tricky new CFA essay...

One of the more enduring clichés in business literature is the likening of business competition to Darwinian evolution through a process of natural selection. Viewed through this lens, the business world is a gradually evolving ecosystem where the strong players slowly dominate and weaklings are routinely cast aside. Scientists now know that nature is not so orderly. Gene pools are relatively stable over time with a little give and take from regular volatility in weather conditions (which drive food supplies etc). It takes massive shocks to the system like once-a-century floods or droughts to drive natural selection and dramatically reshape populations. Rather than a gradual process, evolution happens very quickly and mostly to species facing significant duress.

Kinda like how a virgin becomes de-virginized…happens very quickly and is not a gradual process.

That’s very true, Virgin. Evolution can happen in a single generation if the environmental effects are severe enough. There is no guarantee that this leads to a more “fit” population, since what it takes to survive the transition may not be what is needed to thrive in the new equilibrium state, but on average it does seem to allow more adaptable species to evolve.

FWIW, I didn’t make up that great analogy. I copied & pasted it from an anonymous person in an anonymous place but it fits so well to investing, life & capital structure.

I think what virgin is talking about is called “punctuated equilibrium”