« Freakonomics Radio

169. Failure Is Your Friend (Rebroadcast)

2015-05-21 | 🔗
In which we argue that failure should not only be tolerated but celebrated.
This is an unofficial transcript meant for reference. Accuracy is not guaranteed.
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you're, as your friend hope you enjoy. so Levitt you're a fairly successful fellow. Thank you. I'm just curious. Have you succeeded everything you ve ever done now have mostly failed at everything. I've ever done. Particular airspace or definite. Golf gulf has been a lifeline. Failure, you know when I was a kid. I wanted to be a professional golfer and thank God that I was so bad
of that, I couldn't even imagine trying to be a program. I think one of the worst likes you can have in some sense in the modern world is thinking you're good enough to play programme not being enough play Proba struggling for a decade or twenty years, and then you got nothing to show, but luckily I was so I couldn't even pretend to Father now you also failed it becoming the kind of economists at you thought you should become when you first started, studying economics rank started out as a macro economist, wannabe and very quickly. I realized that modern macro is all about solving dynamic, optimization model, Chris Hopeless then I wanted to be an economic fearest and I actually that with more dangerous because local Almost there now I actually was able to publish some papers that we're pretty good in pretty good journals, but the thing that saved me and being a micro economist is actually a funny story, which is that one
my advisers at MIT. I walked into his office and, on he said So what I ve been working on Dave Any normal person would have said. Actually my name is Steve, but I didn't do it and he called me: Dave afford literally weakened She got so bad that at the annual party of the fact that students I gathered, and all of my friends said. Look he's gonna call me Dave, just don't worry, Finally, it is not that I thought I couldn't be a theorist. It was that I was so embarrassed and traumatized by the idea that some point out can have state of my main advisor that my name was actually Steve, not Dave. After six months of pretending, I decided I should just forget about SIRI and go do something different from the W. And my see this is free economics, radio, the pot cast that explores the hidden.
Died of everything. Here's your host Stephen Governor we ve done before on the show about quitting specifically the upside of quitting. We ask why so many people so reluctant to quit one reason is that we tend to equate quitting with failure and there is a huge stigma attached to failure. But should there be perhaps you're not thinking clearly about failure? Maybe failure can be your friend I always Thomas students fail quickly that quickly veil, the more chance you have to fail at something before you have made today may be fine things, you don't here's the thing when failure, stigmatized demonized people will try to avoid it at all.
Even when it represents nothing more than a temporary setback, Steve Levitt, my for economics friend and co author. He does some consulting on the side He tells a story about one of his earliest consulting jobs with a big multinational retailer. This was a firm like many firms ahead, a very particular culture, and this was a culture in which, if you ever said anything bad about the firmer the prospects of the firm. You are culprit you're, not a team player. This firm was about to open its first store in China in Shanghai, was pretty big deal and for all kinds of reasons. It was really important that store open on time. but two months before the scheduled opening the ceo summoned the leaders of the seven teams that were involved in stores opening, and he asked each of them for a detailed status report. All the reports were positive you asked all seventeen leaders to pick one of three signals.
Green light, yellow light or red light to show how confident they were that the Shanghai store would indeed open on time. All seven went with the greenlight, everyone was so excited. They were completely. Track for this opening. Two months later now, there was a very smart set of people, this firm, who completely understood how this culture, while helpful in some ways, was potential detrimental another's. So they had set up an internal production market and they wanted people to be able to express their true opinions in the market. The sort of protection work. It is a great way to get people to tell you the truth, because its anonymous and and because their actual incentives, money incentives tie to it and it's fun cause people like to win. It was a competition to see who could amass the most money by buying and selling secured.
