This was a nice read!
THE FIVE C’S
My advice to people thinking about getting an MBA is to think about the five C’s. Three are on one side of the equation and the other two are on the other.
What you gain:
1. Curriculum — For me this is the most overrated of the reasons to go. Okay, so maybe you never took statistics, microeconomics or macroeconomics. They are all great for general knowledge but not immediately applicable to your role in a start-up. What about strategy? Do you really think Porter’s Five Forces is going to help you figure out what feature set to launch or how to price your product?
Marketing? You’d get a lot more experience from reading about marketing online or in books and then testing out the concepts for yourself. Many MBAs took marketing courses but have never been on the front line of A/B testing, email campaigns or PR initiatives.
My wife just pointed out to me that learning about the time value of money or how to value a company is something that every non-business undergrad should learn how to do. I agree. I’m not saying that the curriculum isn’t useful or valuable — I believe it is hugely important. But I believe much of it can be learned from reading great books, reading online and testing out the principles yourself.
If you had a non-business undergrad and want to study for a master’s in business — go for it! I’m sure it will be fun and informative. I’m just saying that it’s not required.
2. Certificate — Let’s face it — many people get MBA’s because they think it’s expected. If you look at the website of any major VC you’ll see it plastered with MBAs from Stanford, Harvard or Wharton. So the message that is inferred is that you need a certificate from a top notch MBA program to get in. Well … you might be right on this one.
But there are plenty of partners and successful entrepreneurs who don’t have MBAs. To list a few: Bill Gates, Steve Jobs, Larry Ellison, Marc Benioff, Larry Page, Sergey Brin, Steve Ballmer. I know that many do have MBAs but my point is that it isn’t necessary.
3. Colleagues — For young people who ask me for advice on whether to get an MBA this is the ‘C’ that I emphasize the most. I tell people that if you’re going to go to a top school then the people that you’ll be friends with there will be lifetime friends. And if you go to a top school then no doubt your peer group will all end up 15 years later as senior “captains of industry.” So for me the most compelling reason to go is the network of friendships you’ll form and the importance of this as part of your future network.
I also tell people that if they do go to make sure that they don’t spend all of their free time trying to graduate top of their class. I tell them not to be so entrenched in working on their start-up ideas that they don’t build deep, meaningful relationships with their peer group. Don’t forget that long after you forget the CAPM pricing model, how to do regression analysis or how to calculate NPV without a spreadsheet — your network should endure.
What you lose:
4. Cost — The biggest reason to give serious consideration to whether an MBA is necessary is the cost. Not only will the best program set you back $100,000+++ (much more when you add in books, accommodation, travel, etc) but you also have to calculate in 2 years of lost wages.
The Economist magazine did a study in the late 90’s on the ROI of an MBA (maybe somebody can help me surface it?). From memory I believe that their study showed only 2 MBA programs had a positive ROI (Harvard and University of Chicago). They looked at total cost to the student and lost wages and then they plotted the incremental increases in salary that students who graduated got over the course of their careers. The carve-outs were people who got executive MBAs (e.g. no lost wages) or whose companies sponsored them.
Again, to be redundant — I’m not saying “don’t go.” I’m just saying be aware of the reasons you’re going (e.g. the first three C’s) be knowledgeable about the cost C and be sure in your mind it’s worth it to you for other tangible or intangible reasons.
5. Continuity — The other C factor to consider is continuity. If you want to work in start-ups or VC — what experience could you gain in those 2 MBA years if you had stayed at your start-up? What if you talked to your CEO and told him/her that you were considering an MBA but would prefer to work for the company. Ask if they’d be willing to let you rotate a bit around the company to gain new experiences? Ask if you could shadow different functions like marketing, finance or product management. Would you gain more from that than an MBA?
Closing thoughts:
Before I get shot by every professor or MBA graduate let me set the record straight. I am a very big believer in education and especially higher education. I think that the knowledge gained on an MBA is useful. I do wish that more professors were forced to work in companies to gain real world experience that they could pass on to their students. I do find it strange that the most valuable skill for any employee in any company isn’t emphasized AT ALL in my experience: sales.
Sales is the lifeblood of every organization. It’s how we move products. It pays for all of our great engineers. It fuels our bonus payments, our quarterly earnings, our growth rate, our value at acquisition time. If I were 27 again and working at a start-up and was considering getting an MBA, I think I’d go to my boss and ask if I could spend a year in sales, 6 months in product management or marketing and 6 months in finance. I’d keep my personal balance sheet positive and my future options open. It’s hard to start companies and take risks when you’re $150,000 in debt.
Okay, now you can shoot me. Have at it in the comments section below. Let’s get the arguments from the other side of the table.