Why (and How) Some People Succeed in Business Without Getting an MBA

The following is a guest post by Josh Kaufman, a business teacher and the author of The Personal MBA: Master the Art of Business. He teaches craftsmen, artists, and professionals how to learn the fundamentals of modern business practice without mortgaging their lives. Learn more at PersonalMBA.com.

In my previous post, we discussed why getting an MBA might not be a good decision - particularly if you take on student loans to finance the degree. In this post, we'll examine the alternatives.

The list of successful businesspeople without MBAs is long, and cited often enough to be a cliché. Folks like Steve Jobs, Bill Gates, Jeff Bezos, Sam Walton, and Anita Roddick don't have MBAs, and have done quite well for themselves as CEOs of large companies. And while CEOs consistently grab the headlines, millions of unnamed entrepreneurs and small business owners around the world have figured out how to be successful without obtaining an MBA.

The question is: how?

It's simple, really: these business professionals may not have a credential, but they made it a priority to educate themselves about business - mostly by reading, experimenting, and learning as they went along.

Education is the process of learning something useful - concepts, knowledge, and skills that improve your life in some way. If you want to become a successful person, investments in education can pay massive dividends when it comes to your ability to make things happen in the real world. Aside from luck, education and application are ultimately how successful people become successful.

Believe it or not, colleges aren't really in the education business. Colleges are in the credentialing business - providing a degree, certificate, or other form of verifiable proof you've completed a mostly arbitrary, bureaucratically-defined set of criteria. Satisfy the requirements, pay the tuition, and you get the degree. Any relation between the criteria and real-world usefulness is nice, but a distant concern as far as the school is concerned.

Education and credentialing aren't the same thing. If you go to college, you're ultimately paying for a piece of paper, not an education. Education is about what happens in your head, not in a classroom.

Credentials can be useful because some employers use them as a simple screening mechanism for deciding which applicants to interview. In most cases, it doesn't really matter where the credential is from, as long as you have one.

Corporations use credentials as a way to outsource their HR screening process. By only accepting graduates with certain credentials from certain institutions, the company can save significant time and money screening out poor candidates. (The cynical view is that corporations also benefit from hiring candidates with massive debts - the employee needs the stable salary the company provides more than the company needs their services.)

That's why people say credentials "open doors." If the Goldman Sachs HR department automatically discards resumes that don't feature the letters "MBA", good luck getting an interview if you don't go to business school.

So - if you want to do something that absolutely requires a credential, and you can obtain that credential quickly and inexpensively, then obtaining that credential may help you. If you want to be a surgeon, by all means graduate from medical school - you can't practice if you don't.

Business, however, is distinct from many professional fields in the fact that credentialing and licensure isn't a legal requirement of practice. If you can create something valuable, attract the attention of potential customers, close sales, deliver on your promises, and make more money than you spend, you're in business. If you can give people what they want, you don't need a credential.

That's why getting an MBA is a poor choice if you're interested in entrepreneurship. If a credential "opens doors" you're not interested in opening, you don't really need it.

People like Steve Jobs, Bill Gates, Jeff Bezos, Sam Walton, Anita Roddick, and other successful entrepreneurs became enormously successful because they figured out how to create and deliver things that people desire enough to pay for. That, ladies and gentlemen, is what you need to learn to succeed in business - nothing more, nothing less.

If you have the drive and fortitude to become an entrepreneur, you don't need an MBA - but you still need to learn the essentials of business if you want to do well.

If working for another company is more your speed, all you really need to do is prove to a hiring manager you have Economically Valuable Skills - skills that will help the company create more value, market, sell, deliver value, and/or enhance profitability. If you can't do any of those things, you won't be hired - regardless whether or not you have a credential. Working for smaller companies, where you report directly to the CEO and have significant latitude to make things happen directly, can be huge opportunities that help you build your skills and prove to other employers your work is valuable.

No matter what path you choose, you must learn the essentials of business, people, and systems if you want to do well. Almost everyone (even graduates from MBA programs) gain most of their practical knowledge through experience, over time, and making costly mistakes. Good business education can help make that learning curve much shorter.

Here's a famous and useful quote from Alfred Korzybski that goes like this: "A map is not the territory." The purpose of education is not certification - it's to improve your mental "map" of a given "territory" by making your understanding of a topic relate more closely to how the world actually works.

