Glib, yes, but it gets to my view on the heart of the matter: emotions.
Running a business plan project- in Grade School or an MBA- can never be comparable to running your own business because the emotional connection and the involuntary feelings are not present. This is why the lemonade stand example is correct- a ten year old with a lemonade stand has more emotional connection to their 'business' than an MBA student running models. If you sell 0 cups of lemonade you feel it, and you do something different tomorrow.
Jason- I will send through lonher thoughts by email when not on a train. Disclosure: I coach business owners about business in the real world, so I've seen many MBAs suffer when the theory hits their monthly cashflow. Great discussion to kick off.
People who go to MBA school are making a big investment because they want to get a good, safe, high-paying job for a big company. If they were on fire to start their own company they'd spend that money on starting their own company and shave two years off their time-to-market.
To me the question has always been "Why do we assume MBA is a degree in entrepreneurship".
MBA's have a lot of different coursework, from strategy to finance, from accounting to human resources. I would gather than some schools have a few courses in entrepreneurship, but it is not a 2 year degree of back to back courses in entrepreneurship.
There are some courses that are general, take Strategy for example. And the strategies for optimizing and tuning a fortune 500 company are different then how startups attempt to prove a new business model. Don't get me wrong, in many cases the basic fundamentals are the same, but the overall goal is different.
Summary: MBA schools may be failing to teach entrepreneurship, but I don't think their #1 intent is to teach entrepreneurship anyway.
Note: I do have a certificate in general management from Kellogg. And while I enjoyed my time there, I can unequivocally say, the courses were not intended to teach entrepreneurship.
The argument just doesn't pass the sniff test. I look back at my B school classmates and see that many of them have started businesses successfully just a few years past graduation. Some bootstrapped, some raised VC. Some were in tech, some not.
Like any business, the various flavors of entrepreneurship require lots of knowledge of things that can't or shouldn't be taught in school. This is by design. The same thing is true of i-banking, consulting, CPG marketing, and the other traditionally MBA-dominated fields.
You can't teach entrepreneurship. You also can't teach toothpaste marketing or oil wildcatting. You can teach business fundamentals that will work anywhere and that will give you a leg up at the vocation you choose to follow.
I need to set aside a good hour to flesh out these ideas, but the first ideas that come into my mind:
- Adverse selection: most of the people in any MBA class have profiles that are at the polar opposite of entrepreneurship, valuing social approval and jumping into hoops someone else designed. A class is a very tight environment where the prevailing ethos tends to take it all. Hence even potential entrepreneurs are steered away. Remedy: change class profile --hard.
- Self-assurance: in top MBAs, people are continuously told they are the best of the best. The opportunity cost of entrepreneurship is then artificially inflated and the relative contribution of other profiles (developers, designers, salesmen) implicitly undervalued. Remedy: stop doing this, but then how to justify a 200k fully loaded cost?
- Hindsight: business school curricula are alla bout descriptions and not about predictions. All business cases are written with a massive amount of hindsight. There's the illusion of being able to explain what has happened, but no out-of-sample fit whatsoever. Explanations are sought in outside factor and not in assets such as individual talent, small teams and morale. Business school curricula the polar opposite of what Hackers & Painters is about.
- Skills: the curricula are slaves to student requests: they get easier and easier, grades don't matter, and hard skills that could be learnt (stats/machine learning, quant marketing, programming, sales) are not. A lot of people graduate with no significant skills whatsoever. Remedy: hormetism in business school curricula.
- Bubble: for many people, an MBA is a 2-year vacation that is designed to be as removed from the real world as possible (most people worked terrible jobs 100 hrs/wk and will return to do so). There's no amount of real-world work that you can do for credit during the school year.
- Faculty: same as studentry, it's an incredibly tight group where the dominant philosophy wins. I believe many consider MBA sections as an ensemble are demotivated jerks to be done with as soon as possible, to return to research and undergrads willing to work their asses off. Also, most tenured professors are out of touch with entrepreneurship and these are those who grant tenure to the upcoming guys. Young stars who try to do something radically different are pretty much alone and have to do superhuman efforts for a payoff that might very well be negative in terms of their career. Remedy: I have no clue.
Unfortunately, an MBA is a somewhat marvelous machine that pockets a lot of money (often leveraged) to provide students a socially-accepted way to spend two years out of the world while convincing themselves they are special because they are in the program, without any need to show special work. The real magic is tapping into a corporate system that miraculously provides six-figure jobs at the end, apparently validating the whole concept. Firms like Goldman or McKinsey follow the exact same proposition, expect substitute "pockets a lot of money" with "pockets a lot of time".
