As an entrepreneur and business owner, I believe in failure. Not the “there is so much to learn” variety of failure but the fact that failure is part of the normal business cycle. Failure is neither good nor bad. Failure just is. Get used to it as part of the risk we all take to get the reward we want.
Recently, the US Government has prevented the failures of financial giants like Bear Stearns, AIG, Freddie Mac and Fannie Mae. Interestingly enough, they stepped aside and let Lehman Brothers fail. Should these private businesses be allowed to fail? Isn’t this part of the American Way? When my businesses were failing, it would have been nice to have the US Government loan me a few billion to get me through. Is it “fair” to provide assistance to some and not others?
The answer is not a simple as it seems. First, we need to forget about “fair”. There never has been anything really fair about the free market economy. No matter how much we think there is a free market, there are still plenty of controls out there. As capitalists, our first inclination is to say that the market should rule. If the market has deemed these businesses a failure or the companies have made mistakes that caused their failure, we should let them fail. That is simple enough- pure capitalism and market economics. But we need to look at the effect these huge financial institutions have on the broader economy. Are they part of lynch pin events? That is, if this company goes, it will have snowball effect and hurt other businesses even more? In this case, the government needs to step in and help these private companies in they are part of the economic fabric of the economy. It is in the best interest of all of us. There should be a penalty for the executives of these companies- losing their job, stock options and pensions.
This is not unprecedented. We have insurance if we get ill or our house burns down. We have unemployment insurance if we lose our job. I limited safety net is a good thing.
But “allowing” failure remains an important element of our financial business structure. We need to learn how to “Bounce“, comeback and become resilient. We need to know how to let go of failures and take further actions to give us another chance at success. We also need to give people second and third chances. If failure is so scary where comeback is never possible, this will prevent us from taking risks and innovating.
Remember, failure is never final.
