Michael J. Ryan: A Taste for the Beautiful

Darwin developed the theory of sexual selection to explain why the animal world abounds in stunning beauty, from the brilliant colors of butterflies and fishes to the songs of birds and frogs. He argued that animals have “a taste for the beautiful” that drives their potential mates to evolve features that make them more sexually attractive and reproductively successful. But if Darwin explained why sexual beauty evolved in animals, he struggled to understand how. In A Taste for the Beautiful, Michael Ryan, one of the world’s leading authorities on animal behavior, tells the remarkable story of how he and other scientists have taken up where Darwin left off and transformed our understanding of sexual selection, shedding new light on human behavior in the process. Vividly written and filled with fascinating stories, A Taste for the Beautiful will change how you think about beauty and attraction. Read on to learn more about the evolution of beauty, why the sight of a peacock’s tail made Darwin sick, and why males tend to be the more “beautiful” in the animal kingdom.

What made you interested in the evolution of beauty?

For my Masters degree I was studying how male bullfrog set up and defend territories. They have a pretty imposing call that has been described as ‘jug-a-rum;’ it is used to repel neighboring males and to attract females. In those days it was thought that animal sexual displays functioned only to identify the species of the signaler. For example, in the pond where I worked you could easily tell the difference between bullfrogs, leopard frogs, green frogs, and spring peepers by listening to their calls. Females do the same so they can end up mating with the correct species. Variation among the calls within a species was thought of to be just noise, random variation that had little meaning to the females.

But sitting in this swamp night after night I was able to tell individual bullfrogs apart from one another and got used to seeing the same males with the loudest deepest calls in the same parts of the pond. I began to wonder that if I could hear these differences could the female bullfrogs, and could females decide who to mate with based on the male’s call? And also, if some calls sounded more beautiful to me, did female frogs share with me the same aesthetic?

I never got to answer these questions with the bullfrogs but I decided to pursue this general question when I started at Cornell University to work on my PhD degree.

Why did Darwin say that the sight of the peacock’s tail, an iconic example of sexual beauty, made him sick?

Darwin suffered all kinds of physical maladies, some probably brought on by his contraction of Chagas disease during his voyage on the Beagle. But this malady induced by the peacock’s tail probably resulted from cognitive dissonance. He had formulated a theory, natural selection, in which he was able to explain how animals evolve adaptations for survival. Alfred Russel Wallace developed a very similar theory. All seemed right with the world, at least for a while.

But then Darwin pointed out that many animal traits seem to hinder rather than promote survival. These included bright plumage and complex song in birds, flashing of fireflies, male fishes with swords, and of course the peacock with its magnificently long tail. All of these traits presented challenges to his theory of natural selection and the general idea of survival of the fittest. These sexy traits are ubiquitous throughout the animal kingdom but seem to harm rather than promote survival.

Sexual selection is Darwin’s theory that predicts the evolution of sexual beauty. How is this different from Darwin’s theory of natural selection?

The big difference between these two theories is that one focuses on survivorship while the other focuses on mating success. Both are important for promoting evolution, the disproportionate passage of genes from one generation to the next. An animal that survives for a long period of time but never reproduces is in a sense genetically dead. Animals that are extremely attractive but do not live long enough to reproduce also are at a genetic dead-end. It is the proper mix of survivorship and attractiveness that is most favored by selection. But the important point to realize is that natural selection and sexual selection are often opposed to one another; natural selection for example, favoring shorter tails in peacocks and sexual selection favoring longer tails. What the bird ends up with is a compromise between these two opposing selection forces.

In most of evolutionary biology the emphasis is still more on survival than mating success. But sometimes I think that surviving is just nature’s clever trick to keep individuals around long enough so that they can reproduce.

Why is it that in many animals the males are the more beautiful sex?

In most animals there are many differences between males and females. But what is the defining character? What makes a male a male and a female a female? It is not the way they act, the way they look, the way they behave. It is not even defined by the individual’s sex organs, penis versus vagina in many types of animals.

The defining characteristic of the sexes is gamete size. Males have many small gametes and females have fewer large gametes.  The maximum number of offspring that an animal can sire will be limited by the number of gametes. Therefore, males could potentially father many more offspring than a female could mother.

But of course males need females to reproduce. So this sets up competition where the many gametes of the males are competing to hook up with the fewer gametes of the females. Thus in many species males are under selection to mate often, they will never run out of gametes, while females are under selection to mate carefully and make good use of the fewer gametes they have. Thus males are competing for females, either through direct combat or by making themselves attractive to females, and females decide which males get to mate. The latter is the topic of this book.

Why is sexual beauty so dangerous?

The first step in communication is being noticed, standing out against the background. This is true whether animals communicate with sound, vision, or smells. It is especially true for sexual communication. The bind that males face is they need to make themselves conspicuous to females but their communication channel is not private, it is open to exploitation by eavesdroppers. These eavesdroppers can make a quick meal out of a sexually advertising male. One famous example, described in this book, involves the túngara frog and its nemesis, the frog-eating bat. Male túngara frogs add syllables, chucks, to their calls to increase their attractiveness to females. But it also makes them more attractive to bats, so when these males become more attractive they also become more likely to become a meal rather than a mate.

The túngara frog is only one example of the survival cost of attractive traits. When crickets call, for example, they can attract a parasitic fly. The fly lands on the calling male and her larvae crawl off of her onto the calling cricket. The larvae then burrow deep inside the cricket where they will develop. As they develop they eat the male from the inside out, and their first meal is the male’s singing muscle. This mutes the male so he will not attract other flies who would deposit their larvae on the male who would then become competitors.

Another cost of being attractive is tied up with the immune system. Many of the elaborate sexual traits of males develop in response to high levels of testosterone. Testosterone can have a negative effect on the immune system. So as males experience higher testosterone levels that might produce more attractive ornaments, but these males are paying the cost with their ability to resist disease.

How did you come to discover that frog eating bats are attracted to the calls of túngara frogs?

