Wednesday, March 16, 2011

In praise of failure

I think failure has an undeservedly bad reputation. It has many virtues, and we would do well to recognize and encourage those virtues.

Two very disparate things made me realize this recently. One was a Planet Money podcast on the relative rates of defaults and late payments on mortgages between the US and Spain. Another was a discussion about teaching math to young kids who are intimidated about raising their hands in class for fear of giving the wrong answer.

What do these things have in common, and what do they have to do with the virtues of failure? The short answer is that failure is a powerful contributor to success. In both cases, the ability to fail paradoxically stimulates greater overall success.

In the case of the housing market, the fact that there is an orderly process of foreclosure or bankruptcy, where one can start over again if necessary, makes it easier to assume the risks involved in buying a house than it is in a place like Spain, where there are typically no such protections and where the bank can come after you for every last cent for however long it takes. This lowered barrier to home ownership means more people can enter the market, which leads to a healthier and more liquid housing market.

In the case of teaching math, if a child is terrified of giving the wrong answer, they will likely be significantly more timid about raising their hand in class, which will reduce their participation (and increase their stress about the subject). Contrast that with a classroom where wrong answers, while not rewarded (they are wrong, after all), are not stigmatized and lead instead to a discussion about the process that led to that answer as a way of identifying where the process went wrong, the student can feel much more comfortable about participating and will actually learn where they went wrong. (Stated another way, I believe that in math class the best way to achieve correct answers is, ironically, not to focus on the answers themselves but rather to focus on the thought process; if you nail the process, the answers will follow. But that is a topic for another post.)

Let me back up and say that I'm deliberately being provocative in my thesis title here. Failure should not be without negative consequences - after all, it is by definition the opposite of success. If the goal was worthwhile, failure to achieve the goal will have some degree of pain and cost.

But failure does not need to be a bad thing, nor does it need to be stigmatized, provided that two important conditions are met.

First, the failure must not have been due to a lack of effort or diligence in one's efforts to achieve the desired goal; if one is reckless, careless, or doesn't make an effort, then failure is the appropriate reward and is without virtue. I.e., you have to do everything you can to set yourself up for success. I used mortgages as an example of "good failure" improving the health of the housing market. The mortgage crisis of the past few years, however, clearly shows "bad failure", with many people not meeting my reckless/careless condition. No-doc loans to people who can't afford a house is certainly not "setting up for success", I would argue it is reckless.

Secondly, every failure is an opportunity to learn. As Thomas Edison once said, "I have not failed. I've just found 10,000 ways that won't work." Making a mistake is quite forgivable. Making the same mistake twice is not.

These two principles are key factors for America's entrepreneurial success, especially when compared to other countries that do not share this cultural and legal attitude. When an entrepreneur starts a company, does everything possible to set themselves up for success, and the company fails anyhow, our system allows them to stand up, dust themselves off, and try again. After all, they've just found "another way that won't work." In fact, venture capital investors generally view a few failed startups on a resume as a positive. (Successful startups are generally better, of course, but success can often result from a dose of good luck, which doesn't provide learning opportunities). But this is only true if the entrepreneur was not reckless and shows that they learned from their past mistakes.

We can all learn from our mistakes, and we should not fear making them.

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