‘It’s a huge loss’: Can elite business schools survive coronavirus?

The real value of an MBA is social, not educational. Is it still worth six figures when the classes move online?

‘It’s a huge loss’: Can elite business schools survive coronavirus?
[Photo: Alexander Farnsworth/iStock]

An open secret about business school, conceded by most graduates after a drink or two, is that you aren’t spending $200,000 for the education. Sure, a good program will teach students technical skills, like how to read a 10-K or employ the case method. But the real value of a top-tier MBA is more intangible. It’s the shared language and lifelong bonds, forged over late nights at the library and at local bars, that form the invisible superstructure of the technocracy. It’s the passcode that expedites your interview at Google or Goldman Sachs.


It is, in other words, a credential that is particularly vulnerable to the coronavirus. During the last recession, millions of Americans decided to go back to college for an advanced degree. Business schools face a tougher test: How do you build a social network in the time of social distancing?

As more universities move classes online, MBA programs are struggling to provide answers. Incoming students have not been told how their classes are going to be administered, whether they should move, which opportunities are still available, and whether a virtual education will still be worth the hefty fee.

“It’s a huge loss considering it’s only four semesters,” says incoming MBA student Saba Rashid, who was admitted to the Yale School of Management’s full-time MBA program in March. Now, in the midst of a pandemic that has exploded since her acceptance, she is worried that attending Yale remotely will not yield the same return on investment.

There are no easy answers for students like Rashid, who works at a nonprofit consulting firm and was hoping to diversify her professional network. NYU Stern School of Business professor Scott Galloway describes the value proposition of a university as “the certification that you get from having a degree, the education you get from learning, and the experience, all divided by the tuition you pay.” Is the high price point still worth it, once you remove the campus? 

Even the most numerate MBA graduate may struggle with that calculus. Business school alumni talk wistfully of late night projects with their peers, spring break trips to foreign countries, and dreaming up startups at the bar. Roger Tsai, Kellogg School of Management Class of 2007, traveled eight different times over his two years as an MBA candidate, both for school and for fun with classmates. “The relationships that I built in business school were founded not solely off of an interaction for a class project, but by being with one another during an extended period of time,” Tsai says. Since graduating, Tsai has often leaned on former classmates for advice or for entry points into new industries.

The deferral paradox

Rashid had heard similar anecdotes from friends who had gotten an MBA. “My decision to go to business school was primarily the community aspect, which explains why deferral was a bigger consideration for me,” Rashid confides. After it became clear that most schools would move to online classes in the fall, she began looking into deferring. 


When Rashid reached out to the schools that admitted her, however, not one allowed her to defer. Instead, she was informed that schools would only consider exceptions for students facing unusual circumstances, such as health issues, visa troubles, or military deployment. The sole alternative was to reapply another year.

I have a feeling that demand for the product of business schools is going to go away.”

Duff McDonald

Faced with those options, Rashid decided to keep her spot at Yale. When asked for comment, the Yale School of Management said it is their policy to assess and allow deferrals on a case-by-case basis for domestic students who have stated they are unable to make it to campus due to circumstances beyond their control.

Barring domestic students from deferring may help schools to mitigate the financial fallout from coronavirus. Business schools are struggling to meet their class size and composition targets as international students face massive uncertainty about obtaining visas and flights for fall start dates. They join the nearly 90% of US colleges and universities that anticipate a drop in international student enrollment for the upcoming school year, according to a recent survey. For MBA aspirants like Rashid, it’s yet another blow to their value proposition. “The thought of less international students because of Covid was part of the reason I wanted a deferral,” she says. 

That presents a paradox for business schools, which trade on their exclusivity. Some programs are trying to entice applicants by extending deadlines into the summer, removing barriers to entry like the GRE and the GMAT tests, and lowering application costs. In doing so, however, they risk eroding the prestige that makes their degrees so valuable. Bloomberg Businessweek, one of the five ranking publications that serves as a widely used resource among prospective MBA candidates, bases 25% of its ratings on the quality of the networks that each business school fosters. US News and World Report focuses on student selectivity. Facing skewed performance metrics, on April 17 the organization that owns the GMAT asked publications to postpone their annual rankings indefinitely.

For critics of the business-school industrial complex, it’s just more confirmation that an MBA’s value is largely positional. Duff McDonald, author of The Golden Passport: Harvard Business School, the Limits of Capitalism, and the Moral Failure of the MBA Elite, explains the reasoning: “Applications are down, so money in the bank is down, so variable expenses are under pressure, which means this silly ranking is not even worth doing because we don’t have the money to cover it as a peripheral marketing expense.” 

The end of the MBA?

As prospective students weigh their options, this year’s virtual graduations provide a preview of the world to come. On May 19, the Wharton School of Business swapped its usual, hours-long commencement at The Palestra for a video presentation on YouTube. Like many other schools, they opted to make the event a short one, knowing that it could not be a replacement for the real thing. They did, however, decide to have some fun with the medium, closing out the ceremony with hundreds of pictures and videos submitted by the Class of 2020: montages of sporting events, parties in small apartments, a dance number performed atop Machu Picchu.


“I think this is the reason you come to Wharton,” one of the students said. “To learn from people with completely different backgrounds from you in such a personal and intimate way, visit their homes, and be able to take new perspective to your world and beyond.”

Rashid, who begins virtual classes this fall, wonders if she’ll get that perspective, even after social distancing restrictions are lifted. “The first year is more navigation and the second year is more enjoying the experience,” she notes after conversations with current students. She is concerned that meeting her peers online will make it harder to solidify connections when she eventually arrives on campus. 

Business schools know that students are relying on them to replicate their usual social experience. At UC Berkeley’s Haas School of Business, Assistant Dean Peter Johnson says there are plans for so-called hybrid instruction in the fall, in which the curriculum can transition from online to in-person (and back again) as social distancing guidelines evolve. The school is also planning for in-person events as well as remote events for recruiting purposes. “At the end of the day, our students and our faculty find great value in a lot of community engagement and networking opportunities that are inherent in a leading MBA program and we’re not interested in letting go of these things in the long-term.” 

Creating the conditions for online socialization won’t be easy. “It requires focus and intent to create these pathways,” says Tsai. “I think the programs have to be architected in such a way that brings cohorts together and creates individual connections, opportunities for innovation and exploration, and some culture.” But he draws inspiration from the way Americans have come together, across time zones, to preserve connectivity in the face of crisis. 

Some incoming students share his sentiments, noting that their peers have already been much more genuine and willing to connect through Zoom happy hours and networking events. Others believe the pandemic presents a unique opportunity to learn what it means to be a compassionate leader in an increasingly digital world. 

In the end, the free market will decide. Over the next year or two, as we wait to for a vaccine, business schools will be forced to prove their worth as more than just location-bound incubators for building social capital. Unlike the cautiously optimistic class of students ready to embark on their MBA journey, McDonald believes this could be the beginning of the end for prestige business schools as we know them. In The Golden Passport, McDonald raged against the “moral failure” of the MBA industrial complex, but now he wonders if it will diminish on its own. “I have a feeling that demand for the product of business schools is going to go away.” 


Ikya Kandula is a freelance writer based in Oakland, CA. Her work has appeared in The San Francisco Chronicle, VICE, and Yahoo.