Our hosts John, Maria, and Caroline have some long-standing questions to address in this episode of Business Casual, including what might be the possible reason for the fluctuating number of domestic MBA applications. Is the MBA beginning to lose its prestige?

And one more subject that some applicants would likely find intriguing is what our hosts have to say about a question about white males in particular in the US feeling they don’t have a fighting chance, given all the talk and attention paid to diversity, and all the scholarship funds that are being funneled into making incoming cohorts far more diverse than they had been before.

Episode Transcript

[00:00:07.330] – John

Welcome to Business Casual, the weekly podcast of Poets and Quants. I’m John Byrne with Poets and Quants with my cohost Maria Wich Vila and Caroline Diarte Edwards. Caroline, of course, is the former head of Admissions at INSEAD and the co founder of Fortune Admissions, a leading admissions consulting firm for MBAs. And Maria is the founder of Applicant Lab. We’re going to talk today about the slump in domestic applications. This is something that has been going on for a while. I think this slump right now has become fairly significant. And if you look at some of the class profiles that have been released in the last week or two, here’s what you’re finding. Wharton overall apps down 14%. UCLA down 20%. Darden down 3.5%. Cornell won’t even say what its application numbers are. I assume that they’re down in fairly significant double digits as a result. And the other trend you see, besides the fact that they’re down, is that in general, international enrollments are not only up in these classes, but they’re often at record levels. The only exception here is Wharton, which is pretty much steady. The international cohort in this year’s incoming classes, 35% versus 36%.

[00:01:30.850] – John

But look at UCLA, 47% of the class incoming or international versus 36 the year before. At Darden, it’s a new record, 43% versus 40%. At Cornell, it’s 43% versus 35%. And what those numbers tell you is basically international applications continue to be strong even though there’s a lockdown in China and they’re basically drawing more from an international pool because there are fewer domestic applicants. Now, there are a lot of ideas around there about why this is happening. We’ve talked a little bit about one in the past, which is that the economy in the US. Has been very hot and employers are trying to hold on to their young professionals and doing everything from offering them increases in pay to increase in responsibilities to keep them out of graduate school. But there’s also this whole notion that more and more people are questioning the value of the degree. The degree looks awfully expensive, particularly because you’re only going to see the price tag on them and not the discounts afforded on the price by scholarships and fellowships. There’s a sense that the degree is just not as exclusive as it once was. There are, after all, 1100 accredited MBA programs by the ASCAP.

[00:02:58.070] – John

There are some companies that have relied on MBA hires for a long time, and they basically have opened up new pathways. Even the MBB firms are hiring laterally from the big Ford to some extent. So you don’t have in many cases, an MBA is a requirement for your way on the top. I’m with Carolina. Have you seen this trend in your clients and what do you think is the main reason behind it?

[00:03:27.340] – Caroline

Yeah, I agree. I think it’s a combination of all the things that you’ve mentioned and some of those are long term trends, right? So things like you mentioned about how an MBA is not required to progress in some careers to the same extent that it was in the past. That trend has been going on for 1520 years, I would say. I think that’s a good thing. I don’t think that people should do an MBA because it’s required by their employer. And frankly, I’ve seen some people in the past do that, and they weren’t as committed to the whole experience as other people who are super motivated to do the MBA. And they probably took the place away from someone who might have got more out of it. I think it’s good that people are doing it for the right reasons and not because their employees said, if you want to get a promotion, you have to head off to business school first. So I think it’s good that there are multiple ways to progress in companies and not just head off to business school. And there was a dip in volume of international applicants and international students at the top US schools during the Trump years.

[00:04:45.450] – Caroline

So it’s good to see that those applicants coming back. And I’m a huge fan, as you know, of the benefits of having a strong international community on MBA programs for everybody. And I think everyone benefits from that. So I think that’s a very positive trend, that there will be an increased representation of international students with all the wonderful diversity and variety of perspectives that that brings to the business school classrooms. I think that’s a very positive evolution at the US business schools. So I would agree that there is a downward trend, but I also think that it may well be short-lived, right. Because we are anticipating the strong possibility of a recession in the coming months. And if that does happen, then there’s likely to be a big increase in application volume domestically. So it’s probably a short term trend right now, and it will be interesting to see. I think things could change quite quickly.

[00:05:47.190] – John

Yeah. Maria?

