Leadership is found in a wide range of species, including our close relatives chimpanzees and gorillas, as well as capuchin monkeys, zebras, antelopes, wolves, and homing pigeons. Even some sheep are leaders. Most members of all those species, however, like most members of the human race, are followers. From the perspective of game theory, it is often better to be a member of the herd than a lone wolf who goes it alone, even if it means allowing the leader to have first shot at benefits, like the best drinking position at the watering hole. Without a leader willing to decide whether to head south to the river, north to the pasture, or east to the berry patch, the herd members would disperse randomly and thereby lose the benefits of traveling in a big group when a hungry predator came along.
Human followers, of course, often become very disappointed if their leaders do not provide direction and inspiration. Only a few years after starting Apple, Steve Jobs, who was frequently rude to his team members, was fired by his own board of directors. Michael Eisner, who also developed a reputation for being ruthless and autocratic, was booted out as head of Disney. The office of the US president may be the highest-status position in the world, yet every president in recent history has had to endure a continual barrage of angry and insulting media attention during his term. Bill Clinton was almost removed from office for behaving a bit too much like the amorous Maharajah Bhupinder Singh, and Richard Nixon was in fact forced out of office for his role in the Watergate cover-up. Being humiliated before the eyes of the world seems a high price to pay, but it went even worse for John F. Kennedy, James Garfield, William McKinley, and Abraham Lincoln, who were all killed by unhappy constituents before they could finish their presidential terms.
An important insight is that leaders and followers play the status game differently. Followers offer loyalty, obedience, and special privileges for the leader, but this offer is contingent on the leader’s reciprocating by protecting their interests and having the vision to move the group in the right direction. In a sense, a leader and a follower are playing a real-life version of the “ultimatum game” described earlier, in which the follower expects the leader to show a sense of noblesse oblige and not keep all the goodies for himself.
So far we have talked about the different rulebooks used by our status, kin-care, and affiliation subselves. But which of our subselves actually uses the rules of market pricing as developed by rational economists? You might be afraid to find out.
FOXHOLE ECONOMICS: THE SELF-PROTECTION GAME
In 1221, the residents of the Persian city of Nishapur confronted the ultimate game theory dilemma. Their city was surrounded by one hundred thousand Mongolian warriors on horseback, led by Genghis Khan, who sent a messenger with the following ultimatum: “Commanders, elders, and commoners, know that God has given me the empire of the earth from the east to the west. Whoever submits shall be spared, but those who resist, they shall be destroyed with their wives, children, and dependents.”
Surrendering to an alien army rarely results in a happy outcome. Throughout history, conquering tribes have tended to regard the conquered as somewhat less than human and have rarely felt compelled to be fair as they exploited the vanquished people’s resources, stole their women, demanded tribute, and often forced the vanquished young men into military service. Genghis Khan would compel the men in the last town he conquered to march before his troops into their next battle, then use his horses to push them into the moats of the next city on their warpath, allowing the Mongol horsemen to ride over their bodies. But for the residents of Nishapur, even these possibilities were better than having Genghis Khan’s army slaughter everyone on the spot. The negotiation with Genghis went quickly: Nishapur surrendered.
But sometimes intergroup negotiations are less nasty: outsiders have things we want, and it can be useful to form alliances with them. Despite his sometimes brutal acts of conquest, Genghis Khan set up the world’s most important trade routes, connecting Asia, the Middle East, and Europe. Of course, human beings become especially wary about possible unfairness when they’re exchanging goods or services with members of other tribes, Mongolian or otherwise. Unlike your kin, the members of the other tribes do not share your genes, and unlike your friends and associates, strangers share no history of reciprocity and trust with you.
This is where market economics come in, providing a system to regulate the careful accounting of costs and benefits. Monetary systems provide an elegant means to directly compare the value of Honeycrisp apples, Apple iPads, Kotex minipads, text-messaging services, and erotic massages. But in market exchanges, sellers count every penny, and buyers are wary of shoddy merchandise, with each side quick to anger at any hint of unfairness. The rules of rational economics are deeply rational when the top priority is protecting yourself from getting burned. And this is why our wary self-protection subself operates using the rules of market pricing.
While market pricing is relevant to understanding how people deal with wary strangers, it does not represent how the mind calculates exchanges between relatives, friends, or people higher or lower in the status hierarchy. Yet if you peruse the expansive literature on decision making, you will discover that the majority of theorists and researchers have presumed that some variant of market pricing drives all human decisions. This makes sense to the extent that economists are trying to understand how investors deal with competitors on Wall Street. These rules might also help psychologists understand how people interact with perfect strangers, like most of the people they meet in laboratory experiments. If someone is a perfect stranger, it makes sense that he or she might defect in a prisoner’s dilemma.
