Is an MBA a Plus or a Minus in the Startup World?

A long time ago, I had to make a really tough choice: invest in an MBA from New York University, or make do with my bachelors. I was newly married, had a child on the way, and didn’t have much in savings. The degree would set me back tens of thousands of dollars and take years to complete—especially if I did it part time. And I couldn’t imagine doing anything but programming computers for a living.  So why learn finance, marketing, and operations management, I wondered? Well, I decided to enroll because my understanding of the business world lacked depth, and I harbored a deep-rooted desire to get the best education possible. My wife and I moved into a small one-bedroom apartment in North Bergen, NJ, and we made do with what we had.

For a couple of years after getting my degree, I wondered whether I had made the right choice. Even though I scored a great job at CS First Boston in its IT department, I was just writing code and designing systems. Yes, I started to enjoy reading BusinessWeek and the Wall Street Journal; but had the financial sacrifice and time away from my family been worth it? It didn’t seem to have been.

Over time, I started rising through the ranks in IT. I went from being a programmer to becoming a project leader and then a vice president. I found that I could communicate effectively with user departments and my bosses; I could deliver projects on time; I knew how to manage and motivate employees; and I had the confidence to present business proposals to managing directors and board members. I was even able to help persuade IBM to make a $20 million investment in the technology that my team had developed. We spun off a startup called Seer Technologies, and I became chief technology officer. And that’s when my education really began to pay big dividends.

In the startup world, it’s simply survival of the fittest. You have to involve yourself with almost every aspect of the business—and use all skills. I would find myself having to develop and manage budgets; help market and sell; hire; assist in setting corporate strategy; and review legal contracts. As well, I still had to develop technology and deal with all the uncertainties and failures that come with a startup.

My MBA classes seemed to fit our business needs like the pieces of a jigsaw puzzle. Even obscure topics like corporate finance came in handy, in IPO discussions with investment bankers and later, in raising capital for my own company.

So I have no doubt that my MBA was the best investment I’ve ever made, and my education helped me achieve success.  Which leads me to the reason for this post: a Twitter debate with Guy Kawasaki, Managing Director at Garage Technology Ventures. Kawasaki argues that MBAs are not needed in the startup world; in fact these provide negative value. He insisted that I was “in denial” when I challenged a piece he had written in Forbes several years ago:

What is the value of an MBA these days for young college graduates who want to start their own company?
Probably about a negative $250,000. (I have an MBA, and I was once a young college graduate.) I don’t think an MBA matters very much for starting a company. A much better educational background is an engineering degree. You can always hire MBAs, but if you don’t have the ability to conceptualize and deliver a product, you’ve got nothing.

In email exchanges, Kawasaki explained that his issue with MBAs is that they are “taught that the hard part is the analysis and coming up with the insightful solution”. In other words: implementation is easy and analysis is hard. “But this is the opposite of what happens in startups. Implementation is everything in a startup.” Kawasaki believes that MBAs aren’t a good fit for startups, and engineering graduates are.

I agree that engineering degrees are important. They provide a level of technical depth and analytical capability that is invaluable in the tech-startup world. But not everyone needs to be an engineer. You need smart people coming up with creative marketing campaigns; managing finances; and selling your products. And the CEOs and CTOs need to master all domains.

In my experience, the most successful entrepreneurs have been those with a strong technical background who have been through some sort of “finishing school”. (I am not talking about college dropouts such as Bill Gates and Steve Jobs—I consider them to be outliers). Engineering degrees can be very technical and can actually narrow one’s horizons. To innovate, you need to understand customers and markets. To build a successful product—one that actually sells and makes an impact, you need to understand distribution and finance. So even in the lower echelons of technology, a broader educational background is a plus.

Is the MBA the best degree for engineers? Maybe not. Programs such as the one I teach at Duke may be a better fit. The Duke Masters of Engineering Management program is a one-year program that teaches students marketing, finance, intellectual property and business law, and management. It’s like a mini-MBA. Engineers don’t need to learn how to price an option with the Black–Scholes Model, for example. They certainly don’t need to learn how to create new types of financial products. There are also many other degrees that can provide the needed balance to engineers. These don’t have to be tech or management oriented; even an education in diverse fields such as psychology can be a plus: anything that broadens your horizons and teaches you how to come up with “insightful solutions”. The point is that education is the best investment that one can make. Unlike stocks and bonds, education never loses value; and when you add experience, it gains even more value.

Editor’s note: Guest writer Vivek Wadhwa is an entrepreneur turned academic. He is a Visiting Scholar at UC-Berkeley, Senior Research Associate at Harvard Law School and Director of Research at the Center for Entrepreneurship and Research Commercialization at Duke University. Follow him on Twitter at @vwadhwa