You stare out over the watery landscape through your binoculars. Endless grey skies that go on for thousands of miles. Carefully scanning, you look for any sight of the enemy battleship in the area. You know she’s there…but where?
“Contact! Starboard!” comes the shout. You whip around and sure enough, there is, on the horizon, a ship. You pull out your binoculars and see the distinctive black cross on a red background flag of the Kriegsmarine. “Target acquired!” you shout, confirming what the officer saw. “Bring us around. Gunner, I want a firing solution now!”
Your ship, a massive American battleship, comes around and you gain on your prey.
“Solution plotted!” yells the gunner. “Elevation, 20 degrees! Keep this bearing!” You nod. You see from the bridge the main batteries change position and elevation, their silence now an omen of the death they carry.
“Guns ready!’ comes the shout. “Fire,” you command.
The massive ship bucks as all six 15-inch cannons fire. The blast is loud enough to deafen everyone temporarily. The ship rocks as though hit by a large wave. Hot death is quickly headed toward the enemy ship. You look through your binoculars:
Splash! Splashsplashsplashsplash! All six rounds miss.
“Damn! We overshot! New solution!” Again, the gunners recalculate. “19.8 degrees, sir!” The guns are realigned and the command is given again. Splash! Splashsplashsplashsplash bang! One round hits, but it is a glancing blow.
“I have you now,” whispers the gunner as he does his calculations again. “19.9 degrees, sir!” “Fire everything we’ve got!”
Again, the ship roars with the fury of a god. You watch through your binoculars. Even from several miles away, you can hear the boom as the rounds hit their target. A massive plume of smoke and fire erupts from the enemy ship. “Direct hit, sir! They’re sinking. It looks like we got their magazine!” A cheer goes up from the crew. The prey you have been hunting for weeks was now dead in the water.
How was victory achieved? Tenacity, no doubt. But also trial-and-error. The gunner and crew had to operate on their best information at the time. As new information came in (missed shots), they adjusted their plans. Eventually, they were able to have a direct hit by making changes. In other words, their failures allowed them to ultimately succeed.
The same is true for a market process. Markets fail. People notice those failures. They subsequently make adjustments. Those adjustments help correct for the market failures and bring people closer and closer to their goals. Market perfection may never be achieved, but it is tended toward.
People fail. People learn what not to do. People correct. That is the market process. Failure is just as important as success.