The Fisherman’s Dilemma (TQP0134)

Posted: December 15, 2008 in Braak
Tags: ,

Remember when I said I had insomnia?  This is the kind of stuff that keeps me up.

Okay, I’m trying a thought experiment about tuna fish.  I don’t know anything about math or science or stuff like that; I’d need a calculator to add up my grocery bill IF I COULD AFFORD TO BUY GROCERIES.  So, let’s take all this with a grain of salt.

Thought experiment, like I said.  Here’s how it goes:

There are two companies that run the industry of tuna fish:  Kobayashi Fish and Manufacturing Concern, in Japan, and the Danish Hans Skaargard Ramblesan’s Friendly Fish Factory.  On Tuesday, Haruki Murakami (the CEO of Kobayashi Fish) and Leif Erickson (the CEO of Skaargard Fish) both receive the same report from some scientists:  the tuna population is reaching critically low levels.

The implications of the report are clear, and the math behind it is sound.  The two companies can either both fish at sustainable levels, meaning they’d not be able to make more than $10 million in profits a year, OR they can fish at maximum output, in which case the tuna population will disappear after fifteen years, but there will be an extra $30 million a year to go around if they do.

There are basically three different things that can happen:  1:  both companies agree to fish at sustainable levels, reconcile themselves to $10 million a year, and are able to continue their company indefinitely.  2:  one company tries to fish at sustainable levels, and the other one fishes at capacity, taking in an extra $30 million a year, but there are no tuna left in fifteen years.  3:  both companies fish at capacity, they each take $15 million in extra profits, and there are no tuna left in fifteen years.

For the sake of the argument, I’m assuming that the market share if they both go after all the fish will average out, and that there’s only a certain amount of market flexibility when it comes to the tuna:  i.e., even though tuna would be rare, and thus more expensive, in the first case, there’s a limit to how expensive you can make tuna before you price consumers out of the tuna market.  The $10 million is fixed.

All right now, this probably looks familiar to you, because it resembles the Prisoner’s Dilemma, only it’s not the prisoner’s dilemma.  There’s a couple things going on here, and I think they’re important.

Let’s say Leif (because he’s a Dane, and the Danes don’t know god-damn anything about business) decides to conserve fish, and Murakami (because he’s Japanese, and the Japanese don’t care about anyone or anything) decides to maximize his output.  What does this mean?  Well, you can’t conserve fish if just one of you is doing it, which means that as soon as Murakami decides to fish at max, there’s no reason for Leif to continue trying to fish at sustainable levels–all he’s doing is ensuring that Murakami gets all the extra fish.  If there were more tuna companies, the odds that conservation would be pointless would actually increase–because all it takes is one asshole to fish at output to make conservation pointless for everyone else.

And, in fact, in a competitive environment, the need to fish at max is also increased; if Leif decides to conserve while Murakami decides to overfish, what happens?  Kobayashi has more money for advertisement, distribution, infrastructure, and it’s not long before they drive Skaargrad out of business.  Once one person has decided NOT to conserve, everyone else needs to not conserve also, just to stay competitive.

The only reason that conservation would be incentivized is longevity:  a sustainable fishing operation could last forever, and maybe the guys in charge of these two tuna companies are planning on staying in here for the long haul, so maybe they both want to conserve.  This is unlikely–firstly, because no one works at a company FOREVER, and secondly because Leif and Murakami are both subject to their shareholders–they can’t each make a private decision to conserve, and then expect it to be followed for fifteen years.  They’ll have to justify the decision to the people that own the company, and all it takes is a plurality of people who just figure they’ll pull their money out before the collapse of the tuna population to throw out Murakami and install someone else.

Let’s simplify this and say that Murakami is thirty-six years old, and plans to retire from tuna by the time he’s fifty.  That means fourteen years–just long enough to make undoing the damage that he’s done by over-fishing impossible.  Why, then, is it not in his interests to take the extra fish, and say to Hell with the tuna?

