“Bees have to move very fast to stay still.”
— David Foster Wallace
The Red Queen is a fictional character Lewis Carroll’s Through the Looking Glass.
In the novel, Alice finds herself running faster and faster but staying in the same place.
Alice never could quite make out, in thinking it over afterwards, how it was that they began: all she remembers is, that they were running hand in hand, and the Queen went so fast that it was all she could do to keep up with her: and still the Queen kept crying ‘Faster! Faster!’ but Alice felt she could not go faster, though she had not breath left to say so.
The most curious part of the thing was, that the trees and the other things round them never changed their places at all: however fast they went, they never seemed to pass anything. ‘I wonder if all the things move along with us?’ thought poor puzzled Alice. And the Queen seemed to guess her thoughts, for she cried, ‘Faster! Don’t try to talk!’
Eventually the Queen stops running and props Alice up against a tree, telling her to rest.
Alice looked round her in great surprise. ‘Why, I do believe we’ve been under this tree the whole time! Everything’s just as it was!’
‘Of course it is,’ said the Queen, ‘what would you have it?’
‘Well, in our country,’ said Alice, still panting a little, ‘you’d generally get to somewhere else — if you ran very fast for a long time, as we’ve been doing.’
‘A slow sort of country!’ said the Queen. ‘Now, here, you see, it takes all the running you can do, to keep in the same place.
If you want to get somewhere else, you must run at least twice as fast as that!’
The idea of a Red Queen Effect was originally proposed by evolutionary biologist Leigh Van Valen in 1973. He casted it in the metaphor of an evolutionary arms race between co-evolving species.
The Red Queen in her simplest gown also predicts a perhaps real phenomenon, which Ohta and Kimura (1971) noted as mysterious: that irregularities in the rate of molecular evolution seem to be more or less cancelled out over long intervals by a seemingly negative autocorrelation.
Van Valen continues:
We can think of the Red Queen’s Hypothesis in terms of an unorthodox game theory. To a good approximation, each species is part of a zero-sum game against other species. Which adversary is most important for a species may vary from time to time, and for some or even most species no one adversary may ever be paramount. Furthermore, no species can ever win, and new adversaries grinningly replace the losers. This is a direction of generalization of game theory which I think has not been explored.
From this overlook we can see dynamic equilibria on an immense scale, determining much of the course of evolution by their self-perpetuating fluctuations. This is a novel way of looking at the world, one with which I am not yet comfortable. But I have not yet found evidence against it, and it does make visible new paths and it may even approach reality.
In 2000 Francis Heylighen, summarizing Van Valen, wrote:
Since every improvement in one species will lead to a selective advantage for that species, variation will normally continuously lead to increases in fitness in one species or another. However, since in general different species are coevolving, improvement in one species implies that it will get a competitive advantage on the other species, and thus be able to capture a larger share of the resources available to all. This means that fitness increase in one evolutionary system will tend to lead to fitness decrease in another system. The only way that a species involved in a competition can maintain its fitness relative to the others is by in turn improving its design.
The most obvious example of this effect are the “arms races” between predators and prey, where the only way predators can compensate for a better defense by the prey (e.g. rabbits running faster) is by developing a better offense (e.g. foxes running faster). In this case we might consider the relative improvements (running faster) to be also absolute improvements in fitness.
However, the example of trees shows that in some cases the net effect of an “arms race” may also be an absolute decrease in fitness. Trees in a forest are normally competing for access to sunlight. If one tree grows a little bit taller than its neighbours it can capture part of their sunlight. This forces the other trees in turn to grow taller, in order not to be overshadowed. The net effect is that all trees tend to become taller and taller, yet still gather on average just the same amount of sunlight, while spending much more resources in order to sustain their increased height.
“For an evolutionary system,” Heylighen concludes, “continuing development is needed just in order to maintain its fitness relative to the systems it is co-evolving with.”
Basically, in a competitive world progress (“running”) is needed just to maintain relative placement (“staying put”).
We can find many examples of this effect.
In Deep Simplicity, John Gribbon describes this exact effect:
There are lots of ways in which the frogs, who want to eat flies, and the flies, who want to avoid being eaten, interact. Frogs might evolve longer tongues, for fly-catching purposes; flies might evolve faster flight, to escape. Flies might evolve an unpleasant taste, or even excrete poisons that damage the frogs, and so on. We’ll pick one possibility. If a frog has a particularly sticky tongue, it will find it easier to catch flies. But if flies have particularly slippery bodies, they will find it easier to escape, even if the tongue touches them. Imagine a stable situation in which a certain number of frogs live on a pond and eat a certain proportion of the flies around them each year.
