Price is what you pay. Value is what you get.

— Warren Buffett

In a recent conversation, a person was weighing offers from admission to three business schools. The three admission letters carried different levels of financial aid. This person said, “I’ll just go where the bid is highest. I’ll follow the money. Business is about money, so business school should be about the money too. If I don’t take the highest financial aid package, I’ll incur debts. And I’d have to sell my Beemer. And the school that offers me the most financial aid must really love me.” Is this person making the right decision?

Probably no, for reasons that Warren Buffett would understand.

First, business is about much more than money. Money is important—I say this as a finance professor who has taught the virtue of minding your money. But there is more to business practice than just money. Business is really about inventing products and services, delighting customers, drawing employees together, solving complicated messes, building reliable alliances, and so on. If you do all of that well, money happens. Indeed, focusing too much on just the money may prevent you from attending well to the drivers that really produce the money. To think that business is only about money suggests that you may really need the broadening experience of a good business school education and/or that you may need more maturity and depth of experience to get the maximum out of it.

Of course, business school is not the same as business life—b-school is about preparing you to be an effective business practitioner. You should focus on learning and personal growth, rather than maximizing cash flow. It is not true that the choice of a business school should hinge the money.

Even when you get ready to re-enter the professional world, I would counsel you to choose a job and career path that hold the most growth, impact, and joy rather than appear to create the most wealth. The odds are that if you grow, enjoy, and prove effective in a line a work, you will gain material success. Indeed, I will be so bold as to predict that the average graduate of a highly-rated MBA program today will retire a multi-millionaire. In comparison to your future value, the debts you may incur today will be trivial. What matters most is preparing you for growth, impact, and enjoyment of your work. Selling your BMW to finance your MBA education is a scant sacrifice for the future benefits to be derived from your education.

It is no secret that top business schools offer a wide range of financial aid deals for admitted students. The competition for talent is high, to the point where some schools will offer auction-style bids over the summer for students who have turned down their offers of admission, raising the ante with each call, rather like an airline sweetens the price of tickets as the departure time approaches in an effort to fill its airplanes. By the way, Darden doesn’t do this: we put out best offer up front, out of respect for the people we admit. Do you really want to be the subject of an auction? Does your self-esteem really depend on the financial aid a school will bid?

Giving in to the auction-and-money mentality has unsavory implications. The story is told of Winston Churchill, who turned to a socialite seated next to him at dinner and offered her millions of pounds to sleep with him. She coyly assented. But then Churchill revised his offer to one pound. In a huff, she replied, “That’s outrageous, what do you think I am?” To this, Churchill said, “We’ve already established that. Now we’re merely haggling about the price.”

Consider an alternative mentality for choosing among offers of admission. The schools who have admitted you think you are intelligent, have drive, and have good business promise. The big challenge is how to mold your potential into becoming the most effective practitioner. As I stated in my previous blog posting, molding your potential depends on three issues:

  1. What is my fit with the various schools?
  2. What is my vision for my career, and how can the schools help me reach it?
  3. What is my sense of passion for any of the schools?

Some time ago, a person applied to two b-schools and was admitted. His top choice for school had a policy of financial aid that was based strictly on need, rather than merit. Because this person had worked and saved for a few years, his balance sheet showed resources about adequate to complete the program—it would exhaust his resources and might cause him to borrow. But the school’s financial aid office declined his inquiries. The other school was less expensive, closer to home, and more convenient in many ways. Still the first-choice school appealed to him: the fit was right; his vision aligned with the school, and the school gave him great energy. So, he swallowed hard and spent everything he had on his education at his top-choice school. He didn’t follow the money, but the choice he made was one of the best in his life. The school changed his life for the better and prepared him for a long and effective career.

That person was me.

Warren Buffett, perhaps the world’s most successful professional investor, says it well. Price is not the same thing as value. Minimizing the cost of education is not the same thing as maximizing value. Financial aid is no measure of the value or worth of the educational experience. My very strong advice is to make a decision to accept an offer of admission based on your intention to become the person of your dreams rather than based just on the bucks in the envelope.

Posted by Robert Bruner at 04/29/2007 06:59:13 PM