marbat wrote: Mon Nov 03, 2025 4:56 am
unwitting_gulag wrote: Mon Nov 03, 2025 4:15 amThat’s a poor financial decision. Even if these folks were young, with extensive “human capital”, the $5M invested now, would likely overwhelm their W2 earnings – especially considering income tax. Unless these people score truly exclusive jobs, they’d have higher lifetime earnings as de facto trust-fund-babies. Either that MBA knowledge isn’t getting applied well, or else – perhaps more to your point, yes? – people value the contributory/participatory nature of work, more than the literal money.
It isn’t necessarily a poor decision, as the $5M in this example is conditional upon not working for a paycheck again. So basically asking them if they are willing to “settle” for ~$200K pre-tax income forever with a long horizon/high SORR and minimal future SS.
Most, if not all of my class will end up with a NW higher than that in real terms. With that said, based on career outcomes at my program plus saving/investment performance, most will not end up higher than $7.5-15M NW in real terms, but also unlikely to end up lower if they work for 15-30 years after. And then you have to ask yourself if a 15-30 year post-MBA career is worth the extra $2.5-10M.
Said differently, there is significant and low risk upside available vs. $5M, but you’d have to work hard for it over a long time period. I can see how some people would want to take that bet if they thought the additional money would produce a lifestyle that they actually wanted.
What I can’t see would be if you offered $15M instead of $5M and people still passed, which is more or less the conversations I would have!
That’s a bad bet, not just because they’d be unlikely to reach above $15M by working, but also because money has massively diminishing utility past a certain point. That point is up to everyone to decide for themselves, ideally with a good understanding of their desired spending, healthcare/insurance situation, and taxes, but if you don’t have kids, I’d say massively diminishing utility starts in the $6-8M range. If you do have kids, add maybe $0.5-1M per kid. Today’s dollars, ranged for COL of primary residence.
Perhaps conveniently, those numbers are just above your $5M “offer” – which, for the record, I’d have accepted, but been salty it wasn’t $6M, and wouldn’t have accepted if it was lower than $5M
Silly mind game, but I also disagree it is very likely a poor decision.
If we do compare two people.
1) The student who rejects the challenge, and decides to stay in school. That student will have the debt of the MBA and 1-2 years living like a student. Then afterwards that graduate will get a job, likely low management to start their career which means making well below the $200k. A 2024 Graduate Management Admission Council (GMAC) survey projected a median starting salary of $120,000 for U.S. MBA. This is a wise MBA student who decides to save 10%. Then let’s take out some taxes. We will ignore SS as it is sort of like savings. I will estimate that this person is down to $75k in spending money for a few years. Eventually they start getting raises after a couple of years and that number will increase.
2) Person takes the money. They live the same life as the student would. Like a student for 1-2 years and then like an early grad for a few years slowly increasing their expenses as time goes on. This person’s portfolio grows and grows over the years well past the $5 million and I would not be surprised if it eventually doubles depending on sequence of returns and lifestyle creep.
Here is one downside to this problem: Medicare. One needs to work for 10 years to get Medicare. If you adjust this argument that the person who takes $5million can work just enough to earn Medicare and therefore a small SS payment. The rule would be that they work just enough to get the quarterly credit which I believe is $1k per quarter. Taking the $5 million is no brainer.
