MICHEL PIREU: Leverage in investing is comparable to size in nature
Body size in biology — like leveraging — accentuates the gains but amplifies the losses
Edward Drinker tracked the lineages of thousands of species and showed a clear bias towards animals evolving to become larger over time. Horses went from the size of small dogs to their modern height. Snakes from no larger than an inch to modern boas. Dinosaurs from 10cm lizards to a brontosaurus. This shouldn’t be surprising, explained Morgan Housel at Collaborative Fund. Bigger species are better at capturing prey, can travel longer distances and support bigger brains. So why hasn’t evolution made every species huge?
As Aaron Clauset of the Santa Fe Institute and Doug Erwin of the Museum of Natural History explain: “The tendency for evolution to create larger species is counterbalanced by the tendency of extinction to kill off larger species. Big animals are fragile. An ant can fall from an elevation 15,000 times its height and walk away unharmed. A rat will break bones falling from an elevation 50 times its height. An elephant falling from twice its height splashes like a w...