The third lecture in the Constitution of Innovation series examines several key issues regarding innovative societies from the perspective of their capacity to handle failure. If innovation is finding new ways to use things to create value for others, then the opposite of failure is not success as we often define it -- making it, reaching the top, etc. In an innovative society, competition always pushes the successful to keep moving; you're only as good as your next innovation. An innovative society rewards value creation, but needs to do so in ways that make your reward for creating value proportionate to the value you create for others. Because successful innovation almost always follows failures, an innovative society has to ensure that people are both penalized for not creating value for others, and have the ability to recover and try again. Lecture was filmed during MC 390 class, Fall 2009 at the Michigan State University Podcast Studio. Creative Commons License: Attribution, Noncommercial, No Derivatives; held by Michigan State University and Ross Emmett. Used with permission. For details, see Ross Emmett's website, rossbemmett.com.