When we design our incentive system, we don’t have to make a choice between cooperation or competition, or between altruism and selfishness. This is not an either/or question: it’s a question of finding the right relationship between the two. We need both cooperation and competition as much as we need both altruism and selfishness to thrive. In the right configuration, they are powerful tools that can help us build a better world.

By combining these two approaches, we get the best of both worlds: competitive cooperation or selfish altruism. In competitive cooperation, we compete in our ability to cooperate. While an individual sport like the 100-meter dash or a game of tennis is based on pure competition between athletes, all team sports are essentially based on competitive cooperation: we compete against the other team with our ability to cooperate with our own team.

In evolutionary terms, this is between-group selection, which selects groups based on their ability to cooperate. In football, for example, only the best cooperators are selected into the final team that gets to play on the field, while the rest sit on the bench as reserve players. Since the whole team is rewarded based on the performance of the team on the field, it is in the interest of every player, even those sitting on the bench, that only the very best cooperators are on the field. In an individual sport, however, not getting to play would be a crushing defeat.

The opposite of competitive cooperation would be cooperative competition, which amounts to collusion. This corrupt way of doing business is surprisingly common in today’s economy. Companies that are supposed to compete with each other over customers by lowering prices and increasing quality instead fleece their customers by secretly agreeing to fix their prices. Collusion distorts the market, and we should make sure it has no place in the economy we create.

Competing in your ability to cooperate is very different from pure competition. If the players in a team sport were rewarded only based on their individual achievements and goals, regardless of how well the team itself did, nobody would ever pass the ball. Every player would hog the ball and try to score even from the most unlikely of scoring positions.

Passing the ball is the perfect metaphor for what competitive cooperation and the culture of mutual prosperity is all about. To make sure that your teammates pass you the ball when you are in the best scoring position, you have to reciprocate and pass the ball to them when it’s their chance. Deciding when to pass or try to score yourself can be difficult, but having the right judgment is what elevates you in the internal competition to be chosen as a player on the field.

If we imagine a football team that is owned by its players, we can postulate that the total compensation of the team is determined by the overall success of the team. Yet, from the perspective of the team’s success, not every player is equal. Some players are clearly more critical to its success. It is thus in the team’s and every player’s interest to compensate the best players better in order to retain them.

While this kind of competition does create inequality within the team, it is based on merit and voluntarily agreed upon by the whole team. The level of inequality this results in would likely still be smaller than that between the star athletes and their lowest-paid team members that we see today.

Part of the reason for this success is that small groups, and sports teams in particular, are really good at suppressing disruptive selfish behavior. There is very little room for cheating, free riding or bullying because it is so easy to identify and punish a player by benching them. When everybody knows everybody personally, bad apples can’t hide in the barrel. Everybody knows how much everybody else contributes and who is causing the problems.

If these bad actors aren’t dealt with within the group and they are given free reign and let on the field, the whole team is likely to lose. From the perspective of the wider community, in either case the selfish individual is removed from the competition. This is the magic of between-group selection.

Between-group selection creates the highly beneficial dynamic we want to build our future society on, in which selfishness can only be pursued through unselfish behavior. This means paradoxically that the more unselfishly you act, the more you are rewarded. When we manage to create this kind of dynamic, we succeed in aligning the interests of the individual and the community.

It is important to note that whenever we talk about community, our community is often made up of various smaller groups we have consciously chosen to participate in. So, whenever we serve “our community,” in practice, we serve various smaller groups like the sports team in question.

We have now created cooperative practices within the teams, but how should
society be structured as a whole to take advantage of these benefits? Our
fifth hypothesis is as follows:

Now that we know the best way to incentivize cooperation within a group, we have to come up with the best way to incentivize the groups when they compete against each other. This is the other half of creating competitive cooperation. In evolutionary terms, the question is: What qualities should we select for? The obvious answer is that we want to create a competition in which groups that benefit the community win over groups that harm the community and are justly financially rewarded for it.

While this is still only a hypothesis, competitive cooperation seems like the Holy Grail for any society. This incentive structure should produce the best possible outcome for the community and for the individuals. When everybody is compensated based on how they cooperate, everybody is incentivized to give their all for the common good. When this happens, the likelihood of victory is highest. We can only imagine how a society based on competitive cooperation could flourish.

