Forgetful Elephants

Forgetful Elephants

They say elephants never forget. In addition to describing big, lumbering animals, the word “elephant” can also be a nickname for big, lumbering companies (ex. IBM, GE, Walmart). However unlike the grey, trunky animals that presumably never forget, companies and businesspeople suffer from a kind of amnesia; they forget failure.

Colonel-HathiManagers seem to forget failed businesses – full stop. Failure gets deleted from mental hard drives.

Try this thought experiment:

Step 1: Mentally list three Apple products that were big successes. 

Step 2: Now list three Apple products that failed.

A lot of people can finish both steps, but which took you longer?

For most people, Step 2 takes at least ten times longer to answer (in seconds) than Step 1. By the way, here are ten Apple failures: Apple III, Apple Lisa, Apple Pippin, Apple Macintosh Portable, 20th Anniversary Mac, Apple eMate, Hockey Puck Mouse, QuickTake Digital Camera, PowerMac G4 Cube, U2 iPod.

The point is, it’s a lot easier to remember business successes rather than failures.

Mouse MazeThis is weird because the opposite is true in most other human realms. People usually have a strong “negativity bias,” whereby negative things have a bigger effect on our brains than neutral or positive things. We tend to remember and experience pain more readily than bliss. Bad experiences linger, while positive experiences are more fleeting. The same is true in rodents – mice in a maze remember the path better when they’re shocked for doing it wrong, rather than rewarded for doing it right.

Numerically, there are also a lot more failed businesses than successful ones. Depending on the industry, 70% – 90% of new businesses fail, while the average life span of companies has decreased by more than 1/3rd over the past 55 years[i]. So why are business failures – which are the majority of examples – so hard to remember?

I’m not a psychologist, so I don’t know “why” this happens. However the tendency to remember success and forget failure is one of the biggest barriers to progress in management thinking today.

Forgetting failure is a problem because it prevents us from learning from past mistakes. Even more insidiously, it prevents businesspeople from knowing the difference between good and bad advice.

This dilemma can be illustrated through the Potted Plant Paradox. Imagine studying thousands of billion-dollar companies, only to learn all of them had at least one potted plant in their corporate headquarters. From this, you could conclude it’s impossible to become a billion-dollar company without a potted plant in the office. The conclusion would be based on the “data,” which shows the condition to be true with 100% accuracy.

While it sounds far-fetched, this is how business is almost always studied. People analyze successful companies, find things those successful companies have in common, then profess the qualities as keys to success.

To solve the Potted Plant Paradox, you have to remember failed businesses – not just successful ones. For example, if you studied thousands of failures and found they too had potted plants in their headquarters, you could rule out foliage as a prerequisite for success. It takes both positive and negative examples to learn the difference between truth and illusion. That’s worth remembering.

 

 

 

[i] Reeves and Pueschel, Die Another Day: What Leaders Can Do About the Shrinking Life Expectancy of Corporations, Boston Consulting Group (2015) https://www.bcgperspectives.com/content/articles/strategic-planning-growth-die-another-day/?utm_source=201508GEN&utm_medium=Email&utm_campaign=bdl

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