The Harvard Business School Index

Back to Banking, Back to Consulting, Back to New York

When I was working at a consumer investment fund in 2019, it felt like each week we’d see a DTC brand launch from fresh Harvard Business School grads. Skincare companies, low-alcohol ready-to-drink cocktails, houseplant delivery services. The branding all followed the same template and the companies would often raise a lot of money at high valuations before launching.

It struck me that if so many highly pedigreed people were launching DTC brands, it must not be a very good time to be investing in DTC brands. The space was de-risked enough that people would bypass jobs at McKinsey to start a consumer company. It had become “consensus,” and a common trope in venture is that you need to be both non-consensus and right to make big returns.

Since then, I’ve had the notion of an “HBS index” in my mind, where if there are too many elite b-school graduates flooding a space it is a sign that it is too late to be very exciting for an early-stage investor, because it has become socially acceptable enough that the market will be pricing it highly.

Luckily, HBS provides some data on this, which is fun to look at.

The downturn in graduates going into tech makes sense. MBAs at tech companies tend to go into product management or strategic planning, and these functions proliferate when companies have a lot of cash to invest. In 2019, tech companies had huge balance sheets that they needed to invest and HBS grads could help with that. These jobs dried up after the tech market crashed in 2022.

I always think it is fun and insightful to read articles from past eras, and this same phenomenon occurred in 2000 after the dot com crash:

Business school students have redefined B2B and B2C in the form of a joke-albeit a joke that, like many jokes, is more true than funny: B2B, B2C: “Back to Banking, Back to Consulting.”

If we break out “Technology” into a few more specific industries that VCs tend to invest in, we can see that they’ve mostly trended flat or downward in the past 5 years as the marginal HBS grad instead goes into consulting or finance:

This data does not yet include 2024 graduates, when the hiring market started to thaw and the AI craze pushed a lot of capital and interesting new companies into the system. I expect there will be a big increase in graduates entering tech from the classes of 2024 and 2025.

Back to New York City

Perhaps more interesting to me is to see where these graduates are going. It’s kind of wild that in 2019 HBS grads were as likely to move to Silicon Valley as to New York! And now a third of HBS grads move to NYC and less than 10% go to the Valley.

This has lots of interesting implications.

My sense is that San Francisco has regained its energy as the place for “serious” tech people. All of the best AI people are there, and the “tech tourist” MBA grads have left, or at least are firmly confined to the Marina.

Hopefully, that’s a bit helpful to the cost of housing in SF, and aesthetically I approve of it. San Francisco should be a weird and countercultural city, and when I lived there in 2019 and 2020 it felt overrun with Barry’s bootcamps and expensive fast casual restaurants, and the energy of the city felt misaligned. New York is big enough that it can absorb MBA culture and retain its soul.

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In thinking about this article, I was reminded of this excellent scene from Succession:

Thanks for reading! If you liked this, you might also enjoy my advice to a friend consider business school.