Optimal choices, suboptimal outcomes

Save yourself

Imagine a scenario in which the police arrest two people suspected of collaborating in a crime. They are held in isolation and each promised leniency if they will confess and implicate the other. If both stay mum the case against them will be weak, and conviction on lesser charges is the likely outcome. However, if each tells the whole story the government will have the testimony it needs to put both away for a long time.

The twist comes with the conditions attached to the third possibility: should one person reveal the details while his partner refuses, the confessor will get away with the lightest sentence of all, as the prosecution promises to shift the blame almost entirely to the other party.

In this situation each prisoner knows his best chance of reducing prospective jail time is to spill what he knows, regardless of what the other does. Unfortunately for him his counterpart also understands this perfectly, and since he will behave similarly the result will be longer sentences than if both remained silent and deprived the justice system of its needed proof.

This describes one of the most iconic problems in the social sciences, first codified in the 1950s and known since as the prisoner’s dilemma. In short, doing what seems best for you given the circumstances can in the end make you worse off as those around you choose the same thing. Like the tragedy of the commons, pursuing self-interest has consequences that run counter to what you ultimately prefer.

Enterprising researchers have identified variants of this concept in diverse areas, ranging from the political system to environmental protection to corporate pricing strategy. For instance, citizens overall want an efficient government that serves the highest needs of the people, but if a political candidate chooses that noble path her opponent can win by pandering and whipping up a voting base around wedge issues. As a consequence, public administration gets clogged up with self-dealing and the common good erodes, though that may not be much bother to politicians who regularly win re-election.

A cleaner environment is desirable to all, but mitigating pollution has some cost. If others make the required investments, then those that choose not to still enjoy the shared results, plus the economic lift that comes from polluting a little extra. If everyone thinks that way society goes back to where it started, with smog-choked air and unlivable cities.1

Employee’s dilemma

Your organization probably faces this dilemma in subtle ways. Take the typical large company, where employees are consumed with individual projects and personal development goals. All staff would be better off if the cultural norm was to invest meaningful time in coaching and developing colleagues. Leaders who regularly did this would create a more collaborative and capable organization. Even if the payoff on a single project was minor, the firm as a whole would thrive from having a richly developed workforce continuously growing in effectiveness.

But if that’s the case, and you work in such a competent environment, you might be tempted to just drive your team harder to extract the most immediate performance. Instead of taking time out for feedback and training, you push aggressively towards the objective. In the end you shine as a manager and advance to bigger and better things, while the general capability of staff declines.

Like the prisoners, you face a similar choice among three scenarios:

1. Everyone invests in developing others. Each takes a short-term hit in efficiency, but in the long run collectively creates a better place to work. This is akin to the “no confession” outcome.
2. No one invests in developing others, and everyone looks out for themselves. This builds a mercenary culture where all are worse off. Such is the result when both prisoners confess, except here everyone goes to the metaphorical jail of a gloomy workplace.
3. Let others invest in development and broader culture-building, while you choose to focus only on your narrow goals. You freeload on the system and benefit from capable and well-trained team members. For the prisoners this is the one-sided confession. Others stand firm while you “confess” and come out ahead, rising at their expense.

The same problem operates at the individual scale, among departments or divisions competing for the same resources, or for regional offices that must choose whether to cooperate or battle to extend their turf. Salespeople with quotas to hit have to decide whether to poach on their colleagues’ territory or hunt together to land even bigger clients.

Different parties in a complicated healthcare system can try to squeeze even more money from overburdened payers, or coordinate to create a more sustainable trajectory.2 Manufacturers can squeeze the last penny from their partners, or take the hit to short-term earnings to create a more durable supply chain.

Unresolved prisoner’s dilemmas contribute to a culture that spirals down into decay and collapse. Identifying them early and cracking them is critical.

Prison break

One solution derives from the fact that the classic formulation of the problem isn’t entirely theoretical. Criminal society understands the potential for such prosecutorial tactics to expose its activities. In response it enforces a code of silence among its participants that is regularly communicated—talking to the cops is an offense that gets punished when the prisoner returns home.3 Add in that threat and suddenly the offer dangled by the interrogators becomes less appealing.

Organizations needn’t be so callous about it, but it’s important to establish norms such that individuals can’t throw the rest of the team under the bus, at least not often and not with impunity. Such mechanisms tend to be more formal, going beyond mere statements of valuing a collaborative culture and instead validating corresponding behaviors during reviews or promotions, and penalizing their absence.

Another solution comes from the idea that most real-world scenarios are not one-off events. Given that interactions will be repeated over time, patterns of behavior can be observed and cooperation can be naturally rewarded. Theorists who developed solutions to the original problem noted that starting with the positive, more vulnerable opening move could be more effective when the game is repeated. If the engagement repeats often enough, those who demonstrate willingness to do the “right” thing, however defined in the context, will find likeminded people gravitating towards them, while bad actors are shunned.

Finally, the original problem structure requires that the prisoners be kept separate from each other, to prevent any coordination that could circumvent the conditions that have been carefully set up. When you don’t know what someone else might do, the default response is to assume the worst and act defensively. Better communication channels can break this mindset, making it clear why working together is better, that no one will be punished if they take one for the team, and burdens will be shared fairly.

What conditions do you work within that lead to superficially logical but insidious choices? What role do you play in creating and reinforcing them? More importantly, how can you break free of them?

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