MBAs Useful or Nah?

Why MBAs Struggle as Tech Founders

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We're back with another engaging discussion courtesy of the Pragmatic Playlist! This week, we delve into a dubious question: Do you really need an MBA to build a successful tech startup? In a society that values education—despite the steep costs—many leading tech founders have either dropped out of college or bypassed the MBA route altogether.

In our latest YouTube video, "Never Make an MBA Your Cofounder," we explore this topic through five key takeaways that might change your perspective on the true value of an MBA in the startup world. Join us as we challenge conventional wisdom and reconsider what it really takes to succeed in tech entrepreneurship.

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Ol’ Skool vs. New Skool Approach

In the video, it was discussed that there are two different approaches to starting a business: the traditional or "Ol' Skool" way and the modern or "New Skool" way. The traditional approach focuses on thorough preparation before entering the market. This involves conducting extensive market research to gather detailed insights before developing the product. Startups are encouraged to keep their ideas confidential and perfect their product before launching it. This approach prioritizes protecting brand identity and ensuring the product is complete before going public.

On the other hand, the "New Skool" approach proposed by Eric Reis in his book, "The Lean Startup," encourages startups to implement the Build-Measure-Learn feedback loop. This method helps startups become more agile and innovative while minimizing waste and speeding up their product development cycles. The feedback loop involves building a product, measuring its success, and learning from the feedback to improve the product. This approach values speed and innovation while still prioritizing quality.

But that's not all. In his book "The Lean Startup", Eric Reis suggests implementing the Build-Measure-Learn feedback loop. This method is designed to help startups become more agile and innovative while minimizing waste and speeding up their product development cycles. By following this feedback loop, you can quickly identify what works and what doesn't, allowing you to make the necessary changes to improve your product. With this approach, you can create a successful startup in no time.

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What Tech Startups Founders Have in Common

The video points out that some of the most well-known and successful startups have something in common: the founders don’t have MBAs. Moreover, many of them are engineers, computer scientists, and graphic designers. They understand something that many MBAs may not, which is that they know how to build a product. The video highlights the famous Winklevoss twins who essentially came up with the idea of Facebook. If you’re unfamiliar with the story check out the film TheSocial Network. The main point in highlighting the Winklevoss twins story is to show that these two Harvard Econ majors needed Mark Zuckerberg to help expand their social network product and were unsuccessful because, unlike Mark, they didn’t know how to build a product.

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MBA vs. Technical Expertise: A Founder's Dilemma

Engineers don't enjoy being managed by non-technical people, because non-technical people typically don’t understand how long a product will take to build, what’s possible and what isn’t, and how a product should look. MBAs are trained to operate companies, not build them from the ground up. This fundamental difference often places MBA graduates at a disadvantage in the startup world, where agility and technical know-how reign supreme. The video points out that MBAs typically lack the hands-on coding skills that are crucial in the early stages of a tech company, making them less likely to be the pioneering force behind a successful startup.

Outsourcing Isn't Always the Answer

The idea of simply hiring someone to build your app might sound convenient, but it overlooks the complexities of software development. Maintenance, upgrades, and ongoing management are just a few aspects that require continuous engagement with the product, something that's difficult to manage remotely or through temporary contracts. It’s important to understand the type of engineer you’ll need or how long building the product will take. Also, it’s not easy to find someone to hire because once the raised money runs out you have no capital to pay your new hire. The video notes that the founding team needs to have the skills to get the company to pull in $1M in revenue. It’s not about raising money to hire a new employee, it’s about having the right people with the right skills to make the company or product profitable.

Courtesy of DALL-E and not a real picture of Damien Peters

A Personal Reflection

From a personal standpoint, our founder and CEO, Damien Peters, Mr. Pragmatic himself is a bit of a contradiction. He is the founder of a startup and has both technical expertise and an MBA. This dual perspective allows him to appreciate the value of both skill sets, yet also to recognize the limitations of an MBA in the tech startup arena.

Look, while MBAs provide valuable business management skills, their relevance is less pronounced in the tech startup sector, where practical technical skills and hands-on product development are paramount. As we continue to evaluate the pathways to successful entrepreneurship, it becomes clear that there is no one-size-fits-all answer, but a blend of skills tailored to the challenges and demands of the tech industry might be more effective.

Are any founders and/or MBAs in the building? We’d love to hear your take on this.

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