What about an MBA, then?

I opened a rather large can of worms with my post about whether or not one should do a PhD last Friday, for the most popular question I have gotten since then is whether one should do an MBA – is it “worth it”?

Here are my thoughts on the subject:

  1. Just like the PhD, so also with the MBA. You are doing it to get a job, or get more money in your current job. You should be clear about this. You are not doing it to get better at business, or to start your own business. 1
  2. The major difference between an MBA and a PhD is that one is a marathon, and the other is a sprint. There is some satisfaction to be gained from simply finishing the marathon – but the point of a sprint is to win it. You need to be faster than the others – or the others need to be slower than you.
  3. And if that is true (and I think it is), and if your job is likely to come from the placements process, then “winning” at the placement process becomes oh-so-important. Or, here is another way to think about it – if you think that you CV will look better by being able to say that you got placed in a “good” company while in college, then your MBA degree is about “winning” at the placement process.
  4. And that, unfortunately, makes the acquisition of an MBA degree a zero sum game. You only win by defeating everybody else. Because you don’t get the best job offer by making sure that the others get the best job offers – there’s only so many best job offers to go around.
  5. Walk into an MBA education with your eyes wide open: that’s why you are there, to be the best in a zero-sum game. By definition, the MBA game is a cut-throat game. If that is the world you want to inhabit, then an MBA is a great education to acquire.
  6. Remember, though, that the education isn’t what you learn in class. That education, these days, you can get for free online, and it’ll be better than the education you get in your college. The education that you get is learning how to be demonstrably better than your peers while being part of the same community for two years. You then have to apply these learnings to your career.
  7. That makes the MBA one of those rare degrees where the quality of the college really matters. Not because the faculty is likely to be better, or because you will get better facilities, or because the library will be better. All that is likely true, but the reason you want to get into a “good” college is because you need to show that you have beaten the best, twice over. You first beat everybody else by getting into this college when so many others couldn’t, and you beat everybody else who got in by scoring more than they did. It really is the ultimate zero-sum game!
  8. An MBA with prior work-experience is worth so much more than an MBA with no prior work-experience. Identify the gaps in what you know about the corporate world by working in the corporate world, and then do an MBA.
  9. You do an MBA for the job, for your peer group and for what you learn in the classroom – in that order.
  10. If you are faintly horrified by what you have just read, don’t even think about doing an MBA. If you can’t wait to get started, you should definitely do an MBA!
  1. I’m talking about the median MBA candidate here[]

Understand the beast that is finance

We’ve been building a series on finance here, and we’re not even at basecamp level just yet in terms of our ascent on Mount Finance. But I just realized that while I’ve started the series, I have not laid out two ideas that I think are central to thinking about finance. One idea for today, and the other for tomorrow.

Today’s idea is about zero sum games.

I’m big on non-zero sum games. Students at GIPE are probably sick and tired of hearing me uttering the phrase now, but it’s never going to stop. The world is where it is today precisely because of the fact that it is a non-zero sum game, and most of our problems in life and society would go away if only we understood and applied the principle in all walks of life. But that’s a separate post, and I’ll get to it one day.

For those of you who are unfamiliar with the concept, a trade in which both parties are left better off than they were before is called a non-zero sum game. Also called a double thank you moment, by the way.

Here’s the thing about finance.

It is not a non-zero sum game.

For me to win, you have to lose. There’s debate about whether this is true for all of finance or only a part of it, but options theory in particular is (at least in my view) definitely a zero sum game.

Options and futures trading is the closest practical example to a zero-sum game scenario because the contracts are agreements between two parties, and, if one person loses, then the other party gains. While this is a very simplified explanation of options and futures, generally, if the price of that commodity or underlying asset rises (usually against market expectations) within a set time frame, an investor can close the futures contract at a profit. Thus, if an investor makes money from that bet, there will be a corresponding loss, and the net result is a transfer of wealth from one investor to another.


Speaking of the “for me to win, you have to lose” line of argument, consider this snippet of an excellent conversation between Tyler Cowen and Clifford Asness:

AUDIENCE MEMBER: How confident can you be that there will continue to be the steady supply of stupider investors on the other side of the trade so that you continue to make money?
ASNESS: That’s a great set of questions.
Backing up, you’re not going to believe me, you’re going to think I’m just copying you. But myself and a colleague, Antti Ilmanen — he’s Finnish, he didn’t just have odd parents — have been planning, we haven’t written it yet, to write a paper with the literal title, “Who is On the Other Side?” Just a little shorter version of what you said, because we do think that is a very disciplining question.


In fact, if you ask me, this is the core differentiator between economics and finance. The study of economics is (ought to be?) about non-zero sum games. The study of finance is about zero sum games. It’s confrontational, it’s risky, it’s like sports. For there to be a winner, there has to be a loser.

Why I like watching and playing sports even when sports is very much a zero-sum game is also another post by the way. One day.

Still, back to my main point: finance is a zero sum game.

If you want to get into this jungle, do so with eyes wide open. I’m just sayin’.