The credit for this initial discovery goes to Merlin Tuttle. Merlin is a well-known bat biologist and he was on BCI the year before I was. He captured a bat with a frog in its mouth. Merlin wondered how common this behavior was and whether the bats could hear the calls of the frogs and use those calls to find the frogs.

When Stan Rand and I discovered that túngara frogs become more attractive when they add chucks to their calls, we wondered why they didn’t produce chucks all the time. We were both convinced that there were some cost of producing chucks and we both thought it was likely the ultimate cost imposed by a predator.

Merlin contacted Stan about collaborating on research with the frog-eating bat and frog calls, and Stan then introduced Merlin to me. The rest is history as this research has blossomed into a major research program for a number of people.

Is beauty really in the eye of the beholder?

Yes, but it is also in the ears, the noses, the toes and any other sense organ recruited to check out potential mates. All of these sense organs forward information to the brain where judgements about beauty are made. So it is more accurate to say beauty is in the brain of the beholder. It might be true that the brain is our most important sex organ, but the brain has other things on its mind besides sex. It evolves under selection to perform a number of functions, and adaptations in one function can lead to unintended consequences for another function. For example, studies of some fish show that the color sensitivity of the eyes evolves to facilitate the fish’s ability to find its prey. Once this happens though, males evolve courtship colors to which their females’ eyes are particularly sensitive. This is called sensory exploitation.

A corollary of ‘beauty is in the brain of the beholder’ is that choosers, usually females, define what is beautiful. Females are not under selection to find out which males are attractive, by determining which males are attractive. They are in the driver’s seat when it comes to the evolution of beauty.

What is sensory exploitation?

We have probably all envisioned the perfect sexual partner. And in many cases those visions do not exist in reality. In a sense, the same might be true in animals. Females can have preferences for traits that do not exist. Or at least do not yet exist. When males evolve traits that elicit these otherwise hidden preferences this is called sensory exploitation. We can think of the evolution of sexual beauty as evolutionary attempts to probe the ‘preference landscape’ of the female. When a trait matches one of these previously unexpressed preferences, the male trait is immediately favored by sexual selection because it increases his mating success.

A good example of this occurs in a fish called the swordtail. In these fishes males have sword-like appendages protruding from their tails. Female swordtails prefer males with swords to those without swords, and males with longer swords to males with shorter swords. Swordtails are related to platyfish, the sword of swordtails evolved after the platyfish and swordtails split off from one another thousands of years ago. But when researchers attach a plastic sword to a male platyfish he becomes more attractive to female platyfish. These females have never seen a sworded male but they have a preference for that trait nonetheless. Thus it appears that when the first male swordtail evolved a sword the females already had a preference for this trait.

Do the girls really get prettier at closing time, as Mickey Gilly once sang?

They sure do, and so do the boys. A study showed that both men and women in a bar perceive members of the opposite sex as more attractive as closing time approaches. This classic study was repeated in Australia where they measured blood alcohol levels and showed that the ‘closing time’ effect was not only due to drinking but to the closing time of the bar.

The interpretation is of these results is that if an individual wants to go home with a member of the opposite sex but none of the individuals meet her or his expectations of beauty, the individual has two choices. They can lower their standards of beauty or they can deceive themselves and perceive the same individuals as more attractive. They seem to do the latter.

Although we do not know what goes on in an animal’s head, they show a similar pattern of behavior. Guppies and roaches are much more permissive in accepting otherwise unattractive mates as they get closer to the ultimate closing time, the end of their lives. In a similar example, early in the night female túngara frogs will reject certain calls that are usually unattractive, but later in the night when females become desperate to find a mate they become more than willing to be attracted to these same calls.  It is also noteworthy that middle-aged women think about sex more and have sex more often than do younger women.

Deception seems to be widespread in human courtship. What about animals?

Males have a number of tricks to deceive females for the purpose of mating. One example involves moths in which males make clicking sounds to court females. When males string together these clicks in rapid succession it sounds like the ‘feeding buzz’ of a bat, the sound a bat makes as it zeros in on its prey. At least this is what the female moths think. When they hear these clicks they freeze and the male moth is then able to mount the female and mate with her with little resistance as she appears to be scared to death, not of the male moth but of what she thinks is a bat homing in on her for the kill.

Other animals imitate food to drive female’s attention. Male mites beat their legs on the water surface imitating vibrations caused by copepods, the main source of food for the water mites. When females approach the source of these were vibrations they find a potential mate rather than a potential meal.

What about peer pressure? We know this plays a role in human in interactions, and the influence our perceptions of beauty? What about animals, can they be subjected to peer pressure?

Suppose a woman looks at my picture and is told rate my attractiveness on the scale of 1 to 10. Another woman is asked to do the same but in this picture I am standing next to an attractive woman. Almost certainly I will get a higher score the second time; my attractiveness increases although nothing about my looks have changed, only that I was consorting with a good-looking person.  This is referred to as mate choice and it is widespread in the animal kingdom.

Mate choice copying was first experimentally demonstrated in guppies. Female guppies prefer males who have more orange over those who have less orange. In a classic experiment, females were given a choice between a more than a less colorful male. They preferred the more colorful male and then were returned to the center of the tank for another experiment. In this instance they saw the less colorful and less preferred male courting a female. That female was removed and the test female was tested for her preference for the same two males once again. Now the female changes her preference and prefers what previously had been the less preferred male. She too seems to be employing mate choice copying.

Many animals learn by observing others. Mate choice copying seems to be a type of observational learning that is common in many animals in many domains. It might suggest that we be careful with whom we hang out.

What is the link between sexual attraction in animals and pornography in humans?

Animal sexual beauty is often characterized by being extreme: long tails, complex songs, brilliant colors, and outrageous dances. The same is often true of sexual beauty in humans. Female supermodels, for example, tend to be much longer and thinner than most other women in the population, male supermodels are super-buff—hardly normal. Furthermore, in animals we can create sexual traits that are more extreme than what exists in males of the population, and in experiments females often prefer these artificially exaggerated traits, such as: even longer tales, more complex songs, and more brilliant colors than exhibited by their own males. These are called supernormal stimuli. Pornography also creates supernormal stimuli not only in showcasing individuals with extreme traits but also in creating social settings that hardly exist in most societies, this manufactured social setting is sometimes referred to as Pornotopia.

