A colleague here at Manhattan GMAT forwarded me this infographic about the value (or lack thereof) of an MBA. Though the author doesn’t explicitly say so, the statistics she chose to display indicate that she believes an MBA is by and large overvalued.
The great irony here, of course, is that the training you get as an MBA is exactly the training that sharpens your ability to think critically about arguments like this one. In fact, that’s what the GMAT actually tests with its Critical Reasoning section. Just to demonstrate, I’d like to break down this infographic from top to bottom, using the same strategy I teach my students: pointing out the (flawed) assumptions necessary to conclude that an MBA is overvalued.
Premise: The cost of an MBA program including expenses is $120,000.
Assumption #1: Students actually pay all of that $120,000.
Attack: I’d estimate that around half of my MBA classmates had some scholarship or corporate support that significantly defrayed their cost. This, by the way, is probably the most underrated reason to ace your GMAT – a high GMAT score can open the door to many merit-based scholarships.
Assumption #2: The “expenses” are things you wouldn’t pay if you didn’t get your MBA.
Attack: This is, of course, ludicrous: you pay rent whether or not you get an MBA, so this cost shouldn’t factor into your decision.
Premise: 1 in 5 MBAs default on their loans.
Assumption: 20% is a high default rate.
Attack: I did some fact-checking on this, and it seems like this statistic comes from a recent Fortune Magazine report. According to their definition of “default,” it turns out that nearly half of undergraduates default on their loans. In fact, of all of the types of degrees out there, the MBA actually has one of the lowest default rates!
Premise: It is difficult for MBAs to get a job when their program is done.
Assumption: It is easy for non-MBAs to get a job.
Attack: Companies aren’t hiring MBAs because they’re not hiring anybody. Furthermore, a 14% unemployment rate is pretty good considering the group of people we’re talking about started off with a 100% unemployment rate. And that figure about 12% of MBAs going back to the job they left? That’s just about the exact percentage of my classmates whose MBA was being paid for by their company. They had to go back – that’s part of the agreement.
Premise: Being an MBA doesn’t help you become CEO.
Assumption: MBAs want to be CEOs.
Attack: Some MBAs want a more interesting job in their field. Some MBAs want to manage people. Some MBAs want to work with people overseas. Some MBAs want to actually learn something.
Premise: Instead of paying for an MBA, you should use your money to start a business.
Assumption: Your business will be successful.
Attack: While I’m happy for Warren, Larry, Bill, Jeff, and Richard, there are thousands of entrepreneurs every year who fail. The knowledge gained from an MBA may have helped them. Furthermore, those five guys likely already had the investment connections to get their business off the ground. If you aren’t lucky enough to be in that situation, then perhaps the MBA is the perfect breeding ground.
I’m not saying that the author is necessarily wrong, by the way – the MBA may very well result in a poor financial outcome for some people who choose to pursue it. However, the MBA decision is infinitely more nuanced than it often appears, and the relevant statistics are probably not the ones presented here. Test your own critical reasoning skills – what other considerations would weaken the author’s argument? There are plenty I haven’t covered!