Reviewed by Sep 30, 2020| Updated on
Natural selection is a mechanism by which organisms have characteristics that allow them to adapt to survive and reproduce in an environment, passing their genes onto the next generation. Natural selection ensures that species that can adapt to a given situation will rise in numbers, and eventually outnumber those species that cannot adapt.
The natural selection cycle helps a species to adapt better to their environment by modifying its genetic structure for every generation that passes. These changes are incremental and can occur over thousands of years. However, natural selection can occur much faster in some cases, especially in species with short life spans and rapid reproduction rates.
One of the best-known examples of natural biological selection is that of the English peppered moth. Although present in a range of shades, the light-grey, spotted variety was the most prevalent before the Industrial Revolution in England, as they were easily camouflaged against lichen of a similar light colour.
By comparison, dark-winged moths have become easy targets for birds and other predators. But the Industrial Revolution created tremendous pollution that destroyed the lichen that covered much of the cliffs, while soot turned white-coloured buildings into black.
In the financial sense, natural selection means that only those players who can adjust and adapt to the many changes in the financial and business climate can succeed in the long term. The dynamism and uncertainty of the market world mean that, for very long periods, only a handful of businesses will stay in operation.
For example, at its launch in 1896, General Electric is the only remaining stock of the Dow Jones Industrial Average's first 12 constituents.
Another example of natural financial selection can be seen in the fate of brokerages, such as Bear Stearns, founded in 1923; Merrill Lynch, established in 1914; and Lehman Brothers, established in 1850, during the 2008 credit crunch.