Benefiting from "deliberate" mistakes

In the June 2006 Harvard Business Review, Paul Schoemaker and Robert Gunther write about ways companies get bound up in their own assumptions, and thereby miss important opportunities for growth or improvement.

Their proposal? Deliberately make a "mistake" by doing something that violates an assumption you hold, to test whether the assumption needs to be altered. (Their article can be found here. Note: you need to be a subscriber to access the full contents online.)

Schoemaker and Gunther cite an example where the Bell System decided to forgo security deposits from some customers their systems had identified as credit risks. This was done in a controlled way, with a small but significant sample size, in order to test their approach to dealing with credit-risky customers. They found that their rules for requiring deposits were too strict, and that many of the customers who otherwise would have not opened an account (because they couldn't afford the up-front deposit) turned out to be reliable payers. Adjusting the processes based on the test added, according to the article, $137 million per year to the Bell System's profits.

Here are some highlights from the article:

Although organizations need to make mistakes in order to improve, they go to great lengths to avoid anything resembling an error. That’s because most companies are designed for optimum performance rather than learning, and mistakes are seen as defects that need to be minimized. Executives, moreover, perceive that flawless execution is what makes them valuable to the organization. In business (with the possible exception of venture capital firms and entrepreneurial start-ups), an executive’s reputation and rewards are typically based on the height of his or her successes, not on the depth of learning from failures.

and

Many managers recognize the value of experimentation, but they usually design experiments to confirm their initial assumptions. An advertising company typically may try different approaches to see which tactics work best but won’t run an ad that it presumes will fail. Experiments of this type aren’t deliberate mistakes. True deliberate mistakes are expected, on the basis of current assumptions, to fail and not be worth the cost of the experiment. According to conventional wisdom, they have a negative expected value. But if such a mistake unexpectedly succeeds, then it has undermined at least one current assumption (and, often, more). That is what creates opportunities for profitable learning.

Have you upended any of your assumptions recently? Perhaps it's time you made a few more mistakes--on purpose.

More on mistakes from Alina Tugend

This New York Times article, which excerpts Alina Tugend's book "Better by Mistake: The Unexpected Benefits of Being Wrong," mentioned that Tugend was inspired to study mistakes by analyzing her reaction to two mistakes years earlier. Those two mistakes are discussed in this 2007 column by Tugend, "The Many Errors in Thinking About Mistakes." Here is Tugend's mistake story:

Of the many mistakes I have no doubt made over the last few weeks, two stand out: One cost me money and one cost me some pride.

I made an error in an article, and of the thousands who read it, a few gleefully e-mailed me about it.

I corrected it, although I sheepishly admit my first — though fleeting — instinct was to avoid owning up.

In the second case, in a flurry of zealous organization, I sent in a check to cover a bill for my husband’s monthly train pass. It turns out that he pays by direct debit. I canceled the check.

Then we got a notice that we were being charged $20 for a bounced check.

Neither mistake was on the scale, with, say, amputating the wrong leg or causing two planes to collide.

But they bothered me and made me consider how we are taught to think of mistakes in our society.

A nice story, and interesting to note how a significant project, such as a book, can arise out of a couple of seemingly insignificant events.

The costs of perfectionism

The following was excerpted from "Better by Mistake: The Unexpected Benefits of Being Wrong" by Alina Tugend, which will be published on March 17, 2011. A longer excerpt can be found in the New York Times.

Perfectionists often get caught in the endless cycle of regret and blame that makes it difficult, if not impossible, to move on from their mistakes.

“Perfectionism,” says Jeff Szymanski, executive director of the Obsessive Compulsive Foundation in Boston, is “a phobia of mistake-making. It’s the feeling that if I make a mistake, it will be catastrophic.”

Wait a minute here. Aren’t we always complaining that things are going to hell in a handbasket — that no one really cares about doing a good job? Why not strive to be the very best you can be?

And that is true up to a point.

Being a perfectionist is not a bad thing; in fact, it may mean you have very high standards and you often achieve those standards. Those who have perfectionist tendencies, but those tendencies do not rule — or ruin — their lives, are what psychiatrists call “adaptive” perfectionists.

