How many of the students that graduate at HBS open their own business? You mentioned that recessions are a great time to open businesses, what kind of business do HBS students open or get into?

The Harvard MBA says:

The entrepreneurship bug bites a lot of Harvard MBAs.  It is estimated that over the course of their career, nearly half of Harvard MBAs will try to start their own business.

On a more concrete level, the school reports that 27 members of the Class of 2009 (out of 889) decided to start their own business right out of school.  That may seem low (3%), but remember, most people go to HBS to take advantage of the recruiting machine that funnels you into high-paying jobs with established companies.  It’s hard to turn down $200K/year or more in exchange for ramen and pinto beans.

Of course, I was part of the brave/foolhardy entrepreneurial group from my class, so form your own opinions here!

In terms of what kind of businesses students tend to start, there are three basic types:

1) High-tech startup

2) Low-tech startup

3) Search fund

The high-tech startup is your classic startup, often in Silicon Valley (though sometimes in Boston, New York, Seattle, or Austin).  Usually the HBS student who starts the company is the business person, and works with a technical founder he or she met in college, or at a previous employer.  For the company I started, I worked with both an old college friend, and an old high school friend, both with technical backgrounds.

Of course, in this kind of economic environment, it’s not always easy to convince investors to give untested MBAs millions of dollars, so you will probably need to show some market traction before raising serious money.

The low-tech startup is much rarer, largely because it’s much less sexy.  One of my HBS friends, for example, started a chocolate business.  On the other hand, while tech may be sexy, there are plenty of other ways to make money.  My friend’s business is doing quite well, as have other Harvard MBA-founded restaurants and even maid services (though I don’t think the Havard MBAs were doing the cleaning).

Finally, a small number of graduates opt for the search fund approach.   In this model, a graduating student raises some money from investors (usually rich guys he or she knows personally) to go out and buy an existing business to operate.  In many ways, this is like a mini-LBO, except that the transactions are much smaller, and done with equity from investors rather than a fund.

One of my classmates went this route and bought a printer cartridge refurbishing company.  As far as I know, he’s still doing well.

As for what kind of business to start during a recession, my classic advice is to focus on businesses that help people save money.  A number of my investments play off these theme, including RepairPal (when no one is buying cars, people want to save money on car repairs), and they’re doing well.

I am European and have to make a decision this week whether to do my MBA at a rather unknown, small University in California (accredited though) with a full scholarship or at a (lower) TOP100 Financial Times MBA Ranking school that I have to pay almost full. Both programs take the same time. What would you recommend me to do?

The Harvard MBA says:

As usual, the answer depends on your circumstances.  Here are the variables in play:

1) What is the relative value of the two different MBAs for your career?

For example, if you are a business owner, the delta in value is relatively small.  On the other hand, if you’re looking to get a job at a major management consulting firm, the delta in value is high, since these firms hire disproportionately from the top schools.

One way to gauge this delta is to find alumni from both schools in your chosen field, and ask them about their thoughts.  Not only will their opinions help you make a decision, simply comparing their relative achievements may provide an answer.

Geography is also important; if the lesser-known school is a big player in the area you want to live, it may be a better choice, even if the more prestigious school would provide a better platform in other geographical areas.

2) How much hardship will paying for the more expensive MBA entail?

Your financial circumstances also need to be taken into account.  In many cases, a more prestigious MBA can provide a delta of $30,000 per year or more over a lesser-known school; at that rate, you’ll make up the cost difference in a matter of years.  Don’t forget that you have to consider pre-tax dollars, unless you are able to deduct the cost of your MBA from your taxes.

On the other hand, if you already have hefty student debts from college, or don’t have enough of a cash cushion to easily afford the investment, you might want to do a little scenario planning.  Let’s say the global economy doesn’t recover by the time you graduate, and you have trouble finding a job…would adding the additional debt represent too great a risk?

3) Which school do you think you’ll enjoy more?

