Never let winners write the rules

Like history, law is usually written by the winners. Regulation often is also. As with history, that writing of the rules can lead to mistakes. It can fool us into unfairness. If we want to generate fairness, we need to press against the tendency to favour those who have already been successful, making sure that the rules are not only written by the winners.

This tendency, and the social impacts that it has, are brought into relief through a trading game called StarPower. The winner is the player who has gathered chips of greatest value at the end. At the start, players are allocated chips of random worth and then go through a round of trading, after which they are allocated to one of three groups: those with chips of greatest value are the ‘Squares’, those who have amassed chips of lowest value are ‘Triangles’ and those in between are ‘Circles’. They are given relevant badges to wear and thereafter sit in their different groups, emphasising their stratification. These are not even allocations, as the Squares represent only 10% of the whole group. 

The games’ deliberate unfairness is then institutionalised by the hidden mechanism of Squares drawing additional tokens from a bag with a greater proportion of high-value chips, while the Triangles are invited to draw only from a bag with predominantly low value chips. This unfairness is masked by some scope for additional draws by a few Circles and Triangles so that some have a small chance of advancing through the classes. After the second trading round, unfairness becomes further entrenched because the Squares — asserted to be the most ‘successful’ players of the game — are invited to set the rules for future trading rounds. Apparently invariably, the Squares are tempted to further rig the game in their own favour, closing the door to the entry of any rivals for their dominance.

The game works best as a lesson in unfairness, Nnawulezi et al report, where the facilitators play to participants’ belief and hope in meritocracy — encouraging applause and praise for those who end rounds with the highest scores, as clearly they have worked the hardest and are successful as of right, and emphasising to those with lower scores that they just need to work harder in order to achieve. As discussed in Meritocracy’s Unfair, because we all want to believe in meritocracy we are at risk of ignoring the failures to deliver real meritocracy and the unfairness that surrounds us. This tendency tends to play out in StarPower. The successful too often fall into the trap of believing that they deserve their success through their own skill and effort, not just luck and/or their advantageous starting position.

The psychological force of the experience of disadvantage, even within such a short game, is powerful. One individual with experience of running multiple StarPower games reports the Triangles feeling: “despondent, angry, self-blaming, self-critical, resentful, and often give up on playing the game, or sometimes simply cheat”. Another — Donella Meadows, the environmental thinker and sustainability guru — also reports apathy as the predominant response of Triangles, once they work out the game is rigged against them, and notes that they only rarely rise above this: “They come to life only if they think up a way of cheating or of creating a revolution. Only subversion brings out their interest and creativity.” This seems a very natural response to unfairness; it is hard to blame those who are trapped in such circumstances.

StarPower is just a game, effective though it is in bringing to light various human tendencies. But we see those same tendencies play out in real life. A number of organisations say that ‘doing the right thing’ is a core element of their corporate mindset, but fewer actually deliver on that in practice. As one student participant commented in Scott Allen’s survey quoted in Simulations as a Source of Learning: “There will be times when one has to make ethical decisions. One may have to give up power to make the right decision.” Fewer organisations, and fewer individuals, will give up power in this way than like to imagine they will. Finding ways to ensure organisations fully deliver on the promise of doing the right thing is an ongoing challenge, and takes real leadership.

Winners tend to dominate regulatory thought processes; they have much more resource to spend on lobbying and advising regulators and legislators, much more scope to influence. Inevitably, they believe that the circumstances that allow them best to prosper are the right ones. As with StarPower players, they probably come to believe that what leads to further success for them is also good for the general population, because after all their ongoing success represents building on existing winners, and bolstering market leadership (often seen as particularly important in a globally competitive world). Yet the danger is this favouring of the already successful bolsters the status quo and squeezes out competition, particularly by the small, the insurgent and the entrepreneurial. It can make the system as a whole less robust because incumbents may be less responsive when change is genuinely needed. People tend to talk about this as regulatory capture, but really it is just poor regulation, and good regulators need to work to avoid it.

Regulatory capture, though a relatively new name, has a long history. Aristotle in his The Politics and the Constitution of Athens wrote “The true forms of government, therefore, are those in which the one, or the few, or the many, govern with a view to the common interest; but governments which rule with a view to the private interest, whether of the one, the few, or the many, are perversions.” The bending and corruption of rule-making to private will is a perennial human tendency that needs to be recognised and fought against. As is the tendency among many in power to believe that — even though they set the rules — the usual rules do not apply to them, or that they can breach their own rules almost without impunity. That tendency has been again seen of late, and it too needs to be lent against if leaders are to govern with the consent of the people, which requires a sense that society is demonstrably fair.

Regulatory capture is often used as an argument that regulation inevitably fails and should be abandoned in favour of a freer market. It’s an odd conclusion to draw, when the answer is more surely to make regulation better rather than abandon it altogether. “Using ‘capture’ as an excuse was in itself a form of capture,” suggests Georgetown professor and advisor to utility firms Scott Hempling in a powerful analysis of regulatory failings — and the political failings that led to them — in the US electricity sector. For example, he notes that framing an issue from the perspective of the regulated can often be a problem, rather than framing from the perspective of the consumer. 

Hempling offers ways to avoid regulatory capture, under which the regulator: 

• reframes every application from a private interest request to a public interest question; 
• evaluates industry performance, considering outcomes for consumers rather than industry inputs;
• nurtures, educates and advances its own professional workforce; and
• obtains resourcing based on need not dependent on the whims of politics.

This approach should lead to fewer rules being written by those who are already winners and so to a greater fairness in rule-making. It would avoid falling into the unfair traps of history.

I am grateful to my friend William for drawing my attention to StarPower.

StarPower, Simulation Training Systems (founder Garry Shirts, 1969)

Star Power: An Experiential Learning Exercise to Foster Ecological Perspectives on Power, Privilege, and Oppression, Nkiru Nnawulezi, Christina Campbell, Kalleigh Landstra, Se’ara Davis, Cortney Vandegrift, Amanda Taylor, J Prev Interv Community, 2013, 41(2)

StarPower: Experiencing a Stratified Society, Carol Mukhopadhyay (2014)

Why Would Anyone Want to Play Starpower? Donella Meadows (2011)

Simulations as a Source of Learning: Using StarPower to Teach Ethical Leadership and Management, Scott Allen, Journal of Leadership Education 7.1 (2008)

“Regulatory Capture”: Sources and Solutions, Scott Hempling, Emory Corporate Governance and Accountability Review, 1(1) 2014