They find it important to do certain things in the right way, but this need does not hinder their lives and can actually help them achieve great success. For instance, Dr. Szymanski told me, he likes all the glasses in his kitchen cupboard lined up a certain way. That does not mean he freaks out if someone changes them (as friends sometimes do for fun), or that everything else in his house is equally ordered. He also strives to be the best executive director and psychiatrist that he can be.

But he knows he is not a great tennis player, and that’s O.K. with him — it doesn’t mean he will give it up because he is not world class, or line up a pro to work with him seven days a week. He is O.K. being O.K. at some things.

On the other hand, what psychiatrists call “maladaptive” perfectionists need to be the best at everything, and if they make a mistake, it’s a crisis. It is also not just about how they perceive themselves, but how others perceive them: they believe they will lose the respect of friends and colleagues if they fail. They have to hit all their marks all the time.

Their need for perfection can also sabotage their own success. They do not turn in projects on time because they’re not yet perfect. They can’t prioritize what needs to be done quickly and what needs more time to complete. They want to rigidly follow rules to get things “right,” and this often means they’re terribly uncreative, because creativity involves making mistakes, Dr. Szymanski says.

Remember Hermione Granger from the "Harry Potter" books? She is the prototypical "maladaptive perfectionist."

"Verbal agreements don't hold up"

Another business mistake story reported by Marcia Pledger of The Cleveland Plain Dealer. This story is from MJ Lehman, founder of Nicky Nicole, a boutique for girls.

I worked for many years in merchandising before I decided to use my passion for developing new concepts in a business of my own. But when I finally took the leap, I got so caught up with finding new trendy items for young girls and tweens, that I failed to pay attention to contract details for a big purchase. Verbal agreements don't hold up.

I started Nicky Nicole because I knew I could offer an alternative to the chain store experience for girls 4 to 14. Soon after we opened our first location, a sales representative approached me about a brand new interactive toy. I told her I would take a chance on the stuffed animals that come with secret online codes, if I were the only store selling it in [my town].

We invested about $10,000 in inventory and spent a lot of time training employees how to sell the item. Sales exploded. It was insanely popular with people coming from all over Northeast Ohio.

Several months later, the toy started appearing in nearly every youthful business in town. When the salesperson denied our verbal agreement, I took it to corporate. I was told they would have never agreed to a deal like that.

One thing was certain: Trust should not have been part of my business arrangement. I lost my edge. We lost out on volume and had to lower our prices by $1.

From that point on I got details that mattered to me in writing.

Royal Little: not going the last $500K to buy a great company

Another story from Textron founder Royal Little (1896-1989), author of "How to Lose $100,000,000 and Other Valuable Advice."


This is from a section called "Lost Opportunities":

In addition to losing money for Textron through mistakes, I lost millions for the shareholders by not paying the asking price on several most attractive acquisitions. There must have been at least a dozen cases where the seller and I were a few hundred thousand dollars apart, where I would not budge and refused to meet the seller's price....

JOSTEN

The outstanding case of where I got stubborn and would not meet the offering price concerned Josten. Josten was a competitor of Balfour in making rings for students in schools and colleges. Balfour originally was the leader in this industry, but Josten [as of 1978] now far exceeds them in volume and profits. The offering price was $13,000,000, and I finally came up to $12,500,000 but wouldn't go the last half million dollars. As a result of this lost opportunity, this mistake on my part undoubtedly cost the Textron stockholders over $30,000,000 in lost values. Dan Gainey, who controlled the company and was at the time treasurer of the Republican Party, then made a public offering. In 1976, sales were $163,700,000, net profit after taxes $9,525,600, net worth was $43,000,000, and their 5,040,000 common shares at $25 had an aggregate market value of $126,000,000.

Josten would have been an ideal acquisition for Textron since it fitted our basic concept if being a leader in a relatively small industry. Today Josten is the undisputed leader in the school ring business, and their performance is so superb that their shares are selling at a price/earnings multiple of 12, whereas Textron stock has recently been selling at only 6 times. In retrospect, of the many situations that Textron missed by being too conservative in the price we were willing to pay, the outstanding examples would have to [include] Josten.

