The underlying mathematics of the Prisoner’s Dilemma is complex despite its outward simplicity. Very recently, William Press, (an improbable combination of astrophysicist, bioinformatics specialist, computational genius and oh-by-the-way current president of the American Association for the Advancement of Science) and Freeman Dyson (legendary theoretical physicist) developed and codified in equations new strategies that dominate tit-for-tat. It turns out that extortion, not altruism wins. As Dyson explains it:
If Alice uses an extortion strategy, she can arrange things so that, no matter what Bob does and no matter how much payoff he gets, she will get three times as much. The only way for Bob to get even is to accept zero payoff, in which case Alice also gets zero. If Bob acts so as to maximize his own payoff, Alice’s payoff is automatically maximized three times more generously. At least in the math, all else equal, the jerks win.
Now it can be dangerous to impute a lot of real-life meaning to a mathematical model; sometimes that can be more rhetoric than it is reasoning. But I’m planning to take only a small step in that direction.
Most of us who are or have been responsible for overseeing partnership pay regimes know that striking the balance between Woodstock and Animal Planet is a large part of the task. Woodstock, in my vocabulary, means a partnership with a strong sense of shared fate and a cooperative pay scheme. A lock-step regime is one rather extreme variant.
Animal Planet is a partnership arrangement which in which the sharing element is small and which allows each partner to capture for herself most of the profit she creates. If the membership of each law firm were very like-minded about cooperation versus individualism, there would be no problem. It’s not that one mode is always better than the other (e.g., that more cooperative firms always triumph in competition with more individualistic ones) – there’s no such rule. The real problem is dissention in the ranks of a partnership about where on the spectrum a firm’s pay regime should fall.
