Niles Eldredge - The Darwin Blogs

The Darwin Blogs – April 23, 2006.

Intelligently Designed: Evolution and the Marketplace

The name of the game in the business world is to know what is happening next: where the markets are going, what new product will grab the buying public's imagination—and when the fickle marketplace will all of a sudden turn on an old favorite. Flip phones took the cell phone market by storm a few years back—catching giant industry leaders like Nokia completely unprepared. Nokia makes them now but has evidently lost a percentage of its market share because it didn't see the trend coming. Meanwhile, cheap burgers seem to be luring folks back to MacDonald's, offsetting a decline in popularity in recent years.

How can declines and missed opportunities be avoided? And how can trend-setting new designs and products be detected—or even dreamt up—that will be the next hot item in the marketplace? No one has a crystal ball, after all. But I think there are ways to approach the problem that could reduce the risk and uncertainty—and maybe give some businesses the edge over their rivals.

I'm thinking of evolution. It's notorious that the future of evolution cannot be predicted—if by that we mean precisely what direction the evolution of mice—or humans—is likely to go in. But think again: for 50 million years or more, mice have been scampering around, looking pretty much like mice all this time. It's unlikely that a four-foot tall mouse species with a trunk like an elephant will evolve any time soon.

So history can be our guide here—and the business world has from time to time taken advantage of that fact, mining trends in the past to gain insight into what might happen in the future. Things change—but as one wise Frenchman one exclaimed, "plus ça change, plus c'est le même chose"—or, "the more things change, the more things stay the same."

So that's a good start: understanding the history of a business or product line might give some hint at the way things are likely to be going—or remaining the same. But it's the changes—the sudden declines in popularity of a product that had long led the industry—and especially the appearance of something new with its instant appeal in the marketplace—that's what marketers would dearly love to be able to anticipate.

So we need more than simple history. We need, instead, to know how history works—what, in other words, the dynamic processes in the marketplace are that conspire from time to time to create opportunities for change, that disrupt the status quo and usher in whole new playing fields in the ages-old competition for the attention—and money—of the buying public.

Evolution is a frequent metaphor in the business world. It's a "dog-eat-dog" world out there, we often hear; and newspapers frequently refer to the rough-and-tumble competitiveness of the business world as "Darwinian." "Survival of the fittest" is the battle cry, and the explanation for why one product sold so much better than its rivals is often its supposed "superiority": customers simply "select" the best products, in a way that mimics natural selection in the living world.

Business veterans know it is not as simple as that. Pricing, marketing, brand name, plus other harder-to-specify factors weigh into the equations that make some products more popular with the buying public than their closest rivals. Simple homilies drawn from standard simplistic accounts of how evolution works in the biological world just aren't enough to help us in our search for sharper anticipation of what is going to work best just around the corner in the marketing world.

So we need to know a bit more—about biological evolution, to be sure, but especially how it is the same and, more importantly, how it differs from analogous processes in the realm of human culture. People have been making artifacts for roughly 2.5 million years—going all the way back to the crude stone tools made by early hominids—tools now found in the sediments at Olduvai Gorge in Tanzania. Stone tools—at first just simple chopping implements—have changed over time as people learned to make other kinds of implements (scrapers, spear points, arrow heads, etc.) and to utilize bone and, eventually metals, and then other materials (like plastics) to make their tools. And of course the entire range of manufactured goods has also exponentially expanded: the computer on which I type this blog is a vastly different sort of a thing than an Oldowan stone chopper.

But is it fair to say that artifacts made by humans "evolve?" I think so—particularly if we think of evolution—in both the biological and cultural universes—as the change (and stability) of information through time. A quartz crystal has plenty of information in it: the structure of the molecules of silicon dioxide is such that they link up with one another in one exact way—crystallizing in what mineralogists call the "hexagonal" system (any decent quartz crystal you find has six sides to it).

But quartz crystals cannot pass their information on. Rather, new quartz crystals grow only when the right geochemical conditions occur. And they are always basically the same. The crucial thing is that any variation that might occur in a quartz crystal is restricted to that crystal: it can never be passed along as a "new idea" to some descendant quartz crystal.

The world of quartz crystals is very different from the world of organisms—and, I submit, the world of products in the marketplace. Organisms resemble their parents, and yet no two organisms are exactly alike (save identical twins, and even there…). Inheritance and variation are the first two of the three ingredients Darwin so clearly saw when he came up with the idea of natural selection in the late 1830s:

"Three Principles will account for all:

1) Grandchildren like grandfathers [i.e. heredity]

2) tendency to small change (especially with physical change) [variation—which Darwin thought was induced by the external environment]

3) great fertility in proportion to support of parents [the crucial third part—the overproduction of offspring which meant that only those best able to flourish and survive would themselves leave offspring to the next generation]"

So, natural selection, the core process of biological evolution, is the fate of these heritable variations in time: evolution is the fate of transmissible information through time.

But computers are like quartz crystals: computers do not make baby computers. Rather, computers are produced, one after another, each one a clone of the other as a particular model is being made in large numbers on a production line. Where is the variation there (aside from sloppiness in assembly, or a bad part being installed)? And how is the information passed along?

The answer of course is that humans dreamt up computers; designed their working parts and put them together; are constantly tinkering with ways of making them more powerful—faster, and with more memory. The information arises in the human brain—and is recorded in plans and written descriptions. And the information is there for all to see in the finished product itself. Anyone clever enough (not me!) can dismantle this computer I am typing away on and either make or buy the parts required to make a working copy of it--certainly anyone trained in the engineering and design of computer hardware could do it.

So is there "evolution" in the universe of humanly designed artifacts? You bet! It is the fate of transmissible information through time. Same definition as biological evolution!

And there is more: The "fate" of the transmissible information in both the biological and humanly-designed worlds is determined by economic forces. In biology, "economics" is the matter of finding energy resources (something to eat!), avoiding being eaten by someone else, and so forth. In the business world, "economics" is the marketplace—plus all the other factors (costs) involved in production of designed items.

But there the resemblance ends. It turns out that the differences in how information is transferred (genes in organisms; ideas communicated between people in the design world) makes the universe of design evolution far more complex than biological evolution.

As mentioned in the previous blog in this series, I have built up a prodigious database on piston-valved cornets. I have the entire history of a designed product on my computer and in my head. And I have begun to see what the intricacies of design evolution look like. What this all tells us about how the marketplace works—how inventions spring up, how they are likely to fare under what circumstances—is precisely the sort of thing that can sharpen us up when we try to anticipate what is going to happen next in the marketplace. Stay tuned for more!!

Niles Eldredge

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