Christian sent us a copy of his unofficial score report. More to come!
What exactly do these GMAT scores mean? Well, the 750 score ranks in the 98th percentile. The verbal score was exceptionally well relative to the rest of the applicant pool. This is an overall solid, balanced score – no matter what ethnicity or application profile you have.
Congrats to Christian!
MBA Pay Research
On their websites, top business schools such as Stanford, Columbia and Wharton advertise their degrees as a great investment that guarantees a well-paid career future. And they price their services accordingly, with their tuition fees surpassing $170,000 for a two-year MBA degree. Stanford calculates the annual salary of its graduates for the first year after graduation at $154,713.
This means that a student loan can be repaid really quickly. But for female graduates, it might take some more time.
Surprisingly enough, the more expensive the MBA, the larger the salary gap between male and female graduates. A Bloomberg Businessweek article brought this issue to public attention this December, as it revealed the results of its research on MBA graduate wages.
Since 2002, every two years Bloomberg Buisnessweek presents a ranking of the <a href=”http://www.gmatpill.com/official-school-blog/top-business-school/”>top business schools</a>. The study was conducted by tracking the careers and respective wages of 24,000 fresh graduates of the 30 top business schools (as ranked in 2012).
The conclusion of the research is that male MBA graduates have a significantly higher income than women graduates of the same schools, with the only exception of one school on the top 30 list.
Stanford, Yale, Harvard and Wharton: The Gap is Growing
The average annual income of a fresh female <a href=”http://www.gmatpill.com/about/postgmatpremba-interview-blog-series-marquis-stanford/”>Stanford graduate</a> was $121,945 in 2012, while male graduates averaged an annual salary of $154,713. This means that women got paid about 21% less than men in the first year of their post MBA career. Yale is positioned second in the wage gap list, with its female graduates getting a first salary reduced about $13,400 compared to their male counterparts.
Female Wharton graduates got jobs that paid 14.3 % less than male graduates and in the case of Harvard, women managed to get jobs that reduce the wage difference with their former fellow students to 10.5%. These percentages seem pretty high and they are more striking if we consider the fact that they refer to salaries of more than $120,000 per year.
What is particularly thought-provoking is the fact that the gender wage gap seems to be growing. When the study started, in 2002, women earned 98% of what men did. In 2004 the percentage had already fallen to 94.1% and even though it became slightly higher in 2006, it dropped again in 2008, raised somewhat in 2010, to end up being 93.2% in 2012.
And a 2006 Booth Business School study highlights the fact that even after 10 years of career, the wage difference does not shrink. On the contrary, it becomes even greater with women earning as little as 50% of what men, who studied in the same business school, earn.
As Businessweek points out, there was a great variation of numbers not only among the different schools, but also among the same school when comparing different academic years. Stanford had the biggest wage gap with the female graduates earning 79% of what the male graduates did, but there was also one school at the other end of the spectrum. The Southern Methodist University’s Cox School of Business has an impressive – and rare – earning rate of female/male wages that reaches 103%.
Gender discrimination or career choices?
Once the study was completed, Businessweek tried to contact the director of Stanford’s Career Management Center and a Wharton spokesman, but the two men refused to comment on the findings. This could lead to the conclusion that gender discrimination is what is going on in the business market and no one wants to be involved in this tricky discussion. But there are also other facts that point towards the root of the gender wage gap issue. The aforementioned 2006 study conducted at Booth School of Business showed that the wage difference in the first years of the MBA graduate careers might have a lot to do with their study choices prior to the MBA. On average, women are a year younger when they enter the MBA school compared to men, and this means that they have less work experience, that is of course pays less in the market. The same Booth study showed that men often choose more finance courses during their first degree, while women focus more on marketing. And it is a fact that marketing experience is not as well paid as finance.
Different Ambitions Between Genders
Significantly fewer MBA graduates are pursuing finance careers in 2012 than was the case in 2002, including both genders. Even though Wall Street jobs are some of the most lucrative ones, there is a great pressure involved and significant cutbacks in wages and personnel have taken place the last two years. Only 16% of women graduates chose the finance field as opposed to 29% in 2002 and for men the numbers are 32% and 23% respectively.
