The Very Failed Blog

“What doesn’t kill you makes you stronger.”

“You either win or you learn.”

“It’s the cost of tuition!”

These are mantras you hear in entrepreneurship a lot. They imply that we learn from our mistakes. That we become wiser. It’s a comforting idea. Entrepreneurship is hard, and the inevitable failures are a miserable pill to swallow. Thinking that they move us forward helps us to keep going.

Failure Doesn’t Equal Learning

But that’s not automatic. More often than not, we learn the wrong lessons. And so we make new mistakes, different in their details, but similar in their causes. If we don’t resolve the underlying beliefs and cognitive flaws that caused our mistakes, they will continue to generate new mistakes and new failures.

If, according to Hormozi and the other internet oracles, all we have to do to succeed is to keep going, why do so many quit? Are they cowards? Lazy? Weak?

Maybe. Or maybe they realize intuitively that all the motivational hoopla is bullshit. Because they can feel that the “grind” isn’t getting them anywhere. Or it’s even counterproductive. We see all around us examples of people who try repeatedly. They demonstrate remarkable”grit,” but have little or nothing to show for it. Why not? The common denominator is failure to learn from mistakes, both our own and others. We repeat similar errors over and over.

Grit and perseverance are only useful insofar as they enable us to live through many experiences that gain us wisdom. But wisdom isn’t gained just by having the experience. You have to learn the right lessons.

So how do you do that?

My Method

I won’t pretend I have the wisest answer to that. I’m not rich yet, so take everything I say with a grain of salt. And when I am rich, you should be even more skeptical, as success often breeds hubristic delusion, a malady to which I’m highly susceptible.

But I can tell you how I’ve analyzed my mistakes thus far. And I think it has helped. Time will tell.

You can decide for yourself if my method is useful. One thing is clear: you must have a method for analyzing mistakes. You also need a system for improving that method over time with feedback. This way, you become an ever-better learner and can make better decisions.

My framework is simple. Once I realize I’ve made a mistake, I carve out some time to sit down and reflect on it. I drop distractions, and arm myself with pen and paper. I write down the bad outcome. For example: “We lost $500k on the fort.”

I then ask “why?” and I write down everything that comes to mind. It’s often 5-7 things, smaller mistakes that contributed to a bad outcome. I then break down each of those. I continue asking “why” 5-7 times for each one. Write quickly, without overthinking or second-guessing. Write what pops into your mind. We’re trying to elicit truth from the gut. We’ll apply logic later when we do our analysis.

The point here is to get to the underlying cognitive flaws. In my experience, it’s rarely ignorance. Where the cause is ignorance, that ignorance was a known liability. It was solvable in advance.

The real question is, why didn’t I pay attention to it? Why didn’t I address that risk?

The answer was bad beliefs and limiting decisions. These are counterproductive statements or sentiments. At some point in the past, I had subconsciously decided they were true. They were negatively affecting my thinking and decision making in subtle ways.

A Practical Example

This concept is best illustrated by a specific example. I’ll use the fort incident mentioned above. I plan to write about this particular mistake in a later article. For now, I’ll summarize it so you have context for the exercise.

In the spring of 2022, my business partner in the roofing company bid on a government project on a military base. We had never done such a project before. His bid process was not detailed enough to ensure we were covering all of our bases. The GC awarded us the contract, but their email went to spam, so by the time he realized it, we had less than 24 hours to sign. That’s when he told me about it. With no time to analyze the details, and immense pressure from him, I ignored my gut and all the warnings. I signed the contract. Worst decision that year. It went south immediately. The crew that had bid it for us backed out because their “yes” had been fake all along. (It was brow beaten out of them by my partner).There were strict requirements for work on the fort that were unfamiliar to us. We hadn’t properly accounted for them.

And the most deadly mistake of all, the guy we found to do the work on short notice was a fraud. Four months in, we had lost over $250k in cash. We had also lost more than that in business from having people tied up on the fort instead of doing profitable jobs.

Let’s analyze this mistake together using my method. This will help you get the picture.

We lost “500k” on the fort. “Why?”

• We got a bad yes from a sub
• The new sub was a fraud
• We didn’t understand the requirements
• We didn’t bid high enough
• We didn’t take our time to understand everything

There’s more, but for the sake of this post, let’s move on.

Beneath these, I broke out sub-mistakes, and so on. And as I drilled down on each one, grilling myself on how it happened, a pattern emerged. In every case, I either knew there was a problem, or I knew that we had a knowledge gap that could prove disastrous. None of it was unknowable in advance. Now it was time to get into the beliefs. Here the analysis takes the form of a dialogue:

• “So, why didn’t I protect the downside?”

• I didn’t want to upset my partner. “Why not”

• Because I’m the junior guy. It’s not my place. “Why not? This is one of the reasons you’re here. To balance him out. Why didn’t you do that?”

• Because I don’t feel like an owner. “Why not?”

• Because I don’t deserve to be one. “Why not?”