Disclosure: I graduated with an MBA from Wharton a month ago. I worked part-time at Etsy during my second year and am now working at Squarespace in NYC. The business school failure at teaching entrepreneurship (or, at large, how to build things) bothers me as much as you, and I'd like to fix this, as I have a hunch that an MBA class has a lot of people who could, if trained, go on to build valuable things.
I'd be hard pressed to turn down McKinsey, Bain & Friends if I was $100k+ in the hole after leaving b-school.
By extension, the same argument on adverse selection could be said for YC as well. Although I'm certain YC adds great value to its participants, many people who applied would have done well even without YC. The magic of YC is to be able to get a concentrated group of smart/ambitious entrepreneurs and amplify the success that they probably would have had without it.
I would say that MBA gets in the way of launching a business for an aspiring entrepreneur as you are saddled . with debt. However, should that launch be successful, the skill set that you acquire at B-school will help you in the long run in managing the company.
A typical top-tier business school graduate in the US leaves with $100K in debt that costs at least $800-$1000 a month to pay off. That's going to eliminate a lot of great potential entrepreneurs right off the top, and it's going to make things painful for those who do try.
I did an MBA in 2002-2004 and went into banking after. I would have loved to go do a startup, but when you have that kind of debt, and someone offers you a job, it's a lot harder to turn down.
I did have a number of friends who launched businesses successfully during school - they essentially used the two years and the debt incurred to bootstrap a new enterprise. But in most cases they had those ideas before even arriving at school and I suspect they would have been successful without going.
That said, getting an MBA provides an invaluable toolset for leading a corporate enterprise (if you pay attention.) I just don't think that learning to be an entrepreneur should be one of the expectations. Similarly, getting a CS degree will teach you how to code, but it doesn't necessarily give you the capacity to build products people love.
There are plenty of MBAs who have started financially successful businesses. Most would not be websites, however. I think selection bias is the big culprit here. The majority of MBA students don't actually intend on starting a company, so you end up with a population in which 95% don't give a damn about SV or Hacker News - so the broader startup community groups the 5% that do care in with the others.
Other thing to consider: The majority of people entering an MBA program worked for several years out of college in XYZ big bank, consulting firm, or fortune 500 co. A good number have likely never been faced with "get shit done. on your own. NOW!" - they've been socialized to push papers, write reports, and trust that somewhere down the line some factory worker actually puts a widget in a box and ships it to some paying customer in Phoenix.
It does seem, anecdotally, anyway, that there is a shift happening in B-schools with more students taking seriously the thought of doing something on their own. Keep in mind, it is insanely tough to get into a top-tier b-school, so there is quite a bit of raw intelligence there that could be put to good use. I think you start with a group project that actually designs, builds, and launches a product, no matter how small or trivial.
1. What are the root causes leading to business schools failing at the education of entrepreneurship?
Most MBA programs do not have start-up teaching strategy. Most have one or two courses typically at the tail end of the program and a course requirement of a business plan. They need to have eship in program DNA.
IMO,a better approach may be to help form teams of students with entrepreneurial mindset and personal compatibility after first couple of quarters of the program. As the program progresses, have them focus on their startup in every course. For example, during accounting course for team projects, have these teams evaluate public companies in their target market, during marketing course, have them come up with marketing plan for their start-up, during HR/organization courses, have them come up with the culture and structure plan at a milestone in their startup growth. Every MBA coursework is an opportunity to work on different aspects of a startup.
I believe Steve Blank's recent experiment at Stanford is closest to my thinking what should happen in eship portion of MBA. 10-13 week course may work for another app/web 2.0 creation but most high technology startups require months of planning and that is where MBA program can work and should focus.
John Castle, Sc.D.
Lecturer in Entrepreneurship.
Foster School of Business
What in particular was missing? Did the teams make unrealistic assumptions? Did focus on pie-in-the-sky financials? Etc...
1) The students don't take them as seriously as real businesses.
2) The faculty place requirements on what a pitch should look like.
When I was in school, I wrote horrible, 25 page business plans and the equally horrible slide deck as part of a new venture class. We knew it was shit when we presented it. As a result, you see serious teams literally doubling their efforts. They do one thing for class, and another for real life. (Well, maybe not doubling - real life is much less work.)
This sounds stupid, and to a degree it is. BUT - if you write these monstrous business plans and orchestrated piches, you will learn a thing or two about what works, what doesn't, what is required, what isn't, and what falls flat or gets ignored.
While I won't claim it's 100% intentional, there is at least some method to the madness.
You can't assign an essay on how to not give up when all hope seems lost.