How Evolution Applies to Economics

I have always been curious and fascinated by Darwin and the theory of evolution. While not universally accepted as an explanation of where man came from, it has always been the most plausible explanation for me. I feel that as nations, we have evolved distinct patterns of behavior and taste that have given certain nations an advantage in certain business sectors.

The theory of comparative advantage in Economics (espoused by Adam Smith) holds that if each country simply focuses on what it is best at producing, the whole world will be a better place. This is a much loved theory by those of us who believe storing our belongings in a wall mount jewelry armoire to be a good thing (which I think it is!). However, if this theory was to have been put to practice by the whole world, the Japanese would still only be selling rice and silk to the rest of the world as those were the only industries they had a comparative advantage in after the Second World War.

However, with the help of central government direction and massive investment, the Japanese (and other far eastern countries following their example), have developed a population with a real passion for electronic gadgets. It is curious how in Britain we look to the East for our technology and the West for our social, political and cultural influences. The fact that the local population are always on the lookout for new gadgets and technology allows Japanese companies to innovate and experiment and maintain their lead as they know the local population will purchase the results of this innovation.

The Italians, who have long been considered ultra-fashionable, have for the same reason developed the world’s biggest fashion houses. Having a local discernible consumer base helps these companies try out new fashions knowing that if they succeed in Italy, they are likely to succeed in the rest of the world. And if any of you doubt this proposition, I suggest you take a trip to Milan to see this for real.

Because of the empire, the British have had considerable experience in exporting capital which is one of the reasons why London has developed such a sophisticated financial center and leads the world in services around capital export such as shipping and insurance.

Finally, the fact that there is no speed limit in Germany, explains, why they have been able to develop such powerful automobile companies. The consumer in Germany will value speed in a car as they will be able to put this technology to good use. In theory, why would anyone in the UK need a car that can do more than 70 mph? (The maximum speed limit)

If you remember that great film, Cool Runnings, you will know that the central joke was that a team from the Caribbean would take part in a winter sport! In the same sense, when you are looking at starting or growing a business, you would do well to explore countries or cultures where your product may have a latent advantage.

I invested in a forskolin startup which allows you to download books on to your mobile phone. It seemed like a risky business proposition, but what persuaded me was seeing the market that existed for this type of service in Japan.

My advice from all of this is to get you to look at markets where your product is most likely to already have evolved or is cutting edge. If you are in renewable energy – find out what is happening in California. If you are developing a fast food proposition, make a trip to New York. If you are starting a new fashion label, see what people are doing in Milan.

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