In my earlier post on the Mechanics of Cartels, I opined towards the end that being a good guy might actually be a reasonable strategy in a competitive world. In an environment where everyone else is being a cutthroat, it seems unreal to be decent and trustworthy. But in this article, I am going to show that there are unique benefits to being a good guy, being trustworthy, and not stabbing people in the back.

George Herbert once said, “Honor and Profit lie not in one sack”. And indeed, we read many stories about how the honest person lives a life of penury, whereas the dishonest crook is always rolling in wealth. However, I believe that the dishonest person can only go so far. After a point, they cannot get any richer without becoming honest. It’s like a chess player who has great talent, but hasn’t studied strategy. They can be great club players, but to reach the top league, they have to learn hitherto un-studied theory.

Image Credit: godchased

In cartels, we have seen how doubt about another person’s trustworthiness can cause the cartel to break up. As an example, in India, the iPhone was released by two major companies (Airtel and Vodafone) almost simultaneously. When I say almost, I mean that Vodafone released it one day after Airtel. In the United States, the iPhone costs only $200. However in India, it was released for $775 by both companies. They had obviously come to an agreement beforehand that they were going to release it together at that price.

Perhaps someone here who knows more can enlighten me as to whether or not they could have been taken to court for that for violating anti-trust policies?

In any case, it must have been an interesting negotiation complicated by the fact that Vodafone released the iPhone one day after Airtel committed to selling it at $775. If the next day Vodafone had released the iPhone for say $300, Airtel would have been devastated. No way anyone was going to buy it from Airtel for $775 if Vodafone released it for $300!

Vodafone had a chance to cheat on Airtel and capture the entire iPhone market share. Yet they did not do this. Why? Were they too decent? Did they feel sorry for Airtel? Did they feel that they can’t let Airtel down? After all, I’m sure there was no written contract. That would most certainly be illegal.

I am confident that Vodafone did it because they have to be perceived as trustworthy – not only by Airtel, but by the whole world. If Vodafone had reneged on it’s implied contract, they would lose their  image as a trustworthy business partner. In the modern day world, large portions of wealth are created by partnering with others. And these partnerships frequently require that each party stick their necks out for the greater good. No one wants to do business and form a partnership with someone who is untrustworthy.

Vodafone gave up some of it’s short term profits in order to gain long term credibility. How can you make sure that other people view you as a credible person? After all, they cannot look inside your head. They have to gauge you by your actions. I had written an earlier post on how people use signals to form their opinions. By not letting Airtel down, Vodafone signaled to the rest of the world that it was a good and trustworthy business partner, and thus laid a stronger foundation for it’s future business practice.

So we see that,at least in this case, selflessness is just another way of being selfish in the long run. Of course, it’s much easier to be selfless if you really feel like being selfless. Maybe this is why nature has given us the capability to feel this way. Perhaps this is why nature has implanted us with concepts like righteousness, trustworthiness, and honor. Because as I said, in the long run, they pay off.