The Failure of Government Programs

If there is one entity that fails to learn consistently, it's government.

The crux of national policy for most if not all western governments over the past century has been to improve equality among their citizens (aka "voter base...").

Yet almost without fail... (pun intended...) - the result has been the exact opposite.

Paul Ormerod, in his terrific analysis of failure across all segments of government and industry, Why Most Things Fail: Evolution, Extinction and Economics , provides some telling statistics on the progress - or lack thereof - of government policies worldwide:

The role of the government and direct involvement in the economy has grown considerably in every western country from 1950 to 2000

In 2000, Subsidies for the poor, welfare, tax breaks etc accounted for almost 20% of EU countries' national income

Even in the uber-capitalistic US of A approximately 10% were spent on such items

Overall, in the EU gov't spending accounted for as much as 48% of national income - 36% in the US

Yet equality in western nations is on the decline!

In other words, billions and trillions of dollars are being spent on programs that are failing.

Does it look like western governments are drawing the necessary conclusions from such failures? Are they LEARNING? Not that anyone can tell, as widely accepted economic equality indices such as the Gini coefficient continue to increase.

Why Start-ups Fail

Back in mid-2000, as the first dot.com bubble was imploding, Philip J. Kaplan wrote a wonderful little book called F'd Companies: Spectacular Dot-com Flameouts (highly recommended, and not just for the educational content, it's an amusing read!!)

In his introduction Kaplan delineates, sarcastically - as he does so well...a paragraph full of reasons why companies fail:
"Why'd They Fail?"

too early...

too late...

too expensive...

too cheap...

too big...

too much competition...

to much supply...

not enough demand...

management...

I love Kaplan's description of management...pick up the book to find out more.

In the next few posts we'll be going more in depth into each of the reasons above. Would love to hear more from you.

Although fuckedcompany.com is history (why??), you can still follow Philip J. Kaplan masquerading as @pud on twitter.

WSJ Reports on the top 50 startups - let's start tracking!!

WSJ has published its annual list of the top 50 start-ups, I believe for the third year running. Titled Looking for the 'Next Big Thing'? Ranking the Top 50 Start-Ups, the annual list is gaining quite a following, and is proving to be a good predictor of future success. Ten of last year's "top 50" have already managed impressive exits, six through IPO and four through acquisitions.

"Steiner on Failure" will be following the 2012 list to see how well this year's team fares, how many of these companies fail over time - and what we will be able to learn from their failures.

The secrets of my failure: Why ‘winning’ is not our natural state

Adam Fletcher penned a nice piece on failure for Venture Village, syndicated by VentureBeat - it's titled The Secrets of my Failure.

btw on the subject of failure in scientific research - less than 5% published - that means more than 95% fails, right? Wrong - because much of the 5% published is manipulated.

A couple of good books on the subject of error (aka failure) in scientific research and elsewhere are Wrong: Why experts* keep failing us--and how to know when not to trust them *Scientists, finance wizards, doctors, relationship gurus, celebrity CEOs, ... consultants, health officials and more by David H. Freedman or Being Wrong: Adventures in the Margin of Error by Kathryn Schulz.

Stat to Ponder - Percent of US Businesses Failing Every Year

Unbelievable - fully 10% of US businesses fail annually. Wow.

WSJ Publishes Old News on VC-backed Startup Failures

WSJ published some old news today...according to Deborah Gage, the VC (Venture Capital) secret is that 3 out of 4 startups fail...

News flash: 1 out of 10 succeeds...

Rough VC stats are as follows - for each 1,000 business plans a typical VC sees:
=> VC communicates with 100 teams
...meets with 10 teams for presentations
...invests in ONE single venture

Success stats are approximately:
+ 5-6 fail ... negative returns
+ 2-3 breakeven - living dead etc. ... zero returns
+ 1-2 minor success ... minor returns, in today's climate barely return VC investments
+ 1 raging success ... major returns, finances the whole deal

DO THE MATH - for a single raging success a VC team has to review approximately 10,000 business plans, sit through 100 presentations, invest in ten companies and work with them for periods that can stretch out to ten years and beyond.

It ain't an easy business - even if top firms like Kleiner Perkins and Accel sometimes make it seem like cake.