HBS perspective on spending

March 1 Harbus article

Mo money Mo problems

For a while, I have wanted to write a post about money at Stanford and more generally, at top American business schools because I don't believe that the spending mores of GSB students are unique among business school students.

Two events spurred me to stop delaying:

1) 2nd quarter tuition is due tomorrow. (That's two for two that I have paid on time!)

2) The weekly GSB email of compiled announcements and deadlines informed me today that the Stanford Board approved a 3.5% tuition increase for incoming GSB students. Class of 2012 will be paying $53,118 while members of the class of 2011 (current first years) will still be paying only $51,321 because the school commits to keeping tuition flat during each student's two years of study. (Before I get comments from readers who are outraged that I consider $50K+ a paltry sum, please take a deep breath and realize that "only" is being used facetiously in the previous sentence. Thanks.)

The issue that has been troubling me is the buy-now pay-later spending habits of members of the GSB community. I don't have time tonight to discuss in depth, but I want to begin to write about how we Stanford business school students spend money and what that means about our attitudes towards our job prospects, how that might limit our abilities to take risks, and why everyone else should also be worried.

How we spend money: Recklessly (e.g., mid-week trips to Vegas, regular jaunts to San Francisco and wine country via party bus, numerous official events that cost >$30 per person, international travel every chance we get). How we pay for it: Loans for the vast majority of us. How we treat people who express concern about not being able to keep up: Dismissively and derisively.

How we implicitly view our job prospects: Optimistically. Clearly if we are willing to saddle ourselves with US$200K in debt, we are confident that we will be able to pay roughly $10K per year for the first twenty years of our post-MBA careers. Important to note is that if we decide to stop the principal amortization clock for any reason (e.g., inability to find a job because of prolonged elevated unemployment levels), interest continues to accrue.

How this debt limits our career choices: Safe bets on consulting and banking take the place of start-ups. It's tough to pay down debt when you're getting paid in equity from a start-up or bootstrapping your own venture with credit cards or money from friends and family. The monthly fixed payments from debt skew career choices towards well-worn tracks, while existing debt load makes it difficult to take out a new loan to start a business.

Why everyone should worry: There may be more reasons, but two immediately come to mind:

1) The first stems from the issue I raised above about MBA grads veering away from riskier careers. This is problematic because well-trained managers should be trying to start new businesses to solve the world's problems. Losing a portion of young, energetic, but debt-strapped MBAs does not bode well for the "innovation economy."

2) This endemic attitude is inherently irresponsible and short-sighted, and it is distressing to see the business leaders of the future refusing to make tough choices about how to spend their own money.

The Summer Hunt

I am trying to be very focused on my summer internship search, which should take me out of OCR (on-campus recruiting) for the most part. However, I am finding the job board and classmates' aspirations to be very distracting.

A winery in northern California, a New York private equity fund, Apple's online store--none of these are great fits for what I want to do this summer. However, when I think long enough about them, I seem to be able to fit them into a box that makes them acceptable enough to invest 30 minutes writing a cover letter. But do I really want to invest a couple hours preparing for an interview and then an hour actually doing the interview on campus? And if I got an offer, would I accept it? No and no and no.

But the real problem is actually not the 3-4 hours applying and interviewing for a job I don't want. The problem with this strategy is that when I expand the universe of jobs to pursue from truly excellent fits to maybe-I-can-get-them-to-fit jobs, I am completely inundated. There are enough potential positions that are truly excellent fits that I barely have enough time in the day to make the connections I need to pursue them, so opening up that universe by even half a degree is to truly open the floodgates.

Time to refocus.

Q1 Complaints

After my last post, several readers asked why I did not liked business school during the first quarter. I will try to sum it up, but because time seems to be a great eraser of discomfort, my memories of exactly why I was so unhappy are getting fuzzier by the day. Let's try a list:

1. Social awkwardness - constantly meeting people and having the same mundane conversations is not only tiring, it is downright depressing. With time comes familiarity and the awkwardness noticeably dissipates.

2. Posturing - it is very hard to get to know anyone and very hard to let your own guard down when you are worried about preserving your personal "brand" as the aloof heir or the high-fashion financier or the plugged-in media guy. Again, time seems to break down personas into real people.

