Cooperation beats competition
// Corporate Culture, noventum
Is competition „driving progress“? Ever since Adam Smith, we have come to believe that the answer to this question is „yes“. According to Smith, the „selfish rational striving of the individual competitor for maximum profit does at the same time also lead to increasing common good“. The ideas of Smith were picked up and fine-tuned by numerous economic theorists. Worth mentioning at this point is the „dynamic competition“ model of John M. Clark, which was developed further by Wolfgang Kerber into the „evolutionary competition theory“.
From these ideas, a virtual ideology of competition has developed in our society. We send our children to schools that measure their competitiveness by means of grades. Managers never get tired of calling the competition a war, and co-workers perceive their colleagues as competitors whom they have to outdo as much as possible in the fight for the rungs of the career ladder. To put this ideology into question is – of course – quite a venture.
In his evolutionary theory of competition, Wolfgang Kerber applies the mechanisms of natural selection discovered by Charles Darwin to business. A provider brings a product to market that has to withstand the fight for survival against comparable products for the consumers‘ favour. If the product does not fare well enough in this fight, the provider varies its product with respect to price and/or quality so that it may make gains in the consumers‘ favour. Looked at superficially, this is the same mechanism that leads to living beings (corresponding to products) being better adapted to the environment (corresponding to the market) through natural selection, which Darwin summarised in the phrase „survival of the fittest“. This way, living beings become more and more complex, just like the provider‘s knowledge of the customers‘ needs, which is reflected in the products.
Unfortunately, the theory of evolution most likely is the most often misunderstood scientific theory ever – with fatal consequences. Initially, a look should be taken at what the mechanisms of natural selection are even having an impact on.
The Nazis, for example, did believe that natural selection had an impact on races which gave them, as members of the master race, a natural right to suppress and even extinguish those they considered to be subhumans. The consequences are well known.
Today we know that natural selection does not have in impact on races, not even on individual living beings, but rather on replicators. These are units of information with the ability to replicate. In the case of living beings, these are the genes that constitute the building plan of the living being. A gene that leads to the living being having lots of offspring that also reaches reproductive age will spread within the population, i.e., it will be replicated a lot. Therefore, such a gene will come out on top of its competitors who will have a lower number of offspring capable of reproduction. This smells suspiciously of competition, which is confirmed by the title of Richard Dawkins‘s book „The Selfish Gene“.
But are genes really „selfish“? A gene for long legs does, for example, „harmonise“ well with the other genes of a giraffe, whereas such gene would be rather hindering for a mole – to say the least. Therefore, the competition between the genes consists in which one is cooperating best with the other genes of the living being. Genes for the formation of muscles would not make sense if there were no genes for the formation of a nervous system that controls the muscles. Without the cooperation of genes, there would be no complex living beings that would be able to think about competition and cooperation. No gene has a consciousness, yet, the cooperation of the genes leads to living beings with this characteristic. As such, cooperation is creating new characteristics that none of the parties participating in the cooperation is displaying. This phenomenon is referred to as „emergence“.
Exactly this phenomenon can be observed in business. In this case, the replicators are no genes, but rather memes, meaning units of information, that copy themselves from brain to brain. Here is an example: memes exist on how to program the motor electronics of a car, how to synthesise the plastics for the cockpit, how to form metal into a car‘s body, and a large number of other memes that are needed for manufacturing an automobile. Only through the cooperation of these memes, of which no single person has all, something new is created – a thing that can be used for driving.
The business theory foundations of the ideology of competition are as such clearly questionable since products, just like races or living beings, are no replicators on which natural selection has an impact. Instead, it acts on the memes – the building plans of the products, analogous to the genes, the building plans of living beings. And it is only through the cooperation of these memes that something new is created. This cooperation constitutes the foundation for the progress of our civilisation.
So, now, what specifically is it about the utility of competition between companies that allegedly leads to innovation and progress? Regarding this, Peter Thiel, PayPal co-founder and first investor of Facebook, opines that competition is fundamentally damaging for companies. The latter would only be successful if they develop a unique selling point for themselves, i.e., if they are good in avoiding competition. High profit margins can only be achieved by those who invent something fundamentally new (c.f. cooperation of memes) and as such don‘t encounter any competitors on the marketplace, at least for a certain period of time. In most cases, a run-of-the-mill product won‘t get you very far, not even with variation in the meaning of Kerber.
As such, competition leads to an avoidance strategy, just like pain and fear lead to a situation where the affected party makes efforts to avoid these „states“. Even though pain and fear are „good“ in the sense that they protect us in most cases from greater damages, it‘s not likely that anybody would construct an ideology from that. We sure do not want to live in a culture of pain or fear, so why then should we simply resign ourselves to a culture of competition, i.e., to a state that we would want to avoid permanently?
So, if companies would be well advised to make an effort to avoid competition, what about within the company? Is it a better strategy for each individual employee to perceive the colleagues as competitors or should he or she cooperate with them instead?
Organisational psychologist Adam Grant has pursued this question. He researched the professional success of managers, sales & distribution employees, and graduate students in dozens of cities, and specifically in dependence on the degree of their helpfulness. In this, fundamentally, a differentiation was made between three so-called reciprocity types:
Givers help when their costs for the help granted is lower than the profit of the other resulting therefrom. Exchangers are focused on compensation. But they want to get at least as much out of it as they invested. Takers help when they are convinced that they will get back more than they are investing.
In all studies, Grant found the same sequence of these reciprocity types on the career ladder (from top to bottom): givers, followed by equally successful takers and exchangers in the middle field, and once again givers as the tail light. The successful and unsuccessful givers differ in that the former do not let themselves get exploited while the latter always help, regardless.
The success of this reciprocity type can be inferred quantitatively with the help of game theory. In this, it turns out that the giver behaviour, i.e., the cooperation behaviour, which is the most advantageous for the individual‘s career, also leads to the maximum productivity for the company. From this it can, in turn, be derived that the main task of managers consists of creating and maintaining a climate of cooperation within the company. The measures necessary for this can also be derived from game theory. The most important component in this is the creation of a culture of trust, the economic success of which the work of the Great Place to Work® Institute was able to document.