Re: Competition & Cooperation LO1448

Eric Bohlman (
Wed, 31 May 1995 05:16:52 -0700 (PDT)

Replying to LO1424 --

> Interesting thread on competition & cooperation.
> In my experience (which is not in the insurance business, I would not like
> to be in that business after reading Tom Burke), competition is
> cooperation. When I am without competition, I have to do all the job,
> explain, convince, show, etc, etc.. The client does not know anything. He
> has to learn.
> When I have competition, a part of this job is done by my competitors.
> They do it, I do it. I give informations on their products and services,
> when asked, so do they. Maybe I won't get the sale, but when I get it it's
> much easier, much simpler, much cheaper : the client has listened to
> others, he knows what he wants, he has a certain knowledge on the products
> and services I sell.
> Competition makes clients. Take of the competition and you'll see the
> sales go slowly down.

I think your message points up a semantic difficulty that a lot of us have
with the term "competition"; we use it to refer to two unrelated concepts
and sometimes conflate them. Kenneth Delavigne and J. Daniel Robertson,
in _Deming's Profound Changes_ (Prentice Hall, 1994) point out that "free
market competition" and "social competition" are *not* the same thing.
The latter is what Alfie Kohn would define as "mutually exclusive goal
attainment" (MEGA): one person's success depends on other people's
failures; a "win-lose" orientation. The former, however, doesn't imply
win-lose; rather, it really means open entry to the marketplace and
diversity of producers. As you point out, this can really be
"cooperation" in Kohn's sense; one producer's success can contribute to
another's sense.

The free market, as conceived by classical economists, is not a Spenserian
struggle for survival of the strongest where the goal of each player is to
drive everyone else out of business, any more than nature is a "red in
tooth and claw" struggle of the "top" species to drive the "bottom"
species to extinction. Rather, just as in nature species tend to find
their appropriate niches, in a free market producers tend to gravitate to
doing what they're best at, in accordance with Ricardo's Law of
Comparative Cost.

Another way to look at Kohn's typology of interactions is that
"competition" (MEGA) implies that the partial derivative of one player's
utility with respect to any other player's utility is negative;
"independence" means that it's zero; and "cooperation" means that it's
positive. In a real free market (as opposed to a textbook exercise in
which all the producers produce identical widgets for the same group of
consumers, where the productive capacity exceeds the demand), the latter
condition holds; if N producers are capable of satisfying the consumer
demand for a particular product or service, then the N+1th producer finds
some other demand to satisfy.

Microsoft didn't get its current market position by trying to muscle IBM
out of the mainframe software business in the 1980's; rather, it pursued a
whole different market, namely software for what IBM and its chief
software competitors regarded as "toy computers." This took advantage of
a shift in the market that IBM wound up not being prepared to deal with,
and IBM wound up hurting. But IBM didn't get hurt as a result of being
"wounded" by "aggression" on Microsoft's part; what happened was the
Microsoft was "fitter" in the evolutionary sense, in that it was better
able to adapt to a change in environment (which, in a free market, is
defined by customer demand). In nature, "fitness" means the ability to
survive changes in the environment, not the ability to beat others up;
the same holds in a free market. IBM's problem was that it operated on
the assumption that the environment it had become successful in was a
static and unchanging environment; in the free market, as in nature,
that's a very dangerous assumption.

Eric Bohlman (