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The Opportunity Cost of an MBA

With round one deadlines behind us, some MBA applicants are considering whether to take the plunge and apply. An important question that you may be considering is whether the MBA is a worthwhile investment. What is the opportunity cost of an MBA?

When debating the merits of an elite MBA degree, skeptics often cite the opportunity costs of attending top MBA programs. An Economics 101 term, opportunity costs refers to the value forgone when choosing one action over another.

In the MBA world, opportunity cost typically refers to the salary, benefits, and job opportunities forgone during the typical two-year MBA program.

Critics argue that a two-year elite MBA degree, in addition to costing tens of thousands of dollars, also costs too much in terms of forgone salaries and missed time in the work force.

At first glance, this opportunity cost argument is rather compelling, especially in a sluggish economy.

Top MBA programs often demand hundreds of thousands in tuition and fees, and leaving gainful employment to incur that sort of debt is certainly a daunting prospect.

Indeed, high opportunity costs are one factor driving demand for one-year or part-time MBA programs, each of which minimizes absence from salaried jobs.

I believe this will be a growing trend in years to come, as more schools follow Kellogg’s lead in developing and focusing on one-year MBA programs.

However, I also believe in the value of the two-year MBA, opportunity costs and all.

There’s plenty of talk about the opportunity costs of pursuing your MBA, but let’s take some time to focus on what you will miss if you don’t get that MBA…

The opportunity costs of not pursuing an MBA

The most obvious benefits of a top MBA degree are fairly easy to enumerate- excellent education from top industry professors, stimulating classes, and proven leadership training.

However, there are other benefits that often get overlooked- long-term opportunities that you might miss out without that top MBA ticket.

– Extensive Alumni Networks: Top MBA Schools like HBS are notorious for their committed and well-placed alumni networks.

Graduation from such an elite program will ensure a lifetime place in this network and entrée into an impressive web of benefits- networking, job introductions, partnership opportunities, mentor relationships….the list could go on.

– Leadership roles in the workplace: An elite MBA can put your career on the fast track by giving you comparative advantage over other sharp, ambitious young employees.

Faced with several relatively equal candidates for a leadership position, an employer is very likely to note and respect an MBA degree, especially from top institutions known for producing consistent leaders.

Giving yourself such an advantage makes sense in any market, but especially in today’s extremely crowded and competitive job market.

– Expansion opportunities: Two years at an elite MBA institution can be the perfect time to expand or re-direct your career, or to strike out in a different direction.

MBA classes will expose you to a variety of different fields, and your class will be a veritable melting pot of ideas, ambitions, and opportunities.

Missing this opportunities could mean doing a disservice to your own professional and personal growth- there is no knowing where such exposure and education might lead.

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