How to Survive in Volatile Markets–Lessons from a Vampire Bat


As night descends, a tree hollow in Uruguay awakens with the budding energy of its inhabitants, hundreds of Desmodus rotundus have begun to stir. Soon the night sky will be filled with flying sheets of these vampire bats as they scour the countryside to find their nutrient-rich food. Unfortunately, each search for sustenance is filled with unpredictable pitfalls, and many bats are destined to come up empty.

Failure to find a meal leaves the bats with more than just hunger pangs. The lack of a regular return on hunting investment is particularly problematic because of the bats’ nonexistent body fat and exceptionally high metabolism. Even a single night without food can cost them their lives.  Instead of succumbing to the whims of chance, however, vampire bats have devised clever insurance policies to improve their survival in unpredictable environments. It is here that vampire bats have much to teach us, and their approach offers salient advice to individual investors in volatile markets.

So what can a nocturnal, winged mammal intent on draining blood from unsuspecting ungulates teach investors?  Surprisingly, there are fundamental similarities between vampire bats and individuals working to secure their financial future.  To begin, both vampire bats and investors are after net gains—for the bats that requires finding calories from blood, for investors survival is dependent on securing a positive return. Because both groups are dependent on capturing a sought-after resource, and because failure to do so is disastrous, the similarities begin to emerge.

Also comparable between the blood-seeking animals and investors is the nature of their environments. Both bats and investors exist in equally unpredictable circumstances where they are not exclusively in control of their own destiny. On any given night, innumerable factors outside of the bats’ control can dictate their success at finding food. Everything from the weather, choosing a particular search area, locating an appropriate host, having sufficient time to feed before being detected, and escaping before turning into someone else’s meal are all variables at play. Investors have analogous uncertainties, but their tribulations come from unexpected press releases, CEO statements, earnings reports, foreign currency devaluations, and even destabilizing statements from the day’s polarizing political candidate can interfere with the goal of seizing a profit. No matter how fit and intelligent the bat, nor well-researched and strategic the investor, there remain factors outside of their control that impinge on their respective success.

Given the necessity of blood and the unpredictable conditions in which it is found, just how have vampire bats overcome this adversity? Animal behavior specialists refer to it as “reciprocal food-sharing.” Don’t be fooled by the sophisticated name, it’s simply a regurgitated gift from a bat who enjoyed success to one whose search came up empty (somehow the image is not as uplifting as a momma bird feeding her beloved hatchling, but the concept is the same). At first glance, this seeming self-sacrifice seems counterintuitive–why relinquish part of your valuable meal to someone who failed—until you consider that the fickle nature of finding food means that anyone can fail at any time. Faced with this unsettling prospect, individuals band together to provide mutual support when necessary.   Follow the vomit-united pair of bats over time and you will discover that the initial donor is bound to be the recipient on a different day. Therein lies the insurance…and the lesson for investors.

So what does blood-sharing among bats have to do with investing, you ask? Well, the most direct advice is for you to find a willing network of friends to throw you a few Benjamins when your high-risk flyers fail to pan out (but be sure to return the favor because even bats are quick to ostracize individuals who fail to reciprocate). If you don’t have any particularly altruistic associates willing to take the leap into socialism however, don’t worry, you can more realistically provide your own insurance against random adversity by fashioning a roost of diverse investments.

Begin by imagining each of your investments as an individual vampire bat. Each day you send out your bats in search of profits. Ideally they are all successful, but the reality is that on any given day some will inevitably be prosperous where others will come up empty. Fortunately, they all return their collected spoils to the same location—your portfolio, and once reunited the day’s winners can provide life support to those who happened to fall on hard times. Through this group effort your financial colony, like the bats, can be sustained.

The common and fateful mistake occurs if you decide to evict the day’s underperformers from the roost. At first blush it seems to make sense—eliminate the stragglers, clone the big winners, and develop a super colony that consistently returns gorged with profits.  But remember that the environment in which you are operating is governed by erratic variables, and today’s big winners may just as easily return tomorrow emaciated by an unsuccessful hunt.

In fickle environments, the optimal strategy devised by nature for the long-term survival of a vampire bat colony is to send out a host of diverse hunters each night and then share the spoils among the entire colony. Cull diversity from your roost in an attempt to reap greater rewards and you will likely go extinct when a sector, region, or capitalization-category experiences an unexpected downturn (after all, Blockbuster stock looked pretty good in 2004).

