If we traveled back to the year 800 BC, in Greece, we would see that merchants whose businesses failed were forced to sit in the marketplace with a basket over their heads. In premodern Italy, failed business owners, who had outstanding debts, were taken totally naked to the public square where they had to bang their butts against a special stone while a crowd jeered at them. In the 17th century in France, failed business owners were taken to the center of the market, where the beginning of their bankruptcy was publicly announced. And in order to avoid immediate imprisonment, they had to wear a green bonnet so that everyone knew they were a failure. Of course, these are extreme examples. But it is important to remember that when we excessively punish those who fail, we stifle innovation and business creation, the engines of economic growth in any country.
Time has passed, and today we don't publicly humiliate failed entrepreneurs. And they don't broadcast their failures on social media. In fact, I think that all of us can relate with the pain of failure. But we don't share the details of those experiences. And I totally get it, my friends, I have also been there.
I had a business that failed and sharing that story was incredibly hard. In fact, it required seven years, a good dose of vulnerability and the company of my friends. This is my failure story.
When I was in college, studying business, I met a group of indigenous women. They lived in a poor rural community in the state of Puebla, in central Mexico. They made beautiful handmade products. And when I met them and I saw their work, I decided I wanted to help.
With some friends, I cofounded a social enterprise with the mission to help the women create an income stream and improve their quality of life. We did everything by the book, as we had learned in business school. We got investors, we spent a lot of time building the business and training the women. But soon we realized we were novices. The handmade products were not selling, and the financial plan we had made was totally unrealistic. In fact, we worked for years without a salary, hoping that a miracle would happen, that magically a great buyer would arrive and she would make the business profitable.
But that miracle never happened. In the end, we had to close the business, and that broke my heart. I started everything to create a positive impact on the life of the artisans. And I felt that I have done the opposite. I felt so guilty that I decided to hide this failure from my conversations and my resume for years. I didn't know other failed entrepreneurs, and I thought I was the only loser in the world.
One night, seven years later, I was out with some friends and we were talking about the life of the entrepreneur. And of course, the issue of failure came out. I decided to confess to my friends the story of my failed business. And they shared similar stories. In that moment, a thought became really clear in my mind: all of my friends were failures.
Being more serious, that night I realized that A: I wasn't the only loser in the world, and B: we all have hidden failures. Please tell me if that is not true. That night was like an exorcism for me. I realized that sharing your failures makes you stronger, not weaker. And being open to my vulnerability helped me connect with others in a deeper and more meaningful way and embrace life lessons I wouldn't have learned previously. As a consequence of this experience of sharing stories of businesses that didn't work, we decided to create a platform of events to help others share their failure stories. And we called it Fuckup Nights.
Years later, we also created a research center devoted to the story of failure and its implications on business, people and society and as we love cool names, we called it the Failure Institute. It has been surprising to see that when an entrepreneur stands on a stage and shares a story of failure, she can actually enjoy that experience. It doesn't have to be a moment of shame and embarrassment, as it used to be in the past. It is an opportunity to share lessons learned and build empathy. We have also discovered that when the members of a team share their failures, magic happens. Bonds grow stronger and collaboration becomes easier.
Through our events and research projects, we have found some interesting facts. For instance, that men and women react in a different way after the failure of a business. The most common reaction among men is to start a new business within one year of failure, but in a different sector, while women decide to look for a job and postpone the creation of a new business. Our hypothesis is that this happens because women tend to suffer more from the impostor syndrome. We feel that we need something else to be a good entrepreneur. But I have seen that in many, many cases women have everything that's needed. We just need to take the step. And in the case of men, it is more common to see that they feel they have enough knowledge and just need to put it in practice in another place with better luck.
Another interesting finding has been that there are regional differences on how entrepreneurs cope with failure. For instance, the most common reaction after the failure of a business in the American continent is to go back to school. While in Europe, the most common reaction is to look for a therapist.
We're not sure which is a better reaction after the failure of a business, but this is something we will study in the future. Another interesting finding has been the profound impact that public policy has on failed entrepreneurs. For instance, in my country, in Mexico, the regulatory environment is so hard, that closing a business can take you a lot of time and a lot of money.
Let's begin with the money. In the best possible scenario, meaning you don't have problems with partners, providers, clients, employees, in the best possible scenario, officially closing a business will cost you 2,000 dollars, which is a lot of money in Mexico. Someone who earns the minimum wage would have to work for 15 months to save this amount. Now, let's talk about the time. As you may know, in most of the developing world, the average life expectancy of a business is two years. In Mexico, the process of officially closing a business takes two years. What happens when the average life expectancy of a business is so similar to the time it will take you to close it if it doesn't work? Of course, this discourages business creation and promotes informal economy.
In fact, econometric research has proved that if the process of declaring bankruptcy takes less time and less money, more new firms will enter the market. For this reason, in 2017, we proposed a series of public policy recommendations for the procedure of officially closing businesses in Mexico. For a whole year, we worked with entrepreneurs from all over the country and with Congress. And the good news is that we managed to help change the law. Yay!
The idea is that when the new regulation comes into force, entrepreneurs will be able to close their businesses in an online procedure that is faster and inexpensive. On the night we invented Fuckup Nights, we never imagined that the movement would grow this big. We are in 80 countries now. In that moment, our only intention was to put the topic of failure on the table. To help our friends see that failure is something we must talk about. It is not a cause of humiliation, as it used to be in the past, or a cause of celebration, as some people say. In fact, I want to confess something. Every time I listen to Silicon Valley types or students bragging about failing fast and often like it's no big deal, I cringe. Because I think that there is a dark side on the mantra "fail fast."
Of course, failing fast is a great way to accelerate learning and avoid wasting time. But I fear that when we present rapid failure to entrepreneurs as their one and only option, we might be promoting laziness. We might be promoting that entrepreneurs give up too easily. I also fear that the culture of rapid failure could be minimizing the devastating consequences of the failure of a business. For instance, when my social enterprise died, the worst part was that I had to go back to the indigenous community and tell the women that the business had failed and it was my fault. For some people this could be seen like a great learning opportunity for me, but the truth is that the closure of this business represented much more than that. It meant that the women would stop receiving an income that they really needed.
For this reason, I want to propose something. I want to propose that just as we put aside the idea of publicly humiliating failed entrepreneurs, we must put aside the idea that failing fast is always the best. And I want to propose a new mantra: fail mindfully. We must remember that businesses are made of people, businesses are not entities that appear and disappear magically without consequences. When a firm dies, some people will lose their jobs. And others will lose their money. And in the case of social and green enterprises, the death of this business can have a negative impact on the ecosystems or communities they were trying to serve.
But what does it mean to fail mindfully? It means being aware of the impact, of the consequences of the failure of that business. Being aware of the lessons learned. And being aware of the responsibility to share those learnings with the world. Thank you.