RyanMichael J. Ryan is the Clark Hubbs Regents Professor in Zoology at the University of Texas and a Senior Research Associate at the Smithsonian Tropical Research Institute in Panama. He is a leading researcher in the fields of sexual selection, mate choice, and animal communication. He lives in Austin, Texas.

 

Anurag Agrawal: Monarch butterflies—out of sight, but not out of mind!

By Anurag Agrawal

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The annual migratory calendar for monarch butterflies in eastern North America.

As winter approaches, monarch butterflies are not in sight for most Americans. Beginning in the fall, hundreds of millions of butterflies east of the Rocky Mountains oriented south and began their migration. And indeed the story of how they navigate is truly remarkable: the little insect uses a sun compass that is adjustable depending on the time of day to find its way. Details of the migration and much more are in Monarchs and Milkweed: A Migrating Butterfly, a Poisonous Plant, and their Remarkable Story of Coevolution. And 2017 was a spectacular fall season for monarch butterflies. As far as most monarch biologists can remember, this was perhaps the biggest summer season on record, with monarchs in epic numbers congregating and flying south.

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Southward migrating monarchs in Ontario during autumn. Although monarchs are usually dispersed in the summer, as the fall migration takes hold, butterflies congregate in larger clusters.

As the holiday season approaches, it is useful to keep in to keep in mind where monarchs are and what they are doing.  Cool and concentrated, they huddle en masse for nearly five months.  Will the numbers of butterflies overwintering in Mexico this year show a rebound from their precipitous decline?  If the migration was successful, yes, we all expect (hope!) the numbers to be up.  But only time will tell, as the official numbers are typically announced each February by World Wildlife Fund Mexico.  The monitoring of these unimaginable aggregations of butterflies has been a critical piece in the conservation puzzle for monarchs.

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The state license plate in Michoacán State, Mexico.

In November around the Day of the Dead and leading to American Thanksgiving, monarchs arrive to their overwintering grounds in the highlands Michoacán, Mexico. And legend has it that the butterflies are the returning souls of loved ones. They form clusters that are so dense, they weigh down the Oyamel Fir trees they inhabit above 10,000 feet of elevation in these exquisite sites. The sites are terribly small, with all of them fitting into area smaller than New York City.

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A congregation of monarchs within the Monarch Butterfly Biosphere Reserve, a UNESCO World Heritage Site. Most wings are closed, but look for the orange spots of open butterfly wings.

But before 1975, there was no conservation conversation about monarchs, because scientists simply did not know where monarchs went in the winter (of course native Mexicans of the region have known for centuries).  More importantly, we didn’t know how restricted and sensitive their overwintering sites are. The story of how the monarchs were found is too lengthy to recount here, but it is an astonishing story. In short, Professor Urquhart from the University of Toronto was hot on the trail, and knew that they flew south into Mexico during the fall.  Nora and Fred Urquhart marshaled a citizen science campaign that included a massive effort to engage folks far and wide in the search for the overwintering grounds.  In fact, in 1973, they wrote an article in an English language newspaper in Mexico City requesting help in finding the monarch overwintering sites.

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I obtained this reproduction of the original article outlining monarch butterfly biology and requesting help finding the overwintering grounds from the Library of Congress. It came on microfiche and was a treasure to hold and read.

Still, it was another two years before the overwintering colonies were found and reported to the world. After thirty years of tagging butterflies, enlisting thousands of citizen scientists, and much speculation, shortly after new year’s day in January 1975, the great discovery was made. The Urquharts wrote to their thousands of volunteers: “We now wish to announce to our associates, that, after these many years of intensive study, after having tagged thousands of migrants, we have, finally located the exact area where they overwinter, with the very able assistance of Ken Brugger and Cathy Brugger of Mexico City”. And the rest is history.

Anurag Agrawal is a professor in the Department of Ecology and Evolutionary Biology and the Department of Entomology at Cornell University. He lives in Ithaca, New York.

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Anurag Agrawal: Needing and eating the milkweed

AgrawalU.S. agriculture is based on ideas that make me scratch my head. We typically grow plants that are not native to North America, we grow them as annuals, and we usually only care about one product from the crop, like the tomatoes that give us ketchup and pizza.

And we don’t like weeds. Why would we? They take resources away from our crops, reduce yields more than insect pests or disease, they’re hard to get rid of, and they might give you a rash. But there are few plants more useful, easy to cultivate, and environmentally friendly than the milkweed. The milkweed takes its ill name from the sticky rubbery latex that oozes out when you break the leaves, it’s the monarch butterflies only food, and it is a native meadow plant. Milkweed has sometimes received a bad rep, and perhaps for good reason; they can be poisonous to livestock, they are hard to get rid of, and they do reduce crop yields. But what about milkweed as a crop?

AgrawalThomas Edison showed that milkweed’s milky latex could be used to make rubber. The oil pressed from the seed has industrial applications as a lubricant, and even value in the kitchen and as a skin balm. And as a specialty item, acclaimed for its hypoallergenic fibers, milkweed’s seed fluff that carries milkweed seeds in the wind, is being used to stuff pillows and blankets. Perhaps more surprising, the same fluff is highly absorbent of oils, and is now being sold in kits to clean up oil tanker spills. The fibers from milkweed stems make excellent rope and were used by Native Americans for centuries. More than two hundred years ago, the French were using American milkweed fibers Agrawalto make beautiful cloths, said to be more radiant and velvety than fine silk. And chemically, milkweeds were used medicinally by Native Americans since the dawn of civilization, with a potential for use in modern medicine.  This is a diverse plant with a lot to offer.  Why wouldn’t we cultivate this plant, not only for its stem fibers, seed oils, pillowy fluff, rubbery latex, and medicines, but also in support of the dwindling populations of monarch butterflies?

