When I was 17, my parents went through a difficult financial period. The details aren’t particularly relevant for this article, suffice to say the family business hit a very rough patch and at one point there was genuine talk of losing the family home. As a teenager wrestling with the conflict between childhood and young adulthood, overhearing their stress-fuelled arguments was both confusing and distressing. On the one hand I wanted their financial problems to simply disappear, yet the most fundamental feeling was a desire for them to prioritise keeping the family together. As a naive adolescent it was easy to conclude that relationships are more important than lifestyle, and a part of me found it incomprehensible that such a trivial thing as money would threaten the family unit. Surely losing the family home, albeit very distressing its own right, would be far less distressing than my parents losing each other.
Thankfully, my parents arrived at the same conclusion. When they did, the ability to act became easier and they were able to make the difficult decision to sell the 20-year family business rather than battle with it any longer. This was a difficult decision for several reasons, not least having to confront the various fears that accompany the prospect of moving on from a business that they had built up so closely together for two decades. Many people, when faced with the same fears, fight so hard to avoid confronting them that they lose perspective on the wider picture. Unable to look beyond the fear, they drown in their efforts to resist it.
I think it is far from a coincidence that I started my first business shortly after this period. Of course, having grown up with entrepreneurial parents, the spirit of the startup was very much ingrained already, but I could have been forgiven for going off the idea of setting up a business after witnessing the stress and turbulence of that period. Fear, in its various forms, is what stops the majority of people from ever pursuing an ambition to strike out on their own and in my case I had witnessed first-hand the harsh manifestation of many of the crippling “what if” questions that suppress such ambitions. But from that experience I had learned one fundamental thing that has carried me ever since: the importance and power of perspective.
The worst that could happen
Fear can often lead to poor decisions or, worse, total inaction. Fear of losing one’s home, fear of disappointing one’s loved ones, fear of being deemed a failure by friends, peers and society, are all powerful stressors. The loss of a business that you have poured your heart and soul into has repercussions not only on your material life but on your fundamental sense of identity, self-worth and confidence. It is no exaggeration to describe the prospect of business failure as a profoundly existential threat, psychologically and spiritually life-threatening for those facing it. A natural reaction to such a threat is panic, which quickly unravels any sense of focus or calm. Anger, conjured by stress, often takes over as we lash out indiscriminately at the world around us, like trapped animals, harming anything that happens to be within our proximity at the time: colleagues, loved ones. Depression usually ensues, with its devastating annihilation of any desire to take remedial action. We feel the world is collapsing around us, and there’s little we can do about it. It is a loss of control that, at its most extreme, can culminate in heartbreaking tragedy.
This is the true essence of failure, and exposes exactly why we are so afraid of it. It is rooted partly in shame but also largely in loss, as we tend to focus on what failure will subtract from our lives. Loss is itself a very powerful emotional state linked tightly to the process of grieving and bereavement; indeed, the anger, panic and stress associated with potential business failure can be tellingly similar to the emotional state one might go through when a loved one is diagnosed with a terminal illness. Unlike a loved one, however, a business — or work in general — can be reframed with the application of perspective.
Consider the fear of flying: is it really flying that people are afraid of or, as the British comedian Bob Monkhouse once joked, “being two miles up and suddenly… not flying”? The horror of plummeting 38,000 feet out of the sky to certain doom is quite clearly fuelled by our inherent fear of death as opposed to a fear of flying itself. However, this fear distorts aviophobics’ perspectives on the very process of air travel, amplifying every tiny in-flight noise and bump into catastrophic interpretations. One of the most effective methods for treating aviophobia involves learning how to fly a small aircraft. This does two things: firstly, it demystifies the mechanics of flight so the rational brain can make more balanced interpretations of flight dynamics (making those bumps and noises feel less like certain doom), but secondly it imprints a more extreme alternative to traditional passenger air travel, a sample for comparison against the comparatively silk-smooth experience of flying in jumbo jets. Comparing the cacophony and turbulence of a light aircraft flight to the comparative quiet and smoothness of a commercial airline affords a sense of perspective that makes the latter experience seem mundane instead of frightening. Understanding why planes make noises and bump about in the air, and knowing that this is completely normal and safe, removes the fear of the unknown. Changing your perspective on a situation can completely transform your feelings towards it.
