The Most Illogical Reason To Go To Business School I’ve Ever Heard

There are good reasons to go to business school and then there are bad reasons to go to business school. Let me share one of the worst reasons I've ever heard. I've changed some names and figures for privacy reasons.

I caught up with a friend, Peter, who is a partner at a private equity firm the other day. He was beaming about how their youngest son got into U Penn after letting him take a gap year after high school.

“Getting into college these days is like playing roulette! You really never know where you're going to get in!” he said. “My son got rejected from everywhere, except his top choice. Go figure!”

I congratulated him because getting into an Ivy League school nowadays seems like mission impossible. He then went on to say one of his associates was leaving to go to Harvard Business School.

I asked him why and Peter said the associate wants to explore venture capital or fintech after graduation. That sounded fine to me at first, but not after my friend explained some more.

An Illogical Reason To Go To Business School

“This associate of ours is awesome! Everybody loves him and he does great work,” Partner Peter explained. “He went to a state school, worked for two years at Morgan Stanley, and then we hired him two years ago.”

“I don't understand why he's leaving,” I responded. “Couldn't he just stay on and continue to ascend at your firm?”

“Yes, we'd certainly give him a great chance. But he wants to explore new things. And also, these kids who graduate from Harvard Business School and the likes have lots of options open to them.” Peter responded.

I then asked Peter how much his associate is going to make this year at age 27.

“About $600,000 all-in, including some of his carry.”

Whoah! The Associate is going to make $600,000 from a private equity job thousands of MBA graduates would die to land and he's leaving?! Oh boy. Talk about illogical.

Private equity is one of the sectors where you can easily make over $1 million a year.

The Opportunity Cost Of Going To Business School

I understand the desire to go to business school if:

  • You want to change careers
  • You're stuck in a dead-end job you don't want to do
  • You want to boost your earnings power because it's currently so low
  • You're financially secure and need a two-year break to find something new to do

But you do NOT give up a $600,000 job at age 27 for two years to find another job in a similar space! The opportunity cost for this Associate is at least $1,200,000 in foregone salary plus $115,000 of tuition.

If the associate were to ascend to senior associate, vice president, and then managing director, the opportunity cost could be in the tens of millions. I've got little doubt Partner Peter makes at least $5 million a year.

However, if the associate was making $150,000 a year or less, going back to business school full-time might be more reasonable. The opportunity cost over two years would be about $415,000.

But if you're going to business school, where the goal is to maximize returns, forgoing $1,200,000+ in earnings is way too much.

The Desire For Prestige May Be A Wealth Killer

I asked Peter whether the associate has an automatic in to rejoin his firm upon graduating from business school.

Peter said, “We'd certainly give him a strong look. But there's no guarantee. We only hire one person out of business school a year.”

In other words, if the associate were to change his mind, he would probably have less than a 25% chance of getting his old job back. Those odds are terrible! The associate could also graduate into a recession and get nothing.

I told Peter the associate's choice makes no sense. Joining venture capital might seem more exciting because the associate will be looking at earlier-stage companies. However, at the end of the day, it's the same old thing. He'll be hustling to land deals, networking, and creating financial models.

That's when Peter said, “He just really wants to go to Harvard.”

Ah yes, that insatiable desire for prestige when you're young. The younger you are the less you've accomplished. Therefore, it's understandable that the importance you put on where you went and go to school is higher.

But as every older person knows, where you went to school doesn't mean anything after several years of work. It's what you do at work and the people you develop relationships with that matter the most.

More Reasons Why I'm Against His Decision To Go To B-School

Maybe I'm an odd duck because I write about personal finance. The way I view money and time might be very different from the average person. But I did work in investment banking for 13 years and I went to business school part time.

So let me share some more thoughts as a middle-aged man who has a good idea of what the next 20 years of this associate's professional future will be like.

1) No added happiness.

After you make about $200,000 – $250,000 as an individual or $300,000 – $350,000 as a cohabitating couple, you're not going to gain more happiness. At $600,000, this single associate is already earning way beyond his maximum happiness potential. Besides, we know there are plenty of six-figure income-earners who are absolutely miserable at their jobs.

2) May increase anxiety and disappointment.

If he doesn't get an equivalent-paying job and a better title after business school, he may feel like a failure. $1,315,000 in opportunity cost is a high hurdle for a recent business school graduate. Remember, business school emphasizes the importance of making a high return on capital. He's not going to graduate school in the arts and sciences.

The associate could easily end up going to Harvard and getting a similar job like every other non-top-5 business school MBA graduate. Then what? Inevitability, some in his class will do very well creating more envy.

3) He will mature and have different priorities.

