Should You Go (Back) To School?

Back to school

Almost twelve years ago to the day, it felt like the world was on the verge of collapsing.

Venerable financial institutions have gone bankrupt, while others were teetering on the brink.

Real estate values plunged in an unprecedented way, leaving millions of overleveraged homeowners on the street.  Having taken heavy losses, investors with secondary/tertiary exposure to real estate were busy licking their wounds.

The stock market, probably the best tool we’ve got for gazing into the future, was in the doldrums. The S&P 500 was trading well south of 1,000, reflecting the massive economic pain that was still to come.

And I was on a flight to Philly, looking to plonk down a few hundred grand on an MBA degree.

As ever in life, hindsight is 20/20.  In retrospect, I’ve taken a pretty big risk back then, leaving a cushy job behind and signing up for a tough slog in investment banking.

Looking back, however, it was also one of the best decisions I’ve ever made.

As this blog grew in popularity over the past year or so, I’ve received quite a few emails from readers who are looking to follow a similar path. Some are looking to reinvent themselves.

Others view it as a tool to accelerate their progress.

Going back to school can be a very effective way to do both. In case it has ever crossed your mind, today’s post may be a helpful way to frame the decision.

Key Advantages Of Going Back To School

Because I write from personal experience, my perspective will naturally be biased towards an MBA-like program.  That being said, the advantages listed below can be applied more broadly to any post-secondary degree, training, or designation.

#1: Develop New Skills And Competencies

This one speaks for itself. In today’s knowledge economy, you simply cannot rely on skills and training gained in the first twenty-odd years of your life to sustain you until retirement.

Over a career that spans thirty or even forty years, they will soon become dated and obsolete. If you don’t want to fall by the wayside of progress, you need to keep upgrading your knowledge base.

#2: Get A Better Job

This one is a direct consequence of #1.

Going back to school is the perfect springboard to leave an obsolete industry behind, change a career for a more exciting one, and perhaps even open doors into senior management ranks.

And while making more money doesn’t necessarily need to be the key reason here, it often accompanies all of the above.

#3: Stay Competitive

In some countries or industries, going back to school might not even be optional.

While not as prevalent in the UK, in North America, an MBA is the new college degree – especially when you work in finance. Not having one means you will have a much harder time competing for jobs down the road.

In other industries, you simply need to have an advanced degree to progress.

In investment management, a CFA designation is often compulsory. And you will rarely come across a successful accountant who hasn’t got a CPA / CA or some other accounting designation.

#4: Sit Out An Economic Downturn

When I had arrived on campus to start my MBA, I had a clear objective of moving into investment banking.

To my surprise, many of my classmates simply wanted a place to “park” themselves to wait out the economic tornado of the GFC.

Facing a period of prolonged unemployment, they opted to have a two-year MBA degree instead of a gaping black hole on their CVs.

I cannot blame them.

#5: Build Your Network

This is a big one.  The network I’ve built in 24 months is with me today – and it continues to grow as the number of alumni from my alma mater continues to increase.

There’s nothing quite like walking into a meeting and seeing an old classmate across the table (these days, on the screen!).

And oftentimes, the more senior clients have a soft spot for advisors who have attended the same university.  Even if you muck up, they won’t focus on it – because it makes them look guilty by association!

#6: A Professional “Passport” For Life

One of my good friends once told me: “I am not getting an MBA. I am getting lifetime unemployment insurance.”

He is spot on – a Harvard MBA or a Yale law degree is with you for the rest of your life. Whether it is job interviews, business opportunities, or even simple networking, having a credential like that on your CV will open more doors in your life than you can imagine.

Now, you’ll still have to work to convert those opportunities into something tangible – but you will certainly have a head start in doing so.

It’s a bit like having worked for Goldman Sachs or McKinsey. People may not necessarily hire you – but they will surely want to talk to you.

#7: Take A Sabbatical

One of my classmates from undergrad got a very well-paid job straight out of college. Unfortunately, it was also very demanding and stressful.

Three years later, she got fed up and resigned. Because she was good with money, she was able to leave everything behind and travel the world for 18 months.

By the time she got back, her biggest challenge in landing a job was to convince potential employers she wasn’t about to pull the same trick in a few years’ time. Both she and I were surprised at how complicated her job search became as a result.

