(Photo: DavidDMuir)
It’s fun to think about getting an MBA.
They’re attractive for many reasons: developing new business skills, developing a better business network, or — most often — taking what is effectively a two-year vacation that looks good on a resume.
In 2001, and again in 2004, I wanted to do all three things.
This post is the first of two that will share my experience with MBA programs and how I created my own…
In the process, it’s my hope that these writings will make you think about real-world experiments vs. theoretical training, untested assumptions (especially about risk tolerance), and the good game of business as a whole. There is no need to spend $60,000 per year to apply the principles I’ll be discussing.
Last caveat: nothing here is intended to portray me as an investing expert, which I most certainly am not.
Beginnings
Stanford University Graduate School of Business (GSB). Ah, Stanford, with its palm tree-lined avenues and red terra cotta roofing, always held a unique place in my mind.
But my fantasies of attending GSB reached a fever pitch when I sat in on a class called “Entrepreneurship and Venture Capital,” taught by Peter Wendell, who had led early-stage investments in companies such as Intuit. The class is now co-taught by Eric Schmidt, CEO of Google, and Andy Rachleff, founding general partner of Benchmark Capital.
Within 30 minutes, Pete had taught me more about the real-world inside baseball of venture capital than all of the books I’d read on the subject.
I was ecstatic and ready to apply to GSB. Who wouldn’t be?
So I enthusiastically began a process I would repeat twice: downloading the application to get started, taking the full campus tour, and sitting in on other classes.
It was the other classes that got my panties in a twist. Some were incredible, taught by all-stars who’d done it all, but others — many others — were taught by PhD theoreticians who used big words and lots of PowerPoint slides. One teacher spent 45 minutes on slide after slide of equations that could be summed up with “If you build a crappy product, people won’t buy it.” No one needed to prove that to me with differential calculus.
At the end of that class, I turned to my student guide for the tour and asked him how it compared to other classes. He answered: “Oh, this is easily my favorite.”
That was the death of business school for me.
How to Make a Small Fortune
By 2005, I was done chasing my tail with business school, but I still ached to learn more.
Then, in 2007, I started having more frequent lunches with the brilliant Mike Maples, a co-founder of Motive Communications (IPO to $260,000,000 market cap) and a founding executive of Tivoli (sold to IBM for $750,000,000).
Our conversations usually bounced between a few topics, including physical performance, marketing campaigns (I’d just launched The 4-Hour Workweek), and his latest focus: angel investing.
“Angel investing” involves putting relatively small amounts of money — often from $15,000 to $100,000 — into early-stage start-ups. In Mike’s world, “early-stage” could mean two engineers with a prototype for a website, or it could mean a successful serial entrepreneur with a new idea. The angels usually have relevant business experience and are considered “smart money” — their advice and introductions are just as valuable as the money they put in.
After several lunches with Mike, I’d found my business school.
I decided to make (in my mind) a two-year “Tim Ferriss Fund” that would replace Stanford business school.
Stanford GSB isn’t cheap. I rounded it down to $60,000 a year, for a total of $120,000 over two years (these days, it’s $100,000+ per year).
For the “Tim Ferriss Fund,” I would aim to intelligently spend $120,000 over two years on angel investing in $10-20,000 chunks, so 6-12 companies in total. The goal of this “business school” would be to learn as much as possible about start-up finance, deal structuring, rapid product design, initiating acquisition conversations, etc. as possible.
The curriculum could be thought of as “The Start-up Lifecycle from Birth to Acquisition/IPO or Death.” But curriculum was just part of business school; the other part was getting to know the “students,” preferably the most astute movers and shakers in the start-up investing world. Business school = curriculum + network.
The most important characteristic of my personal MBA: I planned on “losing” $120,000.
I went into the “Tim Ferriss Fund” viewing the $120,000 as sunk tuition costs, but also expecting that the lessons learned, and people met, would be worth that $120,000 investment. The two-year plan was to methodically spend $120,000 for the learning experience, not for the ROI.
I would not suggest mimicking this approach:
1) Unless you have a clear informational advantage — insider access — that gives you a competitive advantage. I live in the nexus of Silicon Valley and know many top CEOs and investors, so I have better sources of information than the vast majority of the world. I don’t invest in public companies precisely because I know that professionals have better access to information than I do.
2) Unless you are 100% comfortable losing your “MBA” funds. You should only gamble with what you’re very comfortable losing. If financial loss drives you to even mild desperation or depression, you shouldn’t do it.
3) Unless you have started and/or managed successful businesses in the past.
4) Unless you limit angel investment funds to 10% or less of your liquid assets. I subscribe to the Nassim Taleb school of investment, with 90% in conservative asset classes like AAA bonds and the remaining 10% in speculative investments that can capitalize on positive “black swans”.
The problem is often that, even if the above criteria are met, people overestimate their risk tolerance. From my previous post, ‘Rethinking Investing: Common-Sense Rules for Uncommon Times’:
I’ve come to realize that the questions most investment advisers (and investors) ask are the wrong questions, or incomplete. Even if you have only $100 to invest, this is important to explore.
Most advice and decisions center on one question: what is your risk tolerance?
I had one wealth manager ask me this, and I answered honestly: “I have no idea.” It threw him off.
I then asked him for the average of his clients’ responses. The answer:
“Most answer that they would not panic, up to 20% down in one quarter.”
My follow-up question was: when do most panic and start selling low? His answer:
“When they’re down 5% in one quarter.”
Unless you’ve lost 20% in a quarter, it’s hard—nay, impossible—to predict your response.
It’s not dissimilar from a common boxing maxim: everyone has a plan until they get punched in the face.
To would-be angel investors, I suggest the following: go to a casino or racetrack and don’t leave until you’ve spent 1/5 of a typical investment and watched it disappear.
Let’s say you’re planning on making $25,000 investments.
I’d ask you to then purposefully lose $5,000 over the course of at least three hours, and certainly not all at once. It’s important that you slowly bleed losses as you attempt to learn the game, to exert some control over something you can’t control. If you can remain unaffected after slowly losing your $5,000 (or 1/5 of your planned typical investment), consider making your first angel investment.
