A fundamental question,...

Both the stock exchange and investmentfonds are concerned with the same one fundamental question:

What are the criteria by which to identify profitable companies?

Where to shift todays money to make maximum profit tomorrow is a question of vital importance. Often, the decisions taken are highly debatable and controversial. They are based on personal experiences and trends rather than on definite knowledge, which is not very surprising because there is...

...a fundamental difficulty...

in measuring the effect a certain property of a company has on the overall profitability. Try to figure out precisely the role played by

• the age of people recruited

• the maintenance philosophy

• the country where company headquarters are based

• the country where production is based

• the target markets of the products

• the average salary granted to employees

• a welfare mentality towards all employees

• a hire and fire system of workforce

• the product image transported by commercials (luxury, cheap, robust, high-tech etc.)

• the legal form

• the number of computers per employee

• the number of employees per unit turnover

• the percentage of the budget dedicated to research and development

• whether new staff are to undergo a trainee programme or rather learn on the job

• the types of products chosen

• the duration leading employees are to remain on one job before being transferred

• whether diversification or concentration on main activites is the right philosophy

• whether standardized software is used or not

• in how far decisions are taken by centralized boards or rather decentralized on "location"

• etc.

...and a fundamentally new approach...

which is just one step beyond classical benchmarking and nothing short of classical genetic evolution:

• Rule 1, the genetic code: Company properties that are thought to be relevant to success but difficult to quantify are encoded so as to be reproducable.

• Rule 2, duplication instead of growth: Successful companies do not strive to grow and expand but to duplicate themselves, thereby spreading the genes responsible for their success.

• Rule 3, variation: single genes may be altered at any time. These variations may be induced by some chance-mechanism, resembling common mutations. They may also be effected by deliberate engineering on the part of humans. Variation can also be implemented via recombination of genes, leading to some sort of company sexuality.

...leading to the vision of economic genetics:

Investmentfonds with their capacity to direct vast sums of money and their power to directly influence existing companies will be the first to implement economic genetics.

The following experiment might suffice to trigger off the transformation of whole economies:

1. A large investmentfond with an imaginative and venturesome leadership decides to give the idea a chance. Twenty small-scale companies all competing on the same market for the same clients, producing the same products with only slighty different company profiles are selected for the experiment.

2. Those aspects of the companies thought to bear some relevance on overall profitability are written down in such a way as to serve as a blueprint in case of duplication. Company properties that cannot be definetely reproduced, such as motivation of the workforce, are to be ignored.

3. Each gene is defined as a "share", with a definite owner who has an interest in money returned. Each share pays out a fixed revenue each year to its owner; no more, no less.

4. It is the aim of each company to duplicate itself, thereby duplicating its shares as well. This is the only way a sharheolder can increase profit. If a company has accumulated enough capital to duplicate itself, the genetic blueprint is strictly followed. Shares are also duplicated, financed by company money and then handed over to the holder of the inital share for free.

5. During two acts of duplication, shareholders may decide to change the genetic code representing their personal share. Shareholders may look at biological genetic systems or genetic algorithms for guidance in chosing the right strategy of altering their gene-shares.

In a fist step, the investmentfond, of course, would be the only shareholder, but with the system spreading, this would soon be different. After a while, some of the small companies will have disappeared, others will have proliferated, giving their shareholders the joy of multiplied revenue. The dialectic of variation and selection will push the whole population of companies towards more successful regions.

The strategists of the investmentfond will no longer have to think about where to shift money or how to identify potentially successful companies. The toatal of their companies will act as a large economic genetic algorithm, going of its own accord to where success is most plentiful.