How do successful entrepreneurs bounce back after failure?

I like to think of myself as someone who’s OK with being wrong. In fact, when I started a company in 2004, my co-founders and I joked that at this new company, we would try hard to make new mistakes.

And so, one of the very first things we did was have a meeting where we laid out our strategy. We used a whiteboard to explicitly model our vision, our company values and our business plan, and we sat there and argued about each item.

It was a very formative time for me and the company, both in terms of articulating our strategy and our values, and so I remember our ideas and our arguments quite clearly. I remember advocating for things that turned out to be critically important, and I remember my cofounders arguing with me and advocating for things that were part of our initial plan but later had to be removed because they were totally wrong.

After those meetings, we began to execute the strategy we had agreed upon—mistakes and all. Over the next several months, we had several pivots, as well as some initial successes, which helped us know which of the bad ideas to jettison. each pivot was excruciatingly painful. But at least (as I remember it now), each pivot was vindication for me because the ideas I thought were critically important turned out to be right whereas the ones I’d argued against had turned out to be wrong. Sounds pretty good, right?

Eighteen months after our initial meetings, we moved offices. Someone unlocked a storage closet that hadn’t been opened in months, and found the whiteboard which had gotten lost and replaced early on. There, preserved in crystal clarity, was exactly what we wrote at the initial meeting. I remember thinking, “What a nice bit of archival history.”

But once I looked a little closer, I had a horrifying realization. I honestly thought someone was playing a trick on me! Right there, in my own handwriting, on this very whiteboard were all kinds of bad ideas about the company strategy. The way I had remembered it was that I had most of the good ideas! But the documentary evidence showed that I had a mix of some good and some pretty terrible ideas. Many of the ideas that had to be jettisoned were, in fact, mine,and here was the proof.

Ever notice how many famous entrepreneurs tell their stories as if they were always right?

I see entrepreneurs making the same mistake all the time. It’s very common. If you don’t write down what you believe ahead of time, as soon as you find out what’s right and what’s wrong, you will retroactively come to believe that you were always right. It’s why the idea that great entrepreneurs never need to change direction is such a popular one. The stories we hear about all the great companies get less and less honest over time, as the errors and the misjudgments of the great entrepreneurs get diminished.

It’s not that entrepreneurs are lying or being deceitful. It’s that they literally remember things differently than the way things actually occurred. They remember themselves as smarter and more able to predict the future than they actually were able to.

I think this is the root cause of why, after people experience failure using waterfall or forecasting planning methods, they think that if they had just planned harder or had been more diligent, things would have worked out. Because their memory tells them that they always knew how things were going to turn out, they forget everything they didn’t know at the time. They never really knew what was going to happen—that’s just what they remember, after the fact.

The Nobel Prize-winning psychologist Daniel Kahneman has written about the human tendency to overestimate our skill at predicting the future in his acclaimed book, Thinking Fast and Slow. It’s a behavior that fosters overconfidence and a bias towards optimism—attributes which can be both “a blessing and a risk” and which are shared by many entrepreneurs.

“Optimistic individuals play a disproportionate role in shaping our lives. Their decisions make a difference; they are the inventors, the entrepreneurs, the political and military leaders—not average people,” he writes. “They are probably optimistic by temperament; a survey of founders of small businesses concluded that entrepreneurs are more sanguine than midlevel managers about life in general. Their experiences of success have confirmed their faith in their judgment and their ability to control events.”

Here’s why this experience was such a critical moment in my life as an entrepreneur. Even though I know the phenomenon of overconfidence combined with a faulty memory exists, even though I know that it’s important to pivot intellectually—even though I’ve seen the whiteboard with the documentary evidence of my being wrong on it— I still remember being right.

Despite the evidence that I was wrong, neither my memory nor my subjective experience of being right has changed.

A lot of people treat me as an expert on this topic — and even I can’t escape the faulty memory of having been right.

Not only are many entrepreneurs unwilling to write down their assumptions prior to big meetings with their team or with customers, people almost never do it. Everyone thinks: I’ll be able to remember what happens, so why bother writing down my assumptions? Even though I’ve witnessed the limitations of my memory, as well as the memories of so many people I’ve worked with, firsthand, sometimes I still make the mistake of forgetting to jot down my assumptions. It’s a very human thing to do.

The good news is, putting our assumptions to the test can be so simple. It doesn’t need require an involved process. All it takes is one moment to jot down what you think will happen and then compare that to what actually does.

I have really come to believe in the 3×5 index card for these kinds of situations. People often want an experiment or hypothesis tracker or project management software. A lot of those tools are excellent, but for a lot of teams, you don’t need fancy analytics or trackers, you just need to write down on a 3×5 card what you think is going to happen with a customer or your team. After you’ve bought 100 notecards and run out, then perhaps it’s time to consider automating and investing in tracking and process tools, but I’m amazed at how many people start with more complicated systems and skip over the notecards cause they’re too simple.

The point of my story is not simply about the importance of writing down your assumptions; it’s a reminder that your assumptions are going to be wrong. You’re going to make mistakes. IMVU is a company that is profitable today and doing well. But as I’ve written about in my book, The Lean Startup, we only succeeded because of an important pivot. We made lots of critical errors in the early days—so does every company. It’s just you don’t usually hear about it. There’s a whole mythological industrial complex whose job it is to tell these stories in a way that glamorizes the people involved. But those stories leave out a lot of important twists and turns.

When people hear me talking about the importance of pivoting, sometimes they think I’m trying to tear down successful people or making it seem like they’re not as smart as they are. Or that I’m saying that because we can’t predict future, it doesn’t matter what your idea is.

But I’m not saying either of those things.

What I’m trying to do is let the entrepreneurs who are in the trenches right now know that when things are going poorly and they’re embarrassed about how many mistakes they’ve made, that’s all part of it. I know there’s a tendency to compare themselves to the legend, to say, “Well, I must not have the right stuff because this wouldn’t have happened to Steve Jobs.”

And I want to say: that’s not true. Even the greats were where you are now and they had the courage and the determination to push through it. They also had the willingness to admit their mistakes and change. They created teams comprised of people with different personality types and skills as a way to keep their optimism, overconfidence, and other cognitive biases in check.

Failure is painful, no matter what anyone says. What’s key is to learn from it and incorporate it into the next thing you do. If you’re a lean practitioner, hopefully that’s your next pivot rather than your next company. But either way, it’s that determination to achieve your vision, even if you have to change your strategy to get there, that makes entrepreneurs great.

This article is published in collaboration with LinkedIn. Publication does not imply endorsement of views by the World Economic Forum.

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Author: Eric Ries is the author of The Lean Startup.

Image: A worker arrives at his office in the Canary Wharf business district in London February 26, 2014. REUTERS/Eddie Keogh.