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Natural Selection applied to business

Several threads lately have discussed the implications of the IT downturn, and have made comparisons to natural selection.

In reading Darwin's original work on natural selection it is fairly clear that "natural selection" describes a statistical result of natural processes. It, in and of itself, is not a process, but a description of the result of a wide variety of processes. So to use the phrase "natural selection" as a verb seems to me to be inappropriate.

Further, the processes involved in creating natural selection include propagation of genes. How, pray tell, does a company propagate its genes?

And although modern business and economics certainly have "processes", it is not clear that they are similar in quality to natural, ecological or biological forces. Further, any and all of these processes are artifacts and inventions, not necessarily inherent to existence or survival.

In summary, to use the idea of adaptation or some vague concept of "fitness" as a launching point for discussion, is, I think fine. However, to try and apply a set of reasoning based on this very crude analogy seems to me to be unwise.

Or, putting on my cynical hat, business in America is concerned almost solely with short-term profit to a small percentage of wealth-holders. This seems to me to be a more solid basis for analysis and discussion than natural selection.

Thoughts?

Jeff Kotula
Tuesday, December 17, 2002

I don't know about the analogy to business, but I disagree with these statements:

"In reading Darwin's original work on natural selection it is fairly clear that 'natural selection' describes a statistical result of natural processes. It, in and of itself, is not a process, but a description of the result of a wide variety of processes."

Natural selection isn't the result -- the result is the current, observable state of all living things in the world.  Natural selection is the theory that attempts to explain how the living things came to be the way that they are (and how most species became extinct).

"So to use the phrase 'natural selection' as a verb seems to me to be inappropriate."

This is true.  It's clearly a noun phrase.

Alex Chernavsky
Tuesday, December 17, 2002


Soon after automobiles were first introduced there were HUNDREDS of manufacturers. Now there are a dozen or so big names left.

Doesn't anybody remember the days of "woah is me, we can't find anyone to work here"? I do. That was when a bunch of .com's sucked up all the available talent and more. Now they're being weeded out and the worker pool is backfilling.

What is so surprising about this?

It's not evolution. It's not ethics. It's people with really bad memories.

Bruce Rennie
Tuesday, December 17, 2002

" Or, putting on my cynical hat, business in America is concerned almost solely with short-term profit to a small percentage of wealth-holders. This seems to me to be a more solid basis for analysis and discussion than natural selection."

This is precisely where you should be starting when you are discussing natural selection.

Anyway let's give you a metapor. Take a virus that propagates so successfully it decimates its host. It is following its short term interest, but in the long term it may well become almost extinct.

On the other hand a virus that is more benign, and only kills its host after twenty or thirty years, or better still never will do better.

You could say the same for businesses. The difference is that the virus is incapable of choosing its action. It's pure chance whether the virus kills its host in a few days or in fifty years or never.

In fact there has always been a clear link between evolutionary biology and economics. It is highly unlikely that Darwin would ever have developed his theory without the intellectual influence of Adam Smith, Ricardo and Malthus, and at a later date Marx showed his debt to Darwin by asking for permission to dedicate "Das Kapital" to him.

However "the survival of the fittest" as an argument has been hijacked for nearly a hundred and fifty years. Rmember that the "fittest" are simply those that survive; so the useless creep who couldn't write code to tie up his own shoelaces will still be the "fitter" in the Darwinian sense if he keeps his job and the world's greatest programmer gets sacked.

Another false idea is that of comparing evolution with progress. There is no suggestion that the curent end of the evolutionary process is any better than that before (except in terms of greater complexity). In evolution there is neither progression nor regression, just gression.

I doubt if the analogy is of much use for the phenomena used in the other thread though. Siome metaphors confuse rather than help

Stephen Jones
Tuesday, December 17, 2002

The other thing to consider is that survival of the fittest is about species, not individuals. Each company is an individual I would think, and companies don't breed - although some are definiately carnivores (corprovores?)

Chris Tavares
Tuesday, December 17, 2002

Companies do reproduce and change their genes.  At a high level, through splits and mergers and so on, and at a lower level, perhaps a "mutation" level, as individual employees come and go.  Normally a small or even a large change in one position won't change the fundamental nature of a company, but every so often it will.
Merging companies, or more particularly merging the employee pools of the two companies, will create something new that may be more like one parent or more like the other, or its own entirely different thing.  So human beings are like company genes, and like human genetic material much of it is just filling in space. :)

Mikayla
Tuesday, December 17, 2002

Survival of the fittest is actually about genes.

The individual is merely the packet or vehicle by which the gene propagates itself.

And the species is a by-product. Evolution works at the level of the individual; changes in species are a result of changes in individuals. A  gene that favours its carrier, the individual, will propagate however nefarious the effect on the species

None of which of course has anything to do with individual companies followinig their own interest, however nefarious the effect on society :)

Stephen Jones
Tuesday, December 17, 2002

It's all about entropy, pure entropy I've decided, anything can and will happen, disorder rules.

Chaos also plays a role.

Yesterday, I came across the following line of code in one of our developers code:

'..test for multiple conditions
If (x<>1) AND x<0 then
    gosub EXIT_HANDLER
endif

I mean, despite the obvious logic flaw, gosub?

It took me about 2 minutes to convince him that the logic was faulty. Then he leant back in his chain, as if he had just discovered the meaning of life and said "Ahhhhhhh".

This developer was on the interview team that interviewed me for a job, I only mention this line of code as it sticks in my mind, plenty more was just as bad or worse.

Chaos.

Alberto
Tuesday, December 17, 2002

It is possible to make intelligent decisions about what will and will not work in business. No guarantees but success in business is not a result of random differences between competing entites.  It is only a conbination of applied intelligence and chance that results in business success.

What busines has succeeded or even existed without applied intelligence?

dos huevos!
Wednesday, December 18, 2002

"success in business is not a result of random differences between competing entites"

I dunno... people generally under-estimate the power of pure, blind luck.  Options trader Nassim Nicholas Taleb wrote a whole book about it.  The book is called, _Fooled by Randomness: The Hidden Role of Chance in the Markets and in Life_:

http://www.amazon.com/exec/obidos/ASIN/1587990717/

The _New Yorker_ ran a good article about Taleb's theories.  You can actually skip the book and just read the article:

http://www.gladwell.com/2002/2002_04_29_a_blowingup.htm

Alex Chernavsky
Wednesday, December 18, 2002

FYI, the new yorker article is much better than taleb's book,.

readthebook
Wednesday, December 18, 2002

Yes...but what if all businesses relied ONLY on pure blind luck?

"I'll start a business and If I'm lucky people will send me money.....without my even trying to give them anything in return."

Businesses are activley producing something that they belive will be of value to someone. Many are "lucky" along the way...they have unanticipated success. Other fail where success is anticipated.

Again, chance is a factor but you increase your chance of succeess by applying intelligence.

dos huevos!
Wednesday, December 18, 2002

I sent the article on Taleb and his theories to a friend of mine who works in the City (ie. works in the finance industry in London) and this was his reply:

"I forwarded this article to our options trader in London and he had an interesting tale to tell, having worked with this guy at CIBC.

"Unmentioned in the article is that Nasim 'blew up' when working for CIBC because he was funding his long position in options through shorting gamma (ie. selling overnight options and trying to pick the day that it would all go wrong).  Every tale has two sides...."

Walter Rumsby
Friday, December 20, 2002

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