Founders who sold or didn't sell reflect on their decisions

In the New York Times, this article provides a very cool window into the minds of entrepreneurs who sold (or didn't sell) their companies. The founders' recollections provide a glimpse into some deep stuff, including how our significant decisions look upon reflection, what is a mistake, etc. Here's PayPal co-founder Max Levchin recalling his next startup experience:

His next company, Slide, was a different story. It made social apps and sold to Google for $228 million. Google shut it down a year later.

“The honest truth about Slide was we were a five-year-old company that had wandered through the desert for a long time wondering what business to be in,” said Mr. Levchin, who later started a new software company, HVF. “I wanted to top PayPal and it didn’t work.”

And here's Ben Horowitz on selling the company he co-founded, Opsware:

“I spent eight years, all day every day, trying to build this thing, and all of a sudden it’s gone, it’s just over,” he said. “It’s a little bit like something dies.

“That decision was one of the most isolated and alone decisions you ever make,” said Mr. Horowitz, who now advises entrepreneurs as a venture capitalist at Andreessen Horowitz. “On the surface it looked good, but I tell you after I sold the company I had total seller’s remorse.”

And Philippe Courtout on cc:Mail:

Mr. Courtot received a second acquisition offer, this time from Lotus Development for $55 million in cash.

Under Lotus, cc:Mail grew from four million users to 24 million, until IBM acquired Lotus in 1995 and shut down cc:Mail. Microsoft Mail eventually became Outlook.

“I should not have sold,” said Mr. Courtot, who is now chairman and chief executive of Qualys, a security company that went public last year. “That was my biggest regret. We could have moved much, much faster and brought it to the cloud. But such is life.”

Ben Horowitz - raising capital? You only need one believer

Venture capitalist Ben Horowitz on the difficult task of raising money in a down market, and the value of persistence:

Once you begin your process, keep in mind that you are looking for a market of one. You don’t need every investor to believe that you can succeed. You only need one. If 20 investors tell you “no”, that does not mean that there is no market for your deal. You just need one to say yes and she will erase all 20 no’s.

Interview with Dan Isenberg, author of "Worthless, Impossible and Stupid"

Dan Isenberg is the executive director of the Babson Entrepreneurship Ecosystem Project and the author of the great new book "Worthless, Impossible and Stupid: How Contrarian Entrepreneurs Create and Capture Extraordinary Value," a very valuable book on the subject. We had a wide-ranging conversation on failure, mistakes, lean startups and whether entrepreneurs need to try to get very big. Enjoy!

Access the podcast here (30 minutes).

Summary:

1:15 What "Worthless, Impossible and Stupid" is about
3:10 On the emerging "Failure Culture"
7:30 The fine line between success and failure in new ventures
8:20 Is the first mover advantage really an advantage?
9:25 Do entrepreneurs have to be innovators to succeed?
10:00 Dan's failed venture
11:30 Lessons from the failure - the sixth sense of business danger; the speed of failure; reading the macro situation; the "Dersu Uzala" story
13:33 Is there a scarcity of capital for entrepreneurs?
17:00 On the Lean Startup movement; not so novel - "that's the way our grandparents did business"; "a lot of really good ventures will require a lot of capital"
18:55 Is a flower-shop owner really an entrepreneur? "There's not a continuum between self-employment and entrepreneurship."
22:30 Entrepreneurs as job-creators - and public policy (please be patient with the interviewer's 90 - 90! - second question. He got carried away.)
28:05 A bit more on the book - great entrepreneur stories without even one about Steve Jobs

"Better Place" bankruptcy as a component of broader trial-and-error process?

There has been much written on the recent bankruptcy filing of A Better Place, a company proposing to drive adoption of all-electric cars by creating a battery-swapping infrastructure - extending the range of electric cars without a lengthy wait to recharge.

Is Better Place's demise the end of the story? Saul Kaplan doesn't think so. In his post at Fortune Magazine's site, Kaplan discusses what the company's failure means, and answers the company's many after-the-fact critics:

The "I told you so crowd" immediately started taking shots. New York Times columnist David Brooks took a swing directly at Agassi calling him a "brilliant technology entrepreneur" but implying that he was among "conference circuit capitalists who give fantastic presentations but have turned out to be marginal in history." Ouch. Easy for David Brooks to criticize others for sharing their point of view at conferences when he leverages a New York Times platform to do the same thing.

