The Point of No Return: Korean Views on Failure
If you are trying to run your own company, chances are that you are going to fail.
90% of startups will fail. In Korea, 59% won’t last more than three years with a grand total of 75% shuttering before their fifth year anniversary.
Given these numbers, in order for a startup environment to thrive, there needs to be a large number of people who, despite knowing these risks, believe strongly enough in their ideas that these risks become inconsequential.
The problem in Korea is that very few people are willing to accept this risk. Failure in Korean society is seen as an absolute, something that you cannot come back from.
This begs the question: what variables are at play that have beget this mindset? In this post, I will look at just that and demonstrate that this belief is derivative of a historical memory of suffering, overbearing cultural pressure, and societal issues including the negative repercussions of a homogenous society.
From Abject Poverty to the OECD: Six Decades in Korea
In six decades Korea has gone from absolute poverty, with a capital city that was captured during the Korean War four separate times, to one of capitalistic opulence. In the early 1970s, it was better to live in North Korea than South Korea and now South Korea has the thirteenth largest economy in the world and is a member of the OECD.
Up until recently, people had to hustle in any and every way possible just to get by. No better story exemplifies this than the older women who would wait outside the military bases in the 1950s and 60s to grab whatever excess food the military did not eat and then make a soup out of it. Life was about survival, there was no glitz and glamour.
The economic upswing in the 1980s and early 90s lead people to believe that only good times were ahead but all of that came crashing down with the 1997 Asian Financial Crisis. To briefly summarize, from 1981 until 1997 Korea’s annual GDP growth rate averaged 8.83% (compared to 3.4% and 3.23% in Japan and the United States, respectively). Then in 1997 financial distress in other Asian countries spilled over in Korea and wreaked financial havoc. Korea posted a -5.7% GDP growth rate in 1998, the middle class was wiped out nearly overnight, and there was a massive diaspora of Koreans moving abroad for work. It is this recent memory of economic suffering that is a variable in why failure holds such a resounding role in decision making.
While memories of the struggles of the Korean War seem slightly distant, the suffering during the 1997 crisis is still etched in the collective memory of the Baby Boomer generation. This group wants to take zero risks and would prefer their children follow a similar route. Tangentially related to this historical narrative are the contemporary unemployment rates amongst Korea’s youth (9.2%) which drives home how, once you have steady income, you must do everything possible to keep it.
(Note: this 9.2% does not take into all those that are underemployed, of which, there are many.)
All this being said, merely taking a historical approach to a full understanding of why failure is seen so poorly in Korea leaves this analysis quite barren. One would be remiss to not combine this historical narrative with the contemporary cultural environment in the country.
Korean Cultural Requirements: Good SPECs → Good Marriage, Bad SPECS → ?
In a society that is so cut-throat when it comes to education, where one or two missed questions on the Suneung (the eight-hour Korean SAT) can mean a blown chance at a top school, failure is anathema. It is the end. You either get a question right or wrong, there is no in-between. Your future depends on it.
All of this pressure to avoid failure and get into the best school derives from the importances of SPECs in Korea. For fear of sounding too histrionic, SPECs are the main barometer of what defines you. If you attended one of the top schools, that’s one SPEC. If you work for Samsung, that’s another SPEC. The more of these SPECs you have, the higher your social standing and the more desirable you are for marriage. With everyone competing to garner these and only so many of them available, you cannot fail at any point.
As I briefly mentioned, these SPECs just don’t define your role in in the highly important social structure of Korea but they also define your marriageability. At least for men, in order to get married you are expected to be financially sound enough to be able to afford a down payment on an apartment the second you are married. This can be quite hard to do without one of those well paying, top jobs.
This lends itself nicely into the final point which looks at gaps in the social structure in the country and how those impact the views on failure.
Social Problems: Safety Nets and Immigration
The last two reason Korea views failure so negatively is partially derivative of the fact that there are not many social safety nets in place for those that fail. The impetus falls upon the family to support each other in times of need — as shown by the lack of government elderly care. When you lack these safety nets, your failure just does not only impact you but it can also be a burden upon your family so there is a lot of pressure to play it safe and avoid potentially negatively impacting others.
Lastly, Korea is not a country of immigrants. 96% of the fifty million people living here are native Korean with the remaining 4% being an assortment of students, low-skilled foreign labor (English teachers, day laborers, etc.), and an assortment of diplomats, US military personnel, etc. What is important here is the lack of foreign business owners and entrepreneurs residing in Korea.
Now, compare that with the United States which is a nation of immigrants where the core tenant of the country, the American Dream, is the ability to pull yourself up by the bootstraps and make something of yourself. Some of the largest and most successful companies in the world (Google, Tesla, Apple, etc.) were founded by immigrants or children of immigrants. Korea does not have that. There are not people pouring in here to create and because of this there is not a real outside influence that shows taking risk can be highly lucrative and enjoyable.
So….where do we go from here?
Having painted the grim photo of what the startup ecosystem is facing in Korea, it is only fair that this post ends on a hopeful note. Slowly but surely, the mindset is starting to change here. It is very incremental, and will take awhile, but there is noticeable change from five, ten years ago. The success of Kakao and Coupang alongside other startups are beginning to show people the potential of starting their own company. Furthermore, the younger generation sees the hardships they will have to face if they go the traditional route and are starting to view the startup as an escape, something new.
Will the movement continue on its current trajectory and provide the startup ecosystem here will the necessary human capital to reach its full potential?
Only time will tell.
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