Wednesday, March 25, 2009

Do You Always Learn More From Failure Than Success?

Try googling:

"learn more from failure than success"

and you get over 1,000 hits. But the New York Times Sunday business section had an article called Try, Try Again, or Maybe Not. It discusses research that calls this idea into question. Here is the intro:

"IF at first you don’t succeed, it doesn’t matter that you tried. That seems to be the message of a working paper prepared recently by a team at Harvard Business School. The study found that when it comes to venture-backed entrepreneurship, the only experience that counts is success."

Here is another key passage:

"The study looked at several thousand venture-capital-backed companies from 1986 to 2003.

Professor Gompers and his co-authors Anna Kovner, Josh Lerner and David S. Scharfstein found that first-time entrepreneurs who received venture capital funding had a 22 percent chance of success. Success was defined as going public or filing to go public; Professor Gompers says the results were similar when using other measures, like acquisition or merger.

Already-successful entrepreneurs were far more likely to succeed again: their success rate for later venture-backed companies was 34 percent. But entrepreneurs whose companies had been liquidated or gone bankrupt had almost the same follow-on success rate as the first-timers: 23 percent.

In other words, trying and failing bought the entrepreneurs nothing — it was as if they never tried. Or, as Professor Gompers puts it, “for the average entrepreneur who failed, no learning happened.”"

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