3. Support - there isn't any official support and it can be very isolating and lonely. By second quarter, genuine friends are there for you; plus, Stanford offers stellar back-up in the form of WIM groups, 2nd year coaches, and student activities.

4. Bubbly - first quarter at the GSB covers you in a hard plastic bubble that doesn't let in news from the outside world (say good-bye to all your favorite blogs), friends from the past (even ones who live in the Bay Area), or connections to long-term goals (the one downside of the exclusive academic period).

5. Misaligned expectations - classes and schoolwork are both valuable and time consuming. Don't expect anything else.

6. Herding - MBA1s are pack animals. There is tremendous tension for independent-minded adults to constantly follow the flock or risk feeling left out.

7. Email overload - it's truly overwhelming. It doesn't let up, but you get a bit better at managing it.

8. Weather - Kidding.

I'm sorry for the heaps of negativity in this post. I really am much happier this quarter. In recent news, I applied to a couple summer jobs through on-campus recruiting and have signed up to help manage two activities I think are interesting. I still struggle with the Sunday night blues, but it's not so bad.

A new year, a new day

At some point during the winter break I stopped being quite so disgruntled about my business school experience. The curriculum started to make more sense, content that I learned in my first quarter classes actually seemed relevant, and I realized that I made a few friends during the first quarter who I like and respect. There was no "aha!" moment, but rather a gradual softening of my negative stance. (Sorry if you never got the memo that I wasn't loving business school, but sharing the bad news on my blog took a backseat to complaining about my experience in real life.)

Now I am back at business school for the 2nd quarter (Stanford is on the quarter system which means that each year we have three terms of classes and the fourth quarter is summer) and am busier than ever. This weekend, I started to feel the familiar and insidious grasp of anxiety to which I was so susceptible during the first quarter. And then I let it go.

One reason I can now let go of the worries is that grades don't matter. They truly don't--anymore. I say "anymore" even though second-years tell us from day 1 that they don't and we then first-years tell each other and our spouses and friends that they don't. Then we try to tell ourselves that grades don't matter. But as the achievement-oriented people who we all are, we cannot truly internalize this. How can we strive only to be in the top 90% of a given course (the level at which you must perform to "pass" a class) when the reason we were permitted to matriculate here is that we have always aimed to be in the top 10 or 5 or 1 percent of any pool to which we have belonged?

But after a quarter under my belt, I now finally know that grades do not matter. What matters is that I use the next 18 months to find people, classes and activities that excite me and that I find an internship that moves me towards my goals. I haven't gotten that involved in clubs and activities, but the ones to which I am committing, I care about and will allocate my time accordingly. I have classes that excite me (economics) and classes that are dull (statistics and modeling) and I will allocate my time accordingly. Grade non-disclosure gives me the freedom to do just that and for that, I am thankful.

post-midterms

Mid-terms were predictable and manageable. The GSB doesn't hold classes for an entire week for all first-year students. We had one test each day on Monday (Finance), Tuesday (Organizational Behavior) and Wednesday (Global), which is actually really manageable in comparison to my undergraduate university when classes, papers, and life are not put on hold for mid-terms.

I spent the better part of Sunday and Monday morning studying for Finance and then switched gears after the Finance test to OB and Global, with the help of an impromptu study group. The Finance exam was long, but not particularly hard. OB and Global were also fairly predictable and fair.

So that's that.

After mid-terms, we had two days of career center stuff, including panels and a speech/workshop by Keith Ferrazzi. Wednesday, Thursday and the weekend after mid-terms were relaxed, fun, and served as a reminder for why I came to business school (meet good people, have good career opps)

Since mid-terms, I've been trying to go out more, to sleep more, and to do less work. We have a couple group papers, but otherwise, nothing too stressful for a while.

Only one more full week of classes and then it's Thanksgiving. Today is "Diversity Day," whatever that means, so I'll have to report back soon.

Workload

Stanford MBA1s have three 1,000-word papers plus comprehensive feedback on 7 classmates due in the next 8 days.

And then we have mid-terms the following week.

Applicants: please do not believe that business school is not a ton of hard work. Even if you're just aiming to graduate, the workload is overwhelming.

Fellow MBA students and business school graduates: please stop perpetuating the silly idea that business school is a joke.