My discussion of failure in the context of the Iraq discussion is part of my broader beliefs about innovation. I saw a great speech a little while back by the guy who's in charge of designing new products at Palm. He talked about an excercise that he does with various groups, where he gives them pieces of spaghetti and some tape and tells them to build the tallest structure they can.
Engineers do all right; MBAs do the worst, because they waste time arguing about who will be in charge. But the best performing group? Kindergarteners. Little kids don't try to design a structure. They just keep trying things, and stick with anything that works. Their structures certainly didn't look as elegant as the neat frames designed by the engineers. But they did the job, which is to be as tall as possible.
To succeed quickly, he said, what you want to do is fail. A lot. Failing eliminates wrong answers faster than any possible analysis. I was reminded of the famous Thomas Edison quote: asked how it felt to have failed to invent an electric lightbulb, Edison said "I haven't failed! I've discovered 10,000 filaments that don't work."
That, in my opinion, is the secret strength of the American economy. We don't try to plan anything. We just see what works, and get rid of what doesn't. We make it easy to try, and hard to keep going once you've failed. Once people have failed, we make it easy to try again--even after our "draconian" 2005 reform, our bankruptcy policy remains the most generous in the world towards both individuals and corporations. But we do not keep moribund industries limping along in the hopes that things will change.
There is a credible argument that the reason Japan's recession lasted ten years is that neither the government nor the banks could let enterprises fail. They carried bad businesses and their loans for years rather than write off the loans. Those ailing firms sucked up all the capital that should have been used to rebuild the economy.
I think this determines how we should handle the financial meltdown. In many sorts of repeat games, "trust, but punish" is the value maximizing strategy for all participants. That's my approach to financial regulation. We should aim to provide maximum transparency, and keep the moral hazard problem down by establishing capital requirements that reduce the government's downside risk. But we should be very suspicious of prospective regulations that aim to prevent failure; the best way to do that is usually to close off potential avenues of success.
As I support easy bankruptcy, I also support having the government be insurer of last resort; letting those who have failed drown in their failure may be morally satisfying, but it is rarely good for society. When we shun failure, we lose all the information they learned.
That doesn't mean that I am in favor of bailing out bankers with taxpayer money. Failure should hurt; that's the "punish" part. Bankruptcy should be unpleasant and destroy your credit; running a company into the ground should be an anguishing experience for bankers.
How, exactly, we should punish them I am still not sure. A lot of commentators I see are underestimating how much Bear's managers are suffering. No matter what your level of wealth, losing your job and being publicly branded a failure isn't pleasant, even if you have millions of dollars. Still, I'd like to see policies aimed more explicitly at making it hurt. A good place to start might be to make the assets of company officers part of the bankruptcy pool--but I haven't thought that through, and I'm sure that there are consequences to doing so that I am not anticipating.
Whatever the punishment, it should be severe but brief. Hit them once, hard, and then get on with life.
"We make it easy to try, and hard to keep going once you've failed."
Except for government.
Failing eliminates wrong answers faster than any possible analysis.
This is a really good sentence.
See my comment on the last point regarding exploration vs. exploitation: there are rational bases for innovative behaviours, but they *do* involve being able to recognize bad risk.
Your discussion of failure is shallow, and you sound like a typical MBA or motivational speaker. Throwing spaghetti against the wall to see what sticks is *not* a strategy.
Throwing spaghetti against the wall to see what sticks is *not* a strategy.
Isn't her point that not strategizing is the best strategy? Read her post again John.
Brilliant. What I learned from veterans post VN was that I had come to premature closure about the war. The Army and the leadership did learn in pursuing the VN war; Lyndon Johnson replaced Westworeland with Creighton Abrams and it was a better war. Bush has replaced the leadership with General Petraeus. One aspect of our nation at war, moralists, is that war is like an investment. Bernanke does not turn from the markets and say, 'You got yourself into this' nor should we simply say regarding Iraq, speaking of the French, 'After us the deluge.'
Which is a point that has as much value as any motivational speaker's.
"If you do not learn to master your rage, rage will become your master."
"He who questions training only trains himself at asking questions."
"To learn my teachings, I must first teach you how to learn."
A lot of commentators I see are underestimating how much Bear's managers are suffering.
Someday I shall suffer as they do.
Someday I shall cry in my Maserati and drown my sorrows by flying my private jet to exotic locations with overpriced courtesans.
Someday I shall experience the crushing sadness such a lifestyle would bring.
If that ever comes to pass, spare a thought and a kleenex for me.
Someday I shall suffer as they do....
You do realize this is exactly how most of the world's population reacts (or would react, if aware) to any claims of suffering originating inside USA? From the standpoint of learning from failure there's no value to an absolute scale of suffering, only to its relative degree. I have never doubted that being rich and healthy is better than being poor and sick; I also don't doubt that getting more of a good thing is better than losing some of it.
