Everything We Know is Wrong – Part II

I’d like to expand a bit on my last entry, which talked about some of the ideas I put forward in my presentation at the Decision Analysis Affinity Group (DAAG) Conference entitled, “Everything We Know Is Wrong.” Last time, I talked about the need for new metrics and wisdom when setting a course for the long term. This time, I’d like to elaborate on why this is so important.

There’s a test which can be given to small children which correlates more strongly with success later in life than any other test – more strongly than intelligence, persistence, work ethic, anything. You give the child a brownie (or a cookie, or a marshmallow…) and you say, “That is your brownie; you may eat it anytime you like. Now I’m going to go away for a while, and when I come back, if you haven’t eaten the brownie, I’ll give you another brownie. If you’ve eaten the brownie, that will be the only brownie you get.”

The ability to defer gratification is the personal trait which correlates most strongly to success in life. A child (or an adult) who is willing to make sacrifices in the short run in order to achieve significant gains in the long run will do well; one who views any short-term inconvenience or hardship as unacceptable will accomplish little.

This test is true for individuals, but I believe it applies to companies and societies, too. A society must be willing and able to invest in the basic building blocks for future success – education, transportation infrastructure, communication facilities, etc. – if it wants to be successful and provide a good lifestyle for its future generations. Often, this means accepting a somewhat lower lifestyle in the here and now, as we divert funds and resources that could go toward making ourselves more comfortable into projects and efforts that yield benefits in the future. The lifestyle and economic prosperity our generation has enjoyed is due in no small part to previous generations’ investments in widespread electric grids, the interstate highway system, local mass transit, and excellent state university systems – the benefits of which largely came too late for those who bore most of the costs.

Is today’s Western society willing to make the same investments? Maybe. I have my doubts sometimes. We don’t see many signs of willingness to put up with inconveniences these days, let alone to make real sacrifices to achieve long-term goals. This attitude is abetted mathematically by analyses and value measures (NPV, cost-benefit analysis, capital efficiency), which give the best results when benefits are maximized today and expenses are pushed as far off into the future as possible. Aside from the moral question around burdening our grandchildren with the costs of maintaining our current level of comfort, it flies in the face of the deferral of gratification that we know to be essential to success.

The concept of self-sacrifice has fascinated evolutionary biologists for years. I’m not talking about sacrifice for the benefit of one’s own offspring or relatives – that’s easy to understand within an evolutionary framework in which propagating one’s genes into future generations is a paramount objective. Rather, it’s individual sacrifice for the benefit of others or the benefit of the generally unrelated group as a whole which has puzzled those who study these things. If Darwin’s theory of survival of the fittest is true, if all any of us really cares about is propagating our own genetic line, why would anyone sacrifice themselves – or put themselves at a disadvantage in any way – when doing so increases the probability that someone else will gain advantage in the great reproductive sweepstakes?

The famed biologist E. O. Wilson has come up with a controversial explanation. This is an oversimplification of his ideas, but Wilson believes that as humans developed highly structured social groups, our very existence became driven by two competing genetically-based forces: selfishness, which generally helps an individual to advance within a group, and altruism, which strengthens the group as a whole (both in its competition against other groups and in its progress toward a higher standard of living in general). This is complicated by many factors, not the least of which is that a group will have strong motivation to encourage altruism among its members, which means that overt selfishness is generally punished – and therefore, the overtly selfish will not advance. Subtle Machiavellianism results in greater in-group advancement. Wilson goes one step further (and this is the controversial part), declaring that this social pressure toward selflessness is the origin of “virtue” and “sin.” Altruistically acting for the greater good is virtuous; selfishly acting solely for one’s own benefit is sinful.

Martin Nowak, a professor of biology and mathematics at Harvard University, has gone one step further. Nowak has done extensive research into the evolution of cooperation in human beings and in other species. He has identified five mechanisms through which cooperation (or altruistic behavior, or self-sacrifice) might come about.

The simplest of these is direct reciprocity: I help you with the expectation that you will help me sometime. If you never help me, my generosity toward you is likely to dry up.

The second mechanism is through kinship; as we have all observed, people will readily cooperate with and sacrifice themselves for their relatives and offspring.

The third mechanism comes about through grouping. When Nowak models individuals’ behaviors in large populations with a fairly uniform distribution of “cooperators” and “defectors” (those who act strictly in their own interest), the defectors see greater levels of success. When the cooperators are located in groups, however, their groups’ success exceeds that of the defectors. In other words, Wilson was right: altruistic, cooperative behavior benefits a group or tribe.

The fourth mechanism stems from the third: grouping into tribes creates a willingness to place the greater good of the tribe ahead of one’s own desires. As humans developed tribal cultures, we also implemented a vast array of rituals, myths, tribally held values and beliefs, and social reinforcements to ensure that members see themselves as a part of something greater than themselves. This belief in the ultimate importance of the tribe can lead individuals quite literally to sacrifice themselves for the good of the group.

Nowak’s fifth mechanism, “indirect reciprocity,” is the most interesting, and the most subtle. In a nutshell, it means that I decide whether or not to help you based on your reputation. Are you known for helping others in need? If so, then I’ll help you, regardless of whether I have any reason to expect that you will reciprocate directly to me. It’s enough to know that you are a “good” person (Wilson would say “virtuous”). This is analogous to “referent power,” as identified by French and Raven back in 1959. In their paper, French and Raven identify five bases of power – i.e., five reasons why others will do what you want them to do. Of all the bases, referent power – in which I do as you want simply out of respect for who you are as a person – is by far the strongest. Nowak would probably agree; he believes that indirect reciprocity is the primary reason humans have become such an enormously successful species.

So what does all this have to do with my original thesis that everything we know is wrong, that we need a new way of thinking and evaluating our options for long-term success? Everything. The biggest problems we face today will require a greater degree of cooperation, collective action, and yes, sacrifice, than “rugged individualism” is going to provide. We enjoy a standard of living which was built upon the sacrifices of past generations, yet very few of our current projects and initiatives are focused on making sacrifices today for the benefit of future generations. This needs to change, and I believe it will. As I said in my last post, I’m actually an optimist at heart. Western society is perfectly positioned to take the lead on the big problems facing the world today, from resource scarcity to global warming to the destruction of fisheries. Everyone is waiting for someone else to go first, afraid that they will give up competitive advantage if they make the first move. Western society can afford to move first on these issues; our economies dwarf those of the rest of the world. In doing so, we will gain referent power and respect – I actually believe we will gain competitive advantage. Others will join us (out of respect and/or because they will no longer have an excuse not to), and we can work together to find creative solutions that will leave us all better off.

One final point: what is true for societies is also often true for companies. Companies must be more cautious about giving up short term advantage – after all, societies generally don’t rapidly disappear, but companies sometimes do. But with that caveat, companies today can gain much by taking the lead on one or more of the big problems facing us all. Customers and clients respect companies which do such things. Respect leads to brand loyalty, which leads to higher profitability in the long run. A good corporate responsibility strategy needn’t be altruistic – just long-term in its view.

Sometimes the smartest strategy involves giving a little now so you can get more in the long run.