Tag Archives: MBA

Does an MBA Help in Running a High-Tech Business?

Question (on Quora): Does an MBA help in starting up and running a technology-based business? 

My Answer on MBA for High Tech

I have an MBA degree and I bootstrapped a software company past $10M annual sales and was a co-founder of another software company that went public in less than four years. And the truth is neither yes or no, but somewhere in between. The value of the MBA depends on who you are, what you want, what other options you have, what you give up, and where you are in career and the more important rest of your life, like relationships, having children, etc.

MBA degree for high tech business

My case with my MBA and high tech

My MBA degree made a huge difference to me as entrepreneur. I would never have managed without the general business knowledge I got in business school. Having a good basic idea of finance, marketing, product development, and organizational admin was essential to me. It changed my risk factors from too high to acceptable. I set out to build my business on my own without any savings or any investors and while being the sole income for my family (at that point we had 4 kids). Knowledge, in my case, reduced risk. So that’s a direct link to this question of whether having an MBA helps. I’m just one data point, but still … my experience is real.

For the record, my MBA wasn’t easy. It was a lot of sacrifice and a lot of risk. I did it at Stanford while married with 3 kids and paying my own way by consulting, supporting my family, without scholarship help. I quit a good job to do it, turned down a transfer from Mexico City to Hong Kong, which I had wanted for years. And I’m very grateful to my wife, who encouraged me to do it, and promised me she’d stick with me even if I failed.

Two important qualifiers

One important factor for me, which might be relevant for others, is that my MBA experience was rooted in the objective of changing careers. I wanted to change directions, not continue in the direction I’d been going. I’d been a business journalist and I wanted to move out of Journalism to business. I didn’t want to write about it; I wanted to do it.

Another factor for me that might help others is I didn’t expect magic. I was already 31 years old, married 9 years, father of 3. I didn’t expect to learn leadership, when and how to take risks, or how to deal with people (i.e. empathy) in a classroom. What I did expect to learn was the intricacies of finance and cash management, accounting, marketing, some sales (ugh – I’ve always hated sales), some product development, decision sciences, and basic analysis.

However, please don’t misunderstand me – I’m not saying that the MBA is good for every entrepreneur or any specific entrepreneur or you, specifically, as you read this answer. I am saying that it was extremely good for me, in my case, and might be as well for somebody else in similar circumstances. Can you afford to do it? Do you have the time? Are you in a position to take advantage of it? Are you already full speed in a career you love or looking to pivot? All of these factors are important.

Three additional thoughts

  1. There’s no doubt that times have changed, and that the relative value of an MBA degree in 1981 is less than it is now. MBAs are much more common these days than they were then and it doesn’t take an MBA degree to understand supply and demand.
  2. MBAs need ripening before they get their full value. Some would say that it would be a good investment to buy fresh new recent MBAs for what they’re worth and sell them for what they think they’re worth. I’ve been an employer for 30+ years now and I like my MBAs much better when it’s their second or third job out of school, or a few years after school.
  3. I believe the MBA degree these days is a lot more valuable from one of the top schools – Stanford, Harvard, Wharton, Northwestern, Babson (for entrepreneurs) and the like – than from second or third tier. The supply and demand factor has heightened the perceived difference.

Reflections on MBA experience

Gilded GraduationThe prestige of the MBA degree is tarnished quite a bit since I got mine in the early 1980s. And that’s for pretty good reasons. With the world of startups like it is, and the progress of high tech, there are some good arguments against stopping a career for two years to go back to school. Still, my two years with the MBA were the right thing for me, for my family, and for my entrepreneurship. Everything is case by case.

So I find myself reflecting on my own MBA experience, and MBAs as a stereotype, and what the MBA degree might or might not mean today. The following thoughts come in no particular order.

