I like to think of this topic using an automotive racing analogy: Fortune 500 companies are the formula 1 cars. They need a great big team to perform efficiently, and minor tweaks applied correctly can yield significant results. The MBAs are the specialists who work the electronics and the advanced controls for the race cars. A team working on a formula 1 car could find a way to increase down force by 5%, or they could install a GPS system to analyze turns and scrape 1/100s of seconds off of lap times, and that edge could help them win.
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.
I question to value of MBA even for large companies. I see value in structured, methodical, analytical thinking for many classes of business problems (not all, many crucial business decisions involve creative guesswork!), but an MBA is way overkill, and whatever it is supposed to teach can be learned on the job. If a person cannot learn that on those skills on the job, I seriously would question his/her ability to be an effective manager.
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.
This is one of the best descriptions I've heard about people who work at startups and MBA's who work inside large organizations. I don't understand why so many people in startups feel the need to rip on MBA's; its comparing apples to oranges.
I downvoted you because I believe your F1 analogy is off. F1 cars are highly optimized to do one thing: go around the given circuits in the calendar that year as fast as possible, within the rules. For a specific GP weekend, they are further optimized to go around that circuit, even if it means doing weird things to the car's balance.
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.
Your analogy works. Most hackers certainly don't belong in business school...but many hackers could benefit from an MBA's experience/education once their product has traction, users, whatever. An MBA as the first hire probably doesn't make sense. But an MBA to optimize sales/marketing/support might make a lot of sense...
People tend to forget that top tier MBA grads are (usually) incredibly bright and productive professionals.
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.
I wonder how the biz started by Stanford Engr students compare with those started by Stanford Biz students? (Yes, Stanford's CS department is part of its Engineering school.)
Someone needs to zoom out on this type of study and look into whether degrees at any school, not business alone, contribute to corporate or even career success.
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.
I think the point missed in here is that if you go into your MBA with a consulting, banking, etc direction, then you'll get all the lessons that go with that.
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.
Agreed. An MBA is a strange animal. Two people coming out of the same school can have vastly different career goals, and have taken much different coursework. While the core courses may be the same, the real meat is often in the elective courses that allow you to focus on a specific area of business. A brand management person is going to exit business school with a much different skill-set than somebody who wants to do investment banking. The same goes for entrepreneurship.
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.
At some point, and it is happening already to a small degree, this problem will no longer exist. Top universities are catching onto the success of YC and will begin to offer programs of lesser magnitude, but similar intent. Once one of the big schools (Harvard, Stanford, etc) will declare victory then the rest of them will begin copying the model as well. I think places like the Stanford d school have some overtures in this direction, but they are not the final word. The bottom line is, the whole intention of an MBA is to credentialize businesspeople the way other professional degrees do (J.D.) etc. The conflict here is that startups are about near the exact opposite. Entrepreneurship is a recursive credential. You can only earn the title by doing the act itself, not some abstraction.
I notice the author mentioned "leave-behind Powerpoint decks." I had a short stint in consulting after getting my MBA, working with enterprise software clients. Within that job I've never once seen a Powerpoint deck that was useful after the fact unless you were in the room when the talk was given.
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.
Leave-behind decks are for when the deliverable is the deck. It can be a useful tool for the company because the content is conveying information that they need for whatever project their working on. While working for a consulting firm, I did a marketing analysis for a grocery chain--it was a 150 slide deck packed with data about each of their geographies. It's something they'll refer to hundreds of times in the future.
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.
Leave-behind decks are used in enterprise sales to allow your internal champion to present to their colleagues and superiors to go through whatever process is necessary to move the sales cycle forward. If you can give them the deck using their own corporate template you save them some time and they are more willing to advocate for you when you aren't onsite or in the meeting.
"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.
I'm so sick of these Ivy League MBA's lumping all MBA programs together in their inability to teach entrepreneurship. At Babson we were learning about the Timmon's model and how to be 'lean' on day one. Long before anyone had heard the name Eric Reis. And in case you're unaware, Babson has been ranked the number 1 business school for Entrepreneurship by US News for the last 17 years, when they started ranking.
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 am surprized. Where did the author get that MBA's are good at teaching entrepreneurship? Where does that expectation come from? I am have an MBA too and I was never told that MBAs are good at teaching entrepreneurship. Pick any blog and articles from real entrepreneurs and they'll confirm that you become one on the field, not in the books. I also disagree that MBAs make people suck up at startups. You may be talking about your personal experience, but it does not fit with mine. I am very happy to know what would have taken me 20 years to learn by myself. You don't need an MBA to become an entrepreneur, but it definitely helps...
This is only true if you go to a shitty school or don't apply yourself. There are some really good schools out there with exceptional programs in entrepreneurship.
I really enjoyed reading this. I've considered an MBA on and off for the past few years and I'm still leaning away from it. An MBA seems to serve a very specific function and I'm not sure if I want to be that person.
I wonder how this is at more entrepreneurial programs like Sloan.
At most schools, the majority of your class will be pushing in one direction, and that's generally towards consulting, banking, bigCo rotation programs, etc. It's what they're explicitly selling--preparation and access to these types of positions. If you don't want that, you should think very carefully about spending that much time and money. If you want to be an entrepreneur, do everything you can to get into YC or any of the other incubators. As many have noted, it's a far better startup prep course.
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.
Typically at a top-20 MBA school roughly 5-10% of graduates start businesses.
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 guess a similar situation happens to programmers who learn a new design pattern or programming paradigm and apply it to every situation, including when it's overkill.
[+] [-] dkokelley|16 years ago|reply
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.
[+] [-] sridharvembu|16 years ago|reply
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.
[+] [-] bradgessler|16 years ago|reply
[+] [-] Maro|16 years ago|reply
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.
[+] [-] ericboggs|16 years ago|reply
People tend to forget that top tier MBA grads are (usually) incredibly bright and productive professionals.
[+] [-] joshkaufman|16 years ago|reply
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.
[+] [-] anamax|16 years ago|reply
[+] [-] TheKid|16 years ago|reply
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.
[+] [-] brc|16 years ago|reply
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.
[+] [-] ryanhuff|16 years ago|reply
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.
[+] [-] ziadbc|16 years ago|reply
[+] [-] ben1040|16 years ago|reply
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.
[+] [-] jaf12duke|16 years ago|reply
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.
[+] [-] babar|16 years ago|reply
[+] [-] snowbird122|16 years ago|reply
An MBA is an education in business. That can't be a bad thing if you operate a business, large or small.
[+] [-] plinkplonk|16 years ago|reply
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.
[+] [-] ojbyrne|16 years ago|reply
I didn't go to a very good B school, but clearly it was a better one than Tuck.
[+] [-] durbin|16 years ago|reply
[+] [-] enjo|16 years ago|reply
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.
[+] [-] bryanh|16 years ago|reply
[+] [-] JVerstry|16 years ago|reply
[+] [-] maukdaddy|16 years ago|reply
[+] [-] tibbon|16 years ago|reply
I wonder how this is at more entrepreneurial programs like Sloan.
[+] [-] jaf12duke|16 years ago|reply
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.
[+] [-] ig1|16 years ago|reply
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.
[+] [-] lelele|16 years ago|reply
http://www.amazon.com/Managers-Not-MBAs-Management-Developme...
[+] [-] lelele|16 years ago|reply
[+] [-] known|16 years ago|reply
[+] [-] alexyim|16 years ago|reply
[+] [-] unknown|16 years ago|reply
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