Kai Ryssdal: Today is Charles Darwin's 200th birthday. He is, of course, the English scientist who came up with the theory of evolution. Over the years, that theory's been applied to all sorts of fields beyond just science and biology. If ever there was a place the phrase "survival of the fittest" applies you'd think it'd be Wall Street. But commentator Natasha Loder says recent events show us that selection in business is far from natural.
Natasha Loder: When the economy is strong it is easy to kid ourselves that the market is Darwinian. In other words, that the least fit companies go out of business leaving only the strongest. But in times like these, it is much easier to see why this isn't how our world works.
If nature were to run its course in markets right now we'd see a mass extinction. But because many businesses serve vital social functions, we are not letting this happen. We need the banks to survive, so we are bailing them out. Ditto Fannie Mae and Freddie Mac, or AIG.
Artificial selection is what humans do. We regulate everything from how much capital banks must have, to how companies treat their employees. Sure, there is some natural selection going on out there--Microsoft killed Netscape using its power as the dominant breeder. And of course there are more companies out there than can survive. But the big companies with political leverage are currently getting the bailouts. Is this really the invisible hand at work?
Markets are more likely unruly gardens than the wild forest full of nature red in tooth and claw. And we are always trimming, weeding and fertilizing this garden so it grows the way it suits us. It's just the same inside companies. What goes on is artificial, more like domestication of cattle than anything natural. Companies decide what kind of employees they want, whether they are selecting for ruthlessness or brilliance. If you want to change a company, you buy a stud CEO, cross-breed him with all the suitable specimens on staff, and send the rest off to slaughter.
It might sound brutal, but that doesn't make it Darwinian. Darwinian is having bank bosses fight to the death for their bonuses armed only with letter openers. Listen. I'm not saying bad companies never get weeded out, just that what goes on is nothing like natural selection. Should we let more companies fail? Darwin might think so. In the long term, propping up companies has got to be bad for efficiency. But nobody is really looking at the long term right now.
--Natasha Loder is the science and technology correspondent for The Economist magazine.
1 comment:
I guess it doesn't matter to me what they call it or whose invisible hand is supposedly at work. I fundamentally disagree with what they are doing. Admittedly, I couldn't possibly understand the complexities of all that has happened nor all that is happening now. But I understand the concept.
I did receive responses from two of our congressmen. Dan Boren voted for the bill and wrote in his email the many ways this is going to help Oklahoma by giving us money (isn't there some proverb about teaching a man to fish?). Tom Coburn voted against the bill and wrote in his email how wrong this spending bill is. No surprises there. It's possible I'll paste the responses in a new post.
I guess there's nothing we can do to influence the way our government does things, so we can only hope things turn out for the best. Shame, really. I (probably ignorantly) believe these events won't affect my business as much as many events will that I have control of or that happen outside the realm of this financial gameplaying.
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