[00:05:49.710] – Maria

Yeah, I think, first of all, I want to say, like, let’s put these plummeting numbers into perspective. I think that we are coming off of record high applications during the peak COVID years. For example. Yes, if I’m doing the numbers right, I think Wharton might be down, say, 13% versus last year, but then it was 11% versus the year before, and it’s actually 7% higher than where it was three years ago. So, you know what? These fluctuations sort of come and go, and I don’t think I want the story to necessarily be like, oh, domestic applications are down so much. It’s a big tragedy because I think that’s a fair thing to do would be to compare them more against sort of remove the past two years from the data set as an anomaly. Although, admittedly, like, in this day and age, the unexpected is now expected. And so I almost wonder if that could also be an explanation as to why things are decreasing. Maybe it is that at first when the pandemic first hit, everyone thought, well, the economy is definitely going to take a hit and so now I should try to find refuge in business school.

[00:07:00.860] – Maria

But now there is so much, maybe there is going to be a recession in three months. Maybe there isn’t going to be a recession in three months. Maybe there’s going to be another strain of COVID in three months, or maybe three months are going to find a vaccine that solves it forever. And so I feel like maybe for some people, because two years ago, at the beginning of the pandemic, it was clear that things were definitely going in a downward negative direction, now we’re in choppier waters. I feel like where things go, they go up and then they go down and they go up and they go down. So I almost wonder if part of it might be some people saying, you know what, maybe there’s going to be a recession, maybe there’s going to be another strain of covet that’s going to ruin everything. Or maybe we don’t know if things are going to go up or down or up or down because there have been such mixed news and mixed messages and all kinds. I almost wonder sometimes people might be clinging to their jobs just out of a sense of at least I know that this is steady and hopefully this is like a little life raft that I can bob.

[00:07:55.570] – Maria

I can sort of bob up and down on the waves as they crest and fall, or at least I can sort of hang on to that. And I wonder if that’s a part of the mentality as well.

[00:08:05.190] – John

What about this notion that the degree itself, it’s been the most popular graduate degree in America for quite some time now, overtaking the Master’s in education. I wonder if there is something to the fact that it doesn’t feel as exclusive a degree it once was. Maria, what do you think of that?

[00:08:25.230] – Maria

I think that there’s always, for any luxury good, the more there is of it, the less luxury as it is. I mean, that’s the definition. That’s the very definition of it, right? Like if Harvard College or Yale College or MIT were to accept every single person who could go, who was smart enough to go, and all of a sudden we have 200,000 people a year graduating with a degree from MIT. Guess what? That is going to make it seem less exclusive. It doesn’t matter what the good or service is. So I think that there is something to that. However, I don’t know that the numbers really back that up, because if that were the case, then what we would see, at least at the top schools, is we would see salaries staying steady or going downwards. We would see lower employment rates we would see people having a harder time getting a job upon graduation. So if the market really were overly saturated, I think that the numbers would bear that out.

[00:09:18.490] – John

Yeah, that’s a really good point. And what we’re seeing are record compensation levels and record placement levels.

[00:09:24.960] – Maria

Right. Perhaps overall, in the overall market, when we talk about, yes, there are over 1000 MBA programs out there. Sure. An MBA from mom and Pop Cornerstore University probably not really going to make that much of a difference in someone’s life, but in terms of the top sort of 2050, maybe even top 100 schools, there may be that perception out there that, yeah, well, now everyone’s got an MBA, so I’m not going to do it. But at the same time, like, the numbers don’t lie and employers are definitely putting their money behind these graduates and they are doing so consistently, so they have to like what they see when they get this new talent in their doors, hence why they keep coming back year after year. That may be the market perception, but I think a quick glance at the career reports would hopefully squash that pretty quickly.

[00:10:14.900] – John

Yeah, that’s a super good point. Caroline, in Europe, where the MBA degree is not even the most popular graduate management degree, it happens to be the Masters in Management. I’m thinking there should be no issue that the MBA is not as exclusive as it once was. Right. In fact, if anything, there should be greater acceptance of the degree that initially didn’t have as much acceptance in Europe as it had in the US.

[00:10:42.230] – Caroline

Yes, it’s true. It’s not as well known a qualification still as the MBA is in the US. Right. It’s not as ubiquitous. And so I think that employers you say that the MBA may have lost some prestige in some people’s eyes. I think that just having it, having an MBA is not enough. Right. Whereas in the past, perhaps if you said you had an MBA, that carries more ways. What matters today is where you got your MBA from. Right. I think that carries much more weight than it may have done in the past because there are so many other schools, and that’s true in Europe as it is elsewhere. It’s what you do with a degree that matters. And so it may still make a lot of sense for someone to go to business school and get an MBA, even if it’s not the most prestigious school. Right. If it’s not one of the top ten top 20 international schools, if they’ve got a good reason to do it and they know how they’re going to leverage that experience and how they’re going to put that knowledge to work, they will still learn a great deal from the program.

