What Nature Can Teach Us About Allocating Capital
TL;DR
Nature’s 3.8 billion years of evolution have produced extraordinarily effective systems for resource allocation.
The economy, like an ecosystem, functions as an interconnected network where energy flows, plurality creates resilience, and adaptation determines survival. By understanding ecological principles such as energy hierarchies, symbiotic relationships, cyclical regeneration, and evolutionary innovation, we can reimagine economic systems that more effectively allocate capital while remaining resilient and sustainable.
We explore the parallels between ecological and economic systems and offer actionable insights for how insights from natural systems can guide our approach to capital allocation in human economies.
Introduction: The Living Economy
An ancient redwood forest and the New York Stock Exchange seem worlds apart. One operates through the silent language of biochemistry, the other through the frenetic exchange of digital information. Yet beneath these superficial differences lies a profound similarity: both are complex adaptive systems that allocate resources to maintain their structure, grow, and evolve over time.
Economic theory has traditionally viewed markets through mechanical metaphors—equilibrium, invisible hands, and rational actors. But what if we instead viewed economies through the lens of living systems? What if, rather than resembling a machine, our economy more closely resembles a forest, a coral reef, or a microbiome?
This perspective isn’t merely poetic. It represents a fundamental shift in understanding how capital—whether financial, natural, social, or intellectual capital—flows through systems to create value. Nature has spent billions of years evolving solutions to allocation problems under conditions of scarcity, competition, and uncertainty. The resulting wisdom offers profound lessons for how we might design economic systems that are not only efficient but resilient, regenerative, and just.
As we face mounting ecological & economic crises which creates instability, a biomimetic approach to economics offers a timely framework. By understanding the principles that govern natural resource flows, we might discover more effective pathways for human prosperity—ones that recognize our economy as what it truly is: a subsystem of the broader ecology that supports all life on Earth.
The Currency of Life: Energy
In both economies and ecosystems, everything begins with a fundamental currency. For economies, this currency is money—a symbolic token that stores value and facilitates exchange. For ecosystems, the primary currency is energy, typically originating from sunlight.
The flow of energy through an ecosystem follows remarkably similar patterns to capital flows in an economy. Just as financial capital tends to concentrate in certain economic nodes (banks, investment funds, corporations), energy in ecosystems concentrates in biomass at various trophic levels (steps in the food chain)—from producers (plants) to primary consumers (herbivores) to secondary consumers (carnivores).
What’s particularly instructive is how energy transfer follows consistent mathematics across ecosystems. Each trophic level captures approximately 10% of the energy from the level below it—a principle known as ecological efficiency. This percentage can actually vary between 5-20% depending on the specific ecosystem, but 10% is used as the general rule This creates an energy pyramid where resources become increasingly scarce at higher levels, naturally limiting the population of top predators and preventing monopolistic dominance.
This pyramid structure reveals a profound truth: the further an organism exists from the primary energy source, the more precarious its existence becomes. Top predators must constantly hunt and consume enormous amounts of biomass to sustain themselves, as their position removes them from direct access to abundant energy flows. When environmental conditions shift, these higher-level consumers are often the first to suffer population crashes, lacking the energetic buffer that primary producers and consumers enjoy through their proximity to original energy sources. Similarly, in economic systems, businesses and institutions farthest removed from actual value creation (multiple layers of financial derivatives, complex holding companies, extended supply chains) operate on increasingly thin margins of real value and become vulnerable to systemic shocks.
Economic systems might benefit from similar structural constraints. When capital becomes too concentrated—when the economic “predators” grow too large relative to the productive base—the entire system becomes unstable. Natural systems provide a model for how constraints on capital accumulation might create more balanced economic flows.
Energy in nature isn’t merely transferred—it’s transformed, stored, and recycled in multiple forms. Forests capture solar energy in leaves but also store it as wood, seeds, and soil carbon. Similarly, businesses transform capital into various forms: physical infrastructure, intellectual property, and customer relationships. Markets develop different financial instruments (bonds, equities, derivatives) representing distinct forms of stored value with varying risk profiles.
Nature’s circular energy flow—where plants capture sunlight, animals consume plants, and decomposers return nutrients to soil—contrasts with linear economic models. Just as species evolve greater energy efficiency through natural selection (better insulation, more efficient metabolism), economies naturally trend toward energy efficiency per unit of value. This efficiency isn’t just environmentally beneficial but economically advantageous—doing more with less drives productivity growth.
