Archive for Startups

Why Failure Is Overrated

It is interesting how statements that would sound patently absurd to any discerning person get trumpeted in our society like they are objective truths. This is certainly the case with the idea circulating around Silicon Valley that failure is a good thing. However, sadly enough, it has now expanded outside of Silicon Valley and we hear people in the business world, and especially those involved in the IT sector with startup companies, claim that it is somehow a good thing for an entrepreneur to fail.

The idea behind this thinking is that if you start a company and fail, you ideally learn many lessons from it and are able to successfully apply what you learned from those experiences to your next venture, and hence be much more likely to succeed at it. While this is indeed possible, from my personal experience as well as what I have read about enormously successful businesspeople, this is an ideal scenario that is not necessarily the case in the real world, something I will explain in depth later on in this blog entry. Additionally, a very superficial consolation that is offered to people who fail goes something like, “The only failure is not trying.” While I agree that one should not let fear prevent them from accomplishing an important mission, and that not doing anything about it may result in the world being worse off, it appears that we are parading failure around as a virtue, rather than looking at it for what it is: something to be avoided at all costs. Indeed, I argue that failure is not only very unappealing, it is incredibly demoralizing. Furthermore, one is not guaranteed to be able to pinpoint the exact reasons why a startup failed, since there are often many different reasons that a company fails, and also because we are not able to run the same experiment with the exact same inputs and variables multiple times in order to see whether our hypothesis was correct. Finally, I argue that failure does not necessarily lead to success, something that is incredibly obvious but which has sailed over the heads of so-called experts and educated people.

It is very obvious that failing in any endeavor is not a desirable outcome, and that it would be much better to succeed than to fail, but why do we as a society not come out and simply say that? This is not a matter of me being a Pollyanna and focusing only on positives while ignoring the many perils involved when starting a business. This is a matter of trying to figure out why we seem to think that failure is a good thing, when it is clearly not. I suppose the reasoning behind this is that we want to hedge our bets and protect the ego in the likely scenario that our startup fails, since most new companies do not succeed as we would want them to. Thus, we want to be able to console ourselves if our company fails and say, “At least I tried,” or “What can I learn from this?”

Also, I suspect the self-help community is partially to blame for the proliferation of this sort of thinking, as nearly any self-help book you read will focus on taking whatever positives you can from failing, and regurgitating clichés based on “looking at the bright side of things,” rather than admitting that a business crashing and burning is a very negative event and one that we should do everything in our power to avoid. While I agree that it is a good idea to make the best out of any situation, the above scenario seems to me to be an unhealthy way of looking at things when you’re starting a company.

When you’re starting a company, and especially a technology startup, you’re often incredibly busy on many fronts, with a myriad of constraints, be it time, money, or resources. Thus, it’s probably not the best use of resources and time to focus on what will happen if you fail or trying to tell yourself that it is acceptable to fail because many businesses fail. By focusing on failure rather than success, we are actually setting ourselves up for failure rather than success. In my mind, it would be much better to focus on how to succeed. Simply put, failing is highly undesirable and we should try to avoid that as much as possible, rather than rationalize to ourselves that it is somehow okay.

Furthermore, related to the first point I made, failing in any given endeavor is incredibly demoralizing, especially if it is one that required a lot of resources. Imagine sinking several years’ time and all of your life savings into a startup only to have it fail. There is a risk that one will become extremely discouraged and demotivated as a result of the business not working out. I suppose that someone with extraordinary mental powers and fortitude could glean some positives from these sorts of scenarios, and could pick himself/herself back up and go at it again, but it would be dishonest to say that bankruptcy would not affect this person in any way, or that this person is somehow better off as a result of the company closing down. When one has a goal but does not reach that goal for whatever reason, it is extremely unlikely for them to be satisfied with that outcome. In my mind, we want to avoid scenarios that discourage and demotivate us, and, not surprisingly, failure is one of the most discouraging events in life.

Additionally, proponents of the idea that failure is a good thing often point out that one can learn many lessons from a failed business and will somehow be much more likely to succeed in the future since they will take those lessons and apply them to their next venture. However, according to venture capitalist and entrepreneur Peter Thiel, startup companies often fail for a multitude of reasons, and sometimes we don’t even know what exactly caused the company to blow up. Perhaps it was the wrong team members, or that the industry was far too competitive, or that the product wasn’t good enough, or lawsuits stemming from intellectual property disputes, or any other reason. The next time around you might be more careful when choosing team members to start your company with, or you may attempt to enter a market that has less competition, or you may even start a business that you are highly confident will not be engaged in legal warfare later down the line.

However, this still doesn’t guarantee that you will get it right the second or third time around, because there are so many variables involved, and also because it is impossible to run the exact same experiment with the exact same company and team members in the same market with the same product or service, again and again, to test your hypothesis of why it all went wrong.

Finally, it is incredibly difficult to prove that repeated failure in the beginning guarantees success later. We are bombarded with examples of people who failed many times before succeeding, but there appears to be very little evidence that the failures are what directly led to the success later, or that these people were somehow better off as a result of failing multiple times. Simply put, failing many times does not automatically make you more likely to succeed later – it just means you failed a bunch of times. Furthermore, how about people who succeeded right away? Or how about people who succeeded in the beginning, then failed, and then succeeded again? One could argue that Steve Jobs was a success straight away with Apple, before experiencing some challenges and setbacks and then succeeding again with his eventual return to Apple. But this wouldn’t fit the hypothetical model that I described earlier, that failure eventually leads to success. Indeed, some people succeed wildly in the beginning and later fail spectacularly; Eike Batista, the Brazilian business magnate who went from a net worth of $30 billion to a negative net worth in less than two years, comes to mind. How do we explain such scenarios?

To be clear, I am not saying one should give up right away whenever they face challenges or experience setbacks, since giving up too easily or being overly pessimistic rarely lead to success. I am also not saying that no lessons can be learned from a failed venture. There definitely are lessons one can learn from a failed business and there are positives one can take away from such situations. Additionally, being resolute is a quality that any entrepreneur should possess, but I would like to dispel the notion that failure automatically leads to success and that the more you fail, the more likely you are to succeed in the future, because there is little evidence that proves this to be the case. In fact, there is much evidence to the contrary, as I have pointed out above.

Searching for the phrase “failure and success” in any search engine brings up numerous articles and Web sites attempting to explain why it is good to fail and propagating the idea that failure leads to success. However, as I have described in my blog entry, before we start celebrating failure, it would be a good idea to ask ourselves why many people in our society believe that failing in a startup is a good thing. When the stakes are so high, it’s absurd to believe such half-baked propositions. As I have pointed out, failure is not only very unappealing, it is highly demoralizing. Furthermore, failure does not necessarily lead to success, and often times it is difficult to know exactly why a given venture failed. Thus, we should very deeply question the idea that failure is good, before we wholeheartedly accept it, since the consequences of not doing so can be disastrous to our well-being, not to mention to our society and indeed, to the world.