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The Shapley Value, Nobel Prize in Economics, and Collaboration

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Lloyd S. Shapley

Lloyd S. Shapley, professor emeritus of economics and mathematics at UCLA, has been awarded the Nobel Prize in Economic Sciences, along with Harvard University economist Alvin E. Roth. (Photo courtesy of UC Irvine.)

I have to be honest with you: The Nobel Prize committee has not been riding high on my favorite list ever since they awarded the Peace Prize to the EU. What a myopic definition of peace. It’s not just the absence of war — what about social peace and economic peace? Besides, I still haven’t forgiven them for not having awarded the prize to Mahatma Gandhi.

So, when I read a few mornings ago that the 2012 Nobel Memorial Prize in Economics, aka the Sveriges Riksbank Prize in Economic Sciences, had been awarded to Stanford’s Al Roth and UCLA’s Lloyd S. Shapley I didn’t know what to make of it — not because I thought that the Committee had goofed, but because I knew nothing about their work.

Ignorance had to be banished. Time for research and reading. What I discovered was all very good stuff — market design and game theory, with applications in education and medicine. Knowledge and the application of knowledge. Exquisite! And in the process, I discovered a very interesting link between the work of one of the prize winners and collaboration. Yes, you heard me right — collaboration. No, it’s not a Freudian slip, and no, I am not promoting my own agenda.

Prof. Shapley’s mathematical and economic achievements are many and numerous to be recounted and recognized in one blog post. However, he is best known for the concept named after him, the “Shapley Value.”  At its core, the Shapley Value focuses on the cumulative benefits reaped by all participants in games in which participants cooperate rather than compete.

OK, I admit that “cooperate” and “collaborate” are not the same. But cut me a little slack, will you? Let’s for a moment transcend the semantics and focus on the underlying dynamics: intellectual, personal, and social.

We are all products of our conditioning. From a very young age we are brought up with a passion for competition. We worship winners; we loathe losers. It’s drilled into us that winning is not everything — it’s the only thing. But very rarely are we brought up to respect and value collaboration, let alone recognize it and reward it. For some inexplicable reason, a desire to collaborate and cooperate is seen as a sign of weakness.

But that’s so inconsistent with the nature of the times we live in. In today’s complex, interconnected, information-rich, and data-saturated world, collaboration is not only important, it is essential, and, in some cases, downright indispensable. Viewing collaboration as a sign of weakness can, in many cases, actually prove detrimental to sustainable, long-term growth. Imagine trying to solve some of the world’s most vexing problems — urban poverty, clean transportation, green behaviors, education, social innovation — without collaboration.

A competitive mindset has definite bounds, it can only get us so far and no further. So, it’s very refreshing and extremely pleasing to find the importance and value (pun intended) of collaboration being recognized and rewarded — the Shapley Value — albeit indirectly. Adopting a new mindset that mixes and matches collaboration and competition sensibly and in an enlightened way can be exciting and fun. We owe it to ourselves to give it a try.

I, for one, look to be inspired by the Nobel Prize awarded to Prof. Shapley and by his most important idea, the Shapley Value. I hope you will too. Bring your friends, your family, your community, your town, your country.

Before we know it, the world will be here!