There are a few ways that behavior like this could be disincentivized, but I’m suspicious of them:

1.  The CEO:  A CEO that supervises the collapse of his company because it destroyed its own industry is probably not going to work again.  And if Murakami’s pension is based on the success of his company, he will lose a lot of money if Kobayashi falls apart. Well, maybe.  First of all, while Kobayashi is making its extra millions, its CEO is probably getting a great salary and lots of extra bonuses.  He probably owns stock in the company, and the stock is worth a fortune.  This means he can save his money for a rainy day, and also that he knows when to pull his money out of the company to ensure that he gets a maximized profit from it.  You’d have to pay him a pension greater than the amount of money he’s making in his own investments in other industries, to make this worthwhile.    But, in order to do that, you’d have to fish at sustainable levels, and Murakami knows you won’t be able to pay him very much money if you do that.

The second part of this is that, if Murakami supervises his business making a fortune in selling fish, then leaves the company, and the a year later it falls apart, Murakami doesn’t look bad.  He looks good.  He looks like a karate tuna fish business genius.  He looks essential to a company, because he blames all of the problems with the industry on his successor, and people will believe him, because of their susceptibility to Post/Propter fallacies.  Murakami can take his fourteen years worth of stockpiled wealth and go get a job as a CEO in another industry (like electric cars), or as a consultant, or something.  Given these conditions, there is no personal disincentive for Murakami to conserve the tuna.

2.  The shareholders:  The shareholders maybe want to keep their money, and maybe they know that when the tuna population bottoms out, they will lose money. (This is assuming the tuna population report is widely available, which I’ll get to later.)  OR WILL THEY?  If they know when the population is going to bottom out, they know when to take their money out of tuna, and put it into electric cars.  In fact, if the report is widely available, there will be more incentive to keep their money in the company for the next fifteen years–because everyone will know that the company will be wildly profitable for the next decade and a half, and will try and buy into the company, all thinking that they’re going to just ditch the stock before the market bottoms out.  The stock value will actually go up in a situation like this, because even for people that invest in the long-term, FIFTEEN YEARS is pretty long-term.

Not only that, but it only takes a few (or, possibly, one) stockholders to control a company; and this stockholder, let’s call him Mr. X, knows that Murakami is good at making him money.  Maybe Mr. X pulls his money out of tuna at year fourteen, when Murakami retires; the company collapses, the tuna are extinct, but Mr. X doesn’t care, because once his stock his sold, his money is real.  He can then buy his way into the electric motor industry, and put Murakami in charge of it.

Because the shareholders do not have any actual investment in the continuing, indefinite success of the tuna industry, there is no particular disincentive for them to dump their money into Kobayashi, have it fish at max, and then try and pull their money out at the last minute.

3.  The consumers:  the consumers will stop buying as much tuna fish if they know that it will cause the extinction of the tuna.  Will they?  WILL THEY?  Let’s say, for a moment, that there are indeed people that make decisions now based on consequences they’ll have to face in fifteen years.  What is going into these consumers’ decisions to buy tuna?  What influences them?

Advertising, obviously, is part of it.  And here Kobayashi has a huge advantage over Skaargard–the Danes, in order to get people to conserve, will have to release advertisements telling people NOT TO BUY TUNA FISH.  This is the opposite of advertisements, generally; and while the Danes are doing that, those clever, amoral Japanese are running ads telling people that they SHOULD buy tuna fish.  I’ll leave it up to the reader which one seems like it would be more effective.

But what about that report?  What if it were widely available?  What if people knew that they shouldn’t be eating tuna fish, because of Science?  Well, poor old honest Science.  The thing about Science is that she has to admit something called “a margin of error;” that is to say, the possibility that she might be wrong.  And if you admit you might be wrong, it won’t take very long for someone to delcare that you ARE wrong.  So, in order to destroy the credibility of the report, Kobayashi just has to commission a half a dozen other studies that say the opposite and release them.  They don’t really need to be accurate or convincing, or anything like that.  They just need to make enough noise to neutralize the correct report–and they only need to do it for the five minutes that the tuna report is able to make it into the news cycle.

