Viking, 2014, 320 pp., $27.95
Learning from failure is increasingly in the zeitgeist. The topic has appeared in sources ranging from the Harvard Business Review to TED talks, Oprah.com, and even a writing prompt in the Common Application for college. High-achieving, college-bound seniors no doubt find this prompt difficult, having rarely been allowed to fail, let alone to learn from it. In contrast, there are those surrounded by a surfeit of failure, whose rational (if depressing) response is often to give up entirely. Both responses should worry us. Those who end up in leadership positions in American life could benefit from an infusion of humility, especially the kind that is earned from chastening experience. Those who are not so well integrated into society would benefit from an American society that was more forgiving of failure.Distinguishing good failure from bad is the subject of popular journalist Megan McArdle’s first book, The Upside of Down: Why Failing Well Is the Key to Success. Although it certainly contains lessons for individuals, the book is not simply about harnessing failure for the sake of self-improvement. It more broadly addresses features of, and responses to, failure across a variety of domains. McArdle makes a strong case for promoting a culture of beneficial failure—a culture that America has uniquely embodied, but that is at risk of wilting away as we seek to inoculate ourselves against adversity of all kinds. The book is best read not as a systematic theory but as a series of thematically related essays distinguishing unrecoverable failure from its more beneficial cousin—a necessary precursor to learning. The essays, with some overlap, advance three main ideas. First, failure imparts lessons otherwise difficult to learn. Second, failure is inevitable, so what matters is how we respond to it. And third, America should sustain and improve its culture of beneficial failure. She explores these ideas through a series of case studies, interviews, and personal observation—and does so with a sharp analytical eye, wit, and good humor, which should be familiar to anyone who has read her prolific writing elsewhere.McArdle’s lively jaunt through failures large and small draws from diverse examples such as nuclear power plants, hospitals, surgery, Solyndra, General Motors, and welfare reform, to name but a few. These cases often motivate excursions into the behavioral and social science literature, illustrating, for example, our remarkably consistent tendency to overweigh losses relative to gains, or the “normalcy bias” that drives us to “act as if things are fine even when they quite obviously are not.” Frequently, these bad individual tendencies in the face of failure are made worse by herd behavior; we seek temporary safety in social conformity when things take a turn for the worse.As she often does in her writing, McArdle weaves personal reflection into her analysis, detailing relationships gone wrong and a long, painful stretch of unemployment after graduate school. She describes these challenging events evocatively, in a way that usefully conveys the subjective experience of someone struggling to come to terms with failure. McArdle has occupied some prestigious perches in journalism (the Economist, the Atlantic, Newsweek, and currently Bloomberg), so it may come as a surprise to some readers that her path was anything but linear. She describes how, during a long and unexpected bout of unemployment during her early career, she faced some bleak and anxious days. Even though she looks favorably on that time in retrospect, she is well aware that failure, real or perceived, can be a serious liability. Nonetheless, weakening the constrictive taboos surrounding it would be easier if more high-profile people would similarly drop their guard and be more open about their past failures, showing that it is a normal life occurrence to be wrestled with rather than shamefully hidden away. In these anecdotes, as in so many other examples in the book, a general lesson can be drawn: “A resilient society lets you fail, and even lets the failure sting, but only for a moment. Then it helps you get back on track, and everyone reaps the benefit.”McArdle further explores the perils of perfectionism through the work of Stanford psychologist Carol Dweck, whose recent experimental research has gained traction lately. People with a “fixed mindset” tend to regard performance as a measure of inherent and largely inalterable ability, whereas people with a “growth mindset” tend to treat tasks as an opportunity to improve. Predictably, when faced with challenges, people with a fixed mindset tend to give up more easily, while people with a growth mindset roll up their sleeves. Dweck’s later research suggests that it may be possible to teach people to be more growth-oriented, simply by praising them for working hard rather than for achieving a good result.A fixed mindset tends to make one not only less resilient, but also more risk-averse; the two qualities go hand-in-hand. Society, of course, benefits from both resilient and risk-taking individuals. Learning from failure is essential for developing toughness, prudence, and humility, yet Americans have developed a societal sorting mechanism that encourages precisely the opposite.Take the putatively meritocratic system of college admissions, which (despite that college application writing prompt) has evolved to punish