Hedging One's Evolutionary Bets, Revisited
TL;DR
Bet-hedging reduces variance at the cost of mean performance
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This paper provides the foundational theoretical treatment of bet-hedging strategies in evolutionary biology, explaining how organisms maximize long-term geometric mean fitness through variance reduction rather than arithmetic mean maximization.
The key insight is that in variable environments, reducing variance in reproductive success can increase long-term fitness even if it decreases average success in any given year. This mathematical framework underlies the business application of maintaining reserves and avoiding 'all-in' strategies during favorable conditions.
Key Findings from Philippi & Seger (1989)
- Bet-hedging reduces variance at the cost of mean performance
- Geometric mean fitness matters more than arithmetic mean in variable environments
- Organisms evolved to sacrifice peak performance for survival across cycles