But proceed with caution.
Even among brilliant people in the start-up world, there is an expression: “If you want to make a small fortune, start with a large fortune and angel invest.”
The First Deal and First Lesson
So what did I do? I immediately went out and broke my own rules.
There was a very promising start-up which, based on comparables using Alexa ranking correlations to valuations, was more than 5x undervalued! If it hit even a “base hit” like a $25,000,000 exit, I could easily recoup my planned $120,000!
I got very excited — it’s the next Google! — and cut a check for $50,000. “That’s a bit aggressive for a first deal, don’t you think?” asked one of my mentors over coffee. Not a chance. My intuition was loud and clear. I was convinced, based on other investors and all of the excitement surrounding the deal, that this company was on the cusp of exploding.
Two years later, it still hasn’t popped.
[TIM UPDATE, 2013: This start-up is now dead, so I lost that $50K.]
Following the Rules
Lesson #1: If you’ve formulated intelligent rules, follow your own f*cking rules.
I learned many more important lessons over the following two years, most of which I’ll share in the next post. Thus far, following the rules, the stats look something like this:
15 total investments (some of which are listed here)
0 deaths
1 successful exit
The one successful exit thus far, DailyBurn, guarantees that I will not lose money on my two-year fund. But, as they say, “Once you’re lucky. Twice you’re good.” I’m still not convinced I know what I’m doing.
My hope, and that of most angels, is that each start-up will “exit”, or be bought within 3-5 years. I’ll therefore have a more complete view of the “Tim Ferriss Fund” two-year portfolio by 2013 or 2014. There will be fatalities, no doubt.
[TIM UPDATE, SEPT. 2013: Now, I’m in 20+ investments, and I’ve made (cash in bank account) about 3-5x back what I invested. I have several million dollars on paper with investments like Twitter, Uber, Evernote, and others. If half of them pan out, I will make more in angel investing than all of my books combined. Only time will tell. Still plenty that could go wrong. Oh, and there have been more startups “deaths,” too. It’s a full-contact sport.]
But recall that the learning was my main reason for doing all of this.
I had one other exit: my own company. Using what I learned about acquisition deal structures through angel investing, I became less intimidated by the idea of “selling” a company. It need not be complicated, as I learned, and BrainQUICKEN was sold in late 2009. This means the ROI on my personal MBA is, so far, well over 2x and could end up more than 10x.
Creating Your Own MBA
How might you create your own MBA or graduate program? Here are three examples with hypothetical costs, which obviously depend on the program:
Master of Arts in Creative Writing – $12,000/year
How could you spend (or sacrifice) $12,000 a year to become a world-class creative writer? If you make $50,000 per year, this could mean that you join a writers’ group and negotiate Mondays off work (to focus on drafting a novel or screenplay) in exchange for a $10-15,000 salary cut.
Masters in Political Science – (same cost)
Use the same approach to dedicate one day per week to volunteering or working on a political campaign. Decide to read one book per week from the Georgetown PoliSci department’s required first-year curriculum.
MBA – $30,000 per year
Commit to spending $2,500 per month on testing different “muses” intended to be sources of automated income. For an example of such, see “How I Did It: From $7 an Hour to Coaching Major League Baseball MVPs.”
If you’re interested in experimenting with angel investing, whether as an angel or as a start-up, here are a few of my favorite resources:
AngelList (I’m now an advisor; here is my profile)
AngelSoft [Ed. note: AngelSoft is now Gust]
Commit–within financial reason–to action instead of theory. Learn to confront the realities and rewards of the real world, rather than resort to the protective womb of academia.
Question of the day (QOD): what would you like to learn specifically about start-ups, angel investing, or start-up financing? Please let me know in the comments with “QOD”.
The Tim Ferriss Show is one of the most popular podcasts in the world with more than one billion downloads. It has been selected for "Best of Apple Podcasts" three times, it is often the #1 interview podcast across all of Apple Podcasts, and it's been ranked #1 out of 400,000+ podcasts on many occasions. To listen to any of the past episodes for free, check out this page.
Comment Rules: Remember what Fonzie was like? Cool. That’s how we’re gonna be — cool. Critical is fine, but if you’re rude, we’ll delete your stuff. Please do not put your URL in the comment text and please use your PERSONAL name or initials and not your business name, as the latter comes off like spam. Have fun and thanks for adding to the conversation! (Thanks to Brian Oberkirch for the inspiration.)
I love this post. Not so much because I have any interest in angel investing, but because of the testimony to educating yourself. If I’ve consistently been anything over the years of my life it’s a practitioner of self education. Of course that’s been mostly out of necessity. 😉
Still, I feel strongly that wherever one’s interest lies, developing and guiding your own learning can be a major key to success. For one thing you discover how much passion you really have for the subject. For another, you can pick up whatever skills you need along the way and avoid spending valuable hours of your life learning useless crap that for some reason always creeps into the formal education channels. If there is something that is dogging you, or you find a hole in your self-made curriculum that you’re having a hard time filling independently, you can seek some education on just that.
Nice article, and cheers!
P.S. I liked the Nassim Taleb reference. I picked up ‘The Black Swan’ after you mentioned it in the last Random episode. Fascinating as hell!
Tim,
Don’t listen to all the haters in the comments here! I think your work has been fantastic and the path your book has lead me down the last few years has been truly great.
People often forget that you are merely offering a different point of view. They can either choose to accept or reject it however, it is a way of allowing them to see possibilities they may/may not have heard before.
Personally, I have found that my Bachelor of Business Entrepreneurship in Australia has been good for networks and experience (I ended up the GM of one of my lecturer’s companies for two years and had a ten% stake) but the actual knowledge taught was useless in 80% of the classes.
Another possibility for people wanting the education more than the piece of paper could be to enroll only in the classes that interested them. This way they could take the 20% of classes that give them 80% of the networks, knowledge, etc. While saving them from spending a full two years of their life doing the full degree.
QOD: knowing what you know, if you had to start again today in business and Angel investing, what would you do? (thanks in advance)
Keep up the great work. Your blog and book have done wonders for me and are some of the recommended reading I suggest to everyone I speak to in relation to business and lifestyle design.