Ever since the four lowest years of monarch butterfly populations between 2012 and 2015, planting milkweeds for monarchs has been on the tips of a lot of tongues. For most insects that eat plants, however, their populations are not limited by the availability of leaves.  Instead, their predators typically keep them in check, or as in the case of monarchs, there may be constraints Agrawalduring other parts of their annual cycle. Monarchs travel through vast expanses from Mexico to Canada, tasting their way as they go. They tolerate poisons in the milkweed plant; indeed, they are dependent on milkweed as their only food source as a caterpillar. Nearly all mating, egg-laying, and milkweed-eating occurs in the United States and Canada. And each autumn monarchs travel to Mexico, some 3,000 miles, fueled only by water and flower nectar.

All parts of the monarch’s unfathomable annual migratory cycle should be observed and studied. My own research has suggested that habitat destruction in the U.S., lack of flower resources, and logging at the overwintering sites in central Mexico are all contributing to the decline of monarch butterflies. Lack of milkweed does not seem to be causing the decline of monarchs. Nonetheless, planting native milkweeds can only help the cause of conserving monarch butterflies, but it is not the only answer. And of course we humans need our corn and soy, and we love our broccoli and strawberries, so is cultivating milkweed really something to consider?

We humans, with our highly sensitive pallets, do the one thing that monarch butterflies don’t do. We cook. And the invention of cooking foods has been deemed one of the greatest advances in human evolution. Cooking certainly reduces the time spent chewing and digesting, and perhaps more importantly, cooking opens up much of the botanical world for human consumption, because heat can break down plant poisons.

AgrawalEuell Gibbons, the famed proponent of wild plant edibles in the 1970s, was a huge advocate of eating milkweed. The shoots of new stems of the eastern “common milkweed” are my personal favorite. I simply pull them up when they are about 6-8 inches tall and eat them like asparagus. Gibbons recommended pouring boiling water over the vegetables in a pot, then heating only to regain the boil, and pouring off the water before sautéing. You can pick several times and the shoots keep coming. With some preparation, the other parts of the milkweed plant can be eaten too, and enjoyed like spinach, broccoli, and okra.

At the end of summer, many insects have enjoyed the benefits of eating milkweed, especially the monarch butterfly. Any boost we could give to the monarch population may help use preserve it in perpetuity. But the real value in cultivating milkweed as a crop is that it has a lot to offer, from medicines to fibers to oils. It is native and perennial, and can be grown locally and abundantly.  Let’s give this weed a chance.

Anurag Agrawal is a professor in the Department of Ecology and Evolutionary Biology and the Department of Entomology at Cornell University. He is the author of Monarchs and Milkweed: A Migrating Butterfly, a Poisonous Plant, and Their Remarkable Story of Coevolution.

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Andrew Lo on Adaptive Markets: Financial Evolution at the Speed of Thought

Half of all Americans have money in the stock market, yet economists can’t agree on whether investors and markets are rational and efficient, as modern financial theory assumes, or irrational and inefficient, as behavioral economists believe. In this groundbreaking book, Andrew Lo cuts through this debate with a new framework, the Adaptive Markets Hypothesis, in which rationality and irrationality coexist. Adaptive Markets shows that the theory of market efficiency isn’t wrong but merely incomplete. Lo’s new paradigm explains how financial evolution shapes behavior and markets at the speed of thought. An ambitious new answer to fundamental questions in economics, Adaptive Markets is essential reading for anyone who wants to know how markets really work. We asked him to explain the Adaptive Markets Hypothesis, the strengths and limitations on the current theories, and how this new thinking can be practically applied.

What led you to write this book?

AL: Ever since I was a graduate student in economics, I’ve been struggling with the uncomfortable observation that economic theory doesn’t seem to work in practice. As elegant as this theory is, there are so many examples where the data just don’t support the theory that, after a while, I started wondering just how useful our theories were. For example, stock market prices don’t follow random walks, market prices don’t always seem rational, and people often make poor decisions, especially when it comes to financial matters. But it takes a theory to beat a theory. Rather than just criticizing existing theories, I decided to develop an alternative—this book describes the personal journey I took to arrive at that alternative, which I call the Adaptive Markets Hypothesis.

What’s the Adaptive Markets Hypothesis?

AL: The Adaptive Markets Hypothesis is my solution to the longstanding debate in financial economics between two competing camps. One camp consists of the disciples of the Efficient Markets Hypothesis, who believe that investors are rational decision makers and market prices fully reflect all available information. The opposing camp consists of the psychologists and behavioral economists who believe that investors are irrational and market prices are driven by “animal spirits.” It turns out that both camps have correctly captured certain aspects of human behavior, but neither camp offers a complete picture of how investors and markets behave. The Adaptive Markets Hypothesis fills this gap.

How?

AL: By drawing on recent research in psychology, neuroscience, evolutionary biology, and artificial intelligence, I show that human behavior is the result of several different components of the brain, some of which produce rational behavior while others produce more instinctive emotional behavior. These components often work together, but occasionally they compete with each other. And for obvious evolutionary reasons, rationality can be trumped by emotion and instinct when we’re confronted with extreme circumstances like physical threats—we “freak out.” The problem is that these hardwired responses to physical threats are also triggered by financial threats, and freaking out is generally not the best way to deal with such threats. Therefore, investors and markets have a split personality: sometimes they’re quite rational but every so often, they freak out.

Are you suggesting that the Efficient Markets Hypothesis, which dominates financial thinking today, is wrong?

AL: No! On the contrary, the Efficient Markets Hypothesis is one of the most useful, powerful, and beautiful pieces of economic reasoning that economists have ever proposed. Generations of investors and portfolio managers have been saved from bad investment decisions because of the Efficient Markets Hypothesis, which says that if something seems too good to be true, it probably is. The Efficient Markets Hypothesis is not wrong; it’s merely incomplete. Its focus is the behavior of investors and markets in normal business environments, where the “wisdom of crowds” rules the day. What’s missing is the “madness of mobs,” when investors are reacting emotionally and instinctively in response to extreme business environments—good or bad—leading either to irrational exuberance or panic selling. The Adaptive Markets Hypothesis provides a more complete framework in which both types of behaviors are possible. The combination of these behaviors yields a much richer set of implications for price dynamics, investment strategies, risk management, and financial regulation.

