The Tragedy of the Commons Is Not About Greed — It Is About Bad System Design

Why People Are Good, and Only Bad Measurements Make Them Do Bad Things

When people hear The Tragedy of the Commons, the dominant conclusion is almost automatic:

“People are greedy. If left alone, they will destroy shared resources.”

Dr. Yung-mei Tsai’s classroom simulation is often cited as proof of this belief. Students, acting rationally, over-harvest a shared resource until it collapses. The commons dies. Everyone loses.

But this conclusion is wrong — or at least dangerously incomplete.

The tragedy does not arise from greed.
It arises from how the system is designed, what is measured, and what is rewarded.

When viewed through the lens of the Theory of Constraints (TOC), Tsai’s simulation becomes powerful evidence of a very different truth:

People are fundamentally good. Systems that reward local optimization create destructive behavior.

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What Actually Happens in the Simulation

In the simulation, each participant is allowed to take up to two items from a shared resource pool per round. The pool regenerates based on what remains. Early rounds forbid communication.

Most groups rapidly destroy the resource.

The usual interpretation:

• Students are selfish

• Individuals prioritize themselves

• Cooperation is fragile

But observe more carefully what participants are actually doing.

Each player is:

• Acting rationally

• Responding to uncertainty

• Protecting themselves from loss

• Optimizing according to the rules and incentives provided

This is not moral failure.
This is logical behavior in a poorly designed system.

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The Core Mistake: Confusing Local Success with Global Success

The real problem in the simulation is not human nature — it is local optimization.

Each participant is implicitly measured on:

• “How many items did I collect this round?”

No one is measured on:

• Total system output over time

• Sustainability of the resource

• Collective success

In TOC terms:

• The system has a constraint (the regeneration capacity of the commons)

• The players are not measured on protecting it

• Therefore, they unknowingly destroy it

This is exactly what happens in organizations every day.

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Why This Is Not Greed

Greed implies excess beyond rational need.

But in the simulation:

• Players take more because not taking feels risky

• Players fear others will take instead

• Players respond to a measurement system that rewards immediate extraction

If greed were the cause, communication would not fix the problem.

Yet when communication is allowed:

• Groups quickly self-organize

• Fair rules emerge

• The resource stabilizes

• Everyone earns more over time

Greedy people do not suddenly stop being greedy.

Bad systems do stop producing bad outcomes when redesigned.

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The Role of Measurement: The Real Villain

TOC teaches a simple but uncomfortable truth:

Tell me how you measure me, and I will tell you how I behave.

In the simulation:

• Individuals are rewarded implicitly for short-term extraction

• There is no penalty for system collapse

• There is no metric for long-term throughput

This mirrors real-world KPIs:

• Departmental efficiency

• Individual bonuses

• Utilization rates

• Quarterly targets

Each looks reasonable in isolation.

Together, they destroy the system.

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Global Goal vs. Local KPIs

The tragedy disappears the moment the system is redesigned so that:

• The global goal is explicit

• Individual actions are subordinated to that goal

• The constraint is protected

• Success is measured at the system level

When participants align around:

“Maximize total benefit over time for everyone”

Their behavior changes — without changing who they are.

This is the most important lesson of the simulation.

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People Are Not the Problem

TOC insists on this principle:

Blaming people is lazy thinking. Improve the system.

The tragedy of the commons is not evidence that:

• People are selfish

• Cooperation is unnatural

• Control is required

It is evidence that:

• Poor measurements create destructive incentives

• Local KPIs generate global failure

• Systems shape behavior more powerfully than values

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Why This Matters Beyond the Classroom

Organizations collapse commons every day:

• Sales destroys operations

• Cost cutting destroys throughput

• Efficiency destroys flow

• Bonuses destroy collaboration

Leaders then blame:

• Culture

• Attitude

• Motivation

But the real cause is almost always the same:

We reward local optima and hope for global success.

Hope is not a strategy.

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The Real Lesson of the Tragedy of the Commons

The tragedy is not inevitable.

It is designed.

And anything designed can be redesigned.

When systems:

• Align measurements with the global goal

• Protect the constraint

• Reward collective success

People naturally behave in ways that look cooperative, ethical, and even generous.

Not because they changed —
but because the system finally allowed them to succeed together.

The Invisible Pillars of Business: Why Measuring the Un-Measurable Matters

 

The Invisible Pillars of Business: Why Measuring the Un-Measurable Matters

The question of measurement in organizational performance cuts to the very core of how we understand value, rationality, and human endeavor within the economic sphere.

The Indispensable Role of Measurable Performance Metrics

From a historical perspective, the rise of modern business is inextricably linked to the development of robust measurement systems. The Industrial Revolution, with its demands for efficiency and scale, saw the emergence of cost accounting, production quotas, and detailed inventory management. Figures like Frederick Winslow Taylor, with his "scientific management," epitomized a philosophical shift towards viewing organizations as machines whose output could be optimized through precise measurement of labor, time, and resources.

Philosophically, this emphasis on measurement aligns with a positivist worldview: what can be measured, can be known; what can be known, can be controlled and improved. Financial metrics (revenue, profit, ROI), operational KPIs (production rates, defect rates, cycle times), and market share provide a universal language for business performance. They allow for objective comparison, facilitate capital allocation, enable accountability, and offer tangible proof of success or failure to stakeholders. Without these numbers, modern large-scale enterprises would be ungovernable, unable to track progress, diagnose problems, or communicate effectively with investors and employees.

