But that one-time payoff comes at the cost of a series of moderate payoffs that would have been possible through the partner’s technical support, greater financial strength, overseas market support and so on, had the Indian businessman continued to cooperate.
ARE WE SO SMART AFTER ALL?
Let us go back to the apple exporters. Let us say had they ‘cooperated’, that is, waited full season before plucking the fruit, they would have earned a net profit of Rs 2 a kilo. On the other hand, by ‘defecting’ or plucking the fruit before the harvest season and ripening them artificially, they could earn a profit as high as Rs 5 a kilo.
Can our rational producers, who are presumably not onetime traders, maximize their ‘satisfaction points’ with their defecting behaviour? They may earn Rs 5 a kilo (temptation points) but only at the cost of an ensured income stream of Rs 2 a kilo (reward points) that they would have earned in the future through cooperation. Thus they fail to maximize their long-term rewards for an immediate temptation. What makes it so difficult for us to realize that the temptation points we earn owing to immediate temptation comes at the cost of a string of future rewards?
For some peculiar reason, we are happy with that one-time skimming of temptation points and lack the ambition to amass those strings of rewards.
PRIVATELY SMART AND PUBLICLY DUMB
When I jump a queue or a red light, or throw that garbage on the sidewalk, I am taking a rational ‘squeal’ decision, since it seems to get me ahead of others or make life easier for me. Here I am being privately smart. But then, as others are no less rational, intelligent and smart, they too start squealing for the same reasons and, before we know it, we have unruly traffic, filthy streets and stinking urinals. So collectively we are all worse off, just as the two prisoners in the dilemma. And then we complain about a dirty country, a polluted city and appalling traffic. In short, publicly we emerge dumb.
Or when a corporate firm puts up ghastly giant-sized billboards all over the city with little regard for aesthetics, or pollutes the environment or makes low-cost, inferior goods to score over competition, and the competitor, with identical logic, puts up ghastlier billboards, pumps more effluents into the river or cuts more costs to produce shoddier products, it is being privately smart. But before long, we have an ugly, polluted country full of shoddy products. And then we raise concern about corporate governance! Clearly, we are publicly dumb.
Consider this. In many countries, one often sees buildings where every balcony, every balustrade and every window maintains, over centuries, the original plan, colour and appearance. Such aesthetics ensures that the real-estate value of that property does not drop. Of course the enforcement of regulation in such matters in these countries is very stringent, shaping the behaviour of the buildings’ occupants. But in a democratic society, regulations are made by ‘us’; so who is to blame if stringent regulations are not in place, as in our country? And how can we enforce such regulations given our resolute resistance to any attempt at such enforcement? If three of us put up a building together, one of us will cover our balcony with glass windows, the other will put out an awning and the third will close his balcony with a concrete wall to extend his room size. In short, we ‘squeal’. And if such conduct violates any city regulation at all, aren’t the enforcers of the regulations ‘squealers’ themselves when they turn a blind eye to such violations for ulterior considerations? At yet the next higher ply, aren’t the politicians who ‘transfer’ the inconvenient enforcers (the upright and strict enforcers) being ‘squealers’ too?
Which ply is initiating the cascading effect of squealing all around? We? The regulators? The politicians? We are all part of the ‘we’, the meta We. We are forever squealing—squealing against each other . . . squealing in our organizations . . . squealing against the system . . . squealing against our towns, our cities, our nation . . .
OUR FATALISM
We also squeal when we do not champion issues, leaving it to others to take the initiative. The others, in turn, do exactly the same, that is, leave it to someone else. So we are left with a thousand issues facing the country and no champions in sight.
‘What difference can I alone make?’ is our well-reasoned attitude. What does it matter if I alone do not vote? Will the country’s corruption rating on Transparency International get any better if I stop greasing a palm? Surely the country’s traffic problems can’t get any worse just because I slip through that red light? What does it matter if I alone come in late for the meeting? Surely the entire pool can’t get dirty just because I urinate in it? How can my not throwing that piece of paper on the street clean up the whole city? What does it matter if I alone keep my high beam on while driving at night? Will the country’s water table get any higher just because I alone invest in a rainwater-harvesting system for my house or remember not to run my wash-basin tap full blast while shaving? This is how we usually reason. This fatalism, ingrained as it is in our psyche, is visible in our day-to-day actions. To give an instance, I was once waiting for my bags at an airport carousel. The baggage of a particular flight had not arrived even an hour after the flight had landed. The airline officials too were missing. While most passengers had begun to get fidgety, one of them took it upon himself to look for the duty manager. There were at least four or five in the crowd who advised that lone gentleman not to waste his time, saying, ‘It will make no difference, take it easy.’ And as soon as the much-delayed bags arrived, the passengers departed hastily with their baggage, not wishing to spend any more time and energy complaining.
From the prisoner’s dilemma viewpoint, the catch here is obvious: if an attitude is rational for me, it is rational enough for everyone else. Such an attitude invariably leads to the squeal–squeal situation, where everybody is left worse off.
