If you go to the Mark Twain House in Hartford, Connecticut, USA – you will see a thing of beauty. The Paige Compositor – a machine that replaced the human manual typesetter. It made the typesetting process about 10 times faster than human typesetting.
Samuel Clemens – whose pen name was Mark Twain – invested $2000 in the Paige Compositor in 1880. He had gone through the manual and tedious process of typesetting books himself, and knew that it was time the whole process was mechanized. And Twain was so impressed by the prototype that he called James Paige – the inventor who was working on the idea since 1872 – the Shakespeare of mechanical inventions!
When Paige needed more money to perfect his prototype, Twain gave him more. By 1882, Paige had created a functioning compositor. But as it was not perfect, Paige kept on working on it.
After 5 long years, the production ready version was finally ready by 1887. The Towner Webster company in Chicago was hired to manufacture 3000 compositors. Twain took over the financial responsibilities by it – for a percentage of all profits!
In all, Twain put in close to $300,000 into the venture. That’s close to $10 million in today’s (2022) value!
Five more years go by, and by 1892, whole of 2 working units of the Paige compositor were manufactured! Mark Twain had to downsize his house in 1891. And file for bankruptcy in 1894 – because by then, the competing Linotype machine had captured the market!
The reason for failure
The Paige Compositor failed because James Paige was a perfectionist working on a faulty idea. Paige was trying to replace the human arm with mechanics. His compositor had 18,000 moving parts – because it was trying to copy the motions of the human hand! And that’s why it kept on breaking! That’s why it was so difficult to manufacture it. The competing linotype machine had a lot less moving parts and was a lot cheaper to make!
But the Paige Compositor’s failure didn’t have to be so costly for Twain. Mark Twain lost his fortune in the investment because he fell in love with the idea. And didn’t let go of it, didn’t cut his losses – even after it was apparent that it would never work! He just could not accept that a mistake had been made, till it was too late.
Do you know the unusual thing? While the Paige Compositor was the biggest loss making venture for Twain, it wasn’t the only one! Mark Twain made losses on various other investments including a steam pulley system, an image engraving process, a magnetic telegraph, a watch company, investing in railway stocks, etc!
How can you avoid failures like Twains?
1. Be patient. Mark Twain was impatient and searched for the get rich quick scheme throughout his life.
2. Don’t fall in love with an idea. Test with a small amount, and add more to your position only when the idea succeeds. Learn to cut your losses. Learn to accept that you were wrong.
3. Pay attention to detail. Mark Twain fell in love with ideas but he abhorred details. All of his failures can be traced to the fact that he just didn’t pay attention to details – he never did his due diligence!
His own personal book publishing business failed – even though his books were selling like crazy – because he just didn’t pay attention to accounts. Money was embezzled, payrolls were insanely high, inventory was overproduced – there were no checks in place!
If you’re not paying attention to details, you’re just speculating! And as Mark Twain himself pithily commented: “There are two times in a man’s life when he should not speculate: when he can’t afford it, and when he can.”
In order to avoid speculation, you have to dig in deep and deduce things accurately. And then, you have to learn to cut your losses when your deductions go wrong.
Mark Twain’s financial resurgence
Mark Twain could have left his creditors in a lurch after his bankruptcy. But instead, he went on a 14 month world tour. And gave speeches all over the world. 122 shows in 71 cities! And he made all of his creditors whole!
When Mark Twain died, his estate held a value of $475,000 (about 13 million dollars in 2022).
- Don’t fall in love with your idea. Test it and evaluate its performance dispassionately.
- Bet more when things are going well, and cut your losses when things are not going so well.
- Pay attention to detail. Go deep.