The $250,000 Gamble  

Posted by Dino in , ,

My worst nightmare for what 2011 will be like for me. ©

The call came in on Saturday morning, waking me up at about 9am. "Can you help on Monday night?", he asked. Within minutes I had been enrolled to help at a public speaking event that one of my MBA application recommenders was organizing. This was the third recommender, requested by some of the schools, for extra curricular activities. Though I could think of better things to do with my time, such as working on my business plan or doing some much needed house-keeping, this guy had taken time out of his days to help me. I should return the favor. So I did. However, this indebtedness pales in comparison to the prospect of a bigger weight of debt: financial debt.

When I enrolled on at Kellogg, I also submitted a financial aid form to the Kellogg finance department with the details of my salary and savings etc. A few weeks ago they provisionally offered me a loan. The formula they used seems to be:
loan = ( estimated cost of living for 2 years - savings ) / 2
You are given a loan for only one year; you apply next year for further funding for the following year. I understand that I'll get full details of the interest rates and terms in May.

What really gets to me about funding my MBA is the thought that I could surely be doing something more worthwhile with my savings than going bankrupt and then taking on debt. If I put my savings down as a deposit on a mortgage backed property, I could rent the property out and recoup the mortgage payments and then some more. My money would be working for me, as some would say. On my current trajectory, I'll be leaving business school with a negative bank balance over my head and finding myself working for the money to pay off the debt. This thought worries me doubly so because I plan to divert off the beaten path and create a venture. A high salary and bonuses to pay off that debt are not probable.

Yet, what keeps me on this path is the non-financial opportunity. At business school I will actually be in an environment offering above average odds for creating a successful startup, from access to mentors and investors to formal dissection and analysis of businesses and business plans. Even if the start-up adventure fails, the MBA will still leave me in good stead for the rest of my career, giving me a noticeable credential.

Perhaps most importantly for me, I'm not sure when I will have such an opportune moment again to establish a business. Some of my friends liken my plans to a gamble, and a big one after taking account of loss of earnings and the cost of the experience. I'm quite a risk averse person and do not quite see it in the same way. I think there will be all sorts of tacit benefits I do not even comprehend yet. For example, if I were to be in the position of my previously mentioned recommender, in dire need of help on a Saturday morning - I think about who I have built relationships - who might help me in such a situation. I then compare that to the relationships I might have built following the MBA. Based on what I've seen of the class thus far, I think my odds of success will be higher with those MBA folk.

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11 comments

OMGparishilton  

calculate your equity value (EV), if even by your most conservative estimates you are +$EV for the mba, then hell go for that shit, else....
gl
btw the current cost for 2 years is now 250k??

23 April 2009 at 08:48
OMGparishilton  

calculate your equity value (EV), if even by your most conservative estimates you are +$EV for the mba, then hell go for that shit, else....
gl
btw the current cost for 2 years is now 250k??

23 April 2009 at 08:48
D. G.  

Oh my god, OMG! Where have you been?! We've been missing your antics.

Based on current Kellogg estimates, the cost is: $73,517 x 2 years = $147,034.

But then you're also not taking a salary for two years, which could be at least another $100,000 over two years. So you quickly reach $250,000 ...

Hmm. I guess if you think about your equity value (or earning power) 10 years from now with and without the MBA, it is not so bad...

23 April 2009 at 10:04
missionmba  

I understand that the debts can be scary, but rest assured you'd pay back every bit of it in no time..

And in any case, the K-brand is unbeatable!! The whole loan thing would be worth it..

23 April 2009 at 14:58
missionmba  

I understand that the debts can be scary, but rest assured you'd pay back every bit of it in no time..

And in any case, the K-brand is unbeatable!! The whole loan thing would be worth it..

23 April 2009 at 14:58
D. G.  

Thanks for visiting MissionMBA.

Le Redacteur: you've painted some interesting pictures, made me chuckle in places and raised some great points. Are you sure you don't want to be replying on your own blog?

