Your Startup Is A Tribe (And Your Customers Are Members, Too)

Cooperation is our species' signature adaptation.

That's the thrust of Harvard biologist E.O. Wilson's The Social Conquest of Earth. The book offers up a new view of human evolution, one that emphasizes our strengths of empathy and altruism, instead of a dog-eat-dog struggle for survival.

This view of human nature also offers lessons for business. When I founded Betterment in 2008, I was inspired by the idea that showing sensitivity to the needs of one's patrons is the best way of ensuring a healthy and prosperous company.

In Wilson's view of our beginnings, unrelated humans self-selected into groups as a way to ensure mutual survival. They divided up tasks such as hunting, gathering and taking care of children in a way reminiscent of an ant colony. Over time, these tribe members came to see themselves as competing against other such cohorts—especially when it came to protecting such vital resources as food and water.

Not surprisingly, these early people also realized they could compete within the group, as a way of seeking advantage over others within the same unit. But if all of us only acted in our own interest, not only would the group's survival be threatened, but also our own long-term well-being would be jeopardized. Humans need the group to survive and thrive.

To manage this conundrum, we developed into social beasts because as, Wilson has it, we needed to decide whether cooperation, competition or domination were the best way to move forward with both our individual and group goals. We are also hard-wired for empathy and altruistic impulses, to better the odds that we will choose to make decisions on behalf of all instead of our own selfish agenda.

This is such an effective system for perpetuating group survival; we still use these skills to instinctually form tribes today (though we don't think of them that way). We call them "family" or "New York Yankee fans" or "neighbors" or "office colleagues." What else is a start-up, after all, but a place where individuals band together, divvy up the labor, and put in long hours in the hope that together they can create something bigger and better than themselves?

So all's well that ends well, right?

Not exactly.

There is a dystopian downside to tribes whether they live together in a cave or do business on Wall Street. Membership in the group can be defined too narrowly, leading us to misjudge our best interests. And when it comes to corporations this, alas, happens all too frequently.

Let's return to the treatment of customers. As hard as it is to comprehend if you are the buyer of a service or product, it is not an automatic given that the company you want to do business with views you as a member of the same tribe.

As a business struggles to maximize revenue and profits, some firms make the mistake of coming to view their consumers as competitors who are looking to take away a scarce resource—in this case, money—instead of allies who can help grow the concern.

Need an example? Look no further than Goldman Sachs—a member of that tribe is on record saying that employees of the company refer to clients they believe could be duped as "Muppets."

Yet as we have all learned over the past several years, this lack of empathy for one's customers is a long-term disaster—not just morally, but practically as well. Selling potential homeowners on mortgages attached to time bombs in the form of rising interest rates sent our economy into the worst recession since the Great Depression. It cost just about everyone involved a lot of money, even if some prospered in the short run. Some companies involved in the process such as Bear Stearns, Lehmann Brothers, AIG and Bank of America either went under or survive as shells of their former, more profitable, selves.

In founding Betterment, my intent from the beginning was to upend this conflict-riddled model of financial service. I was compelled by the notion of aligning company and customer interests. I was forming a new financial tribe.

Others feel the same way. Take Internet shoe behemoth Zappos.com. Shoppers view Zappos as an ally in the battle against bad customer service and want to do business with it. Why? Zappos empathizes with its customers. Unlike many other Internet firms, Zappos doesn't attempt to hide its telephone contact information, instead assuming if a customer wants to give them a call they must have a legitimate reason. As for returns, Zappos understands their customers are busy people and offers them an almost unheard of 365 days to send their products back, with all shipping costs paid for by the company. This sort of stuff makes for both happy customers and healthy profits.

Or look at Costco. The company is so committed to providing value to its members (who pay an annual fee to shop at the store) that it charges a maximum 15% mark-up on all goods. If the wholesale price of a product falls, Costco doesn't pocket the difference. Instead, it drops the price it charges the public. As for employees, they are paid a living wage, given raises and opportunities for professional advancement, and offered affordable health insurance. How's what sounds like a scheme to minimize corporate revenue worked out for Costco? The store enjoys a 90% membership renewal rate, low employee turnover—and a very profitable business model.

Here at Betterment, we aspire to that tradition. For all businesses, the bottom line prospers when the customers' bottom line prospers. That's the altruistic group in action. As the poet W. H. Auden wrote at the beginning of World War II, "We must love one another or die."

Jon Stein is the founder and CEO of Betterment. Passionate about helping people make smart decisions with their money, he founded the online brokerage in 2008. Jon is a graduate of Harvard University and Columbia Business School. His interests lie at the intersection of behavior, psychology, and economics. What excites him most about his work is making everyday activities and products more efficient, accessible, and easy to use.

[Image: Flickr user Mark Owen]

Add New Comment

3 Comments

  • Dean

    Hi Jon,

    I was wondering if I could translate this article into Italian and post it on my company blog. Obviously I would credit you as the author and link to the English version.

    I work with Italian startups and web development companies here in Turin and I think that this information
    might be very useful to them.

    Thanks, keep up the good work.
    Dean 

  • Earl Cole

    Great read, Jon.  I have already validated the notions of this article, being a former contestant on the TV show, Survivor.  Now that I am the Founder of my own tech startup, Particle 5, here in LA, I find it interesting in how both experiences have particular similarities in function.  The concept of Hunting and Gathering for a tribe is practically parallel to Sales and Data for a startup. The daily grind of creating something under conditions of extreme uncertainty is still the same.  Food = Knowledge, Water = Technology, Shelter = Traction. The strategy is to survive, but the goal is to win.

    Earl Cole
    CEO. Particle 5, Inc.