Tuesday, April 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?


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

Investment -
  • 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!

Pay off debt first

By the way, if you have student loans, pay it off first.  That's a guaranteed return!  Guaranty is a hard thing to come by these days.  As a side note, being laid back about debt is a relatively modern, American phenomenon.  For most of history, debt was not a good thing; it's something that was considered to be at least undesirable, and at worst, a sin.


Of course, you may not be able to pay off a big lump sum.  In that case, consider refinancing your loan with low-interest rate loan from Earnest.  Check out the current rates (as low as 2.2% variable at the time of this writing, 3.5% fixed rate).  And by following this link, get a $200 refinance bonus!  www.earnest.com/invite/david491.

Conclusion/Summary
  • So which would you rather have?  200% or OMG%?
  • Food for thought.  Isn't this damning for the traditional education? Is your MBA or other diplomas worth the cost? 
  • 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.  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.

The Truth is that life and career are about more than money.  A happy career is doing things you love doing, and about working with people you enjoy working with.  Neither coding school nor MBA will bring you happiness, but avoiding unnecessary debt is a virtue.

Further Reading

Maybe 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: Choosing the Best Coding Bootcamp for You.

Related Books:
Be sure to subscribe to http://www.betterandhigher.com/.

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