The Perilous Neglect of the Un-Measurable

However, the relentless pursuit of the quantifiable often leads to a dangerous reductionism. As the adage goes, "Not everything that can be counted counts, and not everything that counts can be counted." While easily measurable, an exclusive focus on hard numbers often overlooks crucial, yet intangible, elements that are vital for long-term success.

Historically, this oversight has led to numerous corporate downfalls. The human relations school of management, emerging from the Hawthorne studies, highlighted that employee morale and social dynamics significantly impacted productivity, even when not directly tied to piece rates. Companies fixated solely on quarterly earnings might sacrifice long-term customer relationships for short-term gains, or neglect internal culture, leading to high employee turnover and a decline in innovation. Philosophically, ignoring "un-measurables" like loyalty, trust, harmony, morale, creativity, and ethical conduct reduces human beings to mere cogs in a machine, stripping work of its meaning and organizations of their soul. This mechanistic view fails to capture the complex, adaptive, and inherently human nature of a thriving enterprise, often leading to unintended consequences like employee burnout, brand erosion, and a hollow corporate identity.

Towards Measuring the Un-Measurable: Past and Future Approaches

The challenge, then, is not to abandon numbers, but to broaden our understanding of what constitutes "measurement" and to develop systematic ways of assessing these vital intangibles.

From the Past:

1. Direct Observation and Qualitative Analysis: Historically, wise business leaders, much like ethnographers or anthropologists, would walk the factory floor, visit customers, and simply "listen" to employees and partners. This "Gemba walk" in Lean manufacturing is a prime example: a leader directly observing processes, asking open-ended questions, and sensing the "mood" of the organization, gathering qualitative insights that numbers alone could never convey. While not statistical, consistent, informed observation provides rich, actionable data.
2. Anecdotal Evidence and Narrative Capture: Successful companies often had strong internal storytelling traditions, where legends of customer service or employee dedication were shared and celebrated. Though not quantitative, these narratives served to reinforce desired values and provide concrete examples of "loyalty" or "harmony" in action. Modern businesses can deliberately capture and analyze these narratives through internal blogs, success story repositories, or dedicated feedback channels.
3. Proxy Metrics with Qualitative Depth: While not a direct measure, high employee turnover or frequent customer complaints could serve as proxies for a lack of internal harmony or customer dissatisfaction. In the past, astute managers would then conduct exit interviews or direct customer outreach, using the quantitative proxy as a trigger for deeper, qualitative investigation into the root causes.

For the Future:

1. Advanced Sentiment Analysis & Behavioral Analytics: Leveraging AI and natural language processing (NLP), businesses can analyze vast amounts of internal communication (e.g., anonymized Slack channels, meeting transcripts, internal surveys) and external feedback (social media, reviews) to detect shifts in sentiment, identify emerging themes around morale, trust, or frustration. This moves beyond simple keyword spotting to understanding emotional tone and collective attitudes.
2. Relational Metrics and Social Network Analysis (SNA): Tools can map out informal communication networks and influence patterns within an organization. By analyzing who talks to whom, who relies on whom for information, and where communication bottlenecks or isolated groups exist, we can gain insights into collaboration, harmony, and the flow of knowledge – all crucial yet intangible aspects of performance.
3. Experience-Based Design & Feedback Loops: Moving beyond simple satisfaction surveys, companies can design and measure "employee experiences" (EX) and "customer experiences" (CX) in a holistic way. This involves mapping the entire journey, identifying pain points, and gathering granular feedback at each interaction. Metrics like Employee Net Promoter Score (eNPS) or Customer Effort Score (CES) aim to capture loyalty and ease of interaction, often supplemented by open-ended comments that provide qualitative context.
4. Integrated Reporting & Holistic Value Frameworks: The future of measurement will increasingly move beyond purely financial statements. Concepts like Integrated Reporting (which combines financial, environmental, social, and governance information) and sophisticated ESG (Environmental, Social, Governance) metrics attempt to capture a broader spectrum of value creation. While still quantitative, these frameworks necessitate a deeper engagement with traditionally "un-measurable" factors, pushing companies to define, track, and report on their impact on human capital, social capital, and organizational culture.
5. Longitudinal Qualitative Studies & Participatory Research: Regularly conducting in-depth interviews, focus groups, and even ethnographic studies within a company can provide invaluable insights into evolving culture, unspoken norms, and underlying tensions that quantitative surveys might miss. Allowing employees or customers to actively participate in defining what "loyalty" or "harmony" means to them, and then co-creating ways to assess it, can lead to more authentic and useful measurements.

In conclusion, the wisdom of history teaches us that while numbers provide clarity and control, neglecting the un-measurable leads to a brittle and ultimately unsustainable enterprise. The future of business success lies in a sophisticated, hybrid approach: one that rigorously tracks quantitative performance while simultaneously developing innovative, ethically sound methods to discern, understand, and nurture the invaluable, intangible qualities that truly define a thriving, resilient, and human-centric organization.