The last, and maybe most important issue, as to what consumers buy is cost.  Most people eat the foods they do because they’re as cheap as they are–and tuna fish being produced at maximum levels will be substantially cheaper than tuna fish being produced at sustainable levels.  Even a person that is aware that eating a lot of tuna fish will cause the end of the population does not necessarily have an incentive to stop–I need to eat now; in fifteen years I’ll find something else cheap to eat.

There are a few reasons why a mass disincentive for eating tuna is possible, but in a way it doesn’t matter:  if the demand for tuna starts to go down, Kobayashi, rather than fishing less tuna, will just attempt to advertise it more aggressively.  They’ll need to continue fishing in excess of demand, anyway, because they can’t know what the demand will be until after they can the fish.  Even if people know what’s going on, and even if those people care what’s going on, Kobayashi is going to great lengths to convince them to buy tuna anyway.

All of this bothers me, because let’s say that I’m a sensible tuna consumer.  Let’s say that I know about the tuna population, and that I like tuna, but I’m willing to go without it a while to ensure that it doesn’t get over-fished.  Let’s say that I even have a blog where I warn people about the tuna population, and an activist group trying to let people know to not eat so much tuna–but my efforts are unsuccessful, and people eat too much tuna anyway.  All of the decisions are out of my hands–the choice to make tuna extinct is being made entirely by people to whom my input is irrelevant.  Even though I am a responsible consumer, the tuna still become extinct.

And what am I supposed to do?  Start my own tuna company?  Even if this were a realistic possibility, it’s absurd:  you can’t reduce the amount of tuna fished by starting a new fishing company.  All you can do is ensure that Murakami and Kobayashi and Mr. X don’t get all the money–but I don’t care about keeping them from making money, I care about making sure that there’s tuna fish to eat.

Even setting aside the fact that making an entire species of predatory fish extinct could be a catastrophic environmental problem, what happens with the end of the tuna industry?  Am I just supposed to start eating different fish?  Are the tuna fishermen supposed to just start fishing for different fish?  This presumes that 1) fish are all interchangeable (they’re not), and 2) anyone who can fish for tuna can fish for anything.  I don’t know if (2) is possible, but remember that all the other fish are already being fished.  There’s no room for a million extra tuna fishermen on those boats, and being trained as a tuna fisherman isn’t the same thing as being trained as ANY OTHER JOB.  Workers are also not essentially interchangeable–especially workers that have been in the same industry for fifteen years.  Can the boats be repurposed and made valuable again?  I don’t know–are all boats basically interchangeable?  Can tuna fish boats be made into, I don’t know, zeppelins, or something?

This is what I want to know:  how does a system like this self-regulate?

Do we expect that the market will find a way?  A way to what, exactly?  To save the tuna?  This suggests that markets have never permitted species to be hunted to extinction.  A way to repurpose all of those boats, and find new jobs for all of those workers?  This suggests that no market has ever permitted healthy workers to starve to death.  And what if there just isn’t a way?  That could happen–a man could make a billion dollars by building a functional lightsaber, for example, yet despite this massive incentive, NO ONE HAS BUILT A FUNCTIONAL LIGHTSABER.

Believing that invisible entities will solve intractable problems through inexplicable means sounds an awful lot like wishing for miracles.

Fortunately, this is all a thought experiment, and we’re not in any danger of fishing tuna to extinction.

  1. Josh says:

    There’s just so much distance now between decision-makers and the decisions themselves. I mean, I assume that even back in the robber-baron days, if some of the workers went on a strike, the robber baron or someone who had regular contact with him had to deal with it. Now it seems like the shareholders who determine something like whether the tuna survive, or even whether a business is run well with regard to anything but profit, are so many steps removed from the consequences; my guess is that many of them aren’t even, y’know, attending meetings to hear from a CEO but sending surrogates and receiving statements via mail or email. It’s not unlike fighter pilots from the Gulf War describing how new technology made bombing people like playing a video game.

