Editor’s note: This column was included in the June 20 version of The Pulse, a weekly BankBeat newsletter sent to subscribers.
A few weeks ago, I ran across a provocative LinkedIn post from consultant Jeff Marsico: Failure is critical for the evolution of a capitalist economy. My hackles were immediately up, especially in the wake of the Tri-State Bank failure in Kansas last year. What was Marsico thinking? But those words led to a blog post at the Kafafian Group, where Marsico is president, which explained his position in a way I could fully get behind. I encourage you to read the full post, but the core of his argument is this:
“Innovation requires business models that may be unique. Unique and untested business models could result in calamity. So long as the equity holders end up holding the bag, let calamity come. Evolution requires us to try, fail, and try again.”
Now here’s a viewpoint I can heartily endorse, despite my own risk-averse nature. Marsico isn’t advocating for carelessness or ignoring the dangers inherent in innovation. No one — bankers included — is going to develop the next big thing by playing it 100 percent safe. There’s more than enough room for experimentation in the range under that threshold, both at the institutional and industry level.
Otherwise, the fate of the industry is to shrink and keep shrinking, Marsico warns: “Bowing to plain vanilla business models encourages consolidation because scale will be the only thing left to distinguish one financial institution from another.”
I don’t mean to be dismissive of other kinds of failures, those caused by bad behavior or which cause devastation to their communities, like that of Tri-State Bank. But those are obviously not the kinds of failure Marsico is trying to normalize.
I think Marsico hits the nail on the head: Trying to eliminate every single kind of failure is a recipe for stifling innovation and development. I don’t blame the regulators for focusing so exclusively on the prevention side of the equation; that’s their job. But the rest of us should push the envelope a little bit in the interest of keeping the industry as a whole — and our own companies — healthy and evolving.
P.S. As a quick aside to anyone else who struggles with perfectionism and a fear of failure, I want to direct you to a piece in our archives by Kristina Schaefer of First Bank & Trust in Sioux Falls from a couple years ago. While it deals mostly with imposter syndrome, she’s got some timeless advice on how to keep a dread of failure from stopping your work.