so levitt you're a fairly successful fellow thank you i'm just curious um have you succeeded everything you've ever done no i've mostly failed at everything i've ever done particularly well definitely golf golf has been a lifelong failure you know when i was a kid all i wanted to do was professional golfer and thank god that i was so bad at golf that i couldn't even imagine trying to be a pro golfer i think one of the worst lives you can have in some sense in a modern world is thinking you're good enough to play pro golf not being good enough to play pro golf struggling for a decade or 20 years and then you got nothing to show but luckily i was so bad i couldn't even pretend to follow that now now you also failed at becoming the kind of economist that you thought you should become when you first started studying economics right yeah i started out as a macro economist wannabe and very quickly i realized that modern macro was all about solving dynamic optimization models then i wanted to be an economic theorist and i actually that was more dangerous because i i actually was able to publish some papers that were pretty good in pretty good journals but the thing that saved me on being a micro economist is actually a funny story which is that one of my advisors at mit i walked into his office and um he said so what have you been working on dave now any normal person would have said oh actually my name is steve but i didn't do it and he called me dave for literally weeks and months it got so bad that at the annual party of the faculty and students i gathered around all of my friends i said look he's gonna call me dave just don't worry about it and finally it was not that i thought i couldn't be a theorist it was that i was so embarrassed and traumatized by the idea that at some point i was gonna have to say to my main advisor that my name was actually steve not dave after six months of pretending but i said i should just freaking talk theory and go do something from wnyc this is freakingomics radio the podcast that explores the hidden side of everything here's your host steven dupner in last week's episode we talked about quitting specifically the upside of quitting why are so many people so reluctant to quit one reason is that we tend to equate quitting with failure and there's a huge stigma attached to failure but should there be in our new book think like a freak we make the argument that perhaps we are not thinking clearly about failure maybe failure can be a friend i always tell the students fail quickly the quicker you fail the more chances you have to fail at something else before you eventually maybe find the thing that you don't fail at here's the thing when failure is stigmatized demonized people will try to avoid it at all costs even when it represents nothing more than a temporary setback steve levitt my freakonomics branding co-author he does some consulting on the side he tells a story about one of his earliest consulting jobs with a big multinational week earlier this was a firm like many firms ahead of very particular culture and this was a culture in which if you ever said anything bad about the firm or the prospects of the firm you were a culprit you were not a team player this firm was about to open its first store in china in shanghai it's a pretty big deal and for all kinds of reasons it was really important that the store open on time so about two months before the scheduled opening the ceo summoned the leaders of the seven teams that were involved in the store's opening and he asked each of them for a detailed status report all the reports were positive then the ceo asked all 17 leaders to pick one of three signals green light yellow light or red light to show how confident they were that the shanghai store would indeed open on time all seven went with the green light everyone was so excited they were completely on track for this opening two months later now there was a very smart set of people this firm who completely understood how this culture while helpful in some ways was potentially detrimental in others so they had set up an internal prediction market and they wanted people to be able to express their true opinions in the market this prediction is a great way to get people to tell you the truth because it's anonymous and because their actual incentives money incentives tied to it and it's fun because people like to win it was a competition so you could amass the most money by buying and selling securities that were tied to the outcome of the firm and unlike a stock market which is not supposed to allow insider knowledge this is actually the opposite right in a firm you're trying to get the best knowledge you can from people who actually are working on the project exactly the firm had put this internal prediction market into place exactly with the hope that they could learn the truth about what was going on because they weren't sure they were learning it otherwise this prediction market offered one bet on whether the chinese store would open on time now considering that all 17 leaders involved in the opening had given it the green light you might think that everybody at the company would be bullish they weren't the company's internal prediction market showed a 92 chance that the store wouldn't open on time so guess who was right the anonymous bettors in the prediction market or the team leaders who had to stand in front of their bosses so even though the seven teams that all said we're sure we're on track everybody basically knew almost for sure that there was almost no chance the store would open on time and indeed the store did not open on time what does that say about these 17 leaders who had to present to the ceo and their fear of failure was it fear of failure was it just fear of appearing that they're not doing their job well how does failure factor in well you know it's funny because in this case failure can be defined in different ways i mean ultimately they felt the store did not open could you pin that failure on any individual not really but it's tricky because the incentive and we've talked so much about incentives over the years and what kind of incentives i mean obviously there were some financial incentives associated with that wasn't yet i think that what really was most costly is for you to stand up in the room and be the only one willing to say i'm really sorry and i know we've been planning this launch for five years but we botched it and we're not going to make it but there's no place for that so it's easy especially from a distance to criticize 17 leaders who told