Building A Healthy Economy: An Analogy

  • By Graeme Donaldson
  • Published 2/23/2015

In the early 90s Yellowstone National Park had a problem. The deer population had gotten out of hand and they were beginning to have a detrimental effect on the park. In one specific valley the deer had practically grazed the landscape down to the topsoil making the land somewhat barren. No shrubs, no grass, and as a result weak and unhealthy trees. The winds were eroding the topsoil, slowing the flow of the river, and severely impacting the quality of wetlands with this stagnant water.

The park did one small thing in hopes to keep the deer population under control. In January of 1995 the park brought in 14 wolves. Previously the park had had a policy of reducing (and eventually eliminating) the wolf population in the park citing them as a “undesirable predator” — a policy that was more or less in place for 100 years. They changed course and the effect these 14 wolves had was remarkable.

First they began to kill deer. But more importantly they radically changed the behavior of the deer. The deer were no longer free to eat the valley bare, but they had to hide in the forest and more secluded sites. With the deer removed the valley floor exploded in growth. The grass grew back and shrubs filled the barren lands. This new soil health meant the trees began to renew. In some cases they quintupled in size in six years. Shrubs and healthy trees meant birds, mice, and rabbits. Predatory animals and carrion birds returned to valley. Bears came back because of the berries on the shrubs and the bears helped reinforce the behavior of the deer.

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The newly vibrant valley floor had an effect on the water as well. Less erosion meant that the river meandered less. A more powerful current and less stagnant water created a habitat for fish and fowl. Beavers began to dam up the river creating an even stronger ecosystem.

The valley flourished because 14 wolves changed the behavior of one group of animals.

So what does this have to do with small business and the economy? One lesson we learn is that removing one element of a system can have unintended consequences. Previously the wolves had been thought to be a nuisance or even a hindrance to the growth of animals in the park. There were actively hunted and allowed to die out. However removing one part of the system meant that over time the whole health of the park was threatened. Small businesses have been slowly dying in America. At Able we are not advocating for artificially allowing small businesses to succeed if the market does not call for it. But the lack of affordable debt has meant that we are not trying to keep this small section of the economy alive. Thinking small businesses as quaint or unimportant parts of the economy is similar to saying that wolves were a nuisance and an “undesirable predator.” If they are totally allowed to die out it cannot help the system as a whole.

The second lesson we learn is that a small number of different players in a system can radically change the behavior of bigger groups in the system. Look at how small microbrews have changed the behavior of some of the big beer companies. Or how a small group of online fashion bloggers can alter the entire landscape of the fashion industry. A “pack” of small businesses can drastically alter the culture of a city. Austin is the perfect example of this.

So far at Able we have loaned money to a relatively small number of companies. But they are our 14 wolves. And together, we are doing our part to keep the economy flourishing.

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