MBA Rankings and Opportunity Cost

Wall Street Journal takes a look at the top MBA programs in the country, with both national and regional rankings of schools.

How did my own University of Florida MBA program rank? We came in as 13th out of 51 in the regional rankings. I'm not quite sure where this puts us nationally.

A couple years after earning my MBA (combined with my bachelor of science in mechanical engineering), I quit my job to work on my PhD in economics as a full-time student. Somehow, I don't think I ever quite grasped the concept of opportunity cost.

While I believe I could have gotten into a more highly ranked MBA program than the University of Florida, I see that tuition for top schools is now averaging around $40,000 per year! (Not including books or room and board.) Fortunately, I was able to earn an engineer's salary while getting my MBA and got Mitsubishi to pay for most of my tuition. This enabled me to have the resources to pursue two more personal life goals -- visiting all 7 continents on my first passport (without checking a bag, I might add) and coming back to GMU to get my PhD. With the extra time I've had being a full-time student again, I've also been able to finish visiting the 50 states. Maybe I didn't do such a bad job understanding opportunity cost after all...

It makes me wonder what the true value is of getting a high-ranked MBA? I certainly don't dispute it may be a good path for wealth maximization for driven people, but I wonder at what cost? Most salary statistics I've seen from these programs don't factor in cost of living (most of the highest-paying jobs are in large cities with high costs of living), hours worked (consulting for example, often is not just a job, but a full-time lifestyle), forgone income while attending school, distribution of salary ranges for recent graduates, etc. Another factor to consider is the potential stress that could come from a six-figure student loan and lack of flexibility this debt burden can create in lifestyle and career choices. How do these outcomes compare to the probable outcomes from a lower ranked school? I honestly don't know. I do think all of this information is important in evaluating the true risk-reward payoffs of choosing what school to attend.

I think two of the biggest advantages of attending highly ranked schools are superb networking opportunities (I worked in business long enough to realize how much this matters) and a higher caliber of fellow students which greatly enhances the learning process. It's also much more likely you get exposed to world class business leaders and might even have some as faculty. On the margin, all of these things have value.

Bottom line: I don't think there is one cookie-cutter solution for all people in making a decision for a business school... or PhD program, law school, or undergraduate institution for that matter. (The more advanced the degree, the more reputation probably matters.) For some people, price and location matter. Others have more flexibility in this. Some would prefer low debt and greater range of career choice, while others are extremely driven and have valid expectations for making large salaries. It's important to find a program that matches your talents, intellect, drive, price level, life situation, expectations, and career ambitions.

Questions: Do you think there is too much emphasis placed on school rankings or do they have merit? Do students from highly ranked schools do well because the caliber of education is so much better or because the top schools attracted the best and brightest who would have done well regardless of where they attended (selection bias)? My guess is that there's a fairly strong interaction effect between these two.