The opposite phenomenon—‘But everybody else is doing it’—is equally common, and leads to the same behaviour. Everybody is being corrupt, so why shouldn’t I accept that bribe? Everybody is throwing garbage on the street, why shouldn’t I? Everybody is jumping the queue, why shouldn’t I? . . . Here again we are squealing.
These dual attitudes reflect the extent of our fatalism, our mute acceptance of circumstances, our unwillingness to believe in ourselves and the complete subjugation of the self. I was once travelling in rural Bihar in a Jeep. It took me some time to figure out that the pedestrians who stooped down to their waist and the cyclists who dismounted and adopted a likewise posture as the vehicle passed them were in fact conditioned to paying their respect to the authority that a Jeep—the standard vehicle of local officialdom—represented. There was total resignation to their fates writ large upon their faces. They were not about to challenge their low status in society. Their fatalism was complete.
Things are not very different in cities either. Again and again I have noticed so-called VVIPs nonchalantly jumping queues and going ahead of hundreds of passengers at airports. Such is our awe of authority that I rarely see passengers challenging these worthies or even joining those odd ones who do challenge such interlopers.
Our behaviour is not unlike that of the herd of enormous bison we get to see on National Geographic, watching in mute resignation a couple of lionesses kill and eat one of their own. How often do we read of scores of people standing mute witness to a rape in a suburban train? Nobody else is trying to take on the rogue, so why should I or how can I alone do it, we reason. What is happening is not because of me, so why should I intervene?
And yet, one in ten times, inexplicably those bison on National Geographic are shown to turn on the lionesses. And when they do, the victim simply stands up and walks off. In other words, if only we believed in ourselves and did not hide behind what others are doing or not doing, it is always easy to retrieve the situation. But we seldom do so. So fatalistic have we become that we no longer even seem to suffer a guilty conscience when we give or take bribes, when we stand mute witness to gross injustice or when we allow our rights to be trampled upon by the powerful and the mig
hty. In the language of prisoner’s dilemma, each one of us defects in such situations, and as a consequence our fatalism becomes a self-fulfilling prophecy.
The same ‘what can I alone do’ syndrome is perhaps also the reason we do not always espouse larger causes; it is also perhaps the cause for our low achievement levels; and reason too for our placid acceptance of the filth, corruption and chaos all around us.
PRISONER’S DILEMMA AND THE BIG PICTURE
Though seemingly an abstract problem, prisoner’s dilemma encompasses our lives more pervasively than we imagine. For example, both India and Pakistan argue exactly as the two prisoners cited in the prisoner’s dilemma, and arrive at the ‘rational and well-reasoned’ decision to go nuclear—a squeal–squeal behaviour that results in the two countries forgoing the opportunity to save millions of rupees that could have been used for better health, poverty alleviation or primary education, not to speak of reduced risk of mutual annihilation. In fact, much of international politics takes the same route, whether it is in the context of negotiations on world trade, climate change or banning of whaling operations.
TOO INTELLIGENT FOR OUR OWN GOOD?
At times perhaps we are far too intelligent for our own good. We use our intelligence to quickly see through the fact that no matter what the other does it is ‘better’ for us to squeal. So we make sure we squeal like impaled pigs every time a choice to squeal or not to squeal presents itself.
Of course this is not to deny that the prisoner’s dilemma has a universal applicability and Indians are no exception in being prey to the dilemma. But what is striking is that, in most situations, we Indians do not even see any dilemma. Defection seems to be our default setting. The exasperating thing about prisoner’s dilemma, particularly in a country like ours, is that even after all these discussions, if the same problem is posed all over again, it is given that we will defect all over again. Because you know that if I know that you are not going to squeal on me, I would surely squeal on you (and vice versa), as I am supremely selfish, and my squealing guarantees me freedom at your cost. So you figure that you must squeal on me. That makes a pair of us thinking exactly alike, which invariably leads to a squeal–squeal situation.
Recognizing that there is indeed a dilemma would be the first step towards resolving the dilemma and achieving cooperative behaviour. But it appears that we are nowhere near that realization. The problem gets more complex as we encounter iterative and many-people prisoner’s dilemma type of situations.
Let us explore the iterative prisoner’s dilemma situation in the next chapter.
CHAPTER 4
Iterative Prisoner’s Dilemma and the Gentleman Strategy
A reporter once asked a farmer to divulge the secret behind his corn, which won the state agricultural contest year after year. The farmer confessed it was all because he shared his seed with his neighbours. ‘Why do you share your seed when you’ll be competing with them in the contest every year?’ asked the reporter.
‘Why sir,’ said the farmer, ‘don’t you know? The wind picks up pollen from the ripening corn and swirls it from field to field. If my neighbours grew inferior corn, cross-pollination would steadily degrade the quality of my corn. If I am to grow good corn, I must help my neighbours do the same.’
