Which Graduate Degrees Are the Best Investment? (Why I Skipped My MBA)
When I was 27 years old I was at a crossroads. I was five years into my career, yet I was stagnating. Though I was making six figures, which was great for my 20s, I knew I couldn’t make much more at my job. Without an advanced degree, my future compensation would be an endless chain of 3% annual “cost of living” adjustments and nothing more. At that moment, I knew I had to make a change.
So I considered getting an MBA. I did research on different programs, the kinds of roles they led to, and what I could reasonably earn after graduation. Unfortunately, that’s where my MBA journey ended.
After looking through the data, I discovered that the post-MBA salary (back in 2017) wasn’t that much higher than what I was already making. So why would I give up two years of income and pay $150,000 just to get a job where I’d earn about the same? While money isn’t the only reason to get an MBA, financially, I couldn’t justify it.
But here’s the real issue I was wrestling with: even if my earnings did increase after getting an MBA, how would I know that this was due to the degree itself and not just my increased age/experience?
This is called a counterfactual, or an alternate version of the world. If I got an MBA, the counterfactual would be how much I would’ve earned without one.
Of course, we can’t actually know the counterfactual. We can’t reverse a decision in the past and see how reality would’ve played out instead.
But there is something we can do. We can compare the earnings of those who got their MBA to those who didn’tget their MBA, but are similar in many other ways. Then we can find the present value of non-MBA lifetime earnings and compare that to the present value of the MBA graduates’ lifetime earnings (after netting out the cost of the program and the years of lost income)
