Future of Higher Education: Apprenticeships vs. Business School

Should you go to graduate school?

If so, why?

If not, what are your alternatives?

Millions of young adults across the globe — and their parents and mentors — find themselves asking these questions every year.

Earlier this month, I explored how exponential technologies are rising to meet the needs of the rapidly changing workforce.

In this blog, I’ll dive into a highly effective way to build the business acumen and skills needed to make the most significant impact in these exponential times.

To start, let’s dive into the value of graduate school versus apprenticeship — especially during this time of extraordinarily rapid growth, and the micro-diversification of careers.

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The True Value of an MBA

All graduate schools are not created equal.

For complex technical trades like medicine, engineering and law, formal graduate-level training provides a critical foundation for safe, ethical practice.

(Until these trades are fully augmented by artificial intelligence and automation...)

For the purposes of today’s blog, let’s focus on the value of a Master in Business Administration (MBA) degree, compared to acquiring your business acumen through various forms of apprenticeship.

The Waning of Business Degrees

Ironically, business schools are facing a tough business problem.

The rapid rate of technological change, a booming job market, and the digitization of education are chipping away at the traditional graduate-level business program.

The data speaks for itself. 

The Decline of Graduate School Admissions

Enrollment in two-year, full-time MBA programs in the U.S. fell by more than one-third from 2010 to 2016.

During the 2018 admissions period, applications to business schools in the United States dropped 7 percent from the previous year.

While in previous years, top business schools (e.g. Stanford, Harvard, and Wharton) were safe from the decrease in applications, this year, they also felt the waning interest in MBA programs.

• Harvard Business School: 4.5 percent decrease in applications, the school’s biggest drop since 2005.
• Wharton: 6.7 percent decrease in applications.
• Stanford Graduate School: 4.6 percent decrease in applications.

Another signal of change began unfolding over the past week. You may have read news headlines about an emerging college admissions scam, which implicates highly selective U.S. universities, sports coaches, parents and students in a conspiracy to game the undergraduate admissions process.

Already, students are filing multibillion-dollar civil lawsuits arguing that the scheme has devalued their degrees or denied them a fair admissions opportunity.

MBA Graduates in the Workforce

To meet today’s business needs, startups and massive companies alike are increasingly hiring technologists, developers, and engineers in place of the MBA graduates they may have preferentially hired in the past.

While 85 percent of U.S. employers expect to hire MBA graduates this year (a decrease from 91 percent in 2017), 52 percent of employers worldwide expect to hire graduates with a master’s in data analytics (an increase from 35 percent last year). 

We’re also seeing the waning of MBA degree holders at the CEO level.

For decades, an MBA was the hallmark of upward mobility towards the C-suite of top companies.

But as exponential technologies permeate not only products but every part of the supply chain — from manufacturing and shipping to sales, marketing and customer service — that trend is changing by necessity.

Looking at the Harvard Business Review’s Top 100 CEOs in 2018 list, more CEOs on the list held engineering degrees than MBAs (34 held engineering degrees, while 32 held MBAs).

There’s much more to leading innovative companies than an advanced business degree.

How Are Schools Responding?

With disruption to the advanced business education system already here, some business schools are applying notes from their own innovation classes to brace for change.

Over the past half-decade, we’ve seen schools with smaller MBA programs shut their doors in favor of advanced degrees with more specialization. This directly responds to market demand for skills in data science, supply chain and manufacturing.

Some degrees resemble the precise skills training of technical trades. Others are very much in line with the apprenticeship models we’ll explore next.

Regardless, this new specialization strategy is working and attracting more new students.

Over the past decade (2006 to 2016), enrollment in specialized graduate business programs doubled.

Higher education is also seeing a preference shift toward for-profit trade schools, like coding boot camps. This shift is one of several forces pushing universities to adopt skill-specific advanced degrees. 

But some schools are slow to adapt, raising the question: how and when will these legacy programs be disrupted? 

A survey of over 170 business school deans around the world showed that many programs are operating at a loss.

But if these schools are world-class business institutions, as advertised, why do they keep the doors open even while they lose money? 

The surveyed deans revealed an important insight: they keep the degree program open because of the program’s prestige.

Why Go to Business School?

Shorthand Credibility, Cognitive Biases and Prestige

Regardless of what knowledge a person takes away from graduate school, attending one of the world’s most rigorous and elite programs gives grads external validation.

With over 55 percent of MBA applicants applying to just 6 percent of graduate business schools, we have a clear cognitive bias toward the perceived elite status of certain universities.

To the outside world, thanks to the power of cognitive biases, an advanced degree is credibility shorthand for your capabilities.

Simply passing through a top school’s filtration system means that you had some level of abilities and merits. 

And startup success statistics tend to back up that perceived enhanced capability. Let’s take, for example, universities with the most startup unicorn founders (see the figure below).

When you consider the 320+ unicorn startups around the world today, these numbers become even more impressive. 

Stanford’s 18 unicorn companies account for over 5 percent of global unicorns, and Harvard is responsible for producing just under 5 percent.

Combined, just these two universities (out of over 5,000 in the U.S., and thousands more around the world) account for 1 in 10 of the billion-dollar private companies in the world. 

Figure: Universities with the most unicorn startup founders

By the numbers, the prestigious reputation of these elite business programs has a firm basis in current innovation success.

While prestige may be inherent to the degree earned by graduates from these business programs, the credibility boost from holding one of these degrees is not a guaranteed path to success in the business world.

For example, you might expect that the Harvard School of Business or Stanford Graduate School of Business would come out on top when tallying up the alma maters of Fortune 500 CEOs.