The other well-paid field that one can commit to after an MBA is investment banking. In 2002 it was just 6% of women graduates that chose it but the percentage dropped even more to 2% in 2012. On the other hand, the percentage of men who started a post-MBA career in investment banking raised from 6.9% in 2002 to 9.4% in 2012.
A third sector that pays well is consulting. It is considered by some female MBA graduates as a more woman-friendly sector, contrary to the male-dominated banking world. The director of career services at McCombs told Businessweek that the high rate of its female graduates choosing consulting (31% in 2012) is the reason that the female graduates of the school earn as much as 103% of the male wages. An interesting point can be made when looking at Stanford’s graduate choices.
The vast majority (32%) chooses finance careers, as they are the highest paid ones with an estimation of $152,743. Internet services and e-commerce offer a starting salary of $116,092 and are chosen by 18% of the male and female graduates. A 6% chooses to get employed in the consumer products sector and start with a salary of about $108,750, while a 4% gets absorbed in the media and entertainment sector with a salary of $109,125. Women do show a preference for these last three categories, that have a significant wage gap as sectors, when compared to banking and finance.
Last, but not least, when MBA students are asked about their ideal employer company, men often choose large, highly competitive financial organizations, such as Goldman Sachs, Morgan Stanley, and J.P. Morgan Chase, while women are more attracted to the lifestyle and media sector and companies such as Facebook, Johnson & Johnson, Procter & Gamble, Starbucks, Walt Disney and Nike. Again, the wage difference in these companies is significant and is another way in which career choices influence the wage gap numbers.
The Priciest Business School Program In The World: Stanford MBA
The very high prices of top MBA schools are getting even higher. Within just two years time, Stanford’s estimation for the attendance cost has gone up from $166,812 to $185,054, surpassing that of Columbia Business School and University of Pennsylvania’s Wharton School of Business. Columbia estimates a cost of $ 90,698 the first year and $ 89,234 the second year, summing up in a total of $ 179,932. That is already significantly lower than Stanford’s tuition. Wharton offers an estimate of $ 96,000 for the first year (2013-2014) of the MBA, according to its website. These are astronomical numbers for many people – especially MBA candidates who aren’t lucky enough to score a $50,000 MBA scholarship.
Stanford is now the most expensive two-year business school and people cannot help but wonder whether students are paying this much for the education or the connections. It is a fact though, that once a Stanford MBA graduate gets a job, he or she will make an average of $ 185,000 the first year. It is worth noting that more than 70% of Stanford’s graduates got hired within one month after graduating in 2012, while 93% got hired within 3 months. It is no wonder that those who can afford it, make the investment to spend two years following Stanford’s MBA program. With closely knit classes of fewer than 400 new students per year, Stanford offers a personal teaching approach and a powerful network by the time students graduate.
Harvard’s MBA is Almost $25k Less Expensive than Stanford’s MBA
Harvard is offering a very competitive program and employment rates and is currently the main rival of Stanford in rankings, but offers a cost of around $ 160,000. This is significantly lower, especially if one considers the fact that Boston is not a cheap city to study in. Additionally, Harvard has the most generous fellowship program than any other US business school. On the other hand, it has the highest cost for books and study supplies reaching $ 6,700. The reason for that is the case study-based teaching method of the school. An average for books and study supplies in the top 10 business schools is around $ 2,000.
Stern School of Business has the second most expensive business program, with a cost estimate of $ 92,266 per year. And even though the estimate of living costs is high, residents of New York can assure interested students that the $ 24,500 that Stern calculates for living costs are way to little. Cornell’s Johnson School gives a more feasible budget of around $ 30,000 for two years for food and it is based in Ithaca, New York.
What Is Included In The Cost Estimation?
