This was the first time we’ve come across the ‘Harvard MBA Indicator’. It turns out that MBA’s – even after their years at business school – are terrible at forecasting industries.
An alumni of Harvard Business School, Ray Soifer, coined the Harvard MBA Indicator and showed that if more than 30% of Harvard MBAs choose jobs in a sector, it represented a long term sell signal for that sector. While if less than 10% do so, it represented a long term buy signal. It seems MBA graduates, much like investors, chase performance.
According to the data in this article (which looks at Wharton MBA’s, not Harvard), private equity and healthcare are the two industries that have seen the biggest change in MBA interest. The shift to private equity is not surprising. It feels like the whole financial universe has shifted to focus on the big private equity players like KKR, Blackstone and Carlyle. It is no surprise that is where recently graduated MBA’s want to go and work. But if the Harvard MBA indicator is correct, private equity may be living through its best days as more and more people and capital enter the industry and all of the outperformance PE has enjoyed gets arbitraged away.
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