For much of the history of the world, competition has been the model. We compete for land, resources, mates, and everything else we want or need. People compete with each other in school, on the athletic field, in the workplace and in society in general. Nations compete with each other, both economically and in wars.
For about the last 50 years, ever since the Muppet characters on Sesame Street started to promote sharing, cooperation has been promoted as the better model. This is the basis of the United Nations, DEI in businesses, and what is promoted to children in schools. In this article, we look at competition and cooperation in two settings: in business and in the home and examine which system works best in each setting.
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The competitive system
In a competitive system, individuals compete with each other with the person who wins the competition being rewarded. This happens in athletics where the individuals who can run the fastest, jump the highest, or swim the fastest gets a medal or a trophy. More importantly, he gets sponsorships, better resources like the best equipment and training facilities, and financial rewards like direct compensation or scholarships.
It also happens in the business world. Companies are formed by people with competing ideas and then the markets determine which businesses grow and create more money for the founders and which fail and dissolve. Corporations have employees compete for higher positions with the most capable employees getting the top roles.
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In a competitive system, the person or company that performs the best gets more of the resources. This means that the resources are going to the people/companies that make the best use of them. Lance Armstrong got the best bikes and the best training facilities because he would use them to win races. Walmart got far more money than Kmart because they provided a better store and pleased their customers more than Kmart. As a result, they have the ability to expand and grow their business while Kmart went out-of-business.
Investors place their money into companies that do well, giving them the resources to expand and do more. This happens in the beginning when shares are issued, with companies that have better potential being able to raise more money in initial public offerings (IPOs). It also happens later where companies that have higher share prices are able to issue additional shares to raise capital for expansions and acquiring other companies. Companies that start to fail see their share price decline, making it easier for other companies to acquire them. Eventually all companies will either fail or be bought out by competitors.
The cooperative system
In a cooperative system, everyone works together to achieve the goals, whatever they may be. An example of a cooperative system would be a church that organizes a food pantry. They ask members to donate food and money, volunteer to staff the event, and leadership is normally chosen by committee (with generally few people stepping up who want the roles). The reward in such systems is normally the praise from others who see you as a good person for being willing to help and personal satisfaction at “doing good.”
In business a cooperative system would require broad organization and coordination. A central group would decide what products and services were needed and determine how they would be delivered. Competition would be avoided with each business given specific areas and products/services to sell. Businesses would help each other where if one made more money it would give it to a business that made less so that it could pay its employees.
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Within companies leadership would be chosen by consensus and popularity. The CEO and senior leadership might be chosen by a vote of employees, or perhaps each person would get a chance to fill each role. Pay would likely be nearly equal or at least fairly flat. If an employee were sick or otherwise unable to contribute as much, he/she would still get paid the same. Pay would be based on need rather than performance.
Why competition is better than cooperation
Competition rewards those who do the best. The ones who run the fastest, sell the most products, make the best investment decisions get the most money, fame, and support. If there are multiple companies within the same area and business, those that do the best job providing what the customer wants will survive and prosper. If other companies do a truly poor job, they will fail and free up the space and resources for other companies to enter the market who will do a better job. Competition keeps every company performing since even if a company dominates a market others will come in and take their customer base if they start running the business poorly or stop giving their customers the best price, service, and/or products.
Within a company, those who show the most capability and put in the most effort in the right places move to the top. Employees who do good work and learn new things get promoted to higher positions. Those that show a lot of potential move higher and are given training and groomed to become vice presidents and president of the company. Effective managers are given more employees to manage and bigger responsibilities. Those who are the best at research and generate the best products are given more funding and resources.
In cooperative economies, companies are not challenged. Competition is prevented by creating monopolies where each company has its own region and customer base. This means that there is no incentive to provide better products and services. The company will receive the same profit and people in the company will receive the same pay regardless of whether they sell more products or make customers happy or not. In some cases there are individuals who want to do a good job and please customers, but they quickly find that they get little help from those around them and usually give up. They may even find resistance to doing better and generating more business since more work is just seen as a hassle that creates no benefit for the employees.
Within a company, selecting leadership becomes a popularity contest. The people who are the most charismatic, attractive, or best socially will get promoted into the top positions. Because these individuals have been able to get by on looks and charm their whole lives, they often will not have developed any real skills. They therefore will lean on others around them to get the actual work done. Because those others do not receive benefits for their work, however, they will mostly do as little as possible. Very little work therefore gets done.
Equity will cause resources to be takes from those who are most capable and given to those who are able to do the least with them. Perhaps a company car that could have been given to a star salesman who could then use it to generate more sales will instead be given to an individual who doesn’t perform well and as a result needs a car to get to work. Inclusion means that people who are not well suited for a role will be placed in those roles anyway just so that they can get “their turn.” There will be people on councils and boards who provide nothing useful and waste everyone’s time because they are not competent or do not put in the effort required.
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Where cooperation makes sense
The place where cooperation makes the most sense is in small groups, especially within a marriage. When each spouses chooses specific roles based upon what the family needs and their personal gifts and then supports the other spouse in performing his/her roles, the family as a unit can achieve far more than can the two people living together but working in isolation. If both spouses are duplicating tasks, there is a lot more waste and other areas get neglected. When both spouses work jobs, there is a need to pay for childcare and pay taxes on the money used to pay for that childcare. There is the need to pay for more vehicles, more gasoline, more clothes, more parking/tools, and more meals out. If both parents spend large amounts of time focused on raising the children, such that they’re both around together most of the time with the kids, work will get neglected. Both parents will be leaving early and working minimal hours, so the company will select other individuals for the higher paying positions since they need reliability and availability.
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Disclaimer: This blog is not meant to give financial planning advice, it gives information on a specific investment strategy and picking stocks. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.
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