Culture of Failure

It used to be one of the most contrarian aspects of the culture of Silicon Valley -- rewarding failure. Entreprenuers who took risks and developed companies that ultimately failed were seen in the positive. People with real learning experiences that ultimately make them better entreprenuers. In risk management, without failures to model you have models doomed to fail.

Post-bubble, like many over-reactions, the valley shunned failure. This was made possible because the market for leadership was tight, so VCs and others could be so selective they could work with people that had a track record of success. Given the environmental forces we are all beholden too, such candidates also got by with a little luck of their own. The valley played it safe, but in reality was building teams of people that were predominantly risk averse.

The primary indicator of recovery I have been looking for is a return to a culture that rewards failure. Now comes the first article I have seen on the topic in years. Here is a healthy perspective:

"Having failed once or twice is a very normal and healthy thing to go through," says Roger Lee, a private investor in Friendster. "It would be virtually impossible for an entrepreneur to go through their career unscathed.

And one that misses the point:

Perhaps Evangelos Simoudis, a partner with venture capital firm Apax Partners Inc. in Menlo Park, sums up the dot-com stigma best: "We are not looking at individuals who got high-level executive positions at Internet companies and who really became successful because of the tide that had risen at the time. We've come back to the times when it's important for an executive to know how to behave when times are fast and frothy, as well as when there's a need for more precaution and slower burn."

If you weren't doing something risky and interesting during the bubble you missed more than an opportunity for wealth creation. Most people learned more in those fast years than they did in their entire career. The perspective gained of going through boom and bust at the least teaches you where you are in the cycle and what decisions matter. I can't imagine how any manager who went through it would not recognize past mistakes and false incentives (eyeballs instead of revenue, etc.). Part of an effective culture of failure is when people are recognized for conviction. Entreprenuers who continue to march on today have lived through some hard knocks and work within the constraints of market reality. Those who don't left a long time ago -- and good riddance.

If a culture can't accept and build upon failure, it will never be a success.