When Ivy Leaguers hop on the gravy train, it’s by the caboose

But the quickening pace of change in recent years has rendered this career path as difficult to negotiate as an obstacle course. The confusion is perhaps best illustrated by the shifting career choices of Harvard MBAs over the last dozen years.

In the 1980s, when investment banking was all the rage, young arbitrageurs-in-training sat alongside the Charles River, poring over copies of Institutional Investor, champing at the bit to get in on the action. In the early 1990s, when re-engineers bestrode the business world like colossi, consulting became the Next Big Thing. Louis Gerstner, the one-time McKinsey consultant, was called in to salvage one of America’s greatest corporate brands, IBM. Process experts James Champy and Michael Hammer became best-selling authors. Not surprisingly, a stunning 38% of the Harvard Business School class of 1995 went into consulting, and just 18% went into investment banking. Bain & Co. and the Monitor Group replaced First Boston and Lazard Freres in the pecking order of favored employers.

That year, when Netscape took the world by storm with its earth-shattering initial public offering, Harvard MBA’s still viewed high technology as an alien field best left to the nerds up the river at the Massachusetts Institute of Technology. “In the early 1990s, there was always sort of a fringe of high-tech people, but they were in the minority,” says Josh Lerner, a recently tenured professor at Harvard Business.

Techie paradise nears

In the last few years, however, Internet start-ups have captured the imagination of business go-getters, young and old. From 1998 to 1999 alone, the percentage of Harvard MBA’s going into high-tech jobs exploded from 11% to 20%. Today, its students have traded in stodgy old II for New Economy journals like the Industry Standard and Red Herring. As Mr. Lerner put it: “that fringe seems to have become the mainstream of the business school.”

Indeed, the bold new world of cyberbusiness has snatched eyeballs away from investment banking and consulting. Just 29% of Harvard’s 1999 MBAs went into consulting — nearly a third lower than in 1995. And investment banking suffered the supreme indignity of falling to third, with a 13% share.

Harvard MBAs aren’t just going to the blue chips of the Internet world.

From 1998 to 1999 the percentage of them taking jobs with companies with less than 100 employees soared from 19% to 27%.

In forsaking huge consulting firms and investment banks for small .com start-ups, the newly minted MBAs are simply taking a cue from some of their role models.

In late September, George Shaheen, chief executive and managing partner of powerhouse Andersen Consulting, announced he was stepping down to become president and CEO of Webvan Group Inc., a start-up whose business proposition consists of taking orders for cucumbers, 12-ounce bags of flour and bars of Dove unscented soap on the Internet and delivering them to customers’ homes. Andersen, by the way, currently sports an annual turnover rate of 17% — meaning nearly one in five of its highly paid consultants leaves every year. Many of them are going to Internet start-ups.

The phenomenon of high-ranking, middle-aged executives leaving high-profile companies for garage-stage corporate embryos is spreading. Robert Lessin, a senior executive at Salomon Smith Barney, joined on-line investment bank Wit Capital. When it cast about for a new CFO, Amazon.com ignored the young hotshots at Seattle’s caffeine-laden start-ups and instead hired Warren Jenson, the CFO of Delta Airlines. Marshall Loeb, the former dean of financial journalism at Fortune now plies his trade at Marketwatch.com.

The young turks (and the old ones) are forsaking established companies for sexy new firms even though the start-ups frequently pay less. For 1999 Harvard MBAs, the median compensation at Internet companies was $85,000, compared with $132,500 and $130,000 for investment banking and consulting, respectively. Of course, the upside is much larger. A talented manager could spend her entire career at Ford Motor Co., Prudential Insurance Co. of America or Conoco, and still not reap as many stock options as a low-level technology officer at Yahoo!

According to the Wall Street Journal, Mr. Shaheen, who earned a lousy few million a year at Andersen, could find his small stake in Webvan worth $100 million if its IPO takes off.

So new Harvard MBAs and older alumni are willing to bolt boring consulting firms for the wild frontier of e-commerce. They’re willing to take on more risk for potentially greater rewards.

Nothing wrong with that, right?

Well, here’s the thing. Harvard MBA’s don’t pioneer industries. Look at the resumes of the giants of 20th century industry: Henry Ford, Sam Walton, Charles Merrill, Ray Kroc, Michael Dell, Warren Buffett, Henry Kravis. None of them went to Harvard Business School. Bill Gates, the most successful businessman in American history, didn’t even make it through Harvard College.

Despite its increased efforts to teach entrepreneurship, Harvard Business School is still primarily a hatchery for managers. The most significant person in the Internet world with a Harvard MBA is venture capitalist John Doerr. Doerr doesn’t start e-businesses, he supplies them with cash — an important role, to be sure, but an essentially reactive one.

Tripping over own ivy

Indeed, institutions like Harvard and its Ivy League brethren have historically reacted to trends rather than set them. Whether it’s dress or protest movements, music or new-fangled majors, East Coast private schools tend to lag a few years behind their less exclusive and less stuffy counterparts out west.

The same truth holds for business developments. Marc Andreesen developed Netscape at the University of Illinois. Michael Dell started selling computers while he was a student at the University of Texas. David Filo and Jerry Yang started Yahoo! at Stanford.

Given this, the rush of Ivy Leaguers into tiny Internet start-ups may signal something more than just a trend. It may signal a top. In 1986, 40% of the 1,300 students in Yale’s Class of 1987 applied for jobs at investment bank First Boston. And we all know what happened the fall after they graduated.

Daniel Gross writes monthly on business and politics for InvestmentNews.

Related Topics: Careers