The Greats Study Their Failures

What we learn from Ray Dalio, Taylor Sheridan, and Warren Buffett's failures

“The master has failed more times than the beginner has tried” - Stephen McCranie

The worst part about failure isn’t the loss itself: it’s the rationalization that comes after. We tell ourselves stories like how the timing didn’t work out or we just got unlucky. These stories let us move on quickly. They also guarantee we will fail the same way again.

There is one quality that all great people share: they move on from their failures. And evidently, they fail a lot.

Studying your failures is not a fun exercise. No one particularly enjoys wading through their mistakes. But dissecting them, understanding them, is likely the key towards truly moving past them. Like Buffett says: “Triumphs are trumpeted, but dumb decisions either get no follow-up or are rationalized.”

The actual guidelines to studying your failures are not as easy as just dwelling on the problem. From my reading highlights, I’ve found a few insights on how some famous people have studied failure. And each one has their own approach for different situations.

Ray Dalio’s Principles

In the 1981, Ray Dalio believed that the US was going to go through a debt crisis and bet against the US stock market. Yet within a year, he was broke, humiliated, and had to borrow $4000 from his parents to pay his housing and monthly bills.

From that moment came his famous equation: Pain + Reflection = Progress. Dalio’s key insight has been to name the pain from a specific decision and run towards it rather than away from it. Once the pain and failure is brought into the light, then it can be diagnosed with a reflective process. What Dalio considered improbable instead happened: Fed chairman Paul Volcker’s move to lower interest rates and make credit available helped jump-start a bull market in stocks and the U.S. economy’s greatest ever noninflationary growth period.

But the first part involved taking full responsibility for his mistake to redesign life processes. For Dalio, this meant always fearing being wrong, no matter how confident he was in being right. This iterative process helped Bridgewater succeed in becoming one of the best hedge funds in the world.

In 2023, I started a coffee supplement business. I spent three months researching because I believed niching into Asian drinks and supplements would tap an underserved market. I launched Yo Coffee on Shopify and mixed 400+ bags of Vietnamese coffee and supplements myself. Three months later, I shut it down, demoralized by zero traction.

Looking back, my assumption was that starting a second business in a different industry would hedge against my main business, Interview Query, which was tied to the tech job market. But I missed something fundamental: e-commerce requires relentless dedication to marketing. The product part was fun but I had fallen in love with the wrong part of the business.

What in my process allowed this? I didn’t talk to a single e-commerce entrepreneur before diving in. I believed that solving the problems with my first business meant starting a second one, rather than fixing the root issues with the first. And I’d convinced myself that someone else’s public success, a founder with funding, 10+ years of experience, and a massive social media presence, would translate to my own if I just did some of the same things.

Dalio’s framework works best when you can point to a moment and say “I made the wrong choice” and go back and dissect which parts of your system or process allowed the bad decision to be made. But what failure manifests itself in years of frustration, multiple mistakes, with no clear turning point?

The Sheridan Reframe

Taylor Sheridan is one of Hollywood’s most prolific writers, producers, and directors. But before this, he was a struggling actor for 20+ years in Hollywood. When he finally landed a B-list role in a TV show, the producers decided they would rather kill him off than give him a raise.

“All of my success has come from studying my failures,” Sheridan remembered. “Remove ego. Study it. How do you grow from it?”

What if he reframed his time as a struggling actor as an invaluable apprenticeship in storytelling? “I’ve read 10,000 scripts,” he mused. “Most of them are really bad. If I don’t do that, I’ll probably be okay.”

So, when a friend asked for help with a screenplay, he gave it a shot. “Look, I have no idea how to do this, but I have a 15-year education on how not to do it.” Sheridan wrote the pilot episode “in about ten hours.”

Sheridan reframed his struggle as a new apprenticeship in writing. And suddenly he realized he had already put in the 10,000 hours it takes to become an expert. He learned storytelling by studying bad scripts, an apprenticeship he didn’t know he was serving.

The key thinking here is almost not to dissect what went wrong with failure, but to reframe it as a lesson. What did you come away with, that can build yourself into something much larger in the future?

For the last couple of years, I have been struggling to grow Interview Query to the next stage. While my old ego-driven take was that I wasted years of my life, the Sheridan reframe of it is that I’ve learned how to manage a business while building resilience for the ups and downs.