Kind regards,
Josh Moore
This is an excellent post. It’s the creativity and courage that is required to say no to the status quo that I appreciate. Well done. Ideas like this are empowering.
“He played a lot of chess, and read a lot of books, and otherwise arranged for his own higher education, as all smart people do.” = Michael Herr on Stanley Kubrick.
Tim,
This comment will probably be missed (you have soooo many excellent comments), but I’ll share my thoughts anyway…
It’s funny, because I too do the “I’m thinking about getting an MBA.” I started a part-time executive MBA program way back in the early 1980’s. I completed about one-half the program, then my job disappeared and I moved on. Yes, I returned to University full-time and completed an advanced degree (you can call me Dr. Rob). Oddly, maybe it is my “biological” clock ticking, but I often wish I would complete the MBA.
My DNA is about selecting a challenge, learning all I can about it, and completing the challenge. I think something is bothering me about not completing a challenge…Truthfully, I have no real reason to get the MBA, in my opinion it is a badge of honor for the corporate world, and I’m not corporate material.
Thanks for readling through my discourse…
CaptRob
What an excellent article on MBA’s. I think the need to lose money isnt kinda right as i have learnt numerous lessons through using less money rather than splashing £120,000 on an experiment. If i had a couple of grand spare to throw around i would definitely do this.
For those who do not have large amounts of money to spend in the first place, the attraction to traditional College/University qualifications is the fact that there is funding available in the form of student loans making that option accessible to most people. At least in the UK anyway!
Although designing your own personal development curriculum sounds very exciting the reality is that it is only a realistic option if you have a large pot of cash initially.
Like the article, but have some problems with the theory/math bashing. I’m a PhD student in Operations Management at a business school, and much of what we do is math modeling and theoretical, but in the end anything that’s worthwhile, or published in any decent journal leads both to understanding of underlying processes and informs practice. I agree that much of MBA programs are fluff, but mainly because they aren’t analytical enough and don’t truly explain the underlying mechanisms of the market. Even work that confirms intuitively “obvious” things has value in the explicit confirmation and quantification of the obvious result. Almost every decision made in big business today is underpinned and improved by serious mathematical models and decision support tools. Look at what revenue management has done for the airline and hospitality industries or inventory management modeling has done for supply chain management.
Sorry for the long post,
…
Tim – great articles as always. Is it ok to add you on LinkedIn?
Think it’s been covered in the comments above, but….
QOD: As as angel investor, what are my options for the exit plan? How do I take profits (or losses) and bail out?
My QOD: like @harscoat asked: what are your criteria for investing in startups? In particular, did you develop any new criteria. Or are you still waiting for more results, so you can develop those criteria?
Crazy Idea of the Day: once you have those criteria, can you outsource the angel investing work?
In particular the task of finding the right companies to invest money and expertise in. Of course the expertise you’re investing is yours, but would it be possible to outsource even that?
Once that’s in place, you could open the Tim Ferriss Fund to more investors and experts with time. Then you’re on your way to being a billionaire *and* creating a thousand millionaires.
Angel investing to me seems very similar to learning poker in a cash game, you can always leave, risk aversion is a huge part of it, and success wont make you better. Also you can normally outdo anyone who is theoretical by getting a grasp of what actually happens normally. IE I would rather play a pair of 2s then ace/king, despite the odds being slightly better, because I know I have something with one and the other one is hoping for something to happen because it looks promising and ruins my risk aversion much like the first company in Tim’s example.
It’s kind of like realizing that theres a huge number of statistics that can tell you that playing a 2/7 hand is probably not going to help you win, but if you needed a large equation and some calculous to tell you that because its unlikely to make any decent hand you probably shouldn’t play with it, you most likely arent meant to be sitting at a poker table.
So basically theory is important but its often impractical compared to actual experience. This coupled with the high costs of degrees right now its impractical to go for post graduate degrees unless you intend on being a doctor, lawyer, researcher, or teacher.
Hey Tim,
You saw my video a while back and said we could meet up in San Francisco for coffee.
I’m not going to take you up on the offer yet… but I would love for you to look at this post I’ve just made and help me out however you can.
http://www.matttwilliams.com/2010/07/a-business-to-change-the-world/
Thanks man, you are a huge inspiration behind what I am doing (and planning on doing).
Awesome post Tim.. Thanks!!
Hey Tim
Loved your post and your book. Hopefully Ill be able to write a success story in the next year or so.
I’m 23 and just finished my undergraduate studies. I started a business a year ago (before reading your book) that makes and distributes baked goods to coffee shops and cafes in Mexico City. It has been a great success (though not a muse at all, since it requires quite a bit of time for now). We currently distribute 60 cafes and will easily double that in the next six months.
The business is cool but I want time to travel and move. I’m a physical guy. I’ve trained gymnastics and capoeira for several years and also did a two month retirement in Rio de Janeiro to immerse myself in capoeira and JJ.
I recently went to a couple of business incubators/accelerators and showed them my project (we need funding cause we have big plans). They were very impressed and asked me for business plan. I’ve been writing one for the past three weeks but i have no idea of how deep/specific to go (I’m at 30 pages so far).
I come from an academic background and have tried to be very specific and accurate about what I say, but in my experience, business men don’t really care how you’re going to do stuff, they just want to be sure that you know what you are doing.
So my question is this.
How can I convey this? Is a BP only another credibility indicator?
How specific/detailed does my plan have to be to be credible but not reveal important info or take to much time to write? Where can I find business plans (not how-to guides) of successful start-ups?
The company is growing fast and so are it’s complexities. To capture them in a BP would take ages, and I see no point taking 4 weeks to write a 6 month BP.
Thanks!
Pablo.
Hey Tim,
Great stuff. This could easily be the topic of your next book (or two).
What are your top books, online videos, people, and other resources to learn more about this stuff? Also, if you could interview on your blog some of the CEOs, VCs, and angel investors you’ve made friends with and learned from, that would rock.
Thanks.
Another option is to hire a good coach. You can get your education in the real world, as noted here, but also have an experienced person to use as a sounding board and second opinion, and also to help you with your analytical skills. Best of both worlds!