One final thing to bear in mind is whether or not you like the students and faculty at the school.  You’re going to spend two years of your life there; that’s a long time to spend with people you dislike.  Make sure you either spend some time there, or talk with alumni of the schools, to get the story on student life.

For example, while both schools are certainly prestigious, it is generally acknowledged that it’s a lot more fun to attend HBS than MIT’s Sloan School!

Good luck with your decision.

The Harvard MBA says:

Channel conflict is a very real issue for a lot of companies, especially because of the rise of the Internet.  The traditional role of the channel was to cover specific markets and provide end-user support.  The Internet changed all this, allowing manufacturers to sell directly over the Web.

Unfortunately, it’s difficult to start selling direct without upsetting your existing wholesale partners.  Rightly or wrongly, they will perceive this as bad for their business.  The best you can do is minimize the channel conflict.

A lot depends on the specific circumstances.  For example, what markets do your wholesalers cover?  If your wholesalers focus on true consumers, and the prosumer business is only a small part of their revenues, you may be able to explain to them why your direct-to-prosumer sales won’t interfere with their main business.

Alternately, you may be able to involve your channel partners in your prosumer business.  Perhaps the prosumers buy the products directly from your Web site, but are referred to your channel partners to purchase support and customization services.

Either way, be careful about taking risks with your main business.  It’s human nature to be overly optimistic about new businesses.  Proceed incrementally and avoid doing anything that would pull the plug on existing sales until you have clear indications of success.

The Harvard MBA says:

I chose this question because it’s representative of a lot of questions that I get.  Many of you seem concerned that unless you go to an Ivy League school for undergrad, that you won’t be able to get into HBS.  That’s simply not true.

While it is true HBS accepts more students who did their undergrad work at Harvard than any other university, Harvard grads only make up a small proportion of HBS students.  In fact, the majority of HBS students did not go to Ivy League schools for their undergrad years.

Don’t get me wrong–all other things being equal, going to an Ivy League school will help you get into HBS.  But all other things are seldom equal, and if the choice is between going to a state school, or going to an Ivy League school and bankrupting your parents, I know which one I would choose.

This same concern about snobbery comes through in the question about student attitudes at HBS.  There is no doubt that HBS students are arrogant.  The school practically encourages it.  But it is also true that HBS students are generally more well-rounded, and a reasonable number of us are actually decent human beings.

When I was in school, one of my friends produced a shirt for the entire class that read, “HBS 2000: Leaders of the New Millenium.”  Another mutual friend remarked, “Yeah, that shirt is fine, but I don’t think you should wear it down in Roxbury. [one of the rougher, working-class neighborhoods in the Boston area]”

The truth is that (at least when I was in school) HBS students are generally very supportive of each other.  “Sharking,” which consists of tearing down a fellow student during class to score points for yourself, is definitely frowned upon, and the “Sharks” who make a habit of it tend to be ostracized by the other students.

Ironically, HBS and HBS students are actually more supportive than Harvard University’s undergrad program, which is famously indifferent to whether or not you graduate.  My wife earned her BA from Harvard, and constantly marveled about how differently (and better) HBS treated its students than her undergrad alma mater.

What good is an MBA?  Aren’t MBAs the turkeys that led us into financial crisis while getting rich themselves?  Isn’t a skill where you can build value rather than devise complex money laundering schemes (like CDOs) a better idea?

The Harvard MBA says:

Since I’ve already addressed the role of Harvard MBAs in financial crisis, I’ll focus instead on the second half of the question: Does business school teach you any valuable skills?

The implicit assumption in the original question is that unlike in other fields, business education doesn’t build value.  No one wants to board an airliner designed by a college dropout, appear in court with a lawyer who learned his skills from reading popular law books, or submit to surgery by a self-taught doctor, yet when it comes to business, many people seem to have the attitude that anyone can do it, and that the MBA degree is simply an old boys’ club, much like a Ivy League secret society.