Who is the intended audience for this book?

AL: My intention was to write this book for the general reader, but only time will tell whether or not I’ve succeeded. In fact, I’m hoping that there’s something for everyone in this book. For example, readers wondering whether or not it’s possible to beat the stock market using mathematical models will want to read Chapter 2, “If You’re So Smart, Why Aren’t You Rich?” For readers already convinced that it’s possible and want to understand the neuroscientific basis of irrational behavior, they’ll want to read Chapter 3, “If You’re So Rich, Why Aren’t You Smart?” No book on finance would be complete without a discussion of how the recent financial crisis could have happened to us—a country with one of the most sophisticated financial systems in the world—and that’s Chapter 9, “Fear, Greed, and Financial Crisis.” And for readers interested in getting a glimpse of the future of the financial industry and the amazing things that can be accomplished with finance if used properly, there’s Chapter 12, “To Boldly Go Where No Financier Has Gone Before.” Although the book is based on my academic research, I’ve worked hard to translate “academic-speak” into plain English, using simple analogies and real-life examples to make the research come alive. In fact, there’s not a single equation or mathematical formula in the book, which is no easy feat for someone from MIT!

In Adaptive Markets you take an interdisciplinary view of financial markets, bringing in cognitive neuroscience, biology, computer science, and engineering. How did you come to bring all of these seemingly disparate fields together and why is that important?

AL: Although I do enjoy learning new things and have broad-ranging interests, when I started my academic career as a financial economist, I had no interest or intention in doing “interdisciplinary” research. I was perfectly happy spending my days and nights working on traditional neoclassical financial economics—portfolio theory, derivatives pricing models, asset pricing models, financial econometrics, and so on. But the more I tried to fit financial theories to data, the more frustrated I became that these theories performed so poorly. So I started trying to understand why the theories broke down and how they could be fixed. I began by studying behavioral economics and finance, which led me to psychology, which then to the cognitive neurosciences, and so on. I was dragged—sometimes kicking and screaming—from one field of study to the next in my quest to understand why financial markets don’t work the way we think (and want them to). This process ultimately led me to the Adaptive Markets Hypothesis, which is a very satisfying (for me, at least) integration of various disciplines that have something to say about human behavior. I’m especially pleased by the fact that Adaptive Markets reconciles the two competing schools of thought in financial economics, both of which are compelling in their own right even though they’re incomplete.

Why do we need to understand the evolution of finance?

AL: Many authors and academics will use evolution as a metaphor when referring to the impact of change. In Adaptive Markets, I use evolution quite literally because financial markets and institutions are nothing short of evolutionary adaptations that Homo sapiens has developed to improve our chances of survival. Therefore, if we really want to understand how the financial system works, how it changes over time and circumstances, and what we can do to improve it, we need to understand the evolution of finance. And unlike animal species, which evolve from one generation to the next, the financial system evolves at the speed of thought.

You argue that economics wishes it were more like the hard science of physics where 99% of all observable phenomena can be explained with three laws. Will we ever have a complete understanding of how financial markets function?

AL: It’s true that most economists—myself included—suffer from a psychological disorder called “physics envy.” We wish we could explain 99% of economic behavior with three laws like the physicists but this is a pipe dream. The great physicist Richard Feynman put it best when he said, “Imagine how much harder physics would be if electrons had feelings!” I tell all my students at the start of the semester that all economic theories are approximations to a much more complex reality, so the key question for investors and portfolio managers is not “is the theory correct?” but rather, “how good is the approximation?” The answer to this question lies largely in the environment, which plays a huge role in evolutionary theories. Whether we’ll ever be able to develop a truly complete theory of human behavior—and, therefore, how financial markets function—is hard to say. But I do believe that we can get much closer to that complete theory through the Adaptive Markets Hypothesis.

How can investors and portfolio managers incorporate the Adaptive Markets Hypothesis into their investment philosophies?

AL: The Adaptive Markets Hypothesis has a relatively straightforward but sweeping implication for all investment philosophies, and that has to do with change. During normal business environments, the principles of Efficient Markets are an excellent approximation to reality. For example, from the 1930s to the early 2000s, a period where the U.S. stock market had relatively consistent average returns and volatility, a long-only passive investment strategy of 60% stocks and 40% bonds produced pretty decent returns, particularly for those who were investing over a 10- or 20-year horizon. The problem is that this approach doesn’t always work. When market conditions change and we experience large macro shocks like the financial crisis of 2008, then simple heuristics like 60/40 no longer work as well because financial markets have changed in their dynamics. Today’s markets are now much more responsive to intervention by governments and their central banks and punctuated by the irregular cycle of fear and greed. So since 2007 and 2008, we’ve seen a very different market dynamic than over the previous six decades. The point of Adaptive Markets is not simply to be wedded to any static theory, but rather to understand how the nature of markets can change. And once it does change, we need to change with it. John Maynard Keynes put it best when, in responding to criticism that he flip-flopped on the gold standard, he said, “When the facts change, sir, I change my mind. What do you do?”

Can you give an example of how change might impact today’s investors?

AL: One important implication of Adaptive Markets for investors and portfolio managers is that passive investing is changing and we have to adapt. John Bogle—the founder of the Vanguard Group and the father of passive investing and index funds—had an incredibly important insight in the 1970s which he calls the “Cost Matters Hypothesis:” reducing trading costs can have a huge impact on wealth accumulation. Bogle has done more for the individual investor than anyone else I can think of; he democratized the investment process. Thanks to technological innovations like automated trading, electronic market-making, and big data analytics, we’re ready to take the next evolutionary step that builds on Bogle’s legacy. For example, like the trend in healthcare towards personalized medicine, we can now create personalized indexes that are passive portfolios designed to achieve specific goals for a given individual. You might be more risk tolerant than your neighbor so your portfolio will have more equities, but because you work in the financial industry and she works in big pharma, your personalized portfolio will have fewer financial stocks and hers will have fewer biopharma stocks. Also, personalized indexes can manage the risk more actively to suit an individual’s threshold of “pain.” Current financial wisdom criticizes investors who don’t invest for the long run, and I’ve always thought such criticism to be terribly unfair. After all, how easy is it for someone to stick with an investment that’s lost 50% of its value over just a few months? Well, that’s exactly what happened between the fourth quarter of 2008 and the first quarter of 2009. Traditional investment advice is a bit like trying to prevent teenage pregnancies by asking teenagers to abstain—it’s not bad advice, but it’s unrealistic. Why not manage the risk of an individual’s portfolio more actively so as to reduce the chances of freaking out?