The first time revenue dropped due to job market conditions, I had sleepless nights for months. But through resilience, I gained the ability to separate my business from my personal identity. Thenuka Karunaratne, the founder of daydream puts it well:

I learned this the hard way when my first startup went from $2.4M in annual revenue to less than $1M in a year. This painful experience taught me a valuable lesson:

To build a resilient company, you have to first build a resilient mindset. You need an inner game as strong as your outer game that is grounded in a sense of self, separate from external metrics and outcomes.

I’ve found this concept also related to Paul Graham’s Compounding Framework. The core concept is that in a startup, there are two things growing: the company and the founder. Graham argues that early on, the founder’s growth rate is often the most important asset.

This is one reason Silicon Valley is so tolerant of failure. People in Silicon Valley aren’t blindly tolerant of failure. They’ll only continue to bet on you if you’re learning from your failures. But if you are, you are in fact a good bet: maybe your company didn’t grow the way you wanted, but you yourself have, and that should yield results eventually.

Silicon Valley is tolerant of failure precisely because a failed startup results in a smarter, more experienced, more resilient founder. That founder is now “version 2.0” and is far more likely to succeed on their next attempt.

Extracting the Wisdom

In 1993, Berkshire Hathaway bought Dexter Shoe for $433 million in stock. The deal was announced as a stock-for-stock merger, meaning that Berkshire Hathaway exchanged its own shares for those of Dexter Shoe.

Buffett believed that Dexter Shoe had a “durable competitive advantage”. However that advantage vanished within a few years due to cheap foreign competition, and the investment went to zero.

Finally, I made an even worse mistake when I said “yes” to Dexter, a shoe business I bought in 1993 for $433 million in Berkshire stock (25,203 shares of A). What I had assessed as durable competitive advantage vanished within a few years. But that’s just the beginning: By using Berkshire stock, I compounded this error hugely. That move made the cost to Berkshire shareholders not $400 million, but rather $3.5 billion. In essence, I gave away 1.6% of a wonderful business — one now valued at $220 billion — to buy a worthless business. - Berkshire Hathaway’s Letters to Shareholders

Buffett however is famous for not just analyzing what went wrong. His whimsical and philosophizing nature distills the complexity of business into principles memorable enough that help him avoid future mistakes.

• “It is far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”

• “Focus on identifying and buying businesses with a deep and wide “economic moat.”

• “Price is what you pay, value is what you get.”

The Buffett approach is therefore extracting the wisdom into a principle so sharp you can’t forget it.

I think this is most useful when going through both Dalio’s process and Sheridan’s reframe to find anchors: words and quotes help guide towards lessons and mental models without having to revisit failures in their entirety.

For example, over the past few years I’ve spent hundreds of thousands of dollars hiring and firing multiple team leads. Many times, I have rushed into hires through beliefs in speed over doubt, an exhaustion in hiring over precision in role + candidate fit.

And while there are many lessons to take from it, one resounding principle that keeps me through the next searches:

“The pain of a rigorous hiring process is always less than the pain of a bad hire.“

When I get close to the very end of the hiring process, when I want to sell and immediately bring a candidate on so that I can alleviate a time-consuming headache, I think back towards this principle to remind myself it’s really not as bad as the alternative.

Conclusion

Combined together - each can decision can be stacked thoughtfully but also separately for unique circumstances.

What I’ve found is the hardest thing to do many times is run through the exercises themselves. As noted in the beginning from Buffett, failures on their own, can be easily rationalized, covered up, or excused, because we seek not to tarnish the reputations we have with ourselves.

But those are the ones that we seek to hold true. Here’s a few key points to take from it:

• Remove ego from the process.

• Write down and sit with the failure.

• Apply a retrospective, a reframed lesson, and a principle to take-away.

And hopefully you can too, move on, like I have.

Things to Share

• I’ve really been enjoying Henrik Karlsson’s Substack Escaping Flatland. A few of his articles have really helped shape my thinking lately. One on agency, is a subtle piece on motivation and problem solving disguised in elegant writing and incredible stories. Another on focus, is much within the same vein. The last one I read on not sacrificing the wrong thing, is a nice combination of the first two, and of remembering why it’s important to start from core values in the first place.

• If you live in the Bay Area then you are forced to question social interactions, charisma, and the lack of on a daily basis. I myself am not removed from world this which is why I was pleasantly surprised by this article from the same writer on why humans like responsiveness. One of my core questions coming away from it was: what’s the difference between people pleasing and responsive people? Well evidently Gemini 2.5 states (rather confidently) that “a responsive person operates from a place of strength, focusing on the quality of the interaction itself while a people-pleaser operates from a place of need, sacrificing their own boundaries for external validation.” We could all benefit from operating from a place of strength in all areas of our lives I guess.