. Maybe you're the type who would rather take substantially more career risks; or less risk for substantially less pay. Then again, maybe you're the type staring at $250k in college and grad school debt and would love to get that monkey off your back in short order. Maybe you're the type that plans to take care parents who worked hard all their lives but never had the chance to save for retirement. Maybe you're the type that just really loves money. These, and a million other things will determine how much job risk you're willing to take on, and how much money you hope to make. But let's not write off the 20-40% of students at top business schools every year who choose to go into a perrineally popular and high demand field like banking. Thousands of students before you have looked at the broad field of opportunities open to students at top business schools and decided that banking was for them. They weren't stupid.
23 Jul 2008, 21:50