He points to Tesla's announcement of battery-swapping trials as evidence that the model is far from dead:

Tesla is going to test stations where Model-S owners can swap batteries in 90 seconds for $50-60, less time and money than filling up a tank of gas. Bold business models don't die; they just get reinvented. If we want to go from best practice to next practice we have to try more stuff. We learn more from efforts that don't work than from those that do. So instead of piling on those that try to do bold things without initial success or criticizing those that share their paradigm shifting ideas publicly, we should thank them for pushing us forward and providing the knowledge to try again, only better the next time.

As we've discussed here, trial and error is not a random process; within a constrained problem definition, failures reduce the subsequent exploration that's needed to solve the problem. A Better Place didn't work, but that's not the end of the story. Battery-swapping may very well work, in time.

Wyoming musical tour showcases entrepreneurial drive and creativity

Entrepreneurism is fed by constraints. Obstacles create situations that must be overcome, leading to success, or not, in which case failure results. And that's OK.

I've been reading the book "Worthless, Impossible and Stupid: How Contrarian Entrepreneurs Create and Capture Extraordinary Value," by Daniel Isenberg, and one of the many quotes I've underlined is this: "A degree of adversity strengthens the entrepreneur and weeds out those without the required pluck."

And pluck is precisely the adjective I'd use to characterize the players in the WYOmericana Caravan, a musical tour featuring roots music acts that traveled through some of the loneliest, least inhabited territory in the USA. The tour was featured in a New York Times article.

Some excerpts from the piece that highlight the group's entrepreneurial pluck:

The caravan’s grass-roots style of self-promotion reflects a growing trend. “I’m seeing more and more artists who don’t have an agent or publicist but are finding creative ways to tour,” said Valerie Denn, a booking agent in Austin, Tex. As examples, she cites Dave Barnes, master of the “barnjo” (a hard-body electric banjo), whose coming itinerary takes him through Missouri, Indiana, Kentucky, Ohio and Michigan, and the Denver-based singer-songwriter Megan Burtt, who will be appearing at clubs in Colorado, California and Texas.

“Bands are pooling their resources, coming up with unusual packaging ideas,” Ms. Denn said. “They’re using social media to raise money, find free places to stay on the road or do house concerts between tour dates so they can pick up a little cash and sell some CDs. Crowdsourcing is the new norm among independent bands.”...

The caravan was inspired by the 2011 Railroad Revival Tour, in which members of Mumford & Sons, Edward Sharpe & the Magnetic Zeros, and Old Crow Medicine Show traveled across the Southwest. “We wanted to replicate some of the camaraderie and spirit of that tour,” said [WYOmerica co-organizer Aaron] Davis, 35, “particularly the all-band jam sessions they did at the end of their shows. They just tore it up.”

Both that tour and the caravan featured musicians who claim fealty to the mash-up genre known as Americana, but the similarities largely end there. Mumford et al traveled across the balmy Southwest amid the comforts of the pristinely restored Silver Solarium train car, while the Wyoming bands piled into two vans and Mr. Shogren’s Toyota 4Runner, braving spring hailstorms, snow-clogged mountain passes and squalls that threatened to blow their vehicles into oncoming traffic. Just outside Missoula, Mont., after a long, winding, steep descent through Hellgate Canyon, Mr. Crossland discovered that he had blown a brake line when he pumped his pedal at the bottom of the gorge. “I think God wanted me to play Missoula,” he said.

And while Edward Sharpe & the Magnetic Zeros could choose among sleeper cars, Mr. Crossland curled up each night in his van, which is tricked out with a writing desk, coffee maker, wardrobe, banjo and guitar racks, and caches of food (mostly canned peaches). Hoping for warm weather, the others had planned to camp, but unusually frigid late-spring weather forced them indoors most nights.

By economizing, collaborating and focusing on a neglected part of the country, WYOmericana sounds like what it is: a scrappy, innovative startup. And it demonstrates how a beleaguered music industry might have a future after all.