If you are tired, burned out, or just looking for a change of scenery, going back to school may well be the break you are looking for.

Not only you get to recharge your batteries, but you may well come out of it even better equipped to do bigger, better, and more interesting things.

Where Do I Sign Up?

Having read all of the above, going back to school probably sounds like an absolute no-brainer.

Sadly, it’s not – and you only have to read the horror stories of folks with crushing levels of student debt to snap back to reality.

While the advantages can be considerable, below are some risks you need to take into account.

Key Risks Of Going Back To School

#1: Opportunity Cost

This one can be a whopper.

Advanced degrees typically require a lot of time, money, and effort.

Instead of spending two years climbing the career ladder, you are sitting in a classroom. Instead of earning, saving, and investing money, you spend it like it’s going out of style.

If you are considering going back to school, the very first thing you have to do is to quantify the opportunity cost. For an MBA program, it runs well into six figures.

In other words, tread carefully – and with your eyes wide open.

#2: Not All Advanced Degrees Are The Same

Sad, but true.

An MBA from that community college nearby isn’t the same as the one from Wharton. A dodgy regional financial planner certification will never match the CFA.

At the end of the day, education is a business – and advanced / continuing education can be incredibly lucrative… for organizations that supply it.  This is why there’s such a proliferation of advanced degrees these days.

Colleges, universities, professional bodies (and everyone else for that matter) have realized just how much money you can make exchanging pretty diplomas and some questionable teaching for cold, hard cash.

#3: No Guarantee Of Success

It’s rare, but even smart, hard-working students from top schools can struggle to line up good jobs.

I was lucky, having graduated as the economy was gaining steam again. Those who graduated in 2008 / 2009 faced the equivalent of walking the plank in a category 4 hurricane.

Many eventually ended up fine – but for some, the promise of an advanced degree never materialized. Such is life.

#4: Long Payback Period

Ahh, wouldn’t it be nice to leave school, line up a six-figure job, and sail off into the sunset?

Sure – except it never happens.

First off, you probably have some serious debt to pay off. Unsurprisingly, your future employer knows this. Rest assured that they will extract every ounce of leverage out of this situation.

Then, there are taxes. You may be making a lot more money – but your income will likely be taxed at a much higher marginal tax rate.  Say goodbye to 40% or even 50% of your pay.

And in the meantime, the interest on your student debt keeps ticking.

It’s good to be realistic about what life will look like immediately after graduation.  Things probably won’t be as rosy as the admissions committee would like you to believe.

#5: Degree Dilution

Does an advanced degree really move the needle if everyone else is also parading one around?

Hedging The Risks

Hopefully, by now you have a more balanced view of the pros and cons of dusting off your backpack.

As with any investment decision, it’s time to think about hedging as many of the risks as possible.  You may also want to run a pre-mortem.

You will never be able to completely eliminate the downside.  However, you can certainly go a long way in tilting the risk-reward equation in your favour.

Hedge #1: Only The Best

In today’s world, the top 1% capture an outsized share of economic benefit. If you want to join their ranks, only the best will do.

Once you’ve made up your mind to expend the time, money, and effort required to go back to school, might as well give it your best shot.  And if that means moving abroad or taking on more debt, then so be it.

A lot of my private equity clients tell me they would much rather pay more for a solid business than go for a lower-quality one and watch it go under at first signs of trouble.

The same approach is in order here.

A top law degree will propel you much further than one that leaves you chasing ambulances for the rest of your life.  A $200k Wharton MBA will always be more valuable than a $100k University of Indiana one.

And if you can graduate close to the top of your class, even better.  Academic success matters, grade non-disclosure policies notwithstanding.

Hedge #2: Do Your Research

It never ceases to surprise me how many folks go back to school without doing their diligence.

As I’ve said above, education is a business – and you are the paying customer.

No matter how competitive the process is made out to be (“thousands of applicants”) and how nice it feels to get in (“congratulations on joining the exclusive club”), oftentimes there’s a big marketing component to all of it.  Kind of like private schools here in the UK.

Look up the rankings. Check employment reports. Speak to the career office. Check with your own contacts in the industry.

