Business SchoolEntrepreneurship

Will an MBA Kill Your Chance to Become a Great Tech Entrepreneur?

There is a lot of debate about the value of an MBA, particularly for entrepreneurs and technology executives. So I looked at some top people in the industry and their educational backgrounds. Below are 17 entrepreneurs and technology executives who have run successful, disruptive businesses. The selection process was not conclusive or scientific, but created a list to generate a sample and start a discussion.

(Link to full spreadsheet)

There are a few things you’ll notice (none of which should be surprising): lots of technical degrees, a bunch of dropouts, and 3 MBA’s.

First of all, I am an entrepreneur and I have an MBA so I clearly don’t believe that the answer to the question I posed is yes. Second of all, I don’t want to place too much emphasis on resume credentials, which can be overrated. However, there are some natural points of contention between the spirit of an entrepreneur and the spirit of an MBA program that are worth pointing out. If you’re an entrepreneur at heart and are currently in business school or are considering business school, here are some points to keep in mind.

Short-term vs. Long-term Thinking Entrepreneurs are long-term focused. This can be at odds with the mindset of many MBA programs. MBA rankings are important to business schools and the long-term success of its graduates is hard to measure. What’s easy to measure is the starting salary and signing bonus of recent graduates. Starting salary is a horrible measure of what you get out of business school. But this is what MBA programs will be measured on, so remember that. It’s easy to let somebody talk you into taking a “good job” even if it doesn’t fit your true goals. Entrepreneurs forgo short-term salaries and prestige for the long-term opportunity to build something great. Just like public companies face pressure from Wall Street to focus on short-term profits, many MBA programs are driven to focus on their graduates’ initial paychecks instead of long-term career happiness. Make sure you go to a business school that thinks long-term and don’t compromise your personal goals for a signing bonus and an impressive business card if that’s not your top priority.

Managing Companies vs. Creating Disruptive Businesses MBA programs are good at teaching students to manage companies, but not to create truly disruptive business models that stare in the face of history. MBA programs are focused on case studies. They teach people to follow frameworks, use known approaches, and walk down the career paths of those before them. The best innovators, however, are the ones that do not follow the rules of the past and have the spark to develop their own ideas. FedEx was originally a business plan that Fred Smith wrote at Yale. He got a C and was told that a national overnight delivery service made no sense. It’s a good thing he didn’t listen to his teachers. I’m not saying business school courses are useless, quite the opposite. What I am saying is that following a formula will help you get a good job and do well in your career. But if you want to pursue greatness (enter the entrepreneurs) you are by definition going to have to take risks and ignore some of the things that people try to teach you. None of the great innovators and entrepreneurs have gotten where they are by following a path that somebody else showed them.

Analysis vs. Action In the real world of running a startup, the strategy and “analysis” is 10% of the work (some will argue that it’s 1%) and execution takes up the other 90% or more. It’s the action that counts at the end of the day. MBA programs have real business experiences tossed throughout them, but each class is ultimately a case in analysis. You look at business problems, think about how to solve them, identify key factors, and present your thoughts. You put together a presentation, a document, or a spreadsheet. But you never actually solve the issue. You simply discuss it and write about it. Proposing a strategic initiative is drastically different from operating that business day and night until the initiative has been fully implemented 18 months later. To be an entrepreneur you need to be a builder. You need to create something out of nothing and get others to join you in the adventurous task. So if you want to practice entrepreneurship, don’t go through business training passively. Find projects where you can take real action, create real products, and sell them to real people. Get out of your building, talk to customers, talk to people in the industry, identify business opportunities, and go after them. Entrepreneurship is an iterative practice. Building a great business is about thousands of baby steps all added up. But you’ll never get to the end if you don’t take those first 3 steps. So don’t just practice the analysis, practice the action.

Entrepreneurship, in my mind, is the best business school out there. You learn by doing as job experiences and lessons fly at you from every direction. So if you’re an entrepreneur or an aspiring entrepreneur considering business school, I’d urge you to take a look at the things I noted. Make sure you choose the right program and keep in mind that entrepreneurs have a different focus than bankers, consultants, and brand managers. Going through the business school experience is great. But blaze your own path and don’t follow somebody else’s.

Get career advice and free resources.

  • johnny_mba_applicant

    thanks for your post, I’m looking into business schools now and want to make sure that I find one with an entrepreneurial mindset that won’t turn me into a moderately paid cog

  • Conrad Chua

    Keith

    Congrats on writing a good, thought-provoking article.

    I am the Head of MBA Admissions at Cambridge Judge Business School, so I speak from the other side of the fence. I can’t speak for other schools, but at least in Cambridge, the impact on MBA rankings does not play a part when assessing an individual candidate. Hence, we have admitted students from non-traditional backgrounds, including entrepreneurs. To be fair, some of the rankings such as the Financial Times, have made allowances for MBA programs who admit non-traditional (traditional meaning Wall Street and consulting) candidates in their ranking methodologies when it comes to post-MBA salaries, but it does not solve the problem completely.

