"Why Nations Fail" is airport reading libertarian fan-fic in the mold of Victor Davis Hanson: They cherry-pick examples to match their prejudices.
From a historian's POV, the book has two main flaws: Firstly, there are enormous numbers of basic errors that could/should have been avoided by a cursory Wikipedia check. These two just don't know much about history. e.g. they speak about a Roman princep (instead of a princeps), they imagine medieval Strasbourg to be a French (instead of an Imperial) city, they are baffled about the existence of the university of Cracow - Poland-Lithuania probably does not ring a bell. The number of howlers make it a painful read for a historian.
The more important flaw is their total neglect of context (and thus history!). It is deeply wrong to notice that black farmers in South Africa are not as productive as white ones without mentioning Apartheid/colonialism (worse: all their examples fit the pattern of good behavior by white people, not so good behavior by non-whites).
Methodologically, their book is flawed by not defining/operationalizing "extractive societies". Their I-know-it-when-I-see-it approach lets them subsume very different cases under their term. The book is also politically biased (e.g. holding the highly questionable view that unions today are too powerful in the US). Overall: Avoid.