But a central point in this book is that economically rational market principles apply to only a fraction of human decisions. Most of the time, we’re dealing with relatives, friends, neighbors, coworkers, and long-term business partners. We even come to have relationships with the people who sell us groceries or automobiles. Only rarely do we deal with total strangers. And most of the time, rather than trying to skulk away with the biggest bag of money, we stick around and try to get those other people to like and respect us and care about our welfare. If you use the rules of free market rationality with the people around you, you are likely to find yourself without too many intimate associates to worry about. Indeed, a tendency to treat others in a coldly calculating manner and to try to get them to serve your interests, while giving as little as possible in return, is an indicator of sociopathy, which psychiatrists consider a mental disorder.
Speaking of intimate associates, we haven’t yet discussed two more exchange systems, those used to calculate costs and benefits between romantic partners and between spouses. Unless all of your intimate relations resemble those between a prostitute and a john, you are unlikely to be using the rules of free market rationality in your amorous relationships. The rules of the mating game are so interesting that we dedicate an entire chapter to sexual economics (see Chapter 8). For now, let’s reconsider the rules of market economics in the business world in light of what we’ve learned about how our different subselves reckon self-interest.
IS MARKET ECONOMICS ANY WAY TO RUN A BUSINESS?
Although market economics doesn’t apply to relationships with friends and relatives, at least we can assume it makes sense in the business world, right? It’s only business, after all.
Actually, no. Unless you’re involved in a onetime negotiation with a total stranger about how many pesos to pay for a pound of pomegranates, market economics typically makes for bad business. Cold, hard rational self-interest might make sense in dealing with potentially hostile strangers you’ll never see or hear from again, but it doesn’t work too well when you’re dealing with people with whom you’ll be doing business for any length of time, be they coworkers, clients, or simply repeat customers.
Frederick Winslow Taylor, the father of “scientific management,” was the ultimate capitalist philosopher. Working in the steel industry around the turn of the twentieth century, he observed, “The fundamental pri
nciple upon which industry seems now to be run in this century is that the employer shall pay just as low wages as he can and that the workman shall retaliate by doing just as little work as he can.” His ultrarational solution to this problem was to calculate the precise amount of financial incentive that would motivate workers to boost production rates and allow his company (Bethlehem Steel) to fire the majority of its less efficient coworkers. One biographer notes that Taylor was “so deeply hated by the men that he had to walk home under armed guard for fear of an attack on his life.” The same biographer suggests that Taylor’s rational scientific-management approach inadvertently “contributed more to labor unrest than AFL founder Samuel Gompers and Socialist party founder Eugene V. Debs combined.”
So, things don’t go so well if you treat your colleagues like strangers negotiating over the price of a mango in a crowded marketplace. And as we’ve seen, the rules of the marketplace get completely thrown out when we’re dealing with family members. But if you’re not running a family business, is there anything you can do to foster a more cooperative and trusting environment?
BRINGING HOME ECONOMICS TO WALL STREET
One key difference between the hard-negotiating market-pricing model and the easygoing family model is trust. Remember that even according to the economic rules of game theory, the best outcome in a prisoner’s dilemma comes when both people trust each other enough to cooperate. The problem arises when you can’t trust the other person. Will your fellow crook really honor that pact of silence? Because the other person has large incentives to defect on you, many economists presume that he or she will. If that’s the case, the most rational decision for you is to defect as well, unless you want to end up with the sucker’s payoff.
But unlike in the Wall Street game, there is less incentive to defect in the kinship game. If your brother cheats you out of some benefit, he is also, from an evolutionary perspective, cheating himself out of half that benefit. Because the two of you are aligned genetically, you trust that he is, compared to a stranger in the marketplace, less likely to defect on you, making you more likely to cooperate.
An important implication of all this is that people can negotiate or run a business using a mistrusting psychology of market economics or a trusting psychology of family relations. The key is to switch people from one to the other, even if they aren’t your relatives.
In one interesting study, evolutionary psychologist Lisa DeBruine came up with a clever way to convert wary strangers into kin. She had people play a version of the prisoner’s dilemma called the trust game. In the game, you are given some money (say, $10) and presented with two options. One option is that you can completely dictate how to divide the money between yourself and another person (you can take $9 for yourself and give that other person $1 if you want, because the other person has no say at all). Alternatively, you can let the other person dictate the terms, giving the other person complete control over how to split the money. If you choose to let the other player dictate the terms, the amount of money to be divided will be substantially larger (say, $30). This means that if you let the other person divide the money, you could get a larger payout than if you choose to divide the money yourself. Your choice in the game depends on whether you trust the other person. Do you think the other person will be a malevolent or benevolent dictator?
DeBruine suspected that people’s choices would differ depending on whether they played the game according to the mistrusting psychology of market economics or the trusting psychology of family relations. So at the beginning of the study, DeBruine took everyone’s photo. This means that as you made your decision, you saw a photograph of the other player you were paired with, who was always a complete stranger. DeBruine found that people were not especially trusting of the other person. Even if they could make more money by letting the other person choose, people were generally unwilling to take that risk. When gazing at the face of a stranger, people behaved like employees at Bethlehem Steel, wary that this person might take their money and run.
