Why Is the Right To Fail So Important?...and, Why It is Mostly Unique To America

The American economic system of capitalism is unique in the industrialized world. Forms of capitalism exist in many countries, and the one general statement that applies to its usage is that capitalist countries are always more prosperous than non-capitalist states. That being stated, why is American capitalism so advanced, successful, admired and feared?

We all know that America offers the most dynamic advanced economy in the world. Brands such as Coca-Cola, McDonalds, Estee Lauder, IBM, MicroSoft, Kentucky Fried Chicken and hundreds more are badges of the amazing success of the American model in achieving worldwide prominence. Each of these enterprises were born of entrepreneurial roots, grown with care, and gracefully matured into powerful engines of profit. Other countries can proudly point to their own corporate successes (Finland and Nokia, France and Schlumberger, Chanel, Ireland and Waterford, etc.) No country, however, sports the depth and variety of colossal world brands as the United States.

So what accounts for the amazing growth and breadth of successful American enterprises in a very competitive global marketplace? And, what makes the American field of play so different and compelling as a job, profit and opportunity generator? There are many reasons that can explain parts of the template for success. However, an alpha element is that the United States system does not permanently cripple an entrepreneur who has experienced failure, even several failures.

Many successful entrepreneurs, while enjoying the fruits of their successful efforts, have also suffered the agony of failure. The American model does not insure the right to succeed, jut the right to try. This is not true in most other capitalist countries. Failure is not an option. Barriers to entry are high. Taxes, fees, regulations and restrictive covenants are almost universally more difficult than in America.

The opportunity to fail is not something that any entrepreneur initially considers as an asset. However, it must be considered that most new enterprises do not succeed. Business closings and bankruptcy is very high for new enterprises. Many entrepreneurs, having suffered the disappointment of failure, simply move on and look for a regular source of income. Real entrepreneurs will not give up. They have the genetic makeup necessary to succeed as an entrepreneur. They will keep trying.

I can attest to the difficulty of being an entrepreneur in other capitalist countries. I have started businesses in England, France, Sweden and Spain. When seeking to organize in these capitalist (to a varying degree) countries I was amazed at how difficult it was to satisfy the state. Upon reflection, exploring and experiencing the vagaries of these bureaucracies, I discovered a blunt answer for the very high real costs to enter a new business: these states use extreme barriers to minimize the chance for failure.

Fortunately it is just the opposite here in America. Small business incubators, regional business development centers, university entrepreneurial programs and mentoring organizations encourage the attempt to create opportunity for new enterprises. The result is a wildly vigorous stream of new product, invention, service and enterprise seeking to capitalize on the American economy’s vigor and need for constant sources of growth. All of this occurs while the risk of failure remains daunting for new start-ups.

The growth of the American economy can be attributed to the constant stream of small companies supplying ingenuity, new products and rapidly growing sales and income streams. Virtually no new jobs have been added in Europe over the past two decades. In 2005, America generated over two million new jobs alone.

Growth of the United States economy is not being driven by the mature multi-national companies associated with prosperity in the past. IBM, GE, General Motors, Delta, Delphi, and dozens of other formerly powerhouse firms are downsizing, firing employees and trying to re-invigorate their static business models. The growth of thousands of small businesses entering this vibrant marketplace is the real generator of growth, jobs and profits. The reality that many fail and a few succeed is the strength of the system.

The high barriers to entry applied by so many of our capitalist competitors minimizes their ability to be creative, innovate and take appropriate risk/reward decisions in this brutally competitive global market. This attempt to insure success is actually the death knell of real opportunity.