

Elite MBAs and Wealth - apsec112

"If you work your way down the Forbes 400 making an x next to the name of each person with an MBA, you'll learn something important about business school. After Warren Buffett, you don't hit another MBA till number 22, Phil Knight, the CEO of Nike. There are only 5 MBAs in the top 50. What you notice in the Forbes 400 are a lot of people with technical backgrounds. Bill Gates, Steve Jobs, Larry Ellison, Michael Dell, Jeff Bezos, Gordon Moore. The rulers of the technology business tend to come from technology, not business. So if you want to invest two years in something that will help you succeed in business, the evidence suggests you'd do better to learn how to hack than get an MBA." - http://www.paulgraham.com/start.html<p>I will argue that this is, nowadays, complete nonsense. It might well have been true if you were born early enough to start a company during the dot-com bubble, like Paul Graham was. But it is definitely no longer true.<p>If you look at the list of the top 50 wealthiest people in America (http://en.wikipedia.org/wiki/List_of_members_of_the_Forbes_400), you will indeed find a lot of technical people there. However, trying to succeed in the industry that has <i>just made</i> a whole bunch of people billionaires can be a sucker's game, because whatever market inefficiency those people exploited is probably gone by the time all of those people got rich enough for you to hear about them. It can be like trying to get rich off of real estate in 2008, or trying to get rich off of gold in 1981. Markets are anti-inductive (see http://lesswrong.com/lw/yv/markets_are_antiinductive/).<p>What you really want to look at is what things are causing people to <i>become</i> successful, right at this moment. How does technology stack up? Here is the list of the top 20 most visited websites in the US: http://www.alexa.com/topsites/countries/US. Of the ones that were founded after the Bubble:<p>- Facebook appears to be the only one which will give the founders a decent shot at becoming billionaires.<p>- YouTube was bought by Google for $1.6 billion- a nice amount, to be sure, but that's only a few hundred million per founder, not the billions that earlier founders got.<p>- Wikipedia is, of course, a nonprofit.<p>- Blogger was acquired by Google. The amount was undisclosed, but it was probably in the low-mid tens of millions range, a (comparative) pittance.<p>- MySpace was bought by Rupert Murdoch for $580 million, again leaving only a hundred million or so per founder.<p>- Twitter is an interesting case, but the large percentage of their users that are inactive makes me believe pretty strongly that they'll either burn out or sell out for a relatively low amount. I'd bet on that, if there's any way for me to short Twitter stock.<p>- LinkedIn has a fairly stable valuation of around $1B, again leaving a few hundred million per founder.<p>So, for whatever reason, the mechanism that allowed so many people to become billionaires by starting companies during the dot-com bubble and earlier appears to be mostly gone. On the other hand, there are few indications that an elite MBA is losing its value, because it's not tied to any one industry: if the coal industry or the drug industry or the computer industry went bust tomorrow, an MBA would still be a valuable asset. There are, as of now (2010), seven people with MBAs in the top 50 richest people in America. It is also important to consider that, out of those 50, 18 simply inherited their wealth; any idiot can become a billionaire by inheriting a billion dollars. So, out of the self-made billionaires, 7 out of 32, or 22%, have MBAs from a top business school. Those aren't bad odds.<p>Of course, there are matters to consider other than pure pursuit of the largest number of dollars. At a certain point, after all, having more money won't really improve your standard of living. A hundred million dollars should be enough to maintain any reasonable lifestyle. And there are certainly people here who would be very happy writing computer software and unhappy taking business classes.<p>So, what about becoming a "mere" centimillionaire? Well, I must admit that I don't have hard data here, but I suspect that you'll also do better trying to make a hundred million in startups by focusing on skills other than hacking. The reason is simple: the idea of Silicon Valley has spread so far that it's now seen as <i>the</i> way for technology people to get rich. Hence, the industry is flooded with technology people. So, if there's type of startup 1), which focuses more on pure technical skill, and type of startup 2), which focuses more on social skills and deal-making ability, it's probably going to be a lot harder to make money doing type of startup 1), because there's so much more competition. Hence, the most successful people tend to be people like Sam Altman, who is a good programmer, but who also does "businessy" things that a lot of hackers wouldn't like, like doing deals with cell phone company executives.
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dsplittgerber
What exactly are you arguing for here? MBAs are certainly still a great
investment for certain types of careers. If you want to seriously invest your
life into consulting/investment banking (advisory and relationship
side)/climbing the corpoate ladder, go for it (at one of the Top 10-20
schools, otherwise it's just a total waste). It's all about jumping through
the hoops for the rest of your life then. And you will most probably get rich
- speaking some million dollars here. There is an absolutely low probability
of hitting it really big. You would have to start your own company/fund
whatever for that, and most MBAs just don't ever do that. It's for the risk
averse, mostly.

