Evolution and free-market capitalism

Life has taught us the lesson time and time again: although there are certain prerequisites of homogeneity within a community (or a species) so that the individuals can mate and keep the community alive, diversity is the key to resiliency. Clonal (or highly homogeneous) societies show the problem that every individual is susceptible to the same kind of diseases and environmental factors. As we mentioned in this article, the Gros Michel bananas were attached by the Panama disease and every single plant (all of them clones) had be pulled off the ground. If the plants had been genetically different, there would have been chances that some of them would have been resistant to the fungus.

Of course, diversity does not come for free. In nature, the first organisms all reproduced by clonal mechanisms, and only once evolution figured out sexual reproduction some species started to have genetic sufficient genetic variability to make it profitable without diluting the original genome so much that the individuals were incompatible with one another. In societies, it is not much different: people from diverse backgrounds can contribute a bigger variety of ideas, but they also require certain harmonization effort (e.g. learning a common language) so that they can cooperate.

Photo: Sam Valadi

On a first inspection, free-market capitalism seems to have learnt the concept beautifully. Anyone with a half-credible idea and a couple of sweet words is welcome to try their hand at enterprises where everyone else failed before or, better yet, nobody even dared to try. Venture capitalists can confirm that a very high fraction of these enterprises (90 to 95% depending on the industry) fail miserably, and in those cases most or all of the investment is lost. This is the "inefficiency" part. Could they not invest in enterprises that would succeed? The problem is that life is very complex and it is very hard to predict what is going to succeed or fail without actually getting to work on it. That is why investors hedge their portfolios, knowing that probably 19 out of 20 projects will not provide any return, but with some luck the 20th will not only succeed, but it will be so huge that its returns can offset (compensate for) the losses in the other 19.

However, if we look at the kind of enterprises that the free-market capitalism is producing, we can quickly find a common pattern: the big majority of companies are led by men and most of them have the short-term financial returns for their shareholders as the only point in their agendas. Isn't it remarkable that we encourage anyone to try their business concept to ensure that no idea goes unexplored, but then constrain the development into a corporate structure as the one and only means and goals for the enterprise?

Promoting diversity is more than giving women their right place in our society, it is also a potential source for much better ideas that we are just not hearing about because we are not ready to listen. When Roger Bannister ran the four-minute mile in 1954 it was a sensation, because only white and rich people could afford practicing sports, so the pool of athletes was relatively small. But once the support for professional athletes expanded, people who would have otherwise never put on running shoes had a chance to demonstrate their talent and, as of today, more than 1400 athletes have run a mile in less than four minutes.

The strict regimentation of company structures is also leaving unexplored opportunities. In particular, enterprises which are perfectly able to produce goods and generate benefits for their shareholders can fall out of grace if the benefits do not increase as much as intended. Yes, you have read it correctly: it is not that the company is not turning a profit, or that the profit is not increasing. If the increase is not enough the stock market can severely punish the shares and their credit (for operations or future expansions) can be significantly curtailed. Why are family run companies derided? How about cooperatives, where the workers own the company and do not need to turn a profit as long as they can keep the production running?

Finally, there is the environmental impact. Most companies do not consider it at all or handle it purely to avoid a public relations storm. But what kind of world are we going to leave for the next generation if we allow ourselves to pollute every corner of the atmosphere, the land and the sea? Is it not the right time to knock at the door of the free-market and state loud and clear that the current path is neither the only one nor the best? If we insist on keeping our way, sooner or later we will run out of margin and we will not have the resiliency to survive. The Earth will probably shake its enormous hide and get rid of us as the nagging parasites that we have been for so long. Or maybe we are able to react soon and truly listen to the different ideas and give them the recognition they deserve. Have a nice week.