Do MBAs Want To Be Billionaires?

Studying how MBA career choices differ from the careers of billionaires

By: Daniel Rasmussen with Nicholas Rice

Let’s assume, just for the sake of argument, that MBAs want to get rich. Let’s also assume that, in figuring out how to get rich, they should probably look at how the richest people in the country—the billionaires—made their fortunes. If we’re right in that second assumption, then MBAs are not making optimal career decisions.

Though imperfect as a metric for the wealth a graduate can hope to accrue, we chose to use billionaires as our metric for two reasons. First, because there is reliable data about them, as opposed to average compensation levels for graduate positions or high-net-worth individual populations. Second, because the number of billionaires whose wealth was inherited has been diminishing since the 1980s, making their wealth increasingly representative of industry trends. For instance, in 2011, 69% of those on the Forbes list started their own business, compared to 40% in 1982; and in 2011, 32% belonged to very wealthy families, down from 60% in 1982.

While there is a relationship between MBAs, billionaires, and the boom-bust cycles of the tech sector, MBAs seem to make two miscalculations: First, they appear to overlook the overrepresentation of billionaires in financial industries like investment management and hedge funds, focusing instead on industries in which they are underrepresented: investment banking, private equity, and venture capital. Second, they seem to have a distaste for traditional industries like manufacturing, telecom, retail, and real estate, despite a large number of billionaires who made their money in these sectors.

Below, we show a classic consulting-style 2x2 of which industries produce billionaires on the x-axis and which industries attract the most MBAs on the y-axis. We highlight in red the industries that attract too many MBAs relative to billionaires, namely consulting, banking, and healthcare, and in green the industries that attract too few MBAs relative to billionaires, like manufacturing, hedge funds, real estate, and telecommunications.

Figure 1: Industry Correlation Matrix of MBAs and Billionaires (2021)

Source: Wharton MBA Career Reports, Forbes 400 Lists

Accounting for the fact that many only go into consulting and investment banking for brief periods before transitioning to other industries, MBAs still seem to be making systematic career choice errors: preferring industries where MBAs regularly outnumber billionaires and overlooking those where the reverse is true.

This is particularly true of the financial sector, where in 2021 MBAs favored private equity (11.1% of MBAs vs. 5.25% of billionaires) and venture capital (3.4% of MBAs vs. 1.75% of billionaires) at the expense of hedge funds (3.2% of MBAs vs. 6% of billionaires), traditional investment management (4.5% of MBAs vs. 9.25% of billionaires), and real estate (2.9% of MBAs vs. 6.5% of billionaires).

It is also true of more traditional industries, where MBAs favored healthcare (6.7% of MBAs versus 3.5% of billionaires) while neglecting telecom (1.3% of MBAs versus 10.25% of billionaires), manufacturing (0.8% of MBAs versus 6% of billionaires), energy (0.2% of MBAs versus 4.25% of billionaires), and retail (3.2% of MBAs versus 7.75% of billionaires).

Interestingly, these neglected traditional industries are also those that have seen the greatest increases in their share of the billionaire population in the last two decades— manufacturing is up 10.8%, real estate 4.9%, retail 4%, and hedge funds 1.2%. Meanwhile, increases in the percentage of billionaires in industries where MBAs are overrepresented—healthcare (6.3%) and private equity (0.2%)—and decreases in those in which they are underrepresented—energy (-0.9%), investment management (-4.1%), technology (-10.4%), and telecoms (-11.7%)—haven’t reconciled the disparity between the two populations.

Figure 2: Billionaire Industry Population Change (2000–2021)

Source: Wharton MBA Career Reports, Forbes 400 Lists

MBAs seem to be opting for careers well-suited for cocktail party conversation—venture capital pioneers, private equity visionaries, and healthcare innovators—instead of the careers chosen by those who have gone on to become the wealthiest people on the planet. It may not be sexy for Joseph Grendys to talk about his poultry processing empire in Illinois, but his massive wealth is probably compensation enough.

Why are MBAs neglecting these undervalued traditional industries? As was the case with real estate, the most obvious explanation is compensation. Compared to a salary range of $150–167.5K in the financial or consulting sectors, MBAs can expect to earn $140K in retail, $150K in telecoms, and $142.5K in manufacturing. Another explanation is that MBAs do not want to enter industry-specific roles too early, instead choosing to maximize skill acquisition in advisory roles in consulting or investment banking before selecting an industry specialization a few years down the line.

Our aim in conducting this research was to build on Soifer’s work in developing the Harvard MBA Indicator to identify undervalued industries. MBAs choose their industry based on its prestige, what they think they can earn, what they hope to learn, and where they think they can end up by ascending vertically within it or by exiting to a different one. What this data shows is that they often make that decision poorly, and that there are market inefficiencies to be exploited by MBAs who are interested in pursuing extreme wealth and willing to take less popular paths to get there.

Acknowledgment: This piece was co-authored by Nicholas Rice, a rising senior at Yale majoring in English and philosophy. He is looking for postgraduate roles in finance beginning in 2023.