What can you learn about investing from superorganisms?

 

Early on in my career, one of my mentors jovially remarked to our class of new hires, “well, most of you will be gone in a year.  You know, survival of the fittest!”  As my classmates and I glanced awkwardly at each other, a sense of unease settled upon us:  five minutes before, we had been learning together, helping each other.  Now, we were told, we were competitors.     

Thankfully our little band of junior analysts managed to stay collaborative and supportive, even as we were advised of the “dog eat dog” nature of our business. But a competitive, zero-sum mentality still pervades the investment world, where we are bombarded with phrases “survival of the fittest”, and urged to focus on speed and size as measures of success.  However, Darwin was very specific about what he meant by “fittest”, and it wasn’t biggest or fastest or toughest or even smartest.  The key to survival, according to him, is adaptability.  And no matter how competitive we are, adaptability requires connection, community, and cooperation.  After all, dogs don’t really eat dogs.

Our best models for adaptability are found in the natural world, where we have 3.8 billion years of experience and wisdom at our fingertips.  Within this realm, some of the best investors are superorganisms, where the health and function of individual members are inextricably linked to the well-being of the collective.  This is not an “either/or” world, where the individual wins by sacrificing the good of the whole.  This is “and”, where the individual cannot win unless supporting the whole.

Here are three examples of superorganism investing:

  • Lesson #1 – ANTS.  We seek investment ideas like ants seek nutrients.  How can we optimize this search process?  Ants are context specific– in areas where resources are scarce, like the desert, ants are cautious.  They explore only when there is evidence that it’s worthwhile, when scouts are returning with reports of availability.  In contrast, where resources are abundant, ants go all-out until there is a sign of danger, and then they pull back quickly.

  • Lesson #2 – HONEYBEES.  As investors, we are often trained to seek dramatic short-term growth, but sometimes this comes at a cost.  We’ve all seen those situations where a company starts off at a sprint, only to realize later that some crucial steps were skipped in developing essential supporting infrastructure.  Bees build out their hives in a modular fashion, using only as much space as is needed to support the current size of the colony.  Too much hive “overhead” equals too much cost:  it takes energy to maintain that excess space, energy that could be better spent elsewhere.

  • Lesson #3 – MYCELIUM (mycelium is a fungus – the fuzzy white stuff you find if you pick up a rotting log in the woods).   Many of our investment techniques involve taking in huge amounts of information and processing it – but aside from a few service providers, we don’t focus much on two-way information exchange.  Mycelium perform an “information absorbing” function in the forest, taking in nutrients and other important signals from the environment and organisms around them.  But the key for the forest is, it’s a two way street – mycelium absorb some nutrients and signals, while passing others along to areas where they are needed.  There’s a real exchange here, with mutual benefit – this is what produces a healthy organism, as well as a healthy ecosystem.

Emerson once said, “there can never be good for the bee which is bad for the hive.”  Bees and other superorganisms show an approach to investing where instead of maximizing short-term volume, we maximize adaptability and exchange, resulting in a resilient, regenerative, truly profitable system.  This is not trading, not speculation.  This is the true nature of investing.

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