In nature, energy isn’t simply consumed; it’s transformed. When organisms die, decomposers ensure their energy returns to the system. This closed-loop approach stands in stark contrast to our often linear economic models, where resources flow from extraction to consumption to waste. A truly biomimetic economy would design for circular flows, where capital continuously regenerates rather than accumulating in stagnant pools or being permanently lost as externalities.
Money as Abstracted Energy: Beyond Simple Parallels
While energy serves as nature’s primary currency, human economies operate through money—an abstract token that represents potential claims on real resources. This abstraction creates both opportunities and dangers not present in natural systems.
Money’s symbolic nature enables coordination across vast distances and time periods. Unlike energy, which dissipates when not used, money can accumulate indefinitely. Unlike physical resources, money can be created through social agreement rather than energy capture.
These unique properties allow human economies to transcend certain natural limitations but also create distinctive risks. When money becomes disconnected from the real resources it supposedly represents—through financial speculation, currency manipulation, or excessive debt—economic signals become distorted. Ecological parallels suggest that reconnecting money to real value flows—through mechanisms like natural capital accounting, energy-backed currencies, or reformed banking systems—might create more stable economic systems.
The plurality of monetary forms in human economies—from global reserve currencies to local exchange systems to digital tokens—resembles the varied energy-transfer mechanisms in different ecosystems. Just as tropical forests and arctic tundra have evolved different energy exchange patterns suited to their conditions, different economic contexts may benefit from monetary plurality rather than homogenized global systems.
Pools of Capital: Potential Energy in Markets
In nature, certain structures store energy for future use—seeds contain energy to fuel germination, body fat preserves calories for lean times, forests accumulate biomass over decades. These energy reserves provide resilience during disturbances and fuel bursts of growth when conditions allow.
Similarly, pools of capital in economic systems—whether financial savings, infrastructure, or intellectual property—represent potential energy for future deployment. Like their natural counterparts, these reserves serve crucial functions: enabling long-term investment, providing security during downturns, and funding innovation when opportunities arise.
However, not all capital pools function productively. Natural analogues help distinguish between different forms:
- Generative capital resembles a diverse forest ecosystem, continuously cycling resources while maintaining productive capacity
- Extractive capital resembles a mining operation, depleting resources without regeneration
- Stagnant capital resembles a eutrophic pond, where excessive accumulation in one area creates systemic imbalance
Understanding these distinctions helps clarify contentious debates about capital accumulation. The issue isn’t capital concentration per se but whether that concentration serves regenerative or extractive functions. Biomimetic economic design would favor structures that enable capital to flow to its most productive and regenerative uses—just as natural systems efficiently allocate energy to maintain diverse, resilient ecosystems.
Plurality and Interdependence: The Portfolio Theory of Nature
Walk through any healthy ecosystem—whether rainforest, prairie, or coral reef—and you’ll witness extraordinary biodiversity. This plurality isn’t merely decorative; it’s functional. Each species occupies a niche, performing specialized roles that contribute to the system’s overall productivity and resilience.
Similarly, economic plurality creates systemic strength. Just as monoculture agriculture proves vulnerable to disease and climate fluctuations, economies overly dependent on single industries or business models become brittle. Nature teaches us that specialized adaptations and diverse approaches create systems more capable of weathering shocks and adapting to change.
Ecosystems and economies both thrive through network structures that create value beyond what individual components could achieve alone. The “wood-wide web”—underground fungal networks connecting trees in forests—enables resource sharing and communication between plants. Through these mycorrhizal networks, larger trees support seedlings and share warning signals about threats.
These natural networks mirror economic network effects—where products or services become more valuable as more people use them (think social media platforms or payment systems). Both develop similar architectures: “small world” networks with dense local clusters connected by longer bridges, and hub-and-spoke structures where keystone species or platform companies connect disproportionately many participants. Both evolve from simple connections to complex specialized relationships while maintaining enough modularity to prevent total system collapse when parts fail.
Moreover, nature demonstrates that competition and cooperation aren’t opposed but complementary forces. While species compete for resources within niches, they simultaneously develop complex cooperative relationships across niches. Mycelial networks distribute resources among trees in forests. Cleaner fish and reef predators maintain mutually beneficial relationships. These symbiotic arrangements—mutualism, commensalism, and even controlled parasitism—create value that would be impossible through isolated competition.
