Do We Learn From Our Mistakes? Or Not?

The NYTimes today reported yesterday on a Harvard Business School study of venture capital-backed entrepreneurs to test whether or not we learn from our mistakes. The results are confounding to many—including me.

Here’s the story. Several thousand VC-backed companies were studied over 17 years. First-timers had an aggregate success rate of 22% (success meaning going public).

The study is about those trying for a second time. Did the 78% who failed the first time learn from the experience, and do better the second time? Or worse? How did the 22% first-time winners fare—did they get lazy and decline? Or did they somehow do better the second time?

No less an expert than Gordon Moore, sainted ex-leader of Intel and the author of “Moore’s law,” said “You’re more valuable because of the experiences you’ve been through under failures.”

I’m with Gordon. But according to this data, we’re both wrong.

Those who succeeded the first time upped their success rate, to 34%. But those who failed the first time stayed mired in the muck, at 23%. So much for the myth of the gritty, plucky lads who pick themselves up and learn from their failures.

Apparently the data are not the problem: “the data are absolutely clear,” says Paul Gompers, one of the study’s authors. Yet it is still far from clear what the data mean.

As is often the case, data are one thing, and explanation another. Of course, the obvious explanation may be true: people just do not learn from adversity. This seems to be the study’s authors’ view—that the learn-from-failure ethos celebrated in Silicon Valley is really just anecdotal tales over-told.

Then again, maybe we actually do learn more from success than from failure. If so, perhaps that’s because of increased confidence resulting from one win.

Or, maybe only the really good people learn at all. And they can learn from experience alone, whether success or failure.

Or, perhaps these conclusions are only true of a certain type of person, characterized by some cross-cutting characteristic, such as risk tolerance. (Did you know height is correlated with IQ? True: short people score lower on the same IQ tests that tall people take. Of course, if you separate young children from the adults, or use age-normalized tests, the correlation goes away).

Or, to channel a recent 30 Rock storyline, maybe the first time winners are just very good-looking people who are actually horrible, but live in a bubble in which others let them pass. Hey, you never know!

Causal deductions are never fully provable—thanks, Dr. Hume. But progress can be made toward explanations.

So, what do you think’s going on?

And I’ll throw one idea into the ring, borrowed from Karl Popper, who developed the falsifiability theory of meaningfulness. A theory which is highly disprovable, but which remains standing, is superior to a hard-to-disprove theory.

Maybe people who fail have a much greater chance to learn. Why it is that they don’t still seems a mystery to me.

5 replies
  1. peter vajda
    peter vajda says:

    Hi, Charlie,

    You end with, "Maybe people who fail have a much greater chance to learn. Why it is that they don’t still seems a mystery to me."

    Some thoughts:

    -Experience is not the best teacher, experience deeply reflected upon is…and the operative word is "deeply".

    -Did you ever try to explain an NDE (near-death-experience) to a neuroscience materialist? It’s like two ships passing in the night. Relatedly, one of my fantasies is that such studies would be carried out not only in the School of Business but in the School of Psychology as well – to open the door and allow some fresh air, and exploration (I can dream). For me, to explore the rationale for learning and not learning from one’s experience, in addition to  describing the "who", the "what" and the "how" there needs to be a deeper focus on the "why?" Citing a theory, a fallacy, an "ism" doesn’t do it. What’s underneath their behavior….and that’s a deeper, psycho-socio-emotional (and spiritual, see below) inquiry.

    The data say, "…But those who failed the first time stayed mired in the muck, at 23%" There’s a reason for this. Failure for the VC folks could point to an unconscious addiction in the opposite direction (failure, and not success), that is, addicted to a way of do-ing, be-ing and thinking that serve a purpose for them. Sticking to one’s guns, in a way, might help them deal with their anxiety, feel comfortable (the devil I know vs. the one I don’t), assuage their ego, keep them from feeling lacking and deficient….something is there to be unearthed.