It may be that people feel this way because there are so many examples of successful self-taught businessmen; Bill Gates and Steve Jobs spring to mind immediately (somehow no one ever points out that the universally revered Warren Buffett studied at Wharton and earned an advanced degree from Columbia, along with his University of Nebraska BS).  Yet even these exemplars have benefited from the help of folks like Steve Ballmer (a Harvard MBA)  and Tim Cook (a Duke MBA).

The fact is, while business is not a hard science like medicine or engineering, it is a real discipline with a broad set of knowledge and skills, and business education does serve a purpose.

For example, how many regular folks understand accrual accounting or discounted cash flow analysis?  If you asked a man on the street to analyze why Wal-Mart is successful, would he be able to provide any insights beyond, “Low prices?”

Indeed, the very fact that MBAs were responsible for disastrous financial engineering products like CDOs (again, how many folks without an MBA really understand how these work) demonstrates the power of business knowledge.  Any tool of great power can be abused; medical knowledge can be used to devise bioweapons, engineering knowledge can be used to destroy buildings; why should business be any different?

It is also true that there are other ways to obtain these skills beyond attending an MBA program.  You could certainly find textbooks to teach you many of the same principles you might learn at HBS.  But the same applies to medicine, engineering, or any other complex field.

What an MBA does is give you a broad business education.  The fundamentals of business, if you will.  What you choose to do with that tool is ultimately up to you.  Choose wisely.

“Why do Asian women prefer white men? Seriously… why?”

The Harvard MBA says:

Ah yes, this is an oft-observed but seldom-analyzed phenomenon!  The key is to focus on a market-driven analysis.  The inevitable conclusion is that Asian women prefer white men because white men prefer Asian women.

The concept of market segmentation is both basic and powerful.  Businesses succeed by identifying the market segments with the greatest willingness to pay, and then catering to them.  There’s no value judgment involved–if young people want to watch trashy reality television, let there be “The Hills”!

In the case of Asian women, over the past several decades, they discovered an important fact: Most white guys have an Asian fetish. Heck, pretty much all (non-Asian) American males do.  For example, take the Outkast song “Hey Ya“.  In it, the African-American recording artists sing, “Now all Beyonces, and Lucy Lius, and baby dolls, get on the floor,” implying an equivalent level of attractiveness between Beyonce and Lucy Liu.  I consider myself an connoisseur of female beauty, and I can tell you that Lucy Liu would not be considered hot if she weren’t Asian.  Beyonce is way hotter than Lucy Liu (though neither can hold a candle to Jessica Alba or Megan Fox).

Lest you think this is a unique phenomenon, let me point out that many white girls have similar fetishes for British, French, Spanish, and Italian accents (This is most entertainingly demonstrated in “Love Actually“, where a British loser decides to travel to America, where all the women love English accents; he ends up in Milwaukee, and within a few hours, is engaged in group sex with three American girls, including Elisha Cuthbert.  See also, “Banderas, Antonio”.)

These fetishes represent a market inefficiency; the British loser in “Love Actually” would have no chance at bedding a single attractive woman in his native England, let alone three.  Thanks to the White Guy Asian Fetish (”WGAF”), even unattractive Asian women have a chance to score a significant other or mate.

And remember, race isn’t even the only factor.  The millieu also matters.  One of my friends once taught Economics at UC Berkeley; he told me about the time he heard two Asian undergrads in his class talking about their frustration with the Asian chicks who went the Berkeley.  What really offended them wasn’t the exploitation of the WGAF, but rather that the Asian chicks at Berkeley weren’t even that hot, because “all the really hot ones went to UCLA.”

Put yourself in the typtical Asian woman’s shoes.  Let’s say that you have your choice of two guys.  The first guy is average-looking, of average intelligence, and has an average career.  The second guy is good-looking, smart, and has a good career.  Which one are you going to choose?  If the only difference is that Guy #1 is Asian and Guy #2 is white, my guess is you’re choosing Guy#2.  That’s not racism, that’s smart market segmentation.

