What Butt-Frozen Penguins Have to Teach Us About Business

Here’s this month’s piece from neuroeconomist Paul Zak. For those who might dismiss some of our thinking as the “soft side” of management, Paul puts “hard science” behind it.

There’s nothing new about being shameless, or ruthless and cynical, when it comes to making a buck. Plenty of people in business seem to think that fakery and exploitation is the name of the game. Which is one reason that trade and commerce have always had something of an image problem. “Behind every fortune is a great crime” is one way of looking at it. “Never give a sucker an even break” is another.

Contrary to those sentiments, research in my lab and in numerous field experiments has shown that the marketplace actually makes people more moral, not less. Trade not only depends on moral behaviors like trustworthiness; it extends it beyond the small circumference of kinship or friendship. And then, with a twist that will come as a revelation to the “never give ’em a break” crowd, moral behavior actually increases the efficiency and profitability of trade.

These conclusions are not only based on observing market exchange, but on the neuroscience that drives decisions in markets.  My lab has shown that the neurochemical oxytocin is released when someone intentionally trusts us with money. Oxytocin then motivates us in turn to reciprocate and share money back with the person who trusted us.  This is the biological basis for trade: You trust me, and I’ll play nice in return. It’s true for 95% of the thousands of people whose blood I’ve tested for oxytocin release. This means it’s a pretty good bet that the Golden Rule not only holds in social relationships, but in business, too.  And, because our brains lay down default pathways, trade reinforces this “you play nice, I play nice” heuristic.

Morality is not wishful thinking—it’s biology, specifically the biology of oxytocin. This means the behaviors that equate others’ needs with our own, which we call moral behaviors, aren’t adapted from a Sunday school lesson but are time-tested survival strategies, shaped by the harshest realist of all, natural selection.

If you saw the documentary “March of the Penguins” then you know how the dads in this unlucky species spend the entire winter standing in temperatures way below zero, in the howling Antarctic winds, with an egg tucked between feet and belly fat. (By this point in the breeding cycle, the mothers have taken off for the Antarctic seas—warmer, but hardly St. Bart’s—to recover from their pregnancies by chowing down on baby squid.) Essential to the males’ survival, and the survival of their unhatched offspring, is the way these guys huddle together for warmth. But also essential is the way they rotate the huddle, so that everybody takes a turn on the butt-freezing periphery, everybody gets a turn in the cozy warm center, and everybody moves equally through every level in between. Each individual penguin wants to stay warm and to hatch his chick—that’s the self-interest part. But to stay warm, he needs the group, because without the aggregated heat of all those bodies, he and his future offspring would freeze. To keep the group alive, and thus each individual alive, everybody has to play fair—to cooperate.

Businesses that follow the same rules—treat customers well and share the profits with employees fairly—are those that induce oxytocin release in their customers and employees. Oxytocin makes us care about others in tangible ways, and the same holds true for our favorite businesses.  Call it “customer loyalty” or “I love this brand,” but biology has shaped our brains to seek out individuals and organizations that treat us well, and then keeps us coming back to them.

There is nothing wrong with self-interest, but this nearly always means sharing the gains from trade, not taking them all for oneself. It’s not rocket science, but it is neuroscience.

Excerpted from the recently released book The Moral Molecule: The Source of Love and Prosperity by Paul J. Zak, published by Dutton, a member of Penguin Group (USA). Copyright © 2012 by Paul J. Zak. Paul is the director of the Center for Neuroeconomics Studies at Claremont Graduate University.