their ceo that they were sure the store would open on time from the sound of it the ceo had what is called go fever you ever heard go fever that is a phrase associated with nasa having to do with rocket launches when a boss catches go fever it can take a lot of courage to focus on potential failures just think of all the factors working against you with momentum institutional politics ego and the consequences of go fever can be far more tragic than the delayed opening of a retail shop in shanghai on january 28th 1986 nasa was planning to launch the space shuttle challenger from kennedy space center in cape canaveral florida the mission had drawn massive public interest largely because the crew included a civilian a school teacher from new hampshire and christian mccullough well i am so excited to be here i don't think any teacher has ever been more ready to have two lessons in my life the launch had already been delayed a few times on the night before the new launch date nasa held a long teleconference call with engineers from morton fiacal that's the contractor that built the challenger's solid rocket motors okay well i'm alan mcdonald mcdonald was one of the fiacal engineers on site in cape canaveral at the time i was the director of the space shuttle solid rocket motor project for my company morton fiacal it was unusually cold in florida there is a meteorologist in orlando that's saying that these strong winds we saw today are being followed by extreme cold front moving toward the cape and they're expecting to see temperatures maybe as low as 18 degrees fahrenheit by tomorrow morning at the opening of our lunch window and i said good grief i said i'm really concerned that our o-ring seals and these big joints will operate properly those kind of temperatures these o-ring seals kept the extremely hot gases of 6 000 degrees hot from escaping the shuttle boosters you do not want those gases to escape the shuttle boosters but as mcdonald later described in his book truth lies and o-rings the boosters had never been tested below 53 degrees and the forecast for launch morning was calling for temperatures much lower than that so on that teleconference call the night before the launch mcdonald and his team recommended that the launch be postponed again and nasa immediately challenged the basis for such a recommendation which really surprised me because prior to that time i had given every flight readiness review for every flight since i had was put on the program and i was challenged at every one of them of making sure that i could say it was safe enough to fly and here all of a sudden we recommended not flying and they challenged the basis for that mcdonald couldn't believe that nasa wanted to launch despite what he saw as an obvious risk i was amazed that uh they made such statements because we always erred on the side of safety in fact the engineers got put into a position to prove that it would fail and they could not do that that's a whole different question according to mcdonald his boss back at morton fiacal headquarters in utah got off the nasa conference call for about 30 minutes to talk about the situation with other fiacal executives when he got back on the line mcdonald says the recommendation to postpone the launch had been reversed mcdonald was angry but he'd been overruled the launch was back on now nasa requested that the responsible morton fiacal official sign off on the decision to launch i knew who that responsible fiacal official was that was me that was my job that was my responsibility that's why i was where i was at and i did the smartest thing i ever did in my entire lifetime and that was i refused to sign the launch recommendation as a result of that my boss had to sign it and send it down to me which he did by fax machine as the engineers were waiting for the fax mcdonald spoke up again so then i got more frustrated i said well let me tell you something i certainly hope nothing happens tomorrow but if it does i'm not gonna need the person to stand before a board of inquiry explain why i gave you permission to fly these solid rocket motors in a condition that i knew they were never qualified to do coming up on free comics radio you know what happens next morning don't you the only thing i saw flying were the solid rocket boosters they were still going everything else had disappeared this huge explosion cloud in teeny pieces and what if you could learn how you might fail without going to the trouble of actually failing so lean back in your chair get yourself calm and just a little bit dreamy i don't want any daydreaming but i just want you ready to to be thinking about things from wnyc this is free comics radio here's your host steven gutner so alan mcdonald was the director of the space shuttle solid rocket motor project for morton fireball company working with nasa on challenger shuttle launch the night before the launch mcdonald recommended the launch be delayed out of concern that the shuttle's o-ring seals might fail in the unseasonably cold florida weather but mcdonald was overruled the next morning he walked to launch control during my briefcase in one hand my headset in the other and uh it was like 22 degrees and i saw these icicles hanging all over the place and i said to myself they obviously haven't launched this thing today and i was amazed they finally came on and said they were going to send a team ice team out to see if they could knock the ice down as much as possible to reduce the debris risk and they did that they ended up doing that actually twice before they finally win the terminal count and launched the challenge nine eight seven six we have main engine start i remember i held my breath three two one and liftoff you liftoff on the 25th space shuttle mission and it has cleared the tower 73 seconds later to see this thing blow up in the sky i was in shock i said it blew up my heart sank just like everybody in that control room and i could hear people sobbing in the background and i kept hearing this voice over the network saying rtls rtls which is return to launch site and not getting response back from the arbiter the only thing i saw flying were the solid rocket boosters they were still going everything else had disappeared in this huge explosion cloud in teeny pieces we have a report from the flight dynamic officer that the vehicle has exploded our director confirms that we are looking at uh checking with the recovery forces to see what can be done at this point no way they could survive that in my opinion and they didn't obviously at that point mcdonald says the