sitetitle

Economic (r)evolution

An environmental foundation established by Audi is working to protect the resources needed for the survival of humans, animals and plants. As evolutionary economists know, industry can also learn from nature.

COPY/ERICH SCHNEIDER

When the Audi Environmental Foundation was established, the occasion was marked by the planting of 36,000 oak trees northeast of Ingolstadt. Storms and drought had destroyed a forest of spruce trees there; now broadleaf trees are growing to replace them. In the course of the reforestation, AUDI AG will work together with scientists to determine the most favorable density of plants with regard to storing carbon and biological diversity. With projects like this, the Audi Environmental Foundation uses its five million euro endowment to promote development of environmentally sound strategies and technologies outside the realm of automobiles. We can salvage our natural resources – and achieve much more – by using innovation to protect the environment. Over millions of years, nature has developed survival strategies that companies can also profit from. Professor Carsten Herrmann-Pillath performs research in evolutionary economics at the Frankfurt School of Finance and Management. Psychologist Dr. Klaus-Stephan Otto developed the concept of evolution management, and offers consulting services to companies and organizations. These two experts explain here how nature can act as a guide for economic systems.

1. Diversity sparks the imagination When many different organisms live together in nature, they produce both more and better innovations than do populations with low diversity. Hardly any ecosystem contains as many animals as the forest – with the tropical rainforest being an extreme example. Rich resources enable an enormous variety of species here. Crossbreeding between organisms constantly produces new prototypes, with only the best-adapted ones able to survive. Diversity also promotes innovation in economic systems. The application of evolutionary economics is known as diversity management. “The more diverse the members of a group are, the more effectively they can tackle a challenge,” says Herrmann-Pillath. For this reason, teams should consist of experts with different cultural backgrounds, specialty areas and personalities. The experts exchange ideas in a group and combine the individual aspects of their proposed approaches until they find the optimal solution. Nature produces innovations according to the same principle. If two organisms crossbreed, parts of their chromosomes, and the chromosomes themselves, are reconfigured. Only the best assimilated organisms survive – resulting in a continuous optimization process.

2. Crisis as an opportunity A crisis can occur in nature, just as it does within an economic system. “During an ice age, many species die out; afterward, the rate of development for new species skyrockets,” Otto says. Nature reacts to a crisis with new construction plans, and organisms develop innovative ways to handle resources. Similarly, a crisis both sends shockwaves through an economic system and presents it with opportunities. Those that adapt quickly to changing conditions can also experience swift growth. The potential in a crisis lies in its disorder. One example of this is seen in how metals form crystals. “Heat causes the structures to jumble together. New arrangements are created from this disarray during the cooling process, and at some point, crystal is produced,” Herrmann-Pillath explains. In an economic system, good things also often emerge from disorder. A crisis knocks markets out of their routines – creating an opportunity to leave old paths, seek new approaches and reshape the future.

3. Strength through partnership Evolution means a merciless fight for survival. But the idea that only individual fighters are involved is misguided. Often, the successful organisms are those that enter into partnerships. One example from nature is the bird that cleans the skin of hippos. Both sides profit, with the bird receiving nourishment and the hippo maintaining good hygiene. The sum of this symbiosis is the production of an ecosystem. Symbiosis can also lead to success in economic systems such as networks. This has been seen in California’s flourishing Silicon Valley (see page 94), a loose network of hightech companies. “On the one hand, the companies compete with each other, but on the other, they are also networked through things like research projects,” Herrmann-Pillath says. As in nature, a healthy balance between competition and cooperation determines the stability of an economic system.

4. Courage to fill a niche Evolution is the mother of invention. “Plants and organisms continuously reinvent their environments. In this way, they create niches where they can grow,” Herrmann-Pillath says. Darwin’s finches are a famous example of the development of new niches. To survive on the barren Galapagos Islands off the coast of Ecuador, these songbirds divided themselves into subspecies with different eating habits. Each type of finch has a different beak so that it can focus on a certain kind of food. Specialization in a niche segment is also a proven strategy for success in an economic system. “A company needs to consider whether it should wear itself down in cut-throat competition, or create new niches,” Otto says. However, there has never been a guarantee for successful innovation. For this reason, nature’s strategy primarily demands one thing: courage.

5. Success through adaptation As the environment changes, so do its inhabitants. When white dunes emerged out of the loamy ground of the Chihuahuan Desert some 6,000 years ago, the indigenous lizards wasted no time in shedding their dark skin in favor of a paler tone, thus camouflaging themselves from birds of prey. This holds true for an economic system as well: Those that adapt quickly and intelligently to conditions can not only survive, but can also outpace their competition. Companies that ignored the Internet as a sales channel, for example, began to stumble in comparison with those that deployed online sales from the start. “If the environment changes, this creates selection pressure,” explains Herrmann- Pillath. Two strategies are possible: Businesses may develop new technologies, or optimize existing ones. Usually, a combination of both strategies leads to success. Electric engines are not the only way to reduce CO2; optimization of combustion engines is another option.

6. Sustainable use of materials Even before a dying leaf has fallen from the branch, a tree begins withdrawing the nutritional elements contained therein. Once it falls to the ground, fungi, bacteria and worms break down the foliage, thus releasing valuable nutrients. Thanks to this perfect recycling process, one of the oldest and biggest ecosystems of all – the forest – is able to maintain itself almost exclusively on its own. “In nature, there are many circular-flow economies of this type. A business can orient itself on that in order to conserve resources,” Otto says. Recycling and reuse have long been a tradition at Audi as well, with most production waste being reintroduced for reutilization.

In sum, evolution means continuous progress – in nature and economic systems alike. A company that creates room for diversity, relies on partners, develops niches through innovation, reacts flexibly to change and conserves resources – such a company can not only survive, but can grow and flourish. Toward this end, the non-profit making company Audi Stiftung für Umwelt GmbH (Audi Environmental Foundation) actively works for the protection of our natural resources for survival.