  1. The curriculum used to be a lot more about business analysis than about doing business. Things have changed for the better though, because now entrepreneurship is all over the MBA world now, and MBAs are much better off for it. When I was at Stanford University the entire “small business” curriculum was one course — an excellent course, but still, just one — taught by Steve Brandt.
  2. I screwed up the recruiting process myself and chose the wrong job for the wrong reasons. That story is in this blog as a stupid mistake. I was hardly the only one. I saw somewhere that 80% of the MBAs of my time changed jobs in less than a year after graduating.
  3. The two years I spent studying business were among the best of my adult life. My wife and I and our three kids moved from a fifth-floor apartment in Mexico City to a townhouse on campus at Stanford, for half the rent. I enjoyed the classes immensely.  Our kids had great elementary school on campus. We needed only one car.
  4. I had a friend a few years older than myself who already had the MBA degree when I met him, before I had thought of it. He always said “it’s just a union card. You get it so they pay you more.”
  5. After the first quarter as a full-time student I couldn’t take the pressure of the bank account going one way only, withdrawals and no deposits. So I worked as a market research consultant with Creative Strategies for the rest of my time studying. I made a  full-time consulting income, but  because I was a an early adapter of technology and I did most of my work at home, it was still a good time for family.
  6. By the end of the two years, some of my classmates were disappointed that they had been taught business analysis more than business. I wasn’t disappointed at all, I had learned what I went there to learn. I expected them to teach me stuff that lent itself to chalkboards and lectures and readings and they did.
  7. I wasn’t the typical MBA student. I was 31, married, had three children, and had supported my family for years as a business journalist in Mexico, making more money freelance than on salary. I figured that whether I knew how to deal with people or not, they weren’t going to teach me that; they were going to teach me what I wanted to learn, the analysis.
  8. Getting there was hard for us. It involved quitting a fairly good job in Mexico City and moving back to the United States without a job. I had just won a long-sought-after transfer to Hong Kong, which I had to turn down. That was a hard choice. I’ve never regretted it.
  9. It was expensive. I paid my own way.
  10. Samuel Johnson said that the ultimate happiness is anticipation of happiness rather than realization. During those two years studying, family life was close to idyllic for us so the present was really good, and the grapevine kept telling us that the future would be much better.
  11. It was a lot of work, but it was good clean work, and it made sense.
  12. I’ve dealt with some young people fresh out of business school with shiny new MBA degrees who were full of themselves, ignorant and arrogant. I’ve dealt with some who weren’t. Generalizations suck. Still, generally you want an MBA 10 years later, not in his or her first job out.
  13. I hated the group projects. I had a family to go back home to, and consulting work to do, and group projects had too many people who liked the social aspect of group meetings too much. I usually tried to negotiate a chunk of the project we could separate from the rest so that I could do my part on my own, without going to meetings.
  14. I had been doing business-journalist work for several publications, of which the most well known was Business Week (as McGraw-Hill World News correspondent for Mexico). I was amused sometimes that some of what I did after the MBA was very similar to what I’d done before the MBA, but for much more money.
  15. MBA studies are best for people who’ve had significant work experience first. I don’t know if that’s three years, or five, or seven, or what. I had been out of school eight years when I started.
  16. What’s with the people who put the letters onto their business cards and behind their names on websites, like they were CPAs or doctors or something? Isn’t that awkward? I always think if it isn’t MD or PhD or maybe CPA (for commercial reasons) then it makes me nervous to see it there. Is that just me or what?
  17. Final thought about MBAs: I deal today with a collection of very smart people between the ages of 30 and 40 who have picked up so much business savvy in 10 or more years of high-tech business that I don’t think they should go back to school and get an MBA degree. I do wish there were a test somewhere, like the GED for high school, so these people could take the test and get the [expletive deleted] MBA seal of approval they deserve.

So how to conclude? It’s up to you, and your situation, whether it’s right for you. And, at the very least, don’t hold the MBA against those who have one.

Does Business Education Keep You in a Box?

Last week, I posted a rant about the stupid meme that pits entrepreneurship against education, as if young people are supposed to choose one or the other, but not both. I called it Young Entrepreneurs: They are Lying to You.

But I like paradox, and I like uncertainty, and I also like to remember that you could argue that education—especially business education—teaches people how to do what their elders did. It teaches them to color inside the lines. It teaches them to think inside the box.

On the other hand, you have to know what you’re rejecting to reject it. People who learned the classics are better positioned to reinvent them with something new.

Or are they? What do you think?

Young Entrepreneurs: They Are Lying to You

All over the web, on Q&A sites, blog posts, and so on, in panels and conferences, and in the occasional book, know-it-all alleged experts are lying to young entrepreneurs about the value of education. They sprout clichés that are unrealistic, impractical, and that when taken to an extreme, are even tragic.

