Should I Go Back To School?

Several of the readers of this site have asked about returning to school during the economic downturn. In some cases unemployment or the prospect of same triggers the idea.

There is no generic answer to the question “Should I return to school and upgrade my human capital?” Each individual’s situation has its own particularities and uniqueness. Each decision is a serious with respect to lifestyle, finances and opportunity costs.

Below is presented some correspondence between one reader and me regarding the decision. It is unlikely that it is directly applicable to those addressing similar questions. It may be useful in the sense that some of the trade-0ffs are discussed. For someone who has actually worked inside the educational establishment, I am certainly not what one might consider a major proponent.

Correspondence:

Request:

I hope you are doing well. It’s been a year since we last communicated but I thought I’d bounce a few ideas off you since I know you have a MBA and Phd background. I’m currently thinking about going back to school to pursue either an MBA or Phd in business. My bachelor degree is actually computer science but I’m interested in making a career change into finance/economics. Do you still think a graduate degree from a top school is a good idea? I’d love to hear any insight you could provide.

Nice to hear from you again.

I thought your entrepreneurial multiple income streams was a good strategy, although not necessarily a risk-less one. But then again, nothing is risk free, especially these days.

My background is in technology and I think I will always dabble in the space, but one of my other big passions is economics and the markets. Honestly, my ideal setup would be to make a little money in the entrepreneurial space, then maybe use that money to seed some sort of “fund” or get into managing money. While my “street experience” and investing track record is pretty good, I’m severely lacking in the formal education in the finance space. This is definitely part of my thought process for going the MBA route.

While the entrepreneurial pursuits are still very much alive, I do still have a “day job” – I work in the family business.  Of course, there is risk of the entrepreneurial activity falling flat, and I’m still rather far off from supporting myself with various websites. Plus, the family business opportunity is pretty limited and getting worse each year. As such, I somewhat think it makes sense to transition sooner rather than later into a field which represents more opportunity as well as lines up more with my interests. Meanwhile, in the next few years if some of the websites I’ve started pan out further, then that’s great.

Moreover, if one of my sites were acquired, I’d possibly even consider the Phd route. I have a strong interest in the connection between global macro economic events and investment strategy and would really enjoy researching that and maybe putting together some investment strategies based upon that research. However, the Phd isn’t as attractive as an MBA so at this point I think MBA is the better path.

With regards to the MBA, I do think they have really lost value in recent years and as such, I wouldn’t spend the resources on it unless it was a top 20 or so institution.

This was a lot of rambling, but I do appreciate you taking the time to let me bounce a few ideas off you. As someone with vast experience in the academic and corporate world, your insight is much appreciated.

Warm regards,

Response:

Looked at your site. Nice job.

An MBA at a top-ten school will probably cost $100,000 plus and that doesn’t count the opportunity costs. If you are a networker, you will make friends that may serve you well later in your career. Regarding top ten schools, there are at least 50 that claim they are in the top 10. None are in FL.

You don’t need an MBA to get into a role as financial planner/investment manager.

I am not against an MBA. For me, it was an incredible learning experience (I was fortunate to have as professors three Nobel Laureates (Milton Friedman, Ronald Coase and George Stigler) and knew a fourth (Merton Miller of Modigliani and Miller fame). That was the University of Chicago during the mid to late 1960s. As I recall tuition was $570 per quarter and the normal course load was 3 courses, although more could be taken for the same price. 20 courses were required to graduate and  six quarters were the norm to complete.

Total tuition was about $3,500 total. I suspect one course costs that much or more today. Starting salaries for those with no work experience (in those days, U of C allowed you to come in directly from undergrad school) were about $10,000. I don’t know what undergrads earned because I never interviewed from college. The point is, that the relationship of salary to tuition was about 3:1. Comparable numbers today (if you can find them) would probably be 1:1 or less.

That was a different time and place. My goal was corporate finance. (Wall Street and banking had not yet become prime destinations although consulting had.) The MBA was important for corporate finance and still had a meaningful ROI on the time and money invested to get it.

If you want to manage money, I would get into the industry with your current credentials and take a closer look before committing to a rather massive money and time commitment associated with more schooling. The CFA Institute is worth a look in this regard. With or without an MBA, it is likely necessary.

Life is, or should be, a continuous learning process. Much more is learned (or should be) out of school, regardless of the number of years of education. The deterioration in our educational system at all levels has soured me on formal education. Unless you need the “credential,” avoid the failed education establishment. You can learn anything you truly want to learn on your own. Only the lock still held on credentialling cannot be avoided. Without that need, forget formal education.

Hope this has been helpful. I wish you success however you proceed.