"MBA is worthless": or is it? The ROI calculation that helped me NOT to attend

As an international candidate, I got admitted into the full-time MBA programs at both University of British Columbia (Sauder School of Business), and McGill University (Desautels Faculty of Management) in 2024. I later decided NOT to attend. Here is why.

My background is pretty unique, but so is each applicant's

I want to start off by saying that this is not a trash talk on the business schools. Both Sauder and Desautels are great institutions. Nor do I think MBA is worthless. However, as an older MBA candidate at the age of 36, I've got more things to consider than a 20-something year-old. So my decision making criteria may not suit you. However, one thing I'd say is that an MBA is really an investment, which you need to ask for its return on investment. Don't be fooled by the name and prestige. At the end of the day, your goal is to find a job with a high salary package, and an MBA is the way to get it.

The thinking process that leads me to rationality

I didn't know where to start in the beginning. After all it was me who was chasing after an offer in the first place. I didn't think of the decision from a pure ROI standpoint; instead, my emotions were clouding my judgments. So I put my doubts on a paper to clear my mind. My method was:

1. Try to ask some extreme scenarios to reveal my true underlining values, and 
2. Use a method called "inverse thinking".

Extreme Scenarios

Questions	Yes, no, maybe	Reason (if any)
If it is the Harvard Business School, would you go, even if you pay 100% of the tuition (200K USD)?	Yes	High upside
If a school covers 100% of the tuition, would you go?	Yes	Low downside
If you are working for a reputable employer such as Disney on a high position already, would you go?	No	Mismatch with the MBA employment pipeline
What if you are currently unemployed, suffering at work, or on the verge of losing your job?	Maybe	...But generally it's not a good idea to run away from a problem by going to business school.
If there is a job waiting for you, conditioned that you have an MBA degree, after graduation, would you go? (Say, a job from your dream company)	Yes	Low uncertainty
If you have an opportunity to study at the Stanford Graduate School of Business, another opportunity to launch your company at Y-Combinator, which one would you take?	YC	While you get to hang out with all the smart people at GSB and learn from them, you can get the same result from YC, and you will be working on your company/product instantaneously.

Inverse thinking

Inverse thinking may mean different things to different people, but for me the question I asked myself was:

Option 1 - "not going to business school":

• What could go wrong? I am still working with the same employer after ten years and when I look back there is little accomplished. I have gained an additional ten years of age, and that's the only thing I've gained other than my weight. I essentially followed my parents' footsteps, albeit in a different city, and my focus will be on my kids. 

Option 2 - "going to business school":

• What could go wrong? I didn't get a job after graduation, and I gained an additional two years of age. Jobs are hard to find, and the economy of the Canada is getting worse. I had to resolve to manual labor to support my family. And I'm thousands of miles away from my parents and the wider family.

Insights from all the thinking

By engaging in the "extreme Scenario" thinking process, I learned that what I really want out of life is FREEDOM, and financial freedom is a big part of it. At this point in life I'm no longer fascinated by big name employers; I'm mature enough to know that except a few rare instances, working for others WON'T get me closer to my ultimate goal - FINANCIAL FREEDOM. Considering that an MBA is for the most part a gateway toward a fancier job with a bigger pay, for me it may not a necessary step. And you don't need an intermediate step toward your ultimate goal.

By engaging in the "inverse thinking" process, I learned that I can live with both extreme scenarios. It's not the end of the world. However by taking into consideration of access to the wider family, i.e. whether I can easily visit my parents, etc., I'm leaning more toward Option 1.

What is your goal? Contain your downside, or lift your upside?

I didn't see it at the time, but what this thought process really did was it helped me identify my ideal upside and worst downsides. Now I just need to put a number on them.

• Upside: achieve financial freedom in five years
• Downside: deteriorating household financial situation because of unforeseeable circumstances

I've already set the premise that other than a few rare occasions, working as an employee will NOT help me lift my upside. I might be affected by the book <How to get rich>, which I was reading at the time, but I genuinely believe that ownership is the only gateway toward financial freedom, not a better job. Having ownership means that you get to participate in the unlimited upside when things go well.

But which one is more important for now, containing my downside, or lifting my upside? Depending on your priorities, some may go to study abroad to protect their downsides, i.e. they need to stay close their family, or they need to get away from some bad situations. But to me achieving the higher upside potential is more important, because I need money and resources to protect my downside. 