No successful person I know cares about where they went to college or where anybody else went to college. Instead, the more successful you are, the less you want to share where you went to college, especially if it is an expensive private university.

His life will be filled with work and life challenges, pushing his diploma to the bottom of importance. The desire to put your alma mater's sticker in your rear window will fall to zero by the time you're 40.

4) Time is very valuable.

One of the downsides of going to business school, law school, dental school, medical school, or any type of graduate school is that once you graduate, you usually need to work a longer period of time to justify your graduate school decision. The ability to retire earlier may go down.

When you're younger you don't feel time is as scarce or as valuable. You also feel ready to work forever. Sadly, we don't live forever. And if you die early, then going to business school may delay some of the things you really want to do or have.

For example, if this associate wants to start a family, it is highly probably he will have to delay finding a partner and having children for at least two years. Once he graduates, he will be supremely focused on working his hardest to make back a return, which may delay him finding love for another 3-5 years.

The Better Business School Decision

If I was the associate's trusted uncle, I would tell him to stay on at his private equity shop for one more year and defer admission. During this time, I'd recommend he save 80% of his income after taxes. He could easily save $250,000+ and live off $80,000.

During his third year as an associate, he could make the firm tell him whether he is on track to make principal or not. If he's not, then go to business school. This way, he will have saved more money and not have to second-guess his choice.

The problem I sometimes see with young folks making big bucks is that they always think they can make big bucks. Unfortunately, life happens.

I know plenty of six-figure earners who went to business school and joined fintech startups. Their hope was that they'd win the lottery ticket with equity. Unfortunately, working in fintech doesn't pay well and few make it massive. And even if these fintech companies do go public, there's no certainty they will perform well.

Everything Will Probably Turn Out Just Fine Going To B-School

Despite all the reasons why I don't think the associate should go to business school, he is probably going to do great financially. It's a free world and he should do whatever he wants!

What we don't know is that he might be completely burned out from private equity. Or he might not really like the firm or the people he is working with. If so, going to business school is going to be a wonderful time to network, reflect, and explore. He clearly has enough money after working in banking and private equity for four-plus years.

Finally, there might be some asymmetric information going on here. I know Partner Peter loves his associate because he told me. But maybe the associate doesn't really know how much Peter loves him at the firm. Some me aren't that great at conveying their feelings, especially to subordinates in a work setting.

If the associate knew how much goodwill he has at the firm, maybe he would never leave!

Readers, what do you think? Should the associate give up his $600,000 job to go to Harvard Business School? Or should he continue working in private equity so that'll he'll be making well over $1 million by age 30? Is working in private equity really that much worse than working in venture capital or in fintech, where you actually don't make much money?

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39 thoughts on “The Most Illogical Reason To Go To Business School I’ve Ever Heard”

  1. While it may not be the case in this specific instance, the issue with many PE associate programs is they are 2, maybe 3 years, and out situations whereby the PE shops expects you go to to bschool and you can’t be promoted without going. Thus many people in PE leave these jobs for that reason. Now it sounds like he has a path within the firm but doesn’t like PE, fair. But to your point, then he should lateral direct vs getting and MBA.

    1. Yes, but I asked my friend, a senior partner whether he has upward mobility, and he said he said yes. So there has to be some disconnect that isn’t about the money.

      Maybe a quarter life crisis! Totally understandable after the last two years.

    2. He could have just applied to the Executive MBA and kept his day job. Plenty of schools offer it. Even with $600k, you really can’t live a comfortable life in San Francisco.

  2. Ms. Conviviality

    Maybe the associate’s decision isn’t about the money. Just this past weekend, I met a 20-something Argentinian woman whose father is American but grew up poor in Argentina. This petite woman sought out a physically demanding, 12-hour-a-day, high paying job in Argentina just to be able to save enough to come to the U.S. to get a degree in bioengineering. She spoke about the various jobs she has taken on while in school. One of which was as a personal assistant to the owner of a successful real estate company. The owner trusted her so much that he let her manage the business while he went on a two month vacation. I asked whether she had considered trying to create a similar company seeing that she had the knowledge, grit, and personality to run her own successful company. She told me that she can’t do a job just for money. She chose bioengineering because she wants to find solutions to problems and be able to contribute to the world.

  3. This is crazy!

    Giving up $600k/ year at age 27. I just looked it up and the average HBS MBA grad in the class of 2021 has a total 1st year comp package of $217k (according to

    So this person will forgo $1.2m in salary and probably pay $100k+ in tuition and then could make much less money upon graduation, in a similar job.

    I’m sure they will be ok given they are high achieving to get to this position but that’s crazy.

    By the way I actually did a full-time MBA a while back and it was good for my situation. But seems like a strange move in this case.

