In Thailand, if you fail repeatedly in business, you often change your name. In Spain, dark-suited debt collectors, known as cobradors de frac, will publicly shame you, approaching you in your home, at the office or in restaurants. In Croatia, the Finance Ministry prints what media has dubbed the “pillar of shame,” a list of over 100,000 corporate and individual debtors. And what if you declare bankruptcy in the U.S.? You may just run for president.
The American view toward debt is distinctively lax. But it rewards innovation, and attempts at innovation, by making failure a step on the path that does not stop the journey. But while some companies and individuals may use our bankruptcy laws as an unnecessary crutch, our country’s attitude toward debt more generally allows entrepreneurs and small business owners to freely pursue new ideas without fear of failure. In fact, we have entire industries based on investing in failures. That’s what venture capital is—the investment in many ideas with the hopes that a small number will pan out. Same with the publishing industry; in 2004, the industry put out 1.2 million titles, with only 2 percent selling more than 5,000 copies.bt is distinctively lax. But it rewards innovation, and attempts at innovation, by making failure a step on the path that does not stop the journey. Some economists and policy wonks criticize our insolvency laws as contributing to “reckless borrowing” and unnecessarily risk-seeking business deals. In addition, recent bailout plans have come under fire for supporting more established businesses at the expense of smaller, mom-and-pop startups.
So, what does this laissez-faire attitude toward debt and failure mean for you? As an entrepreneur, you should anticipate that you will fail—and often. The secret is to kill failures early: Don’t get stuck in the trap of sunk-cost fallacy. You may have invested considerable funds and efforts into a single idea, but if it’s not working, it’s time to get out. Pivot instead into a new venture or idea, one that builds on what you learned without causing you to make the same mistakes.
What you’ll find is that all learning comes from failure. In fact, if anything, you should be worried when things are going too smoothly. Our bankruptcy laws allow entrepreneurs and leaders to face failure and bounce back. Consider the riches-to-rags-to-riches stories of leaders like President William McKinley, Henry Ford and Walt Disney, all of whom bounced back from great setbacks. Our country’s structural inclination is for you to get past your failure and find the next great opportunity. Just like a book publisher, you may have to comb through millions of ideas just to find one Harry Potter. Fortunately, we live in the most entrepreneurial-minded country in the world, and our culture is begging you to take a risk and push yourself to uniquely pursue your highest calling.
This article was originally published on LinkedIn on February 24, 2014.