Corporate Darwinism


Applying Nature’s Rules of Survival to Your Investment Portfolio




By Anthony Rhodes




Be it the rules governing the wondrous celestial objects which circulate 

above our heads, or the natural selection processes of the diverse life

forms which live and reproduce closer to home, nature's mandate of 

rewarding the fittest, and most adaptive, appears to be repeated 

wherever one tends to look. These rules are so clearly defined that they

permeate all facets of our daily lives, and exist as a universal truth within

our ever-increasing understanding, and expanding knowledge base, of the

very nature of existence, itself.


With the weight of this evidence being such a clear and reliable constant,

it appears asinine for one to willingly attempt to challenge it. If the rules

governing the universality of all physical phenomena favors these two

must adhere to them as well, correct?


My charge for this week is to explain how to convert this universal 

principle into a viable investment strategy, and to use its concrete

truth to increase the value of your portfolio. Within this attempt, I 

will hope that you resist the temptation to include another 

description to this list (which it certainly should not be present in)


but mistakenly tends to be incorporated whenev
er this topic enters

into discussion. Yes, nature's rule book on survival prioritizes those

being the fittest, and most adaptive...but not necessarily on being

the largest. 


Fiscally Fit


Machiavelli put it best when he stated "During times of peace, a 

Prince prepares for war.", and I often use this metric when 

evaluating the leadership of publicly traded companies. Great 

leaders have learned the importance 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 distinct purposes. First of all, it fortifies their company

from being dependent upon banking institutions when demand for 

their products or services decreases, and secondly, it provides them with

the capital necessary to purchase successful, but ill-prepared rivals

(at the pricing of their choosing) during prolonged economic slowdowns.

This fiscally fit objective is a powerful indicator of companies that will

not only survive during times of difficulty, but will actually thrive in this

environment. As such, these names are poised to endure even through

the most trying of economic conditions, and should therefore hold

standardized positions within your investment portfolio.


Winning Adaptation


Another example of companies that are built to succeed, is to evaluate

how they adapt to their own success. One mistake that larger entities

tend to make (and that I've written about on this blog) is to rest on their

laurels when it's assumed that they've cornered the market regarding

their sectors' offerings. Short-sighted leadership causes such

companies to fail to continue to innovate, and 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 new entrants, but because of their

arrogance, refuse to take them seriously until they've established a firm

foothold. But by then, unfortunately (or, according to nature, fortunately)

inertia usually carries 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

dominate candidates are spending on R&D (Research and Development)

as it is a clear indicator of their companies' overall vision. It's also 

important to see if they are branching out into other types of businesses

in an attempt to diversify their holdings, and increase 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 holds

very little regard for 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 fading hope amidst the toxic, visible haze which

encompassed the once-lush landscape. It appeared, during this ultimate

test of survival, that nothing more than 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 they did so previously.


Yet, even then, nature's rules of survival proved resilient, as our

mammalian ancestors used their intelligence and skills of adaptation to

forage an existence which would ultimately culminate in the development

of stone aged tools, the printing press, and today, artificial intelligence.

Indeed, the awesome benefits of being the fittest and most adaptive has

withstood the test of time. And if correctly 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)    





































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