Which MBAs Make More: Consultants or Small-Business Owners?
It&#x27;s nice to see this analysis actually consider growth and expected value of money rather than simply comparing raw averages.<p>However, it neglects to consider the ceiling of income. For a &quot;typical post MBA job,&quot; sure income might increase for a few years, and even triple as the article says. But eventually, there is a ceiling. In finance for example, the funnel gets progressively narrower toward the top. At first 50% of associates might be promoted to VP, then 25% of VPs might be promoted to MD. But there are very few C level positions, so only the top few MDs will ever be promoted further. Most MDs will eventually reach max compensation, then wait around for 10 years in the hopes of being promoted to C level. If that never happens, maybe they eventually grow impatient and leave to start their own firm. But at that point they&#x27;re in the same position as the &quot;small business owner,&quot; but ten years behind and with a limited skillset.<p>Whereas for those who start a business after MBA, income might start slowly, but there is no ceiling. The business could turn into cloudflare (in the case of Matthew Prince, to use an HBS example) with a massive valuation that clearly beats any income earned by his wage slave peers. Or, the business might fail, in which case the MBA can either start another business, or jump into the same corporate ladder he originally avoided.<p>Also, this article assumes that a &quot;small business&quot; takes investment. In this case, there is very little risk to the personal salary of the MBA, since he will have investor money to pay himself a salary close to market value of his peers, but with much higher upside.<p>I&#x27;ve never understood the appeal of jumping immediately onto the corporate ladder when you&#x27;re young, limiting your upside and constraining your options. It seems much more sensible to take the risk of your own business, with a much higher upside, and a downside that allows you to either start another one or join the corporate ladder anyway. If you&#x27;re good enough to raise investment, there really is very little personal risk.