Thinking of your investment portfolio as a vampire bat colony and employing the same survival strategy of reciprocal profit-sharing among your individual investments will help you maintain a balanced-portfolio and avoid financial starvation when the next big market swing occurs. As for donating blood, well that’s pretty important, too.

Want to read more stories of science-inspired products and strategies? Follow @SaysNature on Twitter an account established and maintained by Kurt MacDonald. Also check back here for original content. Thank you.

How a European Sex-Changing Tree Taught Me The Value of Corporate Agility

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A recent headline caught my attention. “UK’s oldest tree is undergoing sex-change,” proclaimed The Guardian banner, and the title proved decidedly accurate. The subject was a 4000+ year-old yew tree growing quietly in a churchyard in central Scotland. As the article explained, 2015 was the first year that it was observed producing fleshy-covered seeds—a decidedly female commodity. To this point in the tree’s venerable history, it had produced only pollen—the equivalent of mammalian sperm (a reality that turns ‘pollen allergies’ into something all the more personal).

Yew trees are typically dioecious, meaning that a single tree is either male or female, making this a story of true transformation. In technical terms it is called ‘sequential hermaphroditism,’ and after a cursory internet search it turns out that a surprisingly long list of species take part in male-to-female and female-to-male conversions (called protandry and protogyny, respectively).

The clownfish of Finding Nemo fame is one illustrative example. Journey to a reef, find an anemone, and you are likely to encounter a female clownfish fish, her male partner, and a collection of smaller non-breeding males. Pluck out the female and watch as the large male begins the physical and hormonal transition to womanhood. This anatomical and physiological journey can take a handful of weeks so don’t plan to observe it while holding your breath, but it will happen none-the-less. Faced with this latest landscape of opportunity, the next largest male will mature and become the new female’s breeding partner. Keep removing females and the cascading series of sex changes and maturations will continue until the ocean is void of clownfish.

Whether in tree or marine organism, this is a rather curious anatomical maneuver. But as is always the case, it exists for a compelling reason, and exploring its utility yields advice for us all.

Like everything in biology, this extreme makeover boils down to improved reproductive success. If an attribute increases its owner’s opportunity to get lucky and pass on its genes, it will spread through the population faster than a cute cat meme (well, maybe not quite that fast). On the other hand, if a trait increases an organism’s odds of dying alone, increasingly few, and haplessly unlucky organisms will possess it in the future. In that light, having gender-bending flexibility has increased these species’ odds of survival and reproduction. But why these species?

Turns out a yew tree and a clownfish have more in common than meets the eye. Both are relatively imprisoned in a small geographic area. The tree, of course, can’t uproot and relocate, and clownfish are functionally constrained to the safety of their anemone (venture too far from its protector and it shifts from a question of whether it will be eaten to who will eat it). Faced with such limited mobility, finding a compatible mate can be decidedly difficult. Even if a yew tree is initially lucky in the matchmaking lottery and grows within pollen-tossing distance of an opposite-sex partner, death of either tree leaves the other with untapped biological potential (if you know what I mean). The same goes for clownfish—it would be a lonely anemone if the only female passed away and there wasn’t a replacement plan.

Faced with these biological costs, nature stumbled upon a creative solution, sequential hermaphroditism. In that regard, the ability to change sex is a response to alterable environmental circumstances; a pivot to take full advantage of changing market opportunities. It’s also a story with an important lesson.

Specifically, the environments in which we live and work are also fluid. Our companies conduct business in ever-changing atmospheres. Everything from client preferences, competitor tactics, and corporate culture, to scientific understanding, technological innovation, and economic conditions confront businesses with shifting circumstances. Our businesses, like yew trees and clownfish, can also find themselves occupying rigid niches. Call it corporate typecasting, it occurs when a business’ legacy and historical strategies pigeonholes it into specific market segments. Established practices and products all work great until the market shifts, and then inflexible operators go the way of the dodo bird (just ask your local video store, travel agency, or taxicab drivers’ union).

Given the environmental similarities between modern businesses and the sex-shifting species above, it’s clear that successful companies need a transformation plan to address changes in their operating landscapes. They need an ability to radically reposition themselves, a willingness to pivot, and a readiness to restructure at a moment’s notice. If one thing remains constant, it’s that rigid attachment to a single approach isn’t viable in fluid circumstances.  Transformations are essential.  Just ask a clownfish.

On the flip side, drastic change can be difficult, but if a 4000-year-old tree can do it, so can we.


Copyright 2015 Kurt MacDonald