Columbia B-school’s Glenn Hubbard: Is an MBA worth it?

February 8, 2013, 2:16 PM UTC

(Poets&Quants) — If Columbia Business School Dean Glenn Hubbard were to advise his McKinsey-bound son on where to get his MBA, Hubbard says there are only four or five programs that he would recommend. He declines to mention the schools by name, but you can rest assured that Columbia would be on the list along with Harvard, Stanford, and Wharton. That leaves a lot of very good schools off the list.

Hubbard, dean of Columbia’s business school since July 2004, is an economist by training. He joined Columbia in 1988, after beginning his teaching career at Northwestern. He was chairman of the Council of Economic Advisers under President George Bush and a top economic advisor to Mitt Romney during his recent presidential campaign.

In a wide-ranging interview with Poets&Quants, Hubbard discusses, among other things, the anxiety in MBA programs, whether Warren Buffett will become a donor, and Columbia’s MBA application plunge last year, vastly exceeding downturns at other elite business schools.

Last year, applications to Columbia’s MBA program fell by 19%, more than at any other top business school. How are things looking this year?

We are fortunate that our applications are up 9% year-over-year. What was weird about our drop is that it came along all at once. I told the faculty I felt like Wile E. Coyote, where he ran off the cliff and didn’t know it yet. We had a couple of years where applications had plateaued and then all of a sudden crashed. But fortunately we are back up.

Your decline was generally attributed to Wall Street’s troubles and the fact that Columbia’s fortunes are so closely tied to Wall Street. Agree?

Wharton had a similar pattern. And if you were to do a trend line, we are both on that line. Harvard is above it. Harvard is the one school at the top where if you did a trend line pre-crisis and looked at applications, it’s above it.

Do you think the decline is related to the belief that the value of the MBA degree has declined?

No. I think the value of the degree is still very high if you can go to a good school. If you go to any top business school, you will gain a skill set and mindset to make you a very good business leader. If you have in mind only an analytical job track, you might want to question the ROI. I think it’s really hard to defend, at least in money terms, the value of an MBA beyond the top business schools.

And when you say top business schools, who would you put into that category?

No. Honestly, I won’t name names because that always makes staff nervous. But my own son who is graduating from Columbia College and is going to work for McKinsey, if he asked me in a couple of years which business school to go to, I would give him only four or five names and say, “Go to anyone of those. They are all great. They are all different. But go to one of them.”

Glenn, how would you characterize the state of graduate business education right now?

I think the next 20 years are going to be a sea change in our world. I know universities change glacially but not this time because the opportunity cost of getting an MBA is high. It has been traditionally because you have to give up work plus you have to pay the tuition. And we know now that the advent of online technology is going to be very disruptive. I think it is going to be differently disruptive for a school like Columbia than that group of schools I mentioned.

How so?

For us, it will change how we teach in the core that we have coming out this fall. If you look at the tools classes, like stats, microeconomics, or financial accounting, some pieces of those courses will be done online for two reasons. One is to make sure everybody has the same preparation. And the other is if you take a class on statistics, by the time you sit with the stat professor you are actually talking about a real business problem…. I can learn that in my bathrobe at home.

And in the new curriculum you are also allowing students to take more electives in the first year, in part so that they are better prepared for their summer internships. Explain how that will work.

Exactly. Many students come to us without being 100% sure about what they want to do. The rap on us is that we are all about finance. It’s not true. I think students come wanting to do almost anything. But for many of them, particularly if it’s not something they have done before, they need to take a prominent elective before recruiting. In the new core, they can do that very quickly.

Firms are increasingly using the internship as a way to recruit. That is why anxiety is rising in MBA programs. Students know the internship is not a first date. It’s probably a match.

Another long-time pressure point for students at Columbia has been Uris Hall. Of course, you’re getting a new campus, but that won’t come on line for another four or five years.

We have raised $350 million and the university is going to put in another $100 million for our new campus. But we still have $150 million to go.

