FINALLY, SOMEONE ADMITS A MISTAKE

Over the years, we’ve been stunned to see how hard it is for executives to recognize and acknowledge mistakes. After all, everyone makes mistakes. The trick is to learn from them so you don’t repeat them, or, better yet, to learn from others’ errors so you never have to make those particular mistakes yourself. Despite the obvious benefits of learning from errors, the denial among executives runs so deep that, to pick a couple of examples from our book:

–After Sony bought Columbia Pictures in 1989, Sony soon wrote off $3.2 billion, almost the entire value of the purchase. But when asked what had been learned from the mistake, the head of Sony’s U.S. operations bristled and said, “What makes you think the Sony acquisition of Columbia Pictures was a corporate blunder?”

–George Fisher was the CEO at Kodak who set the strategy in the early 1990s that led the company to botch the transition to digital photography and sent it from the rarified atmosphere of America’s best companies down to a spot where its market value is less than its cash on hand. But when asked about the losses his strategy was generating, Fisher replied: “You call it losses. I call it investment.”

So, it was refreshing to see that Gerald Levin has acknowledged that he messed up when he was CEO of Time Warner and championed the merger with AOL that has become a legendary debacle. (The full interview is shown below.) Levin mocked the idea of synergies that drove the merger, saying that he had hoped the companies could mesh so tightly they’d be a supermarket but wound up with a mall instead. He was also thoughtful on the pressure that comes from Wall Street; he said that, in an effort to sell the deal to investors, he made such aggressive promises about the prospects for the combined company that he’d have had an awfully hard time meeting them even if everything had gone perfectly. He called on others to ‘fess up, too, including the former CEOs of Lehman Brothers, Bear Stearns, and AIG. Levin said it was high time that executives began acknowledging their mistakes so we can all learn from them. Would that it were so.

The AOL-Time Warner deal has long held a soft spot in our hearts, because it helped spark us to write “Billion-Dollar Lessons.” When the deal was announced, we were so sure it was a loser that we scoffed at the idea that synergies would magically appear this time when they had failed to appear so many times before. Although we promptly forgot what we’d written, we were so negative and so public that USA Today and other publications came looking for us when it became clear the deal was a dud. Those queries helped prompt our thinking about what other mistakes were made repeatedly even though they could be spotted miles away.

So, let’s hope that Gerry Levin, courageous in defeat, can spark some more new thinking, about how to get executives out of denial and how to learn from mistakes.