If you ever want to hit it really big, in the dozens or hundreds of millions,
there is no other way than working for yourself and swinging for the fences.
Silicon Valley or Hedge Fund, it's basically the same idea: Doubling down with
everything you have and going for the extremely unlikely chance that you will
be the one-in-a-million guy who gets the billion dollar payout.

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plinkplonk
": the idea of Silicon Valley has spread so far that it's now seen as the way
for technology people to get rich. Hence, the industry is flooded with
technology people. So, if there's type of startup 1), which focuses more on
pure technical skill, and type of startup 2), which focuses more on social
skills and deal-making ability, it's probably going to be a lot harder to make
money doing type of startup 1), because there's so much more competition.
Hence, the most successful people tend to be people like Sam Altman, who is a
good programmer, but who also does "businessy" things that a lot of hackers
wouldn't like, like doing deals with cell phone company executives."

All of which has nothing to do with an elite MBA. Does Sam Altman have an
elite MBA? let's check

From Wikipedia

"Loopt was founded during Altman's sophomore year at Stanford University[2]
where he studied computer science with a focus on security and machine
learning. He helped build an autonomous helicopter navigation system."

Doesn't look like he was one of the people who would be happy taking business
classes. Skills other than hacking may indeed be the future of becoming an X
millionaire, but these hardly correlate to having "elite MBA" s which was what
the first portion of your post was about (not to mention the title).

You ask, "What you really want to look at is what things are causing people to
become successful, right at this moment. How does technology stack up?"

Better than having and "elite MBA" The ability to write code _and understand
customers_ , much more so than having an "elite mba".

An "elite mba" probably helps you become a business consultant or something
corporat-ey more than become an entrepreneur building multi million dollar
startups, which was the point of the portion of PG's essay you extracted. You
set out to debunk it and didn't do so at all.

~~~
apsec112
"All of which has nothing to do with an elite MBA. Does Sam Altman have an
elite MBA?"

Of course not. What I was saying was: suppose you accept that an MBA is more
likely to make you a billionaire than going into technology startups, but you
don't want to get an MBA because you wouldn't like it, and you're fine with
the comparatively lower returns in the startup industry. In which case, I
argue that you still shouldn't focus on programming _skills_ (which was Paul
Graham's suggestion), because other skills will probably help you more. This
does assume that you are already a good programmer to begin with.

"The answer is still, the ability to write code and understand customers, much
more so than having an "elite mba". An "elite mba" probably helps you become a
business consultant or something corporatey."

I was talking about the world in general, not just the startup world. Being a
partner at a management consulting firm and making seven figures is
"successful" by most people's standards.

"become an entrepreneur building multi million dollar startups, which was the
point of the portion of PG's essay you extracted. You set out to debunk it and
didn't do so at all."

No, it wasn't. Paul Graham was making a point about _being successful in
general_ , not just _being successful in startups_. Read the quote:

"So if you want to invest two years in something that will help you succeed in
business, the evidence suggests you'd do better to learn how to hack than get
an MBA."

He's talking about _business in general_ , not just startups, which is why he
talks about MBA prevalence among all billionaires, not just those that made
their fortune in startups. I agree that getting an MBA will help you very
little in the startup world, but both me and PG agree on that.

