A Blog by Jonathan Low


Mar 19, 2016

Silicon Valley May Want MBAs More Than Wall Street Does

Yeah, Wall Street wants techies who can mathematically manipulate markets while tech wants MBAs. Could be a signal to short tech stocks. JL

Natalie Kitroeff and Pat Clark report in Bloomberg:

Almost one-fifth of B-school graduates in 2015 went into tech jobs, making the industry the No. 3 employer of MBAs.
PayPal co-founder Peter Thiel said MBAs are predisposed to “herdlike thinking and behavior.” Venture capitalist Marc Andreessen dubbed them a contrarian indicator, saying “if they want to go into tech, that means a bubble is forming.” In a post on the question-and-answer website Quora, Facebook Chief Operating Officer Sheryl Sandberg, who earned an MBA from Harvard in 1995, said that while she got “great value” from her experience, she wasn’t ready to recommend the degree to the country’s future tech stars. “MBAs are not necessary at Facebook and I don’t believe they are important for working in the tech industry,” Sandberg wrote.
Silicon Valley’s trash talking of the MBA obscures the reality that U.S. tech companies are hiring B-school grads in ever-larger numbers. Business schools sent 16 percent of their 2015 graduates into technology jobs, according to a Bloomberg Businessweek survey of students who’d accepted offers by that spring, making it the No. 3 industry for MBA grads after finance and consulting.
By one measure, Silicon Valley values MBAs more than Wall Street does. In 2015 tech companies paid business school graduates more than financial companies did, according to Businessweek’s poll of more than 9,000 MBAs. “If I said all people with a law degree are worthless, what would you say?” says Rich Lyons, dean at the University of California at Berkeley’s Haas School of Business. Forty-three percent of its 2015 class went into tech, according to the survey. “It’s such an unwarranted generalization. Firms wouldn’t keep coming back to hire our MBAs if it wasn’t a valuable skill set.”
Source: Getty Images
Amazon.com, Microsoft, Google, and IBM were among the 15 companies that hired the most MBAs in 2015, according to data reported by 103 business schools to Businessweek, proof that while the founders and chiefs of some of the top U.S. tech companies may see themselves as renegades, they’re not above hiring trained managers to carry out their vision.
While a degree in computer science—or the lack of any degree at all—may confer a high mark of distinction, the Valley’s C-suites are packed with MBAs. Twenty-four of 67 companies in the S&P 500’s Information Technology Sector Index are led by chief executives with MBAs or equivalent degrees. Among those CEOs are Apple’s Tim Cook (Duke’s Fuqua School of Business) and Microsoft’s Satya Nadella (Chicago’s Booth School of Business).
In the eyes of Keith Rabois, an investment partner at the VC firm Khosla Ventures, the presence of MBAs at a tech company is a sign the business is mature, maybe even over the hill. “They tend to get hired after the company is already successful and it becomes a very bureaucratic organization,” says Rabois, an early employee at PayPal who later founded the real estate startup Opendoor. “They will probably keep you out of trouble, but they won’t create any value.”
Source: Getty Images
The idea that MBAs don’t belong at startups has become a Valley meme. Guy Kawasaki, a onetime Apple employee turned venture capitalist, once quipped that in valuing a young company, he adds $500,000 for every engineer on staff and subtracts $250,000 for every MBA. Kawasaki has an MBA from UCLA.
“I don’t buy into the argument that entrepreneurs don’t need an MBA,” says Sri Zaheer, dean of the University of Minnesota’s Carlson School of Management. “If they were a little more clued up about how to make money in their businesses, we wouldn’t see these tech bubbles and the craziness that happens every few years.”
Twenty-four percent of 157 startups valued at $1 billion or more—frequently referred to as unicorns—were founded by MBAs, according to a recent study published by David Fairbank, a student at Harvard Business School. They include eyeglass retailer Warby Parker (all four founders attended the Wharton School), medical directory ZocDoc (Columbia Business School), and health insurer Oscar (HBS). “A unicorn is not necessarily the end-all measure of long-term successful companies, but it’s a pretty good metric for thinking big,” says Fairbank.
Business schools worry the MBA-bashing may discourage potential applicants. The degree appears to be losing some of its popularity, with enrollment down 11 percent since 2009, according to a survey of 265 business schools by AACSB International, an accrediting organization. “When you used to think about good business leaders, you would think about a Jack Welch. Now you think of Zuckerberg, and that’s a really different association with graduate schools of business,” says Amy Hillman, the dean at Arizona State University’s W.P. Carey School of Business, where 43 percent of 2015 grads went into technology.
Hillman says B-school grads will find even more opportunities at technology companies as investors become more discerning about the types of skills required to turn a good idea into a thriving business. “It used to be more risk-takers,” she says. “Today it’s a group of very sophisticated funders who are looking for very sophisticated business ideas.”


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