Malcolm Gladwell explores creativity driven by "misjudgment of the task"

In the New Yorker magazine, Malcolm Gladwell reviews a biography of economist Albert O. Hirschman (a name that was new to me), and his paradoxical findings that progress is often an outcome of misjudgment:

Hirschman had studied the enormous Karnaphuli Paper Mills, in what was then East Pakistan. The mill was built to exploit the vast bamboo forests of the Chittagong Hill Tracts. But not long after the mill came online the bamboo unexpectedly flowered and then died, a phenomenon now known to recur every fifty years or so. Dead bamboo was useless for pulping; it fell apart as it was floated down the river. Because of ignorance and bad planning, a new, multimillion-dollar industrial plant was suddenly without the raw material it needed to function.

But what impressed Hirschman was the response to the crisis. The mill’s operators quickly found ways to bring in bamboo from villages throughout East Pakistan, building a new supply chain using the country’s many waterways. They started a research program to find faster-growing species of bamboo to replace the dead forests, and planted an experimental tract. They found other kinds of lumber that worked just as well. The result was that the plant was blessed with a far more diversified base of raw materials than had ever been imagined. If bad planning hadn’t led to the crisis at the Karnaphuli plant, the mill’s operators would never have been forced to be creative. And the plant would not have been nearly as valuable as it became.

“We may be dealing here with a general principle of action,” Hirschman wrote:

Creativity always comes as a surprise to us; therefore we can never count on it and we dare not believe in it until it has happened. In other words, we would not consciously engage upon tasks whose success clearly requires that creativity be forthcoming. Hence, the only way in which we can bring our creative resources fully into play is by misjudging the nature of the task, by presenting it to ourselves as more routine, simple, undemanding of genuine creativity than it will turn out to be.

And from there Hirschman’s analysis took flight. People don’t seek out challenges, he went on. They are “apt to take on and plunge into new tasks because of the erroneously presumed absence of a challenge—because the task looks easier and more manageable than it will turn out to be.” This was the Hiding Hand principle—a play on Adam Smith’s Invisible Hand. The entrepreneur takes risks but does not see himself as a risk-taker, because he operates under the useful delusion that what he’s attempting is not risky. Then, trapped in mid-mountain, people discover the truth—and, because it is too late to turn back, they’re forced to finish the job.

This idea has been explored here many times. Entrepreneurs start companies ignoring the fact that most of them will fail. They make mistakes because of their ignorance that create awesome challenges, and from time to time overcome them. And thank God they do.

To jump back in after failure, you need to have, or build, irrational confidence

Interesting post on HBR Blog Network by Art Papas,co-founder and CEO of Bullhorn, a vendor of recruiting software.

Papas declares in his title that "For Entrepreneurs, Failure Isn't Always a Good Teacher" and goes on to write,

Failure makes many of us less confident and less aggressive. We become gun shy. That's not surprising. Unfortunately, the cold reality is that once you've failed as an entrepreneur, you need to have blind confidence and a healthy sense of aggression to prove to people that you actually can succeed. You need to try again, and brace yourself to be criticized, lectured, doubted, and flat-out ignored by investors and sometimes even your own team. If at first you don't succeed, you're in for the fight of your life.

This is a good point, and he backs it up with an amazing story:

When I first started Bullhorn in 1999, our original concept was the product of some brainstorming between me and my co-founder. His idea was, "Why don't we build a platform for people to display their creative work on the internet?" Then I added, "We could make it a marketplace for those people to get jobs." Nobody had ever told us that this was a problem that needed solving, yet we thought it was a great idea. So did our original investors. In fact, when we took the idea to creative professionals, they really liked it as well. Unfortunately, when we took it to the businesses that were making hiring decisions, it was a total flop.

