Margaret Heffernan speaks at TEDGlobal 2012 in Edinburgh, Scotland. (Photo: James Duncan Davidson / TED) Entrepreneur and author Margaret Heffernan studies ways of thinking that hold us back and cause societal dysfunction. Her book Willful Blindness explores the costly failure to acknowledge danger in the SEC, the Catholic Church and other institutions. Her most recent book, A Bigger Prize: Why Competition Isn’t Everything And How We Do Better, investigates our obsessive and damaging focus on competition. In her view, teaching competition from the earliest years produces adults who fail at creative thinking and generates a society where cheating is incentivized and people never learn to collaborate. In the following interview, she explains why this failure puts us all at risk. Heffernan recently spoke at the May 5-6 conference on Finance and Society, sponsored by the Institute for New Economic Thinking. Lynn Parramore: What does your research tell us about how competition is wired into human behavior? Margaret Heffernan: It’s very clear that from birth, infants are prepared to compete for their mother’s love and attention because if they don’t get that, they’re dead. You can see in really early experiments that babies will compete for their mother’s attention if she is on the telephone or even just looking away. So it’s clear to me that competition is a survival instinct to ensure that we get the resources that we need. Of course, when it becomes more complex than that, when it becomes sibling rivalry, when it becomes a way of life, when it becomes a kneejerk reaction, that’s when the problem sets in. What are some of the positive aspects of competition? Does it help us excel and achieve? Competition makes really boring things a lot more fun.If you have a boring walk to do, for example, turning it into a race makes it more fun. I think my biggest concern about competition is that when it enters into things that really matter, things that require higher order thinking, its benefits become very dubious indeed. In my book, A Bigger Prize, there’s a long section on what I see as the extremely destructive role that competition plays today in education. This is about competitive parents who are teaching their kids to be competitive and also competition within the classroom. We know from mountains of research that work in companies, for example, is done mostly in groups and teams, and we know that teamwork is really difficult. We also know that teams that are really high achieving are highly collaborative. But none of those lessons really are being taught in an education system where you compete to get into the right school, you compete for class rankings, and you compete for college places. What we’re seeing is that the more the school system and the parents double down on this “If you don’t win you’re toast” kind of mentality, the more kids are absorbing the message that education is all about the grade. There are two consequences of this. If you can’t get the grades then you may as well cheat because if grades are what matters, then who cares how you get them? And if you are competing against your classmates for class rankings and so on, then you are quite specifically motivated not to help them. I’ve lost track of the number of parents or kids who have told me stories where they were asked for help from a classmate but were advised not to help on the grounds that if the classmate did better, then they might push that individual down in the class ranking. This is so common it’s just ridiculous. Yet what we know when we study high-achieving teams is that the single aspect that distinguishes them is helpfulness – information sharing and so on. So we are teaching kids to compete at an early age in a way that specifically disables the kinds of characteristics we want to see later in life. How do kids who are taught to be competitive tend to behave as adults? We produce adults who think that success is all about individual performance. I call these people “heroic soloists.” Basically it’s all about them. Their prevailing mindset is, What’s in it for me? They aren’t particularly generous either in helping or giving credit. I see these people at every level of organizations and it makes for extremely poor leaders. In some organizations these traits can really be career limiting. Another cost is that if I’m only focused on the grades and on getting the right answer, then essentially what I’m doing I’m learning not to explore and think for myself. Of course, later in life we’re going to ask people to think for themselves a lot because that’s how innovation happens. But that’s not at all that we’re teaching. We’re teaching that the high achievers are the people who get one correct answer. Your job isn’t to explore or to find the best answer, just to second-guess what the correct one is. This is intellectually sterile and it encodes a sort of obedience into peoples’ intellect, which is destructive. It produces what author William Deresiewicz has called “excellent sheep.” If we want creative, original thinking in business or finance or whatever- that’s not what this kind of system will produce. Mainstream economists have led us to believe that competitive self-interest produces the best possible outcomes for society. What’s wrong with this view? In my previous book Willful Blindness, I looked at what I think of as the food chain that led to the financial crisis, which was that you had individual consumers buying houses they couldn’t afford, sold to them by realtors and property people who were competing to sell more properties at a higher price and so on. As I went from the consumer to the top of the big banks, along the way I talked to the head of risk at a big Midwest bank. She said to me quite frankly, “Look Margaret, I didn’t like subprime, nobody liked subprime. We all knew it was ripping off poor people. But the thing is, I’m in a competitive market for salespeople, and if I couldn’t offer these high commission products, my sales force would walk out the door.” That interview stuck with me and I thought, hang on a second, classic economy theory tells you that a competitive marketplace is superior because competition provides a diversity of products which is good for the consumer, and it also, therefore diversifies risk. And yet, in this instance, competition has led every single one of these companies to copy each