Secret, Pixar, Schumpeter, and Louis CK: The world’s shortest economics lesson

Flash-in-the-pan smartphone app Secret, has announced it’s shutting down after just 16 months and after raising $35 million from investors.

Secret allows users to post anonymous comments and read anonymous comments by others. Add in location services, and users can post and read comments to other people near them. Yes, it’s a bit creepy, but Secret is not alone in the creepy secret business.

Co-founder, David Byttow, made the announcement in a blog post:

Secret, Inc. still has a significant amount of invested capital, but our investors funded the team and the product, and I believe the right thing to do is to return the money rather than attempt to pivot. Innovation requires failure, and I believe in failing fast in order to go on and make only new and different mistakes.

In a world where hi-tech investors are treated as easy marks for fast-talking Millennials, Byttow shows a bit of class with his promise to return the money (although, one wonders if he’ll keep his Ferrari).

More important is Byttow’s acknowledgement that innovation requires failure. Pixar’s John Lasseter puts it best:

Be wrong as fast as you can. Mistakes are an inevitable part of the creative process, so get right down to it and start making them. Even great ideas are wrecked on the road to fruition and then have to be painstakingly reconstructed.

Lasseter’s wisdom is a version of economist Joseph Schumpeter’s concept of creative destruction in which the creation of new technologies destroys older technologies. While some may regret the loss of older technologies, the creation of new technologies pulls the economy forward in ever increasing prosperity.

And, if you don’t want to believe an economist, you can trust a comedian.