4 Reasons an MBA Is Bad for Entrepreneurs

Last Updated Mar 8, 2011 5:46 PM EST

I don't think entrepreneurship can be taught.

In fact, the list of entrepreneurs who dropped out of school reads like a who's who of company builders: Bill Gates, Richard Branson, Larry Ellison, Paul Allen (Microsoft), Sean Parker (Napster, Facebook), Walt Disney, Mary Kay Ash (Mary K), Coco Chanel (Chanel), Barry Diller, Simon Cowell, Michael Dell, Henry Ford and Steve Jobs are just a few of the Spicoli-esque educated.

I think not only is getting an MBA a waste of money and two years of your life; it may also, in fact, reduce your chances of building a successful business. Here are four reasons why:

1. MBA programs teach causal reasoning
One of the most compelling pieces of evidence that an MBA is a poor investment for aspiring company builders comes, ironically, from one of the institutions that would benefit most if aspiring entrepreneurs got a degree in business. Prof. Saras Sarasvathy, a researcher at the University of Virginia's Darden School of Business recently completed a study in which she compared 45 super-entrepreneurs (all had at least 15 years' experience, had started at least four companies and had taken one public) with a group of equally successful big-company CEOs. One of her key findings was the difference between how entrepreneurs and big-company execs approach planning for the future.

Sarasvathy found that the corporate types (many of whom have MBAs) in her study use "causal reasoning," which means they tend to set goals and systematically develop plans for reaching them. That is, they start with the goal and then figure out how to get there.

Super-entrepreneurs (few of whom have an MBA) use what Sarasvathy calls "effectual reasoning," which means they start by assessing the resources they have at their disposal and then ask themselves what can be created. "They are less like gamblers," explains Sarasvathy in an attempt to bust one of the common myths about entrepreneurs, "and more like an Iron Chef who has the skills to bring together readily available ingredients, whether mundane or exotic, in delicious ways that make us want to pay more for a taste of the end product."

Sarasvathy found the people who displayed causal reasoning in her study were much more likely to be working for a big company after receiving their MBA.

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(MBA Flickr photo courtesy of madaroni, CC 2.0. Chef Flickr photo courtesy of joanna8555, CC 2.0)

  • John Warrillow

    John Warrillow is the author of Built to Sell: Turn Your Business into One You Can Sell. He has started and exited four companies. Most recently, he transformed Warrillow & Co. from a boutique consultancy into a recurring revenue model subscription business, which was acquired by The Corporate Executive Board. Watch this video to hear John's thoughts on starting and growing a business you can sell.

    John and his book "Built to Sell" have been featured in CNN, MSNBC, Time magazine and ABC News. John was recognized by BtoB Magazine's "Who's Who" list as one of America's most influential business-to-business marketers.

    John now divides his time between homes in Toronto, Canada, and Aix-en-Provence, France. He is a husband and father of two rambunctious boys.