~~~
plinkplonk
"I argue that you still shouldn't focus on programming skills (which was Paul
Graham's suggestion), because other skills will probably help you more. "

You don't have much of an argument yet. You are just stating this as a
conclusion and it still has nothing to do with the title of your post ("elite
mba") and neither does it debunk PG's point (learn to hack _as opposed to_
trying for an elite MBA)

~~~
apsec112
I was making a related point that I thought was interesting, not a direct
rebuttal of PG's statement. I was rebutting the related claim "if you choose
not to get an MBA and go into the startup industry, you should focus on
improving your programming skill, even if you're already a pretty good
programmer".

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cowmoo
I think your analysis is correct despite of all the self-congratulations that
goes on here on Hacker News.

A couple caveats though; I think your definition of technology is too narrow,
Web 2.0 is only one segment. The smartest people have moved on from IT which
has already matured, and are working on green tech and genetic therapy where
supposedly the next break through will come.

Also, even in software since money seems to be the biggest concern to you,
consumer-centric software isn't where the money is made - it's just what
appeals to be the most sexy to the young & naive. High frequency trading,
e-discovery, medical informatics, Sarbones-Oxley compliance modules - there
are tons of enterprise software companies in those fields make revenue more
than most of the Web 2.0 startup's you listed.

Finally, I don't think what motivates programmers aren't necessarily the same
that motivates a business-person. The best way I can describe this is by the
musician and A&R example; there are some musician's who want to make it big
and appeal to as many people as they can (i.e., Linkin Park), there are those
complementary record labels who can help popular musicians by handling the
business side and tailor their records to the focus groups. But there are also
those musician's who care more about pushing than envelope than selling
records, and if they are successful, like the early black blues & jazz
musician's in the 40's and 30's, their influence will get heard in the 60's
and 70's (ripped off by white musicians). Most people in IT operates on this
sliding scale between craftsmen and A&R as well.

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Alex3917
Learn business. Don't get an MBA. Don't plan your life by trying to
extrapolate from the Forbes 400.

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revorad
If you are looking for a way to get filthy rich, read Felix Dennis -
<http://sivers.org/book/HowToGetRich>.

In the context of your post, the key is hiring the best hackers. The problem
is that it seems identifying good hackers is hard. You have to be one
yourself! (<http://www.paulgraham.com/gh.html>)

But I suspect you could hire pretty good hackers, if not the best. Most people
want the safety and comfort of a job, not wealth.

In Dennis's words:

 _Talent is indispensable, although it is always replaceable. Just remember
the simple rules concerning talent : identify it, hire it, nurture it, reward
it, protect it. And, when the time comes, fire it._

As you will have noticed, this is also a recipe to be a douchebag. But you
will be one rich douchebag.

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silverlake
Are you measuring the value of an MBA by the odds of becoming a billionaire
(or even >$100M)? People achieve that level of success without regards to
their education. Hard work, luck, tenacity, luck and connections are more
important. I considered getting an MBA from a top 10 school. Basically, it
offers the easiest path and best odds of earning $200+K/year and more
flexibility in terms of careers (tech management, consulting, banking, etc.).
Being a lawyer is grueling and boring, a doctor is grueling and takes a long
time, and a tech entrepreneur is a crap shoot. I ended up in the tech path
because I enjoy it and I don't care too much about money.

~~~
apsec112
"Are you measuring the value of an MBA by the odds of becoming a billionaire
(or even >$100M)?"

I admit that it's a quick-and-dirty metric, but that applies to PG's argument
as well as mine.

"People achieve that level of success without regards to their education."

 _Some_ do, but the point is that education _helps_. Consider this list:

"One of the best ways to become a self-made billionaire is to attend an Ivy
League school. 16 of the 52 self-made billionaires have Ivy League educations:

Warren Buffett, Columbia Bill Gates, Havard Carl Ichan, Princeton John Werner
Kluge, Columbia Edward Crosby Johnson, III, Harvard Sumner Redstone (Viacom),
Harvard Charles Bartlett Johnson, Yale Edward Lampert, Yale Steve Ballmer,
Harvard Geroge B. Kaiser, Harvard Leonard Blavatnik, Columbia, Harvard Ronald
Owen Perelman, Penn Michael Bloomberg, Havard Stephen Schwarzman, Yale,
Harvard Eric Schmidt (Google), Princeton Jeff Bezos, Princeton

An additional six billionaires have near-Ivy quality education:

Sergey Brin, Stanford Larry Page, Stanford Philip H Knight, Stanford Charles
Schwab, Stanford George Soros, London School of Economics James H Simons, MIT

The conclusion is clear. If you want to become a self-made billionaire, get
the most prestigious educational credentials.