ADVICE: If you have an opportunity to purchase a company as outstanding as Josten, don't let a mere $500,000 stand in the way. If a business such as Josten's with its tremendous future potential is worth $12,500,000 it certainly is worth $13,000,000. Refusing to meet the firm offering price in this case was one of the worst mistakes I ever made at Textron.


[pp. 187-188]

Excerpted from How to Lose $100,000,000 and Other Valuable Advice, by Royal Little, (c) 1979 by Royal Little and the Harvard University Graduate School of Business Administration.

Jill Konrath - 5 minutes to engage a prospect, and nothing to say

A sales mistake story from "Selling to Big Companies" author Jill Konrath.

When I walked in the front door of The Kaplan Company, there were at least 30 desks filled with women who were busy doing order entry and handling customer service issues.

I told the receptionist that I wanted to speak to the person who made copier decisions. After a quick check with the boss, she escorted me past all those working women into his office.
"Sit down," he said gruffly. "You've got 5 minutes. Talk."

"If you're busy, I'll come back later," I said, trying to be gracious.

"Nope," he stated. " 5 minutes. Tell me why I should buy your product. Your 5 minutes is starting now."

I mumbled. I stumbled. I tried to engage him in conversation. I tried to explain that I needed more time. He wasn't one bit interested. After 5 minutes, he arose and said, "Your time is up. You can leave now."

That ticked me off. I told him he was rude and obnoxious. Then I turned and stormed out of his office past all those women, shouting back at him, "I'll never sell you a Xerox machine. You don't deserve to work with Xerox."

I know it's hard to believe, but I really did lose my cool. And I'm also sure that guy never wanted to work with Xerox again. But he had a point. I couldn't concisely state why he should listen to me.

I wanted to build a relationship and warm up the call. That made me feel better. He was a busy man who chose to use his time judiciously. I didn't respect his needs. After that cold-calling disaster, I learned to net it out. That lesson is even more important today than it was years ago....

The hardest thing in the world is to look at your own complicity in the situation, yet that's where the maximum growth is for you and ultimately, the key to your long-term sales success.

John Bliss audio story - for entrepreneurs, the cost of losing focus

John Bliss is the founding principal of BlissPR. This story is part of a longer interview from 2010. John discusses getting more and more involved with a nonprofit side project, and the challenges that created in his main business.

You can listen to the story here (2:37).

JK Rowling on the benefits of failure

From the commencement address at Harvard University by Harry Potter creator JK Rowling on 5 June 2008.

On this wonderful day when we are gathered together to celebrate your academic success, I have decided to talk to you about the benefits of failure....

At your age, in spite of a distinct lack of motivation at university, where I had spent far too long in the coffee bar writing stories, and far too little time at lectures, I had a knack for passing examinations, and that, for years, had been the measure of success in my life and that of my peers.

I am not dull enough to suppose that because you are young, gifted and well-educated, you have never known hardship or heartbreak. Talent and intelligence never yet inoculated anyone against the caprice of the Fates, and I do not for a moment suppose that everyone here has enjoyed an existence of unruffled privilege and contentment.

However, the fact that you are graduating from Harvard suggests that you are not very well-acquainted with failure. You might be driven by a fear of failure quite as much as a desire for success. Indeed, your conception of failure might not be too far from the average person's idea of success, so high have you already flown academically.

Ultimately, we all have to decide for ourselves what constitutes failure, but the world is quite eager to give you a set of criteria if you let it. So I think it fair to say that by any conventional measure, a mere seven years after my graduation day, I had failed on an epic scale. An exceptionally short-lived marriage had imploded, and I was jobless, a lone parent, and as poor as it is possible to be in modern Britain, without being homeless. The fears my parents had had for me, and that I had had for myself, had both come to pass, and by every usual standard, I was the biggest failure I knew.

Now, I am not going to stand here and tell you that failure is fun. That period of my life was a dark one, and I had no idea that there was going to be what the press has since represented as a kind of fairy tale resolution. I had no idea how far the tunnel extended, and for a long time, any light at the end of it was a hope rather than a reality.

