Discover more from Sustainable Returns
You Can’t Always Be A Goldfish
Ted Lasso sadly came to an end this week. The series began and ended with “Be a Goldfish.” Ted’s way of encouraging his players, and eventually his son to move on quickly from mistakes. I never doubt the wisdom of Coach Lasso, but today I want to talk about how to respond to those mistakes before we forget about them.
“If you’re going to pursue difficult goals, you’re inevitably going to fall short sometimes. It’s one of the costs of ambition.”
This line from Steve Schwarzman's book, What It Takes, resonates with me whenever I think about ambitious goals. If you never experience occasional failure, chances are you're not pushing yourself far enough.
Consider this in the context of exercising: if you don't push your muscles to the point of failure, they won't repair and grow stronger.
Failure has been the topic of two recent pieces of content that I’ve enjoyed.
During a recent Tim Ferris podcast, Danny Meyer, the founder, and CEO of Meyer Restaurant Group which includes ShakeShack, shared the story of his first failed restaurant, Tabla.
Ironically, Meyer posed the question to himself and his staff: "What if we could be known for how well we closed a restaurant?" What if we could fail as gracefully as we succeed?”
The result was astonishing. Tabla didn't just organize job fairs for affected staff; they invited chefs and managers from other restaurants to work a shift at Tabla, showcasing their team's talents. They hosted fundraisers for causes the staff cared about, keeping the restaurant bustling. They even brought in famous Indian chefs to raise funds for earthquake victims in India.
By the time Tabla closed its doors, the staff had found new jobs, the landlord received every payment, and investors even made a profit. Failure could have destroyed relationships, instead it strengthened them.
Meyer is renowned for his unwavering commitment to hospitality and treating people with respect. It's easy to exhibit these qualities when everything is going well, but it's a different story when faced with adversity.
Kyle Harrison from Contrary recently wrote an excellent post on the hype and hot air of venture investing. He explored why investors are reluctant to admit and learn from failures, at least publicly. This highlights one of the downsides of the venture industry, but it also showcases one of the strengths of Energize.
In a business where taking credit for successful deals is the norm, admitting failure is the complete opposite. Therefore, most investors strive to distance themselves from failure, fearing it will tarnish their track record.
At Energize we don't have track records, and for many reasons including this one, that’s a good thing. We don't run away from failures; instead, we strive to avoid making the same mistake twice.
Kyle also highlights how failure and the acknowledgment of it can lead to eventual success. Accel missed Skype in the early days of online chat because it was “too weird” despite unparalleled user engagement numbers. Accel also missed out on a 100x return.
A few years later, another investment with unparalleled user metrics emerged. The Facebook.
Accel, reflecting on its Skype experience invested $10M. When the company went public in 2012, the stake was worth $12B. It’s not a stretch to say without the lessons from Skype, Accel might have missed Facebook (or Meta, whatever.)
The less time we spend with failure—and failure can even mean things not going as planned—the less comfortable we become with it. If we're not comfortable with failure, we're not comfortable with learning or adapting and that's one of the worst traits any investor can have.
Charlie Munger is one of my favorite investors because his principles are universal. In Berkshire Hathaway's 1985 annual letter, Warren Buffett praised Charlie's emphasis on studying mistakes rather than success, both in business and in life. Charlie is famously quoted as saying, "All I want to know is where I die, so I'll never go there." You can't know where "there" is without studying instances where companies fail.
Berkshire Hathaway and the firms I admire the most are known for their transparency. The chart above illustrates how often their annual letter mentions a mistake they’ve made - there are only 2 zeros in 40+ years. I firmly believe that this type of transparency builds trust, and trust attracts long-term investible capital to take advantage of market cycles.
The market is currently filled with failures even if they aren’t public yet, and it may even worsen before improving. On top of that, we have a generation of investors and operators who have never experienced a downturn.
The silver lining is that tough markets offer the opportunity to emerge stronger on the other side, just like a muscle pushed beyond its limits.
Dealing with failure in the moment is challenging, but like anything else, you need a framework to navigate through it. For me, that framework is simple but not easy.
Go the extra mile to treat people well during moments of failure, both for yourself and others.
Be honest with yourself, analyze your mistakes, and seek feedback on where you went wrong. Avoid making the same mistake twice.
Be transparent with your team and stakeholders as early as possible. This fosters trust and opens up possibilities for new solutions that can be implemented before it's too late.
Here's to hoping we encounter minimal failure in our lives and careers, but just enough to prove that our goals are worth pursuing!
Thanks for reading! Subscribe for free to receive new posts!