Saved by the Bee: Biomimicry and the Nature of Investing

Bioneers | September 12, 2017 Eco-Nomics

Saved by the Bee: Biomimicry and the Nature of Investing

When it comes to items and entities that are human-made—mass transportation systems, homes, businesses, clothing—there’s a historic tendency to rely on original ingenuity. As brainstormers and problem-solvers, humans have become quite adept at creating their own solutions to a multitude of problems. But what if the very best solutions could be found, not by brainstorming or creating ideas from scratch, but by observing nature? How might nature do it? This concept of looking to the natural world as a blueprint for everything from design to finance is called biomimicry. It’s rooted in the idea that nature is perhaps the ideal pattern from which to work; it has, after all, adapted and developed into a brilliant blend of species and ecosystems, all nearly perfectly designed to survive and thrive. Call it 3.8 billion years of R & D.

Katherine Collins, an expert in sustainable and regenerative finance, has turned to biomimicry in order to inform investment strategies. “I decided I needed to be more like a honeybee,” she says of her shift toward biomimicry. “To deliberately refocus on an investment approach that was more open, more connected to the world, and more explicitly focused on its guiding value system.”

It comes as no surprise, then, that when Collins started her own research firm, she named it Honeybee Capital. Her road to the world of ESG (environmental, social, governance) investing has been somewhat winding—she has received her master’s degree in Theological Studies from Harvard Divinity School and a B.A. degree with honors in Economics and Japanese Studies from Wellesley College. Before Honeybee, she spent nearly 20 years working for the same financial company. Today, she is Head of Sustainable Investing at Putnam Investments.

In The Nature of Investing (Routledge, 2014), Collins speaks to how the world of finance has stagnated by becoming to impersonal and mechanical. She suggests taking cues from the natural world using biomimicry investing in order to achieve both financial resilience and ethical, life affirming investments. The following excerpt is from the chapter “Saved by the Bee.”

Katherine Collins will be speaking on a panel about “The Clean Money Revolution” at the 2017 Bioneers Conference.

One of my most treasured possessions is the gift my father gave to me when I started my first job: it’s a sign from IBM, circa 1970. My dad worked there for many years, and so our entire family was constantly surrounded by this motto. Every pencil, every notepad, every coffee mug held this simple command, in classic typewriter font:

THINK.

This sign has come with me everywhere, from a little cubicle with a scenic view of the ventilation shaft to a big corner office, and it’s only recently that I realize what a true gift it was: embedding in my mind, from my earliest memory, the idea that when you go to work, your job is to THINK.

For more than twenty years I’ve been a professional investor, and this is what I love most about my profession: it requires you to think, in a proactive, engaged, creative way. Partly that’s due to the fact that the world is always changing. Of course, things have been shifting within the investment business too. In fact, it’s hard to overstate the changes in the structure of our financial markets just over the last twenty years or so.

Take one small example of an investment tool: the heat map. Twenty years ago, heat maps—those red and green patchwork charts that display stock prices on every TV finance channel and every investing website—did not exist. In fact, when I started as an investor, the Quotron was still our main source of stock prices, and it was down the hall, shared by about a dozen people. This was not an elegant piece of technology: the Quotron weighed at least fifteen pounds, it required a dedicated phone line, and it had one of those tiny green screens that quivered with the sheer physical effort of transporting small bits of data. You had to manually enter each ticker symbol, which led to some long lines around the machine, especially on days when a lot was happening in the stock market.

But the Quotron, precisely because it was so user-unfriendly, brought a great advantage. It was our water cooler. If you were a semiconductor analyst, this is where you learned about oil prices. If you were a retail analyst, this is where you learned about housing starts. You knew which industries were doing well just by the look on your colleagues’ faces as they checked their top holdings. That crowd around the Quotron connected our individual pods of data into a web that was more like knowledge, and sometimes even wisdom. Just as importantly, it connected us to one another.

