Accelerate - The F-Word edition

Looking at the wrong planes: why NZ is afraid of business failure

open this image in new window: Plane

Callaghan Innovation Business Innovation Manager and former anthropologist Sara McFall looks at why, when it comes to business, Kiwis may not be flightless, just afraid to fly.

There is a perception that the US has a greater appetite for business risk than New Zealand. Donald Trump’s companies have filed for bankruptcy more times in the past 30 years than any other major US company, yet he is now the Republican nominee for President, and is considered by voters the better of the two contenders to run the world’s largest economy.

But is it true, and, if so, why?  Gary Bolles, US serial entrepreneur and business commentator, undertook a series of interviews on behalf of Callaghan Innovation to understand the Silicon Valley attitude to failure.  One investor told him: “We are risk seekers ... In an average day, if we see eight people and seven of them are telling us that there isn’t a lot of risk in their model, it’s the eighth one, who is crazy, that we’re listening to because we want the crazy to come true.”

Gary was repeatedly told that investors aren’t interested in entrepreneurs who haven’t failed before. It isn’t that failure is a badge of honour, but failure gives an entrepreneur credibility, particularly if the fail results in lessons learnt.

In his article, ‘Business Advice Plagued by Survivor Bias’, commentator Jason Cohen explains the importance of a culture willing to share failures and learn from them, as opposed to learning from success. He uses a great story from WWII to explain why failure and the lessons from it are so important:

“During World War II the English sent daily bombing raids into Germany. Many planes never returned; those that did were often riddled with bullet holes from anti-air machine guns and German fighters.

Wanting to improve the odds of getting a crew home alive, English engineers studied the locations of the bullet holes. Where the planes were hit most, they reasoned, is where they should attach heavy armor plating. Sure enough, a pattern emerged: Bullets clustered on the wings, tail, and rear gunner’s station. Few bullets were found in the main cockpit or fuel tanks.

The logical conclusion is that they should add armor plating to the spots that get hit most often by bullets. But that’s wrong.

Planes with bullets in the cockpit or fuel tanks didn’t make it home; the bullet holes in returning planes were “found” in places that were by definition relatively benign. The real data is in the planes that were shot down, not the ones that survived.”

To enable us to learn from the failures and avoid survivor bias, we need a culture that is accepting of failure that does not stigmatise its entrepreneurs for sharing their mistakes.

In other words, if we bury the ideas that go down in flames, we’ll never be able to fly.

Affirmations of Failure | Serendipity-Doo-Dah

Updated: 1 August 2016