Cancel anytime. For fans of Drive , Outliers , and Daring Greatly , a counterintuitive, paradigm-shifting new take on what makes people and companies succeed.
Most new products fail. So do most small businesses. And most of us, if we are honest, have experienced a major setback in our personal or professional lives.
So what determines who will bounce back and follow up with a home run? If you want to succeed in business and in life, Megan McArdle argues in this hugely thought-provoking book, you have to learn how to harness the power of failure.
McArdle has been one of our most popular business bloggers for more than a decade, covering the rise and fall of some the world' s top companies and challenging us to think differently about how we live, learn, and work.
Drawing on cutting-edge research in science, psychology, economics, and business, and taking insights from turnaround experts, emergency room doctors, venture capitalists, child psychologists, bankruptcy judges, and mountaineers, McArdle argues that America is unique in its willingness to let people and companies fail, but also in its determination to let them pick up after the fall.
Failure is how people and businesses learn. So how do you reinvent yourself when you are down? Dynamic and punchy, McArdle teaches us how to recognize mistakes early to channel setbacks into future success. The Up Side of Down marks the emergence of an author with her thumb on the pulse whose book just might change the way you lead your life. First of all, this isn't a self-help book fortunately. Rather it is an interesting look at some solid research with the author's own failings as a minor backdrop.
Some of her examples seem to go a little far afield to make the point, but she manages to tie it all up pretty tightly before she's done. That a successful life requires a little friction isn't entirely new of course, but nothing in the book is tired or rehashed and all in all the reader walks away with some pretty good insight.
There are a lot of possible ways to express the premise of The Up Side of Down. The one I like best is, "success is unlikely unless you first risk, and likely experience, failure". Failure is a great teacher.
The concept is hardly new, but Megan McArdle provides so great examples from personal lives and businesses. McArdle is a journalist with an MBA degree. She currently writes a business and political opinion column each weekday for Bloomberg View.
She has worked for the Economist, The Atlantic, and several other publications. I have followed her career since. She is responsible for Jane's Law of US politics; "The devotees of the party in power are smug and arrogant.
So let's minimize our downside. And that enabled me to say, okay, well maybe I can try taking a new job. We can try doing more things because we don't have this mortgage that keeps me awake at night.
But also that personally and socially that you need to tell yourself when somebody has failed, especially if that person is you, Okay, this was always possibly in the cards.
This happened because I was doing something that had never been done before, or that I had never done before. And there was no way to know in advance. So I tried it, and that was great; and it didn't work; and now I have to move on.
It's not just about saying that [? Steve Jobs had a lot of special things that made Steve Jobs. But anyone can feel better. Anyone can try. Anyone can take a risk.
And we should; but on the personal level and on the social level, you are looking to do more of that, not less. And I think we're often moving in the wrong direction. Russ: And I think part of that is--it's a great way to sum it up--I think part of it is our desire to sometimes learn the wrong lesson. Which is: if something went wrong, it must have been a mistake. Whereas that's not true. Russ: And similarly, things that go right doesn't mean that I'm a genius. I may have been lucky; I got the right ball in the urn; and that's why it turned out okay.
And your point that if you take some risk in life, you should expect failure. That's the level of planning that's certainly the right level, right? You are realistic, and it's very much, as Nassim Taleb says, you want to be antifragile. That doesn't mean you want to take no risk. It means, put yourself in a position where, inevitably, when things go wrong it doesn't hurt so much. Guest: Exactly.
As I say in the book, the opposite of failure is not safety, it's nothing. Success and failure are the same process. If you're not trying something, especially in this economy--we think that because this economy is more risky that means that we should hunker down.
But in fact that strategy--that's what the workers at GM General Motors did. They hunkered down in their solid GM jobs that couldn't go anywhere because it was GM. And then when the whole company went away, there was no backup plan. You live in Michigan and the only thing you are trained to do is be an auto worker. That often, taking risks is safer in the long run than trying to hunker down in what you think is some archipelago of safety.
Because when that archipelago gets overcome by the tsunami, there's nowhere to go. Russ: Let's talk about unemployment, it's a good segue to that. You talk a lot about how to deal with it. You were unemployed for quite a while after getting your MBA at the U. Which it didn't turn out to be right away, right? And you write very eloquently and movingly and informatively about that.