Do enough legwork and you’ll be able to come up with an unbiased view of how good your prospects really look.

The last thing you want to happen is to graduate – and only then realize that the diploma you’ve been working for so hard is an absolutely useless piece of paper.

Hedge #3: Protect The Downside

There’s a multitude of ways to reduce the opportunity cost of going back to school, such as:

  • One-year programs (i.e. Insead MBA)
  • Part-time degrees
  • Distance education
  • Scholarships
  • Getting your employer to foot some of the bill
  • Working a part-time job while you study

The list goes on and on. When faced with one of the most expensive decisions of your life, it makes sense to pull every possible lever to reduce the price tag.

But whatever you do, do not sacrifice the quality.

Thank you for reading!

About Banker On FIRE

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Banker On FIRE is a London-based M&A (mergers and acquisitions) investment banker.  I am passionate about capital markets, behavioural economics, financial independence and living the best life possible.

Find out more about me and this blog here.

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10 Comments

  1. That’s a well balanced evaluation of the pros versus cons.

    For mine, the key things to remember are what the potential student is actually buying:

    1) MBAs are about the brand on the diploma far more than the education. There aren’t many that are truly globally recognised, so be mindful of where you intend to work when choosing your institution.

    2) (Potential) access to a network, primarily of your fellow classmates, assuming you put the work in to establish those acquaintances during your studies. For the fortunate, a strong class will float to the top of the career ladder, trading jobs and favours amongst themselves as they do so. Get that timing wrong however, and the graduating class of an e-MBA programme more resembles a bunch of drowning people fighting over a lifebelt.

    The financial cost of the advanced degree(s) should be factored into the opportunity evaluation when choosing a career path. If they are table stakes, then a candidate is making a mortgage sized bet that their chosen career path will work out.

    Therefore it is worth taking some time to ensure that lines up with their life plans to ensure that investment actually makes sense.

    Do they have what it takes? Honestly? For every person who makes it to Partner or Managing Director level, there are thousand who don’t and hundreds more who won’t.

    Do they really want it? Or is it just a continuation of the perceived “default” life path towards “success”?

    If they don’t want to work for a McKinsey or Goldman or Big4 or Magic Circle firm (let’s face it, they aren’t for everyone), do they really need the big school degree with the big school price tag?

    Are they planning to jump off the career ladder in a few years time to write a novel, be a stay at home parent, or move off the grid to become a self sufficient organic legume farmer? If so, does it make sense to pour a huge investment into a piece of paper they won’t be using for long or at all?

    Like all important life decisions, education choices should be a well-informed ones.

    • Spot on as always.

      For the vast majority of people, getting an MBA / advanced degree at a cost of $100k+ means pushing out early retirement (if it was ever in their sights) by at least 5-7 years, often more than a decade.

      At the same time, it can also bring early retirement into the realm of what’s possible. That’s certainly been my experience, though I’m not quite there yet.

      Network is crucial and as you point out, takes a lot of work to establish. It also takes a lot of work to maintain. Folks won’t be nearly as willing to help you along if you hadn’t spoken to them for 10 years until they hit the C-suite, at which point you send them a LinkedIn message.

      In my first job, I replaced a chap who was a few years out of undergrad and went back to get his MBA. Unfortunately, he went back to a local school, which meant that at graduation, he landed a job that I had progressed into naturally by that point in time. As you say, do your research…

      • Pushing out ER is one reason I’m still on the fence for an MBA. Right now I’m projecting ER by mid 40s (I’m early 30s). In my career I’ve always made less than $60K/year (excluding matches/benefits). And that’s with promotions every year. I’ve always wanted $100K+ so there was mad incentive to go for an MBA— until this year— when I finally got a position around $100K/year. I work in finance and job security seems high. If I kept my job/location I would only be able to attend a Top 20 U.S. school, not ivy league or such. So I’m thinking the MBA benefit would be incremental and likely delay ER.

        • When I was contemplating an MBA, ER wasn’t even a concept in my mind, so my decision was much easier.

          Given your situation, I can see the conundrum – tough to make the ROI work given you are already doing what you want to be doing (seemingly?) and making good money.