cause of the explosion was unknown we were told to not copy anything off the screen they're all frozen they locked the doors they cut all the telephone lines so nobody could talk to anybody held the meeting saying that all the data would be considered secret and uh really wasn't until the next day that i really realized what had happened in the days after the accident mcdonald says a review of the data showed the cause of the explosion to be what he had feared might happen the o-rings failed to hold their seal in the cold temperature that's exactly what happened this cause was later made official by a presidential commission to which alan mcdonald contributed testimony in the televised portion of the hearings the physicist richard fineman famously demonstrated the cause of the failure by dropping the o-rings into some ice water well i took this stuff that i got out of luceum and i put it in ice water and i discovered that when you put some pressure on it for a while and then undo it it maintains it doesn't stretch back it stays the same dimension in other words for a few seconds at least and more seconds than that there's no resilience in this particular material when it's at a temperature of 32 degrees i believe that has some significance for our problem now of course alan mcdonald already knew that at least that's what he was worried might happen and that's what makes the challenger explosion so remarkable even more tragic than it was the people in the know at least some of them had foreseen the exact cause of failure so why even with that warning did nasa push on what really happened was typical i think in large bureaucratic organizations and any big organization where you're frankly trying to be a hero and doing your job and nasa had two strikes against it from the start which one of those is they were too successful they had gotten by for a quarter of a century now and never lost a single person going to space which was considered a very hazardous thing to do and they had rescued the apollo 13 halfway to the moon when part of the vehicle blew up seemed like it was an impossible task but they did it so how could this cold o-ring uh cause a problem when they had done so much over the past years to be successful so it gives you a little bit of uh arrogance you shouldn't have and huge amount of money involved but they hadn't stumbled yet and they just pressed on so you really had to quote prove that it would fail nobody could do that you might think it's a rare case when a group of decision makers know with such precision just what will go wrong with the project but is it what if there were a way to peek around the corner on any project to see if it's destined to fail that is if you could learn how you might fail without going to the trouble of actually failing i'd like you to meet gary klein i'm a covenant psychologist i got my phd back in 1969 in experimental psychology klein's most recent book is seeing what others don't the remarkable ways we gain insights he studies decision making especially how people make decisions in real settings like the challenge of launch the challenge of incident has been intensely studied and serves as a wonderful object lesson and what we saw here was repression of consequences that you didn't want to have to deal with because it would have been so inconvenient. So we make the argument in our book that there's a general reluctance to quit or to untangle ourselves from projects or relationships or whatnot. And that's in part because failure is seen as such a stigma. No one wants to.
We don't want to quit because we don't want to be seen as having failed. And so let's talk, first of all, about the stigma of failure. Do you think it deserves it or do you think we should rethink the way we consider failure generally? Well, the standard line is that you fail often to get smarter and you fail in productive ways.
And it's a way of building mental models. And all of those things are true. So how can failure be made more fruitful? Gary Klein has one idea, which I think is pretty brilliant.
It's called the premortem. You've surely heard of a postmortem. That's the process by which you figure out what exactly killed, say, a hospital patient or maybe a big project. Theoretically, everybody benefits from the knowledge you gather during a postmortem.
Everybody accept the patient because the patient is dead. The idea of a premortem is to try to run through that process before the patient dies. But the patient in this case, we should say, is not a human, but it's a project or a product or something like that, correct? Exactly, exactly.
With a premortem, you try to find out what might go wrong before it goes wrong. How does this work? Gary Klein will walk us through it. Imagine you work for a company that's about to launch some big project that you and a lot of others have been working on for months, maybe years.
But before you launch, Klein gathers all the important team members in a room. I need you to be in a relaxed state of mind. So lean back in your chair, get yourself calm and just a little bit dreamy. I don't want any daydreaming, but I just want you ready to be thinking about things.
And I'm looking at a crystal ball and, uh, oh, oh gosh, the image in a crystal ball is a really ugly image. This is a six month effort. We are now three months into the effort and it's clear this project has failed. There's no doubt about it.
There's no way that it's going to succeed. Oh, and I'm looking at another scene a few months later. Project is over and we don't even want to talk about it. And when we pass each other in the hall, we don't even make eye contact.
It's that painful. Okay. So this project has failed. No doubt about it.
Now for the next two minutes, and I'm going to time this, the next two minutes, I want each of you to write down all the reasons why this project has failed. We know it failed. No doubts. Write down why it failed.
I keep the script clock because we don't want to chew up too much time on this. And I see everybody is writing and I say there's 20 seconds to go and they're writing faster because they're trying to get everything in. And now five seconds and then, okay, finish the sentence and then pencils up. Now Klein would go around the room and ask for one item from each person's list and they compile a catalog of all the ways the project might fail.
Klein calls this perspective hindsight. And what does it accomplish? It really reduces overconfidence and people are usually way too confident at the beginning of the project. So the pre-mortem tempers that overconfidence.