set were tied to the outcome of the fur and unlike stock market, which is not supposed to allow insider knowledge. This is actually the opposite right in a firm you're trying to get the best knowledge can from people who actually are working on the project. Exactly the firm had put this internal prediction market into place exactly with the hope that they could learn the truth, but what was going on because they weren't sure they were learning otherwise, this prediction market, for one bet on whether the chinese store would open on time now, considering, all seventeen leaders involved in the opening had given the green light. You might think that everybody, the company, would be bullish. They weren't the company's internal prediction market showed a ninety two percent chance at the store wouldn't open on time. So guess who is right? The anonymous betters in the prediction market or the leaders who had to stand in for their bosses. So even though the seventeenth at all said we're sure were on track. Everybody
ethically knew almost for sure that there is almost no chance historic open on time and indeed the stork did not open on time What does that say about these? Seventeen leaders, who had to present to the seat YO and their fear of failure, was it fear of failure? Was it is fear of appearing at their not doing their job well had his failure factor in, but you know it's funny because in this case, value can be defined and in different ways and ultimately, they felt distorted. Not but could you pin that failure and any individual not really but its tricky, because the incentive em, who talk so much about incentives over the years and what kind of intent in our view, there were some financial incentives associated with the Jesuit wasn't yet. I think that what really was most costly is for use. and up in the room and be the only one willing to say. I'm really sorry We ve been planning this launch for five years, but we botched it and we're not gonna make it, but there is no place for that
so it's easy, especially from a distance to criticise the seventeen leaders who told her seat they were sure the store would open on time from the sound of it. The ceo had what is called GO fever ever her to go fever. That is a fact is associate with NASA having to do with rocket launchers. When a boss catches go fever, it can take a lot of courage to focus on potential failures. Just think of all the factors working against youth is momentum, institutional politics, ego and the consequences of go fever can be far more tragic Then the delayed opening of a retail shop in Shanghai. Twenty, nothing counting here, come on out my crew in writing the elevator ready to depart the only see building where the launch pad
On January, twenty eight nineteen, eighty six NASA was planning to launch the space shuttle challenger from Kennedy Space Center in Cape Canaveral floor The mission had drawn massive public interest, largely because the crew included a civilian, a schoolteacher from New Hampshire and Crystal Mccall. If I'm so excited to be here, I dont think any teacher has ever been more ready to help lessons in my life if the launch had already been delayed a few times on the mate. Or the new launch date. Nasa held a long teleconference call with engineers from Morton Fire call. That's the contractor that built the chair. Andrews, solid rocket motors, ok! Well, I met our Mcdonnel Mcdonald was one of the five call engineers on site. In It can ever at the time I was the director of the space shuttle Solid rocket motor project, for my company. Morton factor was unusually cold in Florida. There is a
meteorologist in Orlando. That saying that these strong winds we saw today are being followed by extreme call front moving toward the cape and their expecting to see them Yours may be as low as eighteen degrees, Fahrenheit, tomorrow morning at the opening of our lunch window, and I said good grief, ices, I'm really can turn that are offering seals in these big joints will operate properly. Those kind adapters these o ring seals, kept the extremely hot gases like six thousand degrees hot from escaping the shuttle. Boosters do not want those gases to escape the shut boosters, but, as Mcdonald later described in his book, truth lies and oh rings. Boosters had never been tested below fifty three degrees and a forecast for launch morning conflict temperatures much lower than that. So, on that teleconference call the night before the launch Mick
and his team recommended that launch be postponed again and at NASA immediately challenge the basis for such a recommendation, which really surprised me because prior. To that time I had given every flight readiness review for every flights inside was put on. Programme, and I was challenged at every one of them of making sure that I could say it was safe enough to flight and he you're all of a sudden we recommended not flying. and they challenge the basis for that Mcdonald couldn't
Eve NASA wanted to launch, despite what he saw, an obvious risk. I was amazed that they made such statements because we always err on the side of safety. In fact, the engineers got put into opposition to prove that it would fail, and they could not do that. That's all different question. According to Mcdonald, his boss, back at Morton vehicle headquarters in Utah, got off the NASA conference call for about thirty minutes talk about the situation with other cycle executives when he got back on the line. Mcdonald says the recommendation postpone. The launch had been reversed. Mcdonald was angry, but he'd been overruled. The launch was back on now NASA request that the responsible, Morton Fire call official sign off on the decision to launch I knew who that responsible, firearm official was that was me that was made.
