Entrepreneurs vs. MBAs
“Graduating Executive MBAs Rank Cox #1 for Entrepreneurship. We Think You’ll Agree” screams a recent ad in The Wall Street Journal for the Cox School of Business at Southern Methodist University.
Well, pardon me! Here I thought that entrepreneurs and business administrators were different people with different skills, different orientations, different missions.
To me, people get MBAs in order to become business administrators, people who run established enterprises. Sure, those outfits can be private for-profit corporations, public companies, even government goodies and charitable organizations as well as family activities. Incidentally, I wonder if Mafia families employ MBAs to manage their often conglomerate and multinational businesses.
I think business managers concentrate on established rules and procedures that are developed over time and reflect the human nature of customers, suppliers and employees as well as the tasks to be done. Native brains and judgment are important attributes of business managers, but many of the skills they need can be taught to intelligent people. Hence, the justification for business schools. Administrators are willing to take risks, but with calculated, often quantified odds of success. They operated mainly within set guidelines, even if they set those guidelines, and rely heavily on strategic planning.
Former GE CEO Jack Welch fits my definition of an administrator. Educated as an engineer with a Ph.D. in chemical engineering, he spent his entire career at GE and rose quickly to the top. He was an innovator and “reinvented” GE by fostering decentralization and simplicity as well as responsibility for managers up and down the organization. But he also was a traditional administrator. A superb strategic planner, he led by example and lived by several inviolable rules. The company must be number 1 or 2 in each product line or dump it. Employees are graded in three categories, with the top rewarded lavishly, the middle encouraged and the bottom fired.
In contrast, I see entrepreneurs as people who see unfulfilled needs, the means to fulfill them and the will, energy and unflagging determination to put them together. They take big and incalculable risks in doing what’s never been accomplished before. They often fail, but are seldom discouraged. They are perennially confident and optimistic and despite past setbacks, willing to try new ventures.
Entrepreneurs get bored with businesses once they are up and running, and often sell them or turn them over to administrators while they move on to new challenges. They also have limited interest in formal education and usually prefer to get into the thick of the fray, learning on the job what they need to get it done.
I also believe that entrepreneurs are born, not taught. Andrew Carnegie, one of the all-time great entrepreneurs, in 1908 hired Napoleon Hill to interview over 500 millionaires to find out what made them successful. These were the great entrepreneurs of the day, the buccaneer capitalists, the captains of the American Industrial Revolution, mend like Thomas Edison, Alexander Graham Bell, Henry Ford, William Wrigley Jr., George Eastman, John D. Rockefeller and F.S. Woolworth. Hill’s resulting book, Think and Grow Rich (1937) describes the common trait of all these great entrepreneurs not as brains or education or experience or money, but the unrelenting will to accomplish their goals.
Bill Gates is a genuine entrepreneur. He dropped out of Harvard at age 19 to co-found Microsoft. IBM was late in realizing the potential of PCs after Apple led the way, and knew that its engineers were too tradition-bound to develop an operating system quickly. Gates learned that Seattle Computer Works had developed the right system, so he bought it for $50,000 in 1980 and licensed MS-DOS to IBM for use in every one of its PCs.
A true entrepreneur, Gates was not satisfied with the resulting immense business success as well as financial wealth when the company went public in 1986. So he moved Microsoft on to Windows and then to the Internet Explorer browser and computer games to keep up with rapidly changing technology and consumer tastes. Moe recently, he turned day to day management of the company over to others and became Microsoft’s Chairman and chief software architect.
In the 1990s, the tremendous success of entrepreneurs in semiconductors, computers and software, telecom and especially, the Internet convinced many bright young guys and gals that they too should be entrepreneurs. Whether they had the necessary talent or not. So the business schools, in true entrepreneurial fashion, stepped right in and assured those folks that they could help them achieve their goals.
The entrepreneurial fad faded with the bursting of the stock bubble. A recent survey found that the number of Americans starting or owning/managing new businesses fill 10.5% in the year ending last Sept. 30. Another survey of senior real estate executives revealed that degrees in real estate or MBAs were irrelevant in new hiring decisions. Instead, the execs “prize the lone cowboy, the gunslinger, the entrepreneur.”
Schools like SMU’s Cox still hope to attract those who think they can be taught to be entrepreneurs. Late last year, several U.S. Senators planned to introduce a package of tax, regulatory and other measures to “expand and extend the entrepreneurial economy.”
Business schools and tax breaks don’t make entrepreneurs. They’re born with the unquenchable zeal to see a need and find the resources to fulfill it.
A. Gary Shilling is President of A. Gary Shilling & Co., Inc., a New Jersey-based economic consulting and investment advisory firm. His firm also publishes Insight, a monthly newsletter of economic forecasts and investment strategies.
