Why having an MBA is a negative hiring signal (for startups)

First off, I’d like to get a few straw-man arguments out of the way. I am not saying MBAs are bad. I am not saying startups should not hire MBAs. I am not saying there are not numerous counter-examples to the points I make below. In fact, I personally know several MBAs that work at or have founded fantastic startups. I have hired & worked closely with individuals with an MBA several times, and will continue to do so if I think the individual is a good fit. Remember, a hiring signal is just that: a signal. Other examples of negative hiring signals are: “earned CS degree from school that advertises on late-night television”, “worked at 4 companies in 3 years” or “2 year gap on the resume with no explanation”. Any positive or negative hiring signal is WAY less important than specific information about a specific candidate.

Now that that is out of the way, let’s get to the point: If a person has a particular skill-set, experience, personality & undergraduate education, that person choosing to earn an MBA has the net effect of the startup market valuing that person as being worth less, not more.

Why?

Supply and Demand

There are some basic supply and demand issues for MBAs. On the supply side, there is a surprising abundance of people with top-tier MBAs who want to work at startups. On the demand side, a candidate with those three little letters on their resume will need to be vetted more closely and will be automatically isolated into a small number of highly-specialized potential roles.

Entitlement

Business school trains people to think of themselves as special snowflakes, future masters of business, worthy of extremely high compensation and authority. Given that a high percentage of business school classes funnel into Wall Street and multinational corporations, it’s also a given that any top-tier MBA has classmates are all making ridiculously high salaries and have extremely powerful jobs. The net effect is that, psychologically, an MBA has to be doing as well or better than their classmates to feel good about themselves. Thus one primary motivation of an MBA is to secure their own massive salary, stock and title… and this motivation is diametrically opposed to the psychological makeup of a succesful startup team-member. Given the social pressure MBAs must feel from their investment banker friends, we can’t really blame them; it’s human nature 101.

Misguided Thinking

in my opinion, the lean startup movement, startup genome project, etc have roared into existence as an antidote to “MBA thinking.” “MBA thinking” involves putting all of the value in high level strategy, which is then rolled out to underlings who are responsible for actual implementation. In other words to an MBA Strategy > Implementation.

Lean startup philosophy suggests all of this strategy stuff is misguided bullshit, and rather you should personally build things as quickly and as cheaply as possible then scientifically iterate over and over again. To an early stage startup Implementation > Strategy .

In fact, learning a bunch of case-studies in a class about startups actually makes you dangerous, because it increases your self-confidence that you actually grok entrepreneurship and innovation, with no actual increase in personal know-how.

Selection Bias

It really bears examining a persons motivation for getting an MBA. Was it so they could skip ahead to get rich? Because they wanted to be powerful? Because they hated their job and applying to business school was a good way out? Because they originally wanted to work on Wall Street but are only now considering a startup because they heard that Sand Hill Road is paved with gold?

Limited usefulness

If someone is on a startup career track that is in finance or high-level dealmaking, an MBA makes a lot of sense. For instance, a smart startup founder would likely want their CFO to have an MBA. But how many startups ever get big enough to need a CFO? How many VP, SVP, COO or CEO gigs are actually out there? This is a very shallow pool to swim in.

Opportunity Cost

The time someone spent getting an MBA was time they could have spent getting on-the-ground experience and seniority. Losing two years of in-the-trenches experience during your 20s puts you at a clear disadvantage vs someone with the same undergrad education and early career who did not go to business school.

A thought experiment

Imagine that if instead of getting an MBA, ambitious young over-achievers spent two years in design school. Or spent two years getting a masters in computer science. Or two years getting into Y-Combinator and doing their own startup.

Who would be worth more in the open market when all is said and done? Who would have a better chance of building their own great company?

 
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