all evidence of failure. This, McArdle writes, “is the remorseless math of the college admissions tournament,” which “treats success like a fixed quantity, and failure as a disaster.” The consequences are twofold. Those with the time and wherewithal have rationally responded to this tournament with a parental investment arms race. Through what McArdle terms “whiffle parenting,” parents strenuously protect their children from failure, resulting in adults who are under-equipped to deal with the inevitable challenges of life. Although these kids could probably use more failure in preparation for the independence of adulthood the failure they do experience is not catastrophic, and very often it serves an instructive function.In sharp contrast, poor children seem to face so many obstacles—chronically low-performing schools, dysfunctional home life, anxious and overworked (and often single) parents—that the tournament seems unwinnable and thus not worth entering. Indeed, McArdle notes, “kids coming out of the households in the bottom 20 percent of annual earnings, only 11 percent of them will manage to earn a bachelor’s degree.” Far from benefiting from circumscribed failure, children from poor families often suffer from a vicious combination of overwhelming disadvantage and a system that magnifies its consequences.Some of the most interesting material in the book examines how America has navigated this tension between beneficial and catastrophic failure. In some domains, America has been unrivaled in its encouragement of beneficial failure through, for example, its extensive reliance on decentralized markets. In an especially good section on unemployment, McArdle details several reasons for American labor market resiliency relative to other countries. One paramount reason is that we make it exceptionally easy to hire and fire people. In contrast, in attempts to make termination more difficult, European laws have had the unintended consequence of making unemployment more extensive and longer lasting than in the United States. McArdle also discusses America’s extraordinarily lenient bankruptcy system, again in stark contrast to Europe. She details, for example, the plight of a man in Denmark who, upon going out of business, was by law required to pay three to six months’ salary for every laid-off employee. He accrued $80,000 in debt to do so, and ten years later had barely made a dent in the principal. Bankruptcy laws in the United States, on the other hand, allow for serial risk-taking by entrepreneurs. America has managed to institutionalize forgiveness and resiliency in many areas of life, and we are better off as a result.In other domains, however, America punishes failure so thoroughly—and so unforgivingly—that resilience seems nearly impossible. The American criminal justice system is perhaps the worst offender in this regard. McArdle highlights the work of public policy professor Mark Kleiman, who describes the current probation system as one that deploys “randomized draconianism,” where probationers experience no feedback for probation violations for long stretches of time, and then are suddenly hit with multi-year prison terms. The long-term consequences of serving prison time are now well established; the mark of a criminal record casts a long shadow on future employment prospects, earnings potential, and reintegration. McArdle details a bright spot in this otherwise depressing policy domain: Hawaii’s Opportunity Probation with Enforcement (HOPE) program, which to great effect has replaced randomized draconianism with swift, certain, and small punishments. Good public policy of punishment, it turns out, hinges on its teaching effectiveness rather than satisfying the collective revenge instinct. It is also more humane. As a result, probationers (and their families and communities) are better off, and so too are the taxpayers.All of these examples and many more drive home McArdle’s broader thesis, which is that while there are many advantages to the American system—lots of beneficial failure through widespread, trial-and-error learning, entrepreneurship, and decentralized markets—there is a great deal of room for improvement in how we deal with those who are simply unlucky, those burdened by an excess of terrible circumstance. Although McArdle sets politics aside for the most part (perhaps in the service of making the book more broadly appealing), her pragmatic, moderate libertarianism suggests that both political parties are implicated in making matters worse. Democrats frequently seem to take innovation and markets for granted, in turn erecting and sustaining large bureaucratic structures and rules that impose a uniform vision from afar. Republicans, on the other hand, have been slow to reckon with post-recession realities, aptly described in books such as Tyler Cowen’s Average is Over and Erik Brynjolfsson and Andrew McAfee’s The Second Machine Age: individuals run a cutthroat race against technology that eliminates jobs and stagnates wages. The returns to cumulative advantage, and the penalties to disadvantage, appear to be increasing, and the standard responses—from the Right and Left—could use some rethinking. One hopes that both political parties can soon extricate themselves from their respective intellectual ruts in order to improve on what McArdle calls our “American Bourgeois Synthesis.” To that end, McArdle’s book is a useful starting place.