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Dropping out to start a billion-dollar business is mostly a myth

Some take a few famous dropout entrepreneurs as proof that school is for losers. Let’s really do the math

Facebook co-founders Mark Zuckerberg, right, and Dustin Moscovitz at Harvard

Facebook co-founders Mark Zuckerberg, right, and Dustin Moscovitz at Harvard during their “semester off.” (Justine Hunt/Boston Globe/Getty)

In the pilot episode of HBO’s sitcom Silicon Valley, the character of Peter Gregory, a billionaire tech investor, delivers a TED Talk in which he smugly rails against traditional education. After listing superstar entrepreneurs who dropped out of college—Bill Gates, Larry Ellison, Steve Jobs, Michael Dell—he calls post-secondary education a “cruel, expensive joke” that “happily churns out unemployed debtors of dubious value.”

It’s a point of view that’s gaining traction: The fictional Gregory is said to be based on billionaire PayPal co-founder Peter Thiel, a vocal critic of higher education. A few years ago he went beyond critique and created the Thiel Fellowship, which gives a US$100,000 grant to entrepreneurial young people who “want to build new things instead of sitting in a classroom.” To receive the grant, the winners—between 20 and 30 of them each year—must drop out of school to pursue their ventures.

Thiel’s fellowship and the imitators that have followed contribute to an image that great entrepreneurship comes not from a textbook but rather from some instinctive “it” that people either have or don’t. The success of legendary dropouts cited (satirically) on Silicon Valley—and of other self-made titans, like Mark Zuckerberg, Bill Gates and Richard Branson—suggests that formal education may, in fact, be a waste of time for those naturally predisposed to empire building.

That mode of thinking is compelling—but ultimately wrong. The truth is that dropouts who achieve long-term success as entrepreneurs are outliers. Sure, certain variables that contribute to startup success (namely, an aptitude for risk and a drive to prove people wrong) can’t be taught in school. But other factors—factors far more important to the successful growth and management of a business over the long term—most certainly can. Like the critical thinking gleaned from a liberal arts degree, for one. Or the creative problem solving that comes from an engineering program. Or the nuts-and-bolts marketing, HR and finance know-how taught in undergrad commerce. Rarely are these skills innate. While it’s possible to learn them on the fly, too many entrepreneurs simply don’t, which tends to lead to trouble once a business grows beyond the starry-eyed startup phase.

For a more representative picture, look to the CEOs of the companies on this year’s PROFIT 500 ranking of Canada’s Fastest-Growing Companies. While there are plenty of school-of-lifers in the group—roughly 21% didn’t finish college or university—a strong majority (68%) have an undergraduate or graduate degree. That’s more than twice the average among working-age Canadians.

Furthermore, the higher the education of PROFIT 500 leaders, the better their businesses performed. On average, degree-holding CEOs grew revenues 63% faster than the unschooled on the list. The better-educated cohort also sold 53% more (by dollar value) last year and created 6% more full-time jobs. Even among these elite entrepreneurs, there’s a clear correlation linking schooling with success.

Now, I would never deny any young person her right to sell first and ask questions later, and I understand formal education is not for everyone. But to claim, as Thiel and his disciples do, that today’s education system doesn’t support entrepreneurs is outdated and ridiculous. Most universities in Canada now offer startup incubator programs that give undergrads enviable access to resources and mentorship. You can write, test and vet a real business plan as part of an MBA. Heck, my cousin’s kid is taking a class in entrepreneurship right now. He’s 16, in Grade 11. We’re far past the point at which educators see starting a business as some sort of fringe vocation.

It’s time to stop romanticizing dropout entrepreneurs. In reality, the average person would be far better off getting a degree than leaving school the second a half-decent business idea comes to mind. A few legendary dropouts have, in fact, changed the world; most aren’t so lucky. That’s the first of many tough lessons aspiring entrepreneurs need to learn.