    And then there’s the whole issue of how even getting one company to do the right thing won’t help. We’re just too fucking big. I continue to not quite admit to myself but secretly believe that we won’t survive another two centuries without a lot of people dying.

  2. Josh says:

    Or, you know, the Singularity.

  3. threatqualitypress says:

    @Josh: Deep down, a part of me really wishes for the advent of NerdGod.

  4. Alice says:

    Oh braak. You’re so glib.

  5. threatqualitypress says:

    Though–thankfully–nowhere near concise.

  6. Alice says:

    You do have some huge teeth though.

  7. threatqualitypress says:

    For biting.

  8. V.I.P. Referee says:

    Alaskan Halibut are still rebounding from being overfished in the 1920’s, a result of the industry’s collective shift from Schooners and long lines to draggers (a dragger could yield three times the catch of a Schooner, all within in a tenth of the time it would take a Schooner trip to pull in the same). Within a decade of the introduction of the dragger, Halibut populations were nearly extinguished; Cod didn’t fare much better. People (of the kind left over from the U.S. industrial revolution of the 1880’s) begin to realize that peddling raw resources required knowledge of turnover limitations; if communities cared to perpetuate a local industry (“Cod towns”), they’d have to think intergenerationally. We don’t quite plan wealth accumulation in the same way, anymore. We’re not willing to live on a less now, to benefit future generations. Not that the dwindling importance of blood lineages and tribal pride is necessarily a negative development, but it’s an influence on social behavior, nonetheless.

    Here’s the sure thing about greedy people: They don’t like to be uncomfortable and don’t want to fear for the safety of their person. Much like it is of all people; except, “greedies” are unwilling to compromise and earn their humanity. They are opportunistic and prone to hoarding.

    Under the right conditions, however, most animals are opportunistic; including sea lions, dolphins, sharks. If food sources are depleted severely enough, animals will seek out new and unusual things to eat. Murakami might order the vaccuming of the ocean floors, earning enough within 15 years to own his own island, but who will hear his screams when he’s cornered by a pod of dolphins, their eyes glazed over with that particular look of needful violence? “Not I”, said the cog.

  9. V.I.P. Referee says:

    Charity! Charity! “Vacuuming” not “vaccuming”…

  10. threatqualitypress says:

    No fury in the animal kingdom can match that unleashed by a pod of angry dolphins.

  11. Kosai says:

    You are assuming that all investors are greedy and only watch the bottom line. This situation only works if the companies are cold corporate entities created solely for profit, IMHO unlikely in the fishing industry. A company in the fishing industry will probably have an investor base of people with strong ties to the area (“cod towns” as VIP calls them). They will probably be mostly family owned and want to maintain their communities.

    If said report was widely available there could also be serious footing for a type of class action lawsuit. It is likely the puppet scientists will not have the same standing as those that put out the original report. So if instead of just informing people your activist sued Kobayashi for the extinction of a species and destroying the livelihood of millions of people I think it could be stopped. Granted Kobayashi would have a lot of money to fight such a lawsuit but Skaargard would join the lawsuit and I think the activist might win.

  12. threatqualitypress says:

    @Kosai: In the first place, on what do you base your opinion on the make-up of the investor base of the fishing industry? What motivation is there to invest in an industry except for profit? Isn’t that what investing is for? Why do you say the fishing companies will “probably” be family owned, and want to maintain their communities? Moreover, even assuming that the fishing industry is family-owned, why wouldn’t the principles that apply to the exploitation of fish apply to the exploitation of any other finite resource, which might not be family-owned?

    Also, what laws protect against the extinction of the fish? What laws protect an industry from becoming obsolete?