    I do agree that there is a huge emphasis on analysis in an MBA but I also see that there is a move away from the case-based method to include other forms of experiential learning. At Cambridge, students complete three projects within a year. Many of these projects are consulting-lite, but they are real problems faced by real companies. Many of these companies are startups (because Cambridge has the most number of startups in any postcode in Europe) so our students get to see first hand the problems, challenges and excitement that is present in any startup.

    Lastly, there is an increasing interest in entrepreneurship at least within the Cambridge MBA students. Last year, it was the second most popular concentration, and each year we have a few students who switch their career goals from finance to entrepreneurship.

    • Conrad,

      Thanks for the comment. I wouldn’t be concerned about entrepreneurs
      having issues during the admissions process, I’m just trying to warn
      students about the process upon graduation. By nature, most MBA
      students are looking for a “traditional” high-paying job. So if
      you’re in business school and you’re an aspiring entrepreneur (like I
      was) it’s easy to get caught up in the parade and end up with a job
      that doesn’t make you happy just because that’s the way the system is
      tuned (and the way MBA programs are externally pressured to think).
      Finding appropriate advisers and mentors is probably the most critical
      aspect here. I don’t think that someone who only has experience with
      banking or consulting will be helpful advising an aspiring
      entrepreneur. So if you fall into that (admittedly minority) category
      – you need to be careful to proactively find the right advisers and
      work with people who understand your goals and understand the way
      startups work. If you truly want to be an entrepreneur, turning down
      a job that pays well in order to get real entrepreneurial experience
      could make you 5x as happy and financially successful 10 years down
      the road. But that’s a tough decision and you need to look at it with
      the appropriate lens.

      I don’t have a large issue with the case method, but as you mention it
      needs to be accompanied by true business experiences. Strong MBA
      programs offer opportunities for students to get their hands dirty
      (investment management funds, real consulting projects, etc.). I put
      it on the student to proactively create real business experiences
      while they’re in business school. If you passively attend class and
      expect an MBA program to change your life and owe you a high-paying
      job, then I think it’s a poor investment. But 2 years is plenty of
      time to create a number of real business opportunities for yourself,
      regardless of the field you want to pursue. If you want to manage
      money, start actively managing a portfolio as if it’s a real client
      (even if it’s only $500). If you want to work for a web startup, go
      talk to an entrepreneur and take on a free project for a couple weeks,
      create a website, start blogging, or launch your own company. It’s
      not even the results that really matter at the beginning, it’s the
      practice of going through the process. So I highly encourage students
      to think that way, especially if they want to run their own companies
      after graduation.

      Glad to hear your entrepreneurship concentration is growing! We need
      more of it. Also nice to see you on Twitter, that kind of
      transparency is part of the evolution needed in MBA programs to adjust
      to the new world of business.

  • Lugom Aidem

    Posts like this are ridiculously stupid. Having an MBA in itself does not kill your chance of being an entrepreneur. It’s the attitude of the individual. While it’s true that the people on the list don’t have degrees, their attitude was that they would experiment with something, and when it got some reasonable traction, it justified them pursuing entrepreneurship instead of continuing with school. To say that MBA people are short term thinkers and infer people who don’t have degrees are long term thinkers is ridiculous. The second point of managing companies is also ridiculous. Mentioning the great stories of the cases where one person didn’t get a good grade and saying that attributed to success isn’t valid in my mind. What about the people who also got bad grades and failed? That’s way more common. Analysis versus action? Are you saying that MBA people are not action oriented? And people who don’t have MBA’s are not analysis-oriented?

    • I don’t think you read the post clearly because I didn’t claim any of
      these things (it sounds like you only read the title, which was
      actually different from the original one on my blog). I have an MBA
      and don’t think I’m a short-term thinker or tinkerer, clearly. But
      the point was that if you want to be an entrepreneur and you choose to
      go to business school (like I did), I think it’s extremely important
      to take the right things into consideration, choose the right program,
      and be extremely proactive while you’re there – pursuing the right
      type of activities – to come out ready to run a business. I’m not
      sure if you’ve gone to business school, but if you have – you’ll
      notice that there are passive students and more proactive students,
      even those that claim they want to be entrepreneurs. If you want to
      be an entrepreneur, you better be the proactive student – that was the
      point of my post.

  • pbreit

    Paraphrasing Keith Rabois: MBA students willingly decided to spend $100,000 and 2 years of their lives on an MBA rather than starting a business (during perhaps their primes years). There are at least two major lessons: 1) an entrepreneur would never make that decision and 2) starting a business is a *way* better education for learning how to start a business.

    • Rico

      I wouldn’t be so quick to answer that way. I’ve done both. Business before MBA and now another business.

  • jeremydf

    Keith,

    I’m about to start my second year at NYU Stern and I think you make some good points in this post and comments, especially about thinking differently and making your MBA program a proactive one.

    But I just get so tired of people doing “statistical” analyses like you did in the beginning of this post. It completely dilutes the value of what you’re trying to argue. If we were to just look at that information without any biases, I think our main conclusion would have nothing to do with MBAs and more to do with how successful people can be if they would just drop out of undergrad and grad school already! That’s a ridiculous idea, but according to the limited sample size of 17, it’s a far less ridiculous observations than the one you make about MBAs.

