Americans Learn to Succeed by Learning From Failure

America succeeds because Americans fail and forgive. That's the intriguing message -- or part of it -- of Megan McArdle's new book "The Up Side of Down: Why Failing Well Is the Key to Success."

McArdle, a Bloomberg blogger and columnist, stands out among economic writers, and not just because she's the only woman among them who is 6 feet 2 inches. She combines a shrewd knowledge of economics and practical experience with a writing style that every so often segues into comedy monologue.

Americans fail a lot, she argues. Most new businesses fail. Most predictions are wrong. As the screenwriter William Goldman wrote about Hollywood, "Nobody knows anything."

And attempts to guard against failure can result in greater failures later on. Children prevented from roughhousing at recess may engage in riskier behavior later. Antibiotic overuse makes bacteria resistant to antibiotics, which then don't work when you really need them.

But good judgment comes from experience. And experience comes from bad judgment -- from failures. The key question is how you respond, whether you learn from failure and rebound.

Drawing from pre-history, McArdle contrasts farmers and foragers, the hunter-gatherers who lived before the development of agriculture.

Foragers tend to share success with neighbors, in the expectation that others will share later. They see success as the result of luck -- the hunter who happens to spy a particularly vulnerable mammoth.

Farmers tend to share success only with family members. They see success -- a plenteous harvest -- as the result of their own families' hard work and conscientiousness. They see no reason to share it with the lazy and feckless.

Americans, in McArdle's view, have values like those of farmers. Much more than Europeans, they believe that there is a connection between effort and reward. Those who have earned more deserve it.

Europeans tend to believe that success comes mostly from luck. They enlist government to, in President Obama's words to Joe the Plumber, "spread the wealth around."

But in some respects, Americans behave like foragers. They're often ready to forgive failures. High-tech entrepreneurs like to hire people whose businesses failed because it shows a willingness to take chances.

The U.S., McArdle points out, has the most accessible bankruptcy laws in the world. You can slough off your debts (except for student loans) relatively easily. In supposedly progressive Denmark, they hang over you for life.

The result is that, contrary to F. Scott Fitzgerald's adage, there are many, many second acts in American life.

Americans also, though McArdle doesn't mention this, donate far more to charity than Europeans do. Great philanthropists have created beneficial institutions -- Andrew Carnegie's libraries, John D. Rockefeller's research medical schools, many donors' universities -- which Europe can't match.

McArdle mostly ignores religion, but this blend of farmer property-owning and forager sharing is in line with Christian teaching. There is such a thing as sin, and it should be penalized. But there is also the possibility of forgiveness and redemption and a duty to share in your own way.

Though not technically part of the millennial generation (those born after 1980), McArdle presents a Millennials' view of the world.

Sudden macroeconomic shifts can result in months of soul-deadening unemployment (she was working in IT just as the dot-com bubble burst).

The future is wildly unpredictable, failure is frequent, success seemingly serendipitous (her freelance blogging got her a job blogging at the Economist).

Her advice is to avoid enterprises that are in long-term decline, such as General Motors starting in the 1970s. In business and public policy, try to learn from well-conducted experiments -- but recognize that successful trials can't always be replicated on a large scale.

Don't rush to conclude that disasters like the 2008 financial crash are the result of conspiracy or the errors of one easily identified group of malefactors. Bubbles happen in any free market economy and are hard to identify until they burst.

"The world is an increasingly insecure place," she writes, "and there is no way to make it less risky."

The best way ahead is to admit mistakes quickly, understand that you may well fail, but you can usually rebound and punish rule-breaking promptly and consistently but lightly.

This book about people who fail is also a book about how a nation succeeds. The "American Bourgeois Synthesis," McArdle writes, is good but not perfect, promoting entrepreneurship but over-penalizing some mistakes.

Americans -- and America -- can succeed, but only if people learn from their failures.

A more powerful idea is that “there is no such thing as failure, just new opportunities that are missed.”

Most people look at failures from two perspectives: either abandonment of effort, because if it didn’t work before it won’t work in the future; or the reinforcement of defeat, by trying the same thing in the same or different way, and hoping for a different outcome.

But both of these are sub-optimal outcomes. The former case is surrender, and the latter case waste. So a third alternative is needed.

On the grand scale, many years ago, the Bush family obtained a system with unknown origins, that made them very effective in foreign policy. H.W. Bush called it “linkages”, and the comedians on Saturday Night Live coined the word “strategery”, assigned to W. Bush. Ironically, it was somewhat more accurate to what was being done, and was adopted by several White House organizational units, as “strategery groups”.

Linkages, later strategery, meant that between nations, there are thousands of interconnections, and with their subtle manipulation, seemingly intractable problems can be overcome. By data mining and collating these interconnections, something extraordinary can be achieved.

Even human geniuses in foreign policy cannot grasp more than a limited number of such dynamic linkages. But computers can, and by using them to do so, you create a third dimension of diplomatic action. This handicaps those relying on human brilliance, or worse, those who are blunt and simplistic, like Democrats, to being so outmatched that their efforts are futile, and they don’t even know it.

In a manner of speaking it is like a manipulated butterfly effect. On one end some innocuous event, like providing one nation with a ship full of reduced price oranges, but the result is that on the other end, a war between two other nations is ended.

Importantly, it is exceedingly powerful. And the idea behind it, that “there is no such thing as failure, just new opportunities that are missed”, suddenly comes to the fore, as a *possibility*.

And this possibility works at a much less advanced, human level, as well. That is, an ordinary person can reject failure, if they just refuse to accept it, and look for ways, not just to mitigate it, but to exploit it, “snatching victory from the jaws of defeat.”

It does require some wit and brain power, however, and often a grasp of mathematics, statistics, and probability distributions.

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