There is no question that the heat map is a better, easier tool to use for data on stock prices. And these days, you don’t need to be a professional investor to access all of that data every second of every day, right from your cell phone. But something has been lost amidst this efficiency: those hallway conversations have disappeared. The perspective, the exchange, the connection provided in that water cooler setting— that’s not something I can carry in my pocket. It’s still out there, but it’s farther away than ever.

This cycle of technological improvement has repeated itself over and over again, with most of our new tools and products and processes bringing big gains in efficiency or speed or scale. But gradually, many of these advances have chipped away at the connection—connection to the world, and to each other—that has always been at the heart of the investment profession.

As the investment business was evolving in this direction over the years, I felt more and more a sense of personal struggle. I couldn’t quite define its source, or even recognize the strain, but at one point during my last few years of money management, I had a long day of client meetings, about a dozen in a row. At the end of the day I realized that every single client had asked me questions about portfolio statistics like tracking error, but only one client had asked anything about an actual investment I’d made—what the company did that was of use to the world, what made it worthy as a place to deploy our shareholders’ funds.

Soon after this, in the face of a tiny market correction in 2006 (nothing like what we were to see a couple of years later), my funds underperformed by ten times more than any of our fancy risk-management models said was possible. Over the course of the next year, my funds recovered and outperformed again, but even after this small crisis passed, I felt a deep sense of disease. I feared that my profession was evolving in a direction that was foreign to me. I feared that the tools we’d invented to help us invest wisely were beginning to pull us off course. Importantly, this was not a question of wanting a new job, or even a new career. Investing is my vocation—and the idea of splitting from one’s vocation, well, it’s just heartbreaking.

Fortunately, in the midst of all this struggle, I found the honeybee.

More precisely, I found Dr. Tom Seeley, the noted honeybee researcher from Cornell University. Dr. Seeley’s recent work has been focused on collective decision making within beehives. It turns out that bees are not just pretty good at decision making, or above average. They are fantastic! For example, bees choose the best available hive location almost every time when they are getting ready to swarm to a new home.

Dr. Seeley’s work is amazing from a scientific standpoint, but what really struck me was the conclusion of his talk, when he described the key characteristics that enabled the bees’ optimal decision making.

• First, bees go out into the world to gather data. When they have an important decision to make, bees do not hole up in a little honeybee conference room and bust out PowerPoint presentations. They leave the hive to see what’s out there in their surrounding environment.

• Second, they come back together and engage in active, objective sharing of information. There are no bee spin doctors, no bee talking heads, no bee pundits. They come back to the hive and share what they’ve learned, openly, directly, and objectively.

• Third, they reiterate this process until the information is complete and compelling.

• Finally, and most importantly, bees have a clear, shared common value system. They all know what makes for the best hive location, and those are the criteria upon which their decisions are based. There are no hidden agendas, no political motives—the bees just want the best answer.

As Dr. Seeley talked, I felt more and more excited, and also, curiously, more and more at ease, a sense of ease I had not felt in a long time. I realized that the honeybees’ characteristics are the exact same ones that lead to the best investment decisions.

The best investors I know go out into the world, observing, interacting, gathering information. They do not expect investment ideas to pop out of the screens on their desks; the best ideas come from the real world. And once they have an initial thought, great investors want to debate it, especially with others who might have different information. They are not concerned about pitching stocks or winning a sound-bite contest; they want to be challenged by other informed people who have different points of view. And finally, great investors have a clear, strong value system. It’s so clear and so strong that they often don’t even stop to think about it, but when they see an opportunity that is a match for their approach, for their own definition of good investing, it is clear as day.

I realized as Dr. Seeley spoke that the core of my profession was completely intact. In fact, it was beautifully aligned with the basic, brilliant principles that govern the natural world. It turned out that this struggle I felt was not against my vocation, the profession of investing—my struggle was against the business of investing, all of the tools and mechanics and distraction that we’ve created. These tools are each helpful in their own small ways, but their cumulative effect had been to gradually pull me off center, away from the essential, connected nature of investing.

