Last night I had a spirited discussion with some friends about US politics. One of our friends was expressing a concern that historically the US has been too “nice”, hopeful, helpful. We have created a culture people want to enjoy, but now we will be taken advantage of and ultimately destroyed. We need to be tougher and not be pushed around. I am not sure I would characterize the US as being “too nice”, but I contest that being collaborative is a liability.

My counter argument is that people are made to collaborate, and maximum value comes when people work together rather than engaging in a winner take all competition. It’s possible for a nation to be collaborative but still thrive even when facing bad actors.

[Update 2021]: Adam Grant’s book Give and Take notes that often we are not in a zero sum game and that cooperation can often “increase the size of the pie”. He has a nice section where he describes how effective givers can minimize the impact of people who attempt to take advantages of their cooperative nature.

Game Theory

The theoretical underpinnings of this viewpoint comes from game theory which is extensively discussed in the book The Evolution of Cooperation by Robert Axelrod. For people who aren’t into books, Leon Seltzer’s article The prisoner’s dilemma and the “virtues” of tit for tat provides a good summary. My super short summary: in a world ruled by selfishness with no central authority or rule, enlightened self interest can lead to effective cooperation in any situation where the participants believe that they will need to interact with each other in the future. In situations where there will be multiple interactions Tit for Tat ends up having the best long term payout. The algorithm is simple. Start by cooperating, and then mirror back the behavior of your competitor. That means “discipline” bad actors, but also “forgive” them if they are willing to cooperating. [A slight variation has a small random probability of cooperating even if the competitor has defected which can break retaliation cycles which out performance pure tit for tat.] Axelrod found that when facing numerous other algorithms, some of which were designed to take advantage of “cooperative” partners, that tit for tat consistent had the best over all returns when playing in multiple round competitions.

Bay Area

I believe that the early silicon valley culture is a great example of how this works. In the mid of the 20th century, there were several places that arguably were better positioned than silicon valley to dominate the technology landscape. For example, the Boston area had more capital and a larger educated workforce. Unfortunately for Boston, they also had non-compete employment contracts and people and institutions which were not inclined to collaborate with competitors.

The former dean of Stanford’s School of Engineering Fred Terman was instrumental in shaping the Bay areas technology landscape to be an open system which welcomes people in, encourages collaboration, and allows many people to succeed base on their merits.

Furthermore, Terman encouraged partnerships between academic, industrial, and government (mostly the military). Government money often funded research in the universities which were commercialized by companies who in turn produced products which were purchased by the government, private industry, and consumers.

The bay area attracted people in the pursuit of excellence and believed in “progress”. It was well known that there was no place that was as open to innovation, and out of the box thinking. Making progress was god. I often heard old-timers say there are enough hard problems, that we should only have to solve them once and share those learnings so we could get to the next hard problem. This drove collaboration.

The Bay Area’s advantage wasn’t just any single factor — it’s the self-reinforcing loop where talent attracts capital, capital attracts companies, companies attract talent and also other companies. That flywheel is what no other place has fully replicated. Also, with this high concentration of skilled people, it becomes easier for people to quickly upskill.

[Update 2021: It has been suggested that the only place in the world which has a similar concentration is Shenzhen, China]

Terman later tried to help the research triangle in North Carolina and the area around Austin, TX replicate the successes in Silicon Valley. These effects fell far short of the results in the Silicon Valley. I believe this was primarily due to less willingness to collaborate. A secondary issue is that in California non-competes agreements are virtually unenforceable while permitted in Texas and North Carolina. Work by a number of researchers such as Matt Marx (Michigan, Brain Drain, etc) have found that non competes employment agreements tend to slow innovation. One other factor is that people outside the Bay Area was more oriented toward large organizations and struggled to take risks (e.g. less entrepreneurial).

Wagon Wheel

A great example of this culture can be seen in the early days of semi-conductors. Competitors gathered weekly at the Wagon Wheel to swap stories and brag about their successes. Sharing took away some competitive advantage, but everyone benefited because really hard problems only had to be solved once, and everyone could move on to the next challenge.

One of the best stories from those days was when Intel was having a serious issue. They were betting the company on a new chip. The chip looked good in prototype form but when they went to mass production the yield rate was extremely low. They spent several months trying to figure out what was going wrong. They couldn’t figure it out. In desperation they shared their difficulties with others at the Wagon Wheel. Engineers from Fairchild, arguably Intel’s biggest competitor of the day offered to help if Intel would provide the beer. The engineer sat down discuss the issue. In the end the engineer’s from Fairchild laughed and then said “Find out who on the line is using hairspray, and get them to stop”. Intel did as requests and their yield rates became viable. It turns out Fairchild’s engineers had chased almost an identical problem for a year before they finally narrowed it down when their yields became acceptable when one of their workers was away from the line for several days. The hair coverings both teams were using weren’t fine enough to contain the micro particles from the hairspray escaping.

Other Analysis

For more stories and analysis, check out Steve Blank’s secret history of silicon valley. Technology Review Article Silicon Valley Can’t Be Copied is one of the best articles summarizing what has made the bay area so unique and the home of so many successful startups and Anna Lee Saxenian’s book Regional Advantage identified many of the same characteristics nearly twenty years earlier. Booz-Alan’s analysis identified a Culture of Innovation as being a differentiator, and Accenture attempted to Decode Contradictory Culture Aspects in Silicon Valley (broken link)

21st Century 🙁

Alas, the Bay Area isn’t as cooperative in the 21st century as it was in the 20th century. The culture is now driven more by personal ambition and money than by innovation. This started in the 1990s and really took off during the “digital gold rush” of the dot.com boom, especially when network effects led to a winner take all market. [Update 2025: See Volk’s The Cost of Ambition]. Unfortunately, this high concentration of people and companies that are driven by ambition has shifted the culture to be more competitive and less cooperative.

Additional Material

There is a nice evolution of trust simulation if you want to experiment with different strategies.