So our first business model failed. After a few months, as our cash dwindled, we thought up yet another problem that we could solve. Our investors loved that idea too. But, much like our previous efforts, we discovered that no one actually suffered from the problem we were out to solve. Our second business model failed, as well. Then the dot-com bubble collapsed. Our early investors quickly turned from loving their investment in Bullhorn to hating it and they shut us off from any additional capital. We decided to forgo salaries to stretch our cash. I was paying my rent by maxing out my credit cards. Then a business dropped in our laps. We met someone with a problem that needed solving and we were uniquely poised to solve it. We realized we had a game-changing idea on our hands: creating the first software-as-a-service applicant tracking system for recruiters. When our new product started to take off, we needed more money to get to the next level. Unfortunately, our investors looked at me like I was the boy who cried wolf and rejected the idea out of hand. The sales traction and momentum was not compelling to them in any way. They told us it would never be a big business. Fortunately, they were dead wrong, but we didn't feel so confident at the time.

I had identified our winning product, but I was late to the game. So what did I do? Did I pick myself up off the floor, dust myself off, and power ahead? Not really. My team and I still had total faith in our concept, but the reality of having failed before made me nervous to take risks. I didn't have the confidence to push my investors to support the idea and decided to essentially bootstrap the business, which worked, but cost us precious time. The business succeeded and the rest is history 13 years later, but we would be three times the size we are now had I been stronger.

Failure is a great teacher, but it's painful and rattles our confidence big time. Who wouldn't be "gun-shy" after the kind of failure Papas describes, especially one (or two) in which investors' money was lost?

And this is the amazing point. Logically, it doesn't make sense to keep going. It would be easier and safer to go in another direction. But entrepreneurs don't think logically at this point. They have, or have built, an irrational self-confidence that allows them to jump back into the fray, maybe to succeed this time, or maybe to fail again. And thank God for the people who do that. They are kind of heroes, aren't they?

Commencement Speech from Steve Blank: "Playing it safe will get you nowhere"

Steve Blank, frequently mentioned on this site, gave a great commencement address at the University of Minnesota last week. The whole speech is on Steve's blog, and here's a tidbit.

Failure

The downside of starting something new is that’s it’s tough, because unlike the movies – you fail a lot. For every Facebook and Google, thousands never make it.

Like Rocket Science Games, which was my biggest failure. 90 days after showing up on the cover of Wired Magazine I knew the game company where I raised 35 million dollars was headed for disaster.

We’d believed our own press, inhaled our own fumes and built lousy games. Customers voted with their wallets and didn’t buy our products. The company went out of business. Given the press we had garnered, it was a very public failure.

We let our customers, our investors, and our employees down. I thought my career and my life were over. But I learned that in Silicon Valley, honest failure is a badge of experience.

All of you will fail at some time in your career…or in love, or in life.

No one ever sets out to fail.

But being afraid to fail means you’ll be afraid to try. Playing it safe will get you nowhere.

As it turned out, rather than run me out of town, the two venture capital firms that had lost $12 million in my failed startup actually asked me to work with them again.

Entrepreneurs discuss a common side effect of a failing business - "chasing losses"

In a recent New York Times op-ed piece, Kai Ryssdahl, host of NPR's "Marketplace," and Megan Larson, the show's producer, profile several entrepreneurs whose early attempts ended in failure ("Following Your Bliss, Right Off the Cliff"). [Note that the web URL hints at an earlier, more interesting title: "The Painful But Liberating Lessons of a Career Failure."]

One theme of the piece is that failures are often made worse by our tendency to "chase losses" - meaning to stick with a failing proposition for too long and therefore lose more than was necessary. This concept is covered nicely in Tim Harford's book "Adapt: Why Success Always Starts with Failure." Here are a few observations from Ryssdahl and Larson on chasing losses:

But even when the future looked grim, [boutique owner Michelle] Tyree hung on. In fact, she dug in. She bought more inventory for the racks and threw celebrity-fueled parties at the store to generate buzz.

"Your gut says this could be a problem, but your head overrides it because you have just put in this huge investment," she said. "You are hanging on to not just the dream, but you are hanging on to the sweat equity and what you put into it financially."

Human beings, by nature, don't like to turn their backs on what are called "sunk costs," said Craig Fox, who teaches decision-making at the University of California, Los Angeles. When a lot of money is put into something - the dream of a small business, stocks or even an education - and it can't be recovered or is otherwise "sunk," few of us can just walk away....

