Bold claim, I know, but hear me out. Markets (defined here as companies that people can invest in) have existed for several hundred years. The Dutch East India Company was the first company to ever be listed on an official stock exchange back in the 17th century. If you allow your mind to drift back to middle school history class, perhaps you can recall a few formative world events occurring between then and now, some good, some bad, some apocalyptically terrible. Here are a few: American Revolution, French Revolution, American Civil War, invention of the telephone, WWI, Great Depression, WW2, Cold War, etc. World power shifted between nations, wars ended countries and began new ones, and the only thing more predictable than another war was another famine (interestingly, there was a permanent global food shortage from the dawn of time until WW2). However, one thing you may not have heard in your middle school history class is that through all of the raging of nations, markets continued to provide a return, decade after decade. Market data, as primitive as it may have been in the 17th and 18th centuries confirms what we’ve seen from more comprehensive data in the 20th century, that markets consistently offer a significant return over time from company dividends (which were more popular back in previous centuries) and from company growth. As we well know, the market doesn’t go up every day or every year, we see the hills as well as the valleys, but history has demonstrated without exception that down markets are temporary and market growth is inevitable. It’s easy to fall prey to the idea that this time really is different, and it’s true that there are different things happening today than there were in the 1700s, but a prediction that the market won’t perform in the future is a bet against history.
What is it about the market that ‘works’? I mean, how do companies keep creating and innovating so consistently over time? How is it that you can invest money in your 20s and receive six times your investment when you retire in your 60s? How is it that people create value?
I’ll submit that the consistency and value of the market (of companies) and of people is directly tied to failure. You see, progress is made through trial and error. If there were no mistakes there would be nothing to learn from. The simple fact that companies and products sometimes fail is what drives innovation forward. It’s why entrepreneurs, regardless of their level of intelligence, are able to create immense value, they’re iterating on failure after failure. It’s why free markets have prevailed for centuries, failure is built into the mechanism. It’s why, on a personal level, the way that failure occurs to you will play an oversized role in your personal success. Winston Churchill famously said, “Success is the ability to go from one failure to another with no loss of enthusiasm.” But it’s even better than that, failures are the milestones on the way to success, they’re what makes success possible. So next time you fail, don’t dress it up, don’t make up reasons or excuses, squeeze every bit of valuable information you can out of it. It may have actually been a huge success.