Finance
The virtues of failing fast
In his book Intuition pumps and other thinking aidsDaniel Dennett’s first intuition pump is to extol the virtues of courageously making mistakes. He describes it this way:
Sometimes you just don’t want that risk make mistakes; you actually want to make them – if only to give you something clear and detailed to solve. Making mistakes is the key to progress. Of course, there are times when it is very important not to make mistakes – ask a surgeon or pilot. But it is less widely recognized that there are also times when making mistakes is the only right way to go. Many of the students who get into highly competitive universities pride themselves on not making mistakes. After all, that’s how they got so much further than their classmates, or at least that’s what they thought. I often find that I have to encourage them to do this cultivate the habit of making mistakes, the best learning opportunities of all. They get writer’s block and waste hours desperately wandering back and forth at the starting line. “Blap it out!” I encourage them. Then they have something on the page to work with.
This reminds me of the old joke about how to carve an elephant out of granite. The ironic advice is to just start with a large piece of granite and then chop away any parts that don’t look like an elephant. Dennett advocates a similar approach: throw the unformed granite block of your thoughts out there and let all the parts that aren’t working be removed as your mistakes are found and corrected.
Dennett cheerfully describes himself as “an experienced mistake maker himself. I’ve made some dillies and hope to make many more.’ But there is a key to being good at making mistakes, Dennett says, and that is the willingness, even eagerness, to have your ideas destroyed:
The most important trick to making good mistakes is not to hide them – especially from yourself. Instead of turning away when you make a mistake, you should become a knower of your own mistakes, and hold them in your mind as if they were works of art, which in a sense they are… The trick is to to take advantage of it. the specific details of the mess you made so that your next attempt will be informed by it and not just another blind stab in the dark.
Mistakes are good if they are quickly recognized, corrected and learned from. I think I believe that most new ideas are terrible – and this applies whether the new ideas come from private market players, or from policy makers acting from the state. The crucial difference is that in markets mistakes are quickly detected and corrected, but this is not the case for mistakes made by policy makers.
For example, in my post explaining that most new ideas are terrible, I used the example of an upcoming technology product called the R1 Rabbit, and why I thought it would be a flop. Since I wrote that, the product has hit the market, and the consensus that has developed since then is that the product indeed pretty terrible. Another product I could have mentioned in that post is the Humane AI Pin, which seemed half-baked to me. This also seems to be the case become the general consensus, and currently Humane is seeing the product returned faster than they can sell it.
I suspect both companies don’t want this world much longer. A significant amount of time, effort and money was spent building the companies and producing the products. And some people ended up spending money to get a product that turned out to be half-baked. This is certainly not ideal, but the correction takes place quickly.
Contrast this with another bad policy I recently implemented markedwhen “King William III instituted a tax on windows, under the assumption that homes and buildings with many windows would likely be owned by the wealthy, and thus this would serve as a way to tax the wealthy.” But as recorded in Scott Hodge’s book Taxocracy“the tax led to particularly dire conditions for the urban poor, as landlords blocked windows and built tenements without adequate light and ventilation.” Some buildings were built without windows on some floors, leading to the “spread of numerous diseases such as dysentery, gangrene and typhoid.”
This was also not ideal. It caused people to live in unnecessarily miserable, dark and cramped conditions. Diseases spread more quickly, killing many people and causing significant pain and suffering to those who survived. This too was eventually resolved – the tax was eventually abolished. But the tax and its adverse effects persisted 150 years before that happened.
Entrepreneurs are not necessarily smarter than government policymakers, nor do they have the intrinsic ability to come up with better ideas. But when entrepreneurs make mistakes, the mistake doesn’t last long. Policymakers can make mistakes that cause illness, suffering, and death, and those policies can last several lifetimes before the mistake is corrected.
Arnold Kling often used the mantra “Markets fail. Use markets.” Yes, because when markets fail, they fail quickly and correct quickly. Dennett advises his students to make sure they don’t hide their mistakes, especially from themselves. But state policymakers have the ability to hide or overlook their mistakes in a way that simply does not exist in the marketplace, making these mistakes so long-lasting that they border on immortality.
