vendredi 9 décembre 2016

Framing of the evolutionary change by Darwin and Lamarck from an entrepreneurial point of vie

Nothing very funny or absurd here, on the contrary. I recently found an old essay i wrote once for school, and i think it has a few interesting comparisons, although going sometimes a bit very quickly through some assumptions. Anyway, somone might find that interesting, who knows ! Food for the mind...

Evolutionary Economics
Dec. 2009

Framing of the evolutionary change by Darwin and Lamarck : in which occasions and events do they make sense for an entrepreneur?

Table of contents

Why does it make sense to compare biology and economy?

Two different theories : Lamarck and Darwin
An entrepreneur has to be Darwinist & Lamarckian at the same time

1. Taking in account the key variables for making strategic decisions and driving a sustainable expansion

The importance of time
The economic environment
Environment, time and inter-dependency with actors
Different states of the environment : cycles and turning points

2. Knowledge and experience as a key to further development in a changing competitive environment (1st period)

3. Creativity and opportunity seeking as the most valuable key to greatness (2Nd period)

4. About limits of biological evolutionary theories

5. Conclusion

6. Sources

Why does it make sense to compare biology and economy?

Darwin's and Lamarck's theories are close to each other in interest yet change the why and how of an evolutionary process. But why would framing economy change with biological changes make sense?
As long as actors of the economy (consumers or firms) are humans or a group of such, it seems obvious that we could find in any change some biological reasons. The fact that we have two legs creates a market of two legs trousers, production of trousers and distribution chain of trousers. The fact that we need to sleep creates a market of beds, pillows, sheets, etc. And so on.
But beyond those very practical facts, similarities with biological evolution cycles go deeper. We, and by extend our economies are subject to unpredictable, complex and time framed changes. The theory of economic evolution illustrated by Kitchin, Juglar and Kondratiev are almost perfect illustrations of this.
The three different time scales, of those cycles seem to match almost perfectly biological cycles although time scales and range are to be adjusted.
  • Long term cycles, example : species evolution (monkeys to men), or climate change
  • Medium term cycles, example : life and transformation of a specie, i.e “expansion” and “crisis of a specie”.
  • Short term cycles (minor), example : (creature's life cycles, measured in years)

As in biology, major changes on long term cycles influence medium cycles (climate change influences the transformation of a specie). Medium cycles influence short term cycles (transformation of the human (homo sapiens to modern man) influences our life expectation).
To conclude this introduction and make reasonable assumption to conduct our study, we should assume that :
  • Time is a key variable and nothing is therefore fixed
  • Change is complex
  • Infinite cycles of evolution probably exist
  • Evolution is unpredictable

For an entrepreneur, this means that he should expect nothing to be fixed, changes to be more complex than at first sight (but we will see we have to simplify it to make decisions), to define only the right cycles and boundaries his activity could be framed in, and to expect uncertainty (i.e make a plan A, B, and C).

Two different theories : Lamarck and Darwin

The Darwinism theory refers to a "single tree of of life" determined only by a random biological creativity and thus excluding the environment as evolutionary factor and only considering it at a "natural selector". Species evolve and only the most adapted survive in a given environment.
Lamarck's theory refers to infinite pre programmed trees of life and infinite evolutionary possibilities of which only a few are triggered by a specific environmental context for the needs of survival.
In essence, Darwin's theory considers change as random and environment as a selector whereas Lamarck's considers change as a calculated response to environmental changes.
Darwin : Evolution happens -> environmental selects the most fit species.
Lamarck : Environment changes -> A specie evolves to be adapt itself to the new environment.

An entrepreneur has to be Darwinist & Lamarckian at the same time

From a Darwinian point of view, economic actors change their strategies or their products and the environment then allows the most adapted to survive. From a Lamarckian point of view, on the other hand, economic actors respond to changes of the environment to survive.

It seems that the aim here shouldn’t be to choose if we should consider economy from a Lamarckian point of view or Darwinist point of view, but rather asses which abilities an entrepreneur should develop to survive as well as understand how he and the environment should interact for the best outcome.

