Healthy Competition (Part 1)

How does competition work?

Photo: Doug Tengdin

Sometimes we can learn about economics observing how species operate in the wild. Nature is supposed to be “red in tooth and claw” – plants and animals in a ruthless struggle for survival. But that’s not always what you see. The next time you walk through a forest, look up. There’s something interesting overhead. Mature trees spread their branches just far enough to so they don’t quite touch the neighboring tree’s crown. It’s called “crown shyness,” and it creates small rivulets of light in the forest canopy.

Is this a waste? Why don’t competing trees grow up into the gaps and take advantage of the extra light there? Different hypotheses have been put forward – from wind action to insect activity to abrasion. The current theory is that the trees sense that their neighbors are using most of the red light next to them, so they don’t grow in that direction. It’s worth noting that this is an emergent property. No one planned for the trees to grow just so wide and no wider. And it seems to happen whether the trees are part of a monoculture stand or mixed group.

Dominant forest tree groups. Source:

In the 17th century the political theorist Thomas Hobbes posited a state of nature that was a war of all against all, in which people would lead lives that were solitary, poor, nasty, brutish, and short. To escape this natural state, he thought, we organize ourselves into societies with rules and rulers.

But nature is far more cooperative than Hobbes imagined. There are built in rules that govern how every ecosystem works. You might call it professional courtesy. And it even operates among trees.

Douglas R. Tengdin, CFA

By |2017-08-14T07:22:41-04:00August 14th, 2017|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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