How to use Bookending & Calculate your admission chances for a top MBA program?

Most of us are optimists or ‘dutiful’ pessimists when it comes to decision making. It is no different when we are selecting MBA programs. We don’t have to deal in the extremes but take a middle of the path thinking when it comes to decision making. Chip and Dan Heath in their extremely popular book – Decisive: How to make better choices in life & work, have shared how Byron Penstock, an investment analyst, uses bookending to make optimum investment decisions.

How Bookending Works

For an investor, the timing of a purchase is one factor that would decide between a profit and loss. No matter how strong the fundamentals are if you invest in good stocks at the wrong time, you are likely to get marginal returns or in most high beta stocks, a probable loss. In “bookending”, investors consider two scenarios – best and worst.

In the best-case scenario, the investor considers all favorable factors – large deal flows, positive environment for future deals, and change in market demands that would be beneficial for the company. Based on the expectation that all factors would be favorable for the company, a high-end stock price is set, say $100.

In the worst-case scenario, the investor considers all negative factors – entry of a competitor, loss of market share due to regulation, and legal costs with partners or competitors. The low-end stock price based on the worst-case scenario is $50.

Once the low-end and high-end stock prices are set, the investor has a range for reference

$50 ----------------------------------------------$100

The investor only buys the stock when it nears the low-end, say $51 to $65, and sells the stock at $75-$80. What you notice with this approach is that the investor is not trying to predict the future accurately; instead, he is thinking in a range bound manner. Since most investors will try to predict the stock price to the last point, they are likely to accrue losses.

A similar approach can work wonders when you are picking top MBA programs. How you set prices for the stocks are beyond the scope of this article but factors for calculating your low-end and high-end scores for MBA research should depend on the following factors:

1) Acceptance Rate

If you are applying to an MBA program without giving any thought into the competition, you are likely to be rejected. For example, Harvard MBA’s Class of 2015 had an acceptance rate of 12% from 9,315 applications, and a yield of 89%. This means that over 8000 applications were rejected due to factors like GMAT, GPA, experience, and leadership potential.

2) Class Composition

The class composition of a top MBA program is unlikely to change in a 5-10 year time period. For example, Harvard MBA Class statistics shows that between 2005 and 2015, very little has changed in the following statistics:

                            

Except the % admitted Women & International candidates, the numbers have remained constant.

3) Unconventional Background

MBA applicants with unconventional backgrounds are often successful in differentiating themselves from ‘typical applicants’. You can count yourself as one if you:

a) Are from a military background
b) Have most of your experience working for a non-profit
c) Have experience in creative endeavors - performing arts, movies, or music.
d) Have a strong migrant story – First Generation American Citizens
e) Have an unconventional Job: Professional Poker Player, and other titles that are sure to gain a few eyeballs.

4) Class Chart

For finding the low-end and high-end score, you need information of the class composition by Undergraduate Major, GMAT Score, GPA, Years of Experience, Leadership Roles, and Nationalities represented from the International %.  This seems a huge task considering that the class size is over 900 for Harvard MBA. By using a representative sample size, this problem can be solved.

Once you chart the numbers for the sample size, set a probability range, reversing the range into a high-end to low-end format.

80% ---------------------------------------------------------------------------50%

Add 30%, if you feel that you fall under the unconventional background.

Add 20% if your GMAT falls in the class median range

Add 15% if your GPA falls in the class range

Add 15% if your years of experience matches that of the class

Add 15% if you have at least 2 leadership experiences where you can demonstrate that your contribution was substantial for the team’s success.

Add 10% if you are a women applicant

Add 10% if you are from a minority community

Based on the data if you feel that your chance to get into a top MBA program is in the 51-80%, pick the MBA program for your top 5 list.

20% we attribute it to ‘unknown factors’.