Charlie Munger, Warren Buffett's business partner, calls these basic units of education "mental models" - a term worth knowing. The more accurate the mental model, the better decisions you'll be able to make using it. The more foundational the mental model, the more that idea can explain. The more mental models you learn well enough to use, the more opportunities and risks you can perceive, understand, react to, and take advantage of in the real world.

Unfortunately, even the best credentialing programs in the world focus less on mental models than on the credentialing process itself. Checking off topics on a bureaucratic syllabus means very little if those topics aren't essential mental models. If the accreditation process says you must learn the Black–Scholes option pricing formula, learn it you must - even if you never use it, and forget it immediately after the exam.

That's why even graduates from top business schools ultimately use a very small fraction of what they're tested on in the classroom - what they're learning in the classroom has almost nothing to do with the mental models they need to do their jobs. That type of "learning" is a waste of time and energy.

That's why I advocate self-education - learning the essentials of a topic on your own, before seeking credentials. By taking full responsibility for your own education, you can spend more of your time and energy learning foundational mental models that will actually make a difference in practice.

Learning is really about what happens in your head, not in a classroom. The best classrooms can certainly facilitate the process, but your ability to master the concepts that matter will always be your sole responsibility. You can save a lot of time and energy by learning the basics on your own.

This approach to learning is a natural offshoot of the "80/20" principle - you don't need to learn everything there is to know about a topic in order to do well. All you need to learn is the Critical Few - the small percentage of concepts that provide most of the real-world value. Learn the essentials first, and you can go surprisingly far. The more you read, the more you research, and the more you experiment with real projects that have real consequences, the more you'll learn.

My book, The Personal MBA: Master the Art of Business, started as a personal project. My goal was to isolate the most important business-related mental models, so I could use them to do more valuable work. By sharing what I learned in the process, I hope to dramatically decrease the time it takes you to master the essentials of business, so you can spend more time doing work that matters.

This approach to education isn't new by any means: books like Drawing on the Right Side of the Brain have used this approach for quite some time, with remarkable success. Topics like mathematics are taught by focusing on core ideas first, then combining them to explain more complex ideas. My book is, as far as I know, the first time it's been attempted in the field of business. The question of whether or not I've succeeded is ultimately up to you to decide.

Whether or not this approach to education is right for you is a personal decision. The business self-education debate is very similar in many ways to the homeschool debate, and is controversial for the largely the same reasons. Regardless of what you ultimately choose, researching all of your options and making a mindful choice will help you make the best possible decision.

In the end, the decision self-educate or go to school is yours, and yours alone. I hope whatever you choose, you find nothing but success.

Comments

[Sunil from The Extra Money Blog]

excellent post and one that welcomes strong favoring and opposing opinions with open arms. but - i love the thoughts and topics discussed.

i agree with what the post has to say. however that said, i have and will always getting a good formal education (through the credentialing process) because that is what our society recognizes, accepts and rewards. while failure rates are high in entrepreneurship, having the credentials required for a stable job/career is a good safety blanket to fall on.

this post is very much consistent with my beliefs as i am a big proponent of starting it up (entrepreneurship) on the side while maintaining a full time job. it really comes down to personal risk mitigation while maximizing upside potential.

[UHNW]

Agree. An MBA is simply a step and shows that you can complete a course of education. It won't necessarily make you a great business leader. MBA courses are money makers for universities, thats why they are advertised so heavily. You need a good formal education, but it doesn't have to be an MBA - do something different. It might make you a more interesting person.
Outside of the US, having an MBA does not rank terribly highly in hiring decisions. Very few people at my firm (of over 20,000 in this country) has an MBA. For us a CPA is more important.
Does the cost / benefit weight up? Maybe in the first few years, but once you have 10 to 15 years experience under your belt, showing what you can do is more important than the bit of paper.

[Eric]

Already requested your book :)

[BobbyC10]

Great article with a number of important points weighing the options of going back for MBA. As an aspiring business professional presently weighing that decision I found this article very helpful and relieving. Thanks

Bobby

[Georgia]

I liked what they said at the college I attended. They said there was no way they could teach us everything we needed to know. Their job was to teach us how to find and use what we would need to know throughout our lives and to help us become useful citizens.

[Concojones]

Josh, you hit the nail on the head. The MBA as an entry ticket to a specific career track, not an entry ticket to entrepreneurship or business in general.