THE ITERATIVE PD
Real life is seldom like a simple one-time prisoner’s dilemma (PD) situation or a one-time interaction between two parties. More often than not, it comes closer to what may be called an iterative, repeated or ongoing PD situation. We interact with the same party over and over again. While any one interaction may be akin to a one-time PD situation as described in Chapter 3, a series of such interactions with the same party over and over again results in iterative or repeated PD situation—more like exchanging a goat for a cheque every month.
To take the goat-trade from Chapter 3 a little further: Let us assume that you and I get into a lifelong (rather than a onetime) arrangement to leave a goat and a cheque for Rs 1000 respectively at mutually agreed spots, on the first of every month at 9 a.m. Again, the exchange arrangement is so impersonal that we will never meet face to face or even communicate with each other, and we are both supremely selfish. Our payoff matrix remains the same as before, namely as represented in Figure 3.2.
How will our arrangement progress? I will soon start wondering how early in the arrangement it will be best for me to defect with my payment, even as you are harbouring similar thoughts regarding your goat, tempted by those alluring four points—double the normal reward of two. Both of us would be careful not to start the transaction with a defection. In the first month, I will cooperate (C) and so will you, and our first exchange, which is a C–C type, will help us pocket two points each. But our temptation to defect is very real and soon we will start sweating out our strategy to earn the temptation points.
The questions that arise here are: What shape will this ongoing trade eventually take? When will it be best for either party to defect on the arrangement to maximize one’s temptation points? Given that the first one to renege on the agreement gets to keep four points while the naive cooperator gets a –1, isn’t the first defector better off? So why should one continue to cooperate, given that we are supremely selfish?
SUPREMELY SELFISH
What is it to be supremely selfish? Let us assume that for a number of years both of us continue with our C–C transactions as it becomes obvious to us that we are better off cooperating, amassing two points every time. Or is it so obvious? Assume that just when you are dozing off, collecting those boringly slow two points every month, a little bird brings you the good news that I am a nonagenarian, on dialysis thrice a week, with one kidney removed and the other failing, lying in the intensive cardiovascular care unit (ICCU) of a heart hospital, just having undergone a quadruple bypass surgery, with a hip fracture that I suffered when I slipped in the bathroom when I had that heart stroke, all compounded by some infection I picked up in the ICCU. Surely you do not expect me to survive the month. Are you not tempted to defect now? After all you may well get away with your last defection, gathering four points without suffering any adverse consequence of retaliatory defection from me. In fact the surer you are that this is my last month to live the more tempted you are to defect. I too would be, if the situation were reversed. This is what we mean by being supremely selfish and that is the assumption underlying total rationality. Since amassing more points for oneself is the sole necessity here, sentiments such as friendship, loyalty, compassion, fairness and goodwill are of little relevance and so we defect.
LET’S GET REAL
The fact is that we don’t trade only goats. We trade many other things—both tangible and intangible. We also have trading relationships with more than one party—in fact with many parties. Again, not all our exchanges are trades. They may also be non-commercial, such as exchange of greetings. We call these social interactions. Even these interactions are trade-like in the sense that we derive satisfaction points from them too, which are not unlike the satisfaction points we derive from trade interactions. For example, when you greet a neighbour and he responds to your greeting affably, you have a C–C like behaviour and you derive some level of satisfaction. But when your greeting elicits no reciprocal greeting you have a C–D like behaviour and you derive negative satisfaction from the interaction. In other words, real life is not just a repeated PD-like situation between two parties: it involves repeated interactions among hundreds or even thousands of people.
MAXIMIZING POINTS
There are millions of us scampering around in the system, interacting with each other off and on, like particles in Brownian motion dashing against each other individually, jointly or severally. Now if we scamper about long enough, sooner or later each one of us in the system ends up interacting with all the others. Assume we are able to recall the nature of our last interaction with a party—whether it was a C–C type, D–D type or C–D type interaction—so that we can strategically decide what to do in response th
is time. Remember once again that each individual is supremely selfish and is only trying to maximize his total points over the multiple interactions over time.
Let us also assume that I am not an ailing nonagenarian, but a young and hearty individual like you, which means the chance of either of us coming down with a life-threatening ailment that could motivate the other to defect soon is bleak. And in this cauldron of Brownian motion, you are interacting with not just me but many others like me. How soon would either of us be tempted to defect in order to collect four temptation points from each of our transactions, thus maximizing the overall number of our points? And what is the best strategy to maximize our points?
THE BEST STRATEGY
Reverting to our monthly goat-trade agreement, let us assume that after three months of C–C type of transactions I get a mite impatient with this boring state of affairs, where I never seem to get the better of you. So on the first of the fourth month I decide to defect (while you cooperate), giving rise to a D–C transaction that gets me the coveted four points, while you lose one point.
As I would be ahead of you by five points (I got ten points in all: two, two, two and four, while you have five points: two, two, two and minus one), what should be your best strategy to maximize your points in due course? Suppose you take the ‘Never Again’ or ‘Massive Retaliation’ stance, according to which ‘I will never ever be the first one to defect, but if you defect once, I’ll never play ball with a scoundrel like you ever again.’ Then we are both doomed to earning no more points off each other, since all future transactions between us are doomed to be D–D type.
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