    Also, sometimes people also need to work in something like consulting or banking to really know that they want to be an entrepreneur (or that they are entrepreneurial)… Way too much emphasis is put on what you choose to do immediately after school.

    School is a structured learning experience, and life is an unstructured one. Spending a couple years in your late 20s after school in a job you thought you wanted but that ultimately showed you what you DON’T want, leaves you leaps and bounds ahead of a lot of people I know in the same age range. Sometimes experience is the only way to know, regardless of the number of mentors and advisors in your life. Again, it’s about thinking differently and not following what people tell you, right?

    • The list was just a starting point for a conversation (I was actually
      searching for successful entrepreneurs who had MBA’s when I started
      the list, just for personal reference). Similar to your final
      comments, I think the main point of being an entrepreneur (as a
      mindset, not as a job title) is that you need to be able to take in a
      bunch of information, synthesize it in a personal way, and have the
      conviction to generate your plans and goals and follow those no matter
      what. I don’t want to take the “thinking differently and not
      following what people tell you” part too far – you should always look
      for advice. But my real warning is that it’s easy in business school
      to get caught in a trap where everybody is interviewing for particular
      jobs and you take one just because that’s where the herd is going,
      separate from whether or not that’s your best personal choice. For
      many successful business people and entrepreneurs, banking and
      consulting is a perfect starting point. But make that decision on your
      own and without the external pressures that encourage as many grads as
      possible to end up at Goldman Sachs and McKinsey. As you probably
      know, even with personal conviction and individual thoughts, it’s easy
      to get caught up in the high speed train that is business school,
      interview for a job, and end up there for the wrong reasons. That’s
      ultimately what I wanted people to take away.

      By the way, my business partner went to Stern, spent 7 years in
      consulting, and is now part of the NYC entrepreneurial community. So
      if you’d like to have a conversation, shoot me an email and I’ll
      connect you.

      • jeremydf

        Thanks for the reply Keith. There was definitely a herd mentality around January when consulting, banking and CPG companies started internship interviews, mainly because the process was more structured and people were freaked out about not getting internships at all in this economy. What was cool to see was the people that didn’t go that route (or even ones that didn’t get offers from them) discover all the opportunities that are out there. I for one will make it my mission next year to talk to as many first years as possible to encourage them not to freak out and take the easy/structured route.

        I’d love to talk to your business partner, thank you! I’ll be in touch.

  • Inspiring ! Very Inspiring !! Thanks Keith !!

  • Krishna9 Gudapati

    excellent facts,,,,,,i got educated

  • Ram

    Keith,

    Very well thoughout article. I am a potential MBA applicant and over the last few months I am facing indecision about whether going to business school is the right thing or investing that money into an venture and give it a go.

    Personally I feel I want to be an entrepreneur and have done some angel investing and have started micro businesses like tutoring etc.. I keep taking about ideas all the time, but always concluded that my ideas are far fetched and non-tangible. All my friends say wow for an idea I propose and I am happy at the moment, but after about 5 days of research and analysis (googing, some excel analysis) I figure this won’t work and I fizzle out. After all this I came to a conclusion that I lack analytical skills and ability to gather information or feedback whether my ideas are good and can be pursued. I started scoring linkedin for profiles of people who are cofounders, founders and saw how they emerged to be entrepreneuers. About 80 % of the people I surveyed were MBA’s from stanford and other top business schools. So I started thinking to myself, MBA might give me the skill needed to assess whether a business can be pursued and the people network which comes along by meeting different people in the MBA program.

    But, maybe business school is not my answer. I am not so sure here. I hear conflicting thoughts. Some people say that business schools prepare you to be a star dog in a big company. But, if that’s what satisfies you and kindles your senses with happiness, then one should definitely pursue it. I feel that being my own boss and having my own vision is something which will keep me happy even If I fail. Well, the indecision continues. hopefully I find my answer.

    • Rico

      First off, MBAs usually have huge attitude. They always think they’re going to run out into the world and tear it a new one. Not always the case. In fact, big companies don’t really favour that type of environment due to the lack of innovation and more of a “team that follows the leader”.

      I did my MBA as an entrepreneur, and I found it useful. Frustrating, but useful. If anything, you can look across the table at someone and know they cannot disqualify you, because of their “insight”. MBAs rely upon their degree a lot, regardless of qualifications or not. The program is also a great way to lean about how people indeed become entrepreneurs, and how companies get formed and move into better ideas. Getting a degree won’t discount your entrepreneurship. It will make you more hungry.

  • Luigui_vampa

    Keith,

    Thank you for this very interesting article, in fact this made me take a desition about apply or not an MBA program in my country and as in fact I’m thinking about short-term (continue working in an organization and grow up in my bussiness understanding) in fact I was wondering if it should be a good option for me and with this I see the answer is yes. Finally let me say that your advice is really interesting, actually there’s no school where you can learn how to become an enterpreneur, that is something you have to learn making bussiness and even creating new services or products or why not, alternatives to the existing ones.

    Thank you.