As the world celebrates the amazing, game-changing insight of Charles Darwin on his birthday today, his wisdom shapes businesses too
In my previous workplace, the inevitable started happening one day – the 'invisible hand' of Adam Smith set to work.
There were certain people in the newspaper whose work was to compose on computers from hard copies. In those days, we had few computers and most of the stories (for readers' understanding, anything journalists write is generally called a story), were written in typewriters. So it was a wasteful, inefficient two-step process to transform those copies into digital versions.
Then computers were becoming cheaper and all journalists slowly started using PCs. The job of the 'compositors' as they were known was becoming redundant.
So the option was clear. Adam Smith's 'invisible hand' was set to intervene and the market forces would take its course. The redundant staff would be axed. That's how the free market economy works.
But then, a greater 'economist' than Adam Smith intervened. It was Charles Darwin. The man who changed the way we look at the world with his theory of evolution and natural selection actually triumphed at my last workplace.
The 'compositors' found it a 'survival of the fittest' situation for them, as Charles had set down in his 1859 book "On the origin of species' and explained how species evolve through natural selection.
They started learning feats that they earlier thought were not suitable for them. Some of them did amazingly good, learning moderately complicated software tasks. Others changed their career pathways altogether and found their usefulness in departments like circulation and bill collection. They also got better salaries. But there were too many of them who picked new skills and the organization did not need them all. And some on the farther side of the spectrum fell through. So they all together had to call it a day and pack their bags.
But then it was not as cruel a world as Adam Smith's. Again Darwin came into action.
What is good for individual benefit may not be good for the group - that is what Darwin had shown. In the natural world, animals fight for their reproductive rights and the fittest one gets to get all the females. In this competition some males become better than others and win. Thus the better traits are passed on to the offspring.
For example, elks fight each other for their possession of the cows. Those with the biggest antlers win the race, and then pass on the trait to its cubs. So through 'survival of the fittest' it wins and then through natural selection the next generation picks up bigger antlers.
However, when time comes for the elks to run away from hunters, the long antlers pose a mortal risk. They cannot run fast, their antlers get entangled with the bush and the elks become easy prey to wolves.
In other words, what was good for individual benefit was not good for the group - here the males of the species.
So for our 'compositors', what was good for individuals mostly did not do good for the group. This is when the application of certain laws came into being. Those who became redundant were not lost to the cruel world of Adam Smith. But they were given a rule-based handshake package, they got their provident fund, gratuities and so on, all set down by the labour law.
Today, as we observe the 211th birthday of Charles Darwin, many around the world regard him a fine economist, outside of the naturalist that he was. Robert Frank, a Cornell University professor of economics and a New York Times columnist, thinks Darwin will be recognized as the greatest intellectual contributor to modern economic theory ahead of Smith.
Smith's theory, the bedrock of the view of the libertarians, that the market will ultimately take care of things quite nicely is now increasingly being challenged by the Darwinian theory - that what is best for individuals may not be good of the group.
When markets fail, in Adam Smith's view, the blame falls on a lack of effective competition where retailers drive up prices. But the Darwinian framework contrarily says market failure can occur despite everyone getting the same opportunities, as happened in case of the elks.
In other words, Darwin had shown a systemic flaw in the dynamics of competition – that failure comes not from too little competition but from the very nature and necessity of competition itself.
And competition for individual interest, as in the case of the elks vying for a mate, may serve the larger group by passing on the finest genes, but then this may lead to a failure as well, as in case of elks with larger antlers.
So it is not the absolute position that matters in life, but the relative situation, as Robert Frank has pointed out.
As Darwin has said, to survive in an environment an animal's nervous system must take information about the options before him to reach various goals. The animal must rank which goals are more important and which can be let go. Which goals are important in time of emergency, which are not. This is what any business model is basically based upon. It is not the absolute goal that businesses have to aim at but the relative goals that are more important for survival.
Darwin has also shed light on the scale of business.
The elks could grow bigger and bigger antlers, if that is what matters in gaining a mate. But that turns counterproductive in the context of survival. They could grow smaller antlers, but that would leave them all equal and no one gaining over the other.
Similarly, in business, companies cannot aim at growing uncontrollably beyond its capacity. If they do so, they would turn out to be Daewoo.
Companies become smarter and smarter, until they need to grow further and then collapse to the detriment of the whole sector.
A fine equilibrium is at work in economics. A business can grow only comparative to its organizational size, or the context within which it operates. It cannot grow absolutely or else it will collapse from within.
Such tendency of overgrowth then brings in the necessity for regulatory frameworks. In racing, sports cars can keep on having bigger and bigger engines to win over the rest. But that would turn counterproductive and not cost effective and hence regulatory rules are set up to cap engine capacity.
So Darwin, that 22-year-old young man who travelled through the New World and collected animals and looked with amazed eyes at nature to come back home and make that crucial connection to the origin of species, not only changed the world view on beings, but had a long impact on economics and business as well.
And thanks that he prevailed in my last workplace, so that in the end the 'compositors' were not handed a harsh severance and let go into oblivion, as they would have under Adam Smith's theory.