Obviously, the hottest topic in the United States at this time is the proposed $700 billion financial market bailout, forwarded by Treasury Secretary Henry Paulson and the Bush administration on September 18. According to CNN, Congress is currently closing in on an agreed structure for the bailout and may in fact finalize the terms by the time you read this post. Obviously, the names have been huge and have transcended the interest level of Wall Streeters and market insiders to become the critical issue of the day. To date, bailouts have been engineered for Bear Stearns, mortgage holders, AIG, Fannie Mac, and Freddie Mac. This doesn’t even account for the $153 billion spent on the economic stimulus package or the nearly $300 billion in farm subsidies from earlier in the year. Next up – the entire financial industry. Click on any political or news website or blog, flip a channel, grab a newspaper and you can read and hear all about it.
But what does it all mean for the clients of Veritas Prep and of other “business school preparation” companies? The short answer is: it means a lot. The long answer is that you have to break it down into a series of key issues. Some of the issues are relatively obvious, short-term in nature, and warrant high priority consideration given the type of investment one makes when pursuing a graduate degree. Other issues are less obvious at this time and tend to have big picture implications.
Issue #1 – The recession push goes into hyperdrive. For companies specializing in preparation for MBA programs, there is almost always going to be an increase in demand in a downturn. Most businesses slow down in a recession, but education firms typically see an acceleration under such market conditions. For GMAT prep and MBA admissions consulting companies everywhere, 2008 was probably already a busy year given the recession and the likely application spike that typically accompanies such an economic climate. One simplified reason for this is that when the market takes a downturn, an advanced degree becomes a more attractive option to young professionals. Not only is there an opportunity to “ride out” a bad market, but the business school graduate almost certainly comes out on the other side with advanced skills, an improved network, and increased earning potential.
When key financial firms recently started collapsing and bailouts became commonplace, a recession climate escalated into the current financial crisis. What happens next? More than likely, the increased application activity at business schools and business school companies will spike even further. In addition to the draw, or “pull” of an MBA during a bad market cycle, now there is a “push” in the form of all the suddenly unemployed and displaced young professionals in the finance industries (and other affected industries). For many people, the MBA has gone from being merely an attractive option to an absolute necessity.
Issue #2 – The end game expectations must shift. The byproduct of this increased activity is that business school applicants must analyze eventual career prospects through a new lens. Those being “pushed” into the MBA arena surely must understand that the career path of former, enviable colleagues is likely to be unavailable. The financial sector – the same quadrant of the business school job market that is driving estimates of accelerated admissions numbers – will not look the same in two, three, or four years as it did even just a few weeks ago. This means that a significant MBA cycle (business major, analyst job on Wall Street, MBA from high profile program, banking job on Wall Street) has been disrupted if not broken altogether. This has an impact on everything from applications (how to explain short and long term goals when the goal just disappeared?) to summer jobs to recruiting to possible overcrowding in other job markets. And it isn’t just finance professionals who will be impacted. MBAs seeking careers in industries such as management consulting, health care, tech, media, product marketing, and operations will now likely face increased competition from peers who otherwise would have pursued employment at investment banks, hedge funds, and private equity firms. And if we are to make a further leap and presume (as many do) that those financial job seekers are comprised of an uncommonly high percentage of top business school students, then competition is increased all the more by the additional quality, as well as quantity, introduced into these other markets. This leads directly into the next issue.
Issue #3 – New avenues should be considered. When analyzing the impact of the bailout on MBA applicants, most of the focus is centered on the two issues above. Less prominent is the discussion of how other programs are impacted, or how they might impact young professionals. In particular, law school becomes an almost necessary consideration for a young professional previously considering applying only to business school. Not so long ago, a law degree – and the earning potential, social prestige, and community standing that came with it – was the most desirable higher education program available to a young, ambitious, business-minded professional. In recent years, the law degree has lost some of its luster as a crown jewel of the financial markets, replaced by the speed, efficiency, and more lucrative career pipelines of business school. This is not to say that a J.D. suddenly became an irrelevant degree. On the contrary, elite law schools continued to produce top-flight entrants into financial careers, and prominent CEOs continued to boast a law degree as part of (if not the centerpiece of) impressive educational resumes. Additionally, the perceptions regarding the intellectual rigor of law school, the social value of legal work, and the job security of working at a large law firm all remained largely unchanged. But let it be said that despite escalating associate salaries, “white shoe” law firms and elite law schools were losing young talent at a fairly alarming rate to their MBA counterparts.