But you talk about what it's like to be unemployed. What are some of the lessons both you personally and the research on this has suggested for people who don't have a job? Because, a perfect example, I think, inevitably people who lose their jobs blame it on themselves. Most of the time it's not their fault, obviously. And yet they don't have a job.
So they can't say--they look at their friends who do have jobs and they get depressed. So, give some of your advice for coping with that. Guest: The first thing is like being unemployed is like the worst thing that can happen to you in a modern society except for death or dismemberment. It's really bad.
It feels terrible. And people treat you differently. It combines economic security with rejection. Which is like the worst two things that happen to you. And so it like, first of all, I would say, My sympathies. Because I've been there and felt terrible. And the second thing is that when you look at economic research, what it tells you is incredibly banal in a way. What it tells you is that for example, who finds jobs faster, people who lower their reservation wage.
Which means they are willing to work for less than they did before. And people who spend more time on their job search. And then people who move. Labor mobility enhances the ability to find a job, because, for very obvious reasons if you are looking country-wide you have more potential job openings than if you were just looking locally.
So, it seems really obvious, but people don't do it. If you look at what happens with when people are doing job search, their job search activity falls off pretty quickly. They exhaust their initial wave of contacts; and then they stop. And it's not surprising that they stop, because if you look at surveys of job seekers, and also just completely intuitively obvious, they report that job search is like the worst thing they do all day.
It makes them anxious and depressed. And so they don't do it. And this to me is an explanation for why unemployment, extended unemployment benefits, seem to increase unemployment: is not that people--there are people who abuse the system; I've met them.
They wait. They just basically sit on their benefits until their benefits are exhausted, and then they go find a job. But for a lot of people that's not what's happening, I think. I think what's happening is that that anxiety and depression is so terrible that they want to avoid it.
So they put it off. And when you have extended unemployment benefits, it enables them to put it off. Because it's not so completely urgent you have to go out and get a job and do something. Or take a job that pays less than you are used to, or is it a lower level, or in a different industry, or whatever it is--it enables you to put off making really hard decisions. Unfortunately especially in this job market what we see is something called 'labor scarring,' where people who are in the job market for, it looks like about 6 months, there's a radical drop-off in their ability to get people to call them in for an interview when they send in their resume.
And so you are enabling someone to make what is a completely rational and understandable short-term decision because again, it really does feel awful, but a terrible long-term decision. And so what I talk about in the book is thinking about systematizing it: taking the decision to do that job search out of your own hands. Because that's where you are going to fall down. So, make a system[? You can't control when you get a job, but you can control how much time you spend doing things you really don't like doing.
Like calling people who you don't know and asking them for an informational interview, or a job, or calling people you don't like and doing the same, or doing want ads, and so forth--is that you set those goals up, you write down the goals and tick off the goals. And you focus on that and you give yourself those little wins, saying, okay, I did this. And then go out and find other people who are in the same boat. Because they are the only people who understand your misery. And get support from those people.
Because it really is tough that the most important thing you do the minute you get laid off is go straight into gear and just keep doing those hours of job search. Every day. Even when you don't know what to do. Being focused on doing job search and thinking of something to do is a much better use of your time-- Russ: You make the analogy of cold-calling and sales.
Russ: Which is--my younger brother is a phenomenal sales person, and spent a summer selling encyclopedias door to door in strange cities. By the way, another great example of how failure made him a great salesperson. Because, strangely enough, most people do not want to give a stranger--first they don't let you in the house, and then once you are in the house they don't really want to give you money.
And you're not going to give them the book. You're going to come back at the end of the summer and bring them the book. It's a hopeless task. So, you are set up to fail. And he failed relentless, but he was extremely good at it by the end of the summer.
But as you point out, one of the things that salespeople do in that situation is they have a routine that they don't deviate from. And one of the things that was amusing about his summer is that his boss would constantly be calling him. And if he ever was not selling--which was always tempting: sleep late, do other things--the boss, that was the only thing the boss cared about. That you were on the street, knocking on doors. You want to give a good sales pitch, too. But he knew that the main thing that counted was the denominator.
