Failure - The US mindset vs the UK mindset

Recently I've been speaking to a lot of business leaders about the way failure is perceived in business.

The conversations have confirmed what I've seen myself over 25 years in business i.e. that people who see failure as a learning tool tend to be successful and the ones that are terrified of it tend to deliver stunted business growth.

Feel free to Listen to my latest podcast on embracing failure where I explore that in more detail - Why embracing failure is a critical component of your business success . ??

I decided to delve a bit deeper into the two prevailing mindsets that started to become apparent.

For the purposes of this article I'm going to call them US mindset and the UK mindset. I have defined them in this way because on my many visits to the US, I have noticed that they view business and entrepreneurship very differently than we do here in the UK. In fact they seem to wear failure as a badge of honour.?They see it as proof that they took risks and tried something new - while growing up in Britain can involve being taught that failure is shameful or embarrassing.

Let’s explore a couple of examples to initially test this hypothesis.

The success of American tech start-ups such as Uber and Airbnb is often attributed to the willingness of their founders to take risks and challenge traditional business models. These entrepreneurs are celebrated for their "move fast and break things" approach that prioritises experimentation and trial and error over simply sticking with the status quo. Elon Musk, love him or hate him once stated "Failure is an option here. If things are not failing, you are not innovating enough." This is reflective of the US mindset and approach to entrepreneurship, where failure is considered a natural part of the journey to success.

Let’s now move to the UK

Nick Leslau, a prominent UK real estate investor, described the hard lessons learned after his companies went bankrupt in 1992. He and his team felt ostracised and struggled to secure funding for future ventures, leading to pervasive fears of stigma.

i.e business failure can have differing meanings to different people and in different countries.

This article seeks to examines the reason for the different attitude towards business failure in the United States and Britain or in my simple terms the US vs the UK mindset.

I really want to understand the reasons behind these mindsets and the stark difference in the attitudes in Britain and the US towards business failure may be attributed to a combination of cultural and legal factors.

Culturally, the US tends to have a more optimistic and risk-taking outlook, where failure is seen as a natural part of the business process and often a stepping stone to bigger success. In contrast, the UK has traditionally been more conservative, and the notion of failure and bankruptcy is often associated with shame and social disgrace.

However that can't be the only thing surely, so I will have a look at a few possible reasons below

The Power of Positive Thinking

One possible explanation for the US mindset in America is the cultural emphasis on positive thinking, self-improvement, and the pursuit of happiness. Americans are often encouraged to believe in themselves and their ability to achieve their goals, regardless of their background or limitations. This mindset is reflected in various self-help books, motivational speakers, talk shows, and popular media that celebrate success, resilience, and personal growth. In contrast, British culture has traditionally valued modesty, humility, and skepticism, often regarding excessive confidence or optimism as delusional or arrogant. This cultural trait can manifest in different ways, fear of disappointment being one of the main ones and hence not trying something new or innovative.

The Immigrant and Class Effect.

I could be on a sticky wicket here, as no one likes to talk about immigration??. However the US is an immigrant nation by its very nature and is well lorded for taking the brightest and the best from all around the world, it has done so for centuries.The United States, as a relatively young and diverse nation, has a narrative of progress, expansion, and innovation that often inspires a sense of possibility, adventure, and optimism. Does this deliver the US mentality i.e. the American dream, I can do anything approach even if I fail. It takes a certain kind of person to upsticks from a home country and try and make it, in one of the biggest economies in the world. You just wouldn't survive if you didn't try, fail and try again.

Contrast that to the class system in the UK, it's not as strong as it was in the past but a rigid system where you know your place and do specific roles surely can't be good for the freewheeling entrepreneurial bent that we see in the US, can it?

The Legal Effect

Legally, the differing bankruptcy laws in the two countries have probably also played a role, with the US offering more generous bankruptcy protection to aid those looking to restructure a failed business under Chapter 11 of the bankruptcy code, and the UK's regulations making it more difficult and costly to do so. placing a greater emphasis on liquidation, with more stringent regulations to govern business practices This probably contributes to a more risk-averse culture in the UK.

In America, entrepreneurship is highly celebrated and failure is viewed as a stepping-stone to growth. Moreover, bankruptcy laws in the U.S. are beneficial to the investor in the long-run. According to Chapter 11 of the bankruptcy code, businesses that are highly indebted may file for bankruptcy protection. This often allows companies to keep on trading while it restructures itself, getting rid of burdensome debts and coming up with a new direction. Numerous household brand names such as General Motors and United Airlines have undergone bankruptcy protection before, and the positive effects of this saved them from liquidation.

The key is that failure in business isn’t seen as a deterrent to future business success unless you don’t learn and grow. For example, Steve Jobs, the co-founder of Apple, faced business failure when he was fired from his own company, but he went on to create another company, NeXT, which later acquired Pixar and eventually reunited him with Apple. The success he achieved despite initial setbacks is celebrated and seen as an expected part of the entrepreneurial journey.

Moreover, in the US, personal bankruptcy is typically seen as a fresh start, with the opportunity to rebuild credit and start again. Chapter 7 of the bankruptcy code in the US allows individuals or businesses that are heavily indebted to have a portion of their debts forgiven or discharged. Although it may have some negative consequences in terms of credit rating, bankruptcy does not carry the same level of stigma as it does in Britain.

In Britain, the community is less sympathetic towards business failure. There is a distinct societal dissuasion regarding the concept of bankruptcy and failure, which usually creates a sense of apprehension in entrepreneurs, frequently preventing them from undertaking more ventures or taking up further risk. Failure, in general, tends to be viewed in a largely negative light, with insufficient emphasis on the benefits of risk-taking and personal growth that can stem from such encounters.

This negative view towards failure is accentuated by British bankruptcy laws. In the United Kingdom, the less favourable regulations tend to discourage risk-taking behaviour in entrepreneurs. (allegedly, although lots of risky behaviours still go on, a topic for another newsletter, me thinks)

Research shows that the British tend to have a greater fear of failure than Americans. Research by Barclays Bank showed that approximately 63% of UK adults were afraid of starting a business, with 43% citing the fear of failure as the reasoning. The reluctance of UK entrepreneurs to take risks can be seen in the relatively low numbers of new businesses registered in the country compared to the US. US outpacing the UK by 10% in Year on year growth of new businesses and being second only to the China when it comes to new business start ups – UHY Hacker Young study

On this last point, the question is, is it the legal framework that drives the mindset or the different mindsets that drive the legal frameworks. ??

I’ve specifically defined them as mindsets, because, as in all generalisations, they don’t apply to everyone. i.e. there are people in the US with the UK mindset and visa versa. Plus a mindset is flexible and can be changed, it's not set in stone just becasue you are born in one country or the other.

However

I believe that it is true, from my own research that people who view failure as the first step to success ( Claire Walton ?? ) tend to be better leaders, coaches and manage more successful businesses.

Conclusion

I could be balanced and say there are pros and cons of both approaches but I resoundingly come down on the side of the US mindset.

The US mindset proclaims the idea that a failure is an opportunity to take risks and challenge oneself to come out stronger as a result.

On the other hand, the UK mindset tends to be more cynical, with failure regarded as shameful and to be avoided at all costs, this often heightens the sense of apprehension in entrepreneurs, limiting business adventure.

It may well be born out of cultural and legal contexts but there is no reason why everyone can’t have the US mindset. It doesn’t mean chasing bankruptcy, it just means embracing failure and learning from it. I believe it drives innovation, learning , growth and has led to some of the biggest and most innovative businesses in the world.