Linda Gottlieb remembers thinking she was invincible.

With a reputation for being aggressive and smart, she had staked out her professional life as senior vice president of Highgate Pictures, a film company she helped found 20 years earlier. She had won Emmy awards for her TV movies and was taking home the big six figures. She had already produced a screen version of her novel Limbo for Universal Studios and was developing other screen treatments for Paramount, Twentieth Century-Fox and Tri-Star.

"I was a fast-track success," Gottlieb says with emphasis on the past tense. She articulates the next words with the same suspended emotion as an alcoholic publicly admitting her problem. "I had never failed. Never failed. And, then -- boom!"

Boom for Gottlieb was a bust. In 1984, Highgate's president, her partner for almost two decades, started rethinking the company's future. Suddenly, Gottlieb's toughness and sharp tongue that once earned respect in a maverick venture were seen as abrasive and annoying. He fired her.

"Like I'm dancing as fast as I can, and if I stop I fall down," says Gottlieb, 48, recalling nonstop successes from the time she earned gold stars from her fifth grade teacher until then. "I'm thinking this is it. It's over. There is nothing else I can do. I'm destroyed. Finished."

In the success-oriented decade of the '80s, failure is the scarlet letter not to be mistaken for the red badge of courage. Forget the braggadocios on top who boast about defeats they have known. For most, it's a tough act to swallow.

For Linda Gottlieb it meant shame, isolation, insecurity and fear. "No one had ever told me it was okay to fail," she says. To commiserate, she called Carole Hyatt, a close friend who a year earlier had suffered her own setback. Following the sudden death of her co-owner in a thriving marketing and research firm in New York, Hyatt, 51, could not continue to run the business. "She felt like a complete failure," says Gottlieb. "She couldn't run that company alone so she said she must be a nonfunctioning half person. She stayed home for a year in mourning."

Gottlieb and Hyatt decided their failures had raised questions in their lives that begged answers. How do we fix this mess? Why do we feel so lousy? Why are we immobilized? Are people talking about us? Laughing at us?

The two women say they became impassioned "explorers in the realm of failure." Newly motivated as aficionados of fiasco, they turned their questions outward. They interviewed almost 200 down-and-outers across the nation, some famous, most anonymous, all relieved to talk candidly with someone who likewise had crashed in their lives. They charted the territory, analyzed responses and searched for patterns. And then they wrote a book with a snappy bestseller sort of title: When Smart People Fail (Simon and Schuster, $16.95).

Some would argue that instead of explorers, Gottlieb and Hyatt became exploiters of failure. Profiteers from the rubble of ruin. Exactly the point.

"Failure does give you opportunity," says Gottlieb, who believes the ultimate reversal on failure is to take advantage of it, manipulate it. Either use it or be used. "When you are stopped in your tracks, you have to make choices again. You cannot just go along."

On close examination, Gottlieb and Hyatt's prescription for surviving and even prospering from failure is not run-of-the-mill advice in another '80s pop-psych-biz book. Rather it is a fail-safe system of protective thinking that guards against the personal malfunctioning failure can cause. It circumvents the backslide. It relabels the unmentionable. The title When Smart People Fail should read: What People Who Fail Do If They're Smart.

The underlying concept is simple enough: We are what we perceive ourselves to be. If we think of ourselves as striving toward a greater goal than holding down the job we just lost, getting canned is hardly a failure. At worst it's an inconvenience. More likely a detour. Clearly an opportunity. But not a failure.

In other words, failure is a figment of our communications. If your life falls apart in the middle of the woods with no one around to hear, does it make a sound? Gottlieb and Hyatt argue no.

"This notion is that failure is only an interpretation of an event," says Gottlieb, who calls "reinvention" the first step in regaining power after failure has made you feel like a powerless stooge. "If failure is the interpretation of an event, and you interpret it differently, there is no such thing as failure. You can make failure disappear ... Most people aren't aware they can do that. So they are crippled by their failures because they've settled on a story that makes them stuck. Or they blame themselves. Or they blame somebody else."

Tom Jackson, a New York outplacement counselor whose job puts him across the desk from failure every day, told the authors that when he is hired to "go into a town where 20,000 people have been laid off," his first task is to "change their language." When a person wakes up in the morning, looks in the mirror, and says, "I'm an unemployed steel worker," he can't move, according to Jackson. "When he learns to say "I'm a human being with options," he sees opportunity instead of a dead end.

It is the difference, says Gottlieb, between understanding a 20-year marriage that broke up as a success that ended rather than a failure that voided a good 20 years. It is a small business owner who regards her bankruptcy as an enlarging experience that made her a "more compassionate" person and a more effective consultant. "It is Billie Jean King," says Gottlieb, "who after losing a match, can say 'I hit my cross-court volleys well and that's something I was trying to accomplish.' "

But Gottlieb admits seeing the sunny side of a setback is no cinch in our culture. "America is the land of success," she says, "the land where success is measured in money, where Vince Lombardi said, 'Winning isn't everything, it is the only thing.' People who judge success only by more, more, more, never have enough. If winning is everything, when you lose you're dead. You're doomed."

Gottlieb mentions interviewing George McGovern for the book. The former U.S. senator suffered one of the worst defeats in the history of presidential elections to Richard Nixon in 1972. "He said it took him years to come to this way of thinking," she says. "When he first lost, he was devastated. Even though, intellectually, he knew he was going to lose, it didn't stop the hurt. It didn't stop the shock.

"But he feels that the campaign was worth it, what he brought to the public's attention mattered. And, now, he says, 'I'd rather be George McGovern loser than Richard Nixon winner.' So, for him, the salve is that he makes himself ultimately the judge of his own victory."

But whatever happened to The Little Engine That Could? If you fall out of the saddle, aren't you supposed to get right back in it? And if at first you don't succeed? Those are all-American axioms about goals and succeeding. None of them are what Gottlieb and Hyatt recommend.

"I think that when you fall off your horse, you don't get right back on," says Gottlieb, who besides writing the book has parlayed her experience into a contract as a producer with a major film studio. Hyatt, meanwhile, realized she never liked the pressure of running a business with 50 employes. She now takes on only short-term projects. She works only with people she likes and makes more money than before. "I think that you stand there for a while and absorb the blows and wounds," says Gottlieb. "And you think for a while why you fell off your horse. And then you think, maybe, you don't want to get back on that horse again. There are a lot of other horses to ride out there."

Gottlieb mentions a film director friend who a few years back won an Academy Award for a small production. At the time, he thought he was a great success. "He expected to take the world by storm because everything is always bigger, better, more," says Gottlieb. "And, instead, he doesn't get hired. Nobody wants him. He's done one small film. It doesn't mean they want him to do a big feature film. For three years he feels like a failure.

"And then he thinks, 'Why am I doing this?' He realizes that everything he has been doing has been ruled by fear of failure, not desire for success. So he starts to change. Instead of saying, 'Am I successful?' he is saying, 'Am I happy?' His answer is no."

Realizing he had "the power to change his life," the film director took a drastic income cut and moved his family to a small village in France.

"So I said, 'What do you do all day?'

"He looks at me as if I'm crazy and says, 'My life is my career. I grow my garden. I talk to people. I write my memoirs, which no one will read, and it's alright.'

"Now the world will probably think he is a failure," says Gottlieb. "But I don't and he doesn't. Still, that's the opposite of the Little Engine."