Entrepreneurs Need Experience More Than An MBA

I don’t have an MBA. I used to fear that this would put me at a disadvantage in starting my own company, but now I’m convinced that it may be the other way around. In some reputable surveys, as many as two-thirds of entrepreneurs felt that their entrepreneurial spirit was more ingrained than learned, so a specific education level is at least irrelevant.

For business professionals who aspire to an executive position in a large company, most people agree that an MBA is always positive. It will get you a higher starting salary, and a valuable edge in your credentials at every promotion opportunity. In fact, BusinessWeek reports that roughly 40 percent of the S&P 500 chief executives have MBAs in any given year.

On the other hand, I had trouble thinking of famous entrepreneurs with an MBA. With a little research I found a few notable names in relatively recent businesses, although each of these actually started with some big-company experience:

• Fred Smith, chairman and founder, Federal Express. Smith is a legend among MBAs because he developed the hub-and-spoke delivery concept in a business case at Harvard Business School. The company now has more than 160,000 employees and revenues of $44 billion. He built an overnight competitor to the U.S. Postal Service.

• Meg Whitman, president and CEO of Hewlett-Packard. As an entrepreneur, she grew EBay from 30 employees and $4 million in annual revenue to more than 15,000 employees and $8 billion in annual revenue, before moving on to HP. She is a graduate of Princeton University and has an MBA from the Harvard Business School.

• John Scully, former CEO of Apple. He has an MBA from the Wharton School of Business. During his ten-year tenure, Apple's sales increased from $800 million to $8 billion. Yet he was ultimately replaced a one-semester college dropout, Steve Jobs, who was the original founder. Sculley is currently doing well, despite his setback at Apple, as a partner in Sculley Brothers, a private investment firm formed in 1995.

These probably feel that their MBA was worthwhile. But I’ve found so many on the other side, like Mark Zuckerberg of Facebook and Steve Jobs, who dropped out of college to start companies, and succeeded anyway. So here's my net on how an entrepreneur should look at an MBA:

1. If you are already an entrepreneur, more education, including an MBA, will only slow you down. Consider it a waste of time.

2. If you plan to become an entrepreneur, and already have business experience or an undergraduate business degree, skip the two-year delay and cost of the MBA.

3. If you have a technical career with no business background, and you want to start your own business, an MBA can be a blessing by giving you the basic knowledge you need to manage your business.

4. If you are still in school, and contemplating an MBA before stepping into the entrepreneurial world, go for it. An MBA will extend your education more broadly into the world of business strategy, and give you more credibility with potential investors.

What’s different about the entrepreneurial environment? Many people argue that it has to do with the requirement for entrepreneurs to use “effectual” reasoning, compared to “causal” reasoning taught by most of the major business schools.

According to Professor Saras Sarasvathy, who teaches entrepreneurship at the Darden Graduate School of Business, causal reasoning begins with a pre-determined goal and a given means, and seeks to identify the optimal way to get there. Effectual reasoning, on the other hand, begins with a given means and allows goals to emerge based on situational dynamics.