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BUSINESS PLANS

How Smart Is It To Be Nice?

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My theory of business, and life, has been "expect the best, and you're likely get it." It's the basis of how I treat employees, customers, and others. I expect them to be honest, hard working, and trustworthy. Overwhelmingly, my trust has been rewarded. Have I been wise or lucky? How smart is it to be nice?

This isn't a new question. For centuries, philosophers and scientists alike have argued whether it is wiser to act solely in one's self-interest or to cooperate with others. Is it smarter to put your own interests first or to consider the interests of others?

Using game theory, researchers have examined the outcomes of different approaches. One of the classic ways to look at the issue is the "game" called the Prisoner's Dilemma:

Two criminals are captured by the police, immediately separated and interrogated. Neither can hear what the other says. The police don't have enough evidence to convict unless one confesses (defects). Each prisoner is offered a deal: if he confesses and the other doesn't, he'll be set free and the other will get a very harsh sentence. If both confess, they'll both get convicted but with a lighter sentence. If neither confesses, however, they'll both be let go.

What's the smartest move for each prisoner?

Obviously, if each knew what the other would do, the best outcome would be for each to remain silent. But that risks a worse personal outcome (harsher punishment) if the other prisoner confesses.

This short-term, two-player game leads to the conclusion that the smartest outcome is to defect. Sure, you can't gain as much, but you cut your losses. In other words, the best strategy is to just look out for number one.

Not so fast! It turns out that strategy doesn't turn out to be the best long-term approach or in situations where you can see how the other person behaves. In other words, in situations that are more like real life.

In a landmark study, Robert Axelrod, University of Michigan Professor and MacArthur "genius" prize winner, pitted different strategies of cooperation and self-interest against each other in computer simulated games. ( The Evolution of Cooperation, Basic Books, 1985, $21.)

Axelrod programmed numerous scenarios, with many more choices than in the Prisoners Dilemma. He compared various responses to betrayal -- hit back harder, at the same level, not at all. He looked at how long to hold a grudge -- one turn, two turns, forever, etc. Was it better to be the first to defect or the last? Or was continual cooperation, never defecting, the best strategy?

No matter how the game was played, the same strategy always won. This was "Tit for Tat" -- cooperate on your first move, then cooperate or defect exactly as the other player does on just one preceding move. In other words, never be the first to defect, and make your response to defection equal and limited. In this way, all those who want to cooperate are rewarded, and all those who defect are punished. And the group has the greatest likelihood of achieving the maximum benefit.

Okay, so what this means for me - - or you -- is that trusting others is a winning strategy. But, you have to be willing to immediately deal with those who betray that trust.

Here are some ways to increase the likelihood of positive outcomes:

  • Select your "players" carefully. Don't get into situations with people who are likely to be uncooperative or untrustworthy. Be very careful and patient when hiring employees. Never rush to fill a job - or rent an apartment. Use your judgment.
  • Make your expectations clear. Many problems are often just misunderstandings or miscommunication. Let others know what is expected.
  • Quickly correct misunderstandings. Don't allow a misunderstanding to become a problem leading to betrayal.
  • Use systems, not suspicion. In some areas, such as your finances, even one "betrayal" can be disastrous. Set up systems of checks and balances for protection.
  • "Punish" quickly. If someone betrays your trust, deal with it quickly and proportionately.

One of my favorite quotes is "Hire people you trust and trust them." That turns out to be a very good business strategy.

Copyright Rhonda Abrams, 2003

Rhonda Abrams is the author of The Successful Business Plan and The Successful Business Organizer . Register to receive Rhonda's free business tips newsletter at www.RhondaOnline.com.

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Last updated: Mar 26, 2003




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