Should Entrepreneurs Have MBAs?

In the past few weeks, I’ve had several conversations in which a prospective applicant said something like this:

“Are business schools really worth it? Mark Zuckerberg (Facebook), Steve Jobs (Apple), Bill Gates (Microsoft), Sergey Brin/Larry Page (Google) didn’t go to business school. If you want to start a company just do it! B-school turns you into a big corporate type and deadens the entrepreneurial spirit. Just hang out in Silicon Valley or one of the other rich entrepreneurial ecosystems and learn how to start companies there. Who ever heard of a company being started in B-school?”

And so on. Perhaps you’ve said or heard some of the same things-often at a lunch table or beer bash, loudly enough to gather a number of listeners. The combination of selective facts and romantic brio seem to make this an irresistible argument. But what is not acknowledged offers a compelling argument to go to business school if you want to start and grow a company.

The applicant’s first error is to lump all B-schools together. A task force that I recently chaired reported that some 12,600 institutions in the world award degrees in business. Ninety percent of these are unaccredited and largely unknown. Of the remaining ten percent, only a subset is selective, meaning that they admit less than half of the applicants. The accredited and selective schools tend to be better endowed, have stronger alumni networks, more prominent faculty, and attract stronger students.

And then within this subset are schools that have strong resources for entrepreneurs. For instance, Darden has one of the strongest centers for entrepreneurship and innovation-the Batten Institute-which operates a small business incubator, arranges venture internships, supports a range of courses, hosts conferences and competitions, and is the nexus of a network of entrepreneurs and venture investors. Our incubator has started some 60 companies and counting. Last week, Princeton Review and Entrepreneurship Magazine ranked Darden #3 among the top 50 graduate entrepreneurship programs in the U.S. Schools like ours serve entrepreneurs very well. To paint all B-schools with the same brush is to deal in stereotypes. Don’t make that mistake.

The applicant’s second error is to generalize from a small sample of special cases. It is fun to summon up the names of a few famous and successful entrepreneurs, but are these representative of the whole population? For each case, it is possible to offer a counterexample of entrepreneurs with MBA degrees. Frank Batten founded the Weather Channel; Phil Knight co-founded Nike; Scott McNealy co-founded Sun Microsystems; Henri Termeer grew Genzyme from fledgling to major biotech firm; Meg Whitman grew eBay from a tiny startup to an online behemoth; Warren Buffett grew Berkshire Hathaway from a small failed textile manufacturer into a major conglomerate. They all have MBAs.

Plainly, one should not assume that entrepreneurship is only associated with founding a company. We know that many of the same qualities are associated with growing a company. Why should we expect entrepreneurs to toil only in fledging startups? Large companies, seeking to rejuvenate their cultures, want to hire people with entrepreneurial spirit. At Darden and its peers, most MBA graduates are hired by mature firms, but this does not mean that they are not entrepreneurs in fact or spirit.

Yet another error is to imply that once you work for a big company, you’ll always do so. In my MBA graduating class, about 95% of the students went to work for the S&P 500 firms or their equivalent upon graduation; by our 20th reunion, only a small fraction remained there. Among Darden alumni, I observe that by the 10th or 15th year after graduating, many alums will have made the leap to a small startup, a family-held firm, a firm they have bought, or a small professional services firm-these alums usually wind up in senior leadership positions, which affirms Darden’s strength in producing general managers. And they are also entrepreneurs.

Most of all, I challenge the applicant’s suggestion that “hanging out” or “just doing it” are always and everywhere more developing than a business education. Such arguments are variations on the virtues of the “school of hard knocks.” Mind you, I have enormous respect for experience as a teacher. But the school of hard knocks is loaded with, well, really hard knocks. The failure rate of small business startups is quite high. Census data suggest<http://smallbiztrends.com/2008/04/startup-failure-rates.html> that about half of all startups are still alive after three years, and only 29% after 10 years.

In that time, you can burn through a great deal of effort, relationships, and money (usually gained from family and friends). For every knockout success like Steve Jobs, there are hundreds of thousands of small business failures each year.

A great B-school education won’t guarantee success, but should improve the odds. It will accelerate your growth, compressing years of hard knocks insights into a short time. It will build your business acumen and help you understand the pitfalls and risks on which other businesses have foundered. It will leaven your romanticism about entrepreneurship with a very practical grasp of what it takes to succeed in business. Perhaps most importantly, a business education will disabuse you of the notion that entrepreneurial success is a matter of the great lone individual, the genius, the maverick like Jobs/Gates/Brin or whoever else you idolize. Instead, B-school will teach you that entrepreneurial success is substantially about teamwork, networks, and business relationships; success is not about opportunism but about living into a purpose for your life with intentionality and integrity.

Philippe Sommer, Darden’s Director of Entrepreneurship Programs says, “If you know you want to be an entrepreneur you are already in a different place than many who come to business school. Entrepreneurs come from families that are entrepreneurial! Is it in the genes? No, it is the observation of the experience. These folks have seen the pros and cons of being an entrepreneur and understand that the failure of the venture is not the failure of the entrepreneur.

If this is not your background, then it is incredibly scary to think about being an entrepreneur. Many of the students in our MBA program did not understand what are the real benefits and risks of being entrepreneurial. That is one of the things an entrepreneurship program like ours will teach you. You may find you love being entrepreneurial and now have an option in life you might not otherwise have had. I often say I don’t teach “entrepreneurship,” I teach “self knowledge.”

We have many students who come to our program having started a business and sometime succeeded quite well and other times failed. What they all realize is if they had known more about how to run a business they would have avoided many of the mistakes they made. That’s a pretty good reason to get an MBA. After all if Mark Zuckerberg had started his business in business school he might have avoided the stupid things he did to his partners and not spent the rest of his career litigating with them and in the end paying them to correct his mistakes.”

Should you go to B-school or head off into the entrepreneurial ecosystem? I’ll let you decide, but you should consider some questions first. Do you have a clear business idea, including clarity about the product/service, the customer, the suppliers, and the investors? Do you have the grubstake of cash to sustain you through a long spell? Are you so impatient to get going that you can’t bear the thought of organized learning? If the answers to these questions are “yes,” then get going and good luck. But for most twenty-somethings I encounter, the answers are pretty hedged. They are eager to learn and glad to have the help of teachers and mentors. They hanker for more than they’ve been doing and want to have an impact with their lives. But they are still searching for the spark, the big idea, the project into which they can channel their energies. For them, B-school makes good sense. You decide.

Robert Bruner is the Dean of the Darden Graduate School of Business at the University of Virginia and co-author of the report, “Globalization of Management Education,” AACSB International, 2011. Read his blog posts on education and other topics.