Since money was invented around several thousand years ago, and probably before that, people have been dickering over trade.
“How much do you want for that scrawny horse?” he asked, attempting to establish a superior negotiating position. Whether or not the horse was in fact suffering from malnutrition didn’t enter into the buyer’s mind. He knew that he wanted the horse, but didn’t want to spend all of his cowrie shells in one purchase. He still had to trade his five chickens for raw olives and he might need to throw in some cash to close that deal. Olives have been scarce lately. OPEC (the Olive Production and Exporting Consortium) had agreed to increase orchard sizes, but those trees were a couple of years from maturity.
“If you can’t see the truth of such a quality animal, I don’t want to sell her to you,” replied the merchant. He turned back to his work repairing a holding pen. He knew that if he seemed anxious to sell the horse, it would reveal his weak bargaining position. He needed to sell the animal before the day was out or he would go without dinner. Ignoring his rumbling stomach, the merchant struggled mightily to look indifferent.
And so the games begin. Do trades always follow these posturing machinations? Certain transactions appear solidly steeped in subterfuge. Buying a car from a dealer, with few exceptions, is the same basic script as the horse traders. And maybe that type of a deal shouldn’t be expected to evolve. Selling horses and selling cars is pretty much the same thing, else why would we still be talking about horsepower? As a nod to an earlier, simpler time, we can suffer occasionally through the perfunctory contest of positioning, trying to create (or discover) an advantage. But can there be a more effective way to negotiate? Can’t we save a ton of time and effort by being more direct and transparent, looking for arrangements that create mutual gain?
In 1981, I bought five acres in the Sequoia National Forest from my father-in-law. We wrote up our own contract, very simple. His philosophy was that a transaction between relatives should be a better deal for both than what they could achieve with non-relatives. He carried the note, which I couldn’t get for undeveloped land at the time, and I paid him an interest rate that was a tad higher than market. We both got what we wanted. Nobody lost. I liked that philosophy a lot, and I thought it could be applied outside of the family circle. Why couldn’t we all make deals that helped everybody involved? The proverbial “win-win” scenario is often talked about, but who out there is really making those scenes come true?
Behavioral economics research is focusing on reviewing what has been called homo economicus, the human character presumed to be competitive, selfish and intent upon winning a zero-sum game. Much of economics theory has been historically applied to asserting how this species behaves in a free-market system. Countless texts and papers have been written on the subject of how self-interested humans interact in the free exchange of goods and services, and our regulatory framework has been built around the assumption that without such constraints our markets would be untrustworthy and therefore collapse. More recent research is revealing a deeper set of principles that we would benefit from understanding.
Through a collaboration of traditionally disparate fields, (economics, psychology, evolutionary biology and anthropology), new findings indicate that our natural tendencies are overwhelmingly oriented towards fair distribution of wealth, altruism, collaboration and cooperation. At least, that’s the tendency when the social group is small. As the group grows and necessarily fragments into sub-groups, the tendency towards fairness and collaboration diminishes proportional to the distance between individuals and to the reduction in frequency of communication. When humans lived in small clans, which was the case for 99.9% of our 250,000 year history, collaboration and fairness were advantages for survival, procreation and quality of life. We also spent thousands of years protecting against the “other”, i.e., all entities that were not part of our small group. So in these modern times, as the population has gone through its own Big Bang, our natural tribal behaviors cause us to hunker into smaller groups, reinforcing our xenophobia.
But down deep, the research is revealing that our strongest overall urge is for fairness, collaboration, and reciprocal support. And research is also showing that where these traits are generally exhibited in a group of people the size of, say, a nation, the average wealth is hugely higher than in countries where competition and selfishness in trading are the rules.
It’s encouraging to find out that the traits which evolved through our quarter of a million years on the planet are logically and firmly biased towards doing deals that are good for everybody. All that remains for us to realize the collective power of this favorable trait is to adopt the view that everybody is our first-cousin. As soon as we do, our collective wealth will grow beyond our imaginations. And buying a car will be oh, so much more satisfying than it is currently.