Lie: A startup is better than an education.

orangutang_istock_000003420564xsmallIt is so not true, but sadly also so widely believed.

They say education is a waste of time. They say that a “real” entrepreneur skips school to do a startup now. You’re in high school and they tell you being an entrepreneur is a viable alternative to getting an education. You’re in college and they tell you to drop out. They’re tricking you.

That’s crap perpetuated by wishful thinking. Sure, starting a business sounds better to you than sitting in a classroom or doing homework. And, when studying bogs you down—as it does at some point for all of us—they tempt you with this lie you can turn to instead: “You don’t have to do this. You’ll just be an entrepreneur. Way more fun.”

Tragic? Yes. They throw you off track. Tragedy is what might have been, but isn’t because something—lies, maybe laziness (that’s what makes those lies work)—got in the way. I learned that in a classroom at college. They are like those beautiful sirens—mythological Greek ladies, sexy as hell, singing from the sidelines—who lured sailors off course and into the rocks.

But no, wait. You don’t have an education, so you have no idea what that reference is about. Unless you saw it in some low-grade movie.

[see-also]Should Entrepreneurs Attend Business School?[/see-also]

Truth: Get your education first.

Don’t kid yourself: You get the education when you’re young because it makes your life better.

First, it means doing something hard, something that takes a few years, and that builds you up. You do homework, you take tests, you write papers. You lose sleep turning work in on time. You grow. You face challenges and overcome them. The best path goes uphill sometimes. You can’t always take the easy route; you’ll end up nowhere.

Second, you learn to think, digest information, communicate, discuss ideas, evaluate options, and make decisions. You acquire skills and mindsets that make you better.

Third, it’s about options. Ten and 20 years will go by really fast. If you have a degree, then you have options. You have more choices. If you don’t get an education, someday there will be a thirty-something-year-old person living in your body, cursing you.

And, by the way, study what you like doing. I majored in lit, then did journalism in grad school. Ten years later, I went to business school. I ended up a software entrepreneur, writing my own code in the beginning. Your business success—or lack of it—isn’t what you learned or didn’t learn in school. It’s who you are. Life is way better with an education, but it doesn’t have to be a business education. Your education is part of who you are. Business is fine if you want to study it, but if not, no sweat. You can still do your own business later.

Yes, there are an extremely rare few who have earned the right to scoff at education. Peter Thiel, for one; nobody can doubt his credentials. He’s not just another amateur expert reading what everybody else says. And yes, Steve Jobs, Bill Gates, Mark Zuckerberg, and a few other rare exceptions. Each of them is one in several million. And all three of them were dragged out of education by one of the biggest deals of the last 100 years. Rumor has it that Jobs actually got the education by auditing—without getting the paperwork—at Reed College. And you won’t find either Gates or Zuckerberg claiming others should drop out. And you aren’t them. They are exceptions, not the rule.

Don’t risk real life betting on yourself as that one in a million. Give yourself options. Look at the odds.

Give yourself time. Startups take seasoning.

In the real world—for the rest of us—actually starting a business takes seasoning first. You need some time. Work as an employee, keep your eyes open. The right time will come. It’s not one of those “now or never” situations until you pass 60 or so. Most of us need a decade or so in the work world, at least, before we’re ready to start our own business. I was 33 when I went out on my own, and 45 when it finally took off.

A few decades ago, before this craziness started, I took a course in entrepreneurship from Steve Brandt, at the Stanford Business School. Look him up on Amazon. It was a privilege I still appreciate.

Toward the end of the course, he paused, looked up at the lot of us, and said (something like): “Listen. I’m not saying you’re supposed to pass this class, graduate, and go start a business. That’s not realistic. You’re too young. You need more experience. So, if you’re serious about this, what you do now is choose the stream you want to swim in. Take a job in an area that interests you. Wait until you’re ready.”

A few decades later I was teaching entrepreneurship part-time, having built my own business, when one of my students asked me how he could set up a business in coffee roasting right out of school. He wasn’t the typical undergrad. He was married and in his middle twenties. I told him to work with a coffee roaster first. He did, for two or three years. Today, about 10 years later, he and his wife own a successful multi-location coffee roasting business called Back Porch Coffee in Bend, Oregon.

