Charlie MungerAdmit mistakes and pivot fast
When a business decision is clearly a mistake, it is better to take a loss and look foolish immediately than to persist and go broke.
All topics
Topic
Failure
What they did when it went wrong
Picked for this topic from the basic records of many masters.
Principles
7Principles are our summary of their public statements.
- Charlie Munger
Jeff BezosScale failure with growth
As a business grows, the size of its failed experiments must also increase to ensure that successful inventions are large enough to impact the company's trajectory.
Marc AndreessenValue High Potential Failures
One should pay attention to works or projects that fail if they demonstrate extraordinary creativity and high potential for future success.
Kevin KellyIdeas Outlast Organizations
Even if a specific venture or non-profit fails, the core idea can succeed by becoming a shared goal for an entire industry.
Seneca the YoungerAcknowledge the Speed of Ruin
Understand that while building a business takes years of toil, it can be destroyed in a single moment.
Jim O'ShaughnessyTreat failure as a ladder
View every failure as a step upward that provides unique information and knowledge that success cannot offer.
Justin Welsh Avoid the trap of drift
Total lack of structure leads to a lack of progress and eventual business failure, even if one is talented.
Episodes
12Episodes are real events from public sources, summarised by us.
Elon Musk2006First Falcon 1 Failure
The first Falcon 1 rocket exploded about 25 seconds after takeoff, destroying a Department of Defense satellite. Despite the loss, Musk publicly stated that the company was in it for the long haul.
LessonExpect to take your lumps early on and use postmortems to reaffirm your long-term commitment.
Peter Thiel1720The Mississippi Company Bubble
John Law attempted to solve France's debt by securitizing it through the Mississippi Company, promising riches from the New World. Investors bid the company's value to equal that of France itself before realizing the Louisiana Territory was mostly undeveloped wilderness.
LessonA great vision of the future can become a catastrophic bubble if it ignores the practical difficulties and time required for implementation.
Warren Buffett1955The Berkshire Hathaway Merger Failure
Berkshire Fine Spinning and Hathaway Manufacturing merged in 1955 as an economic powerhouse. However, despite large initial earnings, the company suffered a $10 million aggregate loss over the following decade as the textile industry declined.
LessonA single year's high earnings do not guarantee long-term business viability if the underlying industry dynamics are poor.
- Charlie Munger
The Diversified Retail Mistake
Munger and Buffett bought a small department store chain in Baltimore but realized it was too competitive as soon as the deal closed. They decided to exit the retail operation quickly and used the remaining cash to buy stocks during a recession, which tripled their money.
LessonIt is better to reverse a bad decision and look foolish than to stay in a losing business until you go broke.
Mark ZuckerbergThe Culture of Rapid Failure
Meta launched numerous products like Facebook Deals, Gifts, and various independent apps that failed to gain traction. The company treated these as experiments to discover which social mechanics would become core parts of the platform.
LessonBeing nimble means being willing to try zillions of things and killing what doesn't work.
Reid HoffmanThe Failure of Webvan
Webvan attempted to build a massive capital-intensive grocery delivery business during the early internet era but failed. Hoffman notes that while the idea seemed foolish then, it was actually just too early for the market.
LessonA business model that fails today might become a massive success later when the supporting technology and consumer habits catch up.
- Marc Andreessen2016
Free Basics Failure in India
페이스북의 프리 베이직스 프로젝트가 인도의 망 중립성 법 위반으로 금지되자 이에 반발하는 트윗을 올렸다가 비판을 받았어요. 이 프로젝트는 폐쇄적인 인터넷 환경을 조성한다는 이유로 결국 실패했어요.
LessonIgnoring local regulations and cultural sensitivities can lead to the failure of expensive international expansions.
Andrew Wilkinson The MetaLab Scaling Struggle
Andrew started MetaLab as a web design agency and found that revenue growth was tied directly to hiring more designers and project managers. Even after landing huge projects, the profit margins barely moved because of the increased overhead and complexity.
LessonService businesses often face linear scaling where more revenue simply leads to more management headaches and stagnant margins.
Noah Kagan2005The Failure of an Early Video Startup
Noah worked on a video-on-demand startup where users could pay for specific video requests. The team insisted on using a heavy BitTorrent client while YouTube launched with a simpler web-based approach and won the market.
LessonBeing too rigid with a specific technology can prevent you from pivoting to a more user-friendly solution that the market actually wants.
- Kevin Kelly2007
The Failed Unveiling
When the car was unearthed 50 years later, it was covered in gunk and rust rather than being in mint condition. Kelly noted that the same model car was actually better preserved by private collectors outside of the capsule.
LessonDon't waste resources protecting what the market or enthusiasts are already naturally incentivized to save.
Dario AmodeiDario's Mass Spectrometry Experience
While working on mass spectrometry, Dario collected massive amounts of proteomics data but found it noisy and incomplete. He realized that simply having more data wasn't enough because it lacked context like cell type or phase.
LessonData quantity cannot compensate for poor data quality or a lack of causal understanding.
Andrej KarpathyIgnoring Andrew Ng's Advice
In his first year, Karpathy strongly disagreed with advice from Andrew Ng and pursued a problem Ng wasn't excited about. He ended up wasting several months because Ng's intuition turned out to be correct.
LessonIndependent thinking is valuable, but ignoring expert advice is a calculated risk that can lead to wasted effort.