Bill Gates, the co-founder of Microsoft Inc., set failure as one of the cornerstones of his hiring policy. “When you’re failing, you’re forced to be creative, to dig deep and think hard, night and day,” he said in a 1995 interview to the Seattle Post-Intelligencer. “Every company needs people who have been through that.”
Tim Harford, best known for his Undercover Economist books, takes that thesis forward in his latest work. He argues that failure is necessary and useful, especially in an increasingly complex world—not only for organizations and governments, but in our individual lives as well.
“Given the likely shape of (these) ever-shifting landscapes, the evolutionary mix of small steps and occasional wild gambles is the best possible way to search for solutions,” Harford writes.
Winning formula: Bill Gates. Paramount Pictures/Bloomberg
While that seems like a notion counter-intuitive to human instincts and how organizations and businesses traditionally work, it is not a terribly new topic. The importance of innovation has been stressed for at least a century now, notably in Clayton M. Christensen’s The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail. Even the notion of failure as a stepping stone to success has been explored in other works, recently in Paul Ormerod’s Why Most Things Fail: Evolution, Extinction and Economics.
Harford succeeds with the elegance with which he tries to persuade us that trial and error is the most effective way of solving problems. He draws on research in evolutionary biology, genetics and nuclear engineering. He traipses through the battlefields of Iraq and schools in Africa to buttress his argument.
Along the way, he throws in facts and nuggets of research which challenge conventional wisdom and understanding—for example, on how productivity in idea generation has remained flat despite the increasing numbers of research and development professionals. Or how experts are fallible because the world is simply too complicated for anyone to analyse with much success.
What makes the book a delightful read, apart from the different theatres it explores, ranging from war to nuclear engineering, is the cast of protagonists—people who challenged convention and took gambles. In most cases, they succeeded; an unfortunate few were sidelined by bureaucracy and rigid policymakers or, in the worst case, ended up dead.
There is the swashbuckling Colonel H.R. McMaster, who chose to define his own tactics during the US occupation of Iraq; Reginald Mitchell, who invented the Spitfire fighter plane; Mario Capecchi, a pioneering geneticist; and Muhammad Yunus, the founder of Grameen Bank, whose first brush with development ended in failure.
But the hero of this book is Peter Palchinsky, an engineer in Stalinist Soviet Union, who was shot dead because he advised against grandiose projects such as the Lenin dam and the steel mills of Magnitogorsk, both of which ultimately proved to be failures.
He was one of the first to raise his voice against centralization and the need to study ever-changing local conditions, and summed it up in three statements. One, constantly seek out ideas and try new things. Two, try these things on a scale where failure is survivable. Three: Learn from your mistakes as you continue to experiment.
Most of Harford’s book is an elaboration of these principles, to which he refers time and again. Using these as a foundation, he shows not only how central command systems and bureaucracies can mess up things, but also suggests solutions.
He makes the case for a carbon tax to solve climate change, for using randomized trials to distribute development funds, for prizes as the way to promote innovation, especially when governments are risk-averse when funding projects, or indeed to avert future collapses of the global financial system by decoupling banking activities.
This is also where Harford’s book almost assumes the tone of a self-help book, with the last chapter talking about how we might use this learning in our individual lives. While such books might usually be avoided on principle, picking up Harford’s book is not a wild gamble at all.