Thank heaven for failure.
Last night, I had my students do something unusual. I assigned them to teams of 3-5 people and had them do an "overnight" business. They were to take an investment of $25 and turn it into $50 within 24 hours. The only restrictions were that the business had to be legal and safe (no discount bungee-jumping).
The looks on their faces ranged between puzzlement and loathing. Almost all groups had trouble coming up with ideas, and most of them were fairly run-of-the-mill--not much creativity. Many expressed frustration at not knowing "what to do" or "what I (the professor) wanted."
Of course, I could not have cared less how much money they made, as long as they honestly tried to double their money. I wanted them to experience firsthand the terror of entrepreneurship and the sting of failure (only a couple of groups made their goal,though most all of them made at least some money).
This morning in class, I talked about how most of us are raised with the implicit message that mistakes are bad. And they are, in a certain sense. Some mistakes, like driving drunk, are bad no matter how you dress them up. These are to be avoided at all costs. For the most part, though, not making enough mistakes is deadly. It probably means you are sitting on the couch watching TV when you could be making life better for you and the ones you love. It is safe, but is it living? Then one day your "safe" world comes apart around you and you have neither the smarts or the stamina to survive.
As we debriefed in class on the experience, I asked everyone to look around the room. Was anyone dead? Were there any serious injuries? None. "So," I prodded, "What was the big deal? Now you know you can make money on your own without a job. Isn't that a step forward?"
Too bad that as a country we have forgotten what my students just learned. We are pulling out every stop to make sure GM and other big companies don't fail. Companies fail for one of two reasons: 1) they are not allowed to compete effectively because of antitrust laws and excessive regulation or 2) they are simply not providing what the customer wants as well as someone else can.
In case #1, the answer is for government to get out of the way. In case #2, it is to let them fail so that other people can provide what the customer wants more effectively. What's so hard to understand about that? Is it disruptive? Yes. I feel for dislocated workers as much as anyone. But what happens to a society that sits on its collective couch wasting away, playing it "safe?"
Like our couch potato above, we become ill-prepared to meet even the mildest crisis. Instead of seeing mistakes as a routine and necessary part of growth, we scurry around pointing fingers at each other and ask "someone" to bail us out. One day, probably soon, there will be no one to bail us out. What then?
I don't know about you, but I have to go. There are some serious mistakes to be made today, and I don't want to get behind.
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Great example of an experiment in doing, Terry, one experiment being worth a thousand words of advice and encouragement. Makes me want to get out there and fail.
ReplyDeleteTeaching should put students to the edge of chaos. Great job. As for why companies fail, well...your suggestions were tried on Wall Street and they gave us credit default swaps and derivatives with their freedom. Didn't they provide their customers just what they wanted. Your simplified model of behavior just doesn't fit the facts. We are not just the sum of the desires of the parts. Capitalism doesn't describe reality on the ground in the 21st century so we should stop trying to predict with it.
ReplyDeleteYou know what I find interesting about pedagogical experiences like this is the timidity of my students. When I ask them to get out and engage in some real action that requires thinking through ambiguous problems, they freak. Lots of coaching is required to get them through it. Now to your other points.
ReplyDeleteCaricatures of capitalism do not describe reality--with that I will agree. Our economy barely resembles true capitalism, however. Were there no promise of a bailout from the government, any company silly enough to engage in the kinds of risk you describe would not survive a balmy afternoon. They would have failed LONG before they got big enough to cause a systemic risk to the system.
The financial crisis we are experiencing was caused for the most part by removing or buffering the feedback that is central to a true free market. People who actually have to experience the fallout of bad decisions either get smart or get out. Absent those mechanisms, they start "giving people what they want" (a free lunch, such as derivatives) instead of what they can actually have.
Lastly, I am not sure what you mean by "we are not just the sum of our parts," so correct me if I misinterpret. You seem to be arguing that there is some kind of collective good that overrides the good experienced by individuals. In my view, this is one of the most pernicious ideas in history. Good (or bad) is experienced by individuals. Individuals eat bread, have thoughts, and make choices. Any "collective" good can only be interpreted in the abstract, as an aggregation of the experiences of individuals.
This would merely be a trivial philosophical mistake were it not for the thugs who claim to speak for this "collective." Invariably, the result is the favoring of some individuals over others, supported by the power of the state. This includes many large business interests, by the way.
I believe that in the end, TRUE capitalism results in an economic and political environment most favorable to all of us. Well, all of us except those who make a profession out of coercing others.