I think it’s fair to assert, as a New York Times article did, that “the American business world now fetishizes failure.”New York Times | The article is about colleges helping students experience failure.  Books, articles, podcasts, etc. extol the virtues of failure, citing the personal and business stumbles of those who went on to attain wild success — and encourage us to be willing to fail and fail again in pursuit of our dreams.

“If you think that’s a big failure,” Jeff Bezos said of one of Amazon’s stumbles, “We’re working on much bigger failures right now.”Money | The article includes failure episodes from nine other “highly successful people” too.  That philosophy is in ascendance at organizations large and small, although there’s no doubt that having a motivational poster on the wall is a lot easier than living a mantra day to day.  There are exceptions,New York Times | The team members of Project Foghorn got a bonus despite their flop. but failure normally isn’t celebrated when it’s time for performance reviews.

In the investment world, there is a lot of discussion these days about “mistakes,” given the publication of Michael Batnick’s Big Mistakes: The Best Investors and Their Worst Investments.Amazon | I have not had a chance to read the book yet; I’m too busy making mistakes.  It has spawned a large number of articlesWall Street Journal | Here’s one from Jason Zweig. and blog postings.  In addition, Ray Dalio of Bridgewater has been promoting his own journey, littered with mistakes, in his book and TED talk and elsewhere, calling himself “a professional mistake maker.”Forbes | This article preceded his promotional blitz surrounding the book.

Is there a difference between a mistake and a failure?  In one online dictionary,Merriam-Webster | The definitions come from this source. the former is described as “a wrong judgment” or “a wrong action or statement proceeding from faulty judgment, inadequate knowledge, or inattention.”  The definitions indicate the presence of direct responsibility.

In contrast, failure (at least as described) is less specific.  “Lack of success,” “a falling short,” and the like indicate simply the opposite of a hoped-for outcome.  Other definitions include the “omission of occurrence or performance.”  In other words, it just didn’t happen, for whatever reason.

The parsing of words aside, let’s focus briefly on FAILURE.  You know, the really big failure — the career-threatening one that for whatever reason goes beyond the typical day-to-day wrongheadedness, leading to a radical change in circumstances and, too often, to another state of mind.  In that light, the last dictionary entry describing failure is the most powerful:  a person who has failed.

In a business built on reputation, it’s hard to admit mistakes and certainly hard to acknowledge catastrophic failure and have the gumption to begin again.  All the learning that is supposed to come from failure, so celebrated in the abstract, can get swamped by the inner voices that remind you that you are not worthy, that your reputation has been destroyed, and that you should be ashamed.

Rusty Guinn, in a brave and thoughtful piece,Epsilon Theory | Guinn is one of the contributors to this Salient Partners site. wrote, “Compounding is the most powerful force in the universe, to be sure, and nothing compounds like shame.”

Those last four words have stuck with me for days.

In the normal course of events, investors make mistakes day in and day out.  That’s to be expected in a complex adaptive system.  But, as the leader of an investment organization once said to me, “What if I told you that you should hire us because we only get 47% of our decisions wrong?”  The reality of the investing challenge is in conflict with the goal of promoting one’s investment acumen and careful process in order to attract new clients.  (That dissonance was the subject of my recent newsletter on due diligence and manager selection.MailChimp | You can sign up to receive new issues of the newsletter here.  They don’t appear on line, so send me a note if you want a copy of the edition referenced here.)

We all want to view mistakes as normal, as fodder for learning that will make us better over time.  But sustaining that spirit when push comes to shove is difficult for individuals and for organizations, providing some questions for the leaders that guide them.

For starters, when does an investment become a “mistake”?  How much time needs to elapse (or price needs to decay) before we pronounce something a bad idea to be discarded?  There are no easy answers.

And, how can we prevent the blame gameFocus Consulting | Here’s a paper from Jason Hsu, Jim Ware, and Chuck Heisinger on that topic. from inhibiting our decision making in the future?  How can we identify those who have difficulty admitting mistakes and/or those who will be paralyzed by a particularly devastating error because they haven’t experienced failure before or haven’t learned to come to terms with the emotional baggage and consequences that can stem from it?  (Reminder:  We’re ten years on from the financial crisis and those who are new to the business haven’t really been stress-tested, so you don’t know how they’ll react.  Others have memories and scar tissue that aren’t very far beneath the surface, posing a different potential problem.)

The emotional health of an organization compounds for better or for worse.  Does the environment allow everyone to deal openly and honestly with “the slings and arrows of outrageous fortune,” or does it foster destructive behavior that hides itself and inhibits resilience when it’s needed most?  A truly sustainable organization is one in which the demons are seen rather than unseen.  Despite all of the celebration of failure and mistakes, that is still pretty rare in the investment world.