Notes From the Fieldby Martin Weil

June 14, 2011

Failure as an option … on the way to success

Most successful businesses basically have trainwrecks behind them.

Tim Harford, author of  The Undercover Economist, one of my favorite books on economics, has a new book, Adapt or “Why Success Always Starts with Failure.”

According to Harford, success is built on the back of hundreds if not thousands of failures. Harford’s contention is that failure, rather than being an impediment to progress, is instead an essential part of the economic cycle.

In this Planet Money podcast, Harford talks failure in depth while discussing New York, Gutenberg, Woolworth, and Wall Street. Regarding the latter, Harford concludes that the biggest problem with the financial crisis was not the cost to the taxpayers, but that the major banks could not be (or were not, in my own view) allowed to fail.

“Don’t be afraid to fail” was replaced by “too-big-to-fail” in this case. With failure not an option for these largest firms, they become inherently incapable of learning from their mistakes. And this is the true market problem, one that stifles innovation and progress.

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