other, which had concentrated the risk. And I thought, Wow, that’s interesting. That’s specifically what’s not supposed to happen. So the book was really inspired by this idea that, okay, if competition doesn’t work there, are there other areas in which it similarly fails? When I started to look, I was absolutely flabbergasted by what I found. Where did you see the most shocking failures? I think it absolutely fails in education. I would argue that it fails even in sports. A very useful piece of research done by a United States anti-doping agency shows that as sports has become more competitive and more high-stakes, more kids are dropping out of it because they pick up that sports is only for winners and if you can’t win, there’s no point in playing. So we have 80 percent of American kids by age of 12 doing no sports whatsoever. That’s a catastrophe. This means that pro sports are not inspiring kids, they’re turning them off. I also looked at pharma, a very competitive industry where again, rather like the housing bubble, everybody’s just copying each other. You get left-handed versions of right-handed drugs. For decades, we haven’t had any real innovation; the competitive marketplace is not rising to the challenge of our huge health crises, like antibiotic resistance. Another interesting thing in pharma is that when these me-too drugs come out, they aren’t cheaper, they’re actually more expensive. Competition in that market is not even bringing prices down. Does competition actually lead to market failure? Yes. But the thing is that most economists would say that it’s a perverse outcome, as if it’s just sort of a once in a blue moon kind of outcome. But I would say that actually we are seeing those outcomes so routinely now that we have got to acknowledge that the higher the stakes in a competitive market, the more these outcomes become predictable. Nobel Prize-winning economist Elinor Ostrom studied the mechanisms for cooperation in human societies. How does her work illustrate alternatives to competition and challenge mainstream economics? Her work is inspiring because she’s empirical, which is unusual for economists in the sense that she looked at actual projects and how they worked out. The other really interesting thing is that where many mainstream economists had always argued that centralized decision-making is more efficient, she found something different. In projects like bringing a sanitation system to Brazil, she saw that when you let these projects be decided at a grassroots level and you are prepared to take the time and effort to inform people who are going to use them, then the ultimate project is more efficient. It works better, it’s used appropriately, and it’s looked after better than when you impose from above. In other words, she was arguing that the tragedy of the commons is not inevitable. The more you inform and trust people, the more productive and sustainable their decision-making will be. Where else do you see creative collaboration at work among organizations and companies? I found creative collaboration in a lot of companies. It was interesting because it was easier to find than people might think. I write about companies like Arup, which is a global engineering firm; Gripple, which is a global manufacturing firm; Method Products, which is a consumer products firm; Baird, which is one of the few employee-owned banks in the United States; and I found that we’re seeing an increasing number of large, global, important businesses adopt a more collaborative style both of leadership and of operations. They’re proving more efficient, and I would argue, less destructive. They’re not using competition to manage people. How does a focus on competition affect whole societies? One of the things you find is that the more a country believes in competition, the steeper the hierarchies tend to be. And the steeper the hierarchies, the higher the level of corruption. The people at the top know they can get away with things, while the people at the bottom can’t get things done the clean and decent way. So I suspect if you have greater and greater levels of inequality and steeper and steeper hierarchies, the people at the bottom don’t believe the system will work – and it probably doesn’t – and the people at the top think they can do whatever they want and nobody is going to catch them, and they’re probably right. It really creates a condition where nobody believes in the system anymore. They all game it furiously, which of course means cynicism. Where is your research taking you from here? The new book I’m working on is called Beyond Measure because it’s really looking at corporate cultures. It grew out my two previous books and it also grew out of a persistent experience I have working with large organizations where the people at the top feel that they can’t influence the corporate culture and they don’t know how. You’ll see lots of senior and chief executives talking about how they’re pulling on levers, but nothing is happening. The people inside the organization feel that they’re too small to have an impact. So you have this kind of stalemate where everybody knows things need to change but nobody thinks they can do anything. The new book is about the small things you can do within your organization that really can make a difference. It’s really a huge cry against apathy and cynicism and it’s partly about reframing some things. A big theme in all my work is the need to speak up when we see problems in organizations and the need to do that early because when problems are smaller. This is not one person’s responsibility, nor is it the responsibility of one level of management – it’s everybody’s responsibility. In every single organizational catastrophe I wrote about in Willful Blindness, people knew days, months, years ahead that things were wrong. To the degree that we can create cultures in which people speak up, those organizations will be healthier. Everybody from the janitor to the CEO must be prepared and willing to speak up.There are some industries, like the aviation industry, where this is common. People from the aviation industry will say that this is what has made air transport the safest form of travel in the world. Not because one or two people speak up, but because you have a culture which is called a “just culture” where everybody is expected to speak up whenever they see anything going wrong.