Economic systems similarly benefit from constructive tension between competition and cooperation. Markets thrive on competitive innovation while depending on cooperative infrastructure—from physical roads to legal frameworks to shared knowledge commons. The most dynamic economic ecosystems, like Silicon Valley or Shenzhen, feature competitive firms embedded within collaborative networks that accelerate learning and innovation.
This ecological perspective offers a middle path between ideological extremes of unfettered capitalism and centralized planning. Like a coral reef, a healthy economy needs both competition to drive adaptation and cooperation to build complexity. The question becomes not whether markets or governments should dominate, but how to design systems where competition and cooperation each serve appropriate functions at different scales and contexts.
Cycles of Change: Creative Destruction and Succession
Nature doesn’t fear change; it embraces it through cycles of disturbance and renewal. Forest fires clear undergrowth and release nutrients. Floods reshape river valleys and deposit fertile silt. These periodic disruptions—what ecologists call disturbance regimes—prevent stagnation and enable succession, the process by which ecosystems transform over time.
Economist Joseph Schumpeter famously described “creative destruction” as essential to economic evolution, a concept strikingly parallel to ecological succession. When old structures become too rigid or inefficient, they must give way to new growth. The death of Kodak enables the birth of Instagram; the fall of Blockbuster creates space for Netflix.
However, nature’s approach to succession offers important refinements to Schumpeter’s concept. In healthy ecosystems, disturbance occurs at appropriate scales and frequencies. Too little change leads to stagnation; too much creates chaos. Moreover, even as species rise and fall, the system maintains essential functions through redundancy and memory—seeds in soil, relationships between surviving species, and adapted physical structures.
Economic policy might similarly aim not to prevent creative destruction but to manage its pace and scale while preserving systemic memory and capability. This means allowing inefficient firms and industries to decline while supporting displaced workers, preserving valuable knowledge, and maintaining critical infrastructure. Rather than bailing out “too big to fail” institutions, we might focus on making the system itself too robust to fail.
The concept of “panarchy”—developed by ecologists C.S. Holling and Lance Gunderson—describes how adaptive systems function across multiple scales, with smaller, faster cycles nested within larger, slower ones. This multi-scale perspective helps explain how economies can simultaneously experience disruption and stability. While startups and technologies may rise and fall rapidly, institutional and cultural foundations evolve more gradually. A biomimetic approach to economic cycles would work with this natural rhythm rather than fighting it.
Feedback Loops and Balance: The Wisdom of Self-Regulation
Perhaps nature’s most sophisticated achievement is self-regulation through feedback loops. When plants capture more carbon through photosynthesis than is released through respiration, climate conditions shift to restore balance. When deer overpopulate, predator numbers increase and plant resources decrease, creating negative feedback that brings the population back to sustainable levels.
These feedback mechanisms operate with remarkable precision, without central control or conscious design. They emerge from the structure of relationships within the system itself—a form of distributed intelligence far more sophisticated than our most advanced economic models.
Modern economies, by contrast, often suppress or ignore crucial feedback signals. When businesses externalize environmental costs, they receive distorted feedback about the true impact of their operations. When financial speculation becomes disconnected from productive value, price signals lose their meaning. When monopolies dominate markets, the feedback loops of competition break down.
Nature suggests we need not choose between “free markets” and “regulation” but should instead design systems where feedback operates effectively at multiple scales. Local feedback—like prices in competitive markets—can drive efficient daily decisions. But we also need intermediate and long-range feedback to govern systemic risks and preserve conditions for the system’s continued operation.
Crucially, natural feedback works because consequences flow to decision-makers. When a predator expends more energy hunting than it gains from its prey, it experiences the consequences directly. Economic systems where decision-makers are insulated from the consequences of their choices—through limited liability, moral hazard, or political capture—inevitably generate distorted outcomes.
Resilience and Renewal: Economic Evolution
Over its 3.8 billion-year history, life on Earth has faced five mass extinctions and countless smaller crises. What has allowed life to persist and thrive through these disruptions is not optimization for stable conditions but adaptability to changing ones—what scientists call adaptive capacity.