The reason for this is similar to the rationalisation of imagined homelessness that I constructed as a teenager: perspective shifts the baseline. In the context of air travel, for most people the baseline is too close to the surface. They can only feel comfortable if the flight is smooth, quiet and turbulence-free. Any deviation from that is perceived as a terrifying shift towards certain death. For those who have experienced far greater turbulence and noise in a smaller plane however, the noises and bumps of larger aircraft are merely a shift towards the comparable: they’ve experienced worse, so it’s okay. The closer the baseline is to the surface of our experience of whatever it is we’re going through, the more likely it is we will focus on it. In cognitive behavioural therapy, one of the key principles is exposure to the things we’re afraid of. Arachnophobes are made to hold spiders, claustrophobes are encouraged to travel on packed trains. The purpose is to put distance between you and the baseline: where previously you might be afraid to even enter a room if there is a small spider in it, you are now holding a huge tarantula in your hand and it’s crawling all over you. Suddenly the small spider in the room is less frightening.
Success = not failure?
In business, the worst that could happen is the company going bust. But is that really true? As with anything else, the baseline dictates the feelings here, and fear is at the epicentre of every narrative around failure. So what exactly are people afraid of?
For one thing, humiliation: a sense of failure as a human being, of not having been able to fit in to the expectation of success that weighs so heavily on most people. There is also fear of financial stress, as going bust means not being able to pay the bills — not just our own, but those of our staff, suppliers and investors. Looking at it more deeply, fear of humiliation is actually a fear of being cast out from our community, of being looked down upon by others and never being hired again, while fear of financial collapse is really a fear of imposing suffering on ourselves and others for which we would feel remorse and guilt. They are fears that tap deep into the core of our sense of survival as human beings and so, in the face of such powerful outcomes, it is understandable that most people harbouring dreams of entrepreneurship never take the leap, choosing instead to covet the dream from the safety of a “normal job”.
These outcomes, however, are driven by a singular perspective. Similar to fear of flying, fear of launching one’s own business is largely driven by how small the gap is between perfection (the smooth, bumpless flight) and imperfection (turbulence = potential death). As discussed earlier, when the baseline is so close to the surface it can become paralyzing: somebody suffering from claustrophobia will often be unable to board a packed train, instead remaining paralyzed on the platform. Fear of failure has a similarly paralyzing effect on many people dreaming of launching their own business, forcing them to stay on the platform of their secure job and watch the entrepreneurial train go by.
One of the main problems with failure is that we tend not to frame it properly. Most narratives around entrepreneurship either focus on great successes (Bill Gates, Jeff Bezos, Richard Branson), spectacular failures (Lehman Brothers, Enron, Blockbuster Video) or, more recently, exploitation of the underlying fear by encouraging people to “never give up”, framing entrepreneurship as some kind of David and Goliath battle against impossible odds. The truth, for most people, is somewhere in the middle. Success and failure are both spectrums and entrepreneurship is basically a process of finding your place on that range.
It is also a matter of perspective. If your vision of success is Microsoft, but your business is only achieving revenues of £500k, then you will look like a huge failure in comparison. As a result, you will keep pushing the business aggressively in an attempt to reach that level. But this is usually a fatal mistake. Most businesses don’t have the underlying metrics to get that big. If you’re selling hand-made quilts, your headroom for growth is limited by your capacity for making quilts and the size of the market of quilt buyers. People often trip up by overestimating their market and overstretching their business in order to meet a future demand that simply doesn’t exist. And that’s before the learning curve bites. But the right question to ask is: does your business need to be that big? If it’s making £500k per annum profitably, but is unlikely to grow beyond £1m per annum, is that a failure? Compared to Microsoft, yes. But you’re comparing a comfortable two-bedroom apartment to Buckingham Palace. You can still have a very comfortable life without having 775 rooms.
Similarly, the narrative around business failures tends to focus on the most sensational examples. In the case of Enron, for example, it was both the scale of the business at its failure point along with the revelations of fraud that made it such compelling viewing. Yet most people don’t remember the collapse of Swissair around the same time, largely because the company was smaller than Enron despite having over 5000 employees at the time. The dialogue and numbers around such events make for dramatic viewing, but the reality is that most people involved in such failures end up just fine — with the obvious exception of the ones who end up in prison (and even some of those people end up doing just fine). Wayne Huizenga, the founder of Blockbuster Video, died peacefully at his 2,000-acre home in Florida, leaving behind a remaining net worth of $2.8 billion despite Blockbuster Video ultimately being sunk into obscurity by the rise of Netflix. He failed with Blockbuster Video, but ended up just fine.
