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Some declines are jaw-dropping. The Massachusetts Institute of Technology (MIT) has a decent claim to be the world’s top university. But at its business school, named after Alfred Sloan, a giant of the automotive industry during the 20th century, the wheels are coming off. During the decade to 2022, on average 82% of its students searching for a job had accepted one at graduation, and 93% had done so three months later. In 2024 those figures were 62% and 77%, respectively. At some top schools the reality may be even worse than it looks. One professor worries that some students who are counted as entrepreneurs are in fact unemployed. American business may be booming. But those who imagine themselves as its future leaders are suffering a recession.
America’s business schools are used to criticism. The argument that business is something which is done and not taught has been around at least since the first Harvard Business School (HBS) class convened in 1908. “Union cards for yuppies”, is how MBAs are described in “Snapshots from Hell”, a memoir by Peter Robinson, a former Stanford student, published in 1994. “Today it is possible to find tenured professors of management who have never set foot inside a real business,” snarled a 2005 article in, of all places, Harvard Business Review. Some hold business schools responsible for everything wicked about capitalism. Others even accuse their graduates of being ineffective capitalists. Elon Musk has lamented the number of MBAs running big firms.
The stereotype of profit-maximisation is not entirely unfounded. One study by Daron Acemoglu, Alex Xi He and Daniel le Maire, three academics, shows that managers with business degrees are less likely to share profits with workers than their less commercially credentialled peers. What are these folks like on weekends? Another paper from 2007 by Nicole Stephens, Hazel Markus and Sarah Townsend found that when compared with firefighters, MBA students were orders of magnitude more likely to be upset if a friend knowingly bought the same car as them.
What is beyond doubt, however, is the enormous success of America’s business-school graduates. Entire classes of HBS graduates have been eulogised: Fortune magazine dubbed the graduates of 1949 “the class the dollars fell on”. The class of 1982 included Jamie Dimon, the boss of JPMorgan Chase, Jeffrey Immelt, the former boss of General Electric, and Seth Klarman, a notable investor. Nearly half of firms in the S&P 500 are run by an mba graduate.
That is a deep well of prestige. But it must be continuously replenished by students scoring great jobs. Business success is, after all, the main object of business education. And as recent employment data suggest, that success is now less secure.
Consulting and finance industries have long absorbed the majority of graduates from top business schools. Every year McKinsey, Boston Consulting Group and Bain, the top consultancies, provide business schools with plenty of new recruits. Many return after their degrees, along with new converts to the industry. The business-school-consulting complex allows the firms to bag credentialled students; business schools get a steady stream of quick studies and reliable fees. The share of students opting for jobs in finance, particularly at banks, has fallen since the financial crisis. But there remains a sizeable cadre of private-equity bros on campus. Some describe themselves arithmetically: one career path is the “2+2+2″, a succession of two-year stints in investment banking, private equity and business school, which serves as a well-paid and punishingly fast treadmill for some of America’s brightest.
When consultancies slowed their hiring after a boom during the pandemic, business schools felt the squeeze. Our analysis of data from four top schools (Chicago Booth, Columbia, MIT Sloan and NYU Stern) finds that the number of graduates ending up at the big three consultancies declined by a quarter last year, compared with the three years before.
Just as worrying for business schools is tech, which is also hiring fewer MBAs. Declines in hiring by the tech giants (Alphabet, Amazon, Apple, Meta and Microsoft) are particularly stark. At the four schools in our analysis students ending up in big tech fell by more than half last year, compared with the average during 2018-2022, to about 50.
Some of these troubles are doubtless cyclical. The technology sector is prone to booms and busts. After the dotcom bubble burst, the share of graduates from Wharton, at the University of Pennsylvania, that entered “high tech” industries swiftly collapsed from 17% to 8%. This time the decline in big tech’s interest in mbas looks to have predated the post-pandemic market correction. It is possible, then, that firms are beginning to sour on professional managers. Even if the consulting industry springs back to life, few think the MBA will be as critical to getting on in the future. Advanced degrees, particularly in science and engineering, are seen as more credible by consultants’ clients today.
What other options do students have? A small but growing number are choosing to run a small business, rather than work their way up a big one. Investors are handing over cash to “search funds”, where fresh business-school graduates attempt to acquire and operate a firm. Investors’ returns are impressive, even if numbers are small—a survey from Stanford says 94 funds were launched in 2023. “It’s a lower-risk way to try entrepreneurship; the results are not as binary as if you start a new company,” says Lacey Wismer of Hunter Search Capital, which backs such funds. “Some of the best MBA students pursue this path. It’s not the McKinsey rejects,” says Mark Agnew of Chicago Booth. Judging by the interest on campus, many more are likely to try it. According to Vanessa Abundis Correa, a student at the school, the “entrepreneurship through acquisition” club is one of the most popular on campus.
Donald Trump, MBA
Convulsions in white-collar industries are only half the story. After all, business schools have one foot in commerce and the other in the quad. Their full-throated embrace of diversity, equity and inclusion (DEI) since 2020 means they have not been spared the crisis of legitimacy afflicting their parent universities. Nestled between big universities, corporations and consultancies—all of which have zealously pursued racial and gender diversity in recent years—it is hardly surprising that some business schools went all-in: Wharton even allows MBA students to major in DEI.
In other ways, too, business schools are out of step with the moment. If America is reindustrialising, word has not yet reached the campus. Business is the most common field of graduate study in America, with around four times as many students doing master’s degrees in the subject as engineering. Will business schools be as keen to change their teaching to reflect the rules of doing business in Donald Trump’s America? Probably not. Even if hiring does improve, that will leave them exposed and out of touch.
