Tragedy of the Commons — Strategy Umwelt

Feb 9

Feb 9 Tragedy of the Commons

Purpose

Understanding the Tragedy of the Commons, a mental model that stems from a failure to think long-term and strategic in favor of quick and immediate gains.

The Tragedy of the Commons, also referred to as the Tragedy of the Unregulated Commons, is a mental model rooted in economic theory that has much wider applications in an environment of growing complexity and disruption.

Originally coined in 1833 by the Victorian economist William Forster Lloyd, it was expanded upon by evolutionary biologist Garrett Hardin in 1968. The concept outlines the inherent problems that emerge when a group of rational individuals try and reap the maximum benefit from a shared resource.

The original concept used an illustration of unregulated grazing on a shared piece of land (colloquially called “the commons”). If each individual used their allotted fair share, the resource would remain sustainable. The tragedy occurs when individuals start to take more than their fair share - they may receive an individual benefit (a few more animals to sell), but if all individuals made this decision, the common would be overgrazed eventually leading to its destruction.

The theory is often seen as an example of emergent behavior, or the outcomes of individual interactions in complex adaptive systems.

At its essence, the tragedy stems from a failure to think long-term in favor of quick and immediate gains.

Tragedy in the Digital Age

So how does this concept apply outside of sustainability or the environment?

We can see this manifest when we examine the underlying business models of organizations and industries, and how this matches up to their incentives.

To put it simply, tragedy occurs when I want to maximize my payoffs, but I’m indifferent to yours. I’m better off, but you’re worse off, all in the name of profit.

This can be direct. In the United States, Wall Street brokers don’t have a fiduciary duty to recommend the best products for you, only ones that are “suitable”. They are incentivised to maximize the profit of their company, and not the individual they are serving. We saw the tragedy hit in full force in the form of the Global Financial Crisis.

It can also be less direct. The media industry has built its predominant business model on advertising funded by clicks and eyeballs, in a desire to own our finite attention. As a result, content has more and more become shallow clickbait. The tragedy is the second order effects of Fake News and ignorance.

Marketing and Advertising are similarly susceptible to this phenomenon. Think Spam, banner ads, pop ups, or increasing television commercials twice as loud as the program you are watching.

It is so much easier to forego creating positive user experiences, but this pushes us closer and closer to a ‘zombie-economy’, the land of the dead.

The Solution

We often talk about innovation in terms of tangible products and services. But to avoid the trap of the Tragedy of the Commons, we need a different type of innovation - Behavioral Innovation.

When you are in the thick of it, thinking long term and strategically is extremely hard, but without this mindset, the tragedy is only a few steps away.

There are five key areas to gut check;

1) Stewardship (Responsibility)

Don't exploit your resources to depletion. Make sure you are being a good steward of the resource that matter to you or your organization.

2) Trusteeship (the Good)

Don't play the game of racing to the bottom. Work to compete on a level playing field with your competitors and see the positives in this tension.

3) Guardianship (Common Good)

Don't erode trust with your peers or your customers. Instead, work to build trust and connections, and give back where possible.

4) Leadership (Challenge)

Disrupt yourself. Be prepared to challenge yourself, cannibalize and experiment. The worst thing you can do is put your head in the sand. Challenge the status quo.

5) Partnerships (Outcomes)

Focus on people's outcomes. Transform your brand into a portfolio of services that try and make people better off (not necessarily just the shareholders). Do good for the user.

There will always be bad actors in any environment, but you have the power to try and break out the ‘tragedy of the commons’ by being different. It may be the harder road, but when we all imagine the environment we operate in to be an ecosystem that is shared, we all have a better chance of ensuring everyone in the value chain benefits, without its destruction.

Author's note, all frameworks are inherently flawed, so apply them wisely. The utility of a framework is always dependent on the individual problem at hand.