At Large June 2002

The Success of Failure

We owe our economic development, our form of government, and even our physical existence to spectacular flops
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Now that we're coming (we hope) to the end of the recession, let's give thanks for the economic down-turn—for being worried and broke, getting fired, and having the value of our investment portfolio reduced to the point that when our stockbroker calls to suggest a trade, he means grocery-store coupons. "It's part of the genius of capitalism," said the Secretary of the Treasury, Paul O'Neill, in January. "People get to make good decisions or bad decisions, and they get to pay the consequences or to enjoy the fruits of their decisions. That's the way the system works."

Of course, O'Neill wasn't talking about the recession. He was talking about Enron. And the system to which he referred is, mainly, the Bush Administration's system of getting off the hook for its involvement with Enron. The Secretary of the Treasury was blowing PR out the seat of his political pants. But truths are sometimes told thus. Rotting dot-coms are a good example—we don't want an economy in which stumbling businesses, intoxicated with bad ideas and blinded by the flash of MBA degrees, aren't permitted to fall down the manhole of Chapter 11.

The Communist bloc of old was a study in the failure of failure. Losers in the Soviet economy were the people at the end of the long lines for consumer goods. Worse losers were the people who had spent hours getting to the head of the line, only to be told that the goods were unavailable. In the Soviet Union no industry went under until they all did.

From the archives:

"The Social Contradictions of Japanese Capitalism" (June 1998)
The economic woes of Asia have been much written about—in purely economic terms. But behind many of those woes lies a social crisis in Japan, whose modern young people inhabit a pre-modern society. By Murray Sayle

This can happen in free societies. In little more than a decade the Japanese economy has gone from frightening powerhouse to frightening, period. Japanese corporations that should be bankrupt continue to receive loans from Japanese banks that actually are bankrupt, owing to a Japanese government that is, politically speaking, bankrupt. The results are a shrinking gross domestic product, enormous public debt, a stock market that has lost three quarters of its value since 1990, and the highest rate of unemployment since World War II.

Not that we want the Japanese to be employed as they were during World War II—conquering Asia, attacking Pearl Harbor, and so on. They were working too hard back then. And this is another reason to keep governments from helping enterprises to avoid death by folly. Compare the learning curves of the private sector and the U.S. government by placing a graph of the NASDAQ stock prices after December of 2000 over a graph of American troop strength in Vietnam after the Tet Offensive. Jeffrey Skilling himself might have been leery of a partnership with Nguyen Van Thieu.

From the archives:

"Will America Grow Up Before It Grows Old?" (May 1996)
The long gray wave of Baby Boomers retiring could lead to an all-engulfing economic crisis—unless we balance the budget, rein in senior entitlements, raise retirement ages, and boost individual and pension savings. By Peter G. Peterson

Even in peacetime and under the aegis of supposed believers in marketplace triage, the business of government is hardly folly-proof. By 2030 America is going to have a very large number of retirees living on Social Security. Government subsidies produce—as they did with wheat and cheese—surpluses that do not respond to the usual methods of clearing markets. What will we do with all the old people? We may have to donate them overseas in the hope of aiding developing countries that lack age, wisdom, and bingo.

Fortunately, most of America is still allowed to flop. Otherwise Vanilla Sky would still be in the theaters. Instead Tom Cruise, Penélope Cruz, and Cameron Diaz are fascinating again. "There is nobody more boring than the undefeated," Tina Brown once said. If failure didn't matter, Brown's own editing career, from Vanity Fair to The New Yorker to Talk, might have kept going, until at last she was editing the Encyclopædia Britannica. Article on quantum mechanics by Cameron Diaz.

Economic failure, however, harms good businesses as well as bad, and we should be grateful for that. The arrogant and greedy come a cropper, and so do the innovators and visionaries. Icarus sees all sorts of possibilities in flight. These elude his task-oriented, linear-minded father, Daedalus, who just wants to get out of Crete. Icarus takes off on his own. He experiences the thrill of a soaring venture, briefly becomes a hot property, gets singed, has a meltdown, and undergoes a rapid decline in personal fortune.