Tim,
Many thanks for the information. When I click on the blue links on your blog posts ( ie; linking to amazon et cetera) and get through the relevant data on that site- I am then unable to hit the “back arrow” on my screen to get back to your post – hence my only option is X’ ing out completely and logging back to your site and start from the beginning of the post.
I am wondering if anyone shares this irritating experience or it is just a function of the settings on my Lap top?
Gracias,
Evan
I love the idea of taking a day off to write and become proficient at it. thats one I will try to do this year.
Angel investing is tough if you’ve never ran a business yourself, what would you recommend as far as investments if you’ve never been in a leadership position within a large organization?
QOD My specific question is, what do the business plans of these start ups look like? Are they similar to other small business plans or do they include grand exit and selling strategies?
I have been researching this a lot too. Did you write this after Seth Godin decided to do an alternative mba program?
It seems like MBA programs are virtually worthless if you have an undergraduate business degree or so I have heard from alot of people. An MBA is really useful only for the connections that you make.
Also, the payoff is horrible if you have under six years of experience. So if you are at the stage in your life where you dont feel like you have the equivalent of 6 years of experience its probably much better and cheaper to start a few businesses first.
Thats my two cents.
MC
Wow, great post Tim! Thank you. Though I have one, I think an MBA is extremely overrated. That doesn’t necessarily mean I don’t recommended getting one, but you should really know why you are getting it. I love the angel investing idea, and I admire your openness in sharing your process. Well done guy.
Hi Tim,
Nice to know your book “The 4-Hour Workweek”.
It seems very interesting, I plan to read it.
Will let you know my comments after read.
Sophie
We take to be true what we prefer to be true…
I have tried to start several businesses and am currently getting an MBA. My advice is this;
MBA=curriculum+brilliant professors+concentration of resources X (network+brilliant classmates)
What you do ultimately depends on your objectives and the alternatives available to you. The only time you should eschew getting an MBA from a good school if you have the opportunity to go is if you are in a Bill Gates or Michael Dell type situation with VC funds available…in sum if you are running a successful business that has future promise you would still benefit from an MBA but you would incur too great an opportunity cost by not focusing on your business to make it economically rational…but then again that may not be your only objective.
This is probably out of place, but here goes:
Hi Tim,
I came to know about BrainQuicken through your blog.
I am interested in buying it, but I have a question.
It says the capsules are gelatin based for ease of swallowing.
Do you know where the gelatin is derived from.?
Do you know which animal the gelatin is derived from?
I contacted the distributor bodybuilding.com, but they didnt know. I contacted the number on the brainquicken website, but it redirected me to bodybuilding.com’s support line.
Thanks in advance.
Koorosh Vahabi
Hi Koorosh,
I sold the company a few years ago, but I believe the capsules are gelatin, probably bovine source, but I don’t know for sure.
Tim
I hate to say this but Tim you have forgotten the true perks of school. School is the best place to find a wife/ husband, its the number 1 not quantified dating agency in the world !!!!. Look around you, how many of your married friends found their love in school ? Chuckles*
“I find angel investing less stressful than building companies. For investing, you don’t need to be “on” as much.”
Lol. Tim, you shoulda said this at the beginning of your post. I’d have been on board 100%.
One problem of building wealth is finding something productive to do with it. Especially if your passions have low capital, high time requirements.
But is angel investing really an effective wealth dump? I wonder.
@ David
You said “Almost every decision made in big business today is underpinned and improved by serious mathematical models and decision support tools. Look at what revenue management has done for the airline and hospitality industries or inventory management modeling has done for supply chain management.”
That’s true, but we’re kind of talking apples and oranges here. It seems to me Tim is talking about entrepreneurship and early stage investing. You’re talking about using sophisticated math to squeeze out more money from huge, mature companies. Being successful as an entrepreneur and as a supply chain expert in a massive company are two completely different skills sets, and I don’t think it’s possible to really learn the former in a classroom.
nn
Similarly…
I learned in 2007 how to acquire massive credit card credit. I’ve used $180K to travel and live on over the past 3 years. I didn’t know how I’d make it back; I believed I’d learn and change enough as a person from traveling that I’d become someone who could earn it back plus much more. I’ve changed in most of the ways I wanted to and have had wonderful experiences. I believe I’ll succeed in my endeavour.
I have an extremely high risk tolerance and desire to live a life I want….
Oops, accidental post
You can delete this, the “oops” and “nn” posts. Sorry.
Tim,
I’d like to volunteer to do some research projects for you. Put me to work!
Love the book and the blog.
Ben
@Nicholas,
You CAN do this with law. As a law school grad I counsel nearly everyone who tells me they want to go to law school to reconsider and usually grill them on why they want to go, for many reasons…
However, I do offer the caveat that if they want to actually practice, they should find a state that allows apprenticeships in law (like Virginia). The idea is that you work under an attorney while studying a prescribed set of coursework. After a set amount of years, you can take the bar. Once you pass, you don’t even have to practice in the field you apprenticed in. If after a year of the apprenticeship you decide you don’t like the practice of law, well you have no loans to repay, plus a year of experience and some connections under your belt.
There are a thousand ways to skin a cat.
[…] Disclaimer: nothing on this site is legal advice, and I am not an investing expert. This post is continued from Part I. […]
@Alexa
Agreed, but he seemed to be knocking math-based MBA courses in general, and I think that it’s dangerous to knock “big words and equations” because we think we already know what they end up telling us. This leads to the know-nothingness and anti-intellectualism we see all around us, and I think is not a good thing at all for our society. Obviously there is a place for math and analytic models, and there have to be people trained to use those to make better decisions, but I think a quantitative analytic approach to business is a good thing in many cases and shouldn’t be so easily dismissed.
Then again, I’m a future “PhD theoretician” so maybe I’m biased.
-David
Hey Tim
I just read your book. Your advice is on point! I took a 10 year vacation traveling the world every music festival , fashion event , island and the connection , experience, the ability to learn how people interact and live has made me have purpose maximization. Now i am working on getting back for where i was to where i need to be. Great advice from a good person hope we can meet or chat one day! …
I’m on board!