  4. Hot damn – that is the most bat $sh*t crazy thing I’ve ever heard! Agree so hard.

    I’ve always thought that MBAs are overrated, and frankly for some jobs nowadays undergraduate degrees aren’t even necessary. In fact, when hiring, I never, ever, ever, worried about hiring on prestige or background. I wanted someone with real-world experience and most of all a willingness to learn on the job. Attitude above almost anything else.

    Anyways, I get some jobs require an MBA, but I would do anything to avoid the added expense, and certainly never, ever, make such a backwards decision as this!

  5. Longtime Lurker in Bay Area

    I want to know how the associate got that job in the first place! (“Asking for a friend…”)

  6. If he is not financially independent it would be crazy to walk away from that money at 27 considering he has a viable path to the next level at his firm based on the article. I would stick with it until 30 and then reassess life at that point. Unless he is completely miserable at (and outside of) work it seems like he already hit the career jackpot

  7. I have a veteran uncle who is in his 40’s has an associates, has a great pension but doesn’t want to waste his education benefits. I’m trying to convince him into doing a MBA.

  8. Yeah, I suspect that he isn’t fully happy at his current job so it’s possible he is headed toward a burn out situation anyway at some point. I think business school can act as an “acceptable” way to have a gap year where you take a breather, meet new people, etc. I actually did something similar where I went back to business school in my early 30s partly because I was burned out and tired of my existing career. Then again, my opportunity cost was much lower because I was making far less than $600k at the time. Admittedly I think I’d find it hard to walk away from that type of money unless I was feeling really burned out. I kind of admire his confidence in walking way from something like that even if it isn’t the best long term decision financially..

  9. When I was a 2nd lieutenant in the US Air Force, I was told I’d likely never get promoted to major if I didn’t have my masters by then. Naturally, I that wanted to keep that option open and promptly ran out and got one. Of course, neither I nor my peers had to quit our day jobs (actually day and night jobs) to do it.

    I’m told it has gotten to the point where, to get a decent shot at making colonel, you had better have finished your doctorate. Doesn’t even really matter what these advanced degrees are in (most of the master degrees I saw people getting were MBAs.)

    I concluded the powers that be either wanted some additional status for the officer corps, were having a hard time making promotion decisions based strictly on merit, or to test everyone’s’ perseverance.

  10. I agree that financially it doesn’t make a ton of sense, though I can’t help think there are a lot of other factors at play. We don’t know the associate’s mindset or reasoning, maybe he’s unhappy and miserable and wants a change.
    Curious your comment about not making any money in FinTech, is that because the money goes to the CEO and founders mainly?

  11. Personally, I think that it’s a no-brainer that he should go. I actually think the opposite of what you think in regards to the opportunity cost being more for someone who makes more money.

    It’s true that for someone making more money, they are foregoing a greater amount of total money in order to quit their job to go to business school. However, someone who’s making that much money easily has plenty of money saved up in investments, thus foregoing a few years of working is no big deal for them. Even if they graduate in a recession year, they surely have enough money saved up to live comfortably to weather the storm.

    Business school isn’t an impersonal investment like buying a stock or a bond. It’s more like investing in a house you love to live in. Think about all of the interesting people he’ll meet and all of the unique experiences he’ll have at HBS. He can always make more money, but only a fraction of people get to experience HBS, along with all of the new things that he learns.

    Even if he comes out of HBS making the exact same amount of money he made before and at the same exact job, his life will be so much fuller and enriched due to his experiences, and he’ll have made priceless personal connections.

    Someone like myself who makes significantly less money than him feels a lot of stress at the idea of paying for business school and foregoing my salary because every dollar feels meaningful to me.

    For someone like the associate who I’m sure is working tough hours to earn that salary, I’m reminded of your article where you interviewed the nurse who said one of the biggest regrets older patients had is they worked too hard.

    All of the people I know who went to business school loved it and had a great time, even if in the short run they weren’t necessarily making that much more money right out of bschool. For the associate, this is a chance for him to try something different for a few years because he can afford it.

    1. What is stopping you from going to business school part time? Seems like you really want to go. Still get a lot of good relationship building experience.

      Your comment does remind me of Jim Carey’s quote, “ I think everybody should get rich and famous and do everything they ever dreamed of so they can see that it’s not the answer.”

      1. I’m not Kevin so i can’t speak for him, but part of it is that the guy can get into HBS. I wouldn’t quit a good job to go to a middle level MBA program (which is where I got mine), but HBS and a few others are different in terms of opportunities created.

        1. I’ll jump in and say as an added benefit, if he plans on having kids, his kids would now be legacies and have a greater chance of getting in. Depending upon your motivations, that could be a big sell.