We have now hit upon a secret sauce. This book’s hypothesis is that competitive cooperation is an incentive system that is superior to anything that has come before. I would even go out on a limb and claim that competitive cooperation is mathematically the best possible incentive system that can be conceived of. From the perspective of game theory, this creates an incredible win-win scenario that benefits everybody. We create the best outcome when we transform the economy from an individual sport into a team sport.

Now that we’ve identified the ideal incentive system on which we can build stable cooperation, we should quickly compare it with the two dominant incentive systems of the past, the one utilized by agriculturalist societies and the one used by hunter-gatherers.

The incentives and power structures in hunter-gatherer tribes were shaped by the first uniquely human major transition in evolution–the invention of spoken language. Agricultural civilizations were, in turn, shaped by the second uniquely human major transition in evolution–the invention of written language. While we are on the cusp of becoming a fully digital society, we still live at the tail end of the agriculturalist civilization that was institutionalized in Sumer some 5500 years ago.

As digital citizens undergoing a third major transition in evolution, we are not trying to replicate either one of these past incentive systems but to learn from them in order to forge a better future. What is of special interest to us is how altruism (cooperation) was rewarded and how selfishness (defection) was disincentivized in each system, and the relationship between competition and cooperation.

Considering that most hunter-gatherers had access only to Stone Age technology, the quality of life they were able to provide their whole community is quite remarkable. Since everybody in a hunter-gatherer community knew each other and shared their material possessions with each other, their society ran on altruism and actively fought against selfish behavior.

But this was also a culture that discouraged individual achievement, which most likely hampered their technological progress. The strict demand for equal material outcomes could be stifling for talented and productive individuals since the fruits of their labor would be shared equally with everybody. While this is pure speculation, perhaps this is a reason why many hunter-gatherers never made it out of the Stone Age.

While hunter-gatherers were unable to properly incentivize innovation, they had a powerful way of disincentivizing free riding, cheating and other antisocial behavior. This is why they were mostly free of the social ills that bedevil us today. Since everybody knew everybody, everything you did, good or bad, would quickly shape your reputation within the community. And even if economic competition was forbidden, competition for a mate was perfectly normal. These other forms of competition provided a powerful incentive for feats of bravery and other altruistic deeds.

Reputation was thus at the heart of the hunter-gatherer incentive system. You didn’t have to have elaborate rules or commands as everybody was aware of how their behavior would affect their reputation. Transmitted orally through gossip, reputation incentivized everybody to work for the common good. In this sense, the reputation system had a self-organizing and self-policing effect. Maintaining a good reputation was a matter of survival, as ostracism would spell certain death in most cases.

While there is much we can learn from hunter-gatherers, we should not replicate their incentive system for the simple reason that a culture that discourages individual initiative has a hard time progressing. Instead, we need an incentive system that encourages and rewards innovation but in a way that doesn’t lead to the domination of others.

In agricultural societies, the incentives were quite different. Farmers would directly and quite literally be rewarded for the fruits of their own labor. These incentives would encourage the adoption of new tools and innovations, which is something that actively drives human progress. We can see the tremendous speed of progress that has taken place over the 12,000 years since humans first adopted farming.

The problem is that the tools used to discourage cheating, free riding and bullying didn’t really have any teeth in larger communities. The self-policing effect of reputation didn’t work any more, because there were always new people you could team up with who didn’t know about your past bad behavior. In fact, many forms of cheating, free riding and domination hierarchies were quickly institutionalized, providing a legal and socially acceptable way to appropriate other people’s productivity.

The result is that while agricultural societies have made incredible technological progress, they are plagued by a whole range of social ills that simple hunter-gatherers rarely suffered from: crime, inequality, slavery, prostitution etc. And while agricultural societies have gone through numerous phases of development, including feudalism and the current iteration of capitalism, they continue to reward individual effort and selfishness over communal needs and altruism.

Competitive cooperation, which builds on the evolutionary dynamics of between-group selection and creates the powerful incentive structure of a sports team, manages to combine the best of the hunter-gatherer and agriculturalist systems while getting rid of the deeply problematic elements they both carry.

We notice immediately the benefits that a multicellular society with its small team size brings with it. By keeping the cell size small, the internal immune system of the group can suppress free riding, cheating and bullying. Team members must be able to vouch for their team mates. They are in the best position to make sure that nobody acts maliciously. If they fail to police their peers, their own reputations are in jeopardy. If the whole team turns malicious, they are still such a small entity that they can be defunded or neutralized in other ways.