I don't know about you, but for me the month of January always has a wistful quality to it. The holidays are over, New Years Eve has been its usual anti-climax – an arbitrary ending that doesn't change anything but the calendar, the college football season has come to a close without resolving the earth-shaking question of "who's number 1?," and somehow we always seem to spend January waiting to see if this winter we'll have enough snow for a good ski season.
I spent part of last week working at the New York Stock Exchange with a group of managers in a specialized function there. I stayed at a hotel opposite the site of the World Trade Center with my room overlooking what is still basically a hole in the ground, and I'm sure that contributed to my sense of melancholy, but so did my experience of being in the heart of Wall Street. I was in New York not long after September 11, 2001, and the feel of the place was much the same – a bit slower than I'm used to in New York, a bit more subdued, a subtle sense of everyone being in the same (sinking) boat together.
One of the things I worked with my clients at the NYSE about was the issue of failure. As you might expect (and hope), these people, who are responsible for oversight of the processes by which investments move in the markets, are very careful and have a healthy respect for the consequences of mistakes they might make or goal they might fail to achieve. They are also conscious of the fact that too much caution can be as dangerous as too much risk, so they were very interested in how to walk that particular tightrope. We spent a good part of the two days looking at what was to them a novel concept – that judicious failure can be a good thing.
An excess of caution, the attempt to avoid any risk at all, makes for a sterile, unimaginative life that few of us could tolerate. On the other hand skating on thin ice, playing on the skinny branches, is too stressful for most, so what's the middle ground? In that middle ground, some failure is inevitable – if we live even a little ways beyond absolute safety, we will, from time to time fail. The movers and shakers of the economy have been living way out on the skinny branches for some time, and through our naïve trust and greed in varying degrees, we followed them out there, so when they failed, we failed as well, so the question isn't a theoretical one. For me, and I believe for all of us, the value of the difficulties and privations of this down economy worthwhile will lie in finding something that gives a return on the investment of our money, hopes, dreams, and egos in what is one of the most colossal failures since the Great Depression.
A friend of mine, years ago, lost his business and most of his net worth when a trusted associate embezzled most of the value of his business. He was understandably upset and chagrined and spent a lot of time on the traditional questions – "why me?", "how could they do this to me?", "how could I have been so blind?" you know the lot. Finally a close friend took him to task and said "if you lost $3.8 million in this failure, for whatever reason, you'd better get more than $3,8 million in learning out the experience, or it was a total waste."
What returns the investment in a failure is getting a lot smarter as a result of it. Learning enough to make the next venture (and the next failure) better and more valuable than the last one. According to Winston Churchill, "success consists of going from failure to failure without loss of enthusiasm, but that is only true if we learn from each failure; if we don't, then we go through the same failure over and over again, and enthusiasm is hard to maintain in the face of that.
So as I listen to economists, business leaders, and government officials talk about how to deal with the economic crisis, and particularly as I listen to those who will take the helm of the ship of state next Tuesday, what I'm listening for is learning – are they focused on learning, have they learned, and are they applying what they have learned, so that the next time we fail it's because of different mistakes and we fail at a much higher level. I hope so.