that was my responsibility. That's why I was aware of that, and I did martyrs thing I ever did in my entire lifetime, and that was I refused to sign the launch recommendation as a result of that, my boss had to sign it and send it down to me which he did by fact machine as the engineers are waiting for the facts. Mcdonald spoke up again, so then I got Marfa A strategy is well. Let me tell you some. I certainly hope nothing happens tomorrow, but if it does, I'm not gonna be the person to stand before abortive inquest. Explain why I gave you permission to fly. The solid Rock Motors condition that I knew they were never qualified to do coming up on Freaking radio, you know
happens in X morning. Don't you like looking very carefully at the new weighting play, a major malfunction. The only thing I saw fly flying with a solid rock boosters. They were still going everything else. It disappeared. This huge explosion teeny pieces and what? If you could learn how you might fail without going to the trouble of actually failing so leaned back in his chair get yourself com just a little bit dreamy. I don't want any daydreaming, but I just want you ready to be thinking about things: four camps? Radio, sponsored by zipper creature,
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Out of concern that the shuttles O ring seals might fail in the unseasonably cold Florida weather, but Mcdonald was overruled the next morning. He walked too, Control Gang, my briefcase in one hand had said the other and there it was like twenty two degrees I saw these icicles hang all over the place, and said to myself how they obviously have been launched. This thing today and I was amazed they fire make him on said they were gonna, send a team I steam out to see if they could knock the ice down as much as possible to reduce the debris is risk and they did, they ended up doing that actually twice before they finally wind tunnel com and launched the challenge I'm a robin We have made engine start. Remember I held my breath three two one,
and less money than they subtle measure. An additive cleared the power twenty nine hundred pay per second altitude nigh nautical mile damage does not seventy three seconds later to see this thing blow up in the sky, shock ice. It blew up. My heart sank dislike everybody in the control room and I could hear people sobbing the background like an orator looking very carefully at the situation? Obviously, a major malfunction hearing this voice over the network, saying archaeology,
start TLS, which is return, the launch site and not getting response back from the arbiter. The only thing I saw a flying with a solid rocket boosters. They were still going everything else that disappeared in this huge explosion cloud. Many pieces report only by dynamic vehicle, unexploded wider, that we are looking at with the recovery forces to see what can be done at this point. No way they can survive that in my opinion, and that they didn't. Obviously, at that Point Mcdonald says the cause of the explode. Was unknown, were tall, do not copy anything off the screen are frozen, they lock the doors they cut off
telephone lines, so nobody could talk to anybody the meeting, saying that all the data will be considered secret and really wasn't it the next day that already realised what had happened in the days after the accident Mcdonald says a review of the data showed the cause of the explosion to be what he had feared might the AU rings, failed to hold their seal in the cold temperature. That's exactly what happened! This cause was later made official by a presidential commission, to which Alan Mcdonald contribute testimony in the televised portion of the hearings. The physicist Richard Feynman famously demonstrated the cause of the failure by dropping the o rings into some ice. Why I took this that I got out of yours, you and I put it nice one when you put some pressure on it for a while and then undo it maintains it doesnt stretch
It stays the same dimension. Another word for a few seconds at least more seconds There's no resilience in these particular material when its temperature- thirty two degrees, I believe that has some significance for our problem. Now, of course, Alan Mcdonald's already knew that are least that's what he was worried might happen and that's what makes the challenger explosion so remarkable, even more tragic than it was the people in the know me. Some of them had foreseen the exact cause. The failure, so why? Even with that warning did NASA push on what really happened was typical. I think in large bureaucratic organizations and in any big organization were your frankly. Trying to be hero and doing your job and ass. I had two strikes against it from the start, which one of those is. They were too successful.
They had gotten by for a quarter of a century now and never lost a single person go into space, which, considered very hazardous thing to do and they had rescued the Paul thirteen have waited the moon when part of the vehicle blew up seem like it was an impossible task, but they did it. So how could this pole lowering cause a problem when they had done so much, past years to be successful. So gives you a little bit of arrogance. She shouldn't have and huge amounts of money involved, but they hadn't stumbled yet and they just pressed on. So you really had to quote proved that it would fail. Nobody to do that. You might think? It's a rare case when a group of decision makers no with such precision just what will go wrong with the project, but is it what? If there?
