Study Finds Engineers Far More Likely than MBAs to Build and Run Companies | Hacker News Reader

Study Finds Engineers Far More Likely than MBAs to Build and Run Companies

blog.identified.com

232 pointsilamont49 comments

I think most MBAs are looking to work for a large company, climb the ladder and so on. The training focuses on that -- it's not called a Masters in Business Administration for the heck of it.

That or go work for Wall Street.

I think another issue could just be that Engineers aren't paid as much as MBAs. Which means we need to take that risk if we want to make the bucks.

Also its generally easier for us to take the risk. If you're an engineer making 120K its easier to take a paycut to 100k if you form a startup. If you're an MBA dude making 500K it just doesn't make sense to give up the Rolls etc and take a paycut to 100K.

120k salaries are typical for engineers though. MBA salaries are probably more varied.

Yes and no. Some engineers make ~200K to 300K, just for hacking code or selling it. Yes its true :-)

Some MBAs make ~140K out of school. EG McKinsey is known to make you work your tail off for very little $ comparatively speaking. But thats a golden stamp: 4 years out of McKinsey and you could be a SVP at some dumbass BigCo in Silicon Valley making ~500K. Why the hell would you want to give it up and join/form a startup?

The job market has been exerting a lot of downward pressure on MBA salaries in recent years, especially in the wake of the financial crisis. While it's still possible for a newly minted MBA grad to make somewhere close to $140k at McKinsey, or more at an investment bank, most MBA grads are falling moderately to significantly south of that figure.

And, as others have noted, the starting salaries are highly variable -- by school, by industry, and especially by job function. When people speak of "average" MBA salaries, they're usually speaking of a mean figure and not a median -- which is a bit silly, because the mean has traditionally been skewed very heavily by investment bankers.

At the end of the day, it's somewhat intellectually lazy to compare "MBAs" to "Engineers," as if both sets are relatively homogenous, or even normally distributed. The fact is, the designation "MBA" could mean so many different things. It could mean a nonprofit manager earning $65k, a brand manager earning $80k, a consultant earning $120k, or a private equity associate earning $200k+. To a certain extent, the same can be said of the broad category "Engineer" -- although there are so many subspecies of "Engineering" masters degrees, that selecting any one of them can yield a more homogenous set to work with.

In the long run, one thing seems abundantly clear: there are perhaps more MBAs entering the job market each year than the job market will actually bear. Conversely, there is a dearth of engineering talent, and a consequent seller's market in most engineering fields. That means engineering salaries will likely trend higher, while MBA salaries trend lower.

Probably. All of my information is from a conversation I had with a newly minted Wharton MBA circa 2007.

Also with just seeing how things operate in the Valley. I haven't seen McKinsey around a lot here though...which may be a good thing. Back in the tech bust years, they seemed to have just one piece of advice for every problem: outsource to India :-)

Seems like it. I graduated from a business program, the curriculum is generally focused towards fitting into a large or otherwise existant organization.

Exactly. MBA programs (traditionally, things are changing slowly) aren't really designed to create entrepreneurs, either.

That's not necessarily a bad thing. Large companies need at least some specialist management types.

Right, you really need people who can say "OK, no more bullshit on these status reports, just say what happened so we can tell how things are going".

Also, good quantitative skills, and a good understanding of scaling and system behavior are important.

Their data doesn't support that conclusion. Actually, you can't make any conclusion without knowing total number of MSinE vs MBAs.

Update: http://www.cgsnet.org/portals/0/pdf/R_ED2008.pdf (p.16) suggests there are a lot more business masters vs engineers masters (23.4% vs 7%). So at a first glance it does look like the conclusion is right.

I don't have the figures to hand, but I believe graduates of business programs outnumber graduates of engineering programs.

I compiled the statistics for the white paper. As I noted below, the sets are largely disjoint. Those with both engineering degrees and MBAs are in the low tens.

It's not about being disjoint, you need to known total numbers to make a useful conclusion. It's not really that the title is wrong, it's just misleading. In the same way as the following is misleading:

Gentiles far more likely than Jews to win Nobel prize

If the numbers from that PDF are right your conclusion is actually 3x stronger - i.e. a Masters of Engineering is an order of magnitude more likely to lead to a CEO position than an MBA.

If wonder if that's really true, I find that level of difference odd. Wouldn't be surprised if numbers go the other way if look at only top schools. I.e. MBA is useful, but only MBA from a top-20 school, which is a generally accepted wisdom. I bet at the end it just correlates to IQ and maybe gender.

I don't have the number in the database off the top of my head but I can say with certainty that the number of business graduates exceeds engineering graduates.

I'd be uncomfortable mixing our numbers with national numbers since our data is skewed toward smaller start-ups. Our data and analysis wasn't perfect but it does reflect the fundamental truth that engineers are more likely to lead companies.

