Does Individualism Drive Economic Development?

It’s the age-old question: do individualist cultures see more economic success than collectivist cultures (e.g. capitalism vs. socialism)?

We’ve mentioned how individualism vs. collectivism is one of the most important (if not the most important) of Hofstede’s cultural dimensions. The degree to which a culture lies along this scale can determine much of the culture’s values and norms.

The West (the US and European countries, in particular) believes that economic development is fueled by individualism.

Is that the case?

The “Spirit of Capitalism”

Adam Smith, the author of The Wealth of Nations (considered “the Bible of capitalism”), wrote that the economic model of the West is rooted in the individual’s aspirations and initiative to earn money, build his career, and elevate his social standing.

He writes:

“The real tragedy of the poor is the poverty of their aspirations. It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. Man is an animal that makes bargains: no other animal does this – no dog exchanges bones with another.”

And he wasn’t the only economist to believe so. Economist Max Weber coined the phrase the “spirit of capitalism,” which embodied the entrepreneurial spirit of the West, the desire to climb the social ladder and build a career, all of which was once believed by some to be the sole method of driving economic success.

However, as we discussed in a previous post, Japan disproved this theory by demonstrating that a collectivist culture, with its own values and norms, can boom economically as well.

Apart from the “Japanese Miracle,” business models like Kaizen’s steps to improvement and the quality circle provide positive outcomes and follow collectivist values.

The Lexus

An example of collectivist culture contributing to economic success:

I was invited to a presentation of the Lexus, a luxury Japanese car brand. The production process involved a unique manufacturing method put in place to guarantee top quality.

The car bodies were mounted in a large hall and transported along an assembly line of steps, in which each worker had his/her own task, like welding or screwing parts to the vehicle. A string hung from the ceiling at each step, allowing workers to stop the entire assembly line production if necessary.

Of course, pulling that string costs the company a fortune. But not doing so, if there is a quality issue, could cost them even more…and might even ding their reputation if left unchecked.

So, despite the costliness of pulling that string, when an assembly worker makes that decision, he’s greeted with cheers.

Why?

Because he took a bullet for the team, stepped up and disrupted the workflow, hopefully with reason. Nevertheless, the worker isn’t punished for putting quality over cost, which is why Lexus has a reputation for reliability.

In this way and many more, Japan has demonstrated that an individualist culture is not required for economic development. Both collectivist and individualist cultures have their strengths.

Next week, we’ll talk about the driving factor behind economic success in either type of culture.

Understanding Cultural Values: With What “Group” Does Your Culture Identify?

Some cultures most identify with their nationality. Others their church. And still others, their family, tribe, or even workplace.

We’ve discussed collectivism in this blog and the mentality of society over self or group over individual.

But of what “group” are we speaking?

In order to better understand the values and norms of a culture, identifying the group with which a culture most closely identifies is essential.

Let’s take a look at some examples.

Who is Your Group?

  • The Irish culture strongly identifies with religion, the Roman Catholic Church.
  • The former Eastern Bloc identifies with Slavic ideals and the party.
  • The French identify with their country, which they call “la grand nation.”
  • The Japanese identify with their company and workplace.

While these are all generalizations (after all, not everyone falls in line with societal values and norms), these broad strokes do highlight the roots of the cultural baobab.

Group identity is flexible. And this is not to say that other groups in said societies are not important.

Family, after all, is important in nearly every culture, and there are other in-groups – like subcultures and company cultures – to which individuals of any society might feel strong ties.

But when trying to understand a culture as a whole and what makes that culture tick, identifying the group that most often defines or impacts the mechanics of society as a whole is essential.

Collectivist vs. Individualist

Group identity, social responsibility, and interdependence are values emphasized in collectivist cultures.

Individuality, self-fulfillment, and independence are those emphasized in individualist cultures.

One wants to fit in.

The other strives to stand out.

One sees conformity as negative.

The other sees singularity as deviant.

As one of Hofstede’s Cultural Dimensions, the scale between collectivist and individualist cultures is just that – a scale. No culture is at the polar extreme, one way or the other.

There are elements of collectivism and individualism in every culture.

And sometimes, these elements are surprising.

We’ll talk about that more next week.

Conformity in Culture: The Colored Pens Study

Say, you’re given a bin of pens.

Most of them are black and a few are blue. Your favorite color to write with is blue.

Which pen would you choose?

This study was conducted by Japanese researcher Toshio Yamagishi and his research team with participants from Japan and the US.

The study involved a default scenario, an initial scenario, a final scenario, and a purchase scenario.

  • Default scenario – participants simply told to choose a pen
  • Initial scenario – participants told they were the first person to choose a pen
  • Final scenario – participants told they were the last person to choose a pen
  • Purchase scenario – participants told they were buying a pen

Considering previous research on the differences between individualist and collectivist cultures, one might think the Japanese would always choose the majority color, due to their preference for conformity, while the American would always choose the minority color, due to their preference to stand out.

The results, however, were a bit more complex.

Preference for Uniqueness

Although the Japanese did choose the majority color and the Americans the minority color in the default scenario, the results between the two cultures were similar in the other three scenarios: the Americans and the Japanese were just as likely to choose either the majority or minority color.

These last three results indicate that both cultures prefer uniqueness in equal measure.

The results also show that each culture, in being the first to choose, is cognizant of other peoples’ desire for uniqueness and, therefore, may be reluctant to offend those who have yet to choose their colored pen.

But when the social situation becomes ambiguous, as in the default scenario, why do the Japanese assume the majority pen, when the results show that they prefer the unique pen just as much as their American counterparts?

This is where the preference for harmony comes in.

Do Not Offend

The default scenario reveals that the Japanese don’t necessarily prefer to conform; after all, they were just as likely to choose unique over conformity in the other three scenarios.

Rather, the Japanese prefer harmony over disharmony.

Yamagishi and his team concluded that the disparity was in the ambiguity: the desire not to offend is stronger in the Japanese than in the Americans, particularly in ambiguous social situations.

And why not offend?

One theory posed by Yamagishi is centered around interpersonal relationships.

Japan is a “closed society” regarding groups and relationships. By this, we mean that it’s considerably more closed to outsiders; if you’re not part of the in-group, you’re not welcome. In this way, it’s harder to replace lost relationships when you’ve offended someone.

The US, on the other hand, is an “open society.” It’s much easier to replace a lost relationship if one has caused offense.

This is why the Japanese avoid offending in ambiguous situations, which may come at the cost of their preferences on occasion. Group loyalty over self-loyalty, as we talked about last week.

The ambiguity of whether your choice of a unique pen may or may not offend someone is balanced against the cost of social rejection.

The result is this strategic and nuanced adaptation under differing scenarios.

How does this apply to the type of management style a culture prefers?

We’ll talk more about that next week.