were away to peek around the corner on any project to see if its destined to fail. That If you can learn how you might fail without going to the trouble of actually failing I'd like you to meet Gary climb I'm cognitive psychologist. I got my phd back in eighteen, sixty nine experimental psychology Klein's. Most recent book is seeing what others dumped the remarkable ways we gain insights. He studies decision making, especially how people make decisions. in real settings, like the challenger launch, challenger incident has been intensely studied and serves as a wonderful object lesson in what we say I hear was repression of consequences that you? we have to deal with because would have been so inconvenient so We make the argument in our book that there's
a general reluctance to quit or to untangle herself from projects or relationships or what not and that that's in part, because failure, is seen as such a stigma. No one wants to. We don't want to quit, because we don't want to be seen as having failed, and so let's talk first of all about the stigma of failure. Do you think it deserves it, or do you think we should rethink the way we consider failure generally, while the a hundred line. Is there dumb you fell off and to get smarter and you fail in production ways and it's a way of building mental models and all Those things are true.
So how can failure be made more fruitful? Gary Klein has one idea, which I think is pretty brilliant: it's called the Pre Morton. You have surely heard of a post mortem, that's a process by which you figure out what exactly killed, say: hospital patient or maybe a big project. Theoretically, everybody it's from the knowledge you gather during a postmortem everybody except the patient, was the patient is dead, the idea A free mortem is to try to run to that process before the patient dies, but the patient in this we should say, is not a human, but it's a project or a product, or something like that correct exactly exactly with the Pre Morton You try to find out what might go wrong before it goes wrong. How does this work Gary Klein will walkest imagine you work for company it's about to launch some big project that
you and a lot of others been working on for months, maybe years, but before you launch Klein, gathers all the important team members in a room did you to be in a relaxed state of mind. So back in your chair, it yourself of calm and just a little bit dreamy. I don't want any daydreaming, but I just want you ready to to be thinking about things and looking in a crystal ball. and the image and crystal Ball is a really ugly image six month effort. We are now three months into the effort and its clear this project has failed is no doubt about it, There is no way that is going to succeed, Looking at another seen a few months later, project is over and you don't, even
to talk about it and when we passed each other in the hall we don't even make eye contact. Is that painful? Okay? So this project has failed, no doubt about it now for the next two minutes, and I'm gonna time this in the next two minutes. I want each of you to write down all the reasons why this project has failed. We know it failed. No doubts right down, why it failed to keep the strict clock, because we don't wanna talk too much time on this and I area in writing, and I say: there's twenty. To go near. Writing faster Christie, trying to get everything in and now five so ends and then ok finishes sentence and then pencils up.
Now climb would go around the room and ask for one item from each person's list and they compile a catalogue of all the ways the project might fail. Klein calls this perspective hindsight What does it accomplish? It really reduces overconfidence and people are usually way too confident of beginning of a project. So the pre mortem tempers that overconfidence. Now climate ask everyone in the room to think up one thing: they could do to help the project and then we go around the room to see why people are planning to do that. They hadn't thought of before to try to make a more successful. You put a happy ending on a potentially sad story, exactly as we were trying to do with of sugar coding the problems that their faces
Now is an obvious question: if you are running a pre mortem and everybody involved with the project is able to come up with a few ways in which the project might fail. Why are these potential problems on the coming up? Now, when the project is about to launch Gary Klein, says that's because pre mortem liberates, whom I otherwise be afraid of. Looking like they're, not a team player, because now everybody's being asked to think about failure. So, instead of looking like a bad time- You are pulling in the same direction as everybody else now. The demand characteristic is show me how smart you show me how clever you are how experience you are by identifying things that we need to worry about. I'm curious to know how well pre mortem is catching on, because I feel like Ever I describe it to a group.
People smaller large, their blown away by a they love. The idea and very few of them have heard of it. So I'm curious for an idea that sounds so great sense of practical. Why hasn't it taken over the rolled a bit. More is very kind of you than I am. Not entirely sure I think one reason is. We have not gone out of our way to publicize it. This is just a kind of activity that grew up out of in practice, and we would just doing it internally and after that, we will do it with a few. Project managers and sponsors and they said, can you use it with some of our? the projects, even though you're not involve so I sort of sea it the other way, I'm surprised at how many people are used. I hear people using it. I've never seen a nobody ever mentioned to me. So I'm impressed the disks.
