Beware of MBAs! The business school curriculum teaches how to suck at startups

I have an MBA from Dartmouth's Tuck School of Business.  It was some of the best experiences of my life.  I met fabulous friends, learned from incredible professors, and developed in many important my ways.  My entrepreneurship professor, Gregg Fairbrothers, is one of my all-time favorite teachers and he taught me a lot about doing start-ups right.  The professors and administrators at Tuck never claimed they were teaching me how to run a startup.  In fact, they were explicitly teaching general management curriculum to be applied towards larger businesses.

 

The problem that I see a lot now that I've been in startup land for 4 years is that too many MBAs think that their education in business can be applied directly to startups.  They forget that startups are not a smaller version of a larger company.  Applying a set of frameworks designed for success with larger companies is a good way to guarantee failure when dealing with start-ups.  Professors like Gregg Fairbrothers preach this all the time.  Yet, I still get calls regularly from MBA friends ready to do their first start-up, believing that their MBA education will give them the right tools.

 

The reality is, we MBAs come with a lot of baggage.  A good way to understand why MBAs are damaged goods for startups is to understand the actual curriculum.  


 Here are standard core courses at any business school: 


Strategy: 

 This is the most dangerous of all MBA courses.  In this course, you learn high level analysis, using the 3 C's, the 4 P's, and, of course, Porter's Five Forces.  So, on a typical day, you read a 15-page case on a company's mistakes and then apply one of these frameworks to think through how you would have done it differently.  Doesn't sound so bad right??  Wrong!  This is all high-level business strategy for larger companies.  For a start-up, no one ever knows what will work and what won't.  That's why there's such a focus on iteration in the lean startup methodology.  Great startups figure out what to do by building really fast, listening to customers, and iterating.  More like guess and check.  An MBA, fresh out of a Strategy course, will try to figure out everything on a white board, naively believing that they can think their way out of mistakes.

 

Accounting: 

In accounting class, you study the annual reports of big companies and learn about gross margin, cash flow statements, balance sheets.  You learn that assets=liabilities + equity and how to convert LIFO to FIFO.  This is all really, really useful if you have warehouse full of stuff and customers that pay on credit.  Pre-revenue start-ups usually have no Cost of Goods Sold, no revenue, none of that.  The only accounting you need is to know how many users are out there, how much it costs to acquire a user, and how much money you'll have from that user.  That and a shoebox to store your receipts until you're ready to pay someone to type them in and do your taxes for you.  An MBA will way-over complicate things with talk of deferred taxes, accrual basis, yada yada--and they forget that their gorgeous, complex set of spreadsheets fails the most basic axiom of all analysis: garbage in, garbage out.

 

Organizational Behavior:

OB was one of my favorite classes.  I would love to have a company big enough someday to implement some of the stuff on building great structure.  For startups with less than 10 people, all that stuff is irrelevant.  No one in OB tells you to let your top hacker work whenever or wherever he wants or that status meetings are best done standing up or that people are motivated more by technical challenge then by compensation.  To be fair, when you're startup gets big enough (over ~20 people), it rocks to have an MBA come in and start to implement structure just as it's really needed.  Too much structure before that gets in the way of the magic.

 

Corporate Finance, Financial Markets, Statistics:

Not really sure how these apply to the startup world.  Once I exit for millions of dollars and need to figure out where to put my big pile of cash, they may become more useful.  Our 8 person company doesn't worry about the optimal debt to equity level or whether we should be doing any currency hedges.  Corporate finance for the start-up is best served by reading Signals vs Noise to understand the dangers of raising money and following Venture Hacks to learn the tricks of working with Venture Capitalists.  MBAs will generally know how to read WalMart's annual report but will be lost in the complexities of a cap table.

 

Management Communication:

This is the most painful to include.  Management Communication teaches how to develop awesome powerpoint presentations.  It's actually a very useful skill and, if you're a consultant for a top tier firm, learning how to put together a perfect leave-behind-deck is invaluable.  For a start-up, you want your presenter to internalize Guy Kawasaki's 10-20-30 rule.  You want your decks feeling like a Steve Jobs presentation.  It's about selling a vision, not presenting analysis.  MBA start-up decks always have way too much text, boxes, and arrows.

