Beware of MBAs: The business school curriculum teaches how to suck at startups
humbledmba.com
humbledmba.com
Startups are cars with a very different purpose. They are project cars, and they have 1 purpose: to go. Forget GPS systems and down force. These cars need tires and a working steering wheel. It would be a mistake to think about installing spoilers on a car that doesn't have all 4 tires, just as it would be a mistake to worry about ideal liquidity ratios in a startup. Entrepreneurs are the mechanics who decide to take on these 'project cars'. Eventually, as the car project develops and grows, specialists (MBAs) can be brought on to find the minor, yet precise changes that will improve the car's results.
It's because we've worked at startups where MBAs were brought in on the middle management layer and wasted our time polishing nuts and bolts in order to reduce drag when what we should have been doing was upgrading the suspension from a Watt's linkage to MacPherson struts.
Not every tech is lousy and incapable of understanding that IT needs to serve business needs, even though lots of MBAs think so.
Broad brush hatred of all MBAs is moronic.
"My god, he decided to supplement his education by learning the basics of accounting, finance, marketing, and a bunch of electives! Fear him!"
So lame.
This has nothing to do with the concept of the MBA or the courses, but more to do with the type of people who feel drawn to a short cut to senior management or influence over senior managers.
People tend to forget that top tier MBA grads are (usually) incredibly bright and productive professionals.
I'm not convinced of this. Apart from the fact that your two sentences contradict each other, I don't believe this optimizes for the right variables. If you're a hacker, and you want to do a startup, you should be learning related skills - and the best way to do that isn't to attend an MBA course, it's to do a startup yourself.
And, besides, if you ever find yourself wanting of MBA skills in the future (which implies that your startup has some degree of success) you can always go out and hire one.
Here is my real world evidence: German and Japanese large companies are as good or as bad as American ones (depending on your point of view). The MBA is relatively rare in Germany and Japan. Japanese large companies, in particular, tend to recruit fresh undergrads without much attention paid to their major, train them internally, and promote from within. The fact that their companies hold their own in global competition, indicates that the MBA doesn't add any superior competitiveness to American companies. In fact, I would argue the MBA actually subtracts from American competitiveness, but that argument would be more subtle, and would require industry-by-industry analysis of competitiveness. I will note in passing that software and internet industry is probably where the MBA influence is the weakest in America (primarily because of the extraordinary rate of start-up creation), and that sector is the one where America is the most globally competitive.
The fact that the consultant wsa trying to get more work out of the company had nothing to do with her qualifications.
You can learn a lot on the job, but how many jobs let you do accounting and marketing? If you're working for a domestic company do you get any experience in international business? If you work in HR are you doing anything involving economics.
It's easy to say you can learn anything on the job, but that's hardly the case when your job has specific responsibilities. A student who truly STUDIES and EARNS their MBA has the ability to apply a broad set of knowledge to any job. What's the basis for questioning someone's ability as an effective manager because of their degree type? Not all MBAs are managers, that's something different entirely.
Then in your "real world evidence" you're questioning the efficacy of MBA graduates based on how foreign companies train from within? Huh?
By itself, any degree means nothing - it's up to the employee to apply the knowledge they gained while earning that degree to bring value to their company.
Questioning if there's value in an MBA in any company is questioning the value of knowledge. If there's no value in knowledge, then why bother having any sort of degree - just hire kids of a working age and teach them to put the widget together. They'll learn the rest on the job right? Hardly.
For starters, I don't know that American companies are as good as German and Japanese companies. US is measurably wealthier than both of these countries, at least in terms of GDP per capita. Maybe US large companies are more efficient.
But even if assume large companies in those countries are similarly efficient, there are way too many differences between US and Japan besides "MBA density". It could be the case that Japanese companies hold their own despite the lack of MBAs. In fact, I do believe they do well despite the custom of treating fresh undergrads as useless, insisting on an archaic seniority system, etc.
A: An MBA is a credential, not necessarily a skill or set of skills. Earning an MBA is applying yourself to learn a set of skills, and then convincing the instructing organization you have learned the skills. Why get an MBA if you can circumvent it and just learn the skills? Why even bother with the superfluous skills and instead only learn the necessary skills on the job (and get paid for it)? With your MBA you can convince someone that you have some set of business skills, and that you are capable of applying yourself.
B: There is a different culture of employment relationships between America and say, Japan. In Japan, you are typically employed by the same company for life. Job hopping is rare, and there is a lot of loyalty in the employee-employer relationship. Why would you get an MBA in such a culture? You can surely learn the necessary skills on the job, and you most likely will not be leaving the company to find a better opportunity. Branching off from point A that an MBA is a credential, it follows that such a credential is not needed as much if you aren't planning on using it to unlock external opportunities. The flip side to this is that in America, an individual might find themselves working 2 or even 3 'careers' in their lifetime, and job hopping isn't considered disloyal, it's being aggressive. A credential is much more important to someone in this culture, as they will need it to convince new employers to hire them.
A counterpoint I want to bring up in support of an MBA is that an MBA readies you for the job you may have 5 years from now. You indicated that the necessary skills could be learned on the job. But training a new manager is expensive and risky. First, the manager must take the time to learn the tools, making him or her less effective. Second, there is the risk that this person is simply not management material, and that the investment will be wasted. Having an MBA shows (in theory) that the candidate is management material, and in fact has already learned many of the necessary skills. A company looking for a manager gets to know that this candidate is more likely to work out for them.
