Apr 30, 2013

ROI on MBA vs Coding Schools - which is better?

What is ROI?

ROI is a plain and simple concept that both prospective engineers and business students can understand.  It is Return on Investment.  We will keep things as apples-to-apples as possible by using annual salary and normalizing class time period - 2 years for MBA.  We do gross (before-tax) salary and expenses.  Basically, cash in and cash out.  We will leave the discussion about the intangible things like network or personal growth, etc.  It's definitely a separate debate.

(In full-disclosure, I attended Darden MBA - campus was beautiful, and I loved it!)

Beautiful Darden Campus - we lived under TJ's shadows and among giant tulips

Should You Get an MBA?

See related post Advice for a young man going to b-school on dklounge.github.io.

Let's take a premier Business Schools - Harvard Business School (HBS)

Investment -
Per HBS cost summary page.
  • yr 1 - Fully loaded cost - $87k/year for single person
  • yr 2 - Repeat at $87k/yr => let's round down to $170k for two years

Return -
Salary depends on the industry/company, but let's take highest median, which is private equity/LBO per HBS Employment Report.
  • Summer internship salary for LBO/private equity (assume 3 months) - $24k
  • Yr 3 - median LBO/private equity salary year 1 - $150k
  • Yr 4 - let's assume 10% bump with good performance in year 2 - $165k

So, here you are, 4 years after you first attended business school.
ROI = $339k / $170k = 1.994 or basically 200%

Should You Attend a Full-Time Programming Course?

There's not a strong or widely publicized salary data around this yet (so this is slightly an orange), and so I use a well-recognized industry report from Riviera Partners - a San Francisco based placement firm for tech talent.  I can corroborate these figures based on indeed.com postings and also local tech group mailing lists where salary figures are thrown around ... so it's reasonable.

Investment -
This varies by program from around $10k to $20k, but let's use an approximate mid-point at $15k for the program duration, which is generally about 3 months.  You can read more about the schools and coding in a prior post - Soon your taxi driver may know more Ruby than you do.
  • yr 0.25 - $15k
  • rest of year 1 - 0, you're making money
  • rest of year 2 - 0, you're making money

Return -
Salary figures, as noted are from Riviera Partners 2012 engineering salary review. Let's use JavaScript.
  • yr 0.75 - junior dev: $83k * 0.75 = $62k
  • yr 2 - $91k (after 10% raise)
  • yr 3 - $100k (after 10% raise)
  • (junior dev is 0 - 3 according to this report, so afterward you're a midlevel*)
  • yr 4 - $132k ($120k in 2012 reasonably adjusted for inflation - but likely higher)
The reality is, many graduates from the 3-month program are hired directly out as non-junior devs and after 3 years, may work as senior developer.

So, here you are, 4 years after you write your first lines of code at a school.
ROI = $385k / $15k = 25.66 or basically, holy crap!

Guide to Coding Bootcamps

It could be you are considering a Programming School. If so, consider making a small investment to purchase and read this guide I wrote just for folks like you: leanpub.com/coding-bootamps.

If your interest is more broadly in tech, and would like to learn more about breaking into tech from a non-technical background, check out my post How does MBA break into Tech?  If you want more motivation for learning to programming, consider reading this post about my experience with RailsBridge and San Francisco area Hackathons - why you should attend now.

  • So which would you rather have?  200% or OMG%?
  • Isn't this damning for the traditional education? Is your MBA worth the cost? 
  • Also, if you are a consumer, it's got to be a no-brainer from a financial perspective (of course, don't do it for the money, do it for interest/passion, etc, etc, but I mean, who has a passion for MBA? That was for money, too, right?  Apples to apples.)
  • Traditional schools/companies - please wake up and smell the competition.
Truth is life and career is far more than simply about the money.  It is doing things you love doing, and about working with people you enjoy working with.  Even on this note, I would assert that tech is just as compelling, if not more so.  By all means, be well informed about the big decisions in your life.  Coding schools are still not widely known, and I think it's worth considering for many.

Further Reading

Did you enjoy this post? I write about personal and business growth at http://betterandhigher.com/.  Please check it out and subscribe!

If you are dead-set on getting an MBA anyway, then I found this book helpful during my application ... mix of practical essay writing tips and self-reflection.

65 Application Essays
65 Successful Harvard Business School Application Essays


Anonymous said...

What is your take on Online MBA programs? I ask because you don't have to give up 2 years of salary doing it.

BTW, very well written article!

David Kim said...

This is a tough one. Here's what I would say. Focus on the outcomes. What the desired outcome - to become a CEO of a Fortune company? To get into Wall Street i-banking? Then, review the people who made it - did they get there through online MBA, or full-time MBA, or no MBA? Hopefully that will help crystallize the decision path a bit more.

nancy john said...

An MBA would provide you with a more wholistic approach of business management, whereas you job will be very specific to one particular or related area. So an MBA would make your basics strong.

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sara said...

An MBA would provide you with a more wholistic approach of business management, whereas you job will be very specific to one particular or related area. So an MBA would make your basics strong.

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