No, Don’t Go Back to School, Become a Ski Bum or Even Think About Chinese Gold Farming: Why You Shouldn’t Time the Market
“Wait, so should I go to business school? Things will be better 2 years from now, right?”
“Should I join the Peace Corps and start my job search afterwards?”
“What if I become a ski bum temporarily and then take advantage of the next upturn in the market?”
No, no, no.
The market might be much worse 2 years from now. The world might go into a deep, 20-year depression that makes that Great Depression thing look like a minor blip.
Or maybe we’ll pull through this in under a year and get back to those attention-starved models and bottles.
But truthfully, I haven’t a clue as to what will happen and neither does anyone else – and trying to “time the market” is like spending all your spare cash on lottery tickets: time-consuming and expensive with no guarantee of a payoff.
The Flawed Logic of Timing the Market
The most commonly used “logic” goes like this:
“Right now, things are really bad and getting worse. But no recessions last longer than 1-2 years, and everyone thinks things will be much better by then.
So if I go to business school, or go and do something else for a few years, I can be in a much better position when I come back and start interviewing after things have picked up.”
This logic depends on 3 key assumptions:
- The market will get even worse in the near future.
- No recessions last longer than 1-2 years.
- You will be in a better position if you do something unrelated, such as school, travel or volunteer work, for a few years.
But forget about CNBC or what you’ve read from “the experts” – are those key assumptions true?
So, Will Things Keep Getting Worse?
Sure, back when Bear Stearns failed we thought we had reached a bottom. And then when Freddie and Fannie went under, we thought that was the real bottom.
And then September came.
So the market has certainly taken a turn for the worst – but will it keep worsening in the near future? No one knows.
No Recession Lasts Longer Than 1-2 Years, Right?
Wrong – just consult Wikipedia. Sure, the longer recessions on the list are from a long time ago – but pay attention to what’s written under “Causes” for the “Great Depression” entry:
“Stock markets crashed worldwide, and a banking collapse took place in the United States. This sparked a global downturn…”
You’ll Be Better Off Elsewhere, Right?
Sure, it’s better to volunteer somewhere rather than watch TV all day.
But is it better to jump into business school if you have almost no experience?
Will teaching English in Asia for 2 years give you that needed boost in banking or consulting interviews?
No on both counts – and we’ll see why in more detail below.
Why Timing the Market is a Bad Idea
There are 3 major flaws with trying to time the market:
- No one knows when, how, or by how much the market will improve.
- You may not, in fact, be better off with whatever you do in the meantime.
- Everyone else is thinking the same way you are.
We’ve already gone into some detail on #1 – no one can predict the future. And from our list of historical recessions, we know they can last anywhere from 1 year to…
Not to be pessimistic or anything.
Will You Be Better Off Elsewhere?
No, not necessarily. There are several ways you can get this wrong, but one common mistake is thinking that an MBA program will be a gateway into whatever bank (or other job) you’re after.
These days business schools are recruiting younger and younger students. But don’t be misled – getting into business school and getting into investment banking via business school are 2 very different things.
Unless you’ve had substantial work experience (3-5 years, at the minimum) it’s tough to get into banking. We usually placed Associate candidates with less experience in the “pass” pile.
Another popular option is to work at a nonprofit, volunteer, teach English or do other “non-business work.”
Only one problem: this type of strategy doesn’t work well for getting into finance. The less relevant your industry is, the more of an uphill battle you’ll face – and the longer you’ve been doing it, the steeper the hill will be.
I’d refer you to some of my friends who just returned from teaching English elsewhere in the world for more on this one, but they’re too busy looking for work right now.
Everyone Else is Thinking the Same Way You Are
It doesn’t matter if it’s getting a job, getting into college / business school, or starting a business: the worst way to succeed is to follow what everyone else is doing.
I’ve seen this one firsthand recently as I’ve spoken with readers who have gotten into finance, even in this market environment.
And I’ve heard some crazy stories of how people got in by going around the usual process and “thinking outside the box.” I respect privacy so I cannot mention anything specific, but trust me when I say that creativity pays off when recruiting.
Lately, you’ve probably seen a lot of stories about “MBA applications on the rise.”
Even if you have a good shot at getting in, do you want to compete when everyone else is thinking “Gee, now is a great time to apply to business school!”?
Even other programs, like Fulbright and Teach for America, are sure to receive increased applications with the downturn.
If you can find the right program for you then go ahead and do it, but be wary of going to business school (or anything else) just because everyone says, “It’s the thing to do!”
The Story of 2003 and Why You Shouldn’t Do What Everyone Else Does
By the spring of 2003, the economy had already been in a recession for 2 years and things looked pretty bleak.
Layoffs continued throughout the spring and then, as now, banks claimed they would only hire from their summer intern classes – for both Analyst and Associate positions.
By the fall of 2003, the economy had recovered, deal activity had picked up and banks were paying huge bonuses to headhunters, junior bankers, and anyone else who could recruit full-timers.
In case you missed that, I’ll repeat it: in under a year, banks went from hiring freezes and laying people off to giving out huge rewards for anyone they could find.
So if you had gone off and done volunteer work for a few years, you would have missed the hiring frenzy.
So, What Should You Do?
Ok, so no one knows when things will recover, everyone else is thinking about the same options to “weather the storm,” and on top of all that, you might not be better off even if you go elsewhere.
So what should you do?
What you’ve been doing already: move into something that’s as closely related as possible to your long-term goals.
In other words, don’t do something unrelated just to “shield yourself” from the downturn.
If you had no interest in nonprofits before, why would you suddenly want to join the Peace Corps now?
If you just graduated a few months ago, why would you even think about applying to business school?
If you worked as a banking analyst for a few years and couldn’t get another job afterwards, do you really think that business school help you get into private equity?
There’s never a “good time” to do anything, whether it’s buying a house, having kids, getting into an industry, or going back to school.
So don’t try to time the market – get on with your life, and adapt accordingly.
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