          One alternative would be to get a part-time MBA (and get your employer to pay for it), but I question the incremental value and also whether it’s worth the time and effort required (which will be significant).

  2. Thanks, Banker on Fire!

    I am in similar doubts – leaving a well paid lead engineer job and move to “business”(PE/investment banking). Been in startups and preparing a technical analysis of the portfolio, but always wanted to play in the “life’s next game level”. However, I would be paying it all by myself and currently thinking of LBS as a primary choice because I am London-based.

    Maybe it’s a more MBA related question, but would you look differently at someone who finished LBS or Oxbridge MBA concerning Wharton/Kellog/Sloan/Stanford, etc.?

    • I think it depends on what you want to do.

      Given your background, breaking into PE right after MBA would be a stretch, as the big PE shops typically look for someone with an IB / consulting background. That being said, a VC or a growth equity firm could find your tech expertise very attractive.

      But assuming you will follow a classic MBA >> IB >> PE path, the question is what MBA degree will get you a foot in the door with the banks.

      In my experience, all of the top US schools (Harvard / Stanford / Wharton / Chicago / Columbia / Kellogg / Stern + a few others) are excellent launchpads into IB.

      The European schools that are well perceived are Insead, LBS, IESE. I’ve had friends/colleagues from all 3 schools who did IB for a few years post MBA and then moved into PE. That being said, it’s not easy.

      I’ve not come across many Oxbridge MBAs to be honest but you could blame it on the sample size.

      Hopefully helpful context – best of luck with your journey!

  3. Hi Banker on Fire,

    nice article.
    I would like to add my own perspective on that.
    I work in real estate finance/investment in Germany. That is considered to be a quite regional market. Previously, I completed a Bachelor in business/finance (+CFA). Education-wise, an MBA will not teach me completely new stuff. So spending a bunch of money for a degree that is almost only relevant in terms of branding/network (intangible skills) is maybe not worth it in my opinion.
    Still, I thought about getting an MBA.
    One of the biggest outcomes for me in terms of “Is an MBA worth it” are:

    – How much money do you currently make and is there actually a way to significantly lever the degree?
    I.E. I am making decent money (base+bonus) with my Bachelor’s degree. I assume that getting an MBA would not bring me a lot more money if I stay in the same industry.

    – Getting more money would require to switch careers into one of the highest paid business jobs (-> IB/PE or consulting). As people mentioned in previous careers: (i) do you want to work in such a field? (Me: no), (ii) do you want this lifestyle? (Me: no)

    Therefore, my biggest takeaway is, that getting an expensive MBA degree somehow forces you to get into IB/PE/consulting.

    Kind regards
    Harald

    • Thank you – glad you enjoyed it!

      You are bang on. If you are paying your own way, the opportunity cost of getting an MBA does “guide” you towards a demanding, highly-paid role to make sense financially.

      Not only that, but you also need to stick around in those roles for at least a couple of years to see a meaningful uptick in your comp.

      Great for those who would like to make a career change. From a monetary perspective, not as straightforward unless you can realize a substantial uptick in compensation.

  4. Hi Banker on Fire!
    Thanks for the blog in general and this article in particular 🙂

    I am software developer working in investment banking in London (making £90K+), I am in my early 30s.
    I like to think that I am fairly decent when it comes to software development, but I usually don’t have a clue about maths, statistics or financial products (I have always thought this would be an interesting area to get into though).
    Is there any qualification I could get which would open doors towards a more front office/quant developer/data science role (and say a £150K salary)?
    So far I have been considering:
    – a masters degree in maths/statistics/data science (downsides: a reputable university costs around £30K and would be hard to do part time)
    – CQF certificate – around £15K and should be possible to do part time – would it open any doors though?
    Thanks!

    • Cheers M, glad you found it helpful!

      Given I am on the advisory side, I am less familiar with what it takes to progress upwards on the quant / data science side as that typically falls into trading / capital markets. Either of the options you outline could make sense.

      That being said, a more accurate way to find out would be to:

      1. Check around on folks who already hold the kind of job you want. What kind of experience and qualifications do they have? A simple LinkedIn search could be informative
      2. Check job postings (or speak to recruiters). Very often, the job requirements themselves can be quite telling.

      Hope this helps – and best of luck!

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