P.S. The logical follow-up question is, what should I do if I’m an Asian guy?  My advice:  Try to exploit market inefficiencies and go for chicks who dig martial arts movies.  Do you think Jackie Chan or Jet Li ever lacks for babes?

Loyal readers:

As you’ve probably noticed, it’s been about two months since my last post.   Things have been insanely busy for me (for a sample, check out this post on my personal blog) and I haven’t kept up.

To make it up to you, I’ll be answering one question per day for the next week.  I’ve got enough questions in the backlog to fill several decades worth of posts, but if you think you’ve got a good one, now is the time to send it in.

I graduated from the US Air Force Academy with a 2.4 GPA. Not so great, I know, but I then went on to get both an MM and MBA from a low-Tier school with a 3.9 GPA. I’m currently on a 1-year tour in Iraq, too.

At the same time, I’m very much a Caucasian from the Midwest so I struggle with how I can best present myself to an admissions board.

My question to you, as an Ivy post-grad alum, is how should I market myself to these Tier-1 schools?  Or does my poor undergrad academic performance eliminate me right off the bat?

The Harvard MBA Says:

First of all, Lieutenant, my thanks to you for serving our country.  Your dedication is appreciated by your fellow Americans.

I can’t speak for Law, Divinity, or Public Policy schools, but I can tell you that your undergraduate academic performance wouldn’t have precluded you from attending HBS.  Many of my HBS classmates, including a number of former academy graduates and other officers, will freely admit to relatively poor academic performance at the undergrad level. (They will also freely admit to being Caucasian as well)

HBS lists three criteria for admissions:

1. A habit of leadership
2. Capacity for intellectual growth
3. Engaged community citizenship

Your undergrad GPA is only relevant to one of those three, and the dedication you’ve shown since then should help allay concerns about your previous record.

This is not to say that superior undergraduate academics don’t help; more HBS students went to Harvard as undergrads than any other university, and all other things being equal, HBS will always choose the superior academic performer.

Therein lies the key to getting admitted to elite schools–if you aren’t a superstar academically, focus on being a superstar in other ways, so that all other things are decidedly unequal.

How can you be a superstar?  This deserves a blog unto itself.  Fortunately, my friend Cal Newport has done just that, with Study Hacks.

So I guess my real question is, how do you deal with failure, even when you tried your very hardest for a very long time?

The Harvard MBA says:

First of all, getting into UC Berkeley isn’t a failure, even if it isn’t as good as getting into Stanford (Go Cardinal!).  Indeed, many of my friends went to Cal, and managed to do pretty well for themselves despite this “handicap.”

More seriously, Berkeley is an elite educational institution, especially in this part of the country, and you shouldn’t beat yourself up.  I can tell you that I’m more likely to hire a Cal grad than a Columbia or Brown grad (sorry guys!).

A bigger issue is your current attitude towards failure.

Failure is an inevitable fact of life.  Everyone fails, which is to say, everyone experiences times when reality fails to meet their expectations.

You can decide that failure indicates a fundamental unworthiness, or you can decide that failure simply helps you uncover opportunities for improvement.  The former represents what Stanford psychologist Carol Dweck calls the “fixed” mindset, while the latter represents the “growth” mindset.

Dweck’s work shows that the growth mindset is consistently associated with both greater happiness and higher levels of achievement.

Right now, your question shows a fixed mindset; for the sake of your long-term happiness and success, I suggest that you work on developing a growth mindset, where failure is not the devastating evidence of incompetence, but a valuable signal of where to focus one’s efforts.

For more on mindsets, check out this blog post:

http://chrisyeh.blogspot.com/2009/02/what-makes-ambition-good-or-evil-is.html

For more on failure, check out the notes from the Silicon Valley Junto that I co-hosted on this topic:

http://svjunto.wikispaces.com/failure