Back in the '90s, when [Michael Dearing] was fresh out of Harvard Business School, he, too, sank a lot of money into his dream of owning his own store.

The Industrial Shoe Warehouse had five outlets in Los Angeles that sold work boots (think back to the Dr. Martens craze). "It had a vibe of, like, Urban Outfitters - concrete floor, high beam ceilings, all the stock was on the floor," said Mr. Dearing. "We had a really good business for awhile."

But, in the end, he said, "It was what you would call a splat-against-the-wall failure."

Mr. Dearing said the economics of running a shoe store were tougher than expected. Plus, the business grew too fast. Then Mr. Dearing's business partner wanted out.

He struggled to keep the business afloat because, he said, it felt dishonorable to let it go. "I personalized the outcome to a degree that it was unhealthy," he said. "I thought failure was total and permanent - and success stamped me as a worthwhile business person."

I discuss a way of managing the urge to chase losses - the concept of "affordable loss" - in Chapter 5 of the Mistake Bank book. If you're going to put your heart and soul into a project, you would do well to establish and manage to an affordable loss, so that your commitment and ego don't cost you in the event of a failure.

Virgin's Richard Branson: Failing "turned us into an adventurous company"

Entrepreneur.com asked Richard Branson about some of the mistakes he's made in his new ventures, and what he's learned from them:

Entrepreneur: You're very open about having made mistakes -- and, at times, literally making things up as you went along.

Branson: My nickname is Dr. Yes. I can't resist a challenge. And I've certainly said yes to too many things in my life. Therefore, not everything has worked out. Fortunately, most of the things I've said yes to were small ideas, just starting from scratch. So if they didn't work out, it wouldn't damage us too much financially or rummage the brand too much.

Entrepreneur: How did those early stumbles shape Virgin as a company?

Branson: In Britain, people who try things and then fail are actually well-respected. People like the underdog. If you go back to my adventure times, generally speaking, we failed on most of my adventures the first time. In attempting to bring back the Blue Riband [an award given to a ship for crossing the Atlantic Ocean in record time] for Great Britain, we created the boat the Atlantic Challenger in 1985. All was going very well until we sank 300 miles from the U.K., and were rescued by a banana boat. And the next year, we picked ourselves up and tried again and succeeded. Interestingly, if we had succeeded the first time, I think it would've been a big story, but not the massive story it turned into. At the time, we had just launched Virgin Atlantic, we were trying to put it on the map, and we jokingly took a full-page advert with a picture of the hull sticking out of the water saying, "Next time, Richard, take the plane." But it was things like that, where we tried and failed, that put Virgin on the map, gave it a sexier image than our bigger rivals, and turned us into an adventurous company and brand.

Entrepreneur: You say Virgin Cola was one of your more notable stumbles in business. In hindsight, what would you have done differently?

Branson: With Virgin Cola, we would not have assumed big means sleepy -- we would have prepared for the largest global soft drink company to fight back. The experience certainly hasn't stopped us from taking on other Goliaths. At Virgin, we don't spend much time regretting the past, and we don't let mistakes or failures get to us, and we certainly don't fear failure. We picked ourselves up and tried again and searched for opportunities in other gaps in the market.

Small business takes prior mistakes to heart

This is from the wonderful "She Owns It" blog in the New York Times, by Adriana Gardella. Ms. Gardella talked to her women's owner group at the end of 2012, gathering some of the lessons they had learned that year. One notable story came from Bari Jay fashion owner Susan Parker:

[Ms. Parker] said she was most pleased that her company had gone from being reactive to proactive. “Every year, we seem to learn from our mistakes and try to plan and do things better,” she said. For example, December is typically when Bari Jay starts shipping its dresses for the spring season (there are spring and fall seasons).

Normally, when Christmas rolls around, she said, she worries that shipping may spill over into January and that stores may no longer accept Bari Jay’s dresses. This year, however, Bari Jay shipped most of its dress samples in November. This meant that stores had more time to re-order dresses and also that stores that budget poorly were less likely to run out of money before ordering.

