Applying Nature’s Rules of Survival to Your Investment Portfolio
Be it the rules which govern the wondrous celestial objects which cir
culate above our heads, or the natural selection processes of the di
verse life forms that both live and reproduce closer to home, nature's
mandate of rewarding the fittest, and most adaptive, appears to be
repeated wherever one seems to look.
These rules are so clearly defined that they permeate all facets of our
daily lives, and exist as a universal constant in our ever-increasing un
derstanding, and expanding knowledge base, of the very nature of
With the weight of this evidence being so overwhelming, it would seem
asinine for one to willingly attempt to challenge it. If the rules which reg
ulate all physical phenomena favors these two characteristics, then
certainly those which dictate the outcomes of our minuscule invest
ment portfolios must adhere to them, as well, correct?
My charge for this week is to convert this universal constant into a
viable investment strategy, and to use its concrete truths to increase
the value of your portfolio. Within this attempt, I would hope that you
will resist the temptation to add another description to this list (which
it certainly should not be present in), but mistakenly tends to be added
whenever this topic comes up for discussion. Yes, nature's rule book of
survival prioritizes those who are the fittest and most adaptive...but not
necessarily for being the largest.
Machiavelli put it best when he stated "During times of plenty, a Prince
prepares for war." and I often use this metric when evaluating the lead
ership of publicly traded companies. Great leaders have learned the im
portance of building their war chest during times of plenty, so that they
can be in dominant positions to take advantage when leaner periods
inevitably arrive. Doing so serves two distinctive purposes. First of all,
it fortifies their companies from being dependent upon banking institu
tions when demand for their products or services decreases, and
secondly, it provides them with the capital required to purchase succ
essful, but ill-prepared rivals (at the pricing of their choosing) during
prolonged periods of economic slowdowns. This fiscally fit objective
is a good indicator of companies that will not only survive during diff
icult financial situations, but will actually thrive within this environment.
As such, these names are likely to endure even the harshest if econom
ic conditions, and should therefore, hold standardized positions within
your investment portfolio.
Another way of identifying companies which will endure during difficult
situations, is to evaluate how they adapt to their own success. One mis
take that larger entities tend to make, is to rest on their laurels when it's
assumed that they've cornered the market on their sectors' offerings.
Short-sighted leadership causes such companies to fail to continue to
innovate, which makes them ripe targets for aggressive upstarts (whom
they consistently ignore) while basking in the luxury of their positional
prominence. Interestingly, most of these companies are actually aware
of the newcomers, but because of their arrogance, refuse to take them
seriously until they've established a solid foothold. But by then, unfortu
nately, (or, according to nature, fortunately) inertia propels their new
(and now serious) rival to the point where they are either weakened, or
eventually replaced. When deciding which companies to add to your
portfolio, always pay attention to what dominant candidates are spend
ing on R&D (Research and Development), as it is a clear indicator of its
overall vision. It's also good to note if they are expanding into other
types of businesses, in an attempt to diversify their holdings, and incr
ease shareholder value. As I mentioned earlier, being the largest is
distinctively different than being either the fittest or the most adaptive.
Which is why nature hold very little regard towards it being placed as
one of her primary tenets of survival.
When the dust settled on our planet, after the cataclysmic series of
maelstroms which wiped out the dinosaurs, 95% of all previous life had
been eradicated, and the prospect of it ever returning seemed nothing
more than a diminishing hope amidst the toxic, visible haze which en
compassed the once-lush landscape. It appeared, during this ultimate
test of survival, that only microbial life would ever occupy the Earth, and
that complex life forms had had their day, and would never again roam
wild and free, as thay did so previously.
Yet, even then, nature's rules of survival proved resilient, as our mamma
llian ancestors used their intelligence, and skills of adaptation, to
forage an existence which would ultimately culminate in the develop
ment of stone-aged tools, the printing press, and today, artificial inte
lligence. Indeed, the awesome benefits of being the fittest and most
adaptive has accurately withstood the test of tome. And if properly
incorporated within your investment strategies, will certainly ensure
that your portfolio will do the same.
(Anthony Rhodes is the President and owner of wealth management
firm The Planning Perspective www.theplanningperspective.com)