"Fail early, fail often, but always fail forward"

John C. Maxwell, American author, speaker, and pastor

Failing Forward

January 13, 2024

Anyone who has read a self-help book will surely be familiar with the saying: “It’s not how many times you fall down, it’s how many times you get up.” There is an entire industry built around this concept and it makes sense. After all, no one wants to be labeled as a “failure.” But are we too hard on ourselves? Is it okay to fail? Are we even better off because of it?

Not only is it okay to fail, but there are ways of failing better. For example, to be successful, the solution proposed by re-searchers is actually to ease up at times. Albert Einstein, for ex-ample, was wildly productive, but his productivity came in bursts – not in a continual manner. “If my work isn’t going well,” he said, “I lie down in the middle of a workday and gaze at the ceiling while I listen and visualize what goes on in my imagination.”
By acknowledging his own limitations – and yes, even geniuses have limitations – Einstein had the self-awareness to realize that stepping back was the optimal solution in his situation. In this sense, he learned to “fail well.”

The same was true of Wolfgang Mozart, who also allowed him-self to slow down between surges of productivity. “When I am completely myself,” he wrote, “entirely alone, and of good cheer—during the night when I cannot sleep— that my ideas flow best and most abundantly.”

Einstein and Mozart certainly have experienced sudden bursts of productivity, but such bursts are hard to sustain. You don’t simply discover a new theory of the universe or compose over 500 symphonies by fighting your demons every time your productivity hits a wall. Both gentlemen recognized that getting back on track was not a matter of using brute force. Instead, they made the conscious decision to take a breather, regroup and take a different approach – all the while accepting that some level of failure is not just inevitable, but necessary in or-der to achieve monumental breakthroughs.

One benefit of this approach is that it makes room for failure. It acknowledges and accepts that no one can produce at peak productivity for sustained periods of time, and that successes will be interspersed with multiple failures. Recent theories of learning realize that progress is impossible without setbacks and unexpected challenges, which in turn means you’ll have to fail – often multiple times - before you can succeed.

Many point to the idea that those who make an effort to try new and difficult things have a higher degree of success in life, compared to those that continually choose “the safe route.” No doubt the greatest athletes in the world aren’t those that continually beat up on their little brother, but instead those that continually pressed their limits, seeking out the best competitors they could find and in turn elevating their skill set.

Is there an optimal level of failure? A team of psychologists and neuroscientists from the University of Arizona sought to determine what this optimal ratio of failures to successes may look like. They realized that both extremes can be problematic, for different rea-sons. For example, perfection may be uninspiring as it doesn’t present opportunities for valuable feedback, and abject failure is simply exhausting and demoralizing. Somewhere between these extremes is the “sweet spot” that maximizes the odds of eventual success.

According to the researchers, the optimal failure rate is 15.9%. Obviously, one’s individual number would vary more than that overly precise number suggests. On some days you might tolerate a higher failure rate, and on days when you’re discouraged you might avoid the possibility of failure altogether. Personality certainly plays a part as well. Einstein and Mozart tended to be more “laid-back” and more willing to tolerate setbacks than most people, which may explain a part of their ongoing success. Either way, research seems to suggest that if we fail about one out of six times, we have reached the optimal level.
There are two things that make the existence of this optimal failure rate important. First, it gives an objective benchmark for optimal difficulty. If you’re failing much more than once in every five or six attempts, you might be failing too often; and if you almost never fail, you’re most likely not failing enough. Second, from a psychological perspective, the optimal failure rate gives you a “license” to fail.

There are many takeaways from failing. Foremost is that it is simply a part of life and should not be thought of as something to avoid at all costs – much can be learned from it. Also, the actual rate of failure if not overly important, but rather one’s reaction to failure is what ultimately counts. As investment managers, failure is something we are faced with constantly. This makes for a challenging and rewarding business to be in, as set-backs are part of the process. At the same time, however, every setback presents us with more data, more information, and more ammunition to enable us to make better decisions moving for-ward. After all, we all will fail at some point, but the secret is to fail well – and learn from your failures.

The article above is an excerpt from the Q3 Quarterly Market Commentary. Here is a link to the most recent issue. Complete the form below if you would like to get this emailed to you each quarter.

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