Growing past a microbusiness requires letting managers make mistakes

From the New York Times "You're The Boss" blog, Josh Patrick discusses how a business changes as it grows from a "microbusiness" - i.e., very small, to a "lower middle" business - one with more than $5 million in sales and more than two dozen employees. He describes his experience in growing his own vending machine business to that level:

The real change for me was learning how to manage. I couldn’t do it by brute force. I had to learn to set standards and then to inspect to make sure our standards were being met. My dashboard was part of the solution. The other part was providing face-to-face feedback and learning to hold others accountable.

That required learning to trust and to allow our managers to make mistakes. When we were a small company, mistakes weren’t O.K. They happened, but no one would admit they happened, least of all me. As we grew I had to learn to let others make decisions and then learn from their mistakes. The key was keeping the mistakes small enough that they didn’t sink the business. The better I got at allowing myself and others to learn from their mistakes, the better my company became.

In a small business, the owner makes every meaningful decision. Workers follow her direction. But as Patrick points out, by the time you approach the lower-middle size, there are simply too many decisions to make. Meaningful delegation is required. And, with that, the ability for people to mess up and learn from it. "Creating the Culture for Learning From Mistakes" is a chapter in the upcoming Mistake Bank book, and the process described here is part of that.

Martha Stewart gets a second chance to be an icon

One theme of the upcoming Mistake Bank book is that we are offered second chances if we make a mistake. This is illustrated in a recent New York Times article portraying Martha Stewart as a newly-minted icon of craftspeople and artisans. Here's an excerpt:

In and around the Williamsburg neighborhood of Brooklyn, Martha Stewart has spawned meet-up groups for people who want to work on crafting, blog items about her sighting at the Brooklyn Bowl rock club, sales of her books at the Brooklyn Kitchen cook shop and decorative displays in the shop window of Urban Rustic, a market and cafe.

Beyond Williamsburg, Ms. Stewart has drawn crafting and baking fans from Saratoga Springs to San Francisco who have made MarthaStewart.com the most-shared site among its rivals on the social site Pinterest, according to Pinfluencer.

While some Martha Stewart fans abandoned their magazine subscriptions and Ms. Stewart’s high-thread-count sheets after she went to prison over her 2004 conviction for lying to federal investigators about a stock sale, this new generation of fans say her prison time only gives her more street credibility.

“She’s such a Suzy homemaker and also did some time in the joint,” said Luis Illades, an owner of Urban Rustic, where some of Ms. Stewart’s store-bought decorations appeared.

“That has helped cement her iconic image. Before, she was someone your mother would follow.”

Crystal Sloane, 29, who grew up on a dairy farm outside Saratoga Springs, N.Y., reading her mother’s issues of Martha Stewart Living, has begun her own business called Vintage by Crystal, designing miniature animals that Ms. Stewart eventually featured on “The Martha Stewart Show.”

“She’s like the Jesus of the craft world,” she said.

“Not that I like criminals, but I heard that she just took some bad advice. Anybody can make mistakes.”

Successful businessman looks back on earlier failures

In 2010, abc.com'a Christine Brozyna wrote a piece about Bob's Red Mill, a seller of grain products, being sold to its employees via an ESOP program. In the article, company founder Bob Moore shared some lessons about business success, and failure:

Moore said there is no secret to building a successful business, just hard work and luck.

"You can sell your house, take your money, and test the waters by doing something you believe in," he said. "And maybe you'll be successful and maybe you won't, and that's what entrepreneuring has been for me, and I have failed."

Earlier in his life, Moore owned a gas station that he thought was a great success. It flourished for five years, but ultimately went under. And in 1988, his mill was burned down by an arsonist.

"I lost everything," he said. "I lost our entire investment. I know what it feels like in my stomach when you can't pay the bills."

But he learned from his mistakes and kept taking chances, eventually making his mark in American households.

Bob told a longer version of the gas station story to Inc. magazine:

To put a few extras on my family's table, I'd been working weekends at a Shell station. A sign went up on one corner saying a new Mobil station would be opening. I called, and pretty soon we had a deal. I sold our house and put the $4,500 down on the gas station. I quit my job and went into business.

