Thursday, February 2, 2012

Capitalism and Evolution?

I have heard evolutionary theory trotted out lately as an analogy for capitalistic systems. On the cover it almost looks like it works, strong companies survive and weak ones adapt or perish. But a closer examination of the concept of the “fittest” (as in “survival of the fittest”) does not match very many successful business models of today.

First lets create a working definition of “fittest” in evolutionary biology terms. When you examine a individual’s fitness what you are directly asking is this individual member of a population more likely or less likely to have offspring then the average of the entire population. Now despite being granted personhood (as well as doing a lot of screwing, I know BofA has screwed me lately) most companies are incapable of reproducing. So how does our model of fitness apply?

Sustainability, is the model of fitness in evolutionary capitalism. How long will this company be able to do business? What kind of sustainable adaptations will increase the success of this business? Is this business a predator or prey? If predatory, what kinds of checks and balances are in place to make sure it doesn’t out strip supply and starve? What role in the greater ecosystem of commerce does this company play? What sub-systems does this company rely on to function? Is all of the necessary sub-systems and the entire system in general sustainable?

If you really want to apply evolution to capitalism, these are the questions that need to be asked.

How is sustainability the model of fitness in evolutionary capitalism? Simply, for a company to have an effect on a market or even its individual employees that might effect other companies down the road, it must sustain its self for a minimum length of time. A sustainable business model is a successful business model, now this is where things start to break down in real life. Most people who have money tied up in a company are do not doing so altruistically, they expect to personally harvest profit and the sooner the better. It is as though your kidney was capable of surviving with out you but wanted your help growing as big as it can before it bails out and leaves you unable to process fluids any longer.

You might get lucky and have another kidney take its place, and hope that it doesn't leverage a lot of growth debt from other organs before it bails out (remember the kidney is only responsible to the cells that make it up, not to the rest of you). Please note that none of this happens in nature. Sooner or later if the health of an organism declines, the individual organs, no matter how healthy they may be, will suffer.

What about the predator prey relationship? I immediately think insurance. Yes, indemnity companies are predators and the general public is the prey. Now the concept of insurance might have started out rather benignly, but what it has become is predatory. Once insurance became compulsory and litigation benefiting individuals was limited, the system became inherently predatory. Need further proof? The only companies that seem to be unaffected as a group in terms of advertising budgets by the economic down turn are exclusively in the insurance market. They are however limited to the amount they are allowed to harvest by a governmental agency and competition.

I have more on this, but it might have to wait for a second post.

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