My beef with Uris Hall isn’t that it is ugly, although frankly it is. My beef is it’s not designed for learning today. The problem with Uris is if you think about how you want to teach … you would have lots of informal spaces in a building where ideas happen. That is not Uris. Uris is filled with theater-style classrooms, a cafeteria, a library, and faculty way up in the clouds.

The new building offers us a chance to reimagine what a business school should look like. It’s about twice as much space as we currently have for the same number of students.

And of course, in New York, everything is more expensive than it should be and everything takes longer. With this project, I thought I was going to be on Social Security by the time we would open. The university was able to assemble 17 acres of land in Manhattan, which is in itself something of a miracle. At Stanford that might be a garden, but not in New York.

When will you open?

The current calendar is late 2017. I also wanted to make sure we didn’t open before other parts of the campus because our fundraising is doing better. I just didn’t want to move into a construction site, so I slowed the gears down.

What will the total cost be?

About $600 million, soup to nuts. So we have $150 million to go. I should be able by the end of this academic year to close that gap to $100 million. And then it will take another couple of years to get the rest.

One of your most famous alumni also happens to be one of the wealthiest men alive. Have you asked Warren Buffett for money?

You know, Warren is close to the school. He visits and sees our students. And he says amazing things. He says that Columbia Business School changed his life. It’s terrific. But that’s not going to happen.

Is that because Buffett doesn’t see the social value in a business school?

I think what we are doing makes a social difference. I think people who go out and create wealth are a noble thing. I often sit with donors who say they would rather give to the hospitals or the medical school and I talk them out of it — not because I don’t think giving to medicine is not valuable but we are valuable, too. It’s not just minting investment bankers. That’s not what our life is about.

I have made this argument to Warren. I have made so many arguments to Warren. One of his points was, ‘I invest better than you and so I want to hold the money.’ And I said, ‘Well I have a great deal for you, Warren. Just give me stock. I won’t sell it. I will hold it.’ He said, ‘You’re good but you’re not that good.’

Our two biggest gifts, one came from Henry Kravis and the other I haven’t announced yet because we haven’t worked out the public relations. It’s not from an alum but rather a close personal friend. He’s very prominent in the city, believes in the project for New York. Friends like that are definitely worth having.

What’s the hardest part of asking people for big money?

I think it’s easier to ask people for big money than small because with big money you know the person has enormous capacity and second it really is about values and dreams. If they share your values, they believe they can make a big difference and they can.

We are more tuition-dependent than Harvard or Stanford. It covers maybe two-thirds of our budget. The rest has to come either from endowment income or fundraising. At Stanford, it’s more like 50-50. And at Harvard, I think the MBA tuition is not even 20% of revenue. They could almost give it away.

On financial aid, we are not going to match Harvard in my lifetime. But we have got to match Wharton, and it is substantially bigger.

Where is Columbia in comparison to them on financial aid?

We are probably a third under Wharton’s financial aid budget and a fraction of Harvard’s. Harvard is just way in a different league.

Harvard Business School recently disclosed that its average fellowship aid last year essentially discounted tuition for half the student body by 58%.

For us, that number would be 10%. When we are trying to assemble a class, we do want it to look a particular way. So we have in mind the right male-female mix as well as having the best students from different parts of the world. I would be naïve if I didn’t think we were losing people who couldn’t afford it.

One of the issues for donors is that it is not always about need. So that can be a harder sell. You hear them say, ‘Wait a minute. You want me to write a check so you can give someone who doesn’t need money a chance to go work for Goldman Sachs?’ It’s a tougher fundraising sell than the building.

Do you think business schools are being too generous with their fellowship aid to applicants?

It’s an arms’ race. Harvard has infinite resources. We don’t and our other peers don’t but I do think at these price points we have to think harder about how to bring the cost of our programs down. When I filed our long-term budget with the trustees, I told them I am decelerating our tuition increases because I just don’t think they are sustainable. Which means I am going to have a different model. We will have other revenue streams and work harder at getting our costs down. Law schools are going to see this in spades. They are in trouble.

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