How to Think About Failure

What's up, everyone. This is Alex Lieberman, co-founder, and Executive Chairman of Morning Brew. Welcome back to Founder’s Journal, my personal audio diary, where I give you, the business builder, the tools you need to think better in order to build better, whether that's building a business, a team, or a new product. You probably heard an ad before the show. That's something we're going to be doing going forward as we prepare for our first sponsorship that kicks off next month. I'm excited to share more great information going forward about what it means for the growth of the show. Now onto the episode. In a recent episode, I talked about my reading around Stoicism and in that episode, I shared how I had a conversation with my girlfriend. And in that conversation, I said that I would feel like a failure if Morning Brew was the only business that I built in my life.

Is failure the cost of ambition? 

After that episode, I reflected on that conversation and asked myself, why would I feel like a failure if I didn't build another business? And is failure even a bad thing? This led me down the rabbit hole of reading all about failure, what it looks like and how we can reframe it to motivate us rather than scare us. Let's hop into it. During my research on failure, I saw this great quote by Shane Parrish on Twitter. He said, quote, failure is the cost of ambition. I think this is so well said. That said, I also think it misses part of the picture, but I want to first talk about where I agree. The good type of failure, the, what I would call the misbranded type of failure, which isn't at all bad, is the failure that is driven by ambition like Shane Parrish referred to. It’s the failure where you want to grow yourself or your business so you decide to try something with a certain outcome in mind.

You decide to make the leap and go full-time on your side hustle. You decide to sell an idea internally to senior stakeholders at your company. You decide to raise venture money and try to build something massive. And what ends up happening is after trying that thing, the outcome isn't as you had planned. This is what I would call a great failure. This is the type of failure that needs to be rebranded and celebrated. This is the type of failure that should be treated like a science experiment, where failure is just a data point that allows you to adjust and change course. I'd even go as far to say that the best businesses in the world treat failure like science experiments and their entire companies are run like efficient science labs.

Treat failure like a science experiment

Here's what I mean: With every business, there's a question, which is your why, the problem you want to solve, you're asking yourself, why is something done this way? Why has it always been done this way? You have, second, your hypothesis, basically your potential solution saying, what if we did it this way? Could we solve that problem? Third, you have the test, which is how you will learn. It is the core offering. It is your product as a business. Fourth are observations, this is all of the data that you collect. Customer acquisition, retention, net promoter score. Is something actually working or is it not? And then fifth, you have conclusions. You learn from the data that you're observing that is telling you if the test worked or didn't work. And that leads you to a conclusion about if you want to double down on your existing strategy, or if you want to adjust. Great businesses are great at moving through this five-step process, as fast as possible in order to evolve. And in this context, all a failure is, is a conclusion that doesn't align with your original hypothesis. 

Given this framing, think about how normal and nonnegative failure actually is, yet how we constantly judged ourselves and others for failing. Here's another way to think about it: Over literally hundreds of thousands of years, human beings have changed and iterated based on our environment, moving from literally the most primitive skills of hunting and gathering to now today, where we as a species are literally creating software and hardware using machine learning to do work for us.

This wasn't a failure. It was nature's way of testing and learning. So if failure isn’t bad, but is instead both a cost of growth and an expectation you should have of yourself, how do we make the most of failure once we invite in? Well, I think in career or business, it's about understanding what stage of failure or learning we're experiencing. And James Clear, the famous author of Atomic Habits, breaks down this idea of three stages of failure. The first stage is failure of tactics. The second stage is failure of strategy. And the third stage is failure of vision. Stage one, failure of tactics, is basically all of the how mistakes we make in career business.

Three stages of failure

These are mistakes related to our processes, where we have a good plan. We have a clear vision, but the way we go about executing on our strategy, just doesn't. And actually, as I reflect on our journey building Morning Brew, I would say most of our failures have been failures of tactics. Some of our biggest failures have been us making the wrong hires, where we would hire someone and three months later, we realized they're not our person. This solution was reflecting on what caused us to make bad hires that either decided to leave the business or that we had to fire. It was a process error.and we learned through these mistakes or quote unquote failures, how we could hire better moving forward. It was the same thing with us moving from being a business that was reactive, doing things that were a day or a few days ahead, to being a proactive business that would actually plan and execute on things that are happening months or quarters in the future. 

