Business lessons from the sporting world

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Sport is a better metaphor for business than most: which makes the tawdry spectacle of Atlanta 1996 all the more depressing.

A century after the foundation of the modern Olympic Games, the unhappy saga of the Atlanta event leaves everyone disenchanted. To focus too much on winning devalues, in the end, what it is that is won. Excessive commercial sponsorship destroys the worth of what it is that companies wish to sponsor.

The old Olympic slogan claimed that the important thing was not the winning, but the taking part. Today, all that seems very old fashioned. More modern epigrams are show me a good loser and I’ll show you a loser, “and” winning isn’t just a matter of life and death, it’s more important than that. The fusty functionaries portrayed in Chariots of Fire, who resisted the onset of professionalism in sport, and who insisted that individuals should subordinate their own concerns to those of the team and the event, now seem to us ludicruously old-fashioned. But perhaps they had a point after all. It is not just the skills of David Puttnam which made the 1924 Paris Olympiad seem a magical event when contrasted with the tawdry show of Atlanta 1996.

There may be a lesson here, not just for other sports, but for the ways we run our businesses and organise our economies. There is a tension between Adam Smith’s invisible hand – which enables us to achieve social ends which were no part of our intention – and A W Tucker’s Prisoners’ Dilemma – the most famous application of game theory – which tells us that individually rational actions can give rise to collective outcomes which no-one would choose.

Drug-taking by athletes offers a striking illustration of the Prisoners’ Dilemma. It is obvious that the best solution for everyone would be that no-one should use drugs. And that the worst result for me is that I don’t and everyone else does, and the best is that I alone do. The consequence is that once drug taking starts, everyone must do it. Yet if they lead to the same improvement in the performance of each competitor, the result will be just the same as if no-one had done it in the first place. Everyone has lost.

And the example illustrates the two ways in which we can resolve the problem One is to apply an unwritten but accepted code of behaviour that simply made the taking of drugs something no serious athlete would consider. That was a flexible mechanism – it didn’t stop you taking paracetamol for a headache – and for long enough it worked. It broke down under the combined pressures of the overwhelming desire to win and a legalism which says you can do what you like until it is prohibited by a formal rule.

So we have now resorted to the second means of resolution, and invoked the formal rule. That subjects everyone, whether they have been taking drugs or not, to the humiliation of urine samples and random testing. And it is far from infallible, so that every unexpected victory leaves a sour taste – of what substance? – in the mouth.

So when do we benefit from the invisible hand, and when do we suffer from the Prisoner’s Dilemma? We benefit from the invisible hand in situations where rivalry between individuals, firms or countries acts as a spur to everyone’s performance. And we suffer from the Prisoner’s Dilemma when co-operative actions by individuals firms or countries are capable of producing more than the sum of what each could produce when working on their own. The Olympics illustrate the issue well because it so clearly demands both. Without competition between individuals, there would be nothing to watch. And yet if the Games account to nothing more than the aggregate of individual competitors there is nothing which is worthwhile to watch.

And commercial success depends, in general, on that tricky balance between competition and co-operation, which worked so well for many Olympiads but which seems no longer to exist. As at the Olympics, the benefits of competition are greatest when that competition takes place within a framework of shared understandings and agreed rules many of which cannot ever be written down. Symbols and myths play an important role in presenting these understandings and rules. The modern Olympics benefited from the fanciful notion that they were a revival of an event conducted millennia ago by the ancient Greeks. The Olympic flame demonstrated the continuity of traditions and values. The opening parade signified the sense of common purpose. Today, all these are reduced to empty rituals. The event organisers and the public relations consultants, connected to the values of the underlying business or the underlying function only by their monthly retainers, have taken over.

What sport illustrates so well is how exhilarating and productive can be the forces of competition within an organised and disciplined framework – and how tacky and tedious are the results of unbridled individualism. It illustrates also that if concepts like sportsmanship – adherence to values as well as rules – and team spirit – willingness to subordinate individual interests to the group – are features of a bygone age, then we are worse off for the passing of that bygone age. We should remember that next time we hear a business leader using a military analogy, or telling us that it is a jungle out there. It is not; and the analogies should remind us that neither war nor jungles produce much in the way of economically useful output. The sporting metaphor, with its emphasis on the need for rules, conventions, teams and umpires, is a far better description of how effective capitalist economies actively work.

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