What I Learned About Investing from Darwin

📚 arvy's Book Club

arvy's Teaser: The species that survive aren't the strongest or the smartest — they're the most adaptable. Darwin proved it in biology. Pulak Prasad proves it in investing. His book draws direct parallels between evolutionary biology and stock markets: natural selection favours companies with durable advantages, overconfidence is extinction risk, and the power of compounding mirrors how small genetic changes produce extraordinary species over time. It's the most original investing book in years.

The Book in 60 Seconds

What I Learned About Investing from Darwin (2023) by Pulak Prasad uses evolutionary biology as a framework for investment decision-making. Prasad — who manages a long-only equity fund — argues that Darwin's principles of natural selection, adaptation, and survival of the fittest apply directly to financial markets. Companies compete for resources like species in ecosystems. The ones with the best "adaptations" (moats, culture, innovation) survive. The overconfident die. And compound returns work like evolutionary change: invisible in the short term, transformative over decades.

Pulak Prasad · 2023 · Investing, Evolution & Decision-Making

Idea 1: Natural Selection Works in Markets — Only the Fittest Companies Survive

Darwin's insight: species don't survive because they're strong. They survive because they're well-adapted to their environment. Prasad applies this directly: companies don't thrive because they're big or profitable today. They thrive because they have adaptations — competitive moats — that protect them from competitors, disruption, and market shifts.

Just as a species with a unique niche advantage (camouflage, speed, symbiosis) survives where others don't, a company with a unique competitive advantage (brand, network effects, switching costs, IP) compounds where others stagnate.

Idea 2: Avoid Extinction Events — The Three Mistakes That Kill Portfolios

Prasad identifies three behaviours — drawn from evolutionary biology — that cause "extinction" in portfolios:

1. Overconfidence: Species that overestimate their dominance stop adapting — and get wiped out when the environment changes. Investors who are overconfident in their predictions stop diversifying, concentrate too heavily, and get wiped out by the unexpected.

2. Overfitting to the environment: Species perfectly adapted to one specific environment are fragile when that environment changes. Investors who build portfolios for one specific scenario (low rates, high growth, no recession) are fragile when the scenario changes.

3. Short-term thinking: Evolution works over millennia, not months. The most successful species are those that optimise for long-term survival, not short-term advantage.

Idea 3: Compounding Is Evolution — Small Changes, Extraordinary Results

Prasad's most elegant parallel: compound interest and evolution work the same way. Both are invisible in the short term. Both produce extraordinary results over long timeframes. And both are consistently underestimated because the human brain isn't wired to think exponentially.

A 1% genetic advantage compounded over millions of years produces a new species. A 7% annual return compounded over 30 years turns CHF 500/month into CHF 610,000. The mechanism is identical. The timescale is different. The principle is the same: small, consistent advantages compound into extraordinary outcomes.

What This Means for Swiss Investors

arvy's Take

What holds up: The most original investing book in years. The Darwin-investing parallel isn't a gimmick — it's a genuinely useful framework. Prasad is a practitioner (he runs money), so the principles are grounded in real investment decisions. The "three extinction events" framework alone is worth the price of the book.

What's missing: The biology analogies sometimes stretch thin. And the book is more philosophical than practical — Prasad doesn't provide specific stock picks or portfolio construction advice.

What we'd add: Pair with Fisher (what quality looks like in practice) and Housel (why behaviour beats intelligence). Prasad gives you the evolutionary framework. Fisher tells you how to find the fittest companies. Housel tells you how to avoid being the overconfident species that goes extinct.

3 Sentences to Remember

1. Companies survive not because they're big, but because they're well-adapted. Invest in durable competitive moats.

2. Overconfidence, overfitting, and short-term thinking are the extinction events of investing. Diversify, stay humble, think in decades.

3. Compounding and evolution work the same way: invisible in the short term, transformative over decades. Don't interrupt the process.

Buy the book

English (Amazon) · Deutsch (Amazon)

Also in Book Club: Common Stocks & Uncommon Profits → · Psychology of Money →

This article was written by Thierry Borgeat, Co-Founder of arvy, and reviewed by Patrick Rissi, CFA, and Florian Jauch, CFA.

Disclaimer: This article is for general informational purposes only and does not constitute personal investment advice. Amazon links are affiliate links. arvy is a FINMA-supervised asset manager.