Finally, you said "If a person cannot learn that on those skills on the job, I seriously would question his/her ability to be an effective manager." The actual purpose of the MBA degree is to show that the candidate does have the capacity to be an effective manager. Again, it's a credential that is designed to remove the risk of a poor hiring decision.
Well, since a lot of learning comes from failures, I think an MBA should teach you at least how to avoid common causes of failures. As a boss of mine used to say: "By practice alone, it will take you one hundred years." (meaning that a little theory goes a long way).
An MBA does not make you an effective manager anymore than knowing OOP and the syntax of a programming language makes and you an effective programmer.
Theory without any practice is entertainment. Practice without any theory is a bet.
What are Fortune 500 companies optimized for? Certainly not for making money, they're wasting money left and right --- for example, on legions of MBAs.
From "The End of Business Schools?: Less Success Than Meets the Eye" by Jeffrey Pfeffer (Stanford University) and Christina T. Fong (University of Washington):
"Although business school enrollments have soared and business education has become big business, surprisingly little evaluation of the impact of business schools on either their graduates or the profession of management exists. What data there are suggest that business schools are not very effective: Neither possessing an MBA degree nor grades earned in courses correlate with career success, results that question the effectiveness of schools in preparing their students. And, there is little evidence that business school research is influential on management practice, calling into question the professional relevance of management scholarship."
Far better to skip the MBA and teach yourself. Better results, and far less debt.
In my class about 10 of us started companies. There have been two successful exits and one is probably doing over $100MM revenue.
All in all, about 8 of the companies will be considered successful and 2 flops. Of the 10, the vast majority raised less than $500K in capital.
The degree doesn't possess its own inate potential for success. The student has the potential to contribute - either they do or they don't. The school is teaching competency in specific topics and skills. It's up to the student to apply those skills and contribute to their company's success.
If you did an MBA with the express purpose of concentrating on making startups work, you'd concentrate on taking away the parts of that education that focus on entrepreneurship.
It's fashionable to diss the MBA but they contain a non-trivial amount of learning about finance, capital markets, legal and other aspects of business that would take a long time to pick up just by going through a startup.
Its not enough to point to an MBA and make generalizations about how it prepares you for X or Y. The devil is in the coursework, the professors, and most importantly, the student.
When I went through I had a fellow student who was preparing to take over the family cleaning business with several hundred staff. A friend was a career airline pilot getting ready to step out of the cockpit and into administration. I also had career public servants learning on the public dime to get to the next pay grade. There was also aimless students who weren't ready to leave university because they had no direction in life. The things that these different groups studied vary a lot.
The one thing that did come through, unfortunately, was a heavy reliance on Powerpoint.
All it took for me to forget nearly everything I learned in business school communication classes was a seminar led by Edward Tufte, where it dawned on me that Powerpoint is no substitute for an appropriate executive summary of your content that can be passed around and referred to long after your talk is over.
As entrepreneurs, we're rarely delivering data in this way. it's usually our job to distill all the potential data points down to the 1 or 2 most important.
It comes down to whether you're persuading or informing. For persuasion, Tufte>MBA every time.
An MBA is an education in business. That can't be a bad thing if you operate a business, large or small.
So some people claim. Other people think it isn't that clear cut. On another discussion (http://news.ycombinator.com/item?id=1330878), someone asked
"I presume you get an MBA to give you a better understanding about business. And startups are in essence businesses. Then how come having a better understanding not impact your startup?"
pg replied,
"The cause of the apparent paradox is that "business" spans a huge range. MBAs train you to be junior officers in the armies of managerial capitalism. But there is almost zero overlap between that sort of work and what startups do."
and later
"Actually I would say it's a slight net minus to have an MBA when doing a startup. You learn nothing of use to you, but investors discriminate against you slightly.
Almost all investors are looking for founders who match past stars. So what they're looking for at this point is hackers.
I have to say I agree with them. I can't imagine Bill Gates or Larry & Sergey enduring B School."
So there are intelligent people with differing viewpoints on whether "An MBA is an education in business." is a valid premise.
It is one thing to say that an MBA won't help you much with your start-up, but it is another to say it is detrimental. Other than the prejudice of investors, I just don't understand why education of any kind is harmful as long as it isn't filling your head with lies.
So suffice it to say that I disagree with my hero, pg, about the value of an MBA. I can tell you that I personally have gained greatly from the experience, and that I'm better at all facets of business (even startups) because of it.
I didn't go to a very good B school, but clearly it was a better one than Tuck.
It's about selling a vision, not presenting analysis.
From my experience that's a sure way to receive a polite "no thank you" from VC's or angels. Good venture capitalists demand meaningful analysis in your pitch. Every single pitch I've been a part of has inevitably zeroed in on market, financial, and performance analysis within 5 minutes of starting. Those slides about vision and big ideas just don't play well in those rooms (again, from my experience).
More than anything, money-folks seem to want entrepreneurs who have an eagle eye on the performance metrics of their business.
I wonder how this is at more entrepreneurial programs like Sloan.
LBS run an entrepreneurship summer school which concentrates on the entrepreneurship parts of their MBA program. Over the last 9 years they've had 350 graduates, and produced 90 businesses. Of those 90, 80 are still operational.
I don't regret my MBA for a second. The best two years of my life. I intend on using my skills from my MBA throughout my life. Someday I want to run a large non-profit and the tools I developed at Tuck will be invaluable. The painful lesson of the last few years was that all of that education is near-worthless as a startup founder.
http://www.amazon.com/Managers-Not-MBAs-Management-Developme...