It turns out that the University of Wisconsin-Madison leads the business school pack with 14 CEOs to Harvard’s 12.

Beyond prestige, the success these elite business programs see translates directly into cultivating unmatched networks and relationships.

Relationships

Graduate schools — particularly at the upper echelon — are excellent at attracting sharp students. 

At an elite business school, if you meet just five to 10 people with extraordinary skill sets, personalities, ideas or networks, then you have returned your $200,000 education investment.

It’s no coincidence that some 40 percent of Silicon Valley venture capitalists are alumni of either Harvard or Stanford.

From future investors to advisors, friends and potential business partners, relationships are critical to an entrepreneur’s success.

Apprenticeships 

As we saw above, graduate business degree programs are melting away in the current wave of exponential change.

With an increasing $1.5 trillion in student debt, there must be a more impactful alternative to attending graduate school for those starting their careers.

When I think about the most important skills I use today as an entrepreneur, writer and strategic thinker, they didn’t come from my decade of graduate school at Harvard or MIT… they came from my experiences building real technologies and companies, and working with mentors. 

Apprenticeship comes in a variety of forms; here, I’ll cover three top-of-mind approaches:

1. Real-world business acumen via startup accelerators
2. A direct apprenticeship model
3. The 6 D’s of Mentorship

Startup Accelerators & Business Practicum  

Let’s contrast the shrinking interest in MBA programs with applications to a relatively new model of business education: startup accelerators.

Startup accelerators are short-term (typically three to six months), cohort-based programs focusing on providing startup founders with the resources (capital, mentorship, relationships and education) needed to refine their entrepreneurial acumen.

While graduate business programs have been condensing, startup accelerators are alive, well and expanding rapidly.

In the 10 years from 2005 (when Paul Graham founded Y Combinator) through 2015, the number of startup accelerators in the U.S. increased by more than tenfold.

Figure: The number of startup accelerators in the U.S. from 2005 through 2015.

The increase in startup accelerator activity hints at a larger trend: our best and brightest business minds are opting to invest their time and efforts in obtaining hands-on experience, creating tangible value for themselves and others, rather than diving into the theory often taught in business school classrooms.

The “Strike Force” Model

The Strike Force is my elite team of young entrepreneurs who work directly with me across all of my companies, travel by my side, sit in on every meeting with me, and help build businesses that change the world.

Previous Strike Force members have gone on to launch successful companies, including Bold Capital Partners, my $250 million venture capital firm.

Strike Force is an apprenticeship for the next-generation of exponential entrepreneurs.

To paraphrase my good friend Tony Robbins: If you want to short-circuit the video game, find someone who’s been there and done that and is now doing something you want to one day do.

Every year, over 500,000 apprentices in the U.S. follow this precise template.

These apprentices are learning a craft they wish to master, under the mentorship of experts (skilled metal workers, bricklayers, medical technicians, electricians, and more) who have already achieved the desired result.

What if we more readily applied this model to young adults with aspirations of creating massive value through the vehicles of entrepreneurship and innovation?

For the established entrepreneur: How can you bring young entrepreneurs into your organization to create more value for your company, while also passing on your ethos and lessons learned to the next generation?

For the young, driven millennial: How can you find your mentor and convince him or her to take you on as an apprentice? What value can you create for this person in exchange for their guidance and investment in your professional development?

The 6 D’s of Mentorship

In my last blog on education, I shared how mobile device and Internet penetration will transform adult literacy and basic education.

Mobile phones and connectivity already create extraordinary value for entrepreneurs and young professionals looking to take their business acumen and skill set to the next level. 

For all of human history up until the last decade or so, if you wanted to learn from the best and brightest in business, leadership or strategy, you either needed to search for a dated book that they wrote at the local library or bookstore, or you had to be lucky enough to meet that person for a live conversation.

Now you can access the mentorship of just about any thought leader on the planet, at any time, for free.

Thanks to the power of the Internet, mentorship has digitized, demonetized, dematerialized, and democratized. 

What do you want to learn about?

Investing? Leadership? Technology? Marketing? Project management?

You can access a near-infinite stream of cutting-edge tools, tactics, and lessons from thousands of top performers from nearly every field — instantaneously, and for free. 

For example, every one of Warren Buffett's letters to his Berkshire Hathaway investors over the past 40 years is available for free on a device that fits in your pocket. 

The rise of audio — particularly podcasts and audiobooks — is another underestimated driving force away from traditional graduate business programs and toward apprenticeships.

Over 28 million podcast episodes are available for free. Once you identify the strong signals in the noise, you’re still left with thousands of hours of long-form podcast conversation from which to learn valuable lessons.

Whenever and wherever you want, you can learn from the world’s best.

In the future, mentorship and apprenticeship will only become more personalized.

Imagine accessing a high-fidelity, Artificial Intelligence-powered avatar of Bill Gates, Richard Branson or Arthur C. Clarke (one of my early mentors) to help guide you through your career.

Virtual mentorship and coaching are powerful education forces that are here to stay.

Bringing It All Together

The education system is rapidly changing.

Traditional master’s programs for business are ebbing away in the tides of exponential technologies.

Apprenticeship models are re-emerging as an effective way to train tomorrow's leaders.

In a future blog, I’ll revisit the concept of apprenticeships and other effective business school alternatives. 

If you are a young, ambitious entrepreneur (or the parent of one), remember that you live in the most abundant time ever in human history to refine your craft. 

Right now, you have access to world-class mentorship and cutting-edge best-practices — literally in the palm of your hand. What will you do with this extraordinary power?