The railroad is another example of a visionary innovation that suffered a worthwhile fizzle. Railroads were vital to American business expansion. But railroad-stock speculation in the 1870s led to an Icarus of a crash. Good as railroads are, do we want a locomotive in the driveway? Would it be convenient to take the train to the McDonald's drive-through window? It's probably not a coincidence that shortly after the railroads went bust, the automobile was invented.

A too-visionary adoption of innovation can be disruptive, as the residents of Hiroshima would attest. Private developers of an atomic bomb would have found that the device made a mess and instigated no end of lawsuits. Venture capital would have dried up.

If "Ginger," the two-wheeled gyroscopic people-mover, had been introduced during the innovative, visionary late 1990s, we might be overrun by the things. Literally. Gingers would be whizzing along our sidewalks, caroming off baby carriages, wreaking havoc among dog walkers, and squashing the sleeping homeless. Teenage boys, with youth's ready affinity for new technology, would hot-rod Gingers. Street racing would ensue, causing grisly accidents and loss of life. Congressional hearings would be held. The National Highway Traffic Safety Administration would get involved. Shoulder restraints and protective bodywork would be mandated, along with two extra wheels for stability assurance. By this point Ginger would be a car.

As it is, in the more conservative and pragmatic 2000s Ginger will have a chance to exhibit its merits over time and to become gradually integrated with the transportation network—and then get chucked for being idiotic.

But it's not just economic development that benefits from failure. The growth of democracy depends more on defeat than on victory. In America—unlike in Zimbabwe, for instance—the political system is based on the ability of politicians to be good losers. John Quincy Adams swiped the White House from Andrew Jackson in 1824. Jackson had fought duels, and Indians, and the British. But Old Hickory chose to wait for a metaphorical bloodbath, in 1828, rather than start a real one. Nor did the combative lawyer Samuel J. Tilden stoop to battle the crooked ascendancy of Rutherford B. Hayes. And after the Florida recount imbroglio, Al Gore conceded gracefully. Almost gracefully.

Only once—following the election of Abraham Lincoln—did prominent American politicians refuse to accept the blessings of failure. They started the Civil War, a failure that has kept the nation free and united ever since.

To failure we owe our form of government and also our actual physical forms. Death was biology's greatest innovation. Without death there's no you. I just keep dividing into endless replications, the whole bunch of myselves having identity crises and forging a lifestyle truly open to the criticism of being "all about me."

Failure is obviously the key to Darwinian selection. Survival of the fittest can't work if the unfit are still hanging around. There they would go, dodging comet-collision debris, being chased by predators but always managing to escape, getting stuck in tar pits, extracting themselves somehow, and getting tar all over the place. It would drive the fittest mad.

Failure is necessary to evolution. But failure may be equally necessary to the creationist scenario. Picture Adam and Eve, epochs later, all talked out, with the thrill of nudity long expired. Adam keeps mowing and de-thatching and re-seeding paradise. He's given up golf. He doesn't have the cuss words for it. He putters, putting coat after coat of Thompson's Water Seal on the new pickets for the eleven-thousandth fence around the Tree of Knowledge. Eve redecorates Eden. It's Olympus this month, Valhalla the next, then a modern, minimalist Nirvana style. She changes all the names of the plants and animals and stares at the fig tree, hoping for something new and stunning in this year's leaves. The animals are tired of one another. The lion lies down with the lamb; the lamb snores. The serpent ended up eating all the apples himself. He's gotten too fat to tempt Eve. From this we're supposed to fill a Bible?

It seems a shame that failure is so central to existence and so inevitable. Should there be exceptions? Maybe our economy will become a permanent success when every defeat is faced with renewed determination, when each crisis leads to stronger resolve, when ambition is never relaxed and self-confidence never abandoned. But if that attitude really paid off, the result would be an immortal Richard Nixon.

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