[see-also]10 Lessons Learned in 22 Years of Bootstrapping[/see-also]

Data? You want data?

Still, you want more?

If you do get that education, you’ll have a huge advantage over the uneducated in distinguishing data that matters from data that doesn’t. So you’ll realize I’m right. But for a quick data fix, check out what the Kauffman Foundation discovered when they analyzed 479 successful high-tech startups. Here’s what they say:

  • The average and median age of U.S.-born tech founders was thirty-nine when they started their companies. Twice as many were older than fifty as were younger than twenty-five.
  • The vast majority (92 percent) of U.S.-born tech founders held bachelor’s degrees. Additionally, 31 percent held master’s degrees, and 10 percent had completed PhDs. Nearly half of all these degrees were in science, technology, engineering, and mathematics (STEM) related disciplines. One third were in business, accounting, and finance.
  • U.S.-born tech founders holding MBA degrees established companies more quickly (in thirteen years) than others.
  • Those with PhDs typically waited twenty-one years to become tech entrepreneurs, and other master degree holders took less time to start companies than did those with bachelors degrees (14.7 years and 16.7 years, respectively).
  • U.S.-born tech founders holding computer science and information technology degrees founded companies sooner after graduating than engineering degree holders (14.3 years vs. 17.6 years). Applied science majors took the longest (twenty years) to create their startups.

Conclusion: They are lying to you.

Before you swallow entrepreneurial advice from anybody, ask first whether they’ve ever built a business. And even then, don’t believe them; think about it, and decide for yourself.

Don’t believe me either. Look around you.

Reflection: Does an MBA Belong in a Web-Based Ecosystem?

There was an interesting comment posted on this blog yesterday, on my post from last week recommending classes.

As someone without an MBA working in business and learning as I go, I am curious to know what you think the value of an MBA is these days? Especially in the tech and web startup sectors. For example, I work in online marketing with emphasis in SEO, PPC, PR management, and social media. These are dynamic and fast-moving sectors that are frequently in a state of change/flux. I have considered the MBA and the costs and I am very much undecided, because as you point our in your answer, there are ways to learn and be successful without an MBA (starting with basics, and then learning-as-you-go). So, as someone who has been through the process, how do you feel about the value of an MBA today especially in a web-based ecosystem?

I wrote the following here back in 2007, when I was barely started blogging. I think it’s fair to bring it back now, five years later, in answer to the question above.

