People often ask me if I have an MBA. “No,” I reply, “but I did go to business school.”
I was fortunate enough to participate in the Carl H. Linder Honors-PLUS program at the University of Cincinnati, which is essentially an MBA at the undergraduate level. As a result, I’ve had the opportunity to experience what business schools teach without the enormous price tag. Here are the four most important things I learned in business school:
Always Consider Opportunity Costs
Here’s what I learned in finance class: whenever you choose to invest your time or money, you’re simultaneously choosing not to do everything else you could potentially do with that investment. The principle of opportunity cost applies to everything: every choice has hidden costs, whether you’re buying groceries, quitting your day job, or taking on a new project.
Financial concepts like the “Time Value of Money” and “Net Present Value” are essentially methods of quantifying opportunity costs – given a particular timeframe and what you know about your next-best potential return, you can figure out whether or not a particular investment is worth the asking price.
The more you can uncover the implicit costs behind the decisions you intend to make before you move forward, the better your decisions will be.
All Prices are Arbitrary
Here’s what I learned in real estate: every price is ultimately arbitrary – the seller decides what it will be, then adjusts it until someone buys. There are a few basic ways to estimate what someone else will pay: estimating replacement cost, looking what other people in the market are paying, calculating the value of a series of payments, or figuring out how much subjective value the offer has to the other party.
Think of selling a house – how much should you ask for it? You could (1) figure out how much it’d cost to re-purchase the land and re-build the same house now, (2) see what similar houses in the area have recently sold for, (3) estimate how much you could rent the house for, then discount that series of cashflows to the present, or (4) sell against a particularly appealing characteristic of the house that makes it even more valuable to particular buyers. (Example: a market-priced $200,000 house can easily sell for $2 million or more if it was previously owned by Elvis Presley.)
No matter what strategy is used, however, it’s ultimately the seller’s responsibility to assign a price and convince the purchaser that it’s worth even more. If you want to put a $5 million price tag on something, go right ahead. Selling is mostly a psychological process of convincing yourself it’s worth that much so you can then convince prospective buyers. In that way, every price is fundamentally arbitrary.
Never Forget the Expectation Effect
Here’s what I learned in operations management: every human interaction is influenced by the expectations each party has going in. If the experience is better than the expectations, the interaction is judged to be pleasant, good, or high-quality. If the experience is worse than the expectations, the interaction is judged to be dissapointing, bad, or poor-quality, even if it’s demonstrably better than other available options. This relationship applies to dealing with everyone: your customers, your boss, or your significant other.
The Expectation Effect explains why people can be dissapointed after having dinner at the most expensive luxury restaurant in the world, why a particular company’s stock tanks 20% after earnings are $0.01 less than anticipated, and why most people think the first Matrix movie is better than parts two and three.
The venerable business adage “under-promise and over-deliver” is a direct statement of how to apply the Expectation Effect – ensure that people are excited enough to move forward but don’t have inflated expectations going in, then do everything you can to amaze them. It’s a difficult balancing act, but it always works.
Actual Experience Beats Any Credential
Here’s what I learned about getting a job: real experience trumps credentials every time. One of the best features of the Honors-PLUS program was mandatory co-op: the program lasted 5 years, but 1.5 years was invested in doing actual work for an actual company, getting actual experience. The university has recruiting relationships with hundreds of regional employers, which made it possible to get interviews with major companies in the area.
Co-op is the only reason I was able to work as an Assistant Brand Manager at P&G (a position that typically requires an Ivy League MBA) straight out of undergrad – I’d been working for the company for a year and a half, and the managers knew the quality of the work I did. I knew the company, I knew the people, and I had real skills that were valuable and needed. The piece of paper I received after graduation was an afterthought.
If you’re currently pursuing (or preparing to enroll in) an undergraduate college education, co-op or internship experience is critically important. If your intent is to land a high-paying job after graduation and you’re not graduating with at least a year of real-world experience under your belt, you’re probably wasting your time and money. Real experience is what employers and customers value.
Did you go to college? What were the most important things you learned?
{ 22 comments }
“real experience trumps credentials every time.”
Isn’t this sort of a chicken and egg situation though? You need credentials to get the quality experience.
Take your own example: you were able to gain experience through a co-op largely because you were part of the Honors-PLUS program right?
I agree 100% with you to the extent that experience trumps credentials, but credentials create the opportunity to gain experience. If two recent grads without much previous experience are offering you free work, you’re going to take the kid from Harvard every time.
PCD – not really. One of the legitimate services MBA programs provide is match-making with corporate recruiters – they act as a filter, which HR departments appreciate. Going to a top school is the equivalent of spending $100,000+ to increase the probability of getting an interview with Goldman Sachs, you’re sure that’s what you really want to do. So you’re right, in a sense – I probably wouldn’t have had an interview for P&G had I not participated in UC co-op. (I actually had my interview before I was in Honors-PLUS – this was open to all UC co-op students.)