I agree and think more school just fosters more structured thinking. Usually it’s professors teaching what they learned years ago. Education is too large of an institution to move with these fast times.
I will continue to let books, conferences and mentors/entrepreneurs be my MBA.
Thanks Tim!
I’m doing this right now. Well, my own version.
I got accepted into my top choice business school last year, INSEAD, but passed on it to start my longtime dream company, an automated personal training service for web and mobile. All of my closest friends are at top MBA schools right now, so I am really bucking the trend. But when I talk to them, it’s clear they envy what I’m doing — they tell me they’re reading cases about ‘people like me’ in their classes at HBS, Stern, Michigan. The payoff hasn’t come yet, but I’m learning a ton! And I still have spent much less money on the startup than an MBA.
The kicker: it’s too bad startup funding is not so easy to obtain as an MBA loan!
Now your life hacking an MBA. The key is to get yourself in front of these high profile business rockstars. Not an easy task, but possible.
Tim,
Only the top MBA schools “matter”. The two reasons that one attends an MBA program is: 1) for the alumni network and 2) for the chance to recruit at ‘elite’ companies.
Love the lessons from your book and other writing and presentations. My husband and I repeat the audio book every couple of months. One thing I appreciate about 4HWW is the emphasis of starting a business or automated income that requires no outside investment, which is how over 90% of new businesses start. That would be a great application of MBA knowledge.
I believe there are a handful of business models that anyone could plug in a product or service idea and start a business without feeling petrified or that they are betting their life savings on. When leaving my corporate job to start a business last year, many thought I was so brave to take the risk, but I have never felt it was a risk because it doesn’t require our life savings or the threat of bankruptcy to test the business and learn if it will work.
BTW – I love your practical MBA approach. The field work or practicuums of MBA programs have become the most popular part of the curriculum and of most interest to employers. I have to say, theoretical or not, my MBA from the ’90’s earned me a 40% pay increase after one year (accelerated MBA program) just to have those three letters. For an entrepreneur, it is all about the skills and new knowledge. For an employee though, the letters of the degree definitely help.
Someone once told me, “Those that can, do. Those that can’t, teach.”
I believe there is another step… “Those that can, do. Those that can’t, teach. Those that won’t, listen.”
I believe Tim is pointing out that it is better to “do”. Those that take action succeed.
Hi Tim,
Nice Post. Here is my question:
How do you approach negotiations for the amount of stake you are buying in a company? I imagine they are selling each % for some made up dollar amount, based on the idea that they have a blockbuster idea. How do you handle those negotiations and do you use some sort of formula to decide how much to invest and how much stake you want for your investment?
Tim,
I completely agree. Sometimes more can be completed in the real world than sitting and learning theory. I have my B.S. degree in marketing and would not trade it for anything. But I have learned more building my business, imcomfy.com, than any MBA could have offered. Besides there are many great books out there including your 4HWW, Rework, Good to Great and the podcasts from Stanford entrepreneur leasdership, that can help much quicker than an MBA and much cheaper. As far as build relationships while in business school, people have plenty of connections if they just put themshelves out there.
Great work Tim!
I love your way of thinking, often you learn more from the mistakes you make than through anything else. Really interesting and imaginative post
I’m a b-school professor who teaches MBAs (at one of the nation’s top entrepreneurship b-schools), but I do work with a lot of entrepreneurs and thus much appreciate your way of thinking. Great read. found it via twitter.
@profpjm
Tim, you have something more to say here.
My father, who does not have an MBA, has started four successful business based on one single business course he took at a community college. It was a basic, fundamental course in business and he has based a bit of his success from this course and the rest from learning from people.
He copied other successful models ( that does not take an MBA), worked hard to grow each business and worked to create what he calls a “fountain of money.” That visual stimulation, I bet, does not exist at the MBA level. All of his “MBA” learning comes from people — working with, selling to, buying from, and watching people behave in good and bad times.
He did surround himself with other successful business owners at the early stages of his business in the 70’s and 80’s. — a key issue in forming a ‘mastermind” group who support your business with comments and insights into seeking more revenue streams.
It is amazing when I come across recent MBA grads who have 100K loans to pay off for an education that does not even eek out a single dollar of income for them. I would be more impressed if 10% of that price tag was for a business that generated an income stream upon graduating with the MBA. Maybe that makes more sense if this is a business degree and students now carry more personal debt, but no income streams except for a single income from a prospective employment. If that is the case — then colleges should rename the degree as MBE : Masters of Business Employment. What a farce — they do not own a business and they spent 100K for the diploma.
Can you do it on your own. Of course. Can you capture success. Sure.
You are right on the money — you can create your own MBA program. But call it what it really is — Masters of Business Creation or something more accurate. Administration of Business is just that — admin. You create business, — income streams, or as my father loves to envision it, you create a “fountain of money to drink from every day, it nourishes your life just like water and the sun.” I just love that line.
Hi Tim,
First time poster here. I’ve been involved with a couple of startups, and have a couple of thoughts regarding your post:
1) In an MBA program, contacts will be your most important take away. It’s who you know, more than what you know. Networking and introductions are critical to success. Having contacts is critical for: bringing on board a topnotch management team and complimentary partners; hiring quality employees; building an advisory board or mentors; finding investors and obtaining funding; locating potential clients; sourcing your legal, accounting, and banking team.
2) When investing in a startup, be prepared to completely lose all your money.
3) When looking for investors for your startup, you better be able to have more than technical engineering expertise. You’ll also need an in-depth market analysis and detailed financials. And don’t just take any money offered to you – educate yourself about the process, and find a good fit. When you’re a small startup, the wrong investors, or employees, can bring you down.
4) Learn about the importance of intellectual property – and protect yours.
5) Bootstrapping is great, but to get critical mass quickly you will need outside investment money, and you will have to give up a portion of your company. But, in the end, owning 10% of a 10 million dollar company is a lot better than owning 100% of a $100,000 company.
The world of angel investing and issuing startup stock is exciting, ruthless, and complicated – not to be taken lightly. If you don’t take the time to educate yourself, you will most likely be taken advantage of and lose your money, or your startup business.
