Owners and Intruders

If two butterflies contest a sunny spot, they spiral around for a few minutes and then typically the intruder departs. But if both butterflies are already resident in the spot, the contest takes quite some time, with an equal chance of either winning. Experiments with baboons show the same pattern -- the owner is likely to win, even if it is a slightly weaker animal. There is a strong inclination to hang on to what one already has, and a lower inclination to take new ground. And I know this from my own experience. At Cape Point in South Africa, a powerful baboon tried to wrest my mother's handbag. She hung on for grim death, and the baboon soon gave up and romped away. If it had just been a matter of strength, the baboon would have won hands down.

Similar experiments on humans have shown what psychologists dub the endowment effect. Say someone is given two tickets to a top sporting event. A few days later, she is offered $400 for the tickets. In experiments, most subjects refuse the money. But when the experiment is reversed, and the subject is first given $400, and then offered the same tickets for the money, most still refuse the trade. This appears perverse, until you realize that idea of ownership explains the paradox. What we own, we want to keep.

The science of game theory has validated the ownership advantage. In games of owners and intruders, there is a dominant strategy that will win most games in the long run. If you are an owner, you should escalate to deter the intruder. If you are the intruder, you should not escalate -- if the owner escalates, you should retreat. When players swap roles, the same phenomenon occurs -- the owner tends to win. Biologist John Maynard Smith called this pattern "bourgeois" competition, since respect for property rights ensures that the conflict is not escalated. Bourgeois competition is implicit cooperation, with consent given to incumbents. You can see the same phenomenon in traffic, when it has to file into one lane. And also in the extreme hostility which perfectly gentle people show to queue jumpers, regardless of size or fitness.

So what? Well, it's useful to know this in business. There is an inbuilt, apparently hardwired, genetic bias towards respect for incumbents, which places challengers at a disadvantage. This bias may be related to risk aversion -- when hunter-gatherers had enough food they would not scramble for more, because it was too risky; but they would scramble even against wild beasts to defend what they had already, because this was vital for their security. Now, when disputed territory is rarely a matter of life of death, there is no objective basis for our actions, but they still reflect Stone Age conditions.

Consider these corollaries:

• The so-called 'first mover' advantage -- the well-documented tendency for the first firm into a market to enjoy market share higher than it deserves on purely objective grounds -- may be rooted as much in the psychology of the challengers and the incumbent as it is in the effect on customers. The conventional wisdom is that customers associated a niche with the first firm into it. Clearly, the challenger can't do anything about this - history can't be undone. If, however, much of the advantages rests purely in the mind game between challenger and incumbent, the advantage may be more precarious than it appears. If the challenger can somehow psych itself up to an absolute determination to take the territory, and make it clear to the incumbent that is doesn't respect 'bourgeois' rights, then the odds may shift in its favor. There is, sadly, a parallel in territorial disputes between tribes or nations -- these are most intractable where both sides believe that the land belonged to them from time immemorial.

A sense of entitlement is not attractive, but it works. It is not to be flaunted, but a quiet sense of what is rightfully yours may tilt your life chances in a decisive way.