Tony Hsieh and Sanjay Madan wrote the program to create LinkExchange over a weekend. Before the following weekend, they had more than a dozen websites participating in their ad-sharing network. Over the next several weeks they worked frantically on the project. They refined their business in real time, learning—quickly!—from their mistakes. Less than a year later, the Harvard grads were offered $1 million (U.S.) for the company. Less than a year after that, they sold it for $265 million.
That was 1996. Since then, this story of development on the run has become commonplace. Hacker culture is now part of the broader culture: “beta test” is in the dictionary, and we accept innovative, albeit imperfect, beta releases even from multibillion-dollar global behemoths such as Google. We’re prepared to accept flaws because the tech revolution is progressing so quickly that it is usually better to be fast, and possibly wrong, than to try to be perfect and end up being slow. By the time your flawless product is released, it will likely be obsolete.
Technologists aren’t the only people operating in a rapidly changing, uncertain environment. Thanks both to the tech revolution and to globalization, that is true of all of us, including our governments. But, as Nobel-Prize winning economist Michael Spence argued at a private equity conference in Quebec City this week, emerging-market governments seem to be better at dealing with an unpredictable, volatile world than Western ones. They are like Silicon Valley entrepreneurs—willing to act swiftly, even if it means making mistakes. Leaders in the West are more like Detroit, reluctant to make bold moves until it is too late.
Part of the problem is the way we judge various types of mistakes. Spence argues that we make two types of mistakes—implementing a bad idea, and failing to act on a good one. If you are religiously minded, you could think of these as sins of commission and sins of omission. In stable times, sins of commission are probably worse. If your industry isn’t changing very much or if your country’s economy and the world economy are on an even keel, launching an expensive new product or government program that fails is probably more damaging than missing out on a great opportunity.
But in times of radical change, making a mistake is less risky than doing nothing at all. Spence thinks that emerging-market leaders understand this better than Western ones do, and he cited the examples of China’s fast and big stimulus program after the financial crisis and the Indian government’s willingness to act to burst asset bubbles.