Beyond the 80/20 Principle

The Science of Success from Game Theory to the Tipping Point

Richard Koch

• Publisher: Nicholas Brealey Publishing
• Year: 2020
• ISBN:
  9781529356472
• Topic: Technology & Engineering
• Subtopic: Applied Sciences
• Index: Technology & Engineering

Millions of highly effective people around the world have read Richard Koch's global bestseller THE 80/20 PRINCIPLE and enjoyed a serious advantage in the pursuit of success. Now, BEYOND THE 80/20 PRINCIPLE (previously published as The 80/20 Principle and 92 Other Powerful Laws of Nature) takes you even further.Including the 80/20 Principle itself - the radical power law that helps you achieve more by doing less - BEYOND THE 80/20 PRINCIPLE reveals 92 more universal scientific principles and laws that will help you achieve personal success in an increasingly challenging business environment.From natural selection to genes and memes, BEYOND THE 80/20 PRINCIPLE demonstrates, in theory and in practice, what science can teach you about business and success. It includes: * Evolution by Natural Selection
* Business Genes
* Gause's Laws
* Evolutionary Psychology
* Newton's Laws
* Relativity
* Quantum Mechanics
* Chaos
* Complexity
* The Tipping Point
* Increasing Returns
* Unintended Consequences'Richard Koch delivers some sharp cross-disciplinary comparisons and knows his onions on both sides of the business/science fence... Koch's feet are firmly on the ground' THE SUNDAY TIMES - Business Book of the Week'Cogently, entertainingly and often controversially, [Koch] draws parallels between the natural universe and the modern business world. Persevere with Koch's often elegant thought processes and you will look at your business quite differently' ENTERPRISE

Part One

The Biological Laws

How Economic Information Drives Progress

Introduction to Part One

Part One relates to insights from biology and related disciplines: how life originates, how it is structured, and how it develops and adapts to the conditions around it. Its focus is on the evolution of life, with particular attention to human life, and the relationship between human evolution and business.

Chapter 1 examines Darwin’s theory of Evolution by Natural Selection, which we have come to take for granted but which is the most amazing, awesome, and counterintuitive way that could be imagined for generating life of ever greater beauty and complexity.

Chapter 2 constructs the Theory of Business Genes, where economic information evolves by selection and where replicators—the business genes—seek vehicles for their survival and proliferation.

Chapter 3 looks at ecological niches and the experiments on small organisms by Soviet scientist G F Gause in the 1930s. Gause’s Laws reinforce the importance of differentiation for business genes and their vehicles.

Chapter 4 covers Evolutionary Psychology and the mismatch between our primitive genes and the requirements of modern business. Punctuated Equilibrium, a key power law discussed at length in Chapter 11, is also introduced here.

Chapter 5 develops a theory of human cooperation and competition, based on insights from the Prisoner’s Dilemma, other concepts from game theory, and from biology, economics and anthropology. Selfish objectives, it transpires, can only be met by ever greater degrees of cooperation and interdependence.

1

On Evolution by Natural Selection

If I could give an award for the best idea ever I would give it to Darwin, because his idea unites in a stroke these two completely disparate worlds, until then, of the meaningless mechanical physical sciences, astronomy, physics and chemistry on the one side, and the world of meaning, culture, art and biology.

Daniel Dennett

The universe is run by selection

In the material world, nothing is more important than Evolution by Natural Selection. Without natural selection, our species could not exist. If selection did not apply to ideas, technologies, markets, companies, teams and products in precisely the same way as it applies to species, we would all be working on the land struggling to avoid malnutrition and famine. Selection drives all material progress.

The origins of Darwinism

I love the story of how the idea of natural selection came to light almost as much as I love the idea itself. In the 1830s, both during his long trip around the world and when back in England, Darwin observed the behavior of animals that favored the survival of themselves and their offspring. For example, when in the Galapagos archipelago in the South Pacific in 1835, Darwin noted that a certain white bird would calmly sit by while the first of its hatchlings killed the second. Why did the bird not intervene—or, if she only wanted only one hatchling, why bother to lay more than one egg? Repeated observation gave Darwin the answer: he determined that a single egg gave only a 50 percent survival rate (survival being defined as that of at least one hatchling), that two eggs raised the survival rate to 70 percent, but that three eggs brought the survival rate below 50 percent. Further, if there were two live hatchlings, the probability of one of them surviving was lower than if there was only one hatchling. Hence the mother’s apparently perverse behavior was actually conducive to the survival of her family.

Darwin combined reflections from his field research with two ideas that had been around for many decades in different academic disciplines, and fused them together with explosive effect. The two ideas were competition and evolution. Darwin first thought of natural selection in 1838 while reading Thomas Robert Malthus’s Essay on Population, a dire prophesy of the effects of competition between individuals for food. Malthus in turn had been influenced by Adam Smith’s theories of economic competition in The Wealth of Nations (the first volume of which had been published in 1776). Smith’s thinking had been influenced by a writer another century or so earlier, namely the political philosopher Thomas Hobbes, who had in 1651 described society as ‘the war of all against all.’ So the idea of competition was common currency among intellectuals some 200 years before Darwin published On the Origin of Species by Means of Natural Selection; or, the Preservation of Favoured Races in the Struggle for Life.

The idea of evolution had also been widely mooted in the early nineteenth century. Fossils showed that species had evolved from earlier, more primitive species. K E von Baer (1792–1876) encapsulated a major insight when he stated that ‘less general characters are developed from the most general, until the most specialised appear’; evolutionists talked about ‘heterogeneity emerging from homogeneity.’¹ What no one before Darwin had explained satisfactorily was how evolution worked.