I enjoyed your post. Thank you.
I have an honours degree in Business Enterprise and can honestly say that tim’s book is far more usefull, just try stuff from it, it really works.
Buy the book, leave it around your home, browse it now and then, it really really works !
Thanks ever so much TIm, for writing a great book !
btw, love the way google ads show you mba courses, on the right, when you look at this topic in the blog listing
mba = a course that someone will sell you, which has value, but is over priced so just do not bother 🙂
Tim,
First of all, great post! I recently decided not to attend business school for a formal degree. Instead, I’ve chosen to start my own company and take business courses at a local collage on a part time basis (two or three courses a year). Your article has is brilliant, and confirms what I already know but only recently have come to fully understand: You dont need a formal MBA to succeed in a business venture. Most of the people I know who live fullfilled and successful (financialy and personaly) lives don’t have MBA’s or any other business degree. They developed business acumen by, well, doing business.
I am in the middle of reading “The 4-Hour Work Week” for the first time and your insight and advice on both business and lifestyle are inspirational.
I’m a step closer to personal liberation
Thank you
Hi Tim, I would love for you to have you come out to Navajo Nation in the next six months! While I live in South Dakota, I still have strong ties to the Navajo Nation (family still lives there). Your philosophy (now mine) needs to be heard among my Navajo relatives who have been “oppressed” for many centuries. Contact me so we can chat!!
[…] Investeringar, affärsutveckling Efter att ha läst igenom (den alltid så energiska) Tim Ferris två blogginlägg How to create your own real world MBA I och II, skulle jag vilja lyfta ämnet “investeringar” för en kort stund. Jag har […]
Tim,
Brave is the writer who can so candidly share his mistakes. I appreciate that you shared this.
Bad. Ass.
[…] Ferris recently wrote a post on his version of a real life MBA that echoes a lot of what is said here. My goal for you: […]
[…] MBA program instead of investing in traditional higher education institution. (Find these posts here and here.) In doing so, he put together a plan to angel invest the amount he’d otherwise be […]
Hi Tim
Interesting post. Love the idea of investing small amounts of money into start up companies.
Could you provide some advice on how someone who’s network doesn’t extend to the level of yours would go about;
(a)finding start up companies to invest in and,
(b)What factor above all makes you pull the trigger and invest in a company
Cheers
Tim,
The more I read and hear from you the more your view of learning and life is pulling me in. About a month prior to this I started thinking why we are so willing to spend money on an education but are not willing to spend the same amount of money or less trying a business idea which you could learn from.
Josh Bulloc
Kansas City
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Entre des blogs sans trop savoir . time à ensenble autrement coup un intérimaire UE Un Pis j ‘oeil d Autre voyis Je l ‘ . Comme toile UNE d areignée l’ ONU web.Ouvers pis ordi Tout CI changeur de remplacer verser facilr.Mais ca c est sur la ligne UNE tu rentres jeu Autre Les Yeux Certaine Fermés Pas Aimé n . C’Est la que tu tu time à Québec dérange OU TU deviens plus visibles au Québec ..
This is very dangerous and renegade idea. If this education system Tim Ferriss is suggesting is followed to the letter, corporate America is not going to find employees to work for them. We are all going to become creators and a world where everyone is his/her own employer is a bad idea. We send kids to school from grade 1 -12 and then four year colleges not to be creative but to be duplicators. We want the majority 99% of them to be workers who produce widgets designed by the creative 1%. To ensure this process mature took long time to achieve and undoing it is tantamount to coup d’état. Why do you think we have high school diplomas, multitude of degrees, SAT, GMAT and all the things in between? To make sure people go through this pre-built tunnel that leads to production of uniform widgets. People like Tim Ferriss and John Taylor Gatto should stop disturbing the peace, before we end up with bunch of Bill Gates or worse Steve Jobs.
Enjoy workin for the man buddy…. I’d be Steve Jobs over Employee 1568 every day of the week.
BTW, I’m sure he explained in the beginning this isn’t for everyone.
A good point none the less… but lay off Bill and Steve.
I sent a copy of the book to a friend in New York, he fired half his staff, doubled his profits, he loves the outsourcing idea !!!!
India is the future, americans are lazy.
rock on the 4 hour work week 🙂
🙂
Hi Tim,
Right before you posted this I signed up for the GMAT b/c I feel like an MBA program will help me develop the skills I need to learn how to help businesses and social change organizations do their work better and in a more sustainable fashion. I’m very interested in the Presidio Graduate School of Mgmt in SF as they seem to have a great, forward thinking and innovative biz program aside from Berkeley and Stanford.
A few questions for you:
Have you heard of the Presidio school, if so, what do you think?
While I’m sure I can learn many things on my own, is the value that comes from the contacts that you make in these programs (that lead to jobs, project opportunities, new companies) worth the investment in an MBA?
Thanks for your great posts and the hard thinking they encourage me to do.
Thanks for the kick start, Tim.
This really got me off my feet to start my own business, and I’ve learned more in a week going through the startup process than…well, I’ve learned a lot more than theory.
I guess the best case study is your own.
Look forward to future posts.
I’ve been meaning to post on this article as soon as I read it, but better late than never.
Personally, I agree with the fact that academia can be very non real-life, with little or no tangible applicable. The same things you were thinking about the MBA program caused me to take the shortcut route to my MD. I was in my undergrad and kept thinking- how many tests do I have to write before I do anything useful with my life, anything real? How many 100%s would I have to grind out before the madness would stop?
So, I went against the crowd. I wrote the MCAT out of first year, and learned most of the background material myself. Nearly all medical schools in Canada require 4 years or at least a bachelors degree to apply. One university still lets you apply after 2 years of undergrad, and even better, it is a three year instead of a four year program. I applied, and was accepted. Even better, it is one of the most hands on programs out there.
Like you’ve said many times before, “cut the fat”. I streamlined my way to getting into the MD program, in a way by harnessing the “superstar effect”, discussed in another one of your blog posts. I was competing against PhDs, law degrees, physiotherapists and other older, more qualified people. I will be 22 when I graduate- likely the youngest graduating canadian MD.
