Why People Cooperate

If you ever need help, run to a village. Trust me, I know. 

I spent a month in San Lucar de Barrameda, a small village in Southern Spain. It wasn’t the beaches or the food that I remember most. Nope. I remember the generosity. Safety was never an issue there. Time and time again, people were kind, supportive, and trustworthy. 

In San Lucar, it seemed like everybody went out of their way to help each other. Each Sunday, the entire town congregated at Church. They sang their prayers, ate delicious paella, and gossiped about others in the town. The gossip was integral to the safety of the city. Instead of relying on policemen, citizens policed themselves. Everybody knew about people who mis-behaved, so people had an incentive to cooperate and help their neighbors. Kind people were welcome anywhere. Mean people were scorned and ridiculed. 

In San Lucar, selfish behavior is unacceptable. But in New York, a city with 8 million people, selfish behavior is the norm. It’s a dog-eat-dog mentality. Policemen are everywhere and sirens are the sound of the city. During rush hour on 5th Avenue, pedestrians fight like soldiers on a battlefield. They step over homeless people, weave through strangers, and J-Walk through red lights.

Why are people so cooperative in San Lucar, but so selfish in New York? 


Short Term vs. Long Term Strategies

The answer lies in a book called The Evolution of Cooperation by Robert Axelrod. 

The author argues that people behave differently in one-time interactions versus repeated ones. When people believe they will only interact once, they have an incentive to behave selfishly. But if they know the interaction will be frequent and repeated, they will likely cooperate. 

Frequent interactions promote stable cooperation. As Axelrod writes:

 “If you are unlikely to meet the other person again, or if you care little about future payoffs, then you might as well defect now and not worry about the consequences for the future…. The evolution of cooperation requires that individuals have a sufficiently large chance to meet again so that they have a stake in their future interaction.”

Cooperation is determined by the length and frequency of interactions. If two individuals are likely to meet again, they will likely cooperate. If not, they likely won’t. 


Tit-For-Tat: The Master Algorithm

Believe it or not, there’s an optimal way to behave in repeated interactions. 

This simple strategy is called Tit for Tat. Reciprocity is the name of the game. Under the rules of Tit-for-Tat, players cooperate on the first move in a series of repeated interactions. Then, they mirror the other player in every subsequent move. After the first interaction, if the other person cooperates, they cooperate. If the other person defects, they defect. It’s simple. 

Tit-for-Tat benefits from its own clarity. It’s easy to recognize and hard to exploit. It strikes the optimal balance of kindness, retaliation, forgiveness, and clarity.

Unlike eye-for-an-eye, Tit-for-Tat can be positive sum. Eye-for-an-eye shrinks the pie. If one person loses an eye and retaliates by taking the other person’s eye, both people are left with one eye. Thus, eye-for-an-eye is a sub-optimal strategy. As people retaliate, the total number of resources diminish. 

Tit-for-Tat is different. It can be positive sum. When people cooperate, the pie expands. Both parties gain resources. Therefore, in an environment of frequent and repeated interactions, Tit-for-Tat is the optimal way to behave. 


Rules for Everyday Life

Axelrod’s lessons are applicable in every day life. 

To recap: Tit-for-Tat teaches us that in a one-time interaction, cooperation is difficult to achieve. The incentive to cooperate is low. To promote cooperation, people should interact more often. 

Cooperation is maximized when people plan to communicate often, for a long time. The more people interact, the greater the incentives for cooperation will be. When interactions are frequent and prolonged, patterns of cooperation emerge. That’s why people are so kind in villages and so selfish in cities.

How about a practical example?

Consider the work environment. Pretend you’re a freelancer preparing to work with a major bank. As you structure the contract, you have multiple payment options. You can (1) receive one big lump sum at the end of the project once all the work has been delivered or (2) receive multiple payments over time (50% up-front, 25% half-way through the project, and 25% once the project is complete). 

You should take the second option. Every time. 

As Axelrod wrote:

"The great enforcer of morality in commerce is the continuing relationship, the belief that one will have to do business again with this customer, or this supplier, and when a failing company loses this automatic enforcer, not even a strong-arm factor is likely to find a substitute… if the other player is not likely to be seen again, defecting right away is better than being nice.

In business and in life, the lessons of game theory are simple: cooperate at the beginning of the relationship. After that, mirror the other person’s behavior. Turn one-time interactions into repeated ones, increase the frequency of those interactions, and village-like cooperation will emerge. 


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