Get the hours in. It's hard to do. But that's a great analogy. Guest: And I use that analogy, because I spent a summer canvassing.
Which is similar except it's nonprofits. It's a very similar thing of mostly talk to you or just not going to give you money. And some don't want you there; they would rather you hadn't knocked on your door. And I turned out to be surprisingly good at it, which was not necessarily something you want to know about yourself, that you're really good at selling door to door.
But it really is that focusing on your speech, on your tick sheet of how many doors you are going to knock on--that is the numerator; and taking that decision to go up to the door or what to say out of your hands, systematizing it, is the only way you get through the day.
And the funny thing is at the end, you don't need it so much. Because you've done it enough that you are not so terrified of that door.
But I still remember the first door I knocked on. This is more than 20 years later. And it was a guy--I was canvassing for [? And by the end of the summer you are not afraid of that guy, because you've had like 20 of them. But those first ones it's really, really important just to have the [? Guest: Oh, my gosh, you have no idea. I was just a chipper, year-old, kind of leftie, really believed in the environment; it just never occurred to me that anyone would yell at me.
They sort of downplayed that in the recruiting. So it's huge. It's huge to have this. And that's why I went to that. And you talk to salesmen, too, because I'm always in awe of what good salesmen do. And the funny thing is that most of them--there are some of them that are just freaks and will enjoy cold-calling. But When they go to a new company, when they go to a new beat--whatever it is--they hate it. They hate getting on the phone and trying to get someone--but they learn to do it.
And the way they learn to do it is usually by setting numerical targets: Okay, I'm going to do this many. Because they know it really is the single best predictor of how many you sell.
That's what they'll tell you, is just how many people do you talk to. And so it's obviously by far not the only thing, but it's the start.
If you don't do that, there's definitely not any second or third step. Russ: Yeah, and the camaraderie part is also very important in both those groups--getting employed and the sales people. Because they are going through the same thing.
And no one else appreciates it. And it's hard. Definitely no one else appreciates sales people. Even though they are really important. They are the oil that lubricates the economy.
But they feel outside-- Russ: I meant nobody appreciates what they are going through. I didn't mean that nobody appreciates them. Guest: That's what I mean. No one is really sympathetic when you are, like, Well, I had to call this stranger; and you're like, I hate it when strangers call me.
Why did you do that? Russ: Let's talk about bankruptcy. Talk about what's unusual about American bankruptcy; for our American listeners, we don't know anything else. For our non-American listeners, you maybe live in a country with a very different set of rules about bankruptcy. You write about that. Talk about what's different about America versus other countries and why you think that's a good thing.
Guest: So, America has the most generous bankruptcy system in the world. Which is something a lot of people don't know, and quite a lot of people are surprised by.
They tend to assume that well, if you are in Scandinavia, well, it's just much more friendly to people who borrowed money because Scandinavians like the underdog and they take care of that guy. But in fact in Scandinavia it's much tougher.
And I talked to a Scandinavian entrepreneur who had gotten caught in that vine of being unable to declare bankruptcy even though he had a lot of debt, it was crippling him.
So, in America we're so much laxer that I was interviewing an expert on a completely different topic, on Russia, and it was this Scandinavian guy, and in the middle of the interview he started making fun of the American bankruptcy system.
And he said, 'So you can just go into a judge and say, I want free money, and the judge says, Okay, don't pay, then. And that's it? And it is surprising. If you stop and think about it, the fact that we allow people, in Chapter 7, only for consumers, not businesses. But to just walk in and say, You know what? And we do it.
That's a really remarkable invention. And the history of this is a little bit weird. We didn't even have a bankruptcy code until And then when we did, there were a lot of small farmers in the West who owed a lot of money to bankers back East, and they liked easy bankruptcy.
So they got it. And then that's grown over the years. So, the United States' system really is unique in that way. Also in how we handle corporations. We are much more likely to try to reorganize a firm than to let it liquidate. And the funny thing is that the American bankruptcy system is a neat little natural experiment. Because the law is Federal; it's in the Constitution that the Federal government has the right to establish bankruptcy code. But the exemptions, how much you can shield from your creditors, that's local.