To lift my upside, i.e. achieving financial freedom, is Canada the place to do it?

Good things don't happen over night, so one shouldn't judge the outcome of a decision with a short-term mindset. Therefore, I set the timeline at five years. 

The five-year ROI of a Canadian MBA

Since getting a job after MBA is still the most likely outcome, I need to get a general feeling of how a job will likely pay off. By taking into consideration of my opportunity cost of not working for 20 months, the overall investment for attending a full-time MBA program in Canada is around 235,000 CAD.

Tuition	(100,000)
Rental: 2000/month x 20 months	(40,000)
Living exenses: 1500/month x 20 months	(30,000)
Total out-of-pocket costs	(170,000)
Total opportunity cost	(100,000)
Total cost of Scenario Canada Without income	(270,000)
MINUS: 8 months of internship income, assuming 4333CAD/month x 8 months	35,000
Total cost of Scenario Canada with Income	(235,000)

According to the 2023 Employment Statistics of the McGill Desautels Faculty of Management, the MBA graduates have a median annual salary of 92,000 CAD. Well I do believe that I belong to the better half of all graduates, I'd rather fall on the conservative side of things in my calculation, so 100,000 CAD it is.

Assume that the after-tax salary from the 100,000 CAD is 73,571 CAD, or 6,131CAD per month. By the time when I join the workforce, I will be joined by my family, so the average monthly expense will be a bit higher, or 4,500 CAD, inclusive of rent. I will have a monthly saving of whopping 1,631 CAD, or an annual saving of 19,572 CAD. In five years I will be able to recoup 97,860 CAD, or only about 42% of my initial investment. In other words, in five years I will be financially far worse than where currently am if I get an MBA degree in Canada. 

But just how much money will I have to make annually, if I want to recoup my initial investment in five years? Well, with some simple calculation and estimation, I will need to make 150,000 CAD per year. Neither Sauder nor Desautels provided the [20%, 80%] salary range for their graduates so I don't know the likelihood of my achieving that, but I don't think it's high (or else they will publish).

The five-year ROI of a US MBA

Just as a side note, what is it like for a US MBA program? Here is my calculation:

Tuition	(150,000)
Rental: 2000/month x 20 months	(40,000)
Living exenses: 2000/month x 20 months	(40,000)
Total out-of-pocket costs	(230,000)
Total opportunity cost	(74,000)
Total cost of Scenario US Without income	(304,000)
MINUS: 4 months of internship income, assuming 10,000USD/month x 4 months	40,000
Total cost of Scenario US with Income	(264,000)

Assuming that I will get a 170,000 USD job, which is a median salary for any top MBA program, will my 264,000 USD investment be paid off in five years?

My after-tax salary will amount to 126,248USD, if I got a job in Seattle. That's like 10,520 USD per month. Assuming that I can keep my overall expenses at 6,000 USD per month, I will net 4,520 USD per month, or 54,240 USD per year. In five years I will recoup 271,200 USD, a number slightly over my initial investment for the MBA. However, the real challenge after all of these for a US MBA program is the country's immigration policy, and that's a totally different subject for another day.

I've decided to stay, but the whole process helped me better understand what I want in life

While I've heard a lot of good things about Canada, but going back to business school doesn't work for me right now. Studying MBA is the US makes the most sense purely because of its traditionally strong job market; one who got into a top business schools should still go for it, especially if you are still in your 20s, since you will ride the high-salary tailwind for a long time. However, if you are seeking a level of financial freedom that can buy out all of your time so you don't have to grind for other people in the office, no job in anywhere in the world will get you there in the short term. Ownership, also known as taking risks, is the key to get there.

Some final parting advice

I hope you don't find MBA is worthless after reading this. An MBA is an incredible valuable education for high achievers who want to fast track their careers. These people are ambitious and hard-working, and should be rewarded. Yet just like everything else in this world, there is a time and place, so invest in your education wisely. There are two things that I want to leave you with that are related to the overall wellbeing of your career, regardless of your MBA decisions:

1. When you are young, put yourself in a situation where you have a high(er) likelihood of success. Generally speaking this is a large city with lots of resources.
2. Evaluate the likelihood of your ideal upside, then go for it, even if the chances are low. You will be amazed at how this world somehow conspires to help you in achieving your dreams.