Natural selection: a simple but subtle theory

Darwin’s theory of natural selection is elegant and extremely economical, resting on three plain observations.

First, creatures systematically overproduce their young. ‘There is no exception to the rule,’ Darwin states, ‘that every organic being naturally increases at so high a rate, that if not destroyed, the earth would soon be covered by the progeny of a single pair.’ He observes that cod produce millions of eggs. If they all survived, the oceans would be solid cod within six months. Elephants are the slowest breeders of all known animals, yet within five centuries, if unchecked, ‘there would be alive fifteen million elephants, descended from the first pair.’ Survival is a numbers game, with the odds stacked against most creatures. ‘A struggle for existence,’ Darwin concludes, ‘inevitably follows from the high rate at which all organic beings tend to increase.’

Second, all creatures vary. We are all unique.

Third, the sum of that variation is inherited. We are more like our parents than we are like other people’s parents.

Darwin put these three obvious facts together to derive the rudiments of natural selection. Competition among siblings means that only a few can survive. As Darwin wrote with feeling in On the Origin:

all organic beings are exposed to severe competition … Nothing is easier to admit in words the truth of the universal struggle for life, or more difficult—at least I have found it so—than constantly to bear this conclusion in mind. Yet unless it be thoroughly engrained in the mind, I am convinced that the whole economy of nature, with every fact on distribution, rarity, abundance, extinction, and variation, will be dimly seen or quite misunderstood.²

Which individual plants and animals will survive? Clearly, those that exploit or fit in best with what Darwin called ‘the conditions of life.’ In the Introduction to On the Origin, he lays out his thesis and acknowledges his debt to Malthus. Darwin comments that he will start by looking at the variation of species, both when domesticated and in nature:

We shall … discuss what circumstances are most favourable to variation. In the next chapter the Struggle for Existence amongst all organic beings throughout the world, which inevitably follows from their high geometrical powers of increase, will be treated of. This is the doctrine of Malthus, applied to the whole animal and vegetable kingdoms. As many more individuals of each species are born than can possibly survive; and as, consequently, there is a frequently recurring struggle for existence, it follows that any being, if it vary however slightly in any manner profitable to itself … will have a better chance of surviving, and thus be naturally selected. From the strong principle of inheritance, any selected variety will tend to propagate its new and modified form.

Darwin coined the phrase ‘natural selection’ and explains it very simply:

This preservation of favourable variations and the rejection of injurious variations, I call Natural Selection.

Plants and animals that have been naturally selected will have had the most successful parents—those who in turn had survived, and came from a long line of survivors—and in turn will have more offspring than other organisms. So in each generation there is improvement, driven by the natural selection of the survivors, and by the relative reproductive success in that generation of the survivors:

The slightest advantage in one being … over those with which it comes into competition, or better adaptation in however slight a degree to the surrounding physical conditions, will turn the balance.

Darwin keeps hammering home his point that natural selection depends on variation. When the ‘conditions of life,’ such as climate, change, he says:

this would manifestly be favourable to natural selection, by giving a better chance of profitable variations occurring; and unless profitable variations do occur, natural selection can do nothing.

For most of Darwin’s contemporaries, the really controversial aspect of On the Origin was not the original part—natural selection—but rather the support that Darwin gave to the general idea of evolution, and especially humanity’s descent from animal species. But Darwin’s big idea was natural selection. Although he collected (rather inconclusive) data between 1838 and 1859, his main contribution was the flash of insight that he had in 1838: that there was competition for life between individuals and that traits were conserved through their relative adaptability to life’s conditions.

Natural selection: the key to life

The process is very simple: variation, then selection, then further variation. Then more variation, more selection, more variation. And so on back to the start of life and forward to eternity. This is how species evolve.

Variation leads to ‘better adaption’

Intrinsic to improved congruence with the conditions of life, therefore, is variation. If there were no differences between parents, there would be no differences between offspring. If there were no differences, even between the offspring of the same parents, there would be no basis for differential success. And success is fitting the ‘conditions of life.’ There will thus be a continual process of improvement or better adaptation to the environment (although, of course, the environment may change, producing different winners and losers).

Variations and improvements occur continually within species, but occasionally a mutation occurs, when an individual has a new characteristic. This mutation may improve or worsen the odds of survival. If the latter, the mutation will die out. If the former, the individual mutant will prosper and leave plenty of offspring, who will inherit and pass on the advantage.

Over time, therefore, most species will evolve positively. And they will respond to any change that the environment brings. When conditions change, new characteristics are required—and encouraged!

For 80 years, scientists have studied intensively one plot of land in the desert in the southwestern United States, photographing its changes in response to climate. They have found that variation is the key to growth. Ecologist Tony Burgess explains:

If conditions are variant, the mixture of species increases by two to three orders of magnitude [that is, 20 to 30 times]. If you have a constant pattern, the beautiful desert ecology will almost always collapse into something simpler.

Diversity leads to efficient use of resources

Darwin suggested that the more species there were on a piece of land, the more efficiently the land would be used. A number of recent experiments have confirmed his hypothesis. For example, research reported in 1984 on 147 plots of Minnesota prairie demonstrated that the greater the number of species in a plot, the more biomass the plot produced, and also the more nitrogen the soil produced; with fewer species, nitrogen leached out of the soil and was wasted.³

If a species is diverse, ...