When you think of the world’s best business schools, you inevitably think of two great rivals: Harvard and Stanford.
For decades, Harvard has long been known as the West Point of Capitalism, the breeding ground of the corporate elite, while Stanford has smartly used its Palo Alto location to serve as a highly productive incubator for Silicon Valley.
Harvard is hoping to change that simplified view of the rivalry.
“There is a great myth about some other institutions and the degree to which they represent entrepreneurship,” says William A. Sahlman, who teaches entrepreneurial finance at Harvard. “It’s total fiction. We have a higher proportion of our faculty and a higher number teaching entrepreneurship than other schools have faculty.”
The Harvard offensive kicks into full gear today with the publication of The Intelligent Entrepreneur, a book by author Bill Murphy Jr. on three successful Harvard MBAs from the Class of 1998 who turned down safe jobs at big companies to launch their own enterprises.
Written with the cooperation of the school, The Intelligent Entrepreneur also touts Harvard’s deep commitment to the field and quotes many of the school’s professors, who writes Murphy, “see the entire discipline of entrepreneurship as necessary, life fulfilling, and at times almost spiritual. They’re not just teaching business strategies and processes; they’re inspiring students to embrace a way of life (an excerpt of the book).”
All of this has come at a time when the job market for MBAs continues to remain weak and more students have become interested in starting their own ventures. Moreover, many of the best and brightest MBA applicants, who often apply to both schools, have been choosing Stanford over Harvard when accepted by both schools, according to insiders. Generally, admits to both schools split roughly 50-50, but lately, Stanford is winning in six out of ten cases. One swing factor could be Stanford’s reputation in entrepreneurship where it always ranks higher than Harvard in U.S. News & World Report surveys of deans and MBA directors. The latest survey, for example, has Stanford in second place, behind Babson College, and Harvard in fourth, behind MIT’s Sloan School.
The vast majority of MBA students, of course, still rush head long into high-paying jobs in consulting and finance to help pay down their tuition debt. But professors at both schools say that more than half the graduates of Harvard and Stanford end up running their own companies within 10 years.
So Harvard is eager to change the notion that it not a place for people who want to become entrepreneurs. “Often, people think of Harvard as the West Point of Capitalism,” says Sahlman. “It’s the place where the leaders of the Fortune 500 get trained. And it turns out that’s absolutely right. Over 20% of the top three jobs in the Fortune 500 are held by Harvard MBAs. Sadly, it turns out there are only 500 companies in the Fortune 500 and we turn out a larger number of students than could possibly go that route and not every student wants to go that route. So while we have Jim McNerney at Boeing, Jamie Dimon at JPMorgan, Jeff Immelt at GE, and A.G. Lafley, formerly of Procter & Gamble, it turns out the rest of them had to find something to do. And it is the most remarkable set of entrepreneurial folks you have ever seen in your life partly because they don’t really want to work for somebody else.”
Each of the three entrepreneurs profiled in Murphy’s highly readable new book started their companies from scratch and have built firms that generate at least $50 million a year in
revenues and/or netted their founders more than $20 million in personal profit. They are Marla Malcolm Beck of bluemercury, a national retailer of cosmetics; Chris Michel, founder of Military.com and Affinity Labs, and Marc Cenedella, founder of TheLadders.com. Michel, who sold his company to Monster.com, is now one of nine entrepreneurs-in-residence at Harvard. At crucial points, writes Murphy, the Harvard network helped to provide smart advice, emotional support, encouragement, and sometimes even board members to each of them.
Of course, both schools can trot out long lists of alums who have achieved great wealth and fame. Among its famous entrepreneurs, Stanford counts Nike founder Phil Knight and Electronics Arts founder Trip Hawkins, along with the founders of Sun Microsystems, Trader Joe’s, and Match.com, along with a slew of prominent venture capitalists from Vinod Khosia to Brook Byers of Kleiner, Perkins, Caufield & Byers (though Tom Perkins is a Harvard grad).
Ask Stanford Dean Garth Saloner about his school’s strength in the field and he holds nothing back. “Our entrepreneurship curriculum is stunning,” he says. “Our courses are taught with a faculty member and a practitioner. All the cases are ours, and the protagonists in the cases are always there in the classroom. And our students are in Silicon Valley and at a university where they are within walking distance of every other school—in medicine, engineering, design—so they can work with other students on ventures to change things in many fields.”
At Stanford, one of every four electives is in the discipline and 95% of the students take at least one course in entrepreneurship. Just down the street from Sand Hill Road, known for its concentration of venture capitalists, Stanford draws on many VCs and startup entrepreneurs as lecturers in its classrooms. Intel founder Andy Grove and ex-Cisco CEO John Morgridge are among dozens of well-known entrepreneurs who have taught at Stanford for years.
And while Stanford has long embraced the field, the history of entrepreneurship at Harvard is quite different. For many years, the school had so thoroughly defined itself as an academy for the corporate elite that it dismissed entrepreneurship as a subject unworthy of serious study. As an HBS account of its own history put it, an inclination toward entrepreneurship was seen as a “personality defect,” and the typical entrepreneur was considered “a chronic malcontent.” The big change occurred in the early 1980s under Howard Stevenson, a veteran HBS professor, who returned to campus at the invite of then Dean John McArthur to develop a full-fledged curriculum in the field. Even so, it took until 1997 when Harvard finally started its first business plan competition, only after prodding from students and over the objections of some faculty. Earlier this year, the competition drew a record 110 teams.
“Last year we had 35 companies started right out of HBS,” says Sahlman, whose “Entrepreneurial Finance” course has been taken by more than 8,000 HBS students. “We had more business plans then at any time in the history of our competition, including 1999. One reason was that the job market is not so great. So people are saying if I can’t get the job of my dreams why don’t I create it. The second reason is that the cost of doing certain kinds of businesses is gotten smaller. So if you’re starting a web-based startup, it’s going to cost $250,000 to $500,000, it’s not going to cost $10 million. So we’ve had a remarkable explosion in entrepreneurial activity at the school.”
Unlike Harvard, which has a separate department of entrepreneurship, Stanford has no dedicated faculty. Instead, the school teaches the discipline by pulling from traditional disciplines in marketing, finance, and organizational behavior. Stanford also doesn’t have a business plan contest because the school views its mission as more “educational” and not as a launch pad for startups, says Linda Wells, executive director of Stanford’s Center for Entrepreneurial Studies. “Our geography is a huge part of the benefit,” adds Wells. “We live in an incubator. Everything you would want to start a company is here, except for funding, and we have venture capitalists as lecturers and relationships with many angel investors.”
If Harvard lacks location, it makes up for it by throwing formidable resources at the field. The school has its own building devoted to the subject, the $25 million Arthur Rock Center, named after the HBS alum who invested in both Apple and Intel. Harvard boasts 35 faculty members who teach the discipline, the second largest faculty group at the school. All first-year MBAs at Harvard have a required course in entrepreneurship and can choose from nearly two dozen second-year electives on the topic–pretty much the same number of courses that Stanford offers. Harvard says its alums compose nearly 25% of the entire venture capital industry.
As a percentage, more Stanford grads (about 15%) are likely to either start companies or immediately work for startups than grads at Harvard. Indeed, nearly 10% of Stanford’s graduating class launch companies right out of school, versus about 4% to 6% at Harvard—numbers that are significantly off the 1999 dot-com era boom in MBA startups. “In 1999, everybody and their brother was starting a company,” says Wells.
If anything, Harvard simply wants to break the myth that it is merely a breeding ground for corporate chieftains, investment bankers and management consultants. As Murphy concludes in his book, Harvard has gone through “an impressive process of reinvention.”