This philosophy - try, fail, learn, then try again - is one of the fundaments to capitalism. Capitalism is, of all economic systems, apparently the most informed by evolution. If biological evolution were a force of intelligence (which, who knows, it might be), it's not planning out how best to nudge nucleotides around to come up with the pinnacle of lifeforms. It's just nudging them every which way, and if the result is stillborn, fine; it's fertilizer. Evolution literally breaks a LOT of eggs to make its omelets. So too with capitalism (if it won't make money, it's bankrupt; toss it), and those kindergartners (if it won't stand, break it, and get more spaghetti).
One could lament at how many innocent pasta strands must fall in the name of evil imperialist Cody, I suppose.
It also once again illustrates that odd pairing of the American two-party system. A faction that denies evolution in its biology embraces evolution wholeheartedly in its economy, while the other faction denies intelligent design in science while believing it's the key to their economy. But I digress.
Meanwhile, he kindergartners aren't acting completely randomly. If they did, they'd get their spaghetti tower at the same pace evolution does. (Come back in a billion years.) There is intelligence at work here. They do understand why a design won't work, to some extent. Just not to an extremely large extent.
For me, one of the lessons I take from this is that careful design might take too long, but so can random trial and error. Some intelligence is indeed required; it's just that that intelligence may enjoy more leverage if applied from another direction, taking advantage of the environment. In this case, more trial and error is possible because of the cheap availability of spaghetti. Engineers are used to plans being cheaper than spaghetti. MBAs are used to organizations being cheaper than the plans.
It may be that the easiest way for us to achieve success in some cases may not be to plan, but to take advantage of cheaply available minds, and make it as cheap as possible for those minds to start over.
The difference between a kindergartner's tallest spaghetti tower and an engineer's tallest spaghetti tower is that while the former may be taller, the latter will withstand a continuous 50mph wind.
Yes, the Japaneses suffered through years of stagnation and one of the reasons was that the banks were not forced to write-off their bad loans.
But we do not know that they would have been better off if they had written-off their loans.
For a decade their real GDP was stuck at around 100. But the alternative may have been to fall one third to 66 at first and then rebound 50% back to 100 so at the end of the period they were at the same 100 they were in the actual case. Some would compare the 33% drop to the 50% rebound and argue that 50% is better then 33% so they were better off. But they still would have lost the output represented by the triangle 100-66-100. This would have made them worse off then the actual stagnation scenario of remaining around 100 for a decade.
The problem is that any answer is hypothetical. Can you give me an answer that demonstrates that we know the alternative was not falling to 66 in the interim?
Everything's hypothetical--but remember, the loans were non-performing. Banks kept throwing good money after bad so they wouldn't have to write the loans off, and as a result, they got deflation, because the banks weren't making any new loans.
Yeah, Kindergardners. Right.
This sounds like standard corporate "Look, aren't the smart people really dumb" nonsense. Your pal at Palm is full of sh*t.
Except maybe for the part about MBAs.
to but my question another way.
How do you know that the Japanese stagnation was not the best case scenario?
How do you know that the Japanese stagnation was not the best case scenario?
That depends on whether or not the long-term stagnation option leaves them unable to resume growth, does it not? If letting the bad fail means a temporary loss in output, but repositions the economy to grow in the future, it's hard to see why that temporary loss is a worse outcome than living in bland-man's land indefinitely.
"...losing your job and being publicly branded a failure isn't pleasant, even if you have millions of dollars."
Best line I read today.
I volunteer to suffer the opprobrium associated with losing a job and being publicly branded a failure in exchange for said millions of dollars. Feel free to contact me at the e-mail address attached to open negotiations.
Megan:
In an earlier post you write, "Failure should hurt."
Indeed.
What exactly would that mean, though, "in the context of the Iraq discussion"?
On assets being part of the bankruptcy pool:
This might have some conflicts with a fiduciary responsibility towards the equity holders, since it means the manager has a personal stake in the debt side of the company. Either managers are supposed to ignore their conflict of interest and focus purely on shareholders (in which case, what's the point?) or else the laws have to be amended so managers take into account both debt and equity holders when making decisions. Granted, I think they're supposed to think about both parties when a company nears bankruptcy, so maybe it's not a huge change in law.
Long run effect: younger CEOs with higher salaries.
Was Vietnam a failure? What did we learn? What was that Powell doctrine thingie about?
"...losing your job and being publicly branded a failure isn't pleasant, even if you have millions of dollars."
The 'ole hurt feelings thing again, with a tinge of civility mixed in.
Christ, what a WATB you are. Your ego is laughably monstrous.
