Most people who knew Gabriel Hammond at Johns Hopkins in the late 1990s could have predicted he would rise quickly on Wall Street. As a freshman, he traded stocks from his dorm room, making a $1,000 bet on Caterpillar. Soon after, he abandoned his childhood dream of becoming a lawyer and, upon graduation, joined Goldman Sachs as a stock analyst.Three years into his new job, Mr. Hammond noticed something. Very few of his young co-workers were taking a hiatus from Wall Street to go to business school, long considered an essential rung on the way to the top of the corporate ladder.
So he, too, decided to forgo an M.B.A.. Instead, he raised $5 million and started his own hedge fund, Alerian Capital Management, in 2004. The fund now manages $300 million out of offices in New York and Dallas, and Mr. Hammond, 28, enjoys seven-figure payouts.
Like other young people on the fast track, Mr. Hammond has run the numbers and figures that an M.B.A. is a waste of money and time – time that could be spent making money. “There’s no way that I would consider it,” he says.
So begins a recent New York Times article, “Bye Bye, B-School”, which addresses the current state of business schools, long seen as the key gateway to successful careers on Wall Street and beyond. Costs of attending school are up, attending is as competitive as ever…but is B school worth it?
The fact is, as the article points out, B school is increasingly losing its cache. The fast paced world of business today no longer grants the luxury of taking two years off and losing industry experience, nor is what is taught in the schools necessarily valued by employers.
“If you want to make the most money in the shortest period of time, you can’t be away from work for two years,” says Vitaly Dukhon, 30, who recently left the Fortress Investment Group in New York to join another hedge fund.
While in college at Harvard, Mr. Dukhon thought he would go to business school in his mid-20s, but in his first job on the Treasury desk at Deutsche Bank, he realized that the smartest people just a few years his senior were staying put. “I saw that people that had been working for 20 years did have M.B.A.’s, but people five to six years older than me were not going,” he says. “Going to business school is a way for people to try to open the door, to try to get into a company or hedge fund. But if you’re already there, it doesn’t make sense to go.”
Mr. Hammond of Alerian noticed the same trend while he was an analyst at Goldman Sachs. His co-workers who went to business school either wanted to change careers, or they were not doing well in their current jobs, he says.
In other words, business school is a place to change careers, not enhance them. This is a sobering message being sent out to elite insitututions that pride themselves on on their influence. But both recruiters and even the professors themselves are claiming that the primary mission of the schools, education, is too often passed over for the goal of placing those few in lucrative career fields:
Next month, Prof. Khurana of Harvard is publishing a critique of business schools’ evolution over the past 50 years. His book, “From Higher Aims to Hired Hands,” argues that famous B-schools, including Harvard, have lost track of their original mission to produce far-sighted leaders who can help the economy run better….”The logic of stewardship has disappeared,” he says. Panoramic, long-term thinking has given way to an almost grotesque obsession with maximizing shareholder value over increasingly brief spans.
As a result, he declares, getting an advanced degree in business no longer amounts to entry into a full-fledged profession, like law or medicine. It’s just a badge that lets graduates latch onto situations where they can jostle the actual managers of companies and make a lot of money for themselves in the process.
For his part, Prof. Khurana would like to see business schools take much more aggressive steps to mend their ways. He is impressed by the ways that law and medical schools certify graduates’ knowledge and require lifelong continuing education. Perhaps business schools should do something similar, he suggests.
Yet Prof. Khurana has identified an important imbalance. In the current environment, many brilliant young M.B.A.s don’t aspire to be corporate chief executive officers, who struggle to uphold their agendas against pressure from all sides. These students would rather be consultants who earn big money fomenting change. Better yet, they want to be the powerful investors who hire and fire CEOs.
Until those dynamics change, it will be hard for top business schools to resume their traditional – and vital – role as training grounds for the next generation of corporate leaders.
This is reiterated by a recent WSJ report on recruiter’s picks for business schools. University of Michigan’s Business School, Ross, fell from the number one ranking in recruiters’ eyes. Why? Students had too much a sense of entitlement versus experience and education, they say. It seems as if the schools are building up expecations, rather than provide industry ready graduates. In the New York Times article, one student from Tepper is hired upon receiving his MBA – not because of his degree, but his computer background from his previous years of study and work.
The one value business schools unequivocally offer is a network of graduates who are established in their fields and can provide meaningful connections for entry. However, as the NYT article pointed out above, this point is mute if the candidate already should have proven themselves in their field, and truly is most helpful to those who truly have reverted from one career path to the other.
Two personal experiences shed light on the MBA for me.
I attended a MBA session attended by representatives by all the major B school players (Stanford, MIT, Penn, etc.) several months ago. It was a crowded room, with many eager 20 somethings looking for hints on getting in and how to differentiate the different schools. My question for the day was, “How come B Schools universally claim to develop great leaders, when in fact 90% of those I personally know attending are only going because their 80 hr week jobs require them to after 2 years?” Their answer, in effect, was: “If you don’t have extracurriculars to put in your leadership section, that’s fine. We can’t expect you to do a lot if you are working a busy job.” So…those earning high pay, whose jobs sponsor their MBA, and are mostly lackeys for their high finance bosses, get a pass at this? I suppose it is hard for them to do different, but in truth I feel this is one reason why many entrepreneurs and movers and shakers don’t come out of Wharton – B School can be very self selective in this way. On the other hand, the B Schools were desperate for career changers as well, maybe because of the discussed trend, noting that GREs are as acceptable as GMATs. One attendee asked what distinguished each program from the next, which absolutely killed the panel. They didn’t want to bash the other schools, and didn’t want to claim their superiority in one field at risk of demoting another. Most pandered and said the people. Someone else asked why the shoudn’t just go to Europe, and in a global world, why they should stay in the U.S. .The answer here was that schools were creating global campuses…but really, this is not the same thing, just playing catch up, and may be another way to score dough from those MBA bound. This left me with the conclusion that business schools, unlike undergraduate studies, may attract certin individuals, but don’t create great businessmen. More Fortune 500 CEOs come from state schools than anywhere else, those that were in high finance are back after a mandatory MBA, and those looking to enter business may just end up with a more advanced network depending how high up the B school ladder they go. But come recruiting time, great leaders will have been great leaders before B school, and quant whizzes could probably have saved themselves two years.
I once interviewed at a startup and ended up being passed over for someone with an MBA. Barely out of school, and I was seriously considered for the role. I lost out not because the other candidate had an MBA, because, as the CEO said, “those mean nothing these days,” but because the other person had startup experience.
Nevertheless, I admit B School will still be seen as a requirement in certain industries, and for this reason for the foreseeable future they will still be holding the cards in their hand. My brother, who started his own successful company abroad and has never been to B school, found a position at qualification-obsessed Google only after he could convince them a high GMAT score taken years ago and excellent experience was just as good as any MBA. He was hired, but remains one of few without that extra certification. Even if Google covered the cost now, would it be worth it? The trend apparently says no.
Will I go to B school? Someday maybe, with a clear purpose. And I may richer for it, but certainly not much smarter.