Does graduating from IIMs and IITs matter?

The Problem

A child, from a middle-class family, has just cracked a competitive exam - take the CAT for the sake of example. Based on her score, she applies to several colleges and gets accepted into two of them in the MBA program of her choice. Now she has to make a choice, but she faces a dilemma - one college is ranked higher than the other in the all-India rankings for MBA programs while the other is cheaper. Which one should she choose?

Here are the options in more detail:

College 1: 

• College Rank: 3rd in the country

• Fees: 9 lakhs per year

• The average salary of graduates: 16 lakhs per annum

College 2:

• College Rank: 15th in the country

• Fees: 0.5 lakhs per year

• The average salary of graduates: is 9 lakhs per annum

Take a moment and try to think through this problem.

The Solution

Albert-László Barabási, a network scientist, has tried to answer this question based on data - not on anecdotes, logic, or probability theory - just on data. What follows are findings from his research. I will keep them lean. My aim here is to cut all the fat, come straight to the point, and support each finding with one example. If you want to go in-depth or require more examples, read the first three chapters of his book - The Formula. 

Here is what the research points out. 

The Role of Performance

In situations where performance can be measured, performance drives success, not the college. 

In this particular case, since CAT scores are the measures of performance, the success of the child only depends on the CAT scores, NOT the college she chooses. If she scores 99.98 in CAT, then her success - her salary - will be equal to the salary of any other child who scores 99.98 in the CAT, irrespective of the college they are in. The higher-ranked college will result in the same outcomes as the lower-ranked one. The cheaper college will result in the same outcomes as the costlier one. 

So, if she has a tighter budget, she can save money by choosing a cheaper college. If budget is not a problem and she wants better facilities or location, she can choose the costlier one, if that works for her. I repeat, her chances of success, that is the salary she earns, will not change based on the college.

The Role of Ambition

Performance, when measurable, is just one factor that determines success. There is another factor - ambition. While Barabási was doing his research, he found a fascinating relationship between ambition and success. Quoting him:

"After accounting for all performance measures for students, such as SAT scores and rankings in their high school class, the key factor determining income a decade after graduation was not the college they attended. The single determinant of long-term success was derived from the best college a kid merely applied to, even if she didn’t get in. "

To understand this, again consider another situation - a child scores 99.98 in CAT and has the following colleges to which she can apply to:

College 1: 

• College Rank: 1st in the country

• Salary of graduates with 99.98 in CAT = 18 lakhs per annum

College 2: 

• College Rank: 3rd in the country

• Salary of graduates with 99.98 in CAT = 12 lakhs per annum

College 3: 

• College Rank: 5th in the country

• Salary of graduates with 99.98 in CAT = 10 lakhs per annum

College 4: 

• College Rank: 10th in the country

• Salary of graduates with 99.98 in CAT = 8 lakhs per annum

Also, keep in mind that MBA colleges, while accepting children, also consider factors other than CAT scores like essays, experience, schooling, etc. Two children with similar CAT scores may get accepted or rejected based on these factors.  

What the research shows is this -

• If she applies to College 1 and gets rejected, she earns 18 lakhs per annum.

• If she applies to College 2 & gets rejected, she earns 12 lakhs per annum.

• If she applies to College 3 & gets rejected, she earns 10 lakhs per annum.

The college which she graduates from does not matter, the college she applies to determines her success. The mere fact she applies shows her ambition and that, along with her performance, drives her success.

After a decade of graduation, the salary of a child with a CAT score of 99.98 graduating from College 4, is equal to the Salary of a child with a CAT score of 99.98 graduating from College 1, given that she applied to College 1. 

"In other words, it’s performance and ambition—where she thinks she belongs—that determine your child's success."

The Formula for Success

If performance is measurable, Success = Performance + Ambition.