Failing eliminates wrong answers faster than any possible analysis. ... A lot of commentators I see are underestimating how much Bear's managers are suffering. No matter what your level of wealth, losing your job and being publicly branded a failure isn't pleasant, even if you have millions of dollars.
And clearly you eliminate even more when you practice 'failing at analysis'.
Good job, Megan.
You changed the subject from Iraq to the economy very quickly. When you were supporting the invasion of Iraq, was your support really based on the idea that "Well, this may be a miserable failure, but it'll be a quick failure and we'll learn a lot, and much faster than if we don't invade"? Really? You were relying on George W. Bush for "innovation"? The only thing in this post that makes sense is the notion that the Bush administration (and its enablers like you) are kindergarteners: quick to judgment, with no planning or thought about the actual consequences of their actions.
How, exactly, we should punish them I am still not sure.
I thought the correct procedure for dealing with them was demonstrated in Mary Poppins? However, I doubt the Wall Street folk wear bowler hats (or even their colleagues in London any more). :-)
Joking aside, do they actually feel ashamed at the consequences of their actions?
A lot of commentators I see are underestimating how much Bear's managers are suffering. No matter what your level of wealth, losing your job and being publicly branded a failure isn't pleasant, even if you have millions of dollars. Still, I'd like to see policies aimed more explicitly at making it hurt.
The question is do _they_ actually believe they have failed? Or, while the previous success was undoubtedly (in their minds) due to their genius, is the current failure someone else's fault?
Megan, perhaps you have already found the answer here - what about publicly branding a large L for loser into their foreheads?
Megan. In your analogy, those who opposed the war in Iraq are the taller spaghetti. Those who supported the invasion of Iraq are the shorter or entirely supine spaghetti. What the media is doing, in continuing to print the thoughts of those who advocated the war in Iraq, is sticking with the shorter spaghetti.
The cost of failure is not addressed here. Spaghetti towers have a low cost of failure. Wars have a high cost of failure. Often times, engineering a situation so that there is no expensive failure is highly preferable to just blowing people and stuff up.
To succeed quickly, he said, what you want to do is fail. A lot. Failing eliminates wrong answers faster than any possible analysis.
Counter-example: Megan McArdle.
Of course, when one is rewarded for being wrong (McArdle et al.), failing repeatedly eliminates sweet eff-all. Supply and demand kicks in, and the US media's demand to hear yet more from those who have been consistently, abjectly wrong on Iraq is unceasing.
Interesting post. Failure has long been an interest of mine, in careers in the military (where it's studied extremely intensively), in aviation (ditto), and in engineering (ditto). The books by Henry Petrosky (I'm thinking of "To Engineer is Human" but really any of his books) are highly readable and accessible to the general reader. Jim Chiles has written a book on failures. The key (and very pessimistic) book on failure in complex systems is Normal Accidents by Charles Perrow. One of Perrow's most interesting conclusions (or perhaps this is more of an implication of his conclusions) was that systems reach a point of complexity where it is impossible to predict unsafe conditions. At this point, actions to palliate these unsafe conditions add further complexity to the system and produce even more unpredictable unsafe conditions.
For military failures in particular, two books I believe to be out of print are very thought-provoking. On the Psychology of Military Incompetence looks at disasters in history and what peculiar traits in military culture and individual leader personalities may contribute to them. (One lesson from this book that's worth noting that Ambrose Burnside, arguably the most incompetent general in recorded history, went on to postwar success as a politician. Different skill sets?)
A very controversial review of Vietnam War failure that had a profound effect on soldiers of my generation was Crisis in Command. Gabriel and... sorry, I forget the other guy and my library app is on the other computer. I daresay we fought and led better because we took the criticisms that these young officers had of their superiors to heart.
Edison is a great example if you want to hold up a man who made essentially random experiments, like a kindergartener, with dogged repetition until he struck upon success. This characteristic of his was an object of much puzzlement (and mirth) for his contemporary and rival, Nikola Tesla. Tesla, unlike Edison, had a stable youth and an excellent academic education in science and engineering, and always started from theory. He considered Edison's empirical approach unscientific. It was unusual for Tesla's experiments to fail, and he never had the long chain of failures leading to success that typified Edison's approach.
In the end, the contributions of both men to technology were broadly equivalent, and we use their innovations without thinking every day. There is a lesson in that, and it's not just that many roads lead to Rome.
In the grand scheme of things, the contributions of scientists, engineers and entrepreneurs to society -- to civilisation, if I may say it -- are much greater than the contributions of politicians, lawyers and journalists. Yet we have a popular culture that reviles the former and lionizes the latter. I make a habit of finding 19th and 20th Century juvenile books on scientists and entrepreneurs as gifts for children and teens. Today, those kinds of books are no longer published, but I want the kids to have Edison, Tesla, Steinmetz, Westinghouse and the Wright Brothers as heroes, not Bush or Obama, let alone Woodward and Bernstein or Dickie Scruggs.
