Sunday, September 16, 2007

Who needs an MBA?

If you can generate alpha, or do math, you might not need an MBA these days :-)

My view on this is that the most valuable aspect of the MBA is the network it comes with. For the technology business, I would rate Harvard or Stanford well above the others. If you have the quant skills to work in derivatives or money management, you probably don't need an MBA, but it would be worthwhile to understand what is taught in business schools, and how that influences the thinking and collective culture of business and the markets.

NYTimes: ... As more Americans have become abundantly wealthy, young people are recalculating old assumptions about success. The flood of money into private equity and hedge funds over the last decade has made billionaires out of people like Kenneth Griffin, 38, chief executive of the Citadel Investment Group, and Eddie Lampert, 45, the hedge fund king who bought Sears and Kmart. These men are icons for the fast buck set — particularly the mathematically gifted cohort of rising stars known as “quants.” Many college graduates who are bright enough to be top computer scientists or medical researchers are becoming traders instead, and they measure their status in dollars instead of titles.

Many of the brightest don’t covet a corner office at Goldman Sachs or Morgan Stanley. Instead, they’re happy to work at a little-known hedge fund run out of a two-room office in Greenwich, Conn., as long as they get a fat payday. The competition from alternative investment firms — private equity and hedge funds in particular — is driving up salaries of entry-level analysts at much larger banks. And top performers at the banks make so much money today that they don’t want to take two years off for business school, even if it’s a prestigious institution like the Wharton School or Harvard.

The new ranks of traders and high-octane number crunchers on Wall Street are also a breed apart from celebrated long-term investors like Warren E. Buffett and investment banking gurus like Felix G. Rohatyn. What sets the new crowd apart is the need for speed and a thirst for instant riches.

“With the growth of hedge funds, you’re getting a lot of really smart people who are getting paid a lot very young,” says Arjuna Rajasingham, 29, an analyst and a trader at a hedge fund in London. “I know it’s a bit of a short-term view, but it’s hard to walk away from something that’s going really well.”

The shift has not gone unnoticed by administrators at some business schools. Richard Schmalensee, who was dean of the M.I.T. Sloan School of Management until June, chalked it up to the changing nature of money-making. In many banks and investment boutiques, traders with math and science backgrounds now contribute more to the bottom line than the white-shoed investment bankers who long presided over Wall Street. And traders tend to be less likely to go to business school.

“I don’t think you will see M.B.A.’s less represented in executive suites, but you may see M.B.A.’s less represented in the lists of the world’s richest people,” Professor Schmalensee says. ...


Anonymous said...

why the emphasis on taught?

rod. said...

This NYT article is somewhat misleading. Pure marketing: pick a catchy title, write a bunch of clich├ęs and the soppy, retarded readers will eat it all up without even questioning it.

People always look for shortcuts. Everybody wants to make money with little effort. That is a human trait, and it is understandable. However, it does not guarantee success.

First of all, hedge funds and private equity are quite different. A trader at a hedge fund might not need a MBA... in fact he might even not need a formal education, just as long as his P&L is good. At a private equity firm, one needs to know about business, accounting... math and computer skills would not harm but are not sooooo relevant.

The zeitgeist goes like: "Do not bother about grad school... go work for a hedge fund instead and retire by you're 30!" or "Forget medical school and join an investment bank or private equity firm". Too good to be true. Most people who graduate with a BSc know jack shit. Maybe one knows a bit of programming, some math, some business, etc... and that is not enough. Hedge funds are fueled by greed, and those who know more, make more. A kid straight out of school can not add much value to a hedge fund. If we think of quantitative hedge funds, let us keep in mind that those supreme beings at Renaissance Technologies recruit from young academics with a n exceptional track record of research.

People should worry less about making money, and worry more about adding value. Those who add value, will ALWAYS make money. Few people have realized that, and that explains why few people ever get rich.

Jenefer Park82 said...

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MBA Dissertation Proposal

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It used to be that top corporations picked up MBA graduates as fast as schools could slap mortarboards on their heads. As more Americans have become abundantly wealthy, young people are recalculating old assumptions about success. Today, the power of the MBA is not so certain.

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