One outcome of this change is that the JD/MBA saw an increase in popularity. Many law students with an interest in finance and the desire for increasingly lucrative careers began to see the more generous returns attached to an MBA and pursued joint degrees to gain entree into lofty markets and firms. Now, that pendulum may swing the other way. The JD/MBA continues to grow in popularity – evidenced by the addition of a three-year Penn Law/Wharton program at the University of Pennsylvania – as students desire to gain more flexibility with regards to their job prospects. However, whereas previously the MBA was primarily added to bolster career prospects and open doors for the JD, now the JD may bolster career prospects and provide job security for the MBA. Attorneys fees will always be the last budget item to be cut and therefore provides more stable career prospects for elite applicants. Pairing a law degree to a high profile MBA is likely to be the most surefire way to safeguard one’s educational investment.
Of course, traditional MBA applicants may decide to forgo business school altogether and instead pursue a JD as a sole professional degree. A law degree – particularly from an elite program – can provide young professionals with exposure to any conceivable financial instrument and remains a proven and reliable method for securing high paying positions with great job security and encouraging executive prospects. (Once you are an executive, you won’t have to worry either way – there will always be a bailout if things go wrong!)
For all of these reasons and more, Veritas Prep decided early in 2008 to add law school admissions consulting and JD/MBA admissions consulting to the Veritas Prep slate of
offerings. Given the popularity of joint degree programs and the natural convergence of law school and business school as mutually beneficial and similarly attractive options for elite young professionals, it is imperative that business school companies afford traditional MBA clients with all of the advice, tools, and services – including law school advice, tools, and services – that are necessary to succeed. This is true now more than ever.
Issue #4 – Knowledge is power. The first three issues in this post have focused on the primary concerns facing business school (and, yes, law school) applicants: how the bailout impacts a client’s application process, job prospects, and educational choices. These issues have been posited in order of most to least pressing, but they all belong to the family of “concepts that effect the bottom line.” Issue #4 is more esoteric, but no less important. Because if this bailout means anything, it means that young people need to be more informed. When this $700 billion allocation is rubber stamped and doled out, it will bring the grand total of bailout money, subsidies, stimulus packages, and war spending to a total of nearly $1.6 trillion dollars … in 2008 alone. Few can deny that much of this has been necessary, but the fact that it has occurred with so little debate, so little oversight, and so little care is, frankly, outrageous. And what has been lacking – even more than common sense – is the outrage. Outrage from young people, who are standing by as the old guard spends tomorrow’s money to bail out bad investments, business practices, and regulation. Politically connected insiders breathe a sigh of relief as they receive taxpayer subsidized bonuses, subject to none of the “claw back” provisions required by even the most rudimentary of phantom bankruptcy schemes (or corporate reorganizations, or workouts, or whatever phrase you prefer) that should always accompany a financial rescue effort of this magnitude.
Part of the reason that so few are outraged is that they lack knowledge. Absorbing what is reported is only so helpful without a toolkit to understand the underlying principals – both the unavoidable principals that necessitate our government’s choices (the U.S. economy does need this latest bailout, for instance), as well as the principals that are being violated by the United States government’s methods of implementation. Such a toolkit is available in business school and in law school. Now, more than ever, attending an elite professional program is about receiving an advanced graduate school education, not just an advanced graduate school degree. For a long time, the analysis of whether to attend an MBA program, or go to law school, or attend med school, or any other grad program, has started and concluded with an examination of the career prospects and rate of return embedded in each pursuit. This bailout signifies a sea change on that front. Getting an MBA or a JD is about more than a degree and an eventual job. It is about building a knowledge base and a skill set to understand a rapidly changing world … and then being equipped to do something about it.