So why do I talk about the benefits of failure? Simply because failure meant a stripping away of the inessential. I stopped pretending to myself that I was anything other than what I was, and began to direct all my energy into finishing the only work that mattered to me. Had I really succeeded at anything else, I might never have found the determination to succeed in the one arena I believed I truly belonged. I was set free, because my greatest fear had already been realised, and I was still alive, and I still had a daughter whom I adored, and I had an old typewriter and a big idea. And so rock bottom became the solid foundation on which I rebuilt my life.

You might never fail on the scale I did, but some failure in life is inevitable. It is impossible to live without failing at something, unless you live so cautiously that you might as well not have lived at all - in which case, you fail by default.

Failure gave me an inner security that I had never attained by passing examinations. Failure taught me things about myself that I could have learned no other way. I discovered that I had a strong will, and more discipline than I had suspected; I also found out that I had friends whose value was truly above rubies.

The knowledge that you have emerged wiser and stronger from setbacks means that you are, ever after, secure in your ability to survive. You will never truly know yourself, or the strength of your relationships, until both have been tested by adversity. Such knowledge is a true gift, for all that it is painfully won, and it has been worth more to me than any qualification I ever earned.

Tina Brown's New Newsweek features "My Favorite Mistake"

OK, it's official. Mistake stories are the new black. Don't believe me? Celebrity editor Tina Brown (a hell of an editor, by the way - I think the New Yorker was much improved by her tenure there) just published her first version of Newsweek magazine. And on the back page is a new feature called "My Favorite Mistake." The first guest of honor, Harvey Weinstein. Here's a snippet of Harvey's story:

But my favorite mistake happened two years ago, when I had the opportunity to buy The Girl With the Dragon Tattoo. Two friends in London told me there was a book they loved. I read the book and thought it was great. Then I heard they were making a movie out of it. I got the people to show us the movie to see whether we’d want to distribute it in the United States, and everything about it in my gut said, “Do this—there’s a franchise here.” But my team said, ‘No, we should focus on bigger movies,’ and I let the committee overwhelm me. I didn’t listen to my very significant gut, and when I say significant, I mean size, geographically. And that was a big bloody mistake—an economic mistake, a company mistake. If you’re going to be in the business we are, it has to be because you want to champion movies that are different. This year, we got The King’s Speech, Blue Valentine, Company Men, and part of The Fighter. Small movies are intensive, but they’re so worth it. It’s what we have to do to be who we are.

Now I have to say that this is a particular type of mistake story that may not be the most instructive. As I read it, Harvey's mistake was listening to his committee. In his eyes, he would have been better served ignoring their advice and buying the movie anyway. I guess this is the deepest personal reflection you can expect from a Hollywood mogul.

I wonder if there wasn't a different mistake here: perhaps he wasn't able to articulate his love and passion for the project clearly enough to convince his committee to change its decision. I think of the neat arguments of John Kotter in his new book "Buy-In: Saving Your Good Idea from Getting Shot Down" (here's a summary of one of the arguments)- perhaps some of them would have been useful to Harvey in this situation.

Chief Learning Officer Magazine discusses learning from mistakes

A friend pointed out a nice article on learning from mistakes in Chief Learning Officer Magazine. Here's my favorite quote from the article:

Because mistakes are common — and we know that mistakes can prevent companies from reaching their goals — then companies should ask themselves, “How do we foster an environment where mistakes become a competitive advantage?” They can become advantageous when they’re expected, encouraged and unique, and when we learn from them, self-identify them and can laugh at them.

Self-identification is a critical point here. If an error or mistake or impending failure can be identified quickly, its damage can be limited. If, instead, an organization teaches its employees to paper over mistakes, not report them, or deny they exist - they can spin out of control, interact with other mistakes, and morph into disasters.

Think about that.

[Also, if you come across a helpful mistake story or perceptive analysis of mistake learning, please share it. Email me at mistakebank (at) caddellinsightgroup (dot) com or leave a comment right here.]

Josh Neufeld runs into cultural stumbles in Prague

Please click the picture to view in a larger size.

There are lots of ways to tell a story. One perhaps underappreciated way is via comics--a narrative combination of words and drawings.

