“Entrepreneurs are risk takers, willing to roll the dice with their money or reputation on the line in support of an idea or enterprise. They willingly assume responsibility for the success or failure of a venture and are answerable for all its facets.” -Victor Kiam
Failure isn’t an option
We are an entrepreneurial country, and our shared profession is one of the most entrepreneurial sectors in this country. Yet we’re being taught on an almost daily basis that failure is not an option.
Who’s next to be bailed out?
How about “none of the above“?
Without failure, how does one define success?
Take for example this from a recent WSJ letter to the editor –
GM CEO Rick Wagoner should heed Frank Borman, the president of Eastern Airlines before it went bankrupt, who stated: “Capitalism without bankruptcy is like Christianity without Hell.”
Note that when Eastern Airlines went down, the world did not end. People still fly and airplanes are still produced.
Must we be allowed to fail?
Is this a scorched philosophy? No, it’s a recognition that we must be allowed to fail.
Realogy is a massive company with legacy costs, systems and infrastructure that is struggling to sustain itself in the face of a severe economic downturn as well as competition that is more nimble, agile and able to withstand the recession (so far).
The Tribune is a massive company with legacy costs, systems and infrastructure that is struggling to sustain itself in the face of a severe economic downturn as well as competition that is more nimble, agile and able to withstand the recession (so far).
The Big Three are massive companies with legacy costs, systems and infrastructure that are struggling to sustain themselves in the face of a severe economic downturn as well as competition that is more nimble, agile and able to withstand the recession (so far) – but they (excepting Ford) are failing, and failing fast. (Update: read the first line of this story)
Take the argument down a level or a thousand –
If I fail – I can’t sell homes because buyers aren’t buying – am I deserving of a bailout? No. If “forces outside of my control” have forced me out of business, am I too big to fail? My family sure thinks so, but I don’t expect the government to prop me up whilst I keep trying the same old things or cobble together a half-baked plan to change my business strategies.
We need to rediscover our desire to succeed – and fail –
The greatest danger in the current economic crisis is that the United States will lose its historic appetite for risk. The mood now is that risk-taking got us into this mess. Risk, though, is the quintessential American trait that built the nation — from the Battle of Bunker Hill to the rise of the microchip. If we let risk give way to a new ethos of commercial reserve and regulatory restriction, the upward arc of the U.S. ascendancy will flatten. Maybe it already has.
The current crisis is the result of a world gone madly long on real estate. Daniel Boone, the famed American frontiersman, went belly-up speculating on Kentucky land. He moved on in 1788 and paid his debts. So should we, without losing sight of the American frontier, where we discovered the rewards of risk.
A culture of dependency propagated by the government is not a recipe for success.
December 9, 2008 at 6:45 pm
I would add that Realogy, the Tribune and one of the big 3 (Chrysler) are the products of recent *highly* leveraged buyouts by private equity firms.
These were speculative, debt-laden bets. That they are now finding it difficult to service their debt in a deflationary economy does not justify a bail-out. They need to be allowed to recapitalize the old fashioned way.
December 9, 2008 at 8:21 pm
“Qu’ils mangent de la brioche”
December 10, 2008 at 9:04 am
I know this sounds petty, but look at the basics of what children are being taught… When kids were failing, we turned to the SOL or no child left behind. So now we have started applying that same mentality to business…
I simply can’t believe that we can learn if we don’t fail at some level. Most of the most successful individuals I know or have studied only succeeded after the need to restructure and learn from their mistakes existed.
December 10, 2008 at 9:50 am
Goes back to the old saying, “No pain, no gain”. Nothing comes easy in life and the biggest potential of huge pay offs comes with the biggest risks.
At the same time though, it seems that many companies and individuals forgot to actually look at the risks involved. And they thought the “pouring rain” of money would never stop falling. That’s just bad business and greed.
December 10, 2008 at 9:59 am
Well Jim, it looks like you have missed the boat on this idea. The goal of the bailout is to save jobs – over 3 million of them. I want to see a millionaire CEO get an egg in his face. I want to see reckless money lending result in firings. But punishment based on capitalistic grounds creates enormous collateral damage at this magnitude.
Self-employed entrepreneurs do not deserve bailouts because there is minimal collateral damage – 1 family starves. Uneducated and blue-collar workers do deserve bailouts because the Big Three are our nations largest employers – 3 million families starve.
December 10, 2008 at 10:55 am
Thanks for dissenting.
Sure we do. Just like everyone else, no?
But now there are likely hundreds of thousands of entrepreneurs (agents) who are suffering; they’re likely finding new/second/third jobs to support themselves.
Whether you want to see a “millionaire CEO” get shamed is irrelevant to the fundamentals of the respective companies (although I’d tend to agree with you on that point).
I’m not going to address why the workers’ education level matters – the demand for autos is not going away; there’s a good chance that Toyota, Honda, Subaru, etc (who make an awful lot of cars here in the States) will hire these displaced workers – the demand will remain, and they will have to hire to meet the demand.
The Big 3 have proven that they are incapable of profitably producing and selling such cars. Their competitors are better at making and selling cars; the only shame is that “we” insist on propping up ineffective and unprofitable companies.
Failure is necessary – it’s how we learn to succeed.
Did you look at the link I updated the post with? If those numbers are accurate, that Congress is even debating a bailout for these companies is shameful.
If I lost money on every single house I sold I wouldn’t sell houses any more. No sane company would.
Definition of insanity?
December 10, 2008 at 12:00 pm
“It is on our failures that we base a new and different and better success.”
“There is nothing so useless as doing efficiently that which should not be done at all.”
“Failure is not a single, cataclysmic event. You don’t fail overnight. Instead, failure is a few errors in judgment, repeated every day.”
“Remember the two benefits of failure. First, if you do fail, you learn what doesn’t work; and second, the failure gives you the opportunity to try a new approach.”
Roger Von Oech
BK is not going to kill the Big 3, but give them an opportunity to retool their broken business model.
December 10, 2008 at 12:40 pm
“Failure… is success… if we learn from it.”
I think Malcom Forbes is the correct person to attribute this to.
It just seems to me that the ‘learning’ part is being way too sheltered these days.
December 10, 2008 at 5:29 pm
Ok Jim, let’s consider the facts:
1. The government will profit from the bailout. [Profit? Yes, in 1979 Chrysler faced bankruptcy and the government bailed them out at the sum of $1.5B, Chrysler repaid the Government loan 7 years ahead of schedule and with a return of about $350M interest. see: “Lemon Aid,” Reason, March 1983]
2. The numbers shown “loss of $38.7B” is a personal loss that GM accepts, i.e. shareholders, employees of GM. This isn’t $38.7B of taxpayer money. What is not mentioned is tax revenue that the US government gained from GM and GM employee income taxes, and the roughly 6% sales tax on every vehicle sold. I assure you, America (you and I) make money from GM.
3. Teaching a lesson through negative reinforcement is slower and less effective than positive reinforcement. Psych 101
4. GM turned a profit on every vehicle that was sold. The losses incurred by GM relate to business expenses (vehicle research, tech development – especially regarding fuel efficiency, manufacturing plant construction, salary raises). To let this new technology and new plants just crumble.
You are making the case that America will be better off if one of these giants fall. Teach our kids a good hard lesson about the truths of business, right? Well, I believe in capitalism just as much as you do. So let’s teach the kids a lesson – let one of the Big 3 fall and let unemployment wreak havoc. Survival of the fittest, and to the victor go the spoils.