Third Degree

We ask if book smarts or street smarts rule in business.
Magazine Contributor
3 min read

This story appears in the June 2005 issue of Entrepreneur. Subscribe »

In the third season of The Apprentice, contestants were divided into two teams, high school vs. college graduates. In a real-life spin, we asked four entrepreneurs with various levels of education, Are street smarts or book smarts more important in business?

Armed with the gifts of gab and persuasion, Steven Arroyo spent time around restaurateur clients as an espresso bean salesman and became convinced he had the street smarts to excel at the restaurant biz himself. He started what is now Cobras & Matadors in Los Angeles 10 years ago. "I knew that my style was as good as anybody's out there," says Arroyo, 36, who never attended college. "When you have a degree, you pay someone tuition to tell you what you can and cannot achieve. No one has ever told me what my capabilities or limitations are." Arroyo now has four restaurants and projects 2005 sales of $7 million. "The street will teach honesty, integrity, humility and how to BS," he says. "Lack of knowledge is sometimes my best weapon."

A high-school dropout at 16, Barry Liben, now 52, co-owns New York City travel agency Tzell Travel Group. Liben became friendly with the owners of Tzell, which was next door to the summer camp he ran, and an inheritance from his uncle allowed him to buy part of it at 24. Taking full control six months later (a silent partner still remains), Liben credits his ability to deal with people, something an MBA can't guarantee, for growing a business that boasts 2005 sales projections of $550 million. While some businesses benefit from book smarts, Liben says a people-oriented business needs street smarts: "Treating people the proper way, with respect--you won't learn that in any class or book."

As the founder of life-sciences solution provider Octagon Research Solutions Inc. in Wayne, Pennsylvania, James C. Walker cites good leadership, passion and a sense of urgency as musts in running a successful business--he projects 2005 sales of over $20 million. Book and street smarts should be requirements for any business, says Walker, 35, who earned his MBA from Duke University in 2003 in an intense 20-month program. Though he deferred his initial enrollment upon Octagon's 1999 launch, Walker explains, "To face the challenges of a hyper-growth company, it was imperative that I get immersed in business knowledge in addition to on-the-job learning." His MBA helped him with strategic planning, decision making and managing a corporate culture, but he stresses that learning doesn't necessarily have to take place in a classroom.

Harvard MBA Bill Herp says his prestigious degree provided him with "the ability to think [big] and the tools and know-how to take a small business from a germ of an idea to a very large scale." Herp adds that his calling card has helped with networking, raising money for past ventures and attracting partners. "For better or worse, a veneer of credibility is associated with an MBA, and a Harvard MBA in particular." In early 2004, Herp, 42, founded private air-taxi service Linear Air in Bedford, Massachusetts, and now projects 2005 sales of $3.5 million. He sees book smarts as the building blocks on the foundation of street smarts. "Street smarts are [what] any successful business-person needs: personal drive, and the ability to communicate well and sell."

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