When Failure Leads to Success - New Book Offers “Billion Dollar Lessons”

Billion Dollar Lessons
Billion Dollar Lessons

Failure is in the air and let’s admit that it feels well, un-American.

We have always been told that failure is not an option. Yet we do fail and sometimes we fail in spectacular fashion – just take a look at what’s going on right now on Wall Street.

A new book, “BILLION DOLLAR LESSONS: What You Can Learn from the Most Inexcusable Business Failures of the Last 25 Years” couldn’t have come at a better time.

I recently exchanged emails with the authors Paul B. Carroll and Chunka Mui about their book:

B.O.B.: Failure is on everyone's mind right now - but you were interested in failure before all of this bad news - why did you want to focus on failure - which seems so "un-American" rather than success?

Actually, we became interested in failure because businesses had such a run of success. We worried that, under pressure to find growth and continue that success, executives might make rash choices and end up failing. We wanted to explore history to try to warn people off the mistakes they might be tempted to make.

B.O.B.: Do you see cases of history repeating itself right now - current companies that are making the same mistakes of those listed/researched in your book?

Absolutely. Bank of America's agreement to purchase Merrill Lynch fits numerous failure patterns. B of A seems to be focusing on the benefits while glossing over the potentially enormous additional problems that may come with Merrill's real-estate investments. B of A seems to be assuming that it can manage a brokerage business, an investment bank and a risky investment portfolio even though it has no expertise in any of those businesses--and actually got out of investment banking in the last year or so because it found the business perplexing. B of A's mistakes mimic those that Conseco made when it bought Green Tree Financial, then went into bankruptcy proceedings.

B.O.B.: Not many success stories in the news today - does that mean that businesses are getting worse at learning from the past?

No, businesses don't seem to be getting worse. The problem is they're not getting better, even though many of the mistakes that are coming to light have been made before and could have been identified ahead of time as bad ideas. Green Tree Financial was a well-known failure a decade ago, yet the subprime lenders repeated the mistakes. Long Term Capital Management's collapse drew all kinds of attention around the same time, yet Merrill Lynch, AIG and others that bought and held mortgage securities repeated LTCM's errors. Let's at least make new mistakes.

B.O.B.: Isn't it against our very nature to think about failure - aren't we supposed to be emulating the successful companies - not those who have failed?

Yes, humans aren't inclined to think about failure, and that's the problem. It isn't enough just to look at success stories. That would be like talking to the winners at a roulette table and assuming that following their strategies will let you win, too. You have to understand the failures to get a full picture.

B.O.B.: Looking ahead - do you think this tidal wave of failure will truly educate and enlighten our business leaders?

Most lessons won't stick, especially in the heat of the moment. That's why we recommend process and culture change mechanisms that might well stick. The smartest companies and managers will instill those mechanisms now, at a teachable moment, so that they won't fail to remember those lessons later, in the heat of the moment.

Questions, comments? bullishonbooks@cnbc.com