Finance has developed a bad reputation in the popular press, particularly in the aftermath of the recent financial crisis. Does the Adaptive Markets Hypothesis have anything to say about this and how things can be improved?

AL: Absolutely. At the heart of all bad behavior, regardless of the industry or context, is human nature. Humans are the Curious George of the animal kingdom, but there’s no “man in the yellow hat” to bail us out when we get into trouble. Homo sapiens has evolved in some remarkable ways and we’re capable of extraordinary things, both good and bad. The same social and cultural forces that give rise to wonderful organizations like the Peace Corps, the Red Cross, and Doctors without Borders can sometimes lead to much darker and destructive organizations. The only way for us to deal more effectively with the negative aspects of society is to acknowledge this dual nature of human behavior. Chapter 11 of Adaptive Markets, titled “Fixing Finance,” is devoted entirely to this objective. We have to be careful not to throw out the baby with the bathwater—the financial system definitely can be improved, but we shouldn’t vilify this critically important industry because of a few bad actors.

What are some specific proposals for how to fix finance?

AL: Well, before we can fix finance, we need to understand where financial crises come from, and the Adaptive Markets Hypothesis has a clear answer: crises are the product of human behavior coupled with free enterprise. If you can eliminate one or both of these two components, you can eliminate financial crises. Otherwise, financial crises are an avoidable fact of modern life. Human misbehavior is a force of Nature, not unlike hurricanes, flash floods, or earthquakes, and it’s not possible to legislate away these natural disasters. But this doesn’t mean we can do anything about it—we may not be able to prevent hurricanes from occurring, but we can do a great deal to prepare for them and reduce the damage they do. We can do a lot to prepare for financial crises and reduce the damage they do to those individuals and institutions least able to withstand their devastating consequences. This perspective is important because it goes against the traditional narrative that financial crises are caused by a few greedy unscrupulous financiers and once we put them in jail, we’ve taken care of the problem. The Adaptive Markets perspective suggests something different: the problem is us. Specific proposals for dealing with crises include: using new technologies in data science to measure economic activity and construct early warning indicators of impending crises; studying crises systematically like the way the National Transportation Safety Board studies airplane crashes so we know how to make the financial system safer; creating adaptive regulations that change with the environment, becoming more restrictive during booms and less restrictive during busts; and systematically measuring individual behavior and corporate culture quantitatively so we can engage in “behavioral risk management.”

Now that you’ve written this book, where do you see your research going from here?

AL: Well, this is still early days for the Adaptive Markets Hypothesis. There’s so much left to be done in exploring the implications of the theory and testing the implications empirically and experimentally whenever possible. The Efficient Markets Hypothesis took decades and hundreds of academic studies to get established, and the same will be true of this one. One of my goals in writing this book is to motivate my academic and industry colleagues to start this vetting process. In the same way that Darwin’s theory of evolution had to be tested and challenged from many different perspectives, the Adaptive Markets Hypothesis has to go through the gauntlet of academic scrutiny. One important implication of the Adaptive Markets perspective is that we need to change the way we collect data and test theories in financial economics. For example, traditional tests of financial theories involve collecting stock market prices and analyzing the statistical properties of their risks and returns. Contrast this approach with how an ecologist would study a newly discovered tropical island in an effort to preserve it. He would begin by first cataloguing the flora and fauna, identifying the key species, and measuring their biomasses and behaviors. Next, he would determine the food chain, environmental threats, and predator/prey relationships, and then turn to population dynamics in the context of the changing environment. Ultimately, such a process would lead to a much deeper understanding of the entire ecosystem, allowing ecologists to determine the best way to ensure the long-term health and sustainability of that island. Imagine doing the same thing with the financial industry. We would begin by cataloguing the different types of financial institutions and investors, measuring their financial biomass, and identifying key species—banks, hedge funds, pension funds, retail investors, regulators, etc.—and their behaviors. Then we would determine the various types of business relationships and interdependencies among these species, which are critical for mapping the population dynamics of this financial ecosystem. This approach seems sensible enough, but it’s not yet being done today (except by my collaborators and me!).

How do you continue to evolve your own thinking? What do you do?

AL: Someone very wise once said that the beginning of wisdom is humility, and I’m convinced that this is how we make progress as a civilization. Once we’re convinced that we have all the answers, we stop asking new questions and learning. So I’m continually looking for new ways to understand financial market behavior, and constantly humbled by how little I know compared to how much we have yet to discover. In this respect, I guess I’m an intellectual opportunist—I don’t care where an idea comes from or what academic discipline it belongs to; if it gives me new insight into an existing problem, I’ll use it and build on it. I’m currently working on several applications of the Adaptive Markets Hypothesis to investments, risk management, and financial regulation, and also hoping to test the theory in the context of individual and institutional investment decisions. The initial results are quite promising and show that financial industry participants adapt much more quickly than we thought. These results point to several important unintended consequences that have clear implications for how we should regulate the industry so as to reduce the chances of another financial crisis.

Andrew W. Lo is the Charles E. and Susan T. Harris Professor at the MIT Sloan School of LoManagement and director of the MIT Laboratory for Financial Engineering. He is the author of Hedge Funds and Adaptive Markets: Financial Evolution at the Speed of Thought. He is also the founder of AlphaSimplex Group, a quantitative investment management company based in Cambridge, Massachusetts.