The best degree to get is an MBA. The following nine self-made billionaires
have MBAs, and it's worth noting that eight out of the nine have an MBA from
one of the nation's top three business schools: Harvard, Wharton, and
Stanford.

Steve Ballmer, Harvard, Stanford MBA Geroge B. Kaiser, Harvard, Harvard MBA
Philip H Knight, Stanford MBA Charles Egen (Echostar), Wake Forest University
MBA Leonard Blavatnik, Columbia, Havard MBA Ronald Owen Perelman, Penn,
Wharton MBA Michael Bloomberg, Havard MBA Charles Schwab, Stanford MBA Stephen
Schwarzman, Yale, Harvard MBA"

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csomar
In order to get a job in this industry, you don't need knowledge, but mainly a
degree. That said, people work for their degrees. There are only x
billionaires out of 100million x person and y millionaires out of 10million y
person.

Being a millionaire or a billionaire doesn't require an MBA, degree, high
school... or any kind of education. It requires skills, luck, determination...

Nevertheless, people will still work toward getting one: 1 out of 5000 get
rich, but 4500 out of 5000 get a job. MBA won't make you rich, but with little
skills it will probably get you a decent job.

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tigger2010
"out of the self-made billionaires, 7 out of 32, or 22%, have MBAs from a top
business school. Those aren't bad odds."

Correlation vs. causation. Enough said.

~~~
apsec112
There's certainly some element of correlation in there, but that doesn't mean
that there's no causation. Going to an Ivy League school is partly correlation
and partly causation. So is getting a Ph.D. from a top university, if you're
going into academia. Why should business school be different?

I should also note that this point applies equally well to PG's original
argument. What if it's purely correlation- that is, what if "programming IQ"
and "business IQ" just correlate really well, so that lots of top businessmen
are also top programmers? In that case, it would be relatively useless to
learn programming.

~~~
tigger2010
Since the data points are solely about extreme wealth and Elite MBAs, the only
thing that can be proven is some degree of correlation between the two. What
you have is insufficient (by a lot) to prove causation.

If your thesis is that the Elite MBA led to the extreme wealth, you have to
look at the volumes of Elite MBAs out there. HBS alone turns out 1000 a year.
Only a small % of them get to extreme wealth (going back to your point that a
few hundred million doesn't count).

As someone else noted, an Elite MBA is a worthwhile investment as a stamp of
approval. I have one of these, and I can speak from experience that it helps.
Is it going to get me to extreme wealth? No.

~~~
apsec112
"Since the data points are solely about extreme wealth and Elite MBAs, the
only thing that can be proven is some degree of correlation between the two.
What you have is insufficient (by a lot) to prove causation."

The conventional wisdom is that there is causation as well as correlation.
Everyone who goes to one of those elite MBA schools- and a lot of smart people
do- goes because they believe in causation as well as correlation. The burden
of proof is on _you_ , to show that there is no causation, because the
conventional wisdom says the exact opposite. See also:

"One who wishes to believe says, “Does the evidence permit me to believe?” One
who wishes to disbelieve asks, “Does the evidence force me to believe?” Beware
lest you place huge burdens of proof only on propositions you dislike, and
then defend yourself by saying: “But it is good to be skeptical.” If you
attend only to favorable evidence, picking and choosing from your gathered
data, then the more data you gather, the less you know. If you are selective
about which arguments you inspect for flaws, or how hard you inspect for
flaws, then every flaw you learn how to detect makes you that much stupider."
- <http://yudkowsky.net/rational/virtues>

"If your thesis is that the Elite MBA led to the extreme wealth, you have to
look at the volumes of Elite MBAs out there. HBS alone turns out 1000 a year.
Only a small % of them get to extreme wealth (going back to your point that a
few hundred million doesn't count)."

Agreed, but that's a lot larger than the percentage of people who "learn how
to hack" that go on to extreme wealth.

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rick_2047
Well I agree that after a certain point having no money will by no way improve
living standards. In that view, having an MBA would be much better. We must
accept that MBAs have more opportunity of making money.

