“I believe we are the best place in the world to fail”Apr 12, 2023
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It’s easy to focus on our failures,
but this focus holds us back from achievement.
This principle, when applied, can improve your decision quality drastically and multiply your results.
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“I believe we are the best place in the world to fail”
So, stick with me… I’m going to use Bitcoin as an example, but this post isn’t about Bitcoin. 🙂
Back in 2013, a friend introduced me to Bitcoin.
At the time, he was one of those friends who would always bring up ideas that are a little out there. We always seemed to be on the line between genius and crazy.
But then, a few weeks later a news source I was reading mentioned Bitcoin as well.
I decided, if I was hearing it from multiple sources, it was probably worth a little research.
Fresh out of college I was really concerned with the health of the dollar.
I know, not typically something a 22 year old is worrying about, but it has me worrying.
So I’d made the decision to buy a significant amount of gold and silver because I thought it was a great protector against the dollars downfall and hedge against inflation. I know… brilliant, right?
Well, turns out that over those 3-4 years all the price had done was go down.
So, I was ready to get out (see how much conviction I had?).
As I researched Bitcoin, I liked that it had many of the same properties as gold and silver.
The problem was, as a young man, too much of my money was going to eating out, needless trinkets, and video games. I didn’t have the cash to put into Bitcoin. The only way to make the purchase was to sell the gold and silver.
I told my friend of the plan and started doing some research.
Selling physical gold and silver is hard…. since I’d already lost money, I wanted to get top dollar for it. That meant going to eBay. As I looked, I saw you have to package it up a certain way.
I dragged my feet and dragged my feet when it came to buying the supplies.
Eventually, I forgot about it completely. I never bought the Bitcoin.
Every time Bitcoin has ran up since I think about that “what could have been.”
The reality is I likely would have sold welllll before the peaks.
But I think over and over again “if I didn’t it could have been X MILLIONS of dollars.”
We’re all smart enough to know I would have sold as soon as I doubled my money and spent it all on pizza and Mountain Dew.
As I’ve watched runs in Bitcoin, the stock market, the housing market, it always seems someone is telling their story “if only I’d acted sooner” or “if only I’d waited.”
We always agrandize what would have happened if we’d take the ideal action at the ideal time.
But that’s not life.
As I reflect on this, I thought… I wonder what decision-making frameworks there are that can help businesses know when it is the right time to act.
The Waterline Principle
Growing up, I always saw failure as a bad thing.
In sports, it was all about winning.
In school, it was about getting the best grade.
But over time, that fear of failure created paralysis.
For years I was afraid to take drastic action because of the possibility that I might fail.
But when we look at others or talk about famous people, we focus on their successes and gloss over their failures.
Bill Gates had multiple companies before Microsoft, all of which failed.
Elon Musk has crashed rocket after rocket, been on the verge of bankruptcy, and was ousted at ZIP2.
Walt Disney struggled for years before his breakthrough.
The reality is, failure is often a necessary part of any breakthrough in life.
But, not all failure is equal or the same.
Jeff Bezos, founder of Amazon, has talked about failure in his shareholder letters:
"One area where I think we are especially distinctive is failure. I believe we are the best place in the world to fail (we have plenty of practice!), and failure and invention are inseparable twins. To invent you have to experiment, and if you know in advance that it's going to work, it's not an experiment.”
“I believe we are the best place in the world to fail” — what a statement!
Bezos uses the example of failing at building a fulfillment center versus failing at developing a new product or service. Failure at building a fulfillment center means that some planning wasn’t done correctly and it has a big, negative financial impact. Failing to develop a product or service is expected and “baked in” to the model. It’s expected.
A good framework to help us identify good failure versus bad failure is the waterline principle.
The company that developed this principle, W.L. Gore, says:
"The waterline principle means that it's ok to make a decision that might punch a hole in the boat as long as the hole is above the waterline so that it won't potentially sink the ship. But, if the decision might create a hole below the waterline which might cause the ship to sink, then associates are encouraged to consult with their team so that a collaborative decision can be made.”
When mistakes are above the line, move rapidly, fail, and then iterate.
When below it, seek the counsel of others and have a more deliberate process.
This applies to all areas of business:
- new products and/or services
- dealing with employees
- general expansion and/or growth
When exploring new products/services, ask: how can I experiment with little real risk?
When working with employees, give them room to experiment but hold a tighter grip when failure is “below the line.”
I don’t know about you, but this principle hits. When I first read about this a little over a year ago, it directly impacted my approach to my business.
Since then I’ve put products and services out much quicker and pulled them back when they didn’t get traction.
The crazy thing? When I talk to people able it, none of them have even realized I had those failures.
So as you look at your business (and frankly life), make it a habit to ask: would this punch a hole above the line or below the line?
Let’s get to failing, people.
- It’s so easy to see all that goes on in the world and think it’s all negative. So when Ben Carlson wrote an article about the 50 ways the world is getting better, I was all in. #6, deaths from natural disasters really hit me.
- After the recent banking scares, there is talk of FDIC insurance being raised. While it will be interesting to watch, my sense is that the majority of main street as no less confidence in the banks. What do y’all think?
- With AI excitement turning to fear (see the first link), one common question has been “what jobs are most at risk?” This article by FT talks about this and highlights a few interesting ones: accountant/auditor and budget analyst. Would you be interested in me doing a deep dive on the impact AI will have on jobs? Click here if you want to see it.
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