Failing Irrationally

In business literature, experts enjoy debating the value of the opposing pendulums of tactical experience: success versus failure. It seems it has become fashionable to discuss which experience, failure or success, will ultimately lead to a further success at some given point in the future.

The concept is popular because its applicability throughout the business food chain is all-encompassing:

Will the starters — the entrepreneurs — be successful with a glorious win or a rough, constructive failure under their belt? Do you hire a previous employee of a failed empire, or do you recruit one that rode the wave to an IPO? Do you invest in the team that has failed marketing a few previous, but promising ideas or that has already built and sold a product?

The answers to these questions might seem obvious, even trite. Of course, you would bet on the previous success! But recent research could sway you to answer differently.

Bob Sutton, in an article in the Harvard Business Review, summarized one particularly compelling study

Shmuel Ellis and his colleagues have really dug into this issue [of learning from failure] with, first, a field experiment with two companies of soldiers in the Israel Defense Forces, who were tested for their performance on navigation exercises. The critical difference between the two groups was that — following standard practice in the Israeli military — the first company had a series of after event reviews during four days of navigation exercises that focused only on the mistakes that soldiers made, and how to correct them. The second company, in its after event discussions, focused on what could be learned from both their successes and failures.

Then, two months later, these same two companies went through two days of navigation exercises. The results showed that, although substantial learning occurred in both groups:

Soldiers who discussed both successes and failures learned at higher rates than soldiers who discussed just failures.

Soldiers in the group that discussed both successes and failures appeared to learn faster because they developed “richer mental models” of their experiences than soldiers who only discussed failures.

One of the more interesting arguments in this realm would be to determine if the startup and founder ecosystem is engineered like evolution: Does Darwinism apply to early-stage companies and their founders? Does success actually breed more success?

I would define the success of a startup, first and foremost, as the construction of a sustainable, profitable business, followed by M&A transactions and liquidity events. Based on the typical longevity of these events, they must favor success by default. But, what about on a shorter¹ time-span? Do only the strong survive, or is the two-time failed entrepreneur more likely to have a third success over the two-time successful entrepreneur? I don’t have the data or the experience to answer this question, but it’s healthy to wonder how and why a previous experience, if any at all, matters.

My opinion is that we shouldn’t see failure as an excuse for not succeeding. That’s where I see the “failure is good!” research conditioning irrational behavior, which can be detrimental to entrepreneurs. Failure has certainly done more good than bad. Consider the Edsel, Newton or the Bob, all seemingly failures with positive, long-lasting outcomes. But, what about the failure of Lehman Brothers, Bear Stearns and AIG? Have these atrocious events provided financial reform or simply conditioned the banks into believing it’s okay to fail at the financial expense of others?

Failure shouldn’t be celebrated or feared. If necessary, it should be reflected on, but never encouraged. Ultimately, the reward of failure is some experience. The reward of success is some experience and, that one thing that really matters, a successful outcome.

Failure is overrated. Failing is a hell of a lot easier than succeeding. The only thing you need to do to fail is nothing. I’m not arguing that anyone supporting failure as a learning mechanism has done nothing, but part of me believes failure is widely encouraged because the majority of the people preaching are trying to feel better for failing themselves.

The “failure is good!” mantra falls into the same trap that many other claims in entrepreneurship-world fall into: they are supported by a culture of echos rather than hard facts and data.

1. I realize this isn’t a perfect analogy to evolution because studying evolution requires analyzing a long time-spans. [↩]

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