Business schools are becoming more and more popular, especially the ones in the top 10 lists, as they almost guarantee immediate employment and a great salary. Students and employees interested in these schools, need to make sure that they can afford them though, before starting the long application procedures. By visiting their sites, one can see that schools estimate the cost of full time attendance by adding up different categories of expenses: tuition fees, health insurance, books, study trips, case study expenses, travel costs and of course rent and food expenses. Almost all of them tend to be quite conservative in their estimations of living expenses though, and applicants need to take that in mind when budgeting. Usually, a high-end school means that the majority of the students will be able to afford a high-end lifestyle. In order to keep networking going, one will want to follow most of the activities, such as weekends in costly resorts and high-class dinners. Applicants should also take into account that almost all schools take it for granted that students will live in the campus or in a shared apartment. If there are any aspirations about more space or individuality, significantly larger amounts need to be included in the budget.
How to Fund an MBA
There are a few different ways to fund an MBA. Applicants need to consider their current financial status and base their calculations on that, but it is also a good idea to keep in mind the height of the expected salary after graduation. Stanford has a “need-blind” admission program. This means that no matter what the applicant’s financial background, they will be admitted if they fit the school’s profile. Then, the Financial Aid Office will help the student get student loans and/or fellowships, in order to manage to finance their studies. In Stanford, about 75% of the students get some sort of financial aid. Harvard, Columbia, Wharton and almost all schools that offer MBAs have similar offices, acknowledging the high costs and presenting their degrees as investments worth the burden of a loan.
Achieving Admission to a High Quality Business School: The Importance of GMAT
For people who have finished their studies a few years ago and have some work experience, an MBA is a great way to gain more knowledge in a wide range of topics, develop their business skills and dramatically increase their value as employees. Even recent graduates are welcome to apply, as many top quality schools, including Stanford, do not exclude fresh graduates as long as they have a great profile. Without work experience of course, great references, recommendation letters, and a GMAT score in the target range for your school is needed.
Breaking Down the GMAT
GMAT stands for Graduate Management Admission test. It is a four-section computer-based standardized test that evaluates the candidates in different categories. The quantitative section is focused on the ability of the candidate to deal with problem solving and data sufficiency. The verbal section includes three different types of tasks: reading comprehension, critical reasoning and sentence correction. It is about understanding and correcting written speech in order to best reflect the ideas of the writer. The analytical writing section consists of an essay that is evaluated based on the analysis of an argument. Since June 2012, the fourth section has been added. It is called integrated reasoning and it has as a goal to rate the ability of the candidate to retrieve and analyze data from different sources and given in different formats. As this section is brand new, business schools are not yet taking it’s score into serious account, when it comes to the admission evaluation process. The cost of the GMAT exam is $ 250 worldwide.
GMAT scores for top Business Schools
The GMAT results range from 200 to 800, but if the applicants are hoping for an admission in one of the top business schools, then they have to be in the 10 percent that manages to get a score higher than 700. The top 3 business schools, according to U.S. News, have an average GMAT score as follows:
Stanford – 728
Harvard – 724
Yale – 722.
MIT, University of California-Berkeley, University of Pennsylvania share an average score of 718.
Dartmouth College students average a 716, while New York University and University of Chicago are at 715.
Northwestern University in the last one in the top ten, with 714.
Apparently, in order to manage such a high score, practice and guidance are needed. Very few people are equally strong in all four sections; and even if the student’s IQ is above average, they still need to polish their performance, in order to increase the chances of getting admitted.
What a tutor or GMAT training program can do for applicants, is to give them all the much needed tips to get from good to excellent. If one wants to get into a top business school, it is important to focus on the GMAT performance and this is a process that can start early on. Even in the first years in college, students can take the GMAT. During these years, the math knowledge from high school is still fresh and there is no need to re-learn things. If the score is good, then one can use it for the following 5 years. And even if it is not high enough for one’s ambitions, one can get familiar with the computer testing system, which can be quite intimidating. Student can increase their score by choosing math and statistics courses in college. And it needs to be stressed, that in order to become a successful businessman, wording counts. This is why applicants need good training in the verbal section, something that many math geniuses fail to acknowledge, resulting in lower total scores. Even more liberal schools that do not provide a minimal GMAT score, make it clear that high scores give a great push to your application.
