Groups Never Admit Failure

You get a schism instead

Naval:
Groups never admit failure. A group would rather keep living in the mythology of “we were repressed” than ever admit failure. Individuals are the only ones who admit failure. Even individuals don’t like to admit failure, but eventually, they can be forced to.

A group will never admit they were wrong. A group will never admit, “We made a mistake,” because a group that tries to change its mind falls apart. I’m hard pressed to find examples in history of large groups that said, “We thought A, but the answer’s actually B.”

Usually what happens in that case is a schism, where you go from the Catholic Church to Protestant and so on. There’s a divergence and usually a lot of infighting. This happens in crypto land, too, where the coins fork. Bitcoin doesn’t suddenly say, “We should have smart contracts.” ETH doesn’t suddenly say, “We should have been immutable.”

I was on the board of a foundation that was charged with giving out money for a cause, and I found it very disillusioning because what I learned was that no matter what the foundation did, they would declare victory. Every project was victorious. Every project was a success. There was a lot of back slapping. There were a lot of high-sounding mission statements and vision statements, a lot of congratulations, a lot of nice dinners—but nothing ever got done.

I realized this was because there was no objective feedback. Because there is no loss—it’s all social profit—they couldn’t fail. And because they couldn’t fail, they misdirected resources all day long. And eventually, of course, such groups run out of money.

If you want to change the world to a better place, the best way to do it is a for-profit because for-profits have to take feedback from reality. Ironically, for-profit entities are more sustainable than non-profit entities. They’re self-sustainable. You’re not out there with a begging bowl all the time.

Of course, you lose the beautiful non-profit status; you have to pay your taxes; and also you can get corrupted by being purely for-profit. But I would argue that the best businesses are the ones that are for-profit, sustainable and ethical so you can attract the best people. You can sustain it because it’s a mission and it’s not just about the money—because there are diminishing returns to making money.

There’s a diminishing marginal utility to the money in your life.