Comics artist Josh Neufeld contributed the great story pictured above, "Past Perfect Progressive in Prague." Perhaps you'll identify with the awkwardness of adapting to a new place and culture.

Josh is the author/illustrator of "A.D.: New Orleans After the Deluge"--taking on perhaps the greatest mistake of our time, Hurricane Katrina and its aftermath. "A.D." follows the stories of six actual New Orleans residents from different neighborhoods and walks of life, through the calamity and thereafter. A powerful narrative containing real dialogue and settings, with hyperlinks to supporting documentation, it's truly an epic work.

He's also the illustrator of NPR commentator Brooke Gladstone's book, "The Influencing Machine."

"Use a trial period for new hires"

Reporter Marcia Pledger of The Cleveland Plain Dealer has been collecting and publishing great small-business mistake stories for several years. Beverly Harris, CEO of Heights Title Agency, discusses some lessons she learned when hiring new employees:

When you work in the title industry, you have to know the law and have high standards. My biggest mistake has been hiring people throughout the years who I believed were qualified based on their number of years in the industry.

I've worked in the title industry for 32 years and run my own business for nearly half of that time. For a long time, I wouldn't hire anyone who had less than 10 years of experience. Unfortunately, I have hired experienced people who sold themselves well in interviews, but their performance told a different story.

For instance, one person I hired with close to 20 years of experience actually closed a deal without collecting money from a client. You can't close any transaction without funds. I've hired experienced people who didn't know the laws that are critical to our industry. Either they didn't understand or they didn't care about the effect on a client. Bad fits have ranged from an attorney who required way too much handholding to someone who performed well but continually had personal issues that affected the company.

The biggest surprise and lesson has been that I've hired a couple of people with far less experience who were so highly qualified that they started their own businesses....

Now any new hire starts out on probation.

When you have a 30- to 60-day probation period, it puts both myself and a prospective new hire on probation. That way they get to see what kind of boss I am and what kind of culture we have, and I get to see how they perform.

Read the rest of the story at the Plain Dealer site here.

A customer meeting takes a turn into the very unexpected

This happened to me some years ago, but the unpleasantness of the encounter still is fresh today. It was supposed to be a routine meeting with a client. I prepared with the account manager and thought I was ready for anything. Wasn't I surprised?

You can listen to the story here (5 minutes).

Mistake mini-story: Petite Palate

This story is excerpted from a NY Times article, "How Six Companies Failed to Survive 2010." It's about the demise of Petite Palate, a specialty baby-food company.

AT ITS PEAK In the spring of 2007, Petite Palate’s organic frozen baby food was sold on Amazon Grocery and in about 100 stores in the Northeast and Midwest. The founders, Lisa Beels, a personal chef, and Christine Naylor, a former cookbook publicist, were presenting their business plan to potential investors, hoping to raise $2.5 million to $5 million.

WHAT WENT WRONG In the fall of 2008, potential investors, skittish about the economy, pulled out. The company was struggling to get its products into the freezer section of grocery stores — yet Ms. Beels and Ms. Naylor stuck to their concept because they believed frozen food was healthier for children than food in jars or pouches.

LOOKING BACK Ms. Beels said she and Ms. Naylor should have been more open to producing shelf-stable formulations. “It took us a long time to acknowledge that and by then we were in debt and couldn’t support the company,” Ms. Beels said. Her new personal chef business is called Haute Palate.

[Hat tip Tim Berry]

John Bliss audio story - don't give away equity for nothing

John Bliss is the founding principal of BlissPR. He sat down for a lengthy interview in 2010, from which this story is excerpted. John talks about inviting a partner in when he started his PR business, since "50% of something is better than 100% of nothing." But when the business changed, the partner's role became less important, and John had to eventually buy him out.

You can listen to the story here (3:01).

Tim Berry: Trying to quit the wrong way

Tim Berry, president & founder of Palo Alto Software, shares this story of a mistake he made much earlier in his career. This story first appeared on Tim's blog Planning, Startups, Stories.

