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4 Reasons an MBA Is Bad for Entrepreneurs
By John Warrillow | March 3, 2011
I don’t think entrepreneurship can be taught.
In fact, the list of entrepreneurs who dropped out of school reads like a who’s who of company builders: Bill Gates, Richard Branson, Larry Ellison, Paul Allen (Microsoft), Sean Parker (Napster, Facebook), Walt Disney, Mary Kay Ash (Mary K), Coco Chanel (Chanel), Barry Diller, Simon Cowell, Michael Dell, Henry Ford and Steve Jobs are just a few of the Spicoli-esque educated.
I think not only is getting an MBA a waste of money and two years of your life; it may also, in fact, reduce your chances of building a successful business. Here are four reasons why:
1. MBA programs teach causal reasoning
One of the most compelling pieces of evidence that an MBA is a poor investment for aspiring company builders comes, ironically, from one of the institutions that would benefit most if aspiring entrepreneurs got a degree in business. Prof. Saras Sarasvathy, a researcher at the University of Virginia’s Darden School of Business recently completed a study in which she compared 45 super-entrepreneurs (all had at least 15 years’ experience, had started at least four companies and had taken one public) with a group of equally successful big-company CEOs. One of her key findings was the difference between how entrepreneurs and big-company execs approach planning for the future.
Sarasvathy found that the corporate types (many of whom have MBAs) in her study use “causal reasoning,” which means they tend to set goals and systematically develop plans for reaching them. That is, they start with the goal and then figure out how to get there.
Super-entrepreneurs (few of whom have an MBA) use what Sarasvathy calls “effectual reasoning,” which means they start by assessing the resources they have at their disposal and then ask themselves what can be created. “They are less like gamblers,” explains Sarasvathy in an attempt to bust one of the common myths about entrepreneurs, “and more like an Iron Chef who has the skills to bring together readily available ingredients, whether mundane or exotic, in delicious ways that make us want to pay more for a taste of the end product.”
Sarasvathy found the people who displayed causal reasoning in her study were much more likely to be working for a big company after receiving their MBA.
2. MBA programs teach adaptive thinking
In another academic study, Dr. Michael Kirton found that people can be categorized into two groups based on their approach to creativity:
“Adaptors” are those people who prefer to take others’ ideas and improve them. These people are fairly cautious and pragmatic. They prefer incremental innovation. Their motto is to do things better.
“Innovators” are those people who prefer to find new ideas by sometimes overturning concepts or industry models. These people challenge others and can be risky and difficult to work with. They are into “big bang” innovation. Their motto is to do things differently.
The Kirton Adaption-Innovation model plots people on a continuum between Adaptor (bank employees typically score high on adaptive behavior) and Innovator. High-growth entrepreneurs are off-the-chart Innovators.
By their nature, entrepreneurs look to overturn concepts and rigid industry models, the very things that MBA schools teach. In fact, spend too much time learning the “right” answers at school, and your intuition to experiment will dull. Like sausage factories, MBA programs churn out management consultants and bankers who know the rules, not entrepreneurs who invent them.
3. Your fellow classmates will not be entrepreneurs
Even the MBA entrance criteria themselves act as a barrier for truly entrepreneurial people to get in. Top-tier MBA programs typically accept excellent students from top-tier undergraduate schools. Getting into a top-20 undergrad program is easier when you’ve gone to the “right” private high school. Getting into the right private school, likewise, usually requires having attended an elite primary school. Most kids in the top prep schools have keen parents who believe strongly in the importance of a formal education. Not surprisingly, many of these parents are bankers, consultants, and lawyers.
Enroll in an MBA program at a top school, and you’ll be around a group of people who have been taught from an early age to do as they are told. In fact, they have succeeded because they are very good at being right.
Ask 10 successful entrepreneurs what they were doing in school, and most will tell you about a little money-making venture they had going on the side. They probably did well enough at school to keep their parents off their backs, but I’m betting they were not accepting the awards for most gifted student. They were too busy hawking and peddling their way to some extra pocket money and learning the skills they needed to survive in the world of company building.
In a tier-one MBA program, your peers will have gotten to the top of their class by answering the question correctly, not by examining the efficacy of the question itself. By the time these model citizens have put the finishing touches on their pristine educational credentials, every ounce of creativity has been replaced by pounds of correctness.
4. Don’t waste 40% of your “risk-free” years in a classroom
Although there are, of course, exceptions, the average person who considers getting an MBA is between the ages of 25 and 30. Having long since passed those years myself, I can say with confidence that the late 20s is an all-too-short five-year period when most people are yet without serious attachments. Kids, orthodontist bills, and a mortgage are typically all still in the future.
And this means it is the perfect time to pour yourself into starting a business. You have more energy and optimism at this age than at any other time in your life, and at the exact same time, you can afford to take a financial risk or go without a paycheck for a year or two. Trust me when I say those 60 glorious months truly present a once-in-a-lifetime opportunity. Your last five years as a 20-something are a finite resource not to be wasted in a classroom. These risk-free years are the time to try things, make mistakes and learn from them. Waste them on an MBA, and by the time you get out, the pressure of paying the bill for the new initials beside your name, combined with kids, a mortgage and all of the responsibilities of adulthood, will make taking a steady job look much more appealing than starting up a company.
If you want to be the next Branson, Gates, or Jobs, an MBA is not a necessity. In fact, I think it may do more harm than good.