  1. The curriculum used to be a lot more about business analysis than about doing business. Things have changed for the better though, because now entrepreneurship is all over the MBA world now, and MBAs are much better off for it. When I was at Stanford University the entire “small business” curriculum was one course — an excellent course, but still, just one — taught by Steve Brandt.
  2. I screwed up the recruiting process myself and chose the wrong job for the wrong reasons. That story is in this blog as a stupid mistake. I was hardly the only one. I saw somewhere that 80% of the MBAs of my time changed jobs in less than a year after graduating.
  3. The two years I spent studying business were among the best of my adult life. My wife and I and our three kids moved from a fifth-floor apartment in Mexico City to a townhouse on campus at Stanford, for half the rent. I enjoyed the classes immensely.  Our kids had great elementary school on campus. We needed only one car.
  4. I had a friend a few years older than myself who already had the MBA degree when I met him, before I had thought of it. He always said “it’s just a union card. You get it so they pay you more.”
  5. After the first quarter as a full-time student I couldn’t take the pressure of the bank account going one way only, withdrawals and no deposits. So I worked as a market research consultant with Creative Strategies for the rest of my time studying. I made a  full-time consulting income, but  because I was a an early adapter of technology and I did most of my work at home, it was still a good time for family.
  6. By the end of the two years, some of my classmates were disappointed that they had been taught business analysis more than business. I wasn’t disappointed at all, I had learned what I went there to learn. I expected them to teach me stuff that lent itself to chalkboards and lectures and readings and they did.
  7. I wasn’t the typical MBA student. I was 31, married, had three children, and had supported my family for years as a business journalist in Mexico, making more money freelance than on salary. I figured that whether I knew how to deal with people or not, they weren’t going to teach me that; they were going to teach me what I wanted to learn, the analysis.
  8. Getting there was hard for us. It involved quitting a fairly good job in Mexico City and moving back to the United States without a job. I had just won a long-sought-after transfer to Hong Kong, which I had to turn down. That was a hard choice. I’ve never regretted it.
  9. It was expensive. I paid my own way.
  10. Samuel Johnson said that the ultimate happiness is anticipation of happiness rather than realization. During those two years studying, family life was close to idyllic for us so the present was really good, and the grapevine kept telling us that the future would be much better.
  11. It was a lot of work, but it was good clean work, and it made sense.
  12. I’ve dealt with some young people fresh out of business school with shiny new MBA degrees who were full of themselves, ignorant and arrogant. I’ve dealt with some who weren’t. Generalizations suck. Still, generally you want an MBA 10 years later, not in his or her first job out.
  13. I hated the group projects. I had a family to go back home to, and consulting work to do, and group projects had too many people who liked the social aspect of group meetings too much. I usually tried to negotiate a chunk of the project we could separate from the rest so that I could do my part on my own, without going to meetings.
  14. I had been doing business-journalist work for several publications, of which the most well known was Business Week (as McGraw-Hill World News correspondent for Mexico). I was amused sometimes that some of what I did after the MBA was very similar to what I’d done before the MBA, but for much more money.
  15. MBA studies are best for people who’ve had significant work experience first. I don’t know if that’s three years, or five, or seven, or what. I had been out of school eight years when I started.
  16. What’s with the people who put the letters onto their business cards and behind their names on websites, like they were CPAs or doctors or something? Isn’t that awkward? I always think if it isn’t MD or PhD or maybe CPA (for commercial reasons) then it makes me nervous to see it there. Is that just me or what?
  17. Final thought about MBAs: I deal today with a collection of very smart people between the ages of 30 and 40 who have picked up so much business savvy in 10 or more years of high-tech business that I don’t think they should go back to school and get an MBA degree. I do wish there were a test somewhere, like the GED for high school, so these people could take the test and get the [blank] MBA seal of approval they deserve.

Hooray for this ‘A Lot of Life Left’ MBA

I got this question today on my ask-me page on my timberry.com website:old graduate

I am currently in an MBA program at a local college. I have recently completed my third course. I have about five years management experience. I am 58 years-old. My wife is going back to college this summer for the graphic design program at the local college. I figure between my MBA degree and her Graphic Design degree we could start a business in advertising. Am I wasting my time completing this MBA considering my age? This may not mean anything but my parents are in their mid eighties. I still have a lot of life left.

My answer: Go for it. You are an inspiration. I love your last sentence:

I still have a lot of life left.

Take that, Gen Y.

I’ve seen research showing that people between 55 and 65 have hormone changes that encourage learning. I say education is good and the second-best activity humans do is learning about something they’re interested in. When I was your age I seriously considered adding a PhD to my MA and MBA degrees. I didn’t, but that’s another story.

There is, however, a possible catch: if the MBA is a drag, hard to do, and no fun at all, then don’t do it. If it’s a sacrifice, don’t do it. If you expect it to pay off in actual dollars, don’t do it. Few if any advertising clients will decide on you vs. others because you have an MBA degree. And, sad but true, to many potential clients your age is a drawback.

Do it because you want to, or not at all.

I’ve posted a lot on when and why to get an MBA degree, and some on why not, too. Click here for the category.

(Image: bigstockphoto.com)

Do You Know The Luxury of Not Having to Know Everything?

Never underestimate the luxury of being able to not know something.

For example, you’re in a business meeting and somebody asks about some acronym you’ve never heard of. The right answer is:

I don’t know what that acronym means. I’m not sure I’ve ever heard it before. Maybe you can tell me, or give me some context?

Too often, though, people think something they don’t know is something they are supposed to know. So they fake it. They work around it, pretend to know, guess, or stumble.

I learned years after getting an MBA degree that one of the unexpected benefits was the luxury of not knowing something. Which leads to the luxury of being able to just ask. “I don’t know” is very freeing.

tour busHere’s another way of explaining it. When I was young I guided two around-the-world groups for a travel agency.

The first time around, I feared having one of the tourists ask me something I didn’t know. I was supposed to have been to these places before, and with most of them, I hadn’t. And that was nerve wracking. There are about 50 churches between the airport and the hotel in any European city. People would start asking names of churches as soon as we got off the highway into town. And I didn’t know.

