Hating MBAs is in fashion these days. I’m sure by now you’ve heard of Guy Kawasaki’s famous adage.
For a rough approximation of your valuation, circa 2004, you can also use Kawasaki’s Law of Pre-Money Valuation: for every full-time engineer, add $500,000; for every full-time M.B.A., subtract $250,000.
Every developer I know that wants to start a company thinks this is the greatest formula ever developed. Truth be told it’s pretty amusing and probably not far from the truth. As I’ve said before there are no absolutes. To make this a little more accurate I’d make two substitutions. I’d replace Engineer with “productive value driven employee” and I’d replace MBA with “overhead employee”.
Recently the CEO at my current employer made some comments about the value of MBAs. Now it should be noted he’s got an MBA himself and met his co-founder in business school. He essentially said don’t bother getting your MBA unless you can attend a top-10 business school. He went on to explain, the most valuable things you get out of business school are pedigree and network. Sure you’l learn a few things as well but you can learn those things pretty much anywhere. I actually agree with this statement for the most part and have discouraged a lot of smart people from pursuing an MBA for the sake of the degree. The rub on this sentiment is that there are about 20 schools that can legitimately claim to be top-10 B-schools. It just depends how you rank them and what criteria you use. This is one fundamental flaw of the MBA. It’s so broad and so obtuse that it’s very difficult to quantify it’s value directly.
I actually think I got a few other things out of my MBA.
- I learned how to work within and lead teams. At Michigan there is a heavy focus on group based learning. In your first year nearly everything was group based assignments. In addition groups tend to be assigned groups. Like “in the real world” outside the ivory MBA towers you rarely get to pick your teams. At least the entire team. I’ll be the first to admit that the DB factor (douchebag factor) is very high in business school. I mean astronomically high. So this means you have to learn how to work with both insanely smart driven people and massively arrogant douchebags. Successfully navigating this challenge is a skill I’ll carry with me forever. The world is full of douchebags and I am prepared for them.
- I learned how to evaluate a business strategically. Thinking about the decisions you need to make and how they will play out over the next 5-6 decisions is incredibly important. It can also be incredibly daunting and lead to stagnation in the startup environment. So it’s incredibly important to know when you need to step back and think about where you’re going. It’s equally important to know when you just need to get shit done.
- I learned that in the end it’s all about the numbers. Actually I only partially attribute this to business school. My undergraduate Science and Engineering education contributed pretty significantly to my comfort with numbers. In business school you learn how to apply this to well … business. It’s not about just reading balance sheets and cashflow statements though. That you can learn anywhere. It’s about knowing how to break down a decision into the core quantitative impact.
I attended business school with some of the most impressive people I know. For instance my friend Grace who is putting her value destructing MBA to work building her own business around a passion she and her husband share. On the other hand there’s a few folks I had the pleasure to cross paths with that I hope stay under what rock they crawled back to after the MBA.
In the end, MBAs are like all people. There are those that add value and those that erode value. There are plenty of caustic engineers out there that are just as toxic. Just because engineers have the magic keys to the castle, the ability to write code, it doesn’t mean they’ll inherently add value.