Indeed, economic history has proven that both points of view are valid. Sometimes the economic environment happens to change unpredictably, which forces actors to adapt. But sometimes the actors themselves are creative and develop out of their own creativity, and then the economic environment decides of the final outcome.

So, for an entrepreneur, I think Darwin and Lamarck theories of evolution are both very interesting and make sense at any time, and that the consistent questions should be:

1. Identify the key variables for the development of a business (ex, time, turning points of changes, reasons for shifts, opportunities).

2. In the Lamarckian way, consider knowledge and experience as a condition of survival on which to base strategic decisions.

3. In the random and more psychological way – the Darwinism way – consider how important creativity is for an entrepreneur. Understanding that it might not be a key to survival, it make the difference between good and great.

1. Taking in account the key variables for making strategic decisions and driving a sustainable expansion

The importance of time

Considering time as a key variable along as the strategic decisions content is important. A decision can be the wrong one at time “T” but be the right one at time “T+1” depending on the environment configuration. A good example would be the launch of a product. Considering the environment (the market demand for instance, but sometimes also governmental laws or other very technical issues play a role), the question should in some cases not be “should we launch this product or not?” but rather “when should we launch it?”.

Statement 1.1 : When should I take decision A?

The economic environment

If course, as explained before, time is linked to a particular configuration of the environment and vice-versa. Both variable should be considered together to make decisions, which conducts an entrepreneur to build possible scenarios of environmental changes :

Statement 1.2 : When should I take decision A? Which factors are likely to change and should I take decision A in (future) configuration 1, 2, 3,etc.?

Environment, time and inter-dependency with actors

Consider change in a Darwinism way or Lamarckian only would be unreal. While thinking that new environment selects the most fit (D) and that we can adapt to new environment, we should also consider how we influence environment ! This might make less sense on large markets where large firms or monopolies are already present, but for countries (like Finland) or even smaller markets and new ventures, it’s interesting for an entrepreneur to consider how he will (or not) influence the environment.

Example : Google products - on a very important rise - change completely the ways of working and are vectors of important cultural change in companies which use the product. In this case, economic actors also have an influence on the environment, which is a cornerstone of economic evolution that is not taken in account by biological evolutionary theories of Darwin and Lamarck.

Statement 1.3 : When should I take decision A? Which factors are likely to change and should I take decision A in (future) configuration 1, 2, 3,etc.? Will this induce a change in the environment, and if yes, when is it likely to happen?

A strategy always has to have scenarios then, and the fact that humans have knowledge and superior conscience of their existence, they are superior to animals and biology evolution because they can transform the environment.

Different states of the environment : cycles and turning points

Having in mind the importance of time and environmental changes as well as our influence on it, how could an entrepreneur achieve or a least favorize the best outcome as possible? We have identified that they were cycles, which means that they are also turning point in the economy.

Here is a very simplified example with the evolution of a product's demand. Note that it can also be on the other way around, in the graph below (drop or increase).


These examples are just here to demonstrate that we can at least and for sure identify two different kinds of period that an entrepreneur has to identify and during which he will have to act differently.

The first on is rather long and is the "cycle" in itself : increase or decrease, more or less constant evolution in a way or another. Example : inflation, or, more interesting for an entrepreneur and very actual, the constant rise of demand and interest for web 2.0 information system product from companies (this is my field of study and internships).

The second periods are very short and correspond to turning point, where the cycle change, sometimes unsuspectingly but always very rapidly.

Therefore, the two means of survival and development an entrepreneur has to develop are:

  • During cycles : routines and processes
  • During turning points : creativity & opportunity seeking

2. Knowledge and experience as a key to further development in a changing competitive environment

So how an entrepreneur should behave in economic sustained periods? I think this is the particular time where professionalism, experience, routines and processes are important since they are a source of effectiveness, cost reduction, confidence for clients.

