October 18, 2011

According to Michael Ellsberg, author of The Education of Millionaires: It's Not What You Think and It's Not Too Late, your real education in how to run a business starts the day you leave school. Ellsberg spent the past two years meeting and interviewing college dropouts who went on to become millionaires and even billionaires. His discovery? They didn't have the one thing society said they needed in order to become successful: a college degree.

So what did they have? Street smarts. Here, Ellsberg answers a few questions about the impact of street smarts versus college education in the context of entrepreneurship.

Q: Can you define "street smarts" for me?

A: I define it as having seven key skills. There are probably more, but these are the key ones: selling, marketing, networking, brand-building, blending meaning and money, learning how to invest in your own earning power and adopting the mindset that you are a proactive creator of economic opportunity, rather than the passive recipient of it.

Q: I know a few B-school professors who would argue they teach those things.

A: The only one I listed that is even remotely touched upon in business school is marketing. Yet even in that case, in school you tend to learn about massive multimillion-dollar campaigns for multi-hundred-million dollar brands. It's just not useful in the real world—in fact, it is anti-useful. It's the opposite of what you need to know if, say, you're a small business owner trying to figure out how best to invest $1,000 or $10,000 or $50,000 in marketing, and you need a return on that marketing investment tomorrow.

Q: True. They certainly don't teach you how to sell.

A: You won't learn how to sell anywhere near an academic institution. Yet, if you talk to street-smart entrepreneurs, and poll them on how important the ability to sell is to their success, they'll say it's crucial.

Q: How about networking? Larry Page and Sergey Brin meeting at Stanford; Zuckerberg and Co. meeting at Harvard...?

A: Probably an exception to the rule. You might get some good networking done at business school, particularly if you go to one of the more elite ones. For many people, that's the main reason to go to business school. Yet there are many cheaper, more effective alternatives.

If you think about it, school is a strange place to network for economic opportunity, as you're mostly networking with other students, who are as broke and out of work as you are at that point. Go to business conferences, and you'll be networking with real business owners who already have things going and who are looking for talent to partner with. A good business conference can cost $3,000, plus airfare and hotel. Go to two of those a year, and you'll get far more of the networking value than an M.B.A. program, at a fraction of the cost.

As for the other components of street smarts—mindset, learning how to build your reputation, defining your sense of meaning, purpose and vision as it relates to your business and career goals—you have to learn those on your own. You won't learn them in school.

Q: What's the most surprising thing you discovered from talking to all these self-made, self-educated millionaires and billionaires over the past two years?

A: That nearly all pointed to reading books and articles as an incredibly important part of their success and education. Reading was part of their daily routine. They found reading to be crucial for inspiration, how-to skills-building, creativity, generating ideas, and keeping abreast of wider trends. The sense was that you can get very very far in life without schooling. But without education? No way. However, education can come from reading on your own; it doesn't need to come from expensive degrees or classes.

Q: But aren't the successful dropouts you write about standouts, outliers, exceptions to the rule?

A: Anyone who becomes a millionaire is, statistically speaking, an exception to the rule. Billionaires, even more so. We're not all going to become Mark Zuckerbergs. These are the most successful people on the planet. But no matter where you are in your economic life, learning real-world sales will give you a leg up. Learning real-world networking will give you a leg up. Learning real-world marketing will give you a leg up—much more so than learning abstract financial models applicable to multi-gazillion-dollar businesses in business school will, and certainly more than memorizing a bunch of history dates and spitting them back to some teacher who has never run a business in her life.

Q: How about the argument that people who have degrees earn more than people who don't?

A: The main reason people who have degrees earn more on average, is probably that people who have degrees are, on average, more motivated, more disciplined and more ambitious than people who don't. Because of the way our society is currently set up, such people tend to get funneled into college and get degrees. That doesn't mean college had anything to do with their success. Put the same motivated, disciplined, ambitious people through a rigorous program of street-smart self-education instead, and I think the self-educators will do just as well, if not far better. And for a fraction of the cost, without the insane levels of student debt kids are getting into these days.

Another reason that people with degrees tend to earn more than people without is that, in our system, degrees serve as a credential entry into professional jobs. And yes, if you want to be a doctor, lawyer, professor, accountant, architect, engineer, or some other professional, then in that case, by all means, go to college—ideally the least expensive one you can find.

But people who create startups and small businesses don't need such credentials. Your customers don't care where you went to school or what your G.P.A. was; they care whether you serve them well and provide a quality product or service.

Q: You graduated from Brown in 1999. You have a nice Ivy League education to your name. Might not some folks think you're being a little hypocritical for writing all this?

A: I spent most of my twenties completely lost, career-wise. I could probably write you an A+ paper on postmodernist hermeneutics or Marxist social theory or other chestnuts of today's liberal arts curriculum. But I had absolutely no idea how to interface with the world of business and careers when I graduated. I finally got my career and business act together and transformed my own financial life dramatically, in my 30s. Not through anything I learned in school, but through the street-smart skills I've been learning and writing about for the past half a decade. I didn't learn these skills in school, and no one is learning them in school.

Q: So the one thing you want everyone to take away from The Education of Millionaires is...?

A: That we all need to start teaching ourselves.

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Join the conversation ( 1 )

• Anthony G. Brouard 7 months ago

  

  This is an extremely insightful article from a writer that is very quickly becoming a leading influence on the Entrepreneurial movement of our age. I just finished his Incredible book. Everyone of his seven street smart components is essential for success and none are in any direct way taught in higher education. Even academic education on Entrepreneurship fails to teach these basics. I will be watching this Author, I think he may be the new incarnation of the great Napoleon Hill. It is certainly a continuation of Hill's work that goes well beyond reinvention. He may be the first Author, that has given a proper treatment to the mind set of the Entrepreneur or recognized the importance of putting money and meaning together.