It’s a truism that the most successful business people rarely seem to have MBAs. Look at the founders of corporate giants and one finds college dropouts like Bill Gates, philosophy majors and those who did not attend college at all, such as billionaire Sir Richard Branson of the Virgin Group.
However, like most truisms, it doesn’t say what most people think it says. While the majority of the CEOs of Fortune 500 companies do not have MBAs, most do have advanced degrees. Among CEOs holding advanced degrees, the MBA is the most common. Gates and Branson may be high profile, but they are exceptions.
An important distinction is that founding entrepreneurs and CEOs are usually two different animals. The entrepreneurial, company-founding personality is usually compulsively attracted to new ventures; the skills it takes to conceive a new idea and bring it to market are quite different from what it takes to run a going concern. Some entrepreneurs manage to combine both sets of skills, but others frequently get bored once their baby grows up, and subsequently move on to the next adventure or are removed by their boards. MBAs, on the other hand, are supposed to administrate, not invent.
The problem lies in what many MBAs do when they take charge of large companies. According to a survey conducted by Forbes, having an MBA at the helm – or even a CEO with an advanced degree – doesn’t guarantee a good return on investment.
In fact, the opposite might be true. Out of a pool of 440 CEOs of top-rated corporations, those without any advanced degree at all produced a better total return for their investors (16%) than those with MBAs (15.2%), although MBA graduates can console themselves that at least those with law degrees performed even worse (13.9%).
Bad old boys
From the perspective of personal financial interest, the MBA certainly can be useful. Most graduates will out-earn those in less money-focused professions. The networking opportunities are significant, provided you are in the right network.
For example, MBA-holders running Fortune 500 companies are almost all Harvard graduates. But the fact that Harvard MBA CEOs only produced a 10.6% return for their investors (compared to University of Chicago grads’ 24% return) says a lot about the durability and the danger of good-old-boy networks. (Note: Harvard MBAs still did better than Columbia-graduate CEOs, who produced a miserable 3.5% return for their shareholders, barely outperforming inflation).
What does this mean in China? First, producing MBA graduates in quantity without paying attention to quality is risky. Second, Chinese applicants’ focus on school brand names is intelligent self-interest but ultimately may not serve the Chinese economy well. Third, true leadership, it appears, is learned outside the classroom, much like common sense.