---

Some thoughts on the recession…

Having just read Andy Hartwell’s big bunch of good news on the Substrakt blog I got to thinking that I should put something on here. Then remembered I’d written something. Phew. That was lucky.

Think back nine months or so to when the recession was looming rather than blooming. There was a good deal of media speculation and commentary on the inexperience of our business leadership. The last recession was nearly twenty years ago.  Since then the old guard have moved on and the then young turks are going grey at the temples and facing their first global crisis as leaders.

Japan followed France and Germany out of the recession this week. Though the UK is yet to report growth it will happen eventually. As the economy moves towards more positive times and everyone hopes that things will get easier there will increasingly be time for wounds to be licked clean and navels gazed at. Survival is the first litmus test, then results. Management information can tell us how we did. But on a deeper level there is the moral question. On the one hand you might consider that when you’re in a knock down fight then anything goes. But you can also ask did we all behave in the best way for our business, our suppliers and our customers? Is the best way for your customers also the best way for your suppliers or are the two mutually exclusive?

Consider this exercise called the Prisoner’s Dilemma. There’s a full explanation on wikipedia but the one I’ve used here is from How To Lead by Jo Owen.  A book that’s definitely worth reading if you’re interested in people or leadership.

“This is a popular version of game theory. It was first developed by Rand and Dresher in 1950 for the Rand Corporation, looking into strategies for nuclear war. Nuclear war disproves the old adage, ‘it’s not the winning, it’s the taking part that counts’.

The same issue of conflict and cooperation apply to the workplace, with somewhat less catastrophic results.

In the game two suspects are locked in separate cells. They are offered four options:

- Admit to the crime, shop your partner and get off free if your partner has not shopped you in the meantime.

- Admit to the crime, shop your partner who also shops you: you both get a reduced sentence of three years for cooperation.

- Say nothing and get five years (if your accomplice shops you).

- Say nothing and get one year on a minor charge (if your accomplice also says nothing to shop you; your accomplice will also get one year.

There are many variations of this. Rationally you are better off shopping each other unless you trust each other, in which case it makes sense to cooperate and say nothing. If the game is played once, there is no chance to test the strategy of the other person. If the game is played many times, then the two partners can evolve a successful strategy.

In the long run, the typical best strategy is tit for tat. When the other side opts for conflict, you follow. Otherwise, you default to cooperation. If you never offer conflict, you will be treated like a doormat to freedom by the other suspect: they will always shop you. If you always conflict, then both sides will always get convicted, albeit on a reduced sentence. If you slowly learn cooperation, you both get away with a minor charge.

The same dynamic works in business. The cheats can succeed in the short term (which can last years). It pays to stand up to them so that slowly they can learn the price of conflict versus cooperation.”

So if we do come out of recession in this or the next quarter, that period in your life that you look back on and say “I did the right things in the right when when the balloon went up” will be over before you’ve had chance to act accordingly.