[00:11:56.610] – Caroline

There are a lot of great schools out there, so I think it’s important for candidates to understand why they’re going to business school and what they’re going to get out of it. And there are many different reasons and there are many different paths into business school and out of school to make it a successful proposition.

[00:12:15.070] – John

The other thing is, there are some other trends, I think, that have occurred that have taken a bite out of the applicant pool. One is the proliferation of online MBAs. They’re not for everyone, but when you’re looking at the entire market, and there are now more than 350 online MBA programs in the US alone, each of them with a good number of students in them, you can say, well, had to have some siphoning effect on the full time market. And the same is true for all the specialty masters programs in business that have become quite popular. Also, the undergraduate business degree, an undergraduate business education is so much better today than it had been a quarter of a century ago. And because business majors are the most popular majors in America, it may be that a lot of people just don’t think they need a graduate degree when they’ve already had a very good undergraduate business experience. And then I had an admissions consultant. I had a conversation with someone last week who raised another issue, and I wondered how the two of you react to this. She thinks that white males, in particular in the US.

[00:13:29.230] – John

Feel they don’t have a fighting chance, given all the talk about diversity and all the attention paid to diversity and all the scholarship money that’s being funneled into making incoming cohorts far more diverse than they had been before. Maria, do you buy that?

[00:13:47.900] – Maria

I mean, any white male candidate who says, wow, I would have loved to apply to business school, but I’m not going to because more women are going or more people who aren’t white are going, if you’re that weak of spirit, then I don’t think it’s a huge loss for the overall applicant pool. Like, if you’re such a big whiner. I think that a lot of very mediocre white men use the influx of women and minorities as an excuse for their own mediocrity. And now that they have to compete against more people, maybe before they didn’t have to compete as much against people who were motivated and intelligent, but now there’s more competition and it’s easy to point the finger towards things that are visible. So gender is something that is visible. Race and ethnicity are often very visible. Someone who practices a certain religion that might be visible. So when you find things that are easy to look at or to see, then you can say, well, I’m the victim here. It’s funny that some white males who today might be complaining, they might not realize that 30, 50 years ago, if they would have not even gone to an Ivy League college for undergrad, they wouldn’t have been even in the running for a top MBA.

[00:15:03.110] – Maria

And so the same diversity that is now giving what some of these men may consider to be a quote unquote unfair advantage to say, women and minorities. They are also beneficiaries of that because of the school’s attempts over the past several decades to not only recruit people from Harvard, Yale, Princeton, brown right. So I think sometimes it’s easy to look at the other and to say, wow, that increased competition. It’s not fair. But you know what? I think the thing that I always love numbers. And you point to those similar GMAT scores. The fact that the schools have been able to maintain. If not raise their average GMAT scores over the past several years. If it really were.

[00:15:49.840] – John

Quote.

[00:15:50.090] – Maria

Unquote. Less qualified applicants getting in and taking the place that a white male. Quote unquote. Deserves. Then the numbers would bear that out. And they don’t. So that is a far more diplomatic version that just came out of my mouth than the version that is in my head. But hopefully I was able to walk a fine lady.

[00:16:12.900] – John

I’m very impressed with that. Very good explanation.

[00:16:16.790] – Caroline

Thank you.

[00:16:17.520] – Maria

I’m going to put myself on mute, though, now and scream it along.

[00:16:22.370] – Caroline

We will read between the lines.

[00:16:26.330] – John

That’s why I asked you, maria, first. Caroline, your take on it.

[00:16:33.620] – Caroline

Yeah, I think that it’s a bit rich, right, coming from the group that has reigned supreme for decades, to sit now say, oh, well, it’s not fair, they are getting in, and it’s making a bit harder for me. It’s really pathetic, and I totally agree with Maria, and I’ve heard some people use this and as she says, it’s an excuse for maybe not trying and for perhaps not having the same success that they might have had 2030 years ago when other groups were not getting a fair shot at things. Right. So it is rather pathetic, and I don’t agree that it’s true. I think if you have a strong case, if you’re a strong candidate, regardless of your ethnicity and so on, then you have a fair shot at getting into business school. Perhaps you don’t have a much better chance than everyone else, as you did in days past, but that’s something that we should be all be glad about rather than complaining about. It may be that there are white males who in the past might have thought, I really have to go to business school for the reasons that you were mentioning earlier, that it’s sort of expected as part of my career path at my investment bank or at my management consulting firm.

