We've had a lot of congressional hearings -- way too many, in fact -- in which business leaders explained away some huge mistake or insisted that a disaster wasn't their fault. Jon Corzine of MF Global. Lloyd Blankfein of Goldman Sachs. The Detroit auto executives who flew into Washington on corporate jets. Richard Fuld of Lehman Brothers. The common thread: They were involved in misfortunes that were really caused by conniving competitors, regulators, the press, greedy lenders or misguided underlings. Never by themselves.
JPMorgan Chase CEO Jamie Dimon broke the mold with his recent testimony before the Senate Banking Committee over a $2 billion trading loss at the firm. By acknowledging that he screwed up, Dimon showed the kind of forthright accountability we should expect in all types of leaders. It may even make him a better CEO.
There remain unanswered questions about how a JPMorgan trading unit that was supposed to "hedge" against losses in other parts of the firm ended up generating a huge loss itself. Regulators are investigating. But Dimon has set a refreshing new standard for business honchos who have some explaining to do. "We have let a lot of people down," he said during the hearing. "The buck stops with me." When asked why he downplayed the trading loss a month before it became a full-blown scandal and sunk the bank's stock price, Dimon answered that he had been "dead wrong."
I'm no apologist for the banks or for overpaid CEOs who co-opt their boards and hoodwink shareholders. And I'm startled that there's even a debate over strengthening regulation of big financial firms that nearly wrecked the whole economy a few years ago.
But I also feel that we have lost sight of the virtues of mistakes, when they are properly analyzed and accounted for. The people's court seems to demand that if you screw up, you should be fired. We've developed a kind of knee-jerk intolerance of mistakes. There's no on-the-job learning. Making a mistake is like a badge of incompetence.
That's crazy, because mistakes are often the most instructive experiences we ever go through. The most battle-tested leaders are those who have screwed up and been forced to acknowledge their own flaws, and improve upon them. Steve Jobs had to do this when he was fired from Apple, the company he founded, in 1985. Warren Buffett has said that buying his landmark firm, Berkshire Hathaway, in 1965 was a mistake that cost him billions of dollars compared to what he could have earned with his money elsewhere. In Silicon Valley, venture capitalists seek out second- or third-time entrepreneurs whose first effort to start a company didn't fly, because they know that priceless experience comes from failing at something you're personally committed to, and owning up to the errors you made.
Mistakes can even provide key insights that are available no other way. In my book Rebounders: How Winners Pivot From Setback To Success, I interviewed and profiled a dozen people who got better by messing up. These "rebounders," as I call them, have a few important things in common. First, they learn from mistakes because they're able to dispassionately identify what they did wrong. This is uncommon. Many of us instinctively blame others or simply deny our culpability when something goes wrong. You don't learn from blaming, however; you only burrow deeper into self-pity.
Rebounders also have the confidence that comes from having been on the hot seat before, and learning that they can work through tough problems by accurately assessing what went wrong and fixing it. Working through smaller mistakes makes you more adept at addressing bigger ones. But you only get better if you acknowledge the mistakes in the first place.
When people make the same mistake more than once, it's a sign they're not learning anything, and are probably in denial about their own flaws. But people who can identify their own missteps in detail are bound to get smarter and stronger.
Jamie Dimon has been through the corporate grinder before, when he got fired by his boss Sandy Weill at Citigroup in 1998, and left New York to run Bank One, in Chicago. He made a kind of triumphant return to New York when JPMorgan bought Bank One in 2004 and made Dimon CEO of the combined conglomerate. There's little evidence he ever became vengeful over his departure from Citigroup, which takes character.
Dimon still has to demonstrate that he can repair the problems at JPMorgan and defog the blind spot that prevented him from seeing a snafu he should have spotted earlier. But being forced to explain an embarrassing mistake to shareholders, the press and Congress is pretty good training. They don't teach that in business school.