In Defense of the MBA

In the Silicon Valley startup community, there is a bit of an anti-MBA sentiment floating around right now. Recently a talk by David Heinemeier Hansson (DHH) cracked the top 5 articles on Hacker News. I have found my MBA from Wharton to be incredibly useful in technology startups. So I wrote a rebuttal. I’ve pasted it below.

I discussed my post with Jason Freedman and Evan Konwiser, the founders of FlightCaster. They both have an MBA from Tuck, so I was curious to get their opinion. Jason made an interesting point: MBA skills are useful at startup that has found product:market fit, but aren’t useful prior to that. And he is probably correct. The quantitive analysis and thought processes that you learn in business school are perfect for optimizing and analyzing a “real business”, however they don’t munch contribute to the pivot and iterate process that pre-product:market fit startups most go through. This isn’t to say that someone with an MBA isn’t useful at this stage startup, it’s just that they will need a different set of skills in addition to their MBA.

Original Post

DHH makes a few mistakes in his reasoning here. I have an MBA and work for a successful YC startup. Here are the flaws with his argument:
  1. Mediocre business schools aren’t worthwhile. And although school rankings are only an approximate quality measure, any school that isn’t in the top 30 in the world or top 10 in the US is probably mediocre. He is basing his analysis on his experience at the University of Copenhagen, which doesn’t make most global rankings (Financial Times rankings, WSJ rankings, Business Week), doesn’t crack the top 30 in Europe (FT Europe), and doesn’t actually offer an MBA. In addition, the 3 year program the DHH refers to is actually an undergraduate program (the MBA is a graduate degree).
  2. Internet businesses operate at large scale (if they are successful), and understanding large scale businesses operations requires quantitative analysis. Working for a YC startup myself, I can attest that what I learned in business school is incredibly useful. My school (Wharton), focused on quantitative analysis, and I came out of it with a set of tools that I use everyday. These include statistical analysis, quantitative model building, quant marketing tools, and financial analysis. Of course you can learn these tools on your own, but you risk not knowing what tools are available to address the problems you face.
  3. In addition to tools, a good MBA program will teach a general problem solving technique to systematically break down, analyze, and solve business problems. And it will teach you to effectively communicate your solutions to others (you boss, a client, a VC, whoever). Some people are naturally good at this and don’t need an MBA to do it. But many need to be taught how to think in this manner.
  4. As another commenter pointed out, a lot of value from getting an MBA comes from networking. However if you get an MBA in one country (Denmark) and then move to another continent, that network will be less useful.
  5. Many of DHH’s lessons about building a successful startup – including charging for your product, picking a competitor, and rejecting conventional thinking about starting a tech company – are exactly the type of things you learn while getting an MBA. In fact, rather than learn specific lessons like these, you learn a framework for evaluating your business and market, and formulating the right way to structure your company.
DHH does make a few good points, both explicit and implied:
  1. Strategy frameworks like the Porter’s 5 Forces (he incorrectly describes it as a management theory) aren’t particularly useful for starting companies. Although these frameworks can help to gut check if a startup is entering a good or bad market, they won’t be at all useful in the day-to-day running of a company.
  2. Based on my small sample set (of 1 school), I don’t think business school is useful for learning how to build a product or be entrepreneurial. Granted, some schools specialize in this and mine did not, so other schools may be useful in this regard (Stanford GSB is known for entrepreneurship).
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6 responses to “In Defense of the MBA

  1. Matt,

    Good points. I’ve found my MBA (UCLA Anderson ’99) to be useful working at tech firms large and small. But, when reflecting back on Anderson’s MBA curriculum, there were some gaps in terms of tools that would be useful for tech executives:

    1) Not enough emphasis on what one could call the “psychology of marketing”, on how to create persuasive marketing messages. I’ve been reading material by Cialdini, Heath brothers, and others to fill this gap.

    2) Little preparation for how to guide engineering teams, how to speak their language, and how to address their concerns. We never read “Mythical Man Month” for instance. I wonder how much recent MBA grads know about agile development, and if they could contribute effectively to a spring planning meeting.

    3) Conversely, lots of cases dealt with low technology industries, like manufacturing, that don’t seem to attract many MBAs, at least at Anderson.

    I’m guessing that the above could be some of the factors driving the anti-MBA sentiment. If MBAs are not able to create persuasive messages that engineers see as valuable, and if they’re not able to understand the needs and practices of engineers, then those engineers (who influence much of Silicon Valley culture) will discount their value.

  2. Pingback: MBAs and Tech Startups - One Year Later | Startable - Healy Jones' & Prasad Thammineni's Blog

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  4. It’s good to hear your perspective on the whole MBA/startup thing Matt. I reacted on my site at: http://www.startable.com/2010/08/02/mbas-and-tech-startups-one-year-later/

  5. Matt -
    Good post – for me, my St. Mary’s EMBA mainly gave me the self-confidence to go after more responsibility. The OD and people side were most helpful for me – motivating, inspiring and leading. Finally, the networking continues (after several years, it’s even stronger for me.)
    Cheers,
    JP

  6. I think the discussion should be less about whether an MBA is valuable in a startup and more about “What skills are needed in a startup.” I’m sometimes surprised to see the level of emotional vitriol on topics like this.

    Similarly, there are sometimes founders and even VCs who lash out against the need for Product Management. But my view is they’ve probably just never seen *good* Product Management before. (And maybe DHH hasn’t seen really good MBAs before.) Good product management capabilities can be found in someone with an engineering background or an MBA or more likely, a bit of both. That is, you need to have empathy for customers and an ability to see patterns in the market and then figure out (or motivate engineering to figure out) how to solve the problems in a way that is better than others can do. When it works right, it’s magical…

    –Zack