The Importance of “Failure”
By Mel Copen From Tokyo, Japan November 12, 1999
© Mel Copen, November, 1999

Often, the value of something can best be appreciated in its absence.

“Here, when you start your company career, it’s like you receive 100 points. Any time you make an error, you lose points. If you do something positive or if you just don’t foul up, you keep your points. And for a successful career, you need to retain almost all of the 100 you started with.”

This was how a very prominent Japanese executive recently described to me the environment within the traditional Japanese corporation.

I’m back on a short visit to Japan and it is fascinating to see an entire nation continue to struggle with critical change. The Japanese economy has been in a nosedive for a number of years. The need for a dramatic departure from the past has become apparent and there are many hopeful signs that things are beginning to move in a positive direction. But it is also clear that many of the entrenched practices and values of the past have contributed to the present difficulties and that these must be altered. Major restructuring will be required before health can be restored.

Although the process has started, the scale has to increase dramatically. Companies must reduce bloated white-collar jobs, inefficient distribution chains must be streamlined, fundamental changes must be made in the banking system and entirely new social service systems must be created. Unfortunately, it will take time for new mechanisms to take hold and the immediate result will be a substantial increase in the already high (by Japanese standards) unemployment rate.

One problem is that this change must take place in a system that has few safety nets to alleviate the resulting pain. Japan’s savings rates are among the highest in the industrial world, despite interest rates that approach zero. One key reason is that there the country lacks the pension and social security systems of other nations, and people have no choice but to put money aside for their old age. The interest rate is almost meaningless under such circumstances. Similarly, many mechanisms to ease the pain still have to be created.

It is clear to all that the change process must take place. Once the economy is back on a healthy path, many of the dislocated will be able to find new employment and a more solid base will be established for the future. Although the resultant dislocation will be temporary, the adjustments will take time, and during that intervening period, there will be substantial “discomfort.”

In a nation that is characterized by conflict avoidance, the pain of getting over the threshold may be more than the political system can bear. But there is another factor, something deeper, at work here. The problem requires not only the willingness of government and business leaders to move forward and take responsibility for the transition and create mechanisms to east it, it also requires a change in a number of characteristics fundamental to the culture. By looking at Japan’s dilemma, we can better appreciate at least one of the often-overlooked factors that has been crucial to the United State’s success. It is highly visible, notably by its absence in Japan and the impact of that absence. I refer to a tolerance for failure.

The opening quotation describes what happens to the employee in the traditional Japanese company who stretches and fails. He loses some of his 100 points and his chances for an eventual top-level position. If he succeeds, there is little recognition or reward. Staying comfortably within the crowd is “safe.” Seniority, therefore, has been a major factor in upward corporate mobility. Similarly, small businesspeople who fail encounter an even stronger social mechanism – they have no further access to capital to start over again. The stigma of failure may be permanent. The message is loud and clear, and individual performance is affected accordingly.

Fortune Magazine has just completed a fascinating series on great managers and entrepreneurs of the century. Each of these profiles a great success story. But a careful reading of the details shows that many of the roads these people followed to success were not all uphill. They were strewn with rocks, potholes and U-turns – i.e. setbacks and failures. However, persistence, vision, skill (and sometimes more than just a bit of luck), applied over the long run in most cases, finally resulted in crowning achievements. Think how different such a list would be if one failure knocked you out. Think of how many prominent companies, products and services would vanish from the landscape if failure resulted in “termination.”

Over the last few decades, the primary stimulus to the growth of the US economy and employment and the engine for innovation has not come from the Fortune 1000. To the contrary, while employment within these firms has actually declined, the expansion has come from entrepreneurs – one or a small group of people with an idea – starting with small firms that have created new products and services and in so doing, new jobs and new wealth. They took risks. Many failed, only to come back again and eventually succeed.

Our tolerance for failure is an often-neglected aspect of our culture that has been critical to this nation’s achievements. Perhaps more than any other nation in history, the US values recognize that the creation of an environment that encourages risk-taking means that reasonable levels of failure must be tolerated (although not encouraged) and that the learning experience that can be derived from failure can become a platform for success.

This is perhaps the greatest challenge that a nation such as Japan faces – how to change the balance to (a) accept a reasonable level of failure and (b) to provide ample rewards for success. In baseball, a hitter who bats less than 1000 is not tossed out. In the sport, the principle is accepted. But without similar acceptance of a tolerance for failure in broader society, Japan will have difficulty developing the flexibility it needs and in creating the jobs that are required to get over its current predicament and build a vibrant and flexible economy.

Much of what we have in the US today is related to our attitudes to failure. Progress comes from stretching one’s capabilities. And if one truly stretches, there are times when failure will result. We have learned that a reasonable level of failure is prerequisite to long-term success. We need to remember that next time we, or our colleagues, or our children take a calculated risk and “screw up.”

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