Once the interview was in place, however, getting the job came down to experience. We’ll see if Ray (my recruiter, former manager, and friend) jumps in to comment, but there are two key factors that were in my favor during the interview. (1) I’m an Eagle Scout, so I had more experience leading a team and managing work than most of my peers; (2) I had actual web design / programming experience on real projects, which was a skill a few teams were looking for. You don’t need a credential or a job to get valuable experience. Personal or side projects can be just as useful, even from the perspective of a hiring manager.
If you’re an entrepreneur (or want to be), the hiring issue is moot – just go out and do what you want to do.
Internships are one way to gain experience but volunteering is also an option. Not only can a young person gain valuable business experience but depending on the type of non-profit involved, they also may see the real-life “justification for higher education.” Nothing inspired me more to get an education than working in the truck fields as a teenager.
There were several nuggets of knowledge I took away from MBA school.
1. Management is about understanding people and how they are motivated. One size does not fit all. You really need to understand your staff and what motivates them.
2. A manager should wait for things to happen at least 50% of the time. This means be available when a crisis occurs. Never be so booked that you can’t drop it to help out.
3. Do the research and do the math. Most poor decisions are made because no one bothered to do the research and then figure out if it’s worth doing.
4. Management sets the culture of the company. A bad culture is the direct result of bad management.
Jarie – excellent adds. Thanks for sharing your experience!
thanks for the insightful post. I really enjoy reading your blog.
What I perceive to be missing (and am curious about) is – the people aspect.
Did you meet any interesting people or develop any relationships that were transformational?
Great post Josh! I would add that if you’re planning on going for a 4 year degree, don’t major in business. Study something that really interests you and stretches your intellectual ability. If you learn to think and learn in undergrad, business will be easy to pick up. I’ve found that people who focused only on business in their education tend to be weak in creative and analytical thinking. Study philosophy, history, chemistry or whatever, but try to get a mix of qualitative and quantitative education, and pay attention to the professors that are most inspiring. I’ve found that the quality of a particular professor matters much more than the title of the class, and EVERY university has good and bad instructors.
The most valuable thing I got from business school was confidence. I was in a classroom full of highly capable people, and I found that I was able to keep up with them, and excel above most of them in some areas.
Confidence subsequently helped to accelerate my career. I was able to try things that I would previously have been reluctant to try because I didn’t know I was able to do them. I was able to hold my ground with others when I disagreed with them on business matters. I was confident I knew which business issues mattered and which didn’t for the stuff I was working on, and skip the stuff that didn’t matter.
Aside from confidence, I really liked interacting with some of my class mates. Even now, more than 10 years later, some of them are still my friends.
Franklin – sure… I met some of my very best friends in college, and I have a few mentors that I still keep in contact with. The social aspect of university is certainly beneficial, but there are many other interesting (and much cheaper) ways to make friends. After all, you can travel around the world for a year for less than 5% of the cost of a $100,000 MBA program.
The implicit assumption of higher-education is that, after graduation, you’ll be able to get a good job that provides a significant return on the investment, so I focused more on the learning and ROI aspects in this post.
You do NOT need credentials to get experience. I have decades of experience at some very cool small companies, doing really fun and important stuff. I’ve been running my own businesses (3 closely related ones) for quite some time. I have no college degree; in fact, other than a telecom class in adult school, absolutely no official training of any kind, in any thing.
If I went looking for a job tomorrow (perish the thought) I’m positive I would find something fulfilling and exciting at a really cool company.
Anyone can do this with some effort. First step, though, is to believe you can.
Yes, yes, yes, yes, yes!!
Josh, I couldn’t agree more with what you’ve outlined here. Having gone through the business school experience prior to working in the field, I can say that it was just another bunch of classes with lots of cocktail hours on the weekends. I learned communication skills and how to network more than I learned the fundamentals of investing, operations and management.
There is certainly no substitute to doing and PersonalMBA is certainly a great exemplar of that.
Jesse – I disagree. If you feel the need to get any kind of credential (including an undergraduate degree), focus on getting it as quickly and inexpensively as you can, and get one that’ll increase your perceived value as much as possible if getting a job is the desired end goal. My program was 5 years of real time, but 3.5 years of classroom time, so it was pretty efficient as far as undergrad programs go.
I minored in Philosophy, and it was a great experience, but I’m very glad I didn’t major in it – in the working world, the skills like critical thinking, deep questioning, and deconstruction are massively undervalued unless you work for yourself or are in a position to negotiate your own terms. Soft subjects are best learned on your own.
I love learning much more than most, but if you’re spending big dollars and investing years to get a few letters on your resume, focus on things that will provide the biggest bang for the buck. Otherwise, you’re taking on too much debt for too little benefit. Harder disciplines like math, science, engineering, math, and business typically have the best returns. Unemployed humanities students (at every level – undergrad, masters, and PhD) are numerous enough to be a cliché.
Great post – thanks! I’d like to add a comment on two of the points you raised:
1 – The reminder to consider opportunity costs is something I’ll take to heart. A lot of opportunities come my way, and I tend to jump on them without thinking through what else I could do with my time. Opportunity being the topic, I’ll throw in a favourite quote from that well-known management theorist, Ann Landers – “Opportunities are usually disguised as hard work, so most people don’t recognize them.”