Now Klein would ask everyone in the room to think of one thing they could do to help the project. And then we go around the room to see what people are planning to do that they hadn't thought of before to try to make it more successful. So you put a happy ending on a potentially sad story. Exactly.
That's what we're trying to do without sugarcoating the problems that that faces. Now here's an obvious question. If you are running a pre-mortem and everybody involved with the project is able to come up with a few ways in which the project might fail, why are these potential problems only coming up now when the project is about to launch? Gary Klein says that's because the pre-mortem liberates people who may otherwise be afraid of looking like they're not a team player.
Because now everybody's being asked to think about failure. So instead of looking like a bad teammate, you are pulling in the same direction as everybody else. Now the demand characteristic is show me how smart you are. Show me how clever you are and how experienced you are by identifying things that we need to worry about.
I'm curious to know how well the pre-mortem is catching on because I feel like whenever I describe it to a group of people small or large, they're blown away by it. They love the idea. And very few of them have heard of it. So I'm curious for an idea that sounds so great, sounds so practical.
Why hasn't it taken over the world a bit more? That's very kind of you. I'm not entirely sure. I think one reason is we have not gone out of our way to publicize it.
This is just a kind of activity that grew up out of our own practice. And we were just doing it internally. And after that, we would do it with a few project managers and sponsors. And they said, can you use it with some of our other projects, even though you're not involved?
So I sort of see it the other way. I'm surprised at how many people are using it. I hear about people using it. I've never, nobody ever mentioned it to me.
So I'm impressed that it's gotten as much mileage as it has. I went back to Steve Levitt with a couple of questions. Why do you think there's such a stigma associated with failure generally? I think to be willing to accept failure, you have to have self-confidence, that you have to be accepting of the idea that failing doesn't define who you are.
Failing gets something out of the way that keeps you from finding the thing that you're actually going to be good at. And I mean, we're spoiled, right? You and I both have stumbled onto a lot of success. And it's so much easier to be terrible at things and to admit you're terrible when in other parts of your life, you get rewarded and people write you letters and say you're great.
So I think it's easy for us to accept failure. And honestly, you know, I think I've gotten much better as I've gotten older at being able to laugh at myself. I was really insecure for a long time. I didn't want to show people as bad.
But no, I think I've actually gotten, I mean, I often will laugh when I do stupid things. I laugh the hardest. So what's the strategy if you're the CEO or if you're another CEO, even if you're the CEO of a two person operation listening to this, what is the strategy to encourage people to acknowledge that failure may happen and that we'd be much better off dealing with the failure beforehand than after? I think the only credible way to make failure acceptable is to celebrate failure.
I know in my little firm, DGG, The Greatest Good, we had our greatest failure actually turned out to be our greatest success, I think, in terms of morale building when I got to give a speech to one of our clients. And I told the truth in that speech. And it led to our being fired the very next day. The executives at the company, it turned out, weren't interested in hearing the truth.
And unceremoniously through email, we were fired from one of our biggest accounts. And the thing was that we celebrated it. Not just pretend to celebrate, we really celebrate it. Because our view was, there's no point in staying up all night working on projects for clients if they don't appreciate it.
If they don't want to hear the truth, then how in the world do we want to spend our life doing this work? And what happened was the people at our little firm, I think they would have thought we'd be upset. And it wasn't just me, the other people who ran the firm. We couldn't have been happier.
And we broke up beer and wine and we celebrated the fact that one of the biggest companies in the world had decided to fire us because we told the truth. And I think, you know, one of the things that you and I have really come to believe over time is that's really not for most people about money. There's something bigger. That if you're going to work hard and do something, it's about the pride and the joy of feeling like you're part of something bigger, something exciting.
And the folks who worked at our little consulting firm actually felt that day that it was about something bigger, that we were about the truth. We were about doing good work. And that's hard to do in a business setting. But it was, you know, I don't know, I want to get all misty on it, but it's kind of magical.
Hey, podcast listeners, on the next week on this radio, it's time for the World Cup, which means that every sports fan in America, including my 13-year-old son, tries to get excited about soccer. What soccer? You don't let me say the word soccer, do you? No, I do not.
You'll hear from football fanatics, including Andrew Luck, quarterback for the American football team, the Indianapolis Colts. We asked him what it would take to finally turn the U.S. into a footy-loving nation. I think more of a Pied Piper would be a U.S.
national team, you know, winning the World Cup. You know, as we know, we love winners in this country. World Cup fever and why we don't catch it. That's next time on Freakonomics Radio.
Freakonomics Radio is produced by WNYC and Dubner Productions. Our staff includes David Herman, Greg Rosalski, Greta Cohn, Bure Lamb, Susie Lechtenberg, and Chris Bannon, with engineering help from Jim Braves. If you want more Freakonomics Radio, you can subscribe to our podcast on iTunes or go to Freakonomics.com, where you'll find lots of radio, blogs, books, and more.