• Because he has all the industry knowledge and experience. “He made you his partner for a reason though.”

• That’s because he doesn’t realize I’m a fraud. Or maybe he feels sorry for me.

Oof.

Enough navel gazing. You get the point, though. I had some very nasty limiting beliefs. They were affecting my ability to deploy my knowledge and judgment. (Also in this case, the beliefs were intensified by the fact that my ongoing role in this company was out of alignment. More on that elsewhere.)

These beliefs also caused me to take a scarcity-driven approach to ecommerce acquisitions. This approach resulted in the catastrophes I’ve generously cataloged for you in this blog.

That’s how I analyze past mistakes. Break them into component parts. Drill down as deep as possible. You’ll arrive at an underlying bad belief, decision, or cognitive bias. In some cases, the root of the problem may be the unavoidable ignorance of being new at something. In which case we can write it off as the cost of tuition. Money well spent. But for me, this has only been the case a couple of times. The bulk of my errors were avoidable using knowledge I already had at my disposal.

The Decision Register

Another useful thing I’ve found for making sure that I get an accurate analysis of past mistakes is Shaan Puri’s decision register. It’s a simple google sheet of all the major decisions you make. Each time you make a decision, write down the basics, what you’re thinking and feeling about the pros and cons. At a predetermined time, revisit the decision and analyze how it has played out. Figure out what you got right and what you got wrong. This helps prevent selective memory and historical revision. This helps prevent selective memory and historical revision. It holds me accountable to what I was actually thinking at the time, not what I remember thinking. Humans are abysmal at remembering our past wrong opinions. (See Daniel Kahneman’s book “Thinking, Fast and Slow”).

Application

Ok. So we have a way to analyze our past failings and elicit lessons. But how do we make sure to apply them to future decisions? First, we break them into three categories. These are: limiting beliefs and decisions, general lessons, and specific lessons.

Beliefs

Limiting beliefs and decisions are the most critical. If they aren’t in order, they will continue to prevent the correct application of the knowledge.  I’m not a shrink or a life coach, so I can’t tell you the best way to handle these. I can tell you that what I did was hire an NLP (neuro linguistic programming) coach to help me release those beliefs and decisions using timeline therapy. This technique aims to get at the core of why you adopted a belief or decision. It also aims to extract learnings from them, so that you can release them. I’m not qualified to speak on the science of this. What I can say is that since releasing limiting beliefs and decisions my thought process is much clearer and I have more inner peace.

You may choose to tackle beliefs with therapy, force of will or affirmations. In my experience none of these resolve the core problem. But maybe that’s just me. However you go about it, getting these handled should be a priority.

Knowledge

Once we have the beliefs/ decisions handled, it’s time to make sure we apply the knowledge we learned.

Knowledge gained from failure falls into two categories: general and specific. Specific knowledge will be invaluable when making the same kind of decisions. For example, if I ever do another ecommerce acquisition, I’ll have a lot of specific knowledge to draw on from my previous failures. (Like including inventory and working capital in my ROE calculations. duh!!) I add specific knowledge to a checklist. I consider these things when making those kinds of decisions. For the acquisitions learnings, I added them to my due diligence checklist. I also used them to create a payback matrix that we use to evaluate risk. We now use the matrix to determine the length of payback we’re willing to accept on a deal.

Reference general business learnings when making any business decision. For example, one of the lessons I had to learn the hard way in all my acquisitions: “Understand and own the value-driving function of the business.” Or “Don’t assume strangers have the same values you do. Make sure you can win regardless.”

This would apply to any business situation, whether it’s an acquisition or not. But it’s a little harder to ensure we’re applying all those lessons to a new situation. One way is to keep a running tally of all the broader lessons you’ve learned. I call this the “Decision Filter.” Run through this list and make sure you’re applying those lessons to each new decision.

For example, one of the biggest lessons I’ve learned is that decisions taken out of fear, greed or desperation lead to bad outcomes. So now when I make a decision, I check in with my gut to make sure I’m not acting from any of those emotions.

(This is another place the decision register comes in handy. It makes you document how you were feeling and what your thought process was at the time of making a decision. So when you’re making a new decision you can ask “Am I thinking/ feeling in a way consistent with my good decisions or my bad decisions?”)

Final Thoughts

For future big decisions, I also plan to bring in a knowledgeable outside party to help evaluate my decision. They will read the decision register to see my track record, how I think and what my blind spots are. They will evaluate the decision on their own, before looking at any of my reasoning. They will think of every way things could go wrong. I will have to provide satisfactory evidence that we can confidently mitigate all those risks before moving forward.

I’ll let you know how this goes.

There you have it. That’s my method so far. As you can see, it’s still in development. But, it’s infinitely better than hoping I remember everything I’ve learned next time I have to make a critical decision. I am hopeful that in developing this method over time with feedback from reality, I will become a better decision maker. Which is the ultimate superpower.

I hope you find this helpful. 

Good luck out there. Stay safe, and stay solvent!