I do think we could have clearer in that regard and that is my oversight.

The conclusion ended up the same, but in the future you should consider normalizing against the size of the population you're drawing from.

In this case, rather than "business undergrad CEOs vs. eng undergrad CEOs" you should have "business undergrad CEOs per 1000 business undergrads vs. eng undergrad CEOs per 1000 eng undergrads".

Or the more wonky form of P(CEO | biz undergrad) vs. P(CEO | eng undergrad) ("probability of being a CEO given a business/eng undergrad degree...").

MBAs and engineers are not mutually exclusive groups. I have an MBA+MSc myself and quite a few people in my MBA class had at least an undergraduate degree in engineering.

In my experience an engineer with 10 years of work experience + 2 years of MBA is much more rounded than an engineer with 12 years of work experience. Given the choice between an engineer or an MBA without an engineering background, I'd pick the engineer though.

I agree. I've got a BS in Computer Science and an MBA, which is very common. A third of the class had undergrad engineering degrees.

I'm not sure they're doing good stats...

A better first question is, "What % of advanced degree engineers become founders?" and "What % of MBAs become founders?"

From there you can go on to questions of size and success.

As listed, the answer tells us nothing. For all we know there are 30x as many engineers as MBAs. Or vice versa. The conclusion could be the same as stated too.

I compiled the statistics for this whitepaper. We do not attempt to quantify success or company size. We aware that our data set is biased toward smaller companies, namely start-ups.

We simply examined CEOs at a certain time period and their degree composition.

Before complaining about success and size, it is important to know what % of college grads have each of these majors. Without knowing this, the conclusion of "Engineers with advanced degrees are more likely to become CEOs than MBAs" is suspect.

I like quoting pg here:

  So if you want to invest two years in something that will help you succeed
  in business, the evidence suggests you'd do better to learn how to hack
  than get an MBA.

-- http://www.paulgraham.com/start.html

I've heard this a number of times anecdotally. I remember once going to the head of my university's business school as an alumni and he said you're one of the few that came out of this school that actually started a company. To which I replied I didn't, I came out of the school for Electrical Engineering. He laughed and said well that makes sense.

I think that selection bias does a lot to discredit any conclusions drawn from the data. The data is drawn from facebook profiles. The founder of the plumbing fittings factory down the street from me is a lot less likely to have a facebook account than a web startup founder. Moreover just because I say I am a founder/CEO or that I have a phd/mba/xyz in my profile does not mean it is true...

This is definitely food for thought. However, I'm not sure it tells the whole story. I'm interested in the size/valuation of the companies in addition to a count. I'd argue that it's a lot easier to found a tech startup and call yourself founder/CEO than it is with more traditional MBA-geared companies. Also, the survey sample is probably pretty skewed since it uses Identified and Facebook.

I didn't even consider the facebook issue. While lots of people are on FaceBook, busy, older CEOs are probably the least likely to be on it and the least likely to put "CEO or Founder" on their profile.

That would also explain why the average age has gone down so much.

Hey kthyqn, I put to together the statistics for the white paper. Our data is necessarily skewed and is not a perfect reflection of reality. Our data is comes with several caveats, namely we probably somewhat over represents startups and under represents large companies.

Nevertheless, it is largely a reflection of reality. A study from Harvard Business School was recently released that came to the same conclusion.

http://online.wsj.com/article/SB1000142405297020336350457718...

*Looking for correct link, please stand by

EDIT: Linked to the wrong HBS study xD, corrected

I find it odd that the data was mutually exclusive. They didn't find a single CEO with both an MBA and engineering degree?

Hi refurb, I compiled the statistics behind the white paper. We found several candidates with both MBAs and engineering degrees. However it was on the order of low tens so the sets are largely disjoint. We excluded it for the sake of clarity. Sorry if it wasn't clear.

When you say, "I compiled the statistics behind the white paper" I'm assuming you were involved in the paper when I ask this, so please excuse me if you were not:

Did you look at whether the companies had any employees or not? Or try to split the data out by whether they were lifestyle businesses or not?

I wrote the SQL calls.

We did not examine company size as we did not have that data on hand. We filtered the data based on known companies to the best of our abilities but that is an area we could devote additional effort.

That being said, an HBS study appears to confirm our conclusions.

http://online.wsj.com/article/SB1000142405297020336350457718...

It looks like it is the same data set. You could have used facebook to detect the number of people who list each company as their employer to build a more accurate picture.

It just doesn't say much if they are lifestyle businesses. Most businesses that are lifestyle businesses without technical degrees are owned by a variety of non MBAs.

