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Traveling Salesman Meets Prisoner’s Dilemma

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You may know “The Prisoner’s Dilemma.” In game theory, it is a classic conundrum. As Wikipedia states, it “demonstrates why two people might not cooperate even if it is in both their best interests to do so.”

It turns out that the solution to The Prisoner’s Dilemma is also the solution to a great many sales problems—those in which your customer doesn’t trust you. Are you living in the Dilemma? Or are you living in the solution?

The Dilemma of the Prisoner

Here is a classic version of The Prisoner’s Dilemma:

Two suspects are arrested by the police. The police have insufficient evidence for a conviction and, having separated the prisoners, visit each of them to offer the same deal:

  • If one testifies for the prosecution against the other (defects) and the other remains silent (cooperates), the defector goes free and the silent accomplice receives the full 10-year sentence.
  • If both remain silent, both prisoners are sentenced to only six months in jail for a minor charge.
  • If each betrays the other, each receives a five-year sentence.

Each prisoner must choose to betray the other or to remain silent. Each one is assured that the other would not know about the betrayal before the end of the investigation. How should the prisoners act?

What’s a poor prisoner to do?

If you analyze the situation rationally (the way a game theorist or economist defines that term), your odds are a lot worse if you remain silent—either you get 10 years or six months. But if you rat on your partner, you either get out free or—at worst—five years.

So, reasons the economist, Option A’s average “value” is five years and three months in prison. Option B’s average is two and a half years. “Ah ha,” says the economist’s rational player, “I’ll go for Option B.”

Of course, the other player does the same math and comes to the same conclusion. As a result, each gets five years in prison—a total of 10 prison-years between them.

If only the prisoners had cooperated with each other; they could have each gotten out with just six months in prison—a total of one prison-year between them.

The question is: why don’t they cooperate?

At least, that’s the economists’ question. In the real world, cooperation is quite common.

So the real question is: why do so many people listen to economists?

The Dilemma of the Salesperson

Before answering the Prisoner’s Dilemma, let’s note the similarity with The Salesperson’s Dilemma.

The salesperson has a similar series of trade-offs. For example:

  • “I could take some extra time to study up on tomorrow’s sales call, getting to know more about the prospect. That would improve the odds of my getting a sale tomorrow.”
  • “On the other hand, I could make another cold call with the time saved if I don’t spend it studying up for tomorrow’s call.”

Or, another example:

  • “I could tell them we have very little experience in this area, which would increase their sense of my honesty, which would help me in the long run.”
  • “On the other hand, experience might be the key in getting this job, and I’d better make the best case I can and fudge the rest.”

Still another:

  • “I could share a lot of my knowledge with them, which would really impress them and make them grateful to me.”
  • “On the other hand, if I give it all away in the sales call, they’ll just steal my knowledge and not pay me for it—I’d better wait until after we have a signed contract.”

And one more:

  • “I could go out on a limb and make some really far-sighted observations that would help them—it would go way beyond what they asked for.”
  • “On the other hand, we don’t have much trust built up yet. They might see that as presumptuous or unprofessional; I’ll just answer the questions they asked.”

Just as with The Prisoner’s Dilemma, if the salespersons continually choose Option B, they will sub-optimize. They will do cold calls, leading with no relationship, taking no risks, treating the customer like a competitive enemy, and offering no great help.

In other words, they’ll lose. Just like the prisoners.

In theory, the prisoners are identical, whereas the salesperson and the customer are distinct. But that’s theory. In the real world, sellers somehow tend to find buyers who are similar to them. Sellers who are fear-driven and guarded somehow often find buyers who justify their worst fears.

Both seller and buyer often operate from the Prisoner’s script. And the result is just as sub-optimal.

The Prisoner’s Solution

As postulated by economists and game theorists, The Prisoner’s Dilemma is usually presented with two key assumptions:

  1. The game is played only once
  2. The players do not know each other

The solution lies in changing each of those assumptions. If you tell the players the game will be played 10 times, cooperative patterns begin to emerge. If it’s played 100 times, cooperative strategies take over.

If the players are given information about each other, they become less abstract to each other. If the information is personal, then the relationship changes tone as well.

These two dimensions—time and relationship—are critical. Without a sense of continuity over time, and without a sense of personal relationship, those playing the game will opt to “rat out” each other—even knowing that the result, system-wide, is negative for them on average. But given time and relationships—the optimal solution emerges. Everyone is better off.

In other words, the solution to behaving stupidly is to develop personal relationships over time. Now let’s see how that insight applies to selling.

The Sales Solution

The sales solution should look pretty obvious now. Suboptimal behavior is the result of short timeframes and shallow relationships. In a Prisoner’s Dilemma world, both buyer and seller fear each other, suspect the worst, don’t have relationships beyond the transaction, and are interested primarily in their own self-aggrandizement, without regard to cost to the other party.