The second stage of failure is the failure of strategy. These are what mistakes, where basically you have your plan to accomplish your vision and that plan is flawed. So you need to change your plan. The way you fix your failure of strategy is through launching and testing strategies quickly and cheaply learning from the strategies that you end up putting into action quickly, and making quick adjustments based on what you learn.

Here's another way to think about it. When failure is expensive with a strategy, plan carefully and deliberately when failure is cheap with a strategy, act quickly. And just to give you an example and paint a picture of what failure of strategy looks like, Amazon is the king of fast fixes and strategic failures. Let's just look back at March of 1999, Jeff Bezos, the founder, just announced that the company would launch a new service called Amazon Auctions, which was basically their product that would allow anyone to sell anything online and it would be the eBay killer. They put a ton of effort into building out this product. They built it from scratch and they launched it in under three months.

Amazon Auctions ended up being a spectacular failure. Just six months after launch management realized the product was going nowhere and in September of 1999, they scrambled to release a new offering called Amazon Z Shops. The idea of Amazon Z Shops was that anyone from big companies to individuals could set up an online shop and sell goods through Amazon. Yet again, the strategy didn't work. Neither Amazon Auctions nor Amazon Z Shops are running today. They were shut down after launch. And in December of 2017, Bezos referred to these failed projects by saying, I have made billions of dollars of failures at amazon.com, literally billions, but it's all about testing quickly and learning quickly. In November of 2000, Amazon unfazed by these two failed strategic launches, launched Amazon Marketplace, which allowed individuals to sell used products alongside Amazon's new items.

Marketplace was a massive success. In 2015, Amazon marketplace accounted for 50% of Amazon's then $107 billion in sales. And Amazon is just the best example of failure of strategies, but how to fix failures of strategies. The faster you test a strategy in the real world, the faster you can get feedback, which allows you to adjust course and keep heading towards your ultimate vision. Amazon's ultimate vision was to be the most customer-centric company in the world. So if you think about it, within 20 months, Amazon released Auctions, shut it down, launched Z Shops, shut it down, and launched marketplace, which ended up being a massive success.

The third and final stage of failure per James Clear is failure of vision. This is when you don't have a clear direction and don't understand why you are doing the things you do. Your vision is your nonnegotiable. It is the North Star that you will not budge on. And so oftentimes when you see startups fail, we think that it's a failure of vision because the company shut down or it's not doing well. It's actually probably just a failure of strategy where the, what needs to be done. Isn't allowing you to accomplish the why. And I have found that failures of vision, I think most of the time happen when people realize that their, why was someone else's why. And so the failure is really in redefining, what is your non-negotiable life or career, which acts as your North Star. Another way to think about it is, if people fail, if entrepreneurs fail in a business, they have to shut it down. That's actually not necessarily a failure of vision. That could be a failure of strategy, and they could go on to launch another company that's going after the same vision, but they figured out a different strategy that has to manifest in a totally different form, such that it's a new business and that is not a failure of their vision. And so bring it back to this point of seeking failure and good failure, everything that I just described is an effort to shift your thinking, to seek failure rather than operate in fear of failure and how to identify the type of good failure that you're experiencing at any given time.

The only bad kinds of failure

But as I had mentioned, I believe the quote about failure being the cost of ambition is incomplete. I do think that there's a bad type of failure. I'm not the person to say, oh, no, failure is just a learning experience. There's no bad failure. I actually think that there is, and the bad failure is failure that's driven by inaction. Inaction because you're fearful of the reputational hit that you'll experience if you say, you'll do something and you don't accomplish it, or inaction because laziness and procrastination prevent you from doing something that you said you’d do. If we can train ourselves to avoid failure through inaction and experience as much failure as we can through action, I  think we build more successful businesses and careers. And I also think we'd just be happier because we'd feel constant growth as people. 

With that. I would love to hear your thoughts on failure. Shoot me an email at alex@morningbrew.com  or DM me on Twitter @businessbarista. And let me know a failure or quote unquote failure that you've had in your career that when you reflect on it, it was actually one of the best learning experiences that you could have had, and you wouldn't trade it for anything. As always, thank you so much for listening to Founder’s Journal, make sure to share the show with friends, family, and your network if you enjoyed the episode. Thanks again for listening and we'll catch you next episode.