In those days, you didn't just take care of cars; you took care of people. I would wipe windows, check the tires and underneath the hood. I cleared 4 and a half cents a gallon, 5 cents for high test. My bookkeeper would laugh at me. But I wore a freshly washed uniform every day, and the sun was always shining.

Then the smog started to get bad. Charlee, my wife, and I felt that getting out of L.A. would be good for the boys' health. I drove around the state looking at gas stations for sale and ended up buying one in Mammoth Lakes, California, in September 1959.

I had a pocketful of cash from selling our house and station in Los Angeles. We bought a big mobile home. We took trips with the boys. We bought a lot of things we didn't need. Mammoth Lakes was a ski town. But Thanksgiving and Christmas went by with no snow. Then we got 14 feet of snow in January! The roads were impassable. The snow was still deep in July, and that kept away the summer tourists. One year after leaving Los Angeles, I was broke.

Paul Downs stops blaming the economy for his sales downturn

Paul Downs, writing in the New York Times You're The Boss blog, published a series of posts on dealing with a downturn in orders this year. The final post discussed Downs's coming to terms with his responsibility to solve the problem and not blame outside forces. This is the "sense of agency" and it comes up again and again in learning from mistakes (it's a key focus in Chapter 1 of the Mistake Bank book).

Over the last few years, I have made a conscious effort to find ways to get advice from other business owners. Writing this blog was the first thing I did, and I have found the feedback from commenters to be valuable. This year, in an effort to find a more focused set of advisers, I joined a Vistage business group. We meet once a month, and a portion of each meeting is devoted to analysis of business issues that each member presents. When a member of the group presents a problem, the other owners listen, ask questions and then suggest solutions.

Through the spring, I kept the group updated as my sales collapsed, and in May (as I explained in Thursday’s post), I told everyone that I felt like a victim of a bad economy. The thing was, nobody else in the business group was having such a hard time. Many of them felt the economy could be better but that conditions were still favorable. I seemed to be the only one who was suffering and the only one who thought that the problem was out of my control. One of the members told me bluntly: “I don’t want to hear any more about the Euro or health care or whatever excuses you come up with. This is YOUR problem, and YOU have to solve it.”

Excellent advice. Complaining hadn’t helped, upping my ad budget hadn’t worked, so I had to keep trying things until we either recovered or went under. But if it wasn’t an outside problem, then what could it be? It had to be something about my marketing, and that meant the problem was in AdWords. Once I decided the problem had to be there, I started looking at the data again to try to find a solution. But this time I approached my analysis with the conviction that the problem was something I had done — not something that was beyond my control.

Read Downs's post to learn what happened.

Decathlon champion discusses failure in business

From the New York Times obituary of 1956 Olympic decathlon champion Milt Campbell, who died this past Friday. This quote establishes Campbell's sense of agency that likely fueled his athletic drive as well:

[Campbell] later became a motivational speaker, with failure in business as his own motivation. “When I lost all my money in the meat-trucking business in 1976,” he told The Times in 1980, “I realized that I understood about success and failure. I realized that it had nothing to do with anyone else, only me.”

Timing is everything: inventors' product returns 10 years after initial failure

From the "Prototypes" column in the New York Times, a discussion with Vanessa Troyer and Chris Farentinos, inventors of the Elephant Trunk, a lockable home mailbox for parcels.

Back in 1999, when [Ms. Troyer] and Mr. Farentinos dreamed up the Elephant Trunk, it was designed to be large enough to hold the television-size computers that people were ordering as e-commerce began to take off. But while it was still in prototype, flat-screen computer monitors came along, defeating its purpose.

“It was deflating,” Ms. Troyer said. “All this time and money and energy had been wasted.”...

Even after shoving the Elephant Trunk into the proverbial drawer, the couple were convinced that it would eventually see the light of day; it was just a matter of when. Sure, computers had become skinnier, but more and more people were shopping online for a wide range of products, and they often were not home to accept the packages.

Beyond the annoyance of coming home and finding those packages “behind a planter,” Ms. Troyer said, or wet from the rain, there was the danger of parcel theft.