That's by each state. And so what we can see when we look at different states, the states that have more generous exemptions also have higher rates of entrepreneurship. And this is actually not shocking, again for some of the reasons I've been talking about. First of all, prospectively, it's easier to start a business if you are not terrified that the bank is going to take your house and your kids are going to be on the street. But also, if you look at what's happened to people afterwards.
And that's why I went to Scandinavia--or I didn't go , but I talked to a Danish entrepreneur, talking about what happens to someone who was an entrepreneur and has failed. In his case, he didn't fail, but he had a serious setback. What happens to them if they don't have bankruptcy. Because what happens is they get shackled to that debt, and they can't grow their business and they can't do anything except struggle to pay off the huge debt.
And that is something that America ended up doing really well; and not intentionally--we didn't start off saying, Hey, this would be great for entrepreneurship. But we discovered this little Secret Sauce for making entrepreneurship easier and better. And it's one of the hidden strengths of the American economy. And unfortunately, it's something that we've been backtracking on, or did in So I actually went to Memphis, which is the bankruptcy capital of America; and since America is the bankruptcy capital of the world, probably the bankruptcy capital of the world, to look at what is the downside of this.
Because there's always a down side to any policy. But the downside when you look at it is so small compared to the upside of entrepreneurship-- Russ: Talk about the rates. Because it's informative of--Memphis has--and by the way, I was born in Memphis.
Guest: Oh, really? I did not know that. Russ: I have a lot of family there. So I don't want to say anything too horrible about it. Guest: I loved Memphis. I had barbecue every night. Russ: It's a nice city. It's okay. I mainly like it because my family is there. But it's okay. I have a running joke with my brother about whether it's as good a town as where I live, where I happen to be living at the time.
He lives in Memphis; I don't. But anyway, what's interesting to me is that the rate in Memphis is very low. But it's much higher than elsewhere. Which is probably what you are saying. So talk about what the magnitudes are, if you have them at your fingertips. And that is enormous. Russ: Of? One percent of the population? Of adults? Guest: Of the population in Memphis.
There's bankruptcy. Russ: It seems like a big number to me. Guest: It's a huge number. But cumulatively, if you [? And it's a little misleading because Memphis has a lot of Chapter 13s, which instead of Chapter which is the 'I don't have any money; Judge, discharge my debt'--it's a payment plan. And so, payment plans, you can imagine more people flunk out of them. And then they'll often try to re-file and reinstate it. Russ: Deadbeats. You're telling me they're deadbeats.
I am pleased with where we are today… However, each day I think about one thing: what can I do as a leader to make sure that our quality of care is the best it can possibly be — you guessed it — for our next patient? So, to avoid failure, to succeed! Bob, I agree. Either, without the other, could spell long-term trouble… And, a current customer can bring you your next customer, which is the ideal world….
Your email address will not be published. Buy session recordings. Operated by: First Friday Book Synopsis. Years ago, I listened to an earnings call with the head of a biotech firm that had sold off the income streams from all its patents, had nothing in its pipeline, and was rapidly burning through its cash. Management and workers seem oblivious to their failures. This dynamic has given rise to a booming industry of turnaround specialists. They range from serial CEOs, like Stibel, who may walk in with an entire senior management team, to more-traditional management consultants.
The industry is big enough to support considerable specialization—by company size, by industry, even by technique cost cutter, brand builder. All seem to agree on one thing: most companies wait far too long to even recognize that they have a problem. And yet, the argument that people continue down dead ends merely because they hate change seems inadequate.
After all, people also hate losing their jobs and their money. Firms are full of these mostly risk-averse people. So why do they so commonly refuse to swerve? Firms that are prone to frequent large changes will probably have more opportunities to kill themselves off with bad choices than firms that resist big changes.
Moreover, the need for accountability and reliability in the modern economy selects against constant radical experimentation—people like knowing that their bank has cumbersome and invariable procedures for keeping track of deposits, for instance. Or consider what happened to Coke after it tried to change the recipe of its iconic product, even though taste tests showed that most people actually liked the new version better.
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