Muddled and specious,
I'll admit that I came into this book with a low opinion of the author. Reading it was an act of curiosity. Megan McArdle has a history of denying that she's ever made any mistakes (be they erroneous forecasts or professional/ethical lapses), so the nature of the book was intriguing. But the book is such a mess that it's hard to learn much of anything from it. I'm quite certain the author didn't.
The Upside of Down is amazingly disjointed and meandering, more a collection of vaguely relevant studies and anecdotes than a book with a unifying thesis. The first chapter introduces this junk drawer approach, containing assorted stories from the business world, a discussion of mindset theory, a bit of "everyone gets a trophy" mythmaking and an irrelevant conclusion about arcade games. It doesn't improve from there. Much of the book is internally inconsistent. The author argues in one chapter that large organizations are so complex that there's no way to fully understand why they fail, and in the very next she professes to know unambiguously why General Motors had financial troubles. She's claimed at length (in the book and elsewhere) that you have to study failure because success is systemic and you can't learn anything from it, only to turn that around in the chapter on the 2008 financial crisis and claim that it's actually failure that's systemic and there's no point in trying to figure out what went wrong - apparently the worst financial crisis in recent history is just one of those things that happens.
The writing is similarly incoherent. The style is odd - it's meant to be a business book, but it's laced with long personal asides and partisan political arguments that don't fit that theme at all (Does a chapter on bailouts really need five pages on the author's love life?). At the same time, there's too much business-oriented content for it to have much appeal to a general audience. Some chapters even veer into an incongruous narrative style that stands out even more. She often makes note of counterarguments to her theories, only to move on without ever addressing them. In fact, argument is one of the weakest aspects of her writing - in Chapter 8, she refuses to even name any of the economists who disagree with her theory that no one was at fault for the economic crisis, content to give broad synopses of their arguments and then liken them to 9/11 Truthers.
The only way I can find to make a coherent thesis out of The Upside of Down is by splitting it into two separate sets of advice for two separate groups. One group must be given freedom, allowed to take big risks and forgiven their failures and missteps. The other group would succumb to moral hazard if given such freedom and must instead be kept to a risk-mitigating process through regimentation and punishment. It's not hard to imagine with which group the author associates.
In sum? There's nothing in The Upside of Down that you couldn't read in any number of other books written by authors who know how to make a coherent case. If this is meant to be McArdle maturing as a journalist, then she's got a long, long way to go.