Why would someone in IB or PE do an MBA?

I make more than the average salary of any B school's average starting salary (especially outside of all the traditional industries) and I want an MBA to expand the opportunities I have for future employment and for the amazing experience that it (hopefully) entails. From an NPV perspective it is probably a bad idea, but financial considerations are far from the top of the list of things I care about.

A few points:

1) A lot of IB/PE folks don't have a choice to remain at their firms or in the business, e.g. a lot are losing jobs, not as many promotions are available, firms might expect or encourage pre-MBAs to leave, etc.;
2) For the IB/PE folks who get MBAs, they are expecting, and indeed are the most likely, to land jobs that pay significantly more than average MBAs;
3) Many in IB get burned out and look to career switch, but they still want a higher-level employment within a new career, and an MBA is seen as the ideal transition tool; and
4) Building network to increase future opportunities for business or employment.

When thinking about the "ROI" calculations, remember that the opportunity cost for just about everyone to go to business school just decreased significantly, e.g. not only is compensation decreasing, we should now use a much higher discount rate to signify the increased riskiness of employment (probability that you will lose your job has gone up.)

I'm going to go ahead and prognosticate here, but I think that there are still a lot of IB/PE wannabes who assume that the business, and more importantly compensation, will bounce back to the glory days, and they are going to be disappointed at the conclusion of their b-school experience. Both the IB and PE business has fundamentally changed, but the reaction of MBAs will happen slower than reality because of all these pre-MBAs in IB/PE who assume they can "hide out" in b-school and a job will be happily waiting for them once they graduate. Inevitably all those pre-MBAs have career-switcher friends who will probably believe the same thing and hope that they will get a seat at the table once the economy rebounds. Don't get me wrong, there is a place for IB/PE, but the competition for those jobs just got a LOT tougher, and the outsized compensation may never return to pre-2008 levels. Gradually, a lot of career switchers are going to realize that they won't be able, or even want, to land in IB/PE, and the will inevitably move on to a new hot industry which offers either high prestige or compensation. That industry will get inundated with smart, young, ambitious, aggressive, relatively inexperienced and yes, money hungry, MBA graduates. Times will be good, for a while, and invariably things will fall apart again repeating the same cycle. My more optimistic side wants to believe that other career tracks will just gain ground on finance and there will be more of an equilibrium, but prices, or paradigms in this case, are sticky.

They go precisely for similar reasons that other applicants go -- to get out of their current industry and find something else. There are also others who are looking to upgrade their employer names (i.e. they want the Goldman job, they want to work at a better fund, etc.). Same with consultants - the Big-4 guys looking to get the McKinsey job.

From my experience with applicants, friends, etc. I've known or worked with I'd say it's 50/50 - half want out of finance, and the others are looking to upgrade their existing wardrobe so to speak.

Alex, are you the guy from BW forum? If so, welcome to this forum!

PS: sorry, off-topic

Most IBs have 2 year analyst programs, with a potential for a third years. Relatively few people are promoted directly from analyst to associate (depends a lot on the firm). So even those that want to stay in banking might have to get an MBA. As others have pointed out, some people look at business school as a break from the grind. Also, people armed with premium experience will be well positioned for jobs that pay above the average business school salaries.

Same is true for most PE firms... it's generally ~two years IB (sometimes MC), then two years PE, then off to B-school.

Welcome to the forums, Alex. Great to have you around.

Hey Alex, thanks for responding to my post. I regularly read your BW posts and have always found them insightful because you give very good life and career advice in addition to simply application advice. Anyway, I think I speak for everyone when I say that all of us here would love to see more of you in the forums.

BTW, I found one of your BW posts (about making the best of your time at B-School) very helpful. I'm posting it in the main forum.

Thanks, and I wish you a wonderful 2009!