Anurag Agrawal: Monarchs vs. Milkweed

by Anurag Agrawal

Coevolution is a special kind of evolution. And monarchs and milkweeds exemplify this special process. In particular, what makes coevolution special is reciprocity. In other words, coevolution is one species that evolves in response to the other, and the other species evolves in response to the first. Thus, it is a back-and-forth that has the potential to spiral out of control. In some arms races, the two organisms both benefit, such as that between some pollinators and flowering plants. But coevolution is more common among antagonists, like predators and their prey.

When biologists first described coevolution, they likened it to an arms race. An arms race, such as that between political entities, occurs when two nations reciprocally increase their armament in response to each other. So how does an arms race between monarchs and milkweeds, or between cats and mice, or between lions and wildebeest, or between plants and their pathogenic fungi, proceed? When coevolution occurs, it proceeds with “defense” and “counter defense.” And one of the few rules of coevolution is that for every defense that a plant or prey mounts, the predator mounts a counter defense, or an exploitative strategy to overcome the defense.

Once a monarch butterfly lays an egg on a milkweed plant, the natural history of coevolution unfolds. For every defense that the plant mounts, milkweed mounts a counter defense. Once the caterpillar hatches, it must contend with a bed of dense hairs that are a barrier to consumption of the leaf. But monarchs are patient, and have coevolved with the milkweed. So their first strategy is to shave that bed of hairs such that the caterpillar has access to the leaves that lie beneath.

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For every defense there’s a counter defense. But next, when the monarch caterpillar sinks its mandibles into the milkweed leaf, it encounters a sticky, poisonous liquid called latex. In this video we will see how the monarch caterpillar deactivates the latex bomb that the milkweed puts forward.

And so the arms race continues, with reciprocal natural selection resulting in coevolution between monarchs and milkweeds. In my book, Monarchs and Milkweed, I outline the third level of defense and counter defense between these two enemies. Milkweed next mounts a remarkable and highly toxic defense chemical called a cardiac glycoside. But, yes, again the Monarch has evolved the means to not only not be poisoned by the cardiac glycoside, but to sequester it away and put it to work in defense of the Monarch itself from its enemies, such as predatory birds. For more on the Monarch – Milkweed arms race see this video, filmed in Ithaca, New York outside of Cornell University where we conduct our research.

AgrawalAnurag Agrawal is a professor in the Department of Ecology and Evolutionary Biology and the Department of Entomology at Cornell University. He is the author of Monarchs and Milkweed: A Migrating Butterfly, a Poisonous Plant, and Their Remarkable Story of Coevolution.

Anurag Agrawal: The oldest butterflies?

by Anurag Agrawal

It’s unclear when humans became humans. Presumably it was a gradual growth of our consciousness over the eons. There are some things, however, that appear to distinguish us from most other animals. For example, our artistic depictions. From the deepest, darkest caves have emerged pictures of humanity from thousands of years ago. And in an Egyptian tomb, that of Nebamun, on a painting called “Fowling in the marshes” (from around 1350 BCE) comes one of the oldest human depictions of butterflies. It happens to be of the African Monarch, Danaus chrysippus, sometimes called the plain tiger, a close relative of our beloved North American Monarch butterfly, Danaus plexippus.

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I stumbled on this lovely scrap of history when a friend and colleague, Harry Greene, gifted me a book: Nabokov’s Butterflies (2000), a collection of unpublished and uncollected writings. Some explanation is in order. Harry is an extraordinary naturalist and big thinker in ecology and evolution. Like many senior scholars, his predicament was the lack of shelf-space in his office. And so I was the beneficiary of Nabokov’s Butterflies. Vladimir Nabokov, a Russian-American author, and noted entomologist, was most famous for his writings, for example, Lolita, and his celebrated translation of Pushkin’s novel in verse, Eugene Onegin. His ideas about biology were diverse, he was a passionate lepidopterist, and he often intermixed his literary writing and entomological excursions. Lolita is said to have been written primarily on butterfly collecting trips in the American west. Nonetheless, Nabokov also clung on to other ideas that held little merit in the scientific sphere. Most prominently, Nabokov rejected evolution by natural selection as a driver of certain organismal traits that he deemed ‘coincidental, miraculous, or too luxurious.’

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Nabokov was a professor at my own Cornell University in the decade following WWII. Although he taught literature and had well-known students at Cornell (including U.S. supreme court justice, Ruth Bader Ginsburg), his entomological interests continued. In fact, after he retired from Cornell in the mid-1960s, Nabokov had sketched out an outline of a book: The Butterflies of Europe. And although the book never came to be, the outline was recapitulated in Nabokov’s Butterflies. Flipping through the book, I stumbled on his entry for Danaus in which he wrote, “This butterfly has the distinction of being the oldest known to have been represented by man. Seven specimens of it (with typical white-dotted Danaus body but somewhat Vanessa cardui like wingtips) are shown flitting over the papyrus swamp…” (page 603).

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I later asked another friend, Harvard’s Lepidopterist, Naomi Pierce: did Nabokov have it right? On the money, she independently pointed to the similarity of Danaus chrysippus and the painted lady, Vanessa cardui, wondering if the butterflies on this three thousand year old tomb painting were Danaus or Vanessa. She concluded, as did Nabokov, that the African Monarch ruled. Detailed assessment of the color patterns on the wings were informative to both entomologists. The oldest human depiction of a butterfly? Perhaps not. Naomi mentioned some evidence of butterflies in Minoan artifacts from Crete, a thousand years earlier than Nebamun, and likely in Pyrenees cave paintings, some 10-30 thousand years earlier!

Of course, there is nothing special about being the oldest depiction of a butterfly by Homo sapiens. But suffice it to say, butterflies, metamorphosis, wing patterning, and the beauty of nature have been on our minds for a very long time. Thanks Harry and Naomi! And thanks Nabokov. Who knows what becomes of those side hobbies and obsessions we all hold.

Nabokov

AgrawalAnurag Agrawal is a professor in the Department of Ecology and Evolutionary Biology and the Department of Entomology at Cornell University. He is the author of Monarchs and Milkweed: A Migrating Butterfly, a Poisonous Plant, and Their Remarkable Story of Coevolution.