    The question here for these folks is, "What’s right about….(e.g., doing it again the same way and failing – a common ‘insanity’ definition; or… seeing what others have done that leads to success and resisting that; or choosing not to do a deeper plus-delta exploration etc)?

    -A common set of terms dealing with learning are: unconsciously incompetent, consciously incompetent, consciously competent and unconsciously competent. I’d be curious where the "failures" are on this continuum, and, moreso, why.

    -The spiritual (not religious, not theological) perspective would take a look at "consciousness", specifically, four levels of consciousness:

    Not conscious – instinctual, follower
    Subconscious – habitual, robotic, reactive
    Conscious – aware, intelligent, conceptual,
    Higher Consciousness- deeply reflective, intuitive, guiding, truthful, loving, universal

    I’d be interested in where the "failures" show up in this area. "Consciousness", here,deals with (the presence or lack of) self-awareness, deeper core values, deeper-level motives, and deeply personal levels of (the choice to) change. The "unconscious" and those operating on a subconscious level (probably 95% of the population) are those who live their life in a routine fashion, driven by their (unwillingness to ever consider changing their) thoughts, beliefs, paradigms…i.e., familiar way of doing things and how they are in the world.


    -Finally, the issue, for me, is never about the "content"- it’s about the people dealing with the content…and their behaviors. The whole research piece could have been consucted with those who have issues with alcohol, drug and food addiction, for example, or gamblers or abusers who were provided "incentives" (their VC capital) to undertake a change program. The vast majority of these "don’t learn from their experience either…". The underlying question is why? What’s happening, or not happening, "under the hood" and why?

    What’s happening vis-à-vis their autonomy or lack of it that reflects change or no change? These are not "business" or venture capital or "alcohol" or "abuse" questions. These are "people" questions and I wish such research efforts would at some point go at it from this perspective. Ah, the chance to dream.

     

    If one truly wants to get at "causal" relationships, instead of "iffy" correlations, the people question is one fine place to start.

    Reply
  2. andrea
    andrea says:

    I was lucky to read two different blog posts this week about the same article!

    Jason at Signal vs. Noise takes something totally different away from this:

    "What? Failure is part of the path to success? This industry’s obsession with failure has got to stop. I don’t know when it became cool or useful, but the industry has been steeping in it for so long that it’s become normal to assume failure comes before success.

    Don’t be influenced by this. If you’re starting something new go into it believing it’s going to work. You don’t have to assume you’re doomed from the start."

    He comes back around to another trust-based point you were discussing in another article this week : the measurements taken and their reliability in defining "success":

    "Going public, being acquired, or merging with another company is a skewed measure of success. It’s easy to measure for a study, but it’s barely what really defines success for most entrepreneurs. How about sustainable profits, loving your work, and making a dent in your universe?"

    Reply
  3. David Heath
    David Heath says:

    A couple of thoughts here – quite contradictory to each other, of course!

    The first thing that came to mind was the old quote from Albert Einstein: "Insanity: doing the same thing over and over again and expecting different results."  Perhaps the data are suggesting that entrepeneurs are simply not learning from their mistakes and that beyond (maybe) 20%, it’s simply dumb luck.

    Contradictory to that is the observation that out of every pool (whether previously failed or not), around 22% of entrepeneurs succeed.  Seems to me that *this* gives rise to the idea that many people succeed after successive failures.  After-all, how many entrepeneurs loudly trumpet to the world that they have failed 6 times but are sure to succeed on the next venture?  Clearly we only hear from those who (finally) made it.

    Finally, I would have expected that 20-odd% was about right.  After-all, in a competitive landscape it is simply not possible for every business to make it.  Further, there is no particular reason to expect that the ‘best’ ones are most likely to get there.  Random events and ‘dumb luck’ are also very important.

    Reply
  4. Philip McGee
    Philip McGee says:

    I know that when I failed in school it was because I didn’t work hard enough and I didn’t work hard enough because I didn’t care to learn that I wasn’t the smartest kid in the class like I always had been in the lower grades.  I suffered from some form of fear of failure/success.

    Reply

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