Sunday, September 01, 2019

How to think about the value of a Master's qualification

I thought I'd follow up on this excellent but fundamentally flawed article on Rice Media.

The article was excellent because the author was the first to admit that our financial blogs are  canonical literature in Singapore fueling my fantasies of becoming Singapore's very own William Shakespeare and having my rants about our Polytechnic students and BBFAs studied intensely as the equivalent of the A levels in 400 years time.

The article was fundamentally flawed because the author showcased too many examples of folks who took Masters Degrees in Arts or Social Sciences, and only had one example from someone who did a Masters in Applied Finance. Totally missing from the article are the folks who studied the bread and butter MBA programs. For many pragmatic Singaporeans, a Master's degree is just not an exercise in intellectual hedonism. It is truly a gateway to a middle class existence.

a) Quantitative analysis of the INSEAD MBA

So let's do this properly the way canonical literature should analyse a situation.

Remember I did a POTS analysis on local degree programs ?

Here is the table comparing degrees in a previous article. In my last article I said that a good degree should achieve an Adjusted POTS score of at least 0.5 with a Nursing degree a surprisingly good option for Gen Z students.

Let's analyse the classic MBA for the most ambitious Singapore executives, the INSEAD MBA.

According to the data release by INSEAD itself, the median starting salary of an INSEAD MBA is $145,000 USD. That is about $200,000 SGD / year. Also 91% of INSEAD MBAs receive an offer 3 months after graduation.

Naturally, the cost of such a top flight program is not cheap. It could set you back $110,000 EUD or $160,000 SGD.

Now, suppose your salary is $80,000 before enrolling into the program. The Adjusted POTS score is ($200,000 - $80,000) / $160,000 * 0.91 or 0.6825 - not as good as signing up for Law or Computing at an undergraduate level but it can hold it's own against Engineering. Hardly the kind of degree you study to get into some serious intellectual masturbation.

So my advice to anyone who can actually get a seat in INSEAD would be to go ahead and sign up for the program.

b) Modelling a Master's degree as a real option

I don't really view a Master's degree as a tool for a career change. In fact, for my own life I failed in two major career transitions in my life. First after I studied Finance, and second, after I studied Law.

So like the Arsenal (?)  football coach, I was a specialist in failure - At least in career transitions !

My Masters in Applied Finance barely landed me a job interview because I graduated sometime after the SARs period. Outplacement in NUS was non-existent with one Finance professor sarcastically asking me whether I had a job to offer to him when I tried to ask him for outplacement services. The real reason why this never bothered me was because my IT career was doing rather well during those days before CECA was signed and we became flooded with foreign IT engineers.

The Masters in Applied Finance was possibly the most important qualification I studied because it was crucial in getting me to take my personal investment portfolio seriously than my day job. You can argue that my substantial dividends today is a direct result of attending that course.

A Master's degree should be modeled as a call option on your human capital. You gain the right but not the obligation of making a career switch. If I exercised my Juris Doctor option today and joined the legal industry, I would probably be making less than 25% what I am earning today.

That's the equivalent to exercising an out of the money call option !

If folks asked me whether I regretted studying Law, I will say that I would gladly do this all over again if SMU offered to let me do it one more time ( But I will skip Constitutional law and Legal Theory thank you ) . My current approach to investing was based on my time spent on the free Bloomberg terminals in campus which, if I rented them on my own, would cost more than my Juris Doctor school fees. ( JD-Bloomberg arbitrage anyone ? )

Right now, my JD qualification is so far out-of-the-money it may expire worthless, but I think all it takes is one big mistake and an actual litigation for my degree to start paying for itself.

Let's pray that never happens (unless I am the one doing the suing.)


  1. Uncle Chua who is an illiterate who has shown us how to be successful investor over market cycles.

    Google "uncle chua investing" to read more

  2. Hi Chris,

    My take is that it is not worthwhile taking a Master's qualification for career enhancement in the event if one decides to adopt such approach. It will be a different story if one decidesto take such qualification for interest.

    My two cents worth of views.


  3. MBA from elite uni is meant for people who are already in a good place in their career to make it even better. Not for career change.

    It acts as a signaling device as well as confering cultural gravitas e.g. same ivy league institution as your CEO or the MD of a rival MNC that you're negotiating with.

    You also build cultural relationships with fellow sharp coursemates who are basically VPs, directors & snr managers of MNCs, international banks etc.

    If you're not already an up-and-coming high flier well in the upper half of the corporate hierarchy, then MBA is a triple waste of money, time & effort.

    For your case I would say it was a series of unintended serendipitous consequences. 😄

  4. I think that's what the GMAT is for. Only allowing elites into the best programs.

    My 720 score I got 10 years ago would not qualify me for INSEAD anyway.

  5. still struggling with the idea of doing an MBA or not.
    so far , people around me that did it say it is good for career change. and most importantly, it opens door of opportunities.

    contemplating the NTU MBA. coz i did my undergrad there, and there is a discount for alumni.
    either that or the SMU MBA.

    first time i heard of this POTS. what would be a fair value ?
    i mean, if someone is already earning say 150k. would it still be worthwhile? unless one is thinking of self enrichment, ie from an different career or non finance, say engineering etc.

  6. I doubt any local MBA program can achieve a score as high as INSEAD. Your best bet is to get information on the starting salaries of a median NTU MBA graduate.

    Even without looking at the number, I expect the results to be underwhelming.