Media Spotlight: Adapt
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By Tim Harford
In a capitalist system there are winners and losers, profitable businesses and bankrupt ones, successes and failures. Every year 10% of US companies fold, while just 1% of US car companies remain from the 2,000 formed at the dawn of the industry in the 1920s.
In Adapt: Why Success Always Starts With Failure, Tim Harford praises capitalism over centrally planned economies such as Mao Zedong’s China because of its ability to manage failure.
The Financial Times columnist says the collapse of a socialist economy spells widespread disaster, whereas one company going bust in a capitalist system can be contained. He believes failing is crucial to learning and that it is part of a spirit of creativity and entrepreneurship that spurs success.
His optimistic theory relies on standard market fundamentalism dogma, brushing aside events that happened just a few years ago - the near collapse of the banking sector followed by massive state bailouts, a devastating recession and the subsequent disarray of government finances across the Western world.
If banks are too big to fail, capitalism is not capable of managing failure and has the same systemic problems as a centrally planned economy such as China. Harford brands the financial crisis an anomaly but fails to address the systemic fundamental flaw.
However, for small firms Harford makes a compelling case that failure spurs competition and forces firms and individuals to adapt.
The best example of an industry being forced to adapt is the story of the personal computer. In the 1970s and 1980s IBM ruled the roost with a huge market share until it was knocked from its perch by Microsoft in the 1990s. Microsoft’s Windows software dominated the market for more than a decade until the firm was caught out by the rise of the internet.
IBM stopped selling personal computers in 2005, while Microsoft has lost the search engine war to Google. After losing out to Microsoft in the 1990s, Apple bounced back from the failure to enjoy huge success with the iPod, laptops and iPad in the 2000s.
Harford argues these failures help companies adapt and emerge stronger, with better products and more capable to capitalise on new technologies.
He uses the example of the toaster to illustrate how the trial and error of the invention process should be widely used.
Its inventor, Thomas Thwaites, learnt a valuable lesson from every failed attempt until he produced a common household appliance.
Harford quotes Thomas Edison as saying the real measure of success is the number of experiments that can be crammed into 24 hours.
“The number can now be dozens, hundreds or even tens of thousands thanks to the introduction of supercomputers and other techniques for systematising experiments,” he says.
The book discusses how failure can be used to help businesses adapt. Harford praises bold experimentation, especially the business entrepreneur who has the courage to use failure constructively rather than let it keep them down.
If at first you don’t succeed then try again could be the motto to sum up this book, as it conjures inspiring visions of redemption from the wreckage of failure.
Apart from the dogma that ignores the impact of the financial crisis, it is an interesting guide for determined and open-minded entrepreneurs.
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