The Problem with Making Entrepreneurship Courses More Realistic

There’s a major push in business schools to make entrepreneurship courses more realistic. If you make the experience of learning about starting a company more like actually starting a company, the belief is, students will develop a better understanding of what it takes to be a company founder.

Whether or not students would gain a better understanding of entrepreneurship from more realistic classes, structuring entrepreneurship courses to be more realistic is unworkable in practice. But not for the reasons you might think. Contrary to popular opinion, most professors know how to make their entrepreneurship classes quite realistic. They just choose not to do it because the realism of starting companies is inconsistent with the academic evaluation system.

Why Entrepreneurship Courses are Not Realistic

To explain this concept, I need to describe two different kinds of statistical distributions. One is a normal distribution, which is shaped like a bell curve. With a normal distribution, a few outcomes are excellent, a few are poor and most are just okay.

In school, most outcomes are normally distributed. A few students get A’s and a few get C’s but most of the class gets B’s. Students expect this distribution of outcomes.

The other is a power law distribution. In a power law distribution, a few cases account for a large portion of the distribution’s total outcome. That, it turns out, is the distribution of most aspects of entrepreneurship, according to research by Chris Crawford and his colleagues. Whether we are talking about which founders get their products launched, which start-ups gain customers, who gets financing or the value of company exits, whatever outcome we are measuring tends to follow a power law distribution.

While society is willing to accept that entrepreneurial outcomes tend to be power law and not normally distributed, few people are willing to tolerate grades following a power law distribution. The idea that a couple of students in a class of 25 would account for half of all the points awarded by the professor is antithetical to the notion of how we believe that students should be evaluated. So if I were to give A’s only to those students who managed to raise money or who got high valuations for their companies or attracted a bunch of customer interest in their products and fail the rest — the equivalent of what the market does to actual entrepreneurs — I would be in serious trouble as an educator.

The failure of academics to approach entrepreneurship with the realism of the market imposes a cost on society. Because entrepreneurship classes are a stylized setting in which a normal distribution of outcomes is artificially imposed, many students are left thinking that their efforts are better than they actually are. When they receive a B+ on an investor pitch that would never interest actual financiers or an A- on their evaluation of customer interest in their products, students are left with the impression that entrepreneurship is easier than it actually is. In some cases, they think their ideas are worth pursuing after graduation, or worse yet, in place of completing their educations, and incur a costly lesson in the difference between evaluation in school and in the marketplace.

Until such time as society is willing to let the distribution of evaluation in classes mimic the distribution of actual entrepreneurial outcomes, it will be impossible for entrepreneurship classes to be realistic. But don’t be fooled into thinking the professor running the class lacks an understanding of how the market place would judge. He or she knows the difference, but is conforming to society’s preferences.

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This article, "The Problem with Making Entrepreneurship Courses More Realistic" was first published on Small Business Trends