    In any case, this was built as a thought experiment to show that a market like this wouldn’t be self-regulating–you’re positing the existence of a regulatory body that’s meant to punish people for doing something like this.

    But, moreover, who cares about a class-action lawsuit against Kobayashi? How does this prevent the tuna from becoming extinct in the first place? How does it prevent the tuna fishermen from losing their jobs? Is the money received from the lawsuit enough to keep the fishermen alive for the rest of their lives?

  13. Kosai says:

    My reasoning behind the investors backing fishing companies is from my experience with farming, in my mind a similar industry. These type of activities tend to be owned by the people who have run them for past generations. I don’t really know the make up of the fishing industry it just seemed like a similar industry that might follow a similar path. Granted there are farming corporations, owned by families, that have heavily exploited natural resources.

    Yes, the point of investing is to make money but IF Kobayashi was family owned it would look on the sustainable plan with a more favorable eye as it will allow the family to do what it has done for generations. This would also limit the willingness of the investors to leave the industry.

    Kobayashi would view the lawsuit as a cost to the over fishing, which would reduce the amount of revenue they could make in the 15 years. (All numbers I made up for sake of argument) Lets say the activist manages to sue Kobayashi for the lost wages for one year of 30,000 fishermen who will need to switch industries. Lets assume the fishermen make $12/hour (five 8 hour days), this would equate to $750 million bucks which taken over the 15 years is about $50 million a year. If this were the case it would no longer be beneficial for Kobayashi to take this route.

    The only regulating body I am proposing are the people involved. Even though Kobayashi is such a large company I think that if people made an effort to learn about their situation on a day to day basis they could avert this type of disaster. Instead of a lawsuit maybe the activist could inform the fishermen of the situation. Then maybe organize a strike in protest of the overfishing.

    I think that the problem posed has more to do with the persons involved not taking initiative. The tools available to the average modern human to enact change are vastly superior to any in history.

    BTW I found your blog through a comment on a sci fi site io9 just in case you wanted to know 🙂

  14. threatqualitypress says:

    You are not just positing a regulating body of the people involved.

    You must firstly propose: a body that can make laws regulating labor (i.e., making it possible to say that depriving fishermen of their jobs is illegal). And, secondly, you are positing a body that can enforce those laws afterwards.

    As for fishermen striking, this is firstly predicated on getting them to believe the report (which is just as unlikely considering the existence of the dummy reports–the fishermen need to consider, “Is it worth it to me to give up my salary and maybe get fired, for a report that might not even be true?”), and, secondly, it requires that the need for fishermen exceeds the number of fishermen available. If the fishermen strike, but there are a thousand more fishermen waiting to take their place, then a strike is meaningless.

    As for the lawsuit, this is simply a question of risk-management: lawsuits aren’t guaranteed victories; the question to Kobayashi is: is it worth risking a lawsuit, ultimately by people that don’t have any money (because the fishermen will be broke, and the Danes will have either become complicit, or been run out of business by their refusal to exploit the tuna), in exchange for enormous profits now? Businesses take calculated risks all the time, and people mistake the actual amount of risk involved all the time, so the possibility of a lawsuit is not a reliable regulatory measure.

    Finally, it may be true that many of these industries are presently family run (though, again, this doesn’t refute the basic principle of concern, here), but with every year that goes by, stock is bought and sold. While there may be many reasons for families to sell stock and open the industries up for investors, there are few reasons for families to purposefully seize control over an industry–meaning the family-run businesses that you’re saying are going to be less and less family-run as years go by.

  15. […] as I pointed out in my thought experiment on the Fisherman’s Dilemma, as a CEO “success” is kind of a tricky idea.  You need to make a lot of money for the […]

  16. […] ALL THE TUNA FISH] if they want to survive?” — a perfectly sensible response to the Fisherman’s Dilemma (apparently also called the Tragedy of the Commons?  I don’t know, I read that in a magazine […]

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s