Your book was a big eye opener for me. Thank you for writing it. Here’s my
QOD:
What strategies would you give to a student in a hectic 3- year compressed med school program, to cut the fat and lessify, to 80/20, so as to have time to enjoy life with friends and family, pursue a few muses? Feel free to send me an email.
Thanks for your reply,
Mario
Hi Tim,
Great post, a real eye-opener. Look forward to your next ideas.
Thanks
Hi,
Help me! I can do things that doctors(MDs, DOs, Orthopedic Surgeons) cannot imagine. I could save a Major League Baseball team hundreds of thousands to millions of dollars every year by keeping their players off the DL with energy healing. No, I’m not a mystic, I’m not a psychic, I’m an energy healer; and I specialize in sports-related injuries.
How can I get the attention of an MLB team’s(preferably the Yankees) front office when what I do is viewed as extremely unorthodox in western society? And without having to go through the Personal Resources Department?
Any ideas or advice is greatly appreciated.
Thanks!
Eric
Yeah – I don’t get why anybody with as much gold as you have would buy an MBA. To me, the MBA gives you the paper cred necessary to get your foot in the door of prestigious places — whose salary you then invest in furtherance of your own ideas.
But if you’ve already got the plata — then you just pursue your ideas, period.
Two disadvantages of schooling yourself:
1. No fancy letters after your name, hence it’s harder to get a job with your skills.
2. Your family and friends won’t take your self-study seriously. Get ready for a lot of, “Are you in school or something?”
Tim,
(QOD)
I hope this reaches you, as I have recently stumbled across your blog and may have read this one to late to generate a response. I must first say, I am very intrigued with your blogs and quickly becoming a huge fan.
I would like to know, from the stand point of seeking angel investors as opposed to investing in start-ups, What do you look for when deciding if and when and how much to invest in any given start-up? I am an entrepreneur at heart and always developing new business ideas, none of which have gotten anywhere due to the lack of funds to launch idea/business. So my question for you is, how would someone go about seeking out angel investors to launch a start-up and what type of things should I be prepared for, in terms of offering a business idea/plan that would draw attention from potential investors?
Any advice would help and thank you very much in advance!!
-vince
[…] and Andy Rachleff, founding general partner of Benchmark Capital), he replaced it with using the two-year “Tim Ferriss Fund” for angel investing. In other words, angel investing was his real-world MBA. While the statistics of successful exits […]
Tim and all,
I encourage you to check out an MBA program that is a startup in itself called Acton. It was founded in 2003 by several successful entrepreneurs who felt the world was missing a realistic MBA for entrepreneur-minded people. It’s a completely radical curriculum that meshes classes with names like “People,” “Life of Meaning,” and “Launch,” with real world simulations. Teachers are required to be full-time entrepreneurs and only teach part-time! It’s completely using the Socratic case-study method.
It’s only a year long to get us in and out of there in a year (because our time is a huge opportunity cost). We do about 300 mainly Harvard cases over the period of nine months compared to HBS doing 400 over two years. The downside is that means we have 90+ hour workweeks for the nine months.
As an entrepreneur who has started (and mainly learned through failure except for some recent success which I attribute to the 4-Hour Workweek) I can honestly say I wish I had this program before losing my own $50k and $50k from family on my first startup.
But don’t listen to me, listen to the Princeton Review which ranked Acton as the #3 most competitive students, #3 best professors, and #2 classroom environment.
I met your friend Stephen Key a few years ago and convinced him to come speak in March. If you would ever be interested we’d love to have you come speak – I know we have several 4-Hour Workweek fans in the class.
Thanks,
Bryan Daigle
4-Hour Workweek Success Story
President, Acton Class of 2011
Tim,
I’m newer to your world than many, and lately I’ve been catching up on some of your older posts, like this one re: creating your own MBA. I like very much these ideas! I am an engineer by training, but have developed interests in public policy issues, so . . . perhaps I’ll use your ideas to dive deeper. A question in response to your post – Do you believe your “create your own” strategy applies to undergraduate studies?! This question is expanded below, as I’m trying to convince my brother to attend college (he’s only graduated high school) but am waring out my own “wisdom.” Might I tap yours?
Thanks so much,
Caleb, in Virginia
P.S. – Sorry about the volume; it’s more of an e.mail than a blog comment. I guess I’m getting desparate for my brother – I’m risking really irritating the snot out of you! Perhaps it’ll help to know that I promote your books to all I know; even my very 9-5ish dad is going to borrow my audio copy of 4HWW!
*************************************
When my brother graduated from high school in 2007, he said he’d not attend college; he was the only of his close circle of friends NOT to. At the time, he rebuffed multiple attempts by multiple relatives and friends to convince him otherwise. We live in a city with a major American university and he’s been part of a youth outreach group since 2007 that has kept him close (in both proximity and friendship) with several guys attending this top-tier school. Through all of these college-attending friends, my brother has clear pictures of what college has and has not been for them. He has continued to live with my parents (smart, given the circumstances) and has earned money from a combination of 1) a lawn care business he started as a teenager and 2) selling insurance with my father’s business. He has become increasingly interested over the last 18 months in big-dream sorts of entrepreneurial pursuits. He loves reading SUCCESS magazine and being motivated by people like John Maxwell. His original objection to attending college was that it “just was not his thing.” However, his friends’ experiences (classes, internships, and job prospects) have forged a belief that much of college is irrelevant to actual jobs and life. All of the traditional reasons to attend college I and my wife could think of when he was 18 remain ineffective. We also have a good local community college, so he took a macroeconomics course in the fall of 2010 (unfortunately, it sounded like he got a HORRIBLE teacher; nice . . . !), but his response was that it bored him and he thought it irrelevant to his job preferences. I tried to get him to attend college years ago, but I relented in order to prevent from ruining our relationship over it. Then, I started encouraging him in the entrepreneurial path he was trying to forge so as to not just keep raining on him with condemnation – whether explicit or implicit. I figured, “Hey, just b/c I’m not doing that doesn’t mean I should keep forcing this on him.” In the last year, I’ve started having my own regrets about risks or challenges I avoided by opting for a traditional 9-5 office job path. So, I’ve arrived at the point where I want to not only strongly encourage his creativity, risk-taking, and entrepreneurial pursuits but also strongly encourage him to attend college to ensure he has that base. I’ve seen recent articles about majoring in entrepreneurship in college, which I was previously unaware of, so I wonder if this would be a good idea. But more generally, I request that you share your belief about college in the modern era as it relates to both the job market at large and successful entrepreneurship. Are there litmus tests you recommend to help folks make a decision about attending college?