In conclusion, a top-notch business school can offer great employment opportunities and fast cash flow right after graduation, but it is an investment that needs to be carefully planned on many levels. From the preparation of the application and GMAT tests to the budgeting and application for student loans and scholarships, it takes patience and effort that will hopefully be rewarded.
Not sure about taking the GMAT? Not sure about Business School?
It’s still worth it to take the GMAT exam – according to our guest author today.
Aspiring career professionals often look to business school to change careers for a better job/pay, or to climb the corporate ladder. But to get to business school, the first step is to schedule a date and take the GMAT exam. But what if you’re not sure about going to business school? Does it still make sense to take the GMAT?
Today, we’ll hear that the answer to that question, after some expert trading risk analysis, is an emphatic “yes”. Our guest author is Mikey, a 25 year old derivatives trader at an investment bank, with 4+ years of work experience. He likens the GMAT exam to a very “cheap” option on his future career – in trading terms, a low risk premium paid ($250 exam fee) for a potentially large reward (the MBA experience, degree, and opportunity for career progression). For any trader, this could very well be the trade of a life time.
The Case for taking the GMAT Exam: Finance Professional
This is NOT an article about the case for business school — that in my view is an entirely separate consideration. This is strictly about my thought process in deciding whether or not one should take the GMAT exam.
I believe that one can think of the GMAT exam as a long-term call option on one’s career — and ultimately on one’s life — whose main costs are sweat equity and the examination fee ($250). I believe that the prudent thing to do is to maximize these sort of “limited downside but potentially life-altering upside” options, especially in this kind of uncertain job market environment and when one is young.
Introducing the Financial Call Option
In the financial services industry, an option is a type of product that costs the buyer an upfront fee and provides him/her with a payoff that is linked to the performance of a pre-specified underlying entity. A call option rises in value when the underlying entity increases in value; a put option rises in value when the underlying entity decreases in value.
When one considers options, one weighs the “costs” versus the potential “payoffs”.
An interesting aspect of the options world is the potentially asymmetric payoff profiles that may arise: a call option costs a fixed, pre-determined amount…
..BUT the payoff is theoretically UNLIMITED as the underlying entity can continue to rise infinitely in value.
But let’s be real, the infinite payoff scenario is highly unlikely to occur. Instead, one should weigh (based on probability) the various potential payoff scenarios and net that against the cost of the option to come up with an expected value for the option.
GMAT As Career Call Option
How does a “call option” relate to the GMAT exam and your career?
The underlying entity is your career.
The option premium is the cost of the exam ($250) and the time required to study for the exam.
The potential upside is infinite.
The downside is limited to the cost of the option.
In my view, the GMAT exam is an extremely low-cost option that can potentially have positive career and life altering impacts.
Should I Buy A Career Call Option?
Ask yourself this question: Is there a small chance that you may consider going to business school in the next 1 – 5 years?
If your answer is yes, then I would argue that as a trade, the risk vs. reward / cost vs. benefit profile seem to be skewed in favor of taking the exam.
If you answer no, I would still argue that it may make sense to strongly consider taking the GMAT as a sort of “tail-risk” hedge, given how relatively low-cost this option is to acquire.
Think about it this way: Options can be used both as a speculative instrument (betting that the value of an underlying asset will go up or down), but also as an insurance or hedging instrument (protecting against the downside of an existing investment). Applied to the GMAT, there are three scenarios here:
- If you already know that you are going to apply to business school in hopes of a better career, then it is obvious that you need to take the GMAT exam in order to apply.
- If there is a small chance that you may want to apply to business school sometime in the future, then it makes sense to take the GMAT exam as a sort of cheap insurance policy.
- If there is no foreseeable plan of business school on the horizon, it still makes sense to take the GMAT exam as a sort of tail-risk disaster hedge option that becomes valuable if you find yourself in the situation of “no job, no job prospects” and “only business school as the next best logical step”.
