An Approach to Failure: Wall St. v Silicon Valley

There are many different verticals to draw comparisons between Wall Street and Silicon Valley. It could be schedule, structure, culture, etc. – they really are endless. However, I don’t think there is any more insightful then this: their respective approaches to failure.

Definition of Failure

Let me be very clear about what I mean by failure. Failure is temporary – it is execution that did not go as planned. When failure becomes permanent, it is defeat – but that’s not what we are talking about. We are talking about temporary failure – with the chance to correct. You get it wrong once; you edit, tweak and revamp. Launch it again, and it works – that is success, not failure (although arguably you failed along the way, but it was only temporary)

Wall Street’s Approach to Failure

If Wall Street were baseball it would be a very peculiar game – one strike, you’re out. Even more peculiar then that, you usually have to hit one or two homeruns before you’re even allowed to step up to bat. Failure is not tolerated. New analysts have the same credo drilled into their brains no matter where they begin their career – check it once, check it twice, and check it again. Handing in work that has an off number, incorrect formula or other deficiency isn’t temporary – it can put a black mark beside your name for a long time.

This practice of punitive failure results in one of two things. Firstly, the person may become a perfectionist – work takes forever to get published/distributed because it needs to be checked three times by the person, three times by the desk, three times by legal, another time by the desk, two times by compliance, another time by the person, then one more time by legal – then it’s sent out. That’s the old joke about research – once its research, its history.

A second habit can form – the individual becomes locked in execution paralysis. They can’t get anything real done because they fear something will be wrong with it, and they will be penalized. Therefore they exist by just moving things around, doing busy work and never actually creating anything.

Silicon Valley’s Approach to Failure

Silicon Valley lies on the other end of the spectrum. Most companies encourage ‘rapid failure’ as a means to prototyping – that’s why Google’s products are in perpetual beta mode – they have an excuse as to why something might not work, it’s in beta! This rapid failing allows companies to rapidly test different products in the market place, and adjust at a much faster rate until they end up with the final product. They are much more agile when it comes to execution and delivery.

Comparing the Two

When comparing the two, first let me state my conclusion: Silicon Valley has a better approach than Wall Street – a culture that accepts failure as a step on the path to success will inevitably win over the long run. However, Wall Street isn’t the way it is out of pure adherence to the status quo. Admittedly, a mistake on a research report can cost a firm a lot more than just money – a loss of reputation, faith and trust. However, where Wall Street makes the mistake is that they apply this credo in a blanket across the firm – even to areas where it is not best suited. In my opinion, the best attitude towards failure would be like a good mixed drink – where the two spirits complement each other. Here’s my recipe for a strong, balanced approach to failure:

  • 4 parts Silicon Valley
  • 1 part Wall Street
  • Shake gently, pour over ice, serve with a garnish of humility (as we could all use a little of that!)

Now that’s something I can toast to.

Blair Livingston’s Blog


One thought on “An Approach to Failure: Wall St. v Silicon Valley

  1. This is the key to your post “However, where Wall Street makes the mistake is that they apply this credo in a blanket across the firm – even to areas where it is not best suited. ”

    Wall Street mistakes can be costly as we have seen first hand in the past few years. However, at the same time, junior people learn to live in fear rather then in a state of perpetual creativity. The challenge is, that in silicon valley, creativity is used to improve a process or a product … sometimes life as we know it. In wall street, creativity is rarely used on improving the clients life. It is normally used to find new ways to make money at the client’s expense.

    How do your encourage and reward creativity that is good for a firm’s clients? Especially in an age-dominated by profits and net margin. That will be a question that many wall street firms will have to ponder on as the world around them changes.

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