This capacity stems from several key features:
- Modularity - Ecosystems comprise semi-autonomous components that can fail without bringing down the entire system
- Redundancy - Multiple species perform similar functions, creating backup systems
- Plurality - Various approaches to solving problems increase the likelihood that some will succeed under new conditions
- Loose coupling - Components interact without being completely dependent on one another
- Innovation - Constant experimentation generates novel solutions
These principles apply equally to economic resilience. Economies dominated by a few “too big to fail” institutions lack modularity. Those prioritizing efficiency over redundancy become vulnerable to supply chain disruptions. Those suppressing plurality through monoculture (whether agricultural or cultural) lose adaptive capacity.
The COVID-19 pandemic revealed these principles in action. Tightly coupled global supply chains proved vulnerable, while redundant healthcare capacity became essential. Economic plurality allowed some economic activity to continue through alternative channels. Communities with strong social ties and mutual aid networks demonstrated greater resilience than atomized ones.
Evolution teaches us that the goal isn’t to build perfect systems that will last forever but adaptive ones that can transform when conditions demand it. This perspective shifts economic priorities from maximizing short-term efficiency to building long-term adaptive capacity—investing in education, research, infrastructure, and social cohesion that enable future generations to meet challenges we cannot predict.
Public Goods and Network Effects: Nature’s Commons
Despite being known for competition, nature abounds with public goods—resources available to all organisms without depletion. The oxygen-rich atmosphere, produced initially by cyanobacteria, benefits all aerobic organisms. Nitrogen-fixing bacteria make essential nutrients available throughout soil networks. Keystone species maintain habitat conditions that support entire ecosystems.
These natural commons challenge simplistic economic narratives about the inevitability of the “tragedy of the commons.” In fact, nature has evolved numerous mechanisms for maintaining shared resources—from symbiotic relationships to community-level selection pressures that punish over-exploitation.
Similarly, modern economies increasingly generate value through non-rival, network-based goods. Software, scientific knowledge, cultural works, and digital platforms all become more valuable with increased use rather than being depleted. These economic forms more closely resemble a coral reef’s collective infrastructure than traditional resource extraction.
Building economic systems that effectively produce and maintain public goods may be one of the central challenges of our time. Nature suggests this requires multi-level selection—incentives that reward individual innovation while selecting for groups that effectively maintain commons. Traditional economic models that recognize only individual self-interest fail to explain or support these essential functions.
The Major Epochs: Evolutionary Parallels
Earth’s biological history unfolds across major evolutionary transitions: from prokaryotes to eukaryotes, from single-celled to multi-cellular organisms, from simple to complex nervous systems. Each transition enabled new forms of specialization, cooperation, and complexity.
Economic history follows surprisingly similar patterns. Hunter-gatherer economies resembled early ecosystems—local, circular, and directly energy-constrained. Agricultural economies created the first large energy surpluses, enabling specialized roles and hierarchical structures. Industrial economies harnessed fossil energy to create unprecedented material throughput. Today’s information economy increasingly organizes around flows of data rather than material resources.
Each economic transition, like its evolutionary counterpart, created new possibilities while introducing new vulnerabilities. Agricultural societies enabled civilization but created new forms of inequality and environmental degradation. Industrial economies generated enormous wealth while accelerating climate change and resource depletion. Information economies connect billions while concentrating power in digital platforms.
Understanding these parallels helps us anticipate challenges in our current transition. Just as major evolutionary transitions required new forms of cooperation and organization, our economies require new institutional forms to manage increasingly complex, interconnected systems. The companies, markets, and governments designed for industrial-era challenges may prove inadequate for coordinating knowledge-based, planetary-scale activity.
Entropy, Directionality, and Economic Evolution
The second law of thermodynamics—which states that entropy in closed systems always increases—shapes both economic and ecological processes. Living systems temporarily reverse local entropy by consuming energy from their environment, creating structure and information while dispersing waste heat.
Economies follow the same pattern. Economic activity creates temporary islands of order—buildings, infrastructure, technologies, organizations—by harnessing energy flows and increasing entropy elsewhere. This thermodynamic perspective reveals that all economic value ultimately depends on energy conversion, whether directly through manufacturing or indirectly through knowledge work that reorganizes matter and energy more efficiently.
The entropic view also explains certain directional patterns in economic evolution. Just as biological evolution favors organisms that capture and utilize energy more efficiently, economic systems tend to evolve toward greater energy efficiency per unit of value created. Industries typically start with crude, energy-intensive methods and gradually refine toward precision and efficiency.