As a trader risk-managing a book, I always think of the worst-case scenarios: What happens if the world blows up? How can I protect the downside of my book?
Protect Your Career Now – Not When You’re In Trouble
Oftentimes, it is exactly when the world is in a pleasant state that these “disaster options” that increase in value in stressed times are cheapest to purchase — everyone thinks all is good in the world and so the market puts little value on these kinds of disaster payoff options.
But as we have seen, tail risks seem to occur more frequently than expected in today’s world.
The WORST thing I could do is manage my trading book assuming the world will always be in a pleasant state. When the world blows up, then I would have to scramble to purchase these “disaster payoff options” when everyone else wants to buy them too.
But by this time, it may be too late: either I may have suffered such great losses on my original position that I am out of a job
these options are so expensive that it does not make sense to purchase them at such rich levels.
Similarly, it MAY be the case that the best time to take the GMAT is NOT when you are out of a job and scrambling to figure out if you have enough time to apply for business school, BUT RATHER when things are seemingly going well and business school is but an afterthought.“The best time to take the GMAT is NOT when you are out of a job…but rather when things are seemingly going well…”
Life Can Change Quickly
Life can change quickly. Things may be perfect for you now, but as anyone in his or her 20s and older has seen (and perhaps even experienced first-hand), the world in general (and whole industries in particular) can experience systemic changes in a matter of months.
It has been remarkable to me to see that the financial services industry that I have worked in for half a decade has changed so dramatically. We have lived through the collapse of once seemingly indestructible investment banks; we have seen the stock market lose half of its value; we have experienced one of the worst economic and job environments in a generation.
I have seen colleagues get “let go” from jobs that they previously have devoted their lives to; I have seen close friends unable to find work after graduation; I have and still continue to experience significant job uncertainty.“I have seen colleagues get “let go” from jobs that they previously devoted their entire lives to.”
–Mikey- Derivatives trader, Bulge Bracket IBank
Be Prepared For Your Future Career
The recovery process is slow. Companies are slow to rehire. There may come a point at which you and I find ourselves with no job and no other immediate job prospects. It is at this point that we have no other options and may need to consider business school.
Having already taken the GMAT puts us in a significantly more favorable position to pursue this option.About the author:
The author is a derivatives trader at a bulge bracket investment bank in New York. He has worked in the financial services industry for five years. In his spare time, he likes to ride and write about his folding bicycle: www.bromptonyc.com.
From 570 to 620 to 710 – Congrats, Raghu!From 570 to 620 to 710 – Congrats, Raghu!From 570 to 620 to 710 – Congrats, Raghu!
Raghu took the GMAT 4 times. After 3 attempts, he was stuck at 620.
Throughout this entire process, we were in discussion with Raghu for some 50+ email exchanges since March. It wasn’t until end of August that Raghu took the GMAT Pill.
Then in October, he scored a 710!
Here’s the proof:
Do you see that amazing improvement? The verbal score was a V25 (36th %ile). His verbal improvement alone was 11 pts from V25 to V36 (79% ile). That’s a jump from the 36th percentile to the 79th percentile in the rankings!
Now, when was the last time you saw something like that?
Here are screenshots of some of the emails:
He first started off with a 570
He prepped again for a 2nd attempt
He came up with a 620 – which is a decent improvement, but he was expecting more
So he took the GMAT a 3rd time, this time getting a 620 again
He was considering some prep options
We usually don’t give opinions on other providers, but since he seemed confused by the many options out there, here’s what we wrote back:
He decided to follow the Stanford guy ;]
He scores 710!! Ecstatic, he wrote us this email late past midnight in India.
As you can see above, we told him a story about how another student was in similar shoes. He took Knewton, but then changed his mind and took GMAT Pill. His testimonial is on our homepage. That was the story we told him.
Well, now, HIS story / testimonial is on our homepage.
Congratulations to Raghu on this huge improvement!