In his book, Loserthink, Scott Adams has a take on a capitalism similar to Rory Sutherland’s in the previous post (and Nassim Taleb). He also expands this to scientific discovery. (Bold added).
Luckily for us, the scientific method is more reliable than human certainty, and it allows for a lot of failure, so long as some things turn out to be right. Most experiments fail. Many published scientific papers turn out to be wrong, or at least imperfect. But you only need a small percentage of rightness in all of that science to move society forward. It doesn’t matter how many times science is wrong so long as sometimes it is right and the good stuff sticks around. To put it in sporting terms, no one cares how many fish you didn’t catch. They only care about the ones you did.
Capitalism is similar to both science and fishing in that it is largely a failure machine. Most startups fail, for example, and most companies eventually go out of business, one way or another. But while all that failing is happening, employees are getting paid, vendors are selling products and services to the doomed businesses while it lasts, and the economy chugs along. You only need a small percentage of companies to succeed in order to have a strong economy.
You might be tempted to think successful companies all have smart founders who see the world clearly, and that skill set is what helps them succeed. But the reality is that entrepreneurs are making educated guesses and talking themselves into a degree of certainty that the facts do not support. People buck the odds because they don’t believe those odds apply to their situations. And it’s a good thing this sort of irrationality exists, because otherwise people wouldn’t take risks and the economy would fall apart.
I’ll add that I think some founders talk themselves into a degree of certainty that the facts don’t support.
But, I also think lots of founders have a fundamentally different view on risks and failure than us average folks. They don’t mind either. They see the alternative — punching the clock for a boss — as worse. When they fail, they don’t take it personally. They learn and move on.