Collaboration is Key
There are some things that we are naturally good at, and others that we were clearly never meant to master. Give me numbers, processes, systems, and theories and I am in my element. But give me a hammer or a saw, and I’ll probably injure myself while breaking something expensive.
This became evident when I was in metalwork class at school. I remember the hot, noisy room full of tools and safety goggles. We had been given our mission; to make a nail puller, apparently a pretty simple task.
We were about 14 years old at the time, and desperately competitive. Most of my classmates couldn’t wait to get in there and were bragging about how theirs would be the best. My ambition was merely to leave with all my fingers intact!
Step one was design; this was fine, as I could draw, measure, and calculate. My friend however was struggling, so I stepped in and helped him out. It soon came time for him to return the favour, as when it came to physically making the item, I was out of my element. Thankfully he was there for me, and between us we succeeded in completing the class and making our first metal tools.
It’s easy to see why collaborating with friends, family, neighbours, and society in general is a good idea. However, what about in the world of commerce, economics, and business? Isn’t it competition that is generally seen as a healthy objective?
Myths of Economic Competition
In economics, competition refers to the process by which various sellers each try to offer better products, lower prices, and other advantages to choosing their wares over a rival’s. Economic competition allows the so-called “invisible hand” of the market to reward the most effective seller, rather than relying on a central committee or monopoly to plan the economy.
In reality, we don’t have the conditions that allow for truly competitive markets. Too often, one company or group of people have advantage over others – either they know more, have “people on the inside” that can influence policy and markets, or they have enough power to simply buy and consume their competitors. There are also many layers of government regulations that can paradoxically hurt competition by creating barriers to entry for small players.
But even if we did have perfect competitive markets, what would the outcome be? As you can see from above, perfect competition drives prices down to the smallest margin that doesn’t squeeze a business to death. Does that sound appealing?
We can’t dispense with the idea of competition, as we are undoubtedly better off with many suppliers rather than just one option. Competition can also be a positive force that drives innovation.
However, competition can also be a trap, as we can become focused on competing and lose sight of what makes us truly unique. Our creativity is inappropriately assigned to the task of winning a battle with competitors, instead of adding maximum unique value to the market. In doing so we fail to improve upon what we do and meet the customer’s needs in a more fulfilling way.
“All failed companies are the same: they failed to escape competition.” Peter Thiel - Zero to One
What About Collaboration?
We can all understand cooperation and collaboration within a business. But how about collaboration between companies that are technically competing? What would motivate such behaviour, and how can it lead to beneficial economic outcomes?
In Rod Axelrod’s seminal work on game theory, “The Evolution of Cooperation”, he demonstrates not only that cooperation emerges naturally between players in competitive systems, but that it leads to better outcomes for all.
“What makes it possible for cooperation to emerge is the fact that the players might meet again” Robert Axelrod, The Evolution of Cooperation: Revised Edition
In short, we are better off helping each other solve each other’s problems, so that we all get ahead faster. This will likely continue as long as we keep bumping into each other, creating virtuous cycles of collaborative competition.
One example of how this works is with competitive hobbies like Magic: The Gathering, where players are both competing with each other to win tournaments while sharing new ideas for card deck configurations online. This community of practice is one of the reasons that Magic has become one of the most popular and profitable hobby brands of the modern era.
In an economic sense, we are now dependent on each other more than ever before. I can’t personally build shelter, make clothing, hunt, or grow food. I can’t even start a fire without tools made by someone else. Many people today are the same way.
Many of our technologies come from and facilitate distributed cognition (DCog). DCog is the social organisation of, and evolution of, information processing. The insight behind DCog is that we don’t even acquire or apply knowledge alone. It’s a collective effort all the way down.
The digital age allows for massive specialisation leading to networks of small, versatile, adaptive companies collaborating and competing together. Customers increasingly want personalised products and services, and with modern supply chains as the glue holding everything together, it is possible for companies to meet this demand.
Throughout our history, humans have worked together to overcome complex problems, particularly hostile environments and scarce resources. We solved together, and thrived together.
But that doesn’t mean you should blindly collaborate with anyone.
Choosing Economic Collaborators
“In this world of relentless chaos, I rely on a small group of “anchors” to keep me and THG steady.” - Matthew Moulding Founder & CEO at THG
As you might expect, it’s not always the best idea to reveal your challenges or your plans to your competitors. There are others that you may not be able to work with due to conflicts of interest. Certain suppliers, clients, and previous colleagues may not be good collaborative partners.
The real power of collaboration doesn’t come from working with people that have the same perspectives, skills, experiences, and background as you either. When a group of people think in similar ways, they tend to arrive at similar conclusions.
Indeed, the real power of collaboration comes from working with people that have different ways of looking at things than you. Bringing different experiences, perspectives, skills, and thinking to a problem generates a far greater number of insights. Potential solutions that you never would have considered become accessible.
When searching for people to collaborate with, you should also look for people that are open to learning and don’t think they have all the answers. It’s vital that they can give and receive feedback and are willing to ask questions, offer opinions, and remain open to listen.
Ultimately, the trusting and cooperative connections we form with other stakeholders in “competitive” economies lead to resilience, adaptability, growth, and innovation. The longer you work together, the greater the value that you can generate as a group.