2 – I couldn’t agree more with your observation about the value of experience over credentials, and I’d add that you can (and should) invest in creating your own credentials, even if you have a good degree. When I was in university I had a co-op term and never went back to finish my degree – I just liked the world of work too much. (Funny, given that your post also talked about the value of a co-op program.) That was over 30 years ago, and in all the time since, no one (other than immigration authorities granting work visas) ever asked for my credentials, or even a resume, at least until a request came out of the blue this year. What’s key is to (a) regularly take the time to reflect on your experience and capture it (not just think about it!) and (b) find ways to demonstrate/share your growing experience and knowledge. Even in that first job, I didn’t hesitate to share what I’d learned through presentations within the company and to relevant groups around town. Later, I built courses to teach it to other people, and started getting asked to travel to conferences to speak. I did a lot of that, and eventually wrote a book that is widely used as a text in MBA programs. (Ironic, given that I don’t have a degree.) The point – lots of people are smarter, more articulate, or have richer experience than me, but even in the age of blogging and social media, a surprisingly small percentage of professionals take their *own* experience, distill an asset from it, and then do something with it.
I’m still glad that all four of my kids have, or are working on, their university degrees – I don’t want to sound like I’m saying that isn’t important, because it is, and increasingly so. But experience, and demonstrating that you’ve learned from it, counts for more than some might think.
This comment is already too long, so I’ll resist the urge to go on about the apparent conundrum of “you need the credentials before you can get the experience.” In short, it’s more cliché than fact.
Thanks again for the excellent post – I’ll be sharing it.
Great article, but in Australia don’t take the “real experience trumps credentials every time” advice. I am in IT and never got the opportunity to go the university but have been programming for over 15 years. In Australia it is not “can you do the work” it is “what qualification do you have”.
Here are the three answers to any question in business:
“It depends”, “variability is the devil” and “pooling!”
Simon (comment 14) – my fellow Aussie!
I think it depends what field you are in. I’m a graphic designer (in Sydney) and have found that a well structured portfolio lined up with industry knowledge helps more than whether you studied at University, Tafe or a private college and I believe the same goes for web design too. If you know exactly what you’re doing, you have the knowledge and talent then I think moving through the industry is quite easy (in the respective career choices just listed). When I am hiring, there are a lot of factors which trump qualifications. Although, I do understand that perhaps recent qualifications may mean up-to-date industry knowledge.
Pick the best business schoool you can get into with the best career services options.
The principles I learned in Supply Chain Management will be obsolete eventually, and in my computer information systems classes, some already are.
What will never go bad is the skills I learned in the 2 career classes I had to take, and the value that was provided to me by having 365 companies come and interview on campus for full time positions just from the business school. That afforded me my first, high paying job, and has made me far and away the youngest person in every position I have held so far.
Hey, Josh.
I am currently a University of Cincinnati College of Business student, im in the college’s Kolodzik Business Scholars Program(I don’t think the college had this program when you were a student). I’ve been reading your blog for a while, I’ve never known you were a UC graduate. That is remarkable. I’ve always found your writings to be very relevant to me, but now they seem even more so. Have you ever thought about coming back to the college to talk to students?
Chris
Great post. The value of actual workplace experience is important. And the value of education built around real work experience makes the learning experience much greater. I am a big fan of Deming’s ideas. Fordham University has a Deming Scholars program which heavily uses internships. http://management.curiouscatblog.net/2008/06/08/internships-increasing/
Isn’t this sort of a chicken and egg situation though? You need credentials to get the quality experience.
Read more: http://personalmba.com/business-school-top-four/#ixzz0R3VQAUcY
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I beg to differ. I know several executives from VP of Marketing to COO and CEO whose only credentials are based on the work that they did. I personally am beginning on a college career at 31, not because I am unemployable, but because I no longer want to be in the industry I recently left. I want to be in a highly specialized field that requires the degree. I have employed hundreds of great employees with no credentials. I have also had employees with MS, BS, BA degrees who were non functioning in the simplest of productive capacities. Credentials are overrated except where there is a direct application of them. Without the real life experience, as an employer, I could care less how much paper sits on the wall above your desk, you simply do not know the business.
It’s human nature to present and defend our own perception of the world and success. And, if that works for you – great! However, as someone with a foot in both higher education and the real world I’ve observed the following: Experience AND your academic credential will give you the best competitive edge long term. One can argue how a cheap MBA online worked for them because they know how to sell themselves. Another could say a top tier MBA changed their life because of the doors opened. But, again, just seeing people mature in their careers – my money is on the credential combined with the experience. You double your chances to placate your judges/audience. Different things are important to different employers and investors. However, you must be prepared to deliver RESULTS no matter what your experience or pedigree. I’ve encountered man fabulous students willing to do the work, but, a few who over-sell themselves, point to a few cushy internships, then fall short on delivering results in the real world. Ulitmately, this is how we are all judged.
Good stuff!
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