Anurag Agrawal: The migration patterns of the monarch butterfly

by Anurag Agrawal

The plight of monarch butterflies if often in the news: many scientists around the world are working hard to understand their annual migratory cycle. How do the monarchs produced during summer in the northern reaches of America contribute to the overwintering population in Mexico? The origin of monarch butterflies that make it to Mexico has been hotly debated because it has profound consequences for how we approach monarch conservation.

A new study is remarkable in its use of historical collections over the past 40 years and modern isotopic analysis. The scientists address the most important regions in the U.S. for producing monarch butterflies that actually make it to Mexico. This sort of data has been very difficult to come by and there has been a lot of speculation. As outlined in my new book from Princeton, the midwest has dominated discussions as being the most important region in the U.S. for monarchs. In the study, the authors find that the Midwest contributes a whopping 38% of the butterflies that make it to Mexico.

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The regions studied by Flockhart et al. separated to highlight their relative areas

I would add two points for discussion. The first is that the areas of land that the authors designated as Midwest, Northeast, etc., seemed totally reasonable, but also somewhat arbitrary. In particular, an issue arises when you consider that, as designated in the paper, the Midwest is about 2.5 times as big as the Northeast. It is therefore not surprising that the Midwest produces about 2.5 times as many butterflies that make it to Mexico (38% vs 15%). In other words, the butterflies that make it to Mexico have about an equal probability of coming from the Midwest and the Northeast when land area is considered. Yet another way to think about this is that two states that are about equal sizes in the two regions (for example, Indiana and Maine) will on average produce about the same number of butterflies that make it to Mexico.

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The annual migratory cycle of the monarch butterfly from Monarchs and Milkweed. In my past research, we have opted for a three simple regions defined by the butterfly generations.

Quite interestingly, the North Central area (including my home in the Finger Lakes region of NY) is slightly more important for butterfly production given its size. When you factor out the area of the Great Lakes (where there are no monarch caterpillars), the area of North Central is small (36% of the size of the Midwest). Thus, about 20% more butterflies per square mile come out of the North Central than the Midwest or Northeast. Where does this leave us?  The agricultural Midwest is certainly important, but perhaps not as important as previously thought.

The other point worth thinking about is that the Southwest (read: Texas) comes out as big in terms of area (equal to the Midwest) and relatively less important in terms of contributing butterflies (11% of the total).  The critical importance of the Gulf States including Texas, however, is not in the last generation of butterflies produced in fall that migrate south, but rather in the first generation of butterflies that are produced in spring and that migrate north to the Midwest and Northeast.  In other words, the Gulf States are absolutely critical for the annual migratory cycle, even if that is not where fall migrants are produced.  Without a spring generation there, the Midwest and Northeast would be empty!  In chapter 9 of the book, I summarize the critical importance of Gulf States not only for the spring, but also in providing floral resources for fall migrating butterflies.

I hope we see more studies like this in the future, as it provides new important information and was inspiring to read.

AgrawalAnurag Agrawal is a professor in the Department of Ecology and Evolutionary Biology and the Department of Entomology at Cornell University. He is the author of Monarchs and Milkweed: A Migrating Butterfly, a Poisonous Plant, and Their Remarkable Story of Coevolution.

Anurag Agrawal: Monarch overwintering

by Anurag Agrawal

The estimates of the monarch butterfly overwintering population were announced February 9th by WWF Mexico. The butterflies are so dense at their dozen or so mountain-top clustering sites that overwintering butterflies cannot be individually counted. Instead, the area of forest that is densely coated with butterflies (at about 5,000 butterflies per square meter looking up into the canopy) is estimated as a measure of monarch abundance. Butterflies arrive in Mexico around early November and stay until March.

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This winter season (2016-2017), there were approximately 2.9 hectares of forest occupied with dense monarchs (somewhere in the neighborhood of 300,000 million overwintering butterflies). This estimate is down 27% compared to last year. Nonetheless, the previous two years were a 600% increase over the all-time low recorded in the winter of 2013-2014.

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Where does this leave us? This year’s population was higher than predicted by many. The season started with a late spring storm that killed an estimated 5-10% of monarchs in March 2016, and many reported low numbers of adults last summer. Nonetheless, the lower numbers this season compared to last are within the range of year-to-year variation, and overall, the population seems to be relatively stable over the past decade. With these 24 years of data, there are various ways to plot and assess the trends. Below I have plotted the four year averages for six periods beginning in 1992. Any way you slice it, the trend has been negative, and the population is not nearly what it once was. Nonetheless, the downward trend seems to have lessened this last period. Is this the new norm? How dangerously low are these numbers? And what can we do to reverse the trend?

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AgrawalAnurag Agrawal is a professor in the Department of Ecology and Evolutionary Biology and the Department of Entomology at Cornell University. He is the author of Monarchs and Milkweed: A Migrating Butterfly, a Poisonous Plant, and Their Remarkable Story of Coevolution.

 

 

 

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Bird Fact Friday – Evolution

From page 14 of Better Birding:

Birds, like all animals, have evolved to take the best advantage of their environment. For example, the Northern Harrier glide and swoops low over fields and marshes, periodically flapping and hovering because that enables it to see the small rodents it preys on. Birds like wrens and rails are dark in plumage because they are most often found in dense habitats, the better to blend in with shadows. Species that make their home in the desert are often paler. The intuitive birder keeps these things in mind when looking for a specific species of bird out in the field.

Better Birding: Tips, Tools & Concepts for the Field
George L. Armistead and Brian L. Sullivan
Introduction

Better BirdingBetter Birding reveals the techniques expert birders use to identify a wide array of bird species in the field—quickly and easily. Featuring hundreds of stunning photos and composite plates throughout, this book simplifies identification by organizing the birds you see into groupings and offering strategies specifically tailored to each group. Skill building focuses not just on traditional elements such as plumage, but also on creating a context around each bird, including habitat, behavior, and taxonomy—parts so integral to every bird’s identity but often glossed over by typical field guides. Critical background information is provided for each group, enabling you to approach bird identification with a wide-angle view, using your eyes, brain, and binoculars more strategically, resulting in a more organized approach to learning birds.