I've made a lot of mistakes. This one wasn't my worst, but it's perhaps one of the more memorable, and one that might help you avoid the same thing. There is a moral to this story. It was August of 1981, early morning, in the office of John Lutz, managing partner of McKinsey Management Consulting in Mexico City. I was three months out of Stanford with an MBA degree, working for McKinsey Management Consulting in Mexico City. The McKinsey offices sat in a very stylish high-profile office building overlooking a critical freeway junction over Chapultepec Park, linking the fancy Las Lomas residencial area with Polanco and the Paseo de Reforma main business district. The streets were wet from rain overnight, and the freeway was, as almost always, jammed. The sky was dense, a mixture of rainclouds and smog.

I needed to quit. It was so embarrassing. I didn't like to see myself as the archetypical fancy MBA blowing off the first job. I was 33 years old, married, and my wife was expecting our fourth child. I was way too mature for this stuff. But still ...I had arranged a job waiting for me with Creative Strategies International in San Jose. From where I was, returning back to the San Francisco peninsula, Silicon Valley, seemed like returning from exile back to paradise. I liked Creative Strategies, and liked living back in the states. I wanted out of McKinsey.

I really didn't like the job with McKinsey. It was stupid to have taken it. It was a job meant for a 26-year-old single person blinded by ambition untrammeled by relationships. Like most professional firms, success involved putting up with a corporate culture that spent 12 to 14 hours a day in the office, whether or not there was work to be done. The firm actively discouraged families by encouraging long-term business travel but without families, and by running 5-day strategy meetings at beach resorts and forbidding families coming along, even at the family's own expense. I was not supposed to disagree with partners on well, you get the idea.

I certainly didn't belong. I'd been entrepreneurial for 10 straight years, making my own way with freelance journalism and, later, my own consulting, and I wasn't up to faking awe for the partners. And as a family, we didn't belong in Mexico City. I had loved that place for nine years in the 70s, it had been good to me, but I was done. My wife is Mexican, she grew up in Mexico City, and had family there, but she was tired of it too. The city was too big, too hard to deal with. We had left in 1979 and shouldn't have gone back in 1981. I fell for the money and prestige, stupidly, because it wasn't enough to keep me.

So, back in the office with John Lutz, did I tell him why I was leaving? That I didn't like the job, had made a bad decision, didn't like Mexico, I'm sorry, it won't work.

No. I didn't. I told him I needed a lot more money.

This is one of the best arguments ever for telling the damn truth, even when it's embarrassing. I'm still embarrassed, but I'm older now, and, well, I think this is a good lesson to share.

So they gave me more money, and then how dumb did I look?

I still left, and I left looking really stupid. Why didn't I just tell the truth in the first place?

So there's the moral to the story. You'll be in a situation where you're tempted to slant away from the truth to make it easier, but remember before you do how bad you'll look if the other side answers the wrong issue, forcing you to admit it was never the real problem. So here there is. It bothered me for a long time but that was 25 years ago or so, and hey, I've made a lot of other mistakes since, the sting has worn off on this one. I hope you find the story useful.

Mistake mini-story: Wesabe

This story comes from a NY Times article, "How Six Companies Failed to Survive 2010" and concerns one of those companies, personal finance website Wesabe.

WHAT WENT WRONG Ten months after Wesabe’s introduction, a competitor, Mint.com, appeared. As [co-founder Mark] Hedlund acknowledges, Mint had a better name and better design and was easier to use. Within nine months, Mint had 300,000 users and $17 million in venture financing. In 2009, Mint was sold to Intuit for $170 million.

LOOKING BACK Mr. Hedlund wishes he had simplified the consumer’s experience. “We wanted to help people,” he said, “but it was too much work to get that help.”

[Hat tip Tim Berry]

"Public relations firm took too long to change to home-based business"

Reporter Marcia Pledger of The Cleveland Plain Dealer has been collecting and publishing great small-business mistake stories for a while. Here's a nice one from entrepreneur Jeanne Bluffston about the cost of worrying too much about what others' perceptions might be:

A manufacturing company told me that if I started a public relations firm, I had its business. My next move was to find a location. Relationships are one thing, but I needed credibility for prospects.

Starting a business from my home 22 years ago was not even a thought. Back then, home-based businesses were not considered "real" businesses, so I leased an office.

I was making a lot of cold calls and one of the first things people wanted to know was where I was located. Just saying Chagrin Boulevard in Beachwood seemed to help the conversation go smoother.

