permaculture

[Lawrence London <lfljvenaura@gmail.com>]

BBC News - Bacteria give lessons in investment economics
http://www.bbc.co.uk/news/science-environment-23623601

Bacteria give lessons in investment economics By Simon Redfern Reporter,
BBC News
A trade-off between protection and growth determines bacterial success

Colonies of bacteria balance growth against risk, just like financial
investors, ecologists have found.

Using lab-based synthetic biology, experiments in bacterial evolution, and
mathematical modelling the study finds links between organisms and markets.

Bacterial investment crashes and boom-bust cycles are described in a paper
in the journal Ecology
Letters<http://onlinelibrary.wiley.com/doi/10.1111/ele.12159/abstract>
.

The study is the clearest experimental test of a 50-year-old theory
relating trade-offs to competitive success.

The study is a classic demonstration of Darwinian economics and survival of
the fittest.”
Dr Ivana Gudelj University of Exeter

The evolutionary successes of bacteria are plain to see as they are found
across the globe, but bacteria may also have something to say about
investment success more generally.

A research group from the UK and Australia used strains of the bacterium *E.
coli* that were constrained in the amount of resource that they had for
growth, but that were also subjected to varying degrees of biological
stress.

Different strains of *E. coli* developed covering a range of ability to
cope with stress and invest in growth.
Petri dish as trading floor

Externally imposed "market conditions", represented by changing salt and
acid contents of their environment, influenced the outcome of the
"investment decisions" made by each bacterium, with success rewarded by
survival, and failure leading to extinction.

The consequences of the trade-offs between development of
stress-resistance, which involves the acquisition of costly proteins, or
increasing consumption to grow were recorded in the evolution of the
genetic codes of the successful bacterial strains.
  Trading floors and Petri dishes share common features

The observations were used to test and validate mathematical models of
bacterial investment booms and crashes.

Dr Ivana Gudelj from the University of Exeter was one of the authors of the
study, and said: "We have shown that very different investment
opportunities can require different investment strategies.

"These strategies are constrained by the subtleties in trade-offs that are
usually invisible or ignored in real markets. The study is a classic
demonstration of Darwinian economics and survival of the fittest."
Evolutionary niche

Almost half a century ago Richard Levins first suggested that trade-offs in
organisms' investment decisions lead to them exploiting different niches,
and this concept may apply both in biological ecology and in financial
markets, but it has not previously been demonstrated as clearly by
experimental observations.

Prof Dan Lovallo, senior research fellow in Innovative Management at
University of California, Berkeley, US, was not involved in the study, and
commented: "This paper breaks exciting new ground in the integration of
sciences... of interest to multiple fields: economics, finance, business
strategy, and biology."

The applicability of the results to real investment decisions in financial
markets should probably be treated with caution however, since the markets
constructed for the study were simplified to allow testing of the model.

They do, nonetheless, show how small changes in market conditions can
sometimes correspond to huge differences between optimal strategies.