So, I decided I needed to be more like a honeybee. To deliberately refocus on an investment approach that was more open, more connected to the world, and more explicitly focused on its guiding value system.

This re‑rooting involved some change. I left the hive, the firm that I had loved, the professional home where I had thrived for almost twenty years. This was the place where I had taken on my first glamorous assignment fresh out of college, as a cement industry analyst. This was the place where I had managed my first sector fund, at the shocking age of twenty-two (never fear, I was very well supervised). This was the place where one company management team brought cake to our update meeting, because they knew I’d be working late on my birthday. This was the place where I’d managed billions of dollars, where I’d met countless CEOs and analyzed hundreds of businesses. This was the place where I’d taken on the toughest management role of all, managing an intense and brilliant team of people (much more challenging than managing money). In that hive, I had had more opportunity than I’d ever dreamed of, had worked side by side with some of the best investors of all time, had learned and been tested in every possible way, and, best of all, had forged many dear, lifelong friendships.

Leaving my home colony, needless to say, was both exciting and unsettling. I reengaged in the world around me, travelling as a volunteer and a pilgrim. I earned a degree at Harvard Divinity School, to strengthen my own core of values that underpin all decision making. And I started Honeybee Capital, with the simple premise that pollination of ideas, connection to the real world, and a strong underlying value system lead to optimal investment decisions.

Dr. Seeley’s honeybees have now led me on a longer journey, a broader exploration of how all sorts of natural systems can provide us with road maps for our own human-created systems. Thanks to the generosity and vision of Janine Benyus and Hazel Henderson, who led a joint gathering of biomimicry leaders and investment innovators in 2011, ultimately my research has led to a deeper study of biomimicry, a framework for understanding the key characteristics of all natural systems and organisms. Applying the principles of biomimicry (life’s principles) to investing gives us an approach that realigns and reintegrates our investment activity with the world around us.

The biomimicry-based framework offers several key advantages:

• It is the ultimate in sustainability. Nature has sustained for 3.8 billion years! In fact, it goes beyond sustainable: nature is adaptive and regenerative.

• It is nonjudgmental. Nature can be a wonderful instructor, but it is not preachy. Nature just is. Nature does not tell you what to do; nature demonstrates how the world actually functions.

• It is an inherently integrated approach. No single component of a natural system exists in isolation. Employing biomimicry automatically employs a networked, systems-based, integrated methodology.

• It is inspiring and comforting. Relying on deep, functional knowledge, embedded in ancient, real, observable natural systems, feels a lot better than taking up the latest clever (but limited) business school buzzwords. And the examples provided by nature are just stunning in their elegance and effectiveness.

• It is flexible and durable. Life’s principles focus on adaptability, local responsiveness, and resource efficiency; they incorporate and anticipate all sorts of environments and changes. These are not ideas that become suddenly invalid when things shift. Just the opposite, they are even more illuminating in times of flux.

• It is un‑fluffy. Nature is not all rainbows and kittens, and natural systems certainly do not sit in a romantic state of perpetual balance and bliss. It is the disruptions in nature, and the responses to them, that can teach us the most.

As I have employed these biomimicry principles more and more in my own investing, I have found greater clarity in my decision making, greater total returns (both financial and nonfinancial), and yes, greater joy. Investing according to life’s principles has led me away from the overly engineered, disconnected, mechanical parts of finance. I still use many of those helpful tools, but they are now in their proper context: used as tools only, not as drivers of my decision making. And I’ve been able to refocus on the connected, integrated, mutually beneficial activity that represents investing in its truest and best form.

This is where real value is created. This is where our future lies. Biomimicry investing requires our most intellectually and emotionally robust resources. It requires us not to react blindly to numbers on a screen, but to engage proactively with the world around us. It requires us to utilize our full, independent, creative, multifaceted minds. It requires us, in the broadest and most inspiring way, to THINK.

This excerpt has been reprinted with permission from The Nature of Investing by Katherine Collins, published by Routledge, 2014.

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