Welcome to the Failure Age!
For decades, entrepreneurs and digital gurus of various repute have referred to this era as the age of innovation. But there is another, unexpected truth about innovation: It is, by necessity, inextricably linked with failure. The path to any success is lined with disasters. Most of the products that do make it out of the lab fail spectacularly once they hit the market. Even successful products will ultimately fail when a better idea comes along.
When a product or company is no longer valued in the marketplace, there are typically thousands of workers whose own market value diminishes, too. Our breakneck pace of innovation can be seen in stock-market volatility and other boardroom metrics, but it can also be measured in unemployment checks, in divorces and involuntary moves and in promising careers turned stagnant. Every derelict product exists as part of a massive ecosystem of human lives — of engineers and manufacturers; sales people and marketing departments; logistics planners and truck drivers — that has shared in this process of failure.
The original age of innovation may have ushered in an era of unforeseen productivity, but it was, for millions of people, absolutely terrifying. Over a generation or two, however, our society responded by developing a new set of institutions to lessen the pain of this new volatility, including unions, Social Security and the single greatest risk-mitigating institution ever: the corporation.
To succeed in the innovation era, says Daron Acemoglu, a prominent M.I.T. economist, we will need, above all, to build a new set of institutions, something like the societal equivalent of those office parks in Sunnyvale, that help us stay flexible in the midst of turbulent lives. We’ll need modern insurance and financial products that encourage us to pursue entrepreneurial ideas or the education needed for a career change. And we’ll need incentives that encourage us to take these risks; we won’t take them if we fear paying the full cost of failure. Acemoglu says we will need a far stronger safety net, because a society that encourages risk will intrinsically be wealthier over all.