But in another condition in the study, DeBruine morphed your photo with the photo of the other person. As a result the other player looked like your long-lost relative. Playing the game with someone who looked like a potential family member activated the kin-care subself. Now, all of a sudden, people trusted the other person and gave him or her the opportunity to dictate the terms of the game. In return, they got larger payoffs themselves. Even though none of the participants realized that their own faces had been morphed into the other person’s, giving money to the other person was like giving money to a family member, because they were, literally, a part of that other person.
A FAMILY COMPANY
Even if it’s not very practical for you to start morphing photos of your employees and customers, the trust game study provides an important lesson: people will trust and cooperate more with others if they feel like they are part of a family. This is exactly what happened at Southwest Airlines under longtime CEO Herb Kelleher. As one former Southwest employee observed, “Rather than being a megacorporation with thousands of employees, Southwest is a large family with many members.”
Unlike CEOs in the rest of the cutthroat airline industry, Kelleher dealt his employees in on the corporation’s profits. To further the familial atmosphere, Kelleher also installed rocking chairs throughout the corporate offices and encouraged employees to wear pajamas to work for a day. After September 11, 2001, when the airline industry suffered a massive crash in business and most of the airlines resorted to massive layoffs, Kelleher appealed to the workers’ team spirit, asking them all to share a general pay cut to prevent the company’s having to start selectively firing other members of the family. As a consequence, Southwest Airlines employees have never gone on strike, and Fortune magazine has frequently listed Southwest as one of the best places to work, as well as one of the most admired corporations in America.
Customers noticed the happier family feeling projected by Southwest employees and have been extremely loyal to the airline. Ironically, by avoiding the cutthroat, profit über alles Wall Street approach, Southwest has been a financial success story, thriving during years when its competitors watched their profits disappear.
Southwest’s secret of success was, in essence, to activate the kin-care subself at work, inspiring unrelated people to treat each other like family. This is a variant of the same principle used in the photograph-morphing study. Southwest managed to psychologically morph all its employees into members of the same family.
Southwest Airlines is, of course, not a family; it’s a large corporation. But its story indicates something important about your different subselves: they are flexible; they can be turned on and off to fit your current social context. Although your trusting kin-care subself usually comes out when you are around relatives, it can be primed by appropriate circumstances. And when it is running the show, your economic decisions will be more familial. By encouraging employees to think of themselves as members of a big family, companies like Southwest are able to shift the rules of the game psychologically.
And the same thing can happen at an even broader societal level. Martin Luther King Jr.’s “I Have a Dream” speech is full of images that encourage people of different races to think of one another as members of a common tribe—as fellow citizens living in the land of Abraham Lincoln, the US Constitution, and the Declaration of Independence—and even as members of a common family, making repeated reference to brotherhood and to children. That speech has been repeated to generations of children in the years since Dr. King gave it, and its familial imagery may have done more to improve race relations than all the laws passed to punish civil rights violations.
Let’s think about the Walt Disney Company in light of what we know about how people’s different subselves do business. Disney not only started out as an actual family company but continued to operate on familial principles even after Walt and his brother left the scene. But then Michael Eisner arrived. Eisner brought to the com
pany a hard-nosed Wall Street emphasis on the bottom line, and the result was a harsher, more cutthroat atmosphere. Whereas Walt and Roy O. kept the Disney family together despite occasional downturns in the bottom line, when Eisner started losing money, he was treated like a foreign invader from a strange land, and Roy E. arranged to have him thrown out on the street.
EACH OF OUR SUBSELVES negotiates according to a different rulebook. Rather than treating everyone according to the same set of cold, objective, self-serving rules in every situation, we have a different set of biases depending on whom we’re playing with. Those biases often lead us to put shallow self-interest aside. But putting self-interest aside, and doing so in different ways for friends, relatives, and business associates, was good business practice for our ancestors. Those biases led to more beneficial exchanges between our progenitors and their family members, friends, and trading partners.
But some of the biases that served our ancestors so well can sometimes produce costly errors and mistakes. We next take a closer look at our biases and mistakes in an attempt to understand seemingly senseless phenomena from everyday overconfidence to egregious miscalculation. Next stop—Africa, where one particularly potent ancestral bias led the people of one country to choose to starve rather than accept help.
4
Smoke Detectors in the Mind
ON MAY 30, 2002, the African nation of Zambia declared a food crisis. Even before this catastrophe, the country had been in bad shape. The nation was mired in chronic poverty, with a typical family earning $395 per year, and one in ten infants dying soon after birth. In 2002, though, things went from bad to worse. The rainy season that usually begins in November and runs into April came to a sudden halt in mid-January. Thousands of acres of crops planted the previous fall withered and died. By mid-spring, with the country’s food reserves running out, Zambians had to resort to boiling poisonous wild roots for eight hours to make them edible and killing protected elephants for meat. Despite these desperate measures, 3 million Zambians were on the verge of starvation, when President Levy Mwanawasa declared a national food emergency.
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