Routines are perfectly adapted to long period of development. If we have to compare routines and process with biological evolution, we could think of a specie way of reproducing or feeding. Giraffes, for examples, have developed a long neck to reach leaves in an environment where green vegetation is scarce. This is comparable to a routine the same way as a company

But as in biological environment, routines are good as long as the environment doesn't change. They become obsolete when not adapted anymore and can even lead to failure if the company is not able to change them or if they are too complex. Actually, biology also shows us that the most simple routines are the most effective and are those who ensure survival.

So, routines and processes have to be:

  • Simple
  • Adaptive

Knowledge and experience, impersonated by routines and processes are necessary qualities for a company to survive.

But when it comes to turning points, changing routines may not be enough, especially if an entrepreneur wants to better than survive (which is not the case for most species).

3. Creativity and opportunity seeking as the most valuable key to greatness

As Darwin underlines, creativity does not depend on a shift of the environment but are random evolution of species. In economics, creativity is also the source of great achievements. To sum up, a change or new idea that is not induced directly by a change in the environment can lead to high return but also has an implicit high risk ratio.

Lamarck does not consider creativity as a reason for development, which I think is a very important thing to take in account in economy. Thinking that companies only adapt to environment is false !

Actually, opportunity seeking for an entrepreneur means two things. First, creativity is essential because it creates opportunities amid high risk ratios. Second, opportunity recognition is essential, i.e, quick response to an change in the environment.

Here we come to a mix between Darwinian and Lamarckian theory : it seems the best outcome is achieved either by creativity without regard of the environment (to a certain extend), or by a quick response to a change with creative ideas.

4. About limits of biological evolutionary theories

  • Creative ideas, because they are out of the human brain should even be considered, in essence and respect, above the laws of natural selection, although the Darwinism theory is great to compare them and understand their value).

  • As Lamarckian underlines, adaptation is calculated or pre programmed. In the economy, this goes further since we have research knowledge and experience of previous failures. We also have tools to compute possible outcomes. Those are of course still unpredictable (crisis), but economic theories for example give us superior knowledge and consciousness of the environment and its possible future shifts, which nature does not have. An economic actors has therefore more means of reducing risks.

  • Another interesting idea of Lamarck (2) is that evolution always goes from simpler forms to more complex forms. A very strange paradox is that we can agree that economic systems also grow from simple to complex since the dawn of civilisation (Barter to exchange with money, internationalization, more communication means, appearance of financial speculation,  etc.), but meanwhile, routines, ideas and products that work best are often the most simple.

5. Conclusion

The conclusion seems to be obvious. The debate is not about choosing which theory would be the most interesting for entrepreneur but what do those theories can bring to an entrepreneur. It seems that awareness of the importance of time, the environment and its two main different states (sustained growth or decrease of multiple economic variables VS quick, unexpected and sudden change in configuration, i.e. turning points) is essential. From that statement, an entrepreneur has tools to adapt and favorize the best outcome as possible through routines and creativity.

Knowing if evolution comes from creativity and if the environment is only here as a selector or if evolution is only a rational response to change is not important because it's both. On the other hand, an entrepreneur, as well as any economic actor has to know when his time has come to play one or the other way. In times of crisis, its best to try to adapt and respond the best way as possible to survive, whereas in times of growth, creativity and opportunity seeking and recognition is essential to achieve "great than just good".

So what is interesting for an entrepreneur?

  • Identify the right variables on which to take decisions : time, environment and their interdependence with actors.
  • Identify economic cycles that the company fits into, and the competitive advantage given by efficient and simple routines.
  • Identify turning point and opportunities, understand the importance of creativity (at the right time) and opportunity recognition.

And to finish with, I would like to add that newdays, comparing economy and biology may not be enough. Actually, economy and human life have gone so far that their influence on the environment, not only economic but also biologic is real. Industry transform earth and even threatens biological natural cycles (pollution, ozone, global meltdown...). Maybe it is time for a micro economical alternative evolution theory that considers economy as a part of biological evolution and makes the Darwinism theory and Lamarckian obsolete in the sense that today, new concerns occur that not only have a real effect on nature but also threatens it.

6. Sources