On Black Monday, October 19, 1987, the stock market fell 22% - the largest percentage drop in the Dow in history. The impact on my trading positions was calamitous. It blew a bankruptcy-sized hole into my account and wiped out the gains made in the prior two years.
Back then I was a 26-year-old “veteran” of the trading floor at the Chicago Mercantile Exchange who, two years before, had taken a $5,000 stake and turned it into a pile of cash for my personal trading account. Now it was all gone and I was dead ass broke! I went to bed thinking of myself as a superstar and the next morning, I was wondering if I should fill out a job application to sell life insurance. I was devastated.
In entrepreneurship, defeats of this nature are a foregone conclusion and failing is a way of everyday life. In preparation for starting a private equity business years later, I read every book I could find, to brace myself for the failure that awaited me.
It didn’t work. I still got clobbered and it always hurt.
Entrepreneurship is like running a wilderness gauntlet where everyone is beating on you with tomahawks and clubs. While rank-and-file employees in a big corporation are generally insulated from the weight of a company’s failures, an entrepreneur has no such relief. We see and feel it all, living as close to the victories as we do the defeats.
So why not work as an employee for BIGCO?
For many entrepreneurs, there is an idea that burns within them. They believe executing on it will make the world a better place. Stewardship demands that they give birth to it and help it walk. Working for another business just isn’t an option.
To add to the challenge, the entrepreneur’s burden must be carried alone. You shoulder it for your team, touting business viability, absorbing bad news, and believing regardless. If they knew what you were really feeling, they would probably quit, and that’s not an option. You shield your spouse by giving an edited version. They’ve already accepted the risk of your new venture, so handing them the frustration that follows is just cruel and unfair. Your best chance for support comes from friends outside your venture, and while it is invaluable, it cannot solve for the fact that for the most part, you’re alone in the struggle.
During last year’s World Series broadcast, commentator John Smoltz talked about baseball as a game of failure management. Smoltz explained that in a sport with such infrequent success, a failure management strategy was essential for survival. The best hitters fail seven times out of ten. Without an effective means to deal with this reality, you will lose the confidence required for the three hits. He normalizes these baseball odds: accept them, plan for them, and adopt a failure mentality in order to become a success.
Entrepreneurs are also in the failure management business. Although numbers vary, in the deal world it seems that three of ten feedback loops are horribly negative and can come from anywhere. Maybe a crop failure, a bad weather event or someone reneging on a contract. These demand immediate energy and focus. Assuming that works, the next six responses are negative to neutral. Challenges with an employee, a project delay, or a problem with a loan. Without some attention, they can cause real problems.
And then, a single piece of good news. Maybe a seller has agreed to our price. Or a new deal is found. Maybe an impasse with an adversary is resolved. On this success, a foundation is built.
This is the math of my business, and it makes hitting a baseball seem extravagant and easy. We’ve come to accept these numbers for what they are and play on. We triage the catastrophes, manage the neutrals, and build on the positives, no matter how few. This has been our approach to failure management for the past twenty-five years. And while we’ve tweaked our approach and prioritized better odds, my hunch is that these are just the numbers.
How you deal with your failures will not only determine the success of your venture, but also the quality of your life.
In case you wondered, the 26-year-old version of me ended up surviving Black Monday. I snapped out of my trance of self-pity, accepted the mistakes I had made, and started on what I could do - buying and selling. Ultimately, I rebounded to where I had started the week, and ended up turning catastrophe into a success.
Press on. Persevere. Endure. You are not alone, and the end is not the end. As you become the kind of person who confronts crises and doesn’t blink, you can lead your team to the other side and become a more valuable person to the world.
Good luck.