If that sounds familiar, just look at this quick list of sales topics that are hot these days: sales automation, lead screening, CRM, social media lead generation, multi-channel messaging. Think about the last step in nearly every sales process model you’ve seen—closing. Think about some of the trends in procurement: online, blind auctions, and RFPs.

What all these subjects have in common is a view of selling that is a) transactional and b) impersonal. In other words, they have short timeframes and weak relationships—two things sure to hurt sales.

Selling benefits from longer timeframes and better personal relationships. If you can stop thinking like an economist and work to eliminate the fear you and your buyers have, you’ll benefit from the long-lasting trustworthy relationships that develop as a result.

 

An earlier version of this post appeared in RainToday

The Interests of Buyer and Seller are Never Aligned? Never Is a Long Time.

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I have a lot of regard for Jane Bryant Quinn, and I’m hardly alone. She strikes me as sober, educated, and generally wise. Of course, no one’s exactly perfect. 

And in those rare cases where sober, educated, wise people don’t get it right, it’s worth asking oneself: how can that be? There are usually instructive answers.

Case in point: her recent column titled, “Should You Trust Your Broker? No, and Here’s Why.” The title says it all. And since she’s talking about brokers—a business few people would argue is a hotbed of trust—she’s not going to get much argument from me or anyone else.

Except when she went uncharacteristically for an absolute statement. In response to a comment, she included this line:

The interests of buyer and seller are never aligned.   

Now, I’m not trying to pick on Ms. Quinn. Maybe she meant it to apply only to brokers (though even then, an absolute statement is an absolute statement).

What’s interesting is, she’s not alone. She speaks for a lot of people in that belief: that the interests of buyer and seller are inalterably, fundamentally, and essentially opposed to each other. So let’s just dissect the belief, and leave Ms. Quinn out of it.

Zero-Sum Sales Thinking

To believe that the interests of buyer and seller are never aligned is equivalent, I think, to believing that they’re always opposed. That is, all sales amount to zero-sum games; one party wins, the other loses (except at some theoretical point in the middle discernable only by medieval philosophers and classical economists.)

When you put it this way, it’s an appalling belief. It suggests that:

There’s no basis for negotiation. It suggests all sales are isolated transactional events, with no connection to past or future transactions. And forget about relationships.

Buying and selling must constantly be regulated; that the proper model for commerce is the example of Las Vegas casinos and the Nevada Gaming Commission. It suggests that commerce is the root of most immoral and antisocial behavior.       

The only sensible model for corporate buying is through arms-length RFPs, unless you’re lucky enough to be able to use online reverse Dutch auctions. 1+1 must always add up to only 2, and not in a balanced way.

Sales is a venal profession, one in which success is driven by Madoff-like sociopaths and their ability to coldly con decent, aka stupid, people. That to be employed as a salesperson requires the advance sale of your soul.

That’s what I think it means to seriously believe that “the interests of buyer and seller are never aligned.” And a lot of people out there do indeed believe those statements.   Some of you reading this may not even note the intended irony in the paragraphs above. 

Which I find scary.

Sales and Commerce Are Not the Root of All Evil

Obviously (I hope, anyway) I don’t believe that. Let me get equally hyperbolic about what I do believe. I believe that the relationship between buyer and seller lies at the heart of human development.

When you think the relationship between buyer and seller is positive, it suggests a number of corollaries. It suggests that:

The relationship between buyer and seller is the foundation of all human economic development. It allows division of labor, lower costs, and human interaction.

The economic relationship between peoples is the single biggest driver for human interaction, collaboration, and social development. The alternative is a world of solitary, frightened and impoverished loners, reduced to the kind of clannish societies that only an anthropologist could find fascinating.

Buyers and sellers are the architects of creative relationships, and creative economic solutions at the same time. 1+1 is always greater than two if the commercial parties are doing their job.

Only in an isolated, abstract moment in time are the interests of buyer and seller inalterably opposed. Add one more day, one more transaction, one more referral, one more cross-sale, one more conversation—and you have the possibility of a relationship. Time is the single biggest counter-argument to the ‘can never be aligned’ naysayers. 

Back to Ms. Quinn for a moment. How can a sober, educated, wise person make such a sweeping, and bogus, claim? A brief slip in focus?

Unfortunately, I think she’s saying that the brokerage business is so close to untrustworthy that she honestly doesn’t see much difference between reality and the absolute statement she made. And you know what? I wouldn’t argue the point with her.  I’ve heard tons of horror stories too.

But don’t let that drag you down. Don’t let the predominantly flawed belief system of one industry drag you down into believing that buyer-seller opposition is a law of nature. 

It’s not.  But belief in the impossibility of alignment can be a self-fulfilling prophecy.  Don’t believe your way into impoverishment.