There's much biologists. It has- I went back to Steve Levitt with a couple of questions. Why do you think that such a stigma associate with failure? Generally, I think to be willing to accept failure. You have to have self confident that term. You have to be accepting of the idea that
failing, isn't doesnt defined, who you are failing, get something out of the way that keeps you from finding the thing that you're actually going to be good at, and I mean like where spoiled way you and I both of stumbled onto a lot of success and is so much easier to be terrible things into admit your terrible when, in other parts of your life you get rewarded, people write letters and say your gray. I think it's easy for us to accept value. In and honestly, I think I've gotten much better. I've gotten at being ever laugh at myself. I was really in secure for a long time. I want to show people is bad, but I think I've got a gun. I mean I often. Lastly, I, when I do stupid things, I left the hardest. So what's a strategy, a fearless
yeah if you another ceo, even if you're the ceo of a two percent operation. Listening to this, what is the strategy to encourage people to acknowledge that failure may happen and that we'd be much better off dealing with the failure beforehand and after I think, the only credible way too?
failure acceptable is to celebrate failure. I know my little firm dvd, the greatest good. We had our greatest failure actually turned out to be our greatest success. I think in terms of rail building Winna let S give a speech, one our clients and dumb. I told the truth in that speech and it led to our being fired the very next day the executives of the company did turned out weren't that interested in hearing the truth and unceremoniously through email. We were fired from one of our biggest account and dumb. The thing was that we celebrated like that. Just pretend celebrate we really celebrate, because our view was there's no point in staying up all night working on projects for clients. If they don't appreciate, if they don't want to hear the truth, then how in the world we want to spend our laws
I'm doing this work and what happened was people at at our little firm? I think they would have thought we'd be upset and it wasn't me the other people ran from, we couldn't been happier and we broke up beer and wine, and we celebrate the fact that one of the biggest companies in the world had decided to fires, because we told the truth- and I think in a one of the things that you and I have really come to believe over time- is it's really not for most people about money or something bigger than did they have you gonna work hard and do something about the pride in the joy of feeling, like your part of something bigger something exciting and the folks who worked at our local Cheltenham actually felt that day that it was about something bigger than we were about the truth. We are about doing good work and an that's hard to do in a business setting but was you know I don't know over this kind of a
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hey there, Stephen doubly again one more thing. If you liked the episode you just heard, we think you like something else in the Friggin Amis radio network. Look for this interview on the new pod cast people. I mostly admire with host Steve Letter from my guest today super it. She collects championships she's for W Nba championships, five euro, the best about championships to end she ate
ships for International Basketball Federation, world cups in four Olympic Gold medal. I would think that, in order to be the player you are, you would have to be a person who acted gets better under pressure rather than worth. Well. Obviously, there are people who are known for heading big. Shots are known for playing, while in big gains that exists for sure, but I think we kind of frame it the wrong way. It's not that you're gonna make nine at it, ten. It's that you might make three at a ten but somebody else's making zero it's on whose mode successful. It's like who's. The most successful The least successful that is people mostly admire you can find it on your favorite podcast app subscribe now, so that you don't miss single episode.
Hey there, Stephen Double again, one more thing. If you like for economics, radio, I think you'll also like the latest episode of people, I mostly admire the podcast hosted by my free economic spreading co, author, Steve Levin. Here's what it sounds like a guest today Sue bird. She collects championships she's for W Nba championships, five euro, the basketball championships too, and see a championships for International Basketball Federation World CUPS. And four limpid gold medals. I'd like to talk about the economics of professional basketball, so the average player in the NBA made eight point three million dollars into the nineteen and in the W Nba the average with eighty thousand is frustrating just now. I think. Actually, if you look
at twenty twenty, our minimum is now higher, but we all put in the same amount of work. So is it hard to swallow, knowing that somebody else's work is being rewarded at times by I live in reality, I understand business and economics. Some people look at us as like charity. They go will will help them out like an it in a terrible. What sense not unlike this business, Investment way everything do look at us as an investment immediately its talked about how we don't make money- and it's like fifty years ago in the nba- did either, but people are willing to make that investment get behind it and growing people. I mostly admire you can find on your favorite podcast app.
Transcript generated on 2021-01-31.