The relevance of group selection to understanding behavior in groups—including in organizations like investment banks—is one of the most hotly-debated topics in human behavioral biology. (For example, see this recent debate on Edge.org). In essence, the debate is between individual selectionists who believe that behavior evolves primarily to benefit individual fitness (genetic survival and reproduction), and group selectionists who believe that behavior evolves to benefit individuals and/or groups. That may sound like a clear-cut debate, but it’s actually a very confused one. Unfortunately, a main reason why people argue so much about group selection is because there’s so much semantic and conceptual confusion, on both sides of the debate, about what group selection actually means.
To judge whether group selection is useful for understanding behavior in banks, then, we first have to define it clearly, or at least choose one of the three definitions of group selection that are commonly used: the good, the bad, and the cultural.
So are any of these definitions of group selection consistent with the kind of behavior we see in investment banks? If we’re choosing between the two genetic kinds of group selection defined above, it’s obvious that the “good” definition is realistic, and the “bad” definition is fantastic. That is, bankers work for banks in order to make themselves money, not to sacrifice themselves for the good of the bank. (Yes, this point is obvious, but its very obviousness seems like a good illustration of what's unrealistic about the "bad" definition). What about the cultural definition of group selection —does that apply to banks? In theory it would, if banks were allowed to succeed or fail based on whether their corporate cultures encouraged sustainable organizational competitiveness, as opposed to encouraging employees to gamble away their firm’s future in the pursuit of short-term payoffs. In practice, however, government rescue missions have artificially prolonged the lives of banks whose cultures are dysfunctional and self-destructive in the long-term, and have thus interfered with the group selection of more sustainable bank cultures.
(A version of this article will appear as the author's "Natural Law" column in the banking magazine Global Custodian).
Copyright Michael E. Price 2012. All rights reserved.