MBAs have far too much opportunity cost to start a car washing business or some other small $50K/year business when even people in marginal MBA programs can easily make $85K first year working less than 40 hours a week.

I think they cast anyone with a MBA into the MBA category. I know of one CEO who has both an engineer degree and MBA. The CEO of Adobe.

http://en.wikipedia.org/wiki/Shantanu_Narayen

CEO of Apple, too:

http://www.apple.com/pr/bios/tim-cook.html

It's pretty common for engineers to enter an MBA program in effort to accelerate their careers into management.

In both cases these guy were not founders and joined when the company was quite big.

The title and the article do not match. The study looks at 'Founder/CEO' and the title says 'Build & Run'.

Being a founder is very different than coming into a company several years later and being a CEO. They are different phases in the businesses life.

I'm an engineer. I plan on getting an MBA someday. My dad is not an engineer, but does have an MBA. He has been the CEO of 3 companies in his career. The first company was 100+ years old. The 2nd company was 200 years old. The 3rd (and current) company is 2 years old and he just joined it as CEO this week. In the first two cases he grew the business substantially. But he will never put 'founder' on his resume because that would make no sense. So by this study he wouldn't count on the MBA tally.

In the beginning, a startup is mostly about making a product and finding product/market fit. But later on once you have an established product it comes down a whole lot more to sales, marketing, operations, partnerships, etc. My dad has a psych/business undergrad & a marketing MBA. All of his work is on improving the sales force, making new ad campaigns, opening new distribution channels, etc etc etc. Things that as engineers we probably don't really want to deal with, but are the difference between being #3 in an established market and #1 in an established market. And that's ultimately what an MBA is aimed at helping you do - growing larger businesses.

So this data doesn't really suprise me.

As an interesting data point - my dad largely runs company in the 100-150 person range and has been in the chemical industry for a while. He noted that almost all of those kind of companies would prefer someone with an engineering undergrad and an MBA because ultimately you oversee sales, marketing, engineering, manufacturing, finance, etc. So if you are blind to the factory you will not be an effective CEO.

This isn't too surprising to me. An MBA doesn't teach you how to build anything, an Engineering degree does. The things that are important early on in most startups are the engineering things, not the business things.

I wouldn't say that exactly. "Business things" are incredibly important, particularly sales. But the very word Administration in the title MBA indicates that MBA is about shepherding a successful business, not bootstrapping one from scratch. In this light, an MBA could be the most important person because if they are good they could take a company from 10m to 20m just based on improving efficiency, but that's of little use if your revenue is only 10k.

There's far more to running a business than "building something". In fact, the reason that most entrepreneurs get buried is because they are good at building something, but can't run a business.

They're both important skills, and neither has to be learned in school.

Here is the difference:

    Engineers = Build First, Sell Later.
    MBAs = Sell First, Build Later.

Engineers use instincts, gut feelings and optimism when they find a opportunity and jump in often to be a entrepreneur. MBA's on the other hand evaluate risk and unknowns.

Engineers often create the companies and MBA's help them grow it to their potentials

Coming from a business background, it's very difficult to create a product if you don't have engineering skills. It's the reason I learned how to code. Knowing how to sell isn't a useful skill if you don't have a product to sell!

This is not an independent study or a "white paper". This is marketing for Identified. The study may be right or it may be wrong. But one thing is for sure: Identified has a vested interest to attract hackers to become members of Identified. So they publish headlines like this to make their way on to places like HN in the hopes it gets attention, and results in a membership bump. And by the 180+ upvotes I see as I type this, it's working.

You can trust that had the study resulted in MBAs being more likely to build and run companies, that this study would never have seen the light of day on its blog.

I think the key word is "build". As someone with both a Master in CS and MBA and have previously been a CEO where I was hired to run the company (not a founder), and now starting my own business, I can attest that its the engineering side of me that pushes me to be a founder and build something from the ground up.

Although, I will say that some MBA schools are promoting entrepreneurship as a viable path more now than before. My alma mater (BYU) now has an Entrepreneurship major I believe.

Entrepreneurship is still a minor in the MBA program but can be majored in by undergraduates. The Business Plan Competition <bpc.byu.edu> and Business Model Competition <bmc.byu.edu> are pretty cool from an entrepreneurial perspective as well.

People that are trained to build things are more likely to start companies that build things, than those that are trained to administer businesses?

Also, did you know that the majority of mba students are engineers?

I am not sure why they needed a study for this. I was told this fact in engineering school in 1994.

Makes sense to me, MBAs would be looking for companies to run, engineers build things and find themselves running companies.

I'm an engineer and have studied several MBA courses as part of my engineering management degree. MBA courses are heavily corporation oriented and have limited value for founders of organically grown start-ups.

Majority of the management techniques taught are economic only when applied at corporate scale.

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