Thank you SO much for your consideration and time; if you recommend resources other than your own/staff’s answer, those would be most appreciated, as well,
Caleb
Ciao,
“The map is not the territory.” ……… I Keep hearing this phrase a lot 🙂
Great post …
Thanks
Alexander
Great Post Tim!
The application of calculus to business dynamics sounds pretty fascinating to me. The whole point of such courses, as I see it, is not to prove that you you will lose money on a crappy product, but to look at this idea in higher resolution. Naturally, this has the corollary that you could also see the dynamics of success in an equally high detail. Which would be useful.
Hi Tim,
I read your book the 4 Hour Workweek and really enjoyed it! I have a money/investing question. Your statement, “contact someone important and do something uncomfortable each day,” is ringing in my ears. I have found that I really enjoy day/short term trading. I have also found that I hate losing money. My question to you is do you know any short term/daytraders out there? I have read countless books on daytrading but have not been able to put it together with my own trading. I just read in this blog that you don’t invest in public companies because the pro’s have more information that we do. Who are the pro’s? Can you lead me to a daytrading mentor please? Thankyou.
Visiting old post. I like the links! You always drop good links, and I fully appreciate that!
A Real-World MBA sounds enticing. Unfortunately, unless you plan on becoming a serial entrepreneur or full-time private investor, how do you translate a “Real World” degree to something that is marketable on your resume for those who seek to advance their professional careers?
It seems like MBA programs are virtually worthless if you have an undergraduate business degree or so I have heard from alot of people. An MBA is really useful only for the connections that you make.
Thanks
Ive been thinking about doing a MBA. This post has given me some great ideas.
Thanks for the post Tim
Great post and comments. It is understandable having to learn some things but many of us feel like we are constantly reinventing the wheel.
Hey, Tim.
Was reorganizing some shit in Evernote and came across this old post.
I think it’d be interesting to revisit this (either now or some time later this year) since you estimated you’d have “a more complete view of the ‘Tim Ferriss Fund’ two-year portfolio by 2013.”
Take it or leave it.
Cheers,
Dave
Hi Tim,
I have learnt a lot from you. Im from Mexico and I bought your first book out from what I think was merely coincidence at the “Last BookStore in LA” ( Used books ) and since then I have followed your published content, including your next books…
So I really havent been able to create muse but I had already my own company thugh , so Im stil trying to spend less time on it; I lost 25 pounds by reding your second book and now I just started to read you 3rd book… and guess what ? Im applying it to study for the GMAT =O !
At the end, the point that I want to put into the table, is the following: What if I would apply the 4-hww concepts to detach from my business but instead of going to argentina and learn to dance , I would rather to go to Stanford to learn a bit, relax ( yes , relax!, kind of vacation ) plus trying to get and live the silicon valley experience ( connections!
some facts:
* Im far from being wealthy. My business gets me to live well but not enough to accumulate wealth at least at the moment. Trying to switch to product business model , since Im on the services side of IT.
*I will have to get into debt in order to go.
*Why not investing that money into a muse?, Because I dont have it, and its way easier to lend money for education ( some could be granted) than for anything else, at least here in Mexico.
The way I see it is this: My ultimate goal is to be a high impact entrepreneur in the enterprise software space and I feel a MBA in the valley could help me to achieve that, but if that fails or just takes longer than expected, well I could have a good salary which actually is going to be more ( at least 2x ) than what i get from my business know.
what do you think ?
I would really appreciate your comments here. Im not trying to convince you at all to recommend me to go for it.. Im just trying to explain my circumstances to you and see what would you do ??
Abpo
So, Tim? How’d you make out on the Twitter IPO. Let’s assume you owned <1% of outstanding shares totalling around $250M. Not too shabby.
Tim, thanks for the lessons learned. I am interested on how you made out on early investing in FB and Twitter. FB stock was trading at around $28 after it came out and is now above $70. An investor could have almost tripled their money through normal trading had they timed it right. So was early investing in FB worth it for you or would you just play the market if you did it again? Also, about how much is an angel investor expecting to get in ROI when they hand money over to a startup (if the company does well)?
Thanks again for all of wisdom on this website. I’ve been very inspired over the last few years.
Enjoyable read, I changed template on my blog and after that
the serps had a huge slide
You are now part of my reading bookmarks, keep up the interesting posts
We learn the best by experience. Saying this, many people who enrolled in MBA, just want to get the connections which otherwise, they wouldn’t have access to. I like your approach of asking “why?”.
This is important first step. If the price of an MBA is half of your early gain, or even a third, that’s a not good investment. On the other hand if you need connections and like what the university is doing, than MBA might be a good choice.
Nice post author.Thank you.Keep it up.
Hi Tim, I recently found you while remaining in a village in India. Reading your blog posts and 4 Hour Work Week has been breaking up lot of my own thought patterns. This has been quite difficult to digest but I am getting accustomed to it. Many thanks!
Thank you Tim for shearing this valuable information with us, i am a business person so my mind always hungry like this information.
Tim! Always enjoy your adventures and the resulting wisdom! I’ve kind of cut my path in business the same way. Ironically, I’ve spent a number of years working with Universities as a consultant in the area of business. I have see all you said as true. Some people in “the system “ are amazing, with real life knowledge, that they pass on, but sadly that’s around 10-20%.
In most cases, if true knowledge and practical education is what you are looking for, you can do a lot better designing it for yourself. Great info! Thanks for sharing!
QOD : How would angle investing work if I can risk only $1000 to $5000 . What would be the best way to make high risk/high return for lower capital .