The second time around, when we’d go through the neighborhoods towards the hotel , I had the luxury of saying “I don’t know” when I was asked about some random church along the way. “It’s not one of the major ones,” I would add, knowing at least that it wasn’t on the tour.

I was reminded of this last week when I read a good post called 5 Surprising Traits Of Successful Entrepreneurs by Adelaide Lancaster on Huffington Post. Number one on that list is:

Ability to admit (comfortably and openly) what they don’t know.

Amen to that. Occasionally I run into one of those people who seems pressured to know everything. They can never just exhale and not know. I’m sure that’s a hard way to live.

(Image: lierne via Flickr CC)

What’s An Entrepreneur’s MBA Degree Really Worth?

[Note: I posted this first on Small Business Trends … I’m posting it here too because this is my main blog. Tim]

I’m an entrepreneur. The last time I was an employee was in 1983. So what did I get from my MBA studies?

It wasn’t about earning power. I quit the  fancy high-paying MBA job I’d recruited into just a few weeks after graduation. I went back to the consulting firm I’d worked with while I was at business school, before I graduated. And I was self employed less than two years later, and I’ve never worked for anybody else since then. I was an employee of the company I founded and owned.

So was it worth it? Yes, many times over. Because of business school, as I developed my own business, I had a general idea of all the parts and how they came together. I knew enough about finance, accounting, marketing, sales, and administration to do it all myself in the beginning. Later on, as the company grew, I had experience and some knowledge about each of the key functions in the business.

Nobody taught me entrepreneurship. I didn’t learn that in school. What I did learn, though, was enough about business to make starting, running, and growing a business conceivable.  Maybe I would have made it anyhow, but I doubt it. Knowledge is power. And it gives you the confidence to take risks and move forward.

Is the value of an MBA degree the income with the degree less what it would have been without the degree, less the cost of the degree, and the earnings sacrificed while studying? What’s education worth? Do you measure it in salary? The value of studying literature is the earning power gained? Fine arts? Philosophy? What about business or engineering?

I don’t think so.

The Best Argument for Business Education…

… is having a better idea of what’s going on.

  • It isn’t about making more money.
  • It isn’t about becoming entrepreneurial.

No. It’s about having a reasonable idea of the whole business, rather than just the specific function. If business education works — and I think we have to admit it doesn’t always — then you have some idea of what’s supposed to go on in finance, sales, marketing, product development, and so on. You avoid tunnel vision. You’re more likely to see the whole forest, not just a few specific trees.

I don’t think the MBA made me "entrepreneurial." I do think that it made being entrepreneurial easier, because as I struck out on my own, I had at least a general idea of the various functions, and what was supposed to happen. I didn’t have to guess what the buzzwords meant. The knowledge was enabling.

More money? Maybe, more likely if it’s one of the top few schools, but even there, a good opportunity costs analysis usually shows that people are not better off, on pure money terms, quitting good jobs to go back to school for two years.

More entrepreneurial? I doubt it.  It’s easy to argue that another two years of schooling is the opposite of entrepreneurial. And also that the qualities of entrepreneurship are hard to teach.

Is it Possible That MBAs, Like Wine, Need Aging?

It occurs to me that I’ve had many good experiences, with hires and colleagues and business contacts, with people who had MBA degrees and years of experience. And I’ve had generally bad experiences with young MBAs fresh out of business school.

You could guess the reasons. Arrogance and entitlement come to mind.

Maybe it’s a matter of seasoning or tempering that fresh knowledge with some of the battering that comes later. Arrogance and entitlement leave a lot of sharp edges that time and experience wear down.

I am no different. As I got older, I found that my MBA studies gave me a better vision of the whole business, the forest as well as the trees; and I was glad for that. I’m sure that it helped me in business and was worth its weight in money many times over. And what I got from the degree wasn’t a higher salary, it was the knowledge to make my way on my own.

On the other hand, fresh out of business school, I recruited into a fancy and prestigious position with McKinsey Management Consulting, and I fell flat on my face. I disliked them, and they disliked me. (I did a post on that mistake here). I hated that job.

I’ve heard that fewer than one in five MBAs lasts even a year in the first job after business school.

Do you think there’s a pattern there?

(Image credit: JakubPavlinec/Shutterstock)