When Failure is Good

No one likes to fail.  On the flip side, in the startup community we probably romanticize failure too much.  The truth is it sucks.  But, it should not be a road block to never trying again.

A free enterprise capitalistic society inherently is built on failure.  That’s why you hear story after story of some person consistently failing, and then finally building an awesome company.  Unfortunately when I was in school, the message on failure wasn’t about a businessman, it was the story of Abraham Lincoln trying to win elected office.

It’s a good example, but capitalistic failure is better.  Running for office and government elections are narcissistic failure. Capitalistic failure is mostly about execution and not finding product market fit.  You can learn from that.

I have failed a lot in my life.  When I traded, I failed at least a few times every single day.  Failure cost me money.  Talk about pain! When a startup I invested in fails, I don’t blame the startup.  I look at the process I used to make the decision to invest in the startup.  Is it something I did?  Is there an error I made?  Usually I find something and it’s part of the learning process of investing.  At the same time, no one can bat 1.000.

There are plenty of recent examples of companies that should have failed, but didn’t.

In China today, they are just beginning to think about letting companies fail.  In Asia, and in communist societies, failure is a cardinal sin.  They are learning and it will take a couple of generations to have true cultural change-along with ditching the communism!  In the US, we propped up and bailed out plenty of companies post financial crash that we should have let fail.  The reason they do it in Asia is cultural and political.  The reason we did it in the US was fear and reputation.

Failure in the case of companies can be a good thing.  Bankruptcy is an organized cleansing process that redistributes assets and sometimes allows the company to survive.  Failure also frees up employees to pursue other things.  It can be short term painful for those employees, but it’s the capitalistic markets way of reallocating labor to better purposes.

Companies that fail show that someone somewhere is trying.  Better to try and fail than do nothing at all.  That’s why the best advice for a person contemplating a startup is generally to just do it.  Launch, and go.  You will never get it perfect so just go.  Then figure it out as you roll.

In the US today, we are soon going to be faced with a major choice.  Will we let governments fail or not?  In my state of Illinois, there isn’t a government entity that is actually solvent if you run the numbers the right way.  Bankruptcy will be short term painful.  It will sully reputations.  But, if the outcome of bankruptcy is a different way of doing things, and a smaller restructured more nimble government not beset by the problems of cronyism, then it is a good idea to go through the bankruptcy process.

In many ways, fear of failure is actually manifested as fear of taking risks. When a society avoids failure, it’s really avoiding risk.  Avoiding risk steers us clear of fun things that help society grow, like innovation.  Avoid innovation, and you will be stuck on a treadmill, moving but never going anywhere.

I’d rather accept some failure, and risk.  I like to go places, not sit.