COURSE OF ACTION

A brief history of the MBA




“A CAREER-TRANSFORMING, LIFE-CHANGING LEARNING EXPERIENCE.” JAMES WALLMAN SETS OUT TO EXPLORE THE HISTORY AND ATTRACTION OF THE MUCH-COVETED MBA.

My favourite line about America’s most outspoken businessman was a comment made by Kellyanne Conway in November, just after the election. “It’s a great story for America that someone with zero political experience can pop in and become president of the United States,” she said. “It really is the American dream.”



Think about this statement for a moment, and you can see she’s right. President Trump does encapsulate the American dream. And he does this through two indisputable facts that both begin with the letter B.

First, Trump is a billionaire. That doesn’t just mean he’s rich. As Alexis de Tocqueville observed in Democracy in America, in a fluid society like the one in the US, a person’s worth is measured by their wealth. So Trump’s money is not only a measure of his financial power. It also signifies that he is worthy of respect.

The second B is for businessman. According to former president Calvin Coolidge, speaking back in January 1925, “The chief business of the American people is business.” So, while some scoff at the idea of someone with zero political experience in power, there’s another view that says it makes perfect sense in a business-oriented country like the US.

Take the US’s pioneering graduate business schools, for example. The first business schools were founded in the 19th century in Europe, in cities like Paris, Antwerp and Budapest. But the first Masters in Business Administration (MBA) – now considered the gold standard in business education – were first taught in the US, four decades before they were taught anywhere else.

Harvard University ran the first MBA programme in 1908. Based on the ‘scientific management’ revolution influencing industrialists like Henry Ford, it was a turning point in business education, and instantly popular. From 80 students in 1908, Harvard’s intake rose to 300 by 1920 and to more than 1,000 by 1930.

As capitalism took off in the 20th century, so did the allure of business, business schools and the MBA. In the US today, more master’s degrees are awarded in business than in any other discipline – almost 200,000. And there are now hundreds of business schools all around the world, from the Indian Institute of Management in Ahmedabad to INSEAD in Paris and Singapore, from Boston, Massachusetts, to Cambridge, England.

The thought of an MBA, then, sparks many questions. But there’s only one place to begin: should you get one? The answer is surprisingly simple. I’ll assume that you value status, a certain standard of living, health and longevity. If you do, the answer is yes.

As Sir Michael Marmot, one of the world’s leading public health experts, shows in his book Status Syndrome, status is key to a long, healthy life. And while money is important, the closest correlation to status can be found in the level of educational achievement. Graduates, in general, live longer than those who drop out of education after high school. Those with master’s degrees outlive graduates. Doctors live longest of all.

Of course, MBAs are expensive. They take a lot of time and cost a lot of money. But MBA graduates tend to pay off the cost of the course within around four years, including the requisite living expenses and the opportunity cost of what they would have earned over that period. They tend to earn a lot more after than before. MBA graduates from the top 50 business schools, according to the Financial Times, earn between 70 per cent and 142 per cent more than they were earning pre-MBA.

Besides the money, people with MBAs tend to progress faster and go further. Three out of ten CEOs at the world’s 500 largest listed companies by market capitalisation are led by an MBA graduate, also according to the FT.

So MBAs help if you want to earn more, get ahead and lead a large organisation. But are they also relevant for startup entrepreneurs?

“Sure, startups are asking why they need an MBA,” says Jonah Berger, author of bestselling books Contagious and Invisible Influence, and associate professor of marketing at The Wharton School. “You don’t need one to have an idea, but to grow that idea, understanding management certainly helps.”

Many of today’s most newsworthy startups are the work of MBA grads. For instance, Deliveroo was co-founded by a Wharton MBA, and has raised almost half a billion dollars in funding.

So now you’re thinking about an MBA, there are further questions to ask.
A regular MBA or a specialist one? Full-time, part-time or online? And perhaps most important, where?

If you’re a purist, and you want to lead one of the world’s largest companies, you’ll want one of the leading schools, like Stanford, Wharton, or Cambridge Judge. These schools pride themselves not only on teaching the ‘hard skills’, like financial management and decision-making, but also on ‘soft skills’, especially leadership and networking.

“A key question for any prospective MBA student to think about,” says Jaideep Prabhu, co-author of Frugal Innovation and marketing professor at Cambridge Judge Business School, “is not only the book knowledge you need, like finance and marketing, but also about the practical skills that will help you to communicate, manage emotions, lead teams and motivate others.”

If you’re more practical than purist, and especially if you have children or some other reason to stay put, you’ll consider a school closer to home, or an online course, which are rising fast in popularity. According to higher education organisation the Graduate Management Admission Council, online courses will have risen by 9 per cent in 2017. While you might miss out on some of those networking opportunities, you’ll probably still earn more after completion: a friend of mine upped his salary from £40k to a whisker under £160k within three years of finishing an online MBA at Warwick.

“Three out of ten CEOs at the world’s 500 largest listed companies by market capitalisation are led by an MBA graduate”

Once you’ve decided on your mode of study, you’ve got to narrow down the style of MBA. One of the core benefits of the MBA has always been its generalist nature. The skills are transferable and the network wide.  But, today, many people already know the area they want to pursue, so specialist MBAs work for them. If you’re one of them, and already set on a career in shipping, CSR, tourism, sports management, music, there’s probably a tailored MBA out there to suit your needs.

Another question worth asking. With the rise of MOOCs – Massive Open Online Courses – do you even need to shell out the required thousands to get the skills? Couldn’t you get the ‘hard skills’ online, and spend more time working on networking and learn leadership skills elsewhere?

So having made the decision to MBA, more complex answers as to where, how and whether it’s really right for you still need to be answered.

But despite the clear benefits, an MBA isn’t essential for success. After all, seven out of ten of the world’s largest listed companies by market cap are led by people who aren’t MBA graduates. And America’s CEO, while he may have once have had his own eponymous university, doesn’t have an MBA either.

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