A brush with failure may be just what you need

Philip Anderson

I began to understand the competitive nature of India’s educational system 20 years ago when I first started reviewing applications for the PhD program at Cornell’s Johnson Graduate School of Management, where I began my academic career in 1987.

I swiftly learned how to read a letter of recommendation from an Indian professor. “Not bad; won’t embarrass himself or our school” meant “one of the ten highest-scoring graduates of our institution in the past decade.” The top 1% of the top 1% applied America’s most prestigious schools, and for us, trying to separate “really brilliant” from “really, really brilliant” was nearly impossible.

India’s educational system is set up to separate the absolutely extraordinary from the merely exceptional from the extremely good. To accomplish this, schools rely heavily on examinations, particularly in quantitative subjects, designed to achieve an absolute ranking of individuals by distinguishing those who make one mistake from those who are absolutely perfect. One unintended consequence of this system—despite its undeniable efficiency at producing students for whom Failure Is Not An Option—is that in pursuit of perfection, far too many people learn to play defensive cricket. Being “not out” becomes the goal as competitors strive to dodge traps and avoid the one mistake that can close the doors of opportunity.

For this reason, I was especially intrigued when talking with an experienced venture investor recently who told me about one of his techniques for spotting the kind of management talent in which he wants to invest. “I ask people to tell me about a near-death experience in their career, a time when things looked as hopeless as they ever have,” he said. “I ask if they have ever painted themselves into a corner where there seemed to be no way out, and then I asked what happened, what they did in that situation.”

An immediate red flag goes up if the interviewee has to struggle to think of such a situation, which turns into a flashing danger sign if the answer is, “Honestly, that has never really happened to me because my career is one unbroken chain of successes.” Someone who has never faced looming defeat, has never wrestled with despair, is a weak candidate, not a strong one in this expert’s view. Why? “Nothing is more certain in a venture than at some point things will look hopeless and a rational person would quit,” he explains. “I don’t want someone’s first brush with adversity in his life to take place with my capital at stake.”

When I tell my MBA students this story, I’m invariably asked “Does that mean we should try to fail at least once, to ensure that we have a failure on our resumés?” Of course, failing is not a badge of honor and is not a career goal. What matters is not whether you failed or not: it is how you conducted yourself under extreme duress, when failing seemed inevitable.

Failure itself isn’t necessarily much of a teacher. Plenty of people have bowled a few balls or tried their hand at art; concluded they wouldn’t be much good at it; and moved on without strengthening their character noticeably. What forges toughness is the experience of struggling against almost-certain failure when the stakes are high, when you are desperate to find a way to win. How resourceful and resilient you are when it’s easier to focus on disaster rushing toward you is the aspect of your track record that professionals want to learn more about.

What is the difference between a “noble failure” that enhances the amount of respect people have for you, and an “ordinary failure” that is best avoided? Talking with venture investors, I have uncovered five elements of a “noble failure experience” that seem to capture whether one can reasonably expect that you will surmount challenges in the future just when things look their bleakest.

The first is whether you were taking an appropriate risk. When someone has an unblemished record of success, the first question in venture investors’ minds is whether that reflects an unwillingness to take appropriate chances. It is frequently said that entrepreneurs are risk-takers, but that doesn’t mean they go hang gliding on weekends or ride a motorcycle without a helmet. It means they are not risk-averse, which most people are: they take risks even though they don’t seek them.

Suppose you play a coin-flipping game: you invest a rupee, winning three if the coin comes up one side, none if it comes up the other side. On average you win half a rupee each time you play so it’s a good bet. But most people will not play the same game if the downside is more severe or more likely. If you have a 1/3 chance of winning 100,000 rupees and a 2/3 chance of losing 40,000 rupees, the expected value of the game is positive (on average you’ll win 20,000 rupees every three turns), but the prospect of losing so much money is too daunting for the average person.

An entrepreneur is someone who is willing to take risks when the expected value is positive because he or she is willing to tolerate the risk of a negative outcome. If you take such a risk and fail, it’s a noble failure. If the odds were so far against you that on average you could expect to lose, then you get no credit for accepting the hazard.

If you can explain why the probability of success multiplied by the payoff made taking a chance worthwhile, failing in such circumstances is more admirable than not playing at all.

Second, was yours an execution failure? To illustrate, science normally proceeds through dozens of unsuccessful experiments for every successful one, so scientists seldom bemoan such failures. However, if an experiment went wrong because someone forgot to wash the glassware or mis-measured or neglected to keep the heat constant, there is nothing to learn from the failure. Similarly, if you fell short in business because you carried out a project too carelessly, it’s unlikely you learned much or grew significantly from the experience.

Third, when faced with failure, did you exhibit unusual resourcefulness and creativity? Some people fail because they keep battering at the same wall, hoping that sheer persistence will bring things right eventually. But, as either Benjamin Franklin or Albert Einstein (depending on your source) once said, “The definition of insanity is doing the same thing over and over and expecting different results.” The author of a noble failure thinks through why things aren’t working and tries every clever solution he and his team-mates can conceive when doggedness alone is not producing results. Sometimes one runs out of time before running out of alternatives, but those are exactly the kind of defeats that make a person stronger.

Fourth, did you keep your cool and stay optimistic? A number of investors I know enjoy taking prospective portfolio company CEO’s on long airplane flights to visit customers or facilities, because they want to know how the person performs under stress. A great deal of success in life depends not just on being able to perform, but on being able to perform when you are tired, distracted, distressed, and bombarded with a mounting wave of negative feedback. Such circumstances can forge the steel in your soul, but only if you stay focused on closing the gap between the present and your goal instead of giving free rein to your frustrations and disappointments.

Finally, when and how did you admit defeat? There comes a time in many endeavours when cutting your losses and finding a different way to accomplish your objective is the sensible thing to do. The dividing line between stubbornness and perseverance can be fine, but the best indicator is whether you actually listen to data in an honest way. If your defeat stems from confronting reality instead of losing faith, and if you strive to retrieve as much as possible from a bad situation on behalf of yourself, your teammates, and your backers, then you have shown the same nobility under duress that characterizes those who turn setbacks into triumphs, even if triumph escaped you this time.

A brush with failure may be just what you need to demonstrate your worthiness as an entrepreneur—as long as you conducted yourself appropriately. Knowing how someone behaves under dismaying circumstances can give your prospective supporters a greater level of comfort than is possible with a champion who is undefeated and untested. Take intelligent risks in your career and do everything possible to overcome worthy challenges. You might be surprised to find yourself considered a better bet than your “perfect” peers who survived the game of school without learning how to play the game of life.

Published in Dare Edition Feb, 2008