In 2002 Edward Lazear, an award-winning economist from Stanford University, wrote a working paper for the American National Bureau of Economic Research. In the paper he introduced the “jacks-of-all-trades” theory of entrepreneurship. Lazear found that individuals with a broad and diverse set of skills are much more likely to succeed as entrepreneurs than individuals who specialize in only a few specific areas.
His research, based on the answers of 5,000 Stanford MBA alumni, revealed that the more positions a person has held in the past, the more likely he or she is to be an entrepreneur in the future. The number of past roles was the most important indicator in explaining the tendency towards entrepreneurship—far more than previous experience, earnings, and past employment tenure. In numbers, Lazear found that only 3% of those who have had fewer than three roles are entrepreneurs, whereas 29% of those with over sixteen prior roles are entrepreneurs. Furthermore, he suggests that students who took a more general curriculum while attending Stanford’s MBA program were also more likely to be entrepreneurs.
This theory, which has been tested on different samples from different countries, has been found to hold. Entrepreneurs are jacks of all trades, also known as generalists. Their broad set of skills allows them to juggle the different requirements of their business successfully.
While Lazear focused on entrepreneurship, there is a growing body of research supporting the idea that specializing in a specific area of business is becoming irrelevant to today’s economy. Why, you may ask? I offer two examples, but I’m sure there are many more.
The first one relates to technology. As technology becomes a dynamic and fast-paced field, more and more organizations find it hard to re-train their current technology specialists. While higher-education programs are falling behind and still continue to teach students to be specialists, companies today require diverse technological experience from their future leaders.
The second example refers to business in general. Today more than ever, the marketplace is characterized by uncertainty that is intensified due to the close relations and dependence between the world economies. In order to be a successful player, you must be open-minded and creative. Having a broad perspective of the business environment that takes into account various influential factors is also crucial. In that regard, specialists who often view the world from a very specific angle relevant to their area of expertise might have a hard time seeing the full picture and analyzing it correctly.
While expertise is still required in certain fields, the uncertainty and dynamism of today’s business environment is the fertile ground on which the need for generalists is growing. Unsurprisingly, Lazear’s findings prove that entrepreneurs have long understood what large corporations are only now realizing.