Failure is fine if entrepreneurs don’t sweeten the truth

First published in the Financial Times on 15th July 2014.

Winning, not losing, victory not defeat – anything else is an unwelcome outcome

It appears that it is now cool to celebrate business failure. Such a positive approach was not always the way. Once upon a time insolvency was a taboo subject, and founders who suffered a financial collapse never talked about it. But the mood towards flops has changed.

Today there are reams of recently published books on the subject. Fail Fast, Fail Often: How Losing Can Help You Win, by Ryan Babineaux and John Krumboltz, and The Up Side of Down: Why Failing Well is the Key to Success, by Megan McArdle, are two examples.

It is a favourite topic for business bloggers. Meanwhile, there is a worldwide series of conferences devoted to failure, called FailCon, whose motto starts: “Embrace Your Mistake.”

Is it a good idea to cast away the shame and almost relish failure?

I am torn on the subject. I sense that my most popular speeches are the ones where I talk about my failures. The first time I spoke at length in public about a series of poor investments, it was a cathartic experience for me.

Perhaps audiences are sick of hearing entrepreneurs boasting about their business victories – instead, they like to hear about the setbacks, problems and disappointments. It is partly that the British in particular prefer self-deprecation to conceit; but also because a willingness to acknowledge errors is now part of the zeitgeist. As GK Chesterton wrote: “It is human to err; and the only final and deadly error, among all our errors, is denying that we have ever erred.”

But I am not convinced that making a fetish of failure is a good thing. No one sets out to be a failure. Winning, not losing, victory not defeat – anything else is an unwelcome outcome, surely.

I suppose a willingness to discuss failure is all part of society’s desire to be open and honest about difficult subjects, including commercial disasters. As an article in New York magazine had it recently: “The tech industry used to bury its dead quietly . . . But these days, start-up flame-outs are increasingly serving as badges of honour.”

Of course, we should all be given a second chance in life. Redemption and forgiveness are at the heart of most great human narratives, fictional or otherwise. Indeed, everyone has made mistakes, both big and small, and I admire those who have, as Theodore Roosevelt said, “nobly ventured, and put forth all their heart and strength” – even if the conclusion is a wreck.

It is right that no one is written off as a loser if they launch a new idea, but it goes wrong. Personal bankruptcy is no longer seen as an insurmountable obstacle: an automatic discharge applies in Britain after just 12 months, unless there are serious objections. After all, without risky ventures, which may well lose money, there would be no innovation, and hence no progress. Every improvement is built upon the bones of projects that expired.

Moreover, failures typically lead to valuable lessons, and produce a battle-hardened entrepreneur who is more likely to succeed next time.

Yet to romanticise business failure is to sugarcoat the truth. Very often business breakdown can lead to marriage breakdown, and even mental breakdown. Unfortunately, few of us ever have the luxury of “failing often”. The money and, perhaps more importantly, the confidence run out. I notice that much of the damage from failure is psychological, rather than financial. It means that recovery is a less predictable journey.

But ultimately there is no heaven without hell. The joy of success tastes much sweeter if you have previously seen your dreams laid to waste. Failures are required to teach us what does not work, and to recycle resources so they can be used in more productive ways.

Generally speaking the private sector adapts and reforms much more swiftly than the public sector, partly because the former is for ever stalked by the spectre of going bust. As Samuel Johnson said: “When a man knows he is to be hanged in a fortnight, it concentrates his mind wonderfully.”

Failure is neither a wise career move, nor an end in itself. But it is a necessary corrective, and a crucial reason why free enterprise invariably raises living standards.