I've been promoting manufacturers and service companies in the business-to-business world for a long time. I'm in the service business so I gladly go to them when we need to meet. It's all about convenience for the client.

My biggest mistake was taking so long to move my business from an office to my home. I wasted a lot of time on the road, and a lot of money on rent and gas, because I needlessly worried about perceptions....

read the rest of the story at the Plain Dealer site here.

Max Weinberg of the E Street Band: Not doing research in a real-estate transaction

From the April 11, 2008, issue of the Wall Street Journal.

In 1984, [Max Weinberg and his wife Becky] paid $300,000 for a five-acre farm that was part of a development, also in Monmouth County, and learned a lesson that Mr. Weinberg hasn't forgotten.

The Weinbergs bought the property, part of a subdivision, from the developer, who initially planned to keep the farm for himself. The developer seemed impressive -- he wore fancy suits and drove a Cadillac -- but he was deeply in debt and needed to make a deal, Mr. Weinberg says. But Mr. Weinberg didn't know any of that -- and he didn't dig into the deed records that might have revealed it. (Mortgages usually are attached to deeds.)

After the deal was done, the seller pulled Mr. Weinberg aside. "You paid me too much for the house," he told him. "I was up to here in debt. I needed the money."

"Why didn't you tell me this 10 minutes ago?" Mr. Weinberg recalls asking.

"That's business," the man replied.

In the end, Mr. Weinberg made money on the deal -- he sold the house for $590,000 in 1997, records show. But he knows he could have had the house for less, and he says he resolved never again to be out-researched on a real-estate purchase. He credits that lesson with helping him in later deals, from his current land, which he bought in a complex transaction involving a land swap with the seller, to a house he's considering buying in Tuscany, Italy, for which he has studied up on wild boar, a local nuisance. (They can burrow, he has learned, but they can't jump.)

"My whole thing has been research," he says. "All the answers can be found in city hall."

The principals dissect the failed AOL-Time Warner merger, 10 years later

The most powerful lessons can be learned years after a mistake is made. This is especially true with a colossal failure. Only after much time has passed can the people involved shed their self-protective impulses and see clearly what happened.

There has been much written (for example here and here) about the 10th anniversary of the failed AOL-Time Warner merger (AOL again became an independent company in mid-December 2009). But nothing has been as compelling and rewarding to read as this New York Times article recounting the history of the merger from the viewpoints of the principal actors involved. Did you know that TW CEO Gerald Levin and AOL founder Steve Case first met at the 50th anniversary celebration of the People's Republic of China? I didn't either.

Once back in the States, Case began his pursuit:

MR. LEVIN We’re now back in the United States and I think Steve Case called me on the phone and in that conversation more than alluded to putting the companies together. I had my traditional script and quasi-legal background that when someone calls you on the phone, make sure they understand you’re not for sale, which we certainly weren’t, and decline any overture, which I did over the phone.

And the story goes on from there. It's riveting, candid, and revealing, and a must read for anyone who is eager to do a big merger. It might make them stop and think a bit.

Roughnecks learn to learn from mistakes

"Unmasking Manly Men" in the July-August 2008 Harvard Business Review has a grabby title and a thesis puncturing a resilient stereotype: one of the roughest, most macho, most dangerous industries in the world--offshore oil drilling--has developed a new work culture where workers support each other, where they are open and candid with their feelings, and...my favorite topic...where they admit mistakes and seek to learn from them.

The piece, written by professors Robin Ely of Harvard Business School and Debra Meyerson of Stanford University, states that the culture change was led from above, primarily as a way to improve safety and reduce accidents. And that worked--on-the-job accidents declined 84% over a fifteen-year period. Efficiency and productivity improved as well.

This culture of candor had at least on beneficial side effect--the company developed a new assessment of leadership potential based on ability to listen and learn rather than excellence as a roughneck. [A lesson to the many many professions out there that still select new leaders based on skill in the old job vs. capability for the new one.]

Developing a culture of destigmatizing mistakes, discussing them and learning from them makes the whole organization a lot more human, caring and fun. Oh, yeah, innovative, too.

