Wall Street Journal: Why I Don’t Advise Startups to Hire M.B.A.s
I have no doubt that my M.B.A. from New York University’s Stern School of Business was one of the best investments I ever made. It helped me climb the corporate ladder and become an entrepreneur. As a tech executive, I would readily pay a premium to hire B-school graduates. I also used to advise tech startups to strengthen their management teams by recruiting professional managers from M.B.A. programs.
I no longer advise startups to hire M.B.A.s and I discourage students who want to become entrepreneurs from doing an M.B.A.
That’s because I have seen a growing mismatch between the skills that business schools teach and what fast-paced startups require. And corporate management isn’t the best path to entrepreneurship anymore—the best way is to work for a startup.
Most business schools are geared toward churning out investment bankers and management consultants. That is who they put on the pedestal. In his new book, “Turnaround: Third World Lessons for First World Growth,” the dean of my alma mater, Peter Blair Henry, goes as far as to prescribe that countries measure their success “through the lens of their stock exchanges.” This is the same lens that business schools use to measure the success of their students.
Indeed, by offering ridiculously high salaries, companies like Goldman Sachs and McKinsey always get the top pick of the graduating M.B.A. crop. M.B.A.s who don’t get the plum jobs sometimes feel like they had to settle for less when joining a startup. They start their careers with inflated perceptions of their skill and value. And then they undergo a harsh period of adjustment from the elite world of business schools to the rough-and-tumble world of startups.
I have seen this far too often.
Is it the business-school curriculum that creates the mismatch? No, not at all. Subjects like management, marketing, law and accounting are still as important as they ever were. My M.B.A. allowed me to transition from being a programmer to a project leader and then a vice president. I found that I could communicate effectively with user departments and my bosses; I could deliver projects on time; I knew how to manage and motivate employees; and I had the confidence to present business proposals to managing directors and board members. When I became an entrepreneur, I had the knowledge to develop and manage budgets, market products and review legal contracts.
There was a time, not long ago, when big companies were the keys to the nation’s economic growth and competitiveness. Big research labs produced almost all of the cutting-edge innovation. Now, the cost of developing world-changing technologies has dropped exponentially. Startups can out-innovate the big players. And as the Kauffman Foundation documented, all of the net job growth in the U.S. comes from startups. Startups invent some of today’s most innovative products, create new business models and disrupt industries. So, the people that business schools should be putting on the pedestal are the entrepreneurs, not the bankers.
To be fair, business schools do have entrepreneurship clubs and some have rock-star entrepreneurs such as Steve Blank and Eric Ries as visiting faculty. The majority of these schools, however, still teach students how to write old-fashioned business plans to be pitched to venture capitalists. These plans are based on market research and make lofty financial projections based on five-year product plans. This is how tech companies were started in the past, when technologies changed slowly and business models stayed constant. Today, it is all about starting small and experimenting. Business plans get outdated rapidly and market research is no substitute for prototype and user testing. The focus on venture capital is also misguided. VCs rarely fund infant startups—it is angel investors, friends and family who provide the outside seed funding. So even when trying to teach entrepreneurship, business schools get the basics wrong.
Instead of M.B.A.s, what I advise students with technology backgrounds to complete are one-year long masters of engineering-management programs like the one at Duke University—where I teach. These teach management, marketing, law and accounting skills and skim over the intricacies of finance and investment banking. And they are half the price of an M.B.A. After all, the skills that startups care about aren’t how to conceive new types of financial products, but how to create technologies that actually do good for the world.