[00:18:05.890] – Caroline

That may have been the case in the past where they felt that they really needed to do that to progress, and that’s not the case anymore. So maybe some of those white males aren’t applying because they don’t absolutely have to and they’re not terribly motivated to do so. Again, maybe there is a drop in that group applying to business school. But as I said, I think people should apply for the right reasons and not because they feel that it’s a hoop that they have to jump through. They should apply because they’re truly motivated and they’re really passionate about pursuing that as part of their personal development.

[00:18:46.750] – John

And all this brings me back to something we’ve said here before and said it more than once. If you want to go and you are a domestic applicant, my goodness, make sure you apply in the Round One for the Round One deadlines, because we expect this decline to continue. But if the recession occurs, as Caroline has mentioned earlier, and the trend that has been historical is withheld is held up, we would expect to see a significant increase in applications, possibly even as early as Round Two. And so we think we’ve said this before, round One is a fantastic time to apply to a highly selective MBA program. If you are a domestic applicant, for sure, that’s always true to try to get in there early as long as you think you can make your best case. But for domestic applicants, I think that’s especially true given the continual decline in the applicant pool of domestic candidates. Any last words, Maria?

[00:19:59.450] – Maria

I think that there are just always going to be these fluctuations up and down. And I just think that what folks should do is look at the degree, decide if the pros and cons and expenses and pay offs make sense for them, and then go for it. And also keep in mind that one thing that’s very nice about the MBA process as compared to other forms of higher education is that if you don’t get in one year, you can always try again. You don’t just get one shot at it. So just keep trying and or also be flexible. Right. Some of those alternative degrees that you mentioned, John, is a reason why perhaps the MBA itself may be losing some of its sheen. Those alternative degrees also, however, give you as an applicant alternatives to strengthen your education and to advance your career that don’t necessarily require the MBA. So just sort of be flexible with how you go through your life and your career and I think you’ll be fine.

[00:20:54.110] – John

And I’m going to remind people that when they look at the price tags of MBA programs and they’re shocked by them to remember that the price seems to be transparent, but the actual cost is not. And that’s because there is a lot of scholarship money sloshing around. And all of these schools in the last 10, 15, 20 years, dean’s have made it a priority to go out and fundraise for scholarship money. So these price tags are heavily discounted. And there are many MBA programs that in fact operate at a loss because they’re so heavily subsidized by the schools. And part of that is the whole rankings game and gaining a high ranking that casts more favorable shadow and everything else the school does. But it’s a shame that those discounts are not more transparent for candidates because you basically have to go through the marathon journey of taking the test. Scoring well. Doing the apps. Executing a really good app. Getting your recommendations. Going through the interview. All these hurdles before you find out if you’re going to get any money from a school and if there was a way to make more transparent those scholarship awards and to put into perspective those high price tags.

[00:22:16.640] – John

I think that actually would help the industry a lot. Caroline, don’t you think that’s true?

[00:22:23.030] – Caroline

It’s very true, John, that it’s impossible for candidates to know at the outset what the true cost for them will be, and that makes planning very difficult and does put some candidates off. The issue is that schools are using scholarships to manage their yield, to make sure that they are able to attract the very best candidates and retain the very best admits. And so if they were more transparent upfront about who gets what money, might make it more difficult for them to use their scholarship funds in that way. So there’s certainly benefits to the schools of having some flexibility behind the scenes of how to allocate those funds. But it’s definitely an interesting debate because, as you say, the price tag can be very off putting for some candidates. And I’m sure there are people who don’t apply because of that, not realizing that if they actually went through the process and got admitted, at the end of the day, they may end up getting some really good financial support from the school and it would actually be more feasible than they imagined.

[00:23:33.530] – John

Right? And only recently Harvard announced. For example. That they’re going to give out far more full rides for their MBA program than they ever had before. Which is also ups the ante for all the schools that are in the fear group that Harvard competes in. Because even if they don’t match it. They’re going to feel pressure to throw more money in the kitty to hand out to really qualified applicants if they want to land. And that’s part of the game. So, big takeaway. Hey, if you’re a domestic applicant, get your application in round one. We think this is an ideal shot for you, and I think admission offices are going to we often say they’ll wink at one bad aspect of your application and tend not to wink at two, whether it’s a low GPA or a below average GMAT or GRE score, or maybe your work experience isn’t as exclusive or redeeming as they would like. Well, I actually think they’re going to wink at two things if you’re a domestic applicant, maybe only one if you’re an international applicant. So get your append before the recession makes a big difference and pushes volume back up.

[00:24:50.090] – John

This is John Byrne with Poets and Quants. Thank you for listening. Thank you, Maria, and thank you, Caroline, for your insights.