How to Make a Brilliant Mistake
The difference between a great company and a mediocre one isn't whether it avoids mistakes. It's how much it learns when it makes them.
Everyone makes mistakes—every entrepreneur, every business leader, every employee. The mark of a great company isn’t that it avoids failures—that’s impossible—but that it has the wisdom to take full advantage of them.
Behavioral economics tells us that we humans are short-sighted by nature. We are wired to seek out evidence that confirms what we already believe and to ignore evidence that contradicts it. On top of that, we are usually overconfident, thinking we know more than we do and underestimating how much we don’t know. This leads to tunnel vision and myopic judgments. The great virtue of mistakes, whether by accident or design, is that they widen your range of experience and shrink your ego—and thereby open you to discoveries you’d otherwise never make.
Stumbling on Chaos
History is full of such brilliant mistakes. A notable one occurred in the early 1960s at MIT. Meteorologist Edward Lorenz had just completed a large round of simulations of a weather system and wanted to repeat the experiment over a longer time frame. Rather than waste valuable processing time, he manually typed in final numbers from the results table. To his surprise, the second simulation diverged radically from what he expected. He puzzled about it for days. Then it struck him: he had entered numbers using a computer printout that rounded all numbers to three decimal places, whereas the computer stores six decimal places. This tiny rounding error pushed the second simulation onto a markedly different path. In that sense, the exercise was a failure.
But the apparent error led Lorenz to a far more significant discovery. In a complex system, tiny changes in the initial inputs can cause massive changes at a later stage. Lorenz’s discovery is now known as the “butterfly effect”—after the notion that the fluttering of a butterfly’s wings can ultimately lead to a tornado halfway around the world—and is one of the foundations of chaos theory. For his brilliant mistake, Lorenz was awarded the 1991 Kyoto Prize.
The Lorenz example illustrates the two prime ingredients of a brilliant mistake:
- Something goes wrong far beyond the range of prior expectation; and
- New insights emerge whose benefits greatly exceed the mistake’s cost.
The brilliant part lies especially in condition (2), but also in recognizing that (1) is necessary for (2) to occur. You want to increase the chance of (1) and (2) occurring together. When they do, you could have a brilliant mistake on your hands.
Golden Egg on Your Face
It’s not easy to get your business to view failure so positively, but it can be done. The president of an Ann Arbor, Michigan business concocted what he calls the Golden Egg award to make sure his people would extract as much learning as possible from failures. He asks managers to share their mistakes at a monthly meeting not unlike the mortality and morbidity reviews hospitals hold to learn from medical errors. At first participants were reluctant to open up, but eventually these confessionals became a favorite part of the session.
The manager who presents the best mistake of the month gets the Golden Egg trophy—a spray-painted L’eggs pantyhose plastic egg. Initially, the trophies stayed in the desk drawer of the (un)lucky winner. But over time, winners became proud enough to place the trophy on their desk for the entire month. This naturally prompted conversations with visitors about with how managers were able to convert egg on their face into omelets rich with insight and learning. In short, the president managed to change the culture from one that hides mistakes to one that celebrates them. You can do likewise, and your company will reap the benefits.
2nd Article
You Need to Make More Mistakes
Many of today's best companies arose out of lucky mistakes. That's why fear of being wrong is the biggest mistake of all.
If you have ever flown in an airplane, used electricity from a nuclear power plant, or taken an antibiotic, you have benefited from someone's brilliant mistake. Each of these life-changing innovations was the result of many missteps and an occasional insight that turned a mistake into a surprising portal of discovery. Even Albert Einstein made at least 23 mistakes in his published scientific publications. Some of these were necessary to achieve his monumental insights about the deeper forces of nature.
Successful people tend to have a different view about mistakes than most ordinary people. Not only are they more tolerant of them (in themselves and others), but they often embrace them. Steve Jobs celebrated his mistakes during a commencement speech at Stanford, and J.K. Rowling admitted that she could not have produced the astoundingly successful Harry Potter series without having hit rock bottom first.
People in the arts and humanities tend to embrace mistakes comparatively easily. As trumpet great Wynton Marsalis put it, if you are not making mistakes, you are not playing jazz – you are not trying. But I believe the same applies to business:
During the monopoly era, U.S. telephone companies had to provide service to every household in their region, no matter the household's credit history. Each operating company collected deposits from customers with the worst credit history in their state, in order to minimize damage to equipment and delinquent bills. A few companies decided to test their credit scoring model by not charging the deposit for several months. This was clearly a mistake by normal business standards. But then they discovered that the "risky" customer segment actually had fewer delinquencies than some of the others, with less damage to equipment. This counterintuitive insight caused them to recalibrate their risk models and to charge deposits based on different criteria. The improved credit models added an average of $137 million to the bottom line every year for a decade.
As Chairman and founder of our company Decision Strategies, I wondered whether our policy of not responding to Requests for Proposals (RFPs) that came in over the transom was perhaps flawed. We had never responded to an RFP without knowing at least one person at the requesting company, assuming that the prospective client was either price shopping or had already determined its favorite candidate. Against the better judgment of many, I decided to test this assumption. We took the next RFP that came in and tailored a proposal. To our pleasant surprise, the unknown client accepted the proposal, and then hired us for additional projects, amounting to more than $1 million in consulting fees.
John Wanamaker, founder of the first major department store in Philadelphia, famously said: I know that half my advertising dollars are wasted, but I don't know which half. The same is true for your business assumptions, especially if you are in a changing market, uncertainty is high, your problems are complex and innovation is your game. In such an environment, a good portion of your assumptions are likely wrong, but you don't know which. The only hope to escape from your self-imposed mental box is to test beyond the scope of what you deem worth testing.
This is quite different from normal experimentation which you can justify on the basis of expected cost and benefits. When making a deliberate mistake, you are spending time and money on tests that conventional wisdom suggests is not justifiable. Deliberately making errors goes against the human grain. But trying too hard to avoid them may be the greatest mistake of all.
