What’s the difference between an MBA and an entrepreneur?

Sometimes being a nerd isnt enough
Sometimes being a nerd isn't enough

Pretty much everything it turns out.

It’s not a surprising distinction given the old adage that entrepreneurs are born, not made, and the fact that everyone seems to be doing an MBA these days. However Bill Taylor’s blog takes it a step further and argues that the differences between the two are becoming more important and that it’s time to change our minds about what kinds of people are best-equipped to become the business leaders of the future.

Taylor cites Professor Saras Sarasvathy’s interesting research about entrepreneurial thinking in which she’s discovered that MBAs use “causal” reasoning while entrepreneurs use “effectual” reasoning. According to Professor Sarasvathy, the casual reasoning of MBA’s “begins with a pre-determined goal and a given set of means and seeks to identify the optimal -fastest, cheapest, most efficient, etc.- alternative to achieve that goal.” An entrepreneur’s effectual reasoning “does not begin with a specific goal. Instead, it begins with a given set of means and allows goals to emerge contingently over time from the varied imagination and diverse aspirations of the founders and the people they interact with.” Here’s an example:

  • MBA’s Causal Reasoning: With the mindset of “to the extent that we can predict the future, we can control it,” MBAs at big corporations use competitive analysis, market research and statistical models to predict and solve problems. They are risk-averse and use established tools to control the future.
  • Entrepreneurs’ Effectual Reasoning: “To the extent that we can control the future, we do not need to predict it.” Entrepreneurs essentially control the future by creating (or inventing) it, taking the risks needed to forge new ground and using all their resources and networks to deal with unforeseen challenges. They are those that can drive by the seat of their pants (if needed) and succeed.

So who do we want as our business leaders in such uncertain and fast changing times? Entrepreneurs, naturally, as they just may be better suited to the challenge than MBAs. Or, as Taylor writes, “[Entrepreneurs are] the ones with the right stuff for tough times.”

It seems strange now but when I did my MBA, the career books actually advised people to take  the word “entrepreneur” off their resume. Their reasoning was that the word “entrepreneur” would suggest that you wouldn’t stay at a company for long (perhaps true). How times have changed – today it shows that you have the pluck and courage to make your own business rather than running someone else’s and the ingenuity to think of solutions to tough problems. In a rapidly changing business world, this is exactly what we need more of.