It’s harder to track the fortunes of all the entrepreneurs who have started businesses and then failed, but I would wager that most of them ended up just fine as well. I certainly did after my first business collapsed in 2004. Failure, therefore, is not an absolute. Neither is success a single event. To the “motivational speakers” who promote the never-say-die mentality and exuberantly encourage aspiring entrepreneurs to “dream big”, “hustle” and “do what you love”, I would issue a warning advising their followers to consider what success really is. By framing your life as a pursuit of some nebulous dream, treating it as a battle to be won regardless of whether anyone is actually fighting you, or making decisions based on whether you 100% love what you’re doing, you’re narrowing your perspective to the point of potentially ignoring success milestones that would otherwise be cause for celebration. Failure can also be experienced as an inability to recognise success.
Perhaps the most damaging piece of data around entrepreneurship is the oft-cited statistic that 90% of businesses fail. It’s damaging because, let’s be honest: if you heard that 90% of flights ended in a crash you would likely never step on a plane. But the statistic is fatalistic; it disregards the reasons for failure and the consequence of personal learning and growth that arise from such failures. Blockbuster Video failed, so was Wayne Huizenga a failure? I will get to that a little later, but first let’s examine two key points: how much of an impact does experience have on the failure rate, and exactly where does one pin the failure flag on a company’s timeline?
Taking the value of experience, the 90% statistic does not distinguish between first-time entrepreneurs and more seasoned ones. In fact, the vast majority of those failures are first-time business attempts, and of those first-time entrepreneurs only 30% dust themselves off and try again. But when they do, studies have shown that they find much more success with their second, third, fourth businesses and beyond. In fact, the success rate for serial entrepreneurs has been found to rise with in correlation with the number of failures. This should hardly be surprising. Humans as a species learn from mistakes, so it follows that the more mistakes you make the more you learn. Eventually you will acquire a body of experience that will allow you to navigate the perilous early stages of start-up life and develop a longer-term business, whatever the size.
Perspective matters here too. I can tell you from personal experience that obstacles that seem insurmountably hard on your first start-up become significantly easier the second and third time around. This has the effect of not only allowing you to avoid mistakes as you learn, but perhaps more critically alters your perspective so that you are able to treat obstacles with much less emotion and keep your eye trained on the business as a whole. The more difficult obstacles seem, the more all-consuming they become and the more likely they are to make you panic your way into poor decisions. For example, laying off 80% of your employees feels like the end of the world the first time. When your business hits a point where mass downsizing is the only option for survival, most people struggle to get past the turbulent and overwhelming stress and emotions of the here-and-now of it all. Unable to see past the horror of the present events, many people decide to call it a day, and 70% never go back to try again. This turns out to be a decision many later regret. If only they had the long-term perspective which would tell them that this period will pass, the laid off employees will be fine, and the business will be in a position to try and recover, they would have been able to move past it instead of declaring defeat.
Which leads into the second point, that businesses ebb and flow in waves rather than moving in a straight line. Whether a business is successful is as much a matter of perspective as determined by timing as it is core business metrics. Returning to Blockbuster as our case study, Wayne Huizenga’s trajectory with the company actually mirrored Ray Kroc’s with McDonalds, in that he didn’t initially found the business. Instead, he bought into it in 1987 when it had 19 stores and grew it to 4000 stores nationwide before selling it for $8.4 billion. From his perspective, Blockbuster was therefore a resounding success. Failure came much later, and not on his watch. It all depends on which timeframe you’re measuring. The same thing applies to all large companies. For example, of all the Fortune 500 firms that existed in 1955, only 12% still exist. That statistic echoes the 90% failure rate for startups, indicating that nearly all businesses disappear given enough time. Not that this detail tends to be included with the alarmist “90% of startups fail” articles.
When thinking about failure, perspective matters. One person’s success could be another’s failure purely because of their point of view. Turbulence feels like an imminent plane crash to an inexperienced or nervous flyer, while to an experienced passenger it is a minor inconvenience that makes it a bit trickier to eat the in-flight meal. A packed train feels like a coffin to a claustrophobe while other passengers merely feel irritated by having to endure others’ body odours at such close proximity. Business failure feels like the worst thing in the world the first time, but on the second or third attempt its value as a learning experience starts to manifest and pay dividends. In the end, though, the most effective way of overcoming a fear of anything is to expose yourself to it.
Originally published on my personal blog in May 2020.