The Value of Business School

I've already started talking about the costs of business school, but what about the value? There is a party line that anyone who has researched business school will hear- the value of business school centers around three main things: 1.) the things you will learn, 2.) the way you will learn it (in small working groups with opportunities for real life applications and 3.) the people you will meet (also indirectly, the network that you are absorbed into- imagine the network available to Stanford or Harvard alumni).

But what about an overall industry perspective of the value of business degrees? At the rate that business schools continue to grow, won't there be a saturation point in the market? It is estimated that in the 1960s, there were approximately 5K MBA students graduating per year, but that number increased to 100K in 2000. Now, business schools across the country are producing ~150K MBA grads a year!

So here are my three predictions for the future market for MBAs:

1. Red Line- assumes everything stays the same, the value for MBAs continue to increase as MBAs become more popular (aka you're expected to have one) OR value of MBAs will continue to increase as they become more popular, BUT under the condition that highly prized MBAs (Stanford, Harvard, Wharton, Kellogg, etc.) become MORE highly prized as the market becomes saturated
2. Dotted Black Line-value of MBAs will increase in the short term, but as the market gets saturated, the value of MBAs will decrease (because everyone has one) until it flattens out (at a lower final value than current market)
3. Blue Line- value of MBAs will increase in short term until market becomes saturated, at which point, the market will value you them less and in turn, the public will decrease attempting to obtain MBAs. However, at another inflection point, MBAs will be scarce again and MBAs will increase in value and people will begin going back to school to repeat the cycle again

The above graph from Fast Company (a very good infographic came out recently around the statistics of  inequality in the US- highly recommend looking through it if you have the time) claims that bachelor's degrees make approximately $350 dollars more per week than their lesser-educated counterparts. I would assume that this is even more pronounced once you get into higher education. It also indicates that this disparity has grown over time ($170 dollars in 1979 compared to $350 in 2006).

In the current economy,  I think that we're more of a red line than a dotted line. In the long run though, I think we're fooling ourselves if we don't think that there's a re-balancing that will occur soon. I think it's more likely that the blue line will be the truth overall (in that MBA value comes in cycles) but probably not in the exaggerated manner I suggested above. Perhaps it would be more of a cyclical upward trend like the graph below.

Either way, I hope I'm either on the upswing or in the red line model. It would be very disappointing if I was in a dotted line model. More things to ponder in the business school game...