However, human economies can temporarily resist these thermodynamic constraints through fossil fuel subsidies—essentially borrowing concentrated energy from the past. As we transition to renewable energy flows, economic structures will need to realign with foundational energetic constraints, potentially driving new forms of efficiency and sufficiency.
Moral Abstractions and Economic Systems
Human systems operate in a domain nature never contemplated: the realm of moral values and intentional design. When a wolf hunts an elk, we don’t convene ethics committees or hold the predator accountable for its actions. No legislative body in the grasslands sets quotas on seed consumption or mandates equitable access to watering holes. Nature’s allocation system runs purely on the mechanics of survival, reproduction, and energy transfer—it has no concept of fairness, justice, or long-term planning beyond what emerges from evolutionary processes.
Human economies, by contrast, are saturated with value judgments and competing ideologies about how resources should flow. We must therefore approach biomimetic economics with caution, lest we fall into what philosophers call the naturalistic fallacy—the error of assuming that what exists in nature is what ought to exist in human society. Natural systems can inspire our models, but we filter these lessons through uniquely human moral frameworks.
Different economic systems reflect different approaches to this moral filtering:
Capitalism (market-driven allocation) resembles ecosystems with no central controller, where individual agents pursue self-interest and overall order emerges from apparent chaos. The parallel strengths include innovation and adaptive efficiency; the parallel weaknesses include potential extremes of inequality and failure to provide for the vulnerable. While nature allows the weak to perish without intervention, human societies typically find this morally unacceptable. Unfettered markets, like unchecked species, may also generate negative externalities that the system corrects only after significant damage has occurred. What constitutes a normal “boom and bust” cycle in nature may represent intolerable human suffering in an economy.
Socialism (planned or collective allocation) finds its natural analogue in cooperative biological systems like social insect colonies, where resources flow according to collective needs rather than individual competition. Like ant colonies distributing food to workers, larvae, and the queen, socialist systems attempt to coordinate resource allocation for the common good. However, the analogy breaks down because ant colonies operate with perfect genetic alignment and instinctual coordination that human planners cannot replicate. Information problems and incentive misalignments plague centralized human systems in ways that don’t affect biological superorganisms. Interestingly, even nature’s most cooperative systems exist within a competitive landscape—ant colonies compete with other colonies, just as socialist nations compete in a global economy.
Communism (in its theoretical form as a stateless, classless society) presents an even more challenging natural parallel. Perhaps certain elements resemble a climax ecosystem where resources flow according to need within a fairly stable state. On smaller scales, communal behaviors appear in tight-knit animal groups like elephant herds or meerkat clans, where something resembling “from each according to ability, to each according to need” operates. Yet these behaviors typically function only at limited scales among genetically related individuals—not across entire diverse societies as communism envisions.
The principal-agent problem that plagues human organizations finds loose parallels in nature as well. Just as corporate managers might pursue personal gain at shareholders’ expense, individual organisms sometimes evolve “cheating” strategies that exploit cooperative systems. Parasites divert host resources for their own reproduction; cancer cells abandon the body’s cooperative protocols to multiply selfishly. Nature develops mechanisms to combat these deviations—immune responses, mutualistic partner switching—just as human systems implement transparency requirements, incentive alignment, and regulatory oversight.
What becomes clear is that economic systems represent value-laden choices about how we structure our human “ecosystem.” Most functioning economies are hybrids—mixed systems that harness both competitive and cooperative dynamics, just as most natural systems balance these forces. However, nature cannot provide the moral compass that ultimately guides our economic design choices. We might appreciate the efficient energy transfer of a predator-prey relationship without wanting a society where the powerful literally consume the vulnerable. We might admire an ant colony’s coordination without sacrificing the individual freedom and diversity that define human flourishing.
Therefore, while learning from nature’s wisdom about resource flows, feedback loops, and resilience, we must filter these lessons through distinctly human values. We might choose to protect vulnerable populations that natural selection would eliminate, or redistribute resources in ways nature never would, because our moral frameworks value equity and dignity. The wisest approach treats nature not as a governor dictating what we should do, but as a guide revealing how complex systems function.
The most productive stance views our economies as designed ecosystems where we set the rules and norms—not passive natural systems but intentional creations that can incorporate both nature’s efficient dynamics and humanity’s ethical aspirations. We become gardeners of our economic ecosystem rather than mere observers, cultivating systems that harness natural principles while transcending nature’s moral limitations.