  12. I went to state school undergrad. Landed a “prestigious” consulting job, but wound up going to HBS. Best decision of my life.

    As an engineer I was very skeptical that I would learn anything of value, but I couldn’t have been more naive.

    Further, what if we hit a rough patch in the economy and his PE job vanishes. Armed with HBS on his resume, he’ll be bullet proof come what may….

    No brainer that he should go….

    1. What were you making before HBS so we can have a proper comparison. And what is your compensation now?

      If he graduates in a recession, there will be fewer high-paying jobs with no guarantee of getting one.

  13. Work 5yrs until enough money to retire, then do what you want. Bonus play, take 50k/yr and Invest in high risk crypto if interested in truly being set for life.

  14. Neither. Assuming he is somewhat frugal and has saved his money he should buy rental property in the Midwest and build semi-passive income (more passive if he builds property management into his pro forms) until he’s covered what he needs to live. If he’s saved half of his income for even over the last two years he could likely cover base expenses. Work, save, and buy for another couple years with that salary he could be quite comfortable. He can then do exactly what he wants (unless that is specifically going to Harvard HBS of course).

    I decided not to go to business school part-time after getting in at 27 and instead focus on my career at my current company and building a real estate portfolio. Looking back now I’m so glad I decided to do that, even though my employer would have covered the tuition. It would not have helped my career at all and would have taken the time away that I needed to focus on performing well in my job and buying/managing real estate.

    1. Neither? You mean don’t go to b-school and just invest in passive income generating investments while working yeah I would think.

      There’s no way I’d give up $600,000 at 27, unless I was being abused at work.

  15. This is a tough one. It is so hard to convince a 27-year old who makes 600k a year how rare that is. But if you’re 27 years old making 600k, then you think that you’re always going to be able to make that kind of money.
    Of course, there’s a possibility that he’s right. He actually could finish school and pick back up where he left off. But, if he finishes the MBA and has to work for less, he’s going to be living with that regret for quite some time.
    Ah! “youth is wasted on the young”.
    I always hear about these rich celebrities losing all of their money on bad business ventures. WHY?!?? You were already rich!!
    There’s a quote in a movie called “From Dusk till Dawn” where the preacher (Harvey Keitel) asks the villain (George Clooney) “are you so much an effing loser that you don’t know when you’ve won?”

    Some people either don’t know when they’ve won….or worse, aren’t happy even when they’re winning.

    1. Yes, the dangers of making a lot so young so early. It’s easy to trick yourself into thinking the good times will last forever.

      I thought somewhat like that in 2007 at age 30. Then the financial crisis hit.

  16. Don’t forget what Cornell did for Andy on the Office. He was Dwight’s equal. Could he have achieved such lofty status without it?

  17. Hey Sam – one point to consider is that the $600k quoted here includes Carry, which likely is deferred far into the future and is certainly not cash received today (so your example of saving 80% doesn’t hold). The Associate may also have a belief that the investments in the fund are not turning out right and therefore unlikely to beat the hurdle rate / leave the carry worthless. That also goes hand in hand with affecting future fundraising and longer term trajectory.

    Finally I would suggest a Harvard MBA is a very valuable stamp that never really goes away; I’ve done a deal with an independent sponsor who worked 20 years at a premier IB and had a Harvard MBA and the latter is what is always used to describe why we partnered with him. I would suggest that most small business owners / lower middle market businesses place higher degree of value on this sort of elite credential – so having it can in turn open up the ability to run his own investments vs work for someone else.

    1. Maybe on the investments. Probably not as this is a tier 1 shop with a strong track record.

      The person that carries the most weight in business is the successful entrepreneur and business operator.

  18. Dunning freaking kruger

    Spock said it best:

    That is illogical!

    Perhaps the person already has family wealth so the salary is irrelevant. He is more interested in the alleged prestige and spiffy class ring and secret

  19. One thing I wish I did before going to college for my undergraduate was talk to companies I wanted to work for and see what education/experience they require for the position I want. In other words, what do you need to see on my resume in 4 years? Then make my decision.

    I think this person believes the Harvard degree will help his case, but it doesn’t sound like he confirmed that this move will give him what he actually wants.

    Then again, 27 is the age where you realize the path you’re on will soon become the only one, and not everyone deals with that loss of potential the same way.

  20. What a fascinating story. I can see the allure of HBS but given his income and desire to go into a related line of work I agree it doesn’t seem like the best use of his time and money. But perhaps it’s less about the money for him and more about the relationships. Although he may want to go all-in on his career after graduating perhaps he will meet the love of his life at school. Then it would be worth it. You’ll have to let us know what happens down the road if you get word. I’ll be curious to hear his outcome!

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