Chapter 20: Economy as Ecosystem

1. Every organism is defined by the information in its genes, but a living thing is also defined by its relationships to its prey, competitors, and predators. An organization is defined by its technology and by its associations with its suppliers, competitors, and customers.

2. In the ecosystem, resources flow up the food chain. In the economy, resources flow up the value-added chain from mines and farms to fabricators, assemblers, and service firms.

3. Ecologists define an organism's niche by cataloging the resources it consumes from the level below it in the food web. When business people speak of a niche, they refer to market position, links to customers above in the value-added web.

4. In nature, a population of species is constrained primarily by the availability of resources. Ecosystems are "resource-limited" networks. An industry's size is limited by customer demand, not the availability of resources.

5. Organisms cannot live forever. They must produce offspring that survive long enough to yield their own offspring. Organizations face the reverse. They can maintain their technology in perpetuity.

6. Creatures camouflage themselves almost to invisibility. Oppositely, companies devote enormous resources to attracting customers.

7. The basic design of ecosystems and economies are much the same. To overcome the survival threat posed by predators, rabbits produce as many offspring as possible. To capture the survival opportunity offered by customers, aircraft builders produce as many planes as possible.

8. The products in the nation's supermarkets are the current winners in a never-ending struggle for shelf space and market share. More than 80% of all new products don't even last a year. As in nature, the overwhelming majority of mutants do not find a niche and die a quick death.

9. Just as competitively superior species force their predecessors out of ecological niches, new economic species conquer their forerunners, pushing them into retreat if not outright extinction.

10. The firms surviving these competitive crunches fall into one of two categories: cost leaders and niche players. Cost leaders compete by being more efficient than their adversaries. Niche players survive by avoiding head-to-head price competition.