 

 

___

 

 

 

 

Perhaps the most difficult part lies in the underlying motivation of why people get MBAs.  Any MBA will tell you that it wasn't the academics that drove them to their master's degree.  Unlike almost every other master's field, in which mastering the content is of primary concern, MBAs usually blow off classes after the first semester (especially at the top schools).  Most people get an MBA because of the network.  They have learned that having a group of successful friends will open doors for you.  Pedigree from a top school=better opportunities for success.

 

For start-ups, only one thing matters.  Can you build something that people want.  Your pedigree is exactly worthless compared to this simple ability to execute.  And for an MBA that just spent 3 years (remember, the application process takes a year!) and over $120,000 building a network, it's really difficult to hear that the network and the education are no longer as big of an asset as you had hoped.

 

Find discussion of this post on Hacker News

******************
I'm Jason Freedman.  I co-founded FlightCaster.  
I would be remiss not to recommend the following opportunity: @JasonFreedman.
Don't be shy.  You can send me a Linkedin request or become my bff on Facebook.

 

 

Oh crap, not another startup blog...4 Reasons not to read my new blog

Reason #1: You have better things to be doing with your time.
This is 100% true.  You should be doing better things.  If you're here because you're interested in entrepreneurship, you should just get back to building your company.  Reading this blog won't get you customers, won't get your employees hired, won't write new code.  If you're not working on a start-up, go for a run or spend more time with your friends or family--just don't waste your time with yet another blog!

Reason #2: You have better places to get advice
Also 100% true.  I recommend you start with Paul Graham, Brad Feld, Fred Wilson, Mark Suster, Guy Kawasaki, Venture Hacks, and a daily check-in at Hacker News,  Once you've read those, you really should be well prepared to start your company--see Reason #1.

Reason #3: You shouldn't trust my advice
Duh.  I haven't sold a company (yet).  I've been wrong on most things before.  I'll probably be wrong on most of this stuff as well.

Reason #4: You shouldn't listen to 
hypocrites
I'm a hypocrite.  I got an MBA and am now writing a blog in which I talk about why MBAs are so bad at running start-ups.  Wow, hypocrisy all over the place!  I'm not even claiming humility!

 
you were warned.

First 4 Posts
I pre-wrote the first few blog posts--Here's what you can look forward to in the next few days:
    • Beware of MBAs! The MBA curriculum teaches startup failure
    • Why humility is inversely correlated with MBAs
    • Dear MBAs, here's how not to ask for an internship
    • Spend $485. Put an end to Delayed Sleep Phase Syndrome and other types of insomnia.
    First 4 Themes
    I've tried to pick up a few themes that would be helpful.  Like any agile process, it's only a rough draft...but here are the first thoughts
      • Dear MBAs
      • Y Combinator
      • FlightCaster
      • LIfe Hacks

      I started preparing for this blog by randomly listing 50 or so blog posts I'd like to write.  My favorite theme that emerged is the Dear MBAs theme.  The title of my blog came about after realizing just how often I get contacted from MBAs that haven't been humbled yet--and their lack of humility is one of their biggest character flaws when it comes to working on start-ups.  I'm not anti-MBA and I loved my Tuck exerpience, but I do believe an MBA without humility is worse than no degree at all.  There are some great examples of MBAs learning to run great startups--they all seem to talk about this humility theme along the way.  

      The Y Combinator theme is a no-brainer.  One of the easiest services I can do for my readers is help them understand what it's like and what it takes to get in.  Along those lines, I'll share our overall experiences fundraising as well.

      The FlightCaster theme is also a no-brainer.  Yes, that means this is yet another, let-me-tell-you-about-my-startup...blog.  I promise to try to make it all useful stuff.  There are a lot of things we did well and not so well--I'll share them both.

      The Fighting Insomnia post is part of a larger Life-Hacker style theme.  Entrepreneurs are often afflicted by similar 'ailments'  Get a group of successful entrepreneurs in the room, and you'll find all spectrums of OCD, manic-depression, ADHD, social anxiety, fear of structure, insomnia and more.  I seem to have all of these working against me  at one time or another (or for me depending on the perspective).  I also buy just about every gadget out there for addressing them.  I'll share what works and what doesn't.

      These four themes were the easiest to quickly brainstorm.  Any requests?  What else are you interested in?

      ******************
      I'm Jason Freedman.  I co-founded FlightCaster.  
      I would be remiss not to recommend the following opportunity: @JasonFreedman.
      Don't be shy.  You can send me a Linkedin request or become my bff on Facebook.