Ms. Mcardle,
I understand your desire to learn from mistakes, but there are three clear problems with the analysis as presented.
1) Expertise matters. The Palm story is useful in large organizations where not enough risk is taken, but even the speaker does not believe it. They have hired no kindergarteners, and I doubt they (or anyone else not selling to kindergarteners) even does. No one says, "I need to build a walkway, let me get ten 6 years olds together."
2) Failure is not success. You can learn from failure, but failing is still failing. The failure narrative you described helps in large organizations to get them to take risk, but risk is not the goal. Edison meant his story to be more about perseverance than failure.
3) Success is success. When you want a walkway built, you do not look for contractors who have built bad walkways. If you want to build a walkway yourself, or learn how to build one, you ask people who have successfully completed one. When you started writing, I assume you did not emulate failed writers.
One (well, two or so) last point(s). At least in engineering, it is all about the details. The internet, and blogs are even worse, promote a superficiality of understanding, where opinion is confused with expertise. Because the details cannot be (or are not) compared, all opinions are equal. If you want to really learn what to do in the future learn from the failures of Iraq, it will require detailed knowledge of the people of Iraq, the history of the area, our military and our government. If you want a short close version (history does not repeat, but it does rhyme) watch "The fog of war" (with McNamara) and think Rumsfeld. The lessons are there. Despite his pillorying I think Rumsfeld understands what happened (and Cheney does not).
Shoot, my logical explanation went political. Sorry.
"We make it easy to try, and hard to keep going once you've failed."
Yes, too easy to try again in Iran but somehow I think neocons like Megan will continue to fail with great gusto for many years to come.
"Failing eliminates wrong answers faster than any possible analysis."
It also eliminates many many Iraqis and so far 4000 American soldiers. I prefer proper analysis which explains why I don't have Megan's job.
Cut first, measure caskets later.
In the context of Iraq? Killing hundreds of thousands of people in a war of choice does not make you like a business leader who fails, then learns from failure to succeed. It makes you a mass murderer. Because those people don't magically come back even if you "succeed" at something else later.
Not that you regret your support of this killing, of course. Not when you can object to those dirty hippies who don't know anything about business.
Here's the basic problem - failing in the exact same way, repeatedly, after people warned you that you were repeating past failures, is *not* innovation. It's just failure.
Furthermore the reason why human innovation doesn't move at the glacial pace of biological evolution is that we have things like "insight" and "foresight" that pure dumb trial-and-error lack. Edison's famous quote notwithstanding, we can be fairly sure that at no point did he try to make a working lightbulb filament out of gasoline, cheese, or happy thoughts.
From the way you put it, you'd almost think Edison was screwing up just to screw up, that his failure constituted progress in and of itself. This is simpleminded. He wasn't trying stuff he knew wouldn't work, he wasn't repeating the same experiment over and over again at different times of day or in different locations hoping this time different rules would apply (a la Keating S&L -> Bear Stearns, Korea -> Vietnam -> Iraq). Edison was making careful observations of his tests (and those of others', I'm sure) and using them to guide his research. The key is not to fail, it is to learn from failure.
To put it another way, a wise man in the computer industry once warned me to be careful not to confuse a man with ten years' experience in his field with a man with one year's experience, repeated ten times.
It is also probably worth pointing out that none of Edison's failed lightbulbs cost anybody their savings, homes, limbs, or lives. Not sure if that factors into your analysis at all.
When it comes to real economies I'm not sure the contrast -- between
planning and experimenting, between analysis and just slapping things
together -- is actually there.
It's true in the aggregate that parts of the american economy
look like they are going in all directions at once -- as if everything was
being tried -- but still if we look at individual actors, most are pouring an
awful lot of thought into what they attempt to do beforehand.
The difference between this and a planned economy would then be not that
there aren't attempts to analyze but that the ones doing the planning
and analysis in the planned economy are experts: the top of the academic
heap.
By confining themselves to a few experts and more than that to the experts that
win the power scramble to the top of the bureacratic heap the planned economy
not so incidently guarantees that there will be few new efforts at any
given time.
And isn't that a more significant distinction right there? When power is
in the hands of so many parties, aren't there going to be, at any given
time, so many more efforts? Couldn't it be, that irrespective of what
analysis is being put into it, that this difference in the number of new
things being attempted is the more significant?
Also, as a practical example, are there any comparables? It seems to me
that every real world planned economy, past or present, is actually playing
catch-up. It's a heck of a lot easier to be a planner when you are
attempting to do has already been achieved elsewhere and you are 'merely'
attempting to make it happen in your own country.