I am entirely engineering my MBA to fit my purpose:
* The specific business idea I'm pursuing is significantly influenced by research that has come out of Northwestern.
* Secondly, the idea needs a large but tight community to trial it on: though substitutes are possible, the Kellogg student body is a good fit for this and I've already started sowing some seeds to get them on board.
* Thirdly, there are some specific resources - contacts with media companies, particular courses/professors in marketing and links to incubators/investors that are particularly good for what I want to do.

There are some more personal reasons I am pursuing an MBA also:
* Education. I did one course at undergrad on business. The course featured an analysis of an award winning business plan. At the moment I'm writing a business plan myself and find myself constantly refering back to it. What others do with their MBA education is up to them, but I'm hoping the MBA education will give me a lot more to refer back to through the rest of my life in business. Hell, I did one "sample class" of marketing at DAK1 and find myself still wrestling with what it means.
* Skills / Experience. When I graduated from undergrad, I tried the "screw it, let's do it" thing of trying to start a big business. We had some interested investors, but it all died a death - accelerated by 9/11 and the dot com bust. I realise now that we didn't know what we didn't know. We didn't realise that we lacked skills, such as sales and marketing, and we simply did not know what was required to grow revenue and build a business. I hope to gain some of that missing understanding through hands on classes in market research, as well as widely varied fellow students.
* If all else fails, at least I leave business school with an MBA! (... and can look forward to a picket fence, wife, kids and all that jazz).

26 April 2009 at 22:19
D. G.  

Thanks for visiting MissionMBA.

Le Redacteur: you've painted some interesting pictures, made me chuckle in places and raised some great points. Are you sure you don't want to be replying on your own blog?

I am entirely engineering my MBA to fit my purpose:
* The specific business idea I'm pursuing is significantly influenced by research that has come out of Northwestern.
* Secondly, the idea needs a large but tight community to trial it on: though substitutes are possible, the Kellogg student body is a good fit for this and I've already started sowing some seeds to get them on board.
* Thirdly, there are some specific resources - contacts with media companies, particular courses/professors in marketing and links to incubators/investors that are particularly good for what I want to do.

There are some more personal reasons I am pursuing an MBA also:
* Education. I did one course at undergrad on business. The course featured an analysis of an award winning business plan. At the moment I'm writing a business plan myself and find myself constantly refering back to it. What others do with their MBA education is up to them, but I'm hoping the MBA education will give me a lot more to refer back to through the rest of my life in business. Hell, I did one "sample class" of marketing at DAK1 and find myself still wrestling with what it means.
* Skills / Experience. When I graduated from undergrad, I tried the "screw it, let's do it" thing of trying to start a big business. We had some interested investors, but it all died a death - accelerated by 9/11 and the dot com bust. I realise now that we didn't know what we didn't know. We didn't realise that we lacked skills, such as sales and marketing, and we simply did not know what was required to grow revenue and build a business. I hope to gain some of that missing understanding through hands on classes in market research, as well as widely varied fellow students.
* If all else fails, at least I leave business school with an MBA! (... and can look forward to a picket fence, wife, kids and all that jazz).

26 April 2009 at 22:19
D. G.  

Well. At least the comment count on this post has gone up ;-)

Thanks for the kind words.

30 April 2009 at 02:23
D. G.  

Well. At least the comment count on this post has gone up ;-)

Thanks for the kind words.

30 April 2009 at 02:23
Le Redacteur  

Sorry D.G. - There is a tipping point between creativity and stupor when drinking alcohol - I thought went over the brow somewhat...
The offer of assistance stands, as does the comment about your reply being excellent, and indicative of great spine and focus. Cheers.

30 April 2009 at 18:16
Le Redacteur  

Sorry D.G. - There is a tipping point between creativity and stupor when drinking alcohol - I thought went over the brow somewhat...
The offer of assistance stands, as does the comment about your reply being excellent, and indicative of great spine and focus. Cheers.

30 April 2009 at 18:16

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