The Red Cross owns up to a Twitter mistake

I'm sure Gail McGovern, the Red Cross CEO, was seeing red when this Tweet stream came out in mid-February. An honest mistake, by all accounts - a young staffer had gotten tripped up between a personal and business account using the Twitter application Hootsuite.

This faux pas provided a few seconds of laughter, but the response by the Red Cross will linger. They owned up to the mistake and showed a sense of humor. From the Red Cross' blog post after the tweet went viral:

We realized our honest mistake (the Tweeter was not drunk) and deleted the above Tweet. We all know that it’s impossible to really delete a tweet like this, so we acknowledged our mistake:

In the meantime we found so many of you to be sympathetic and understanding.  While we’re a 130 year old humanitarian organization, we’re also made of up human beings. Thanks for not only getting that but for turning our faux pas into something good.

Thanks to the Red Cross for showing that an embarrassing mistake can be handled with grace and humor!

(Hat tip Anne D. Gallaher)

Listrak's Ross Kramer on not investing in sales and marketing

This audio story comes from Ross Kramer, founder and CEO of Lititz-PA-based email marketing provider Listrak. When Ross Kramer started his first technology business, he focused on the technical side to the exclusion of sales and marketing. In retrospect, that was a mistake.

You can download the story here (3min 17sec).

Biography:
Ross Kramer started his first company, a web hosting firm named Vertex Internet, in his Penn State dorm room in 1997. He quickly noticed the struggles his customers were having in communicating with their customers efficiently and effectively, so he started Listrak to help with their email marketing needs. Under Ross’ direction, both companies have grown into technologically-advanced companies that are leaders in their industries.

Listrak services clients such as Daimler Chrysler, Motorola, L’Oreal and the Islands of the Bahamas from its Lititz, PA headquarters. Listrak is a two-time winner of the Central Penn Business Journal’s Top Fifty Fastest Growing Companies and the 2005 Growth Company of the Year by the Technology Council of Central PA.

Marissa Mayer on Google’s Biggest Mistakes

It's always refreshing to hear mistake stories from companies whose successes have given them mythical status. Consider Google. There have been so many stories written about their engineering prowess (here), their unique culture (here & here), etc., that it's easy to view them as mistakes (Though it's fair to say their public image has taken a bit of a beating recently.)

Anyway, here's Google exec Marissa Mayer on some of Google's mistakes along the way (she also does a nice job of discussing the value of making mistakes in an innovative business):



(Hat tip The Next Web)

Editor Tina Brown learns from Talk Magazine mistakes

There's an important difference between the kind of mistake stories you find here at the Mistake Bank and those you may read elsewhere. Here we focus on first-person stories. "I made this mistake, and here is what I learned." In other places you'll read about others' mistakes; say, Lindsay Lohan's.

The Mistake Bank is about learning from experience. The other type of story is about schadenfreude. Making us feel better about ourselves by dwelling on the problems of another. The dubious pleasure of schadenfreude lasts a few moments. Learning from our mistakes and others' lasts a lifetime.

Tina Brown, former editor of Vanity Fair and the New Yorker, talked to the New York Times ("At Newsweek, a Humble and Frugal Tina Brown") about her planned relaunch of Newsweek magazine, and shared this brief mistake story:

Ms. Brown would not reveal anything about the contents of the redesigned magazine or its debut. “We’re only going to do it when we’re ready, let’s put it that way,” she said in the interview. Between answering questions, she clicked through her BlackBerry, scanning e-mail.

“I think that big, sort of theatrical relaunches tend to set you up for failure and hype,” she added. “And you know we — I — went through that at Talk magazine, and it was a mistake.”

This is remarkable to me for several reasons. First of all, Tina Brown is not the first person you think of for being reflective or, as the Times headlines states, "humble." Second, she makes a subtle but profound shift in her statement. She first says, "you know we..." then shifts to "I went through that at Talk magazine, and it was a mistake."

Tina took ownership for the theatrical launch contributing to hype and ultimately failure at Talk. As such, she put herself in the position to learn from it, and not repeat it, in her new assignment. I respect that a lot, and look forward to what Newsweek will unveil in March 2011.