Still, when they floated the idea of a mailbox for packages, the response from retailers was, “I think it’s too soon for that,” Ms. Troyer said....

Last year, good timing was compounded by luck when Ms. Troyer and Mr. Farentinos met with Theresa Graham, a merchant for the builders hardware category at Home Depot. As they chatted, Ms. Graham explained that she was a working mother who often came home to boxes strewed all over the porch. She said to Ms. Troyer and Mr. Farentinos, “You know, what I’d really like to see is not a mailbox, but a parcel drop,” Ms. Troyer recalled.

“Chris and I looked at each other and our eyes lit up. It was like, O.K., it’s time.”

The Elephant Trunk is beginning a 3-month sales trial in selected Home Depot stores. Will it become a success the second time around? We'll have to wait and see.

Even if you have strong capabilities, you still need to sell yourself

A mistake story from Kevin Liles, CEO of KWL Management, as quoted in Adam Bryant's Corner Office column in the New York Times.

I wanted to be the host of a new hip-hop show, and I didn’t get the job. I was the biggest guy in the marketplace. Given what I’d done, that should have sold me. But I didn’t sell myself. So, after that, I realized that no matter what I have done before, I had to learn the art of selling. I had to learn the art of explaining my value proposition when I show up somewhere. How do I differentiate myself? I know who I am. I’m very clear. If I’m meeting someone, I’m very clear about their value proposition, and I know what my value proposition is.

This is very good advice, and something I have trouble doing. I oftentimes expect my resume to sell me. I am proud of my accomplishments and expect that others would see the value in them, and connect it to their needs. But, as Kevin Liles says, that's not enough. I need to understand what they need and point them to what I can do to directly address that need.

"Affordable loss" concept helps reduce the cost of failure

Affordable loss is a concept defined by Prof. Saras Sarasvathy of the University of Virginia's Darden School. The website effectuation.org provides a very concise definition of the concept:

Affordable loss involves decision makers estimating what they might be able to put at risk and determining what they are willing to lose in order to follow a course of action. Using the entrepreneur’s new venture plunge decision, this article combines insights from behavioral economics to develop a detailed analysis of the affordable loss heuristic. Specifically, we develop propositions to explain how individuals: (1) decide what they can afford to lose; and (2) what they are willing to lose in order to plunge into entrepreneurship.

This video from Professor Stuart Read of the IMD business school elaborates on the idea of affordable loss. Rather than sketch out a long-term vision and quantify potential, competitive strategy and define target customers, launching with affordable loss is done by defining a crucial first step (or steps) and deciding to invest a fixed amount (money and time) in it. If that step achieves its goal, it would justify more investment and the next step can be taken.

Affordable loss helps an entrepreneur know when something is not working and gives a signal that an effort should be stopped or redirected before too much money and time is spent. It's also discussed in two recent business books, Peter Sims' "Little Bets: How Breakthrough Ideas Emerge from Small Discoveries," and "Just Start: Take Action, Embrace Uncertainty, Create the Future," by Leonard Schlesinger et al.

Here's a quote from an entrepreneur who is interviewed in the video, Kevin DeWhitt, founder of Agilyx, a maker of alternative fuels:

The primary key was a wife who understood me. And when I came to her and said, "Honey, I think in a year's time if I develop a model and a story, I think I can get this project funded, and from there we can move on our way." In reality it took 2 years, and that was 2 years of a scientist not generating any income. There were 5 kids in the house, and a wife that was supporting everybody, that's a little hard. That vision, though, that she and I had together and she allowed me to pursue was really key in getting it launched.

A reminder that failures can really hurt

Over at the HBR Blog Network, Dan Pallotta has published an anguished story about the failure of his business 10 years ago. The tone of regret, sadness and bitterness illustrates why failures can be so devastating. Even the lessons learned (example: "I have a less sophomoric approach to trust. Don't offer it freely, unless you're prepared for the consequences") reflect a deep and lingering pain.

Living with The Mistake Bank for five years now has taught me that letting go of anger and bitterness can greatly help to learn from failures and move forward positively. However, it's good to have a reminder that failures leave a deep imprint, and are difficult to separate from personal feelings of injury and injustice, even 10 years on.