By John Warrillow | March 3, 2011
I don’t think entrepreneurship can be taught.
In fact, the list of entrepreneurs who dropped out of school reads like a who’s who of company builders: Bill Gates, Richard Branson, Larry Ellison, Paul Allen (Microsoft), Sean Parker (Napster, Facebook), Walt Disney, Mary Kay Ash (Mary K), Coco Chanel (Chanel), Barry Diller, Simon Cowell, Michael Dell, Henry Ford and Steve Jobs are just a few of the Spicoli-esque educated.
I think not only is getting an MBA a waste of money and two years of your life; it may also, in fact, reduce your chances of building a successful business. Here are four reasons why:
1. MBA programs teach causal reasoning
One of the most compelling pieces of evidence that an MBA is a poor investment for aspiring company builders comes, ironically, from one of the institutions that would benefit most if aspiring entrepreneurs got a degree in business. Prof. Saras Sarasvathy, a researcher at the University of Virginia’s Darden School of Business recently completed a study in which she compared 45 super-entrepreneurs (all had at least 15 years’ experience, had started at least four companies and had taken one public) with a group of equally successful big-company CEOs. One of her key findings was the difference between how entrepreneurs and big-company execs approach planning for the future.
Sarasvathy found that the corporate types (many of whom have MBAs) in her study use “causal reasoning,” which means they tend to set goals and systematically develop plans for reaching them. That is, they start with the goal and then figure out how to get there.
Super-entrepreneurs (few of whom have an MBA) use what Sarasvathy calls “effectual reasoning,” which means they start by assessing the resources they have at their disposal and then ask themselves what can be created. “They are less like gamblers,” explains Sarasvathy in an attempt to bust one of the common myths about entrepreneurs, “and more like an Iron Chef who has the skills to bring together readily available ingredients, whether mundane or exotic, in delicious ways that make us want to pay more for a taste of the end product.”
Sarasvathy found the people who displayed causal reasoning in her study were much more likely to be working for a big company after receiving their MBA.
2. MBA programs teach adaptive thinking
In another academic study, Dr. Michael Kirton found that people can be categorized into two groups based on their approach to creativity:
“Adaptors” are those people who prefer to take others’ ideas and improve them. These people are fairly cautious and pragmatic. They prefer incremental innovation. Their motto is to do things better.
“Innovators” are those people who prefer to find new ideas by sometimes overturning concepts or industry models. These people challenge others and can be risky and difficult to work with. They are into “big bang” innovation. Their motto is to do things differently.
The Kirton Adaption-Innovation model plots people on a continuum between Adaptor (bank employees typically score high on adaptive behavior) and Innovator. High-growth entrepreneurs are off-the-chart Innovators.
By their nature, entrepreneurs look to overturn concepts and rigid industry models, the very things that MBA schools teach. In fact, spend too much time learning the “right” answers at school, and your intuition to experiment will dull. Like sausage factories, MBA programs churn out management consultants and bankers who know the rules, not entrepreneurs who invent them.
3. Your fellow classmates will not be entrepreneurs
Even the MBA entrance criteria themselves act as a barrier for truly entrepreneurial people to get in. Top-tier MBA programs typically accept excellent students from top-tier undergraduate schools. Getting into a top-20 undergrad program is easier when you’ve gone to the “right” private high school. Getting into the right private school, likewise, usually requires having attended an elite primary school. Most kids in the top prep schools have keen parents who believe strongly in the importance of a formal education. Not surprisingly, many of these parents are bankers, consultants, and lawyers.
Enroll in an MBA program at a top school, and you’ll be around a group of people who have been taught from an early age to do as they are told. In fact, they have succeeded because they are very good at being right.
Ask 10 successful entrepreneurs what they were doing in school, and most will tell you about a little money-making venture they had going on the side. They probably did well enough at school to keep their parents off their backs, but I’m betting they were not accepting the awards for most gifted student. They were too busy hawking and peddling their way to some extra pocket money and learning the skills they needed to survive in the world of company building.
In a tier-one MBA program, your peers will have gotten to the top of their class by answering the question correctly, not by examining the efficacy of the question itself. By the time these model citizens have put the finishing touches on their pristine educational credentials, every ounce of creativity has been replaced by pounds of correctness.
4. Don’t waste 40% of your “risk-free” years in a classroom
Although there are, of course, exceptions, the average person who considers getting an MBA is between the ages of 25 and 30. Having long since passed those years myself, I can say with confidence that the late 20s is an all-too-short five-year period when most people are yet without serious attachments. Kids, orthodontist bills, and a mortgage are typically all still in the future.
And this means it is the perfect time to pour yourself into starting a business. You have more energy and optimism at this age than at any other time in your life, and at the exact same time, you can afford to take a financial risk or go without a paycheck for a year or two. Trust me when I say those 60 glorious months truly present a once-in-a-lifetime opportunity. Your last five years as a 20-something are a finite resource not to be wasted in a classroom. These risk-free years are the time to try things, make mistakes and learn from them. Waste them on an MBA, and by the time you get out, the pressure of paying the bill for the new initials beside your name, combined with kids, a mortgage and all of the responsibilities of adulthood, will make taking a steady job look much more appealing than starting up a company.
If you want to be the next Branson, Gates, or Jobs, an MBA is not a necessity. In fact, I think it may do more harm than good.
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