Here’s why Stanford MBAs earn the most

At least four self-made billionaires and 244 active CEOs have studied at the Stanford University's business school, but Ross Pedersen, from the class of 2016, wakes up around 2 am, does four days a week to clean toilets.

Until February this year, the 25-year-old served as the vice president at Dallas-based hedge fund Verdad Advisers, helping pick securities to purchase companies worthy of investment. He had begun the job while still at Stanford as part-time, but then joined full-time as he graduated.

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With around $55,000 of student loans to repay, and an annual six-figure compensation package from Verdad, his future looked set. However, within a few months, a desire to do public service started to crawl inside him. Soon after, he took a yearlong leave to join the U.S. Army and prepare to become a national guardsman.

With Pedersen’ story in mind, one can understand why Stanford MBAs earn more as compared to their peers, some as much as $450,000 a year.

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The reason lies at the business school itself, where students are encouraged to pursue their passions and not just settle for traditional gigs.

"We have a culture where you are encouraged to do whatever you want, to explore the things you want to do that others may think is crazy," Pedersen told Bloomberg.

They are allowed to celebrate past failures, and skip reading assignments so that they can meet with venture capitalists and hope to get funding for their fledgling ideas.

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This attitude helps Stanford Alumni to get extra money, if they decide to join a company and not become an entrepreneur.

The generous pay offered to alumni could also be because of Stanford's prestige, its strategic location in the high-cost San Francisco Bay Area, and its proximity to Silicon Valley companies like headquarters of Google and Facebook.

Stanford also doesn’t fill up its seats to make class sizes bigger, another factor that contributes to its prestige. It admitted just 5.1% of applicants for its Class of 2018, as against Harvard's admission rate of 9.6% and Wharton's of 12.7%.