The Roots of Biomimicry Investing – The Nature of Investing: Resilient Investment Strategies through Biomimicry

The Roots of Biomimicry Investing

Two things fill the mind with ever new and increasing wonder and awe: the starry heavens above and the moral law within.
—IMMANUEL KANT, CRITIQUE OF PRACTICAL REASON1

We are all investors. We invest our time, our energy, our money. We invest every single day, as citizens, as consumers, as businesspeople. At its core, done well, investing is well aligned with nature. It involves connection, exchange, and mutual benefit: we humans invented this activity, to serve our own needs, our communities, and our planet.

Lately, however, this primary, beneficial function of investing has become overshadowed by ever-more-extended iterations of finance. In my definition, finance consists of all of the secondary activity that’s related to those initial exchanges: in its earlier stages finance produced vehicles like the stock market, where activity was still closely connected to the real world. You can buy stock in a railroad company, and assuming the price you pay is a fair one, if the railroad business does well, your investment will likely do well, too.

But as our tools have become more and more specialized, they’ve taken on a life of their own. We now have funds of funds, securitizations on top of securitizations, and entire firms whose businesses are based on harvesting the advantage of microseconds of trading speed. None of these developments is inherently bad, but each one pulls us further and further away from that primary, useful function of investing: flow of resources and mutually beneficial exchange. When we move deeper into the specialized mechanics of finance, we often end up in the realm of speculation, and lose sight of the primary role of investing.

Additionally, as risks and uncertainties have mounted in recent years, we’ve sought more control over our investing. The trouble is, driven by fear, we have focused on the wrong goals. Instead of aiming for resilient, optimized portfolios, we have sought risk-free, return-maximizing strategies that promise to sail through uncertain conditions unscathed. Or we’ve sought more safety, protection at any cost. These approaches might sound great, but they are figments. Fiction. Our faith in mechanics has become stronger than our faith in human judgment. Our faith in individual tools has become stronger than our faith in a connected whole. Our efforts to confine risk have just rearranged it into different pieces and different places, and in some cases magnified the dangers. We desperately seek control. But what we need is flexibility, adaptability, and resilience.

So what is the result of our intense focus on organization, mechanization, and risk management? In many ways it is the worst of all worlds, where risk and uncertainty are increasingly hidden, but undeniably present. Where flexibility and adaptation are constrained by ever smaller investment-style boxes and ever greater layers of processing (and cost) between the investor and the investment. Where our structures and systems are increasingly complicated, but without the benefits of variation and diversity. Where our investment products are more and more numerous, but controlled by fewer and fewer entities.

It is now widely recognized that our financial system is not as robust nor as resilient as we’d hoped and planned, and proposed reforms tend to focus on ever more complex regulation, with increasingly esoteric bureaucratic levers in the system. The premise is that if we make the rules dense and detailed enough, we will somehow be protected.

What my own journey as a professional investor has shown is that there is a time to “go deep” like this, to dive into more specialized pools of knowledge and tactics. However, there is also a time to “cut across,” to look for other models that are not specialized, but rather more connected and universal. It may be appropriate to regulate the micro-level details of the financial business, but I also believe that the time has come for us to refocus on the investing profession. We need to reengage with investing in its essential, connected form—to reintegrate our profession with the real world, instead of the world on the screen.

How can we re-center our focus on investing in this original, beneficial role? Traditional economic theory, upon which traditional investment theory relies, can be useful, but it is incomplete. These theories take a mechanical approach, and to do so they must begin with a series of disconnects. One of the first phrases that any Econ101 student learns is “ceteris paribus,” “all else constant.” But “all else” is never constant. Likewise, a long list of “externalities” is ignored in all sorts of economic studies and business decisions, even when those externalities are vitally important, and not external at all. This does not make traditional economic theory useless, but, like any set of tools, we need to be conscious of its shortcomings.

Re-rooting investing is no small task. It requires a philosophical framework that is flexible enough to apply to many layers of a system, yet steady enough to apply to all sorts of shifting circumstances. It requires ideas that are aspirational, yet still easily linked to practice in the real world. It requires tools that are connected to deep truths and observable facts.

Biomimicry fits this bill. It is both philosophy and practice. A provocative, nuanced approach to transforming finance is to use biology instead of mechanical engineering as our starting point for modeling. Specifically, biomimicry provides us with a model that embodies connection and integration, a model of our natural systems that have proven to be effective, adaptive, and sustainable for 3.8 billion years. This is not a nifty new quantitative approach or a fancy consultant’s pitch; the principles of biomimicry, life’s principles, describe how the natural world actually functions. As educator Dayna Baumeister notes, “biomimicry is an emerging discipline of an ancient practice.”2

This is not the newest theory. This is our most ancient wisdom. In my own search for a more complete, reconnected approach to investing, I was fortunate to find my mentors in biomimicry, Janine Benyus and Dayna Baumeister. The visionary futurist Hazel Henderson drew us together with other biomimicry and investing enthusiasts at a small gathering in 2011, and by noon on the first day I realized that, though we were deep in discussions about all that was flawed in our current world, I was breathing more deeply. I was wide awake. I was smiling. Unlike some sustainability frameworks, biomimicry does not root itself in anger and blame. It begins with acknowledging the reality of connected systems, and from that springs a natural and genuine sense of responsibility, stewardship, participation, and care. While a blame-centered approach begins with liability, shame, and negativity, a responsibility-centered approach begins with agency and positivity.3

As we sank into deeper and deeper conversation in Hazel’s Florida backyard, I felt more than optimistic, more than hopeful. I felt a great sense of homecoming. I felt powerful. For the first time since I’d begun working in sustainable investing, I did not feel the need to convince anyone that I was right (or righteous). Janine and Dayna’s work reminds us that this is how the entire natural world functions: it is our choice whether or not to align with nature’s principles in the short term, but ultimately, they do prevail. There’s a reason we say, “don’t mess with Mother Nature.”

This book’s discussions of biomimicry and of life’s principles draw heavily on the work of Janine and Dayna, on materials they’ve published, and on teaching and discussions that form the Biomimicry Specialist educational program.4 It also builds upon the inspiring vision set forth in the Principles of Ethical Biomimicry Finance, authored primarily by Hazel, Janine, and Rosalinda Sanquiche after that initial gathering in Florida.5 I offer these highlights, plus my own interpretations of their applications to investing, with tremendous gratitude to Janine, Dayna, Chris Allen, Hazel, Rosalinda, and all of our many colleagues throughout the years. Not only are these people brilliant and pioneering intellectuals, they are also generous and compassionate teachers and doers.