Do We Really Learn from Failure? (Part I)

by Lane Wallace on May 6, 2009

Rich Karlgaard, publisher of Forbes magazine, often says that one of the things that distinguishes American culture from others is our passionate belief in second acts. Even if we fail at something, or lots of things, Americans believe in the power of second chances. Of starting over. Of learning from our mistakes and using that accumulated wisdom to succeed a second time.

In innovative or entrepreneurial fields, the idea of not only learning from failure, but the importance of failure, is even more pervasive. Without the willingness to take risks, including the risk of failing, nothing new … or at least, nothing significantly new, would ever be discovered. Thomas Edison is famously reported to have tried over a thousand types of light bulb designs before finding one that worked.

So, everyone agrees that failure is not just an inevitable part of exploration and innovation, but an important element for growth and learning. Search for “learning from failure” on the internet, and you’ll find an avalanche of earnest platitudes about how much we can learn from failure. We believe in failure. We embrace failure. We learn our greatest lessons from failure.

Or so the conventional wisdom goes.

But is that really true? Despite all the platitudes, do we actually learn from failures and use that knowledge to reap future success? The statistics on second marriages are not encouraging, in that regard. But surely in uncharted entrepreneurial ventures, where all navigation is by trial-and-error, people would pay more attention to their failures so they could avoid similar mistakes down the line?

Ummm … maybe not. A recent Harvard Business School study looked at the success rate of entrepreneurs to see what difference previous success (or failure) made on subsequent start-up ventures. The researchers also looked at several other factors, including what influence the involvement/backing of a highly experienced (versus less experienced) venture capital (VC) firm had on initial and successive start-up efforts.

Here are just a few cryptic statistics about the success of entrepreneurs from a working paper the research team published last summer:

First, the study looked at the overall success rates of venture-capital-based entrepreneurs:

  • First-time entrepreneurs: 25.3%
  • Serial entrepreneurs on their first venture: 36.9%
  • Serial entrepreneurs in future ventures: 29.0%

Then the study analyzed serial entrepreneurs more closely, adjusting for other factors, including prior track record and experience of the VC firm, and found the following success rates:

  • First-time entrepreneurs (at means of other variables): 20.9%
  • If previously successful (at means of other variables): 30.6%
  • If previously failed (at means of other variables): 22.1%
    -
  • First-time entrepreneurs with experienced/successful VC: 20.9%
  • First-time entrepreneurs with less-experienced VC: 14.2%
    -
  • If previously successful and with experienced/successful VC: 32.4
  • If previously successful but with less-experienced VC: 31.9%
    -
  • After failure if paired with an experienced/successful VC: 25.9%
  • After failure if paired with a less-experienced VC: 17.7%

Without going blind from parsing the details of all those findings too much, and with usual caveats about relying too much on statistics or a single study, there are a number of possible conclusions one could draw from these statistics. One is that it is astoundingly difficult to be successful in a new business venture, even with the help of a great VC firm. Two out of 10 or 4 out of 10—either way, the odds are against you.

Another potential conclusion is that experience and wisdom are a valuable asset in improving those odds. No great news flash there. But it does make sense that an experienced VC firm would make more of a difference in the success of a new entrepreneur, or one whose previous venture failed, than it would for an already-successful entrepreneur (who probably has accumulated not only know-how, but also some good contacts and a track record that will help them get whatever other resources they need).

I’ll have more feedback on this study and subject in later posts. But a recent New York Times article focused on the second grouping of the above results: the different success rates of serial entrepreneurs (with a mean value for other factors) based on whether they had succeeded or failed in previous ventures. And it quoted Paul A. Gompers, a professor at Harvard Business School and one of the lead researchers on team, as saying the results showed that, “for the average entrepreneur who failed, no learning happened.”

That conclusion may or may not be valid. (Randy Komisar, a partner at the venture capital firm Kleiner Perkins Caufield & Byers, has some interesting thoughts on that subject I’ll list in a later post.) But just looking at that one set of numbers, it would appear that entrepreneurs at least learned more from success than they did from failure.

And that possibility intrigues me, because it flies in the face of all the conventional wisdom about the value of failure. Now, granted, the follow-on success rates of the entrepreneurs in the Harvard study might be due to other factors, not just (or not at all) because of what they “learned” from their prior experience. But still—the results at least raise the question: do we really learn from our failures? Or do we learn the right lessons? Even if we know it’s important to re-examine those times when things don’t turn out well (in business, relationships, or life) so we can avoid some of those mistakes a second time … how many of us really scrounge up the courage to face failure honestly and wrestle useful and important lessons out of it? And if the answer is “a minority”—no matter how beneficial or even critical that process might be—why is that?

{ 3 trackbacks }

Do you have the core attributes to be an Entrepreneur? | Essentials LLC – Behavioral Profiling for Marketing, Organizational Development and Hiring
06.02.09 at 11:03 am
Learning from Failure #intlib10 | Librarian by Day
10.30.10 at 6:49 am
Randy Komisar on Learning from Failure | No Map. No Guide. No Limits.
10.09.13 at 6:02 pm

{ 2 comments… read them below or add one }

1 david foster 05.08.09 at 5:24 am

Sometimes you see an entrepreneur who is very, very successful with a first venture..in a field he knows something about..and the experiences gives him a sufficient amount of money & self-confidence to go start one or more ventures in fields he knows little or nothing about. This phenomenon may have something to do with the results shown.

2 Dylan Woodbury 02.15.11 at 8:23 am

Great essay (well done), but I don’t think we improve upon failure - we improve upon learning from failure. Just because a businessman fails, it doesn’t mean he has learned from his failure (what he/she did wrong and how to avoid that mistake). I strongly believe that if you looked at the first-time businessmen who failed and leaned from their failure (something extremely difficult to test on a wide scale), a much higher percent of them would succeed the next time around.

It’s like a student failing a test. He/she will fail the retake (even though they already took it) if the student didn’t learn from mistakes, studying where he/she went wrong and how to do it correctly. However, if he/she learned from mistakes, the retake would go much better.

Failure does not lead to success. Experience does not lead to wisdom. Learning from what we have done leads to these things.

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