What Business School Actually Buys You: Notes on Optionality, Signals, and Networks

In 2018, my boss gave me 17 reasons why business school was a bad idea and convinced me to stay. I accepted.. but only to find myself on a flight to Boston two years later. This isn't a story about my boss being wrong – most of his criticisms were spot on. Rather, it’s illustrative of the fact that the value of an MBA is fairly context dependent. That's the problem with most business school takes out there: they reek of confirmation bias or rest on assumptions that don’t generalize. So I'll try to do better than that here by offering a general framework that you can use even if my personal story isn’t very illuminating to you (it probably isn’t).

Business School as a Consumption Good

For some – particularly wealthy professionals exhausted after years in investment banking or private equity – business school serves as a socially acceptable break. It's a way to recharge without the stigma of a resume gap. I have nothing interesting to say here.

Business School as an Investment

But most of us aren't thinking this way. We're thinking about the MBA as an asset – an expensive, intangible one – and trying to figure out if it'll pay off. But here's where people mess up: they do some quick math dividing MBA cost by the median post-grad salary and call it a day. That's dumb for two reasons:

1. You wouldn't be making zero dollars without the MBA

2. You're not the median anything

The real question is more specific: Given your unique background, credentials, and experience, what's the MBA actually going to add? Is that, in present value terms, worth $200K + 2 years in opportunity costs?

Theories/Mechanisms of Change

1. Career “Transition” aka Optionality

When people say they want an MBA to "switch careers," what they usually mean is they want to level up into something more prestigious with better guaranteed money. It used to be mostly consulting and investment banking. In the last few years, Product Management in big tech has entered the fray.

If you want to transition into something specific — say real estate investing — because you really fucking love real estate — you wouldn't be getting an MBA. As long as you put yourself out there and are smart enough to pick up the fundamentals of real estate, it'll be easier for you to convince someone to give you a chance rather than spend $200K, wait two years and then convince someone to give you a chance.

What people actually want from an MBA – is the most prestigious and high optionality version of product management or real estate investing or a myriad other things. If you want to be a product manager at Google, you probably need an MBA. If you just wanted to be a product manager (and were willing to break into the space through a smaller company) because it’s a skill you’d like to learn and cultivate, you don't need an MBA.

To be clear, optionality is not a farce. Starting at Google gives you more options than starting at a Series A startup - you can always go from Google to a startup, but the reverse is much harder. Large companies, especially the prestigious ones, act as strong positive signals that can open doors later.