Why nature and the economy are similar
The economy and biology are strangely connected. In both the economy and biology similar events occur that have similar causes. In this article, I will name some causes and effects. Within the plant- and animal life, there are periods of growth and decline, just as in the economy. But that is just a comparison on a very high level. What can we learn from the science of biology?
Life is concentrated
The number of different species of life is concentrated in a few small places on our planet. For example, in the rainforest live a lot of different animal species. And of course the rainforest is full of trees, plants, flowers and fungus. Besides the number of different species, also the sizes of these species vary a lot. Large animals and trees live next to small insects and bacteria.
This is exactly the same with companies. The number of companies and the number of types of companies is also not equally distributed amongst the countries. For example, in the US there are a lot more companies than there are in Europe. The type of companies vary a lot in the US, as well as the number of new companies that arise each year. This creates a wide variation within the landscape of companies and thus within the economy.
But why do these differences between regions exist? This is mainly caused by the environmental factors. The rainforest is warm and wet. This causes the perfect environment for trees to grow and, with them, other life to exist within this region. Also for companies it is important to have a breeding ground with balanced environmental factors. The important environmental factors for companies to succeed, are:
- An entrepreneurial culture
- A supportive government
- Lots of money to help companies grow
- Unique knowledge
Thus, the existence of companies depends on the environmental factors. Companies that have the ability to find the best environmental factors will have a higher chance to be successful. There are even companies that can influence these environmental factors.
Mass extinction of life
Once in a while, biological life is confronted with mass extinction. This can have several reasons, for example a large meteorite can collide with the earth or an ice age presents itself. This causes the species that are not prepared or made to survive such an event to extinct. On the other hand, species that are prepared for such a disaster can survive it, and even come out stronger and take the open places of the species that do not exist any more.
With companies, the same thing can happen. Companies that do not have enough money or have a too low profit margin, will not survive a disaster. Disasters like the bursting of bubbles, like the internet bubble, will happen once in a while. Some companies will be hit harder by such disasters, and other companies will take their place.
Thus, you can predict quite well which companies will be able to survive disasters. Some companies will even be able to benefit from disasters.
Climate change
Climate change causes environmental factors to change and disasters to occur more often. Because of this, some species will extinct and others may take their place. Climate change is an ongoing process. The environmental factors will return to the previous condition when a disaster has taken place. Climate change will change the environmental factors forever. Species will extinct and other species will be able to adapt to the new environmental factors. This makes the climate change a different type of disaster.
Within the economy, climate change has a corresponding event. Crises, like the financial crisis, have the ability to change the environmental factors forever. Laws will change, previously important knowledge will become less important and the culture within countries may change. Appreciation and trust in industries and companies crumbles. Other industries will be perceived more valuable.
Thus, crises will change the playing field in which companies operate. Some companies will be able to benefit from the new environmental factors, others will go bankrupt.