Because of a mutation a frog developes an extra sticky tongue. It will do well, compared with other frogs, and genes for extra sticky tongues will spread through the frog population. At first, a larger proportion of flies gets eaten. But the ones who don’t get eaten will be the more slippery ones, so genes for extra slipperiness will spread through the fly population. After a while, there will be the same number of frogs on the pond as before, and the same proportion of flies will be eaten each year. It looks as if nothing has changed – but the frogs have got stickier tongues, and the flies have got more slippery bodies.
Drugs and disease also represent an “arms-race.” Siddhartha Mukherjee, in his Pulitzer-prize winning book The Emperor of All Maladies describes this in the context of drugs and cancer.
In August 2000, Jerry Mayfield, a forty-one-year-old Louisiana policeman diagnosed with CML, began treatment with Gleevec. Mayfield’s cancer responded briskly at first. The fraction of leukemic cells in his bone marrow dropped over six months. His blood count normalized and his symptoms improved; he felt rejuvenated—“like a new man [on] a wonderful drug.” But the response was short-lived. In the winter of 2003, Mayfield’s CML stopped responding. Moshe Talpaz, the oncologist treating Mayfield in Houston, increased the dose of Gleevec, then increased it again, hoping to outpace the leukemia. But by October of that year, there was no response. Leukemia cells had fully recolonized his bone marrow and blood and invaded his spleen. Mayfield’s cancer had become resistant to targeted therapy…
… Even targeted therapy, then, was a cat-and-mouse game. One could direct endless arrows at the Achilles’ heel of cancer, but the disease might simply shift its foot, switching one vulnerability for another. We were locked in a perpetual battle with a volatile combatant. When CML cells kicked Gleevec away, only a different molecular variant would drive them down, and when they outgrew that drug, then we would need the next-generation drug. If the vigilance was dropped, even for a moment, then the weight of the battle would shift. In Lewis Carroll’s Through the Looking-Glass, the Red Queen tells Alice that the world keeps shifting so quickly under her feet that she has to keep running just to keep her position. This is our predicament with cancer: we are forced to keep running merely to keep still.
* * *
We can also think of this happening in business as well.
In describing the capital investment needed to maintain a relative placement in the textile industry, Warren Buffett writes:
Over the years, we had the option of making large capital expenditures in the textile operation that would have allowed us to somewhat reduce variable costs. Each proposal to do so looked like an immediate winner. Measured by standard return-on-investment tests, in fact, these proposals usually promised greater economic benefits than would have resulted from comparable expenditures in our highly-profitable candy and newspaper businesses.
But the promised benefits from these textile investments were illusory. Many of our competitors, both domestic and foreign, were stepping up to the same kind of expenditures and, once enough companies did so, their reduced costs became the baseline for reduced prices industrywide. Viewed individually, each company’s capital investment decision appeared cost-effective and rational; viewed collectively, the decisions neutralized each other and were irrational (just as happens when each person watching a parade decides he can see a little better if he stands on tiptoes). After each round of investment, all the players had more money in the game and returns remained anemic.
In other words, more and more money is needed just to maintain your relative position in the industry (stay in the game). This situation plays out over and over again. Managers find it difficult to not invest to maintain a relative position (I think this happens mostly for psychological reasons — over confidence, ignoring base rates, incentives, etc.)
Inflation also causes a Red Queen Effect:
Unfortunately, earnings reported in corporate financial statements are no longer the dominant variable that determines whether there are any real earnings for you, the owner. For only gains in purchasing power represent real earnings on investment. If you (a) forego ten hamburgers to purchase an investment; (b) receive dividends which, after tax, buy two hamburgers; and (c) receive, upon sale of your holdings, after-tax proceeds that will buy eight hamburgers, then (d) you have had no real income from your investment, no matter how much it appreciated in dollars. You may feel richer, but you won’t eat richer.
High rates of inflation create a tax on capital that makes much corporate investment unwise—at least if measured by the criterion of a positive real investment return to owners. This “hurdle rate” the return on equity that must be achieved by a corporation in order to produce any real return for its individual owners—has increased dramatically in recent years. The average tax-paying investor is now running up a down escalator whose pace has accelerated to the point where his upward progress is nil.
The Red Queen is part of the Farnam Street latticework of mental models.