Biomimicry in investing

Investing tactics inspired by nature and superinvestors. Invest you must, so invest like the best!

Biomimicry in investing Portfolio Build maximum wealth by having minimum costs or the magic of the honeycomb hexagon

Build maximum wealth by having minimum costs or the magic of the honeycomb hexagon

The miraculous space and material efficiency of the bee honeycomb

 “The honeycomb is a masterpiece of engineering that is absolutely perfect in economizing labor and wax.” Charles Darwin 

Why bees build space‑efficient and strong nests using hexagonal cells?

A honeycomb is a mass of hexagonal prismatic wax cells built by honey bees in their nests to contain their larvae and stores of honey and pollen.

The question of why honey bees adapted to building their nests from hexagonal cells has been debated for centuries. In On the Origin of Species, Darwin theorized that natural selection led to “an economy of wax.” Being frugal with wax is wise work for a honey bee given they need to consume approximately eight pounds of honey to produce one pound of wax.

But it took mathematicians studying the hexagon shape to make a beeline to the truth. Around 36 B.C., a scholar by the name of Marcus Terentius Varro first wrote about this particular math problem, later dubbed the “the honeycomb conjecture,” by stating that, compared to other shapes such as a triangle or a square, a “hexagon inscribed in a circular figure encloses the greatest amount of space.”

In a 2019 interview, Thomas Hales—the mathematician who finally proved the conjecture—said that ultimately, “A hexagonal honeycomb is the way to fit the most area with the least perimeter.” From a bee’s perspective, that means storing more honey in a larger volume while spending less energy building a structure to contain it. In other words, Darwin was right.

 Figure: A hexagon with the same perimeter as a triangle contains more area.

Figure: Hexagons are the highest‑sided polygons that fit together. Comparing triangles and hexagons with the same area illustrates that hexagonal honeycombs minimize the material needed, making them space‑efficient.

Why do we see hexagons in nature?

To answer this question, we must take a step back and determine the goals of living organisms in nature. We’ve already touched on the idea that survival is the chief job of a species. Every decision an organism makes can generally be traced back to survival. A key element to an organism’s survival is efficiency.

Increased efficiency allows an organism to spend as little energy as possible, which is an important factor for survival. When food becomes scarce, energy must be conserved. Efficiency is key.

And it’s actually not just the living organisms that follow this “efficiency frontier”. Other examples of hexagonal structures are the Giant’s Causeway basalt columns in Northern Ireland, the equally sized soap bubbles nested to each other or the insects eyes:


More on the hexagons in nature can be seen in the below two videos. The first one “It’s Okay To Be Smart” is a short clip on why Nature loves hexagons, while the second is the fascinating BBC episode 2 “Shapes” of the “Code” trilogy.

How to mimic Nature and efficiently “shape” your investment portfolio

“When there are multiple solutions to the problem, choose the simplest one”

“Net return is simply the gross return of your investment portfolio less the costs you incur. Keep your investment expenses low, for the tyranny of compounding costs can devastate the miracle of compounding returns.”

“The two greatest enemies of the equity fund investor are expenses and emotions.”

“The winning formula for success in investing is owning the entire stock market through an index fund, and then doing nothing. Just stay the course.”

 John Bogle

How can you build your investment portfolio in such a way that over time it stores maximum value with minimum costs?

And thus mimic the way bees store their honey into hexagonal honeycomb cells  – maximum volume with minimum material and efforts.

Furthermore – is there an investment tool for humans to emulate the way the bees consume gradually their honey in portions over the long winter days? Imagine a pensioner being able to reliably live off its investment portfolio throughout his retirement period?

 How can we emulate the honeycomb efficiency and apply it on the investing world side? What parallels can we make to compare it with the “portfolio shaping philosophies” of real world superinvestors and find practical ways to build it yourself?

Meet the investment biomimicry equivalent of the bee honeycomb – the index fund

How many of you are familiar with the concept of index fund and its creator John Bogle of Vanguard?

John Clifton “Jack” Bogle (May 8, 1929 – January 16, 2019) was an American investor, business magnate, and philanthropist. He was the founder and chief executive of The Vanguard Group, and is credited with creating the first index fund. An avid investor and money manager himself, he preached investment over speculation, long-term patience over short-term action, and reducing broker fees as much as possible. The ideal investment vehicle for Bogle was a low-cost index fund held over a period of a lifetime with dividends reinvested and purchased with dollar cost averaging.

His 1999 book “Common Sense on Mutual Funds: New Imperatives for the Intelligent Investor” became a bestseller and is considered a classic within the investment community.

John Bogle attended Princeton University where he studied mutual funds. In his early career, he worked for Wellington Management before founding his own mutual fund company, Vanguard Group, in 1975.

With Vanguard, Bogle employed a novel ownership structure in which the shareholders of mutual funds became part owners of the funds in which they invested. The funds themselves own the investment firm, making the fund investors indirect owners of the firm itself. This structure allows the firm to incorporate any profits into its operating structure, reducing investment costs for fund investors.

In 1976, Bogle introduced the Vanguard 500 fund, which tracks the returns of the S&P 500 and marked the first index fund marketed to retail investors. Bogle’s unique structure for Vanguard also made it a natural fit for the provision of no-load mutual funds, which do not charge a commission on investment purchases.

When the Vanguard 500 fund was launched in its initial iteration, it raised only $11 million in its first underwriting in 1976. As of Oct. 31, 2020, the fund manages $557 billion in assets.

Bogle’s Investment philosophy on Passive Investing

Bogle’s “biomimetic” idea for emulating Nature’s efficiency was to create the world’s first index mutual fund in 1975. Bogle’s idea was that instead of beating the index and charging high costs, the index fund would mimic the index performance over the long run—thus achieving higher returns with lower costs than the costs associated with actively managed funds.

Bogle was known for his insistence, in numerous media appearances and in writing, on the superiority of index funds over traditional actively managed mutual funds. He contended that it is folly to attempt to pick actively managed mutual funds and expect their performance to beat a low-cost index fund over a long period of time, after accounting for the fees that actively managed funds charge.

John Bogle contributed significantly to the popularity of index investing, in which a fund maintains a mix of investments that track a major market index. Bogle’s philosophy that average investors would find it difficult or impossible to beat the market over time led him to prioritize ways to reduce expenses associated with investing in mutual funds. For example, Bogle focused on no-load funds featuring low turnover and simple investment strategies.

The philosophy behind passive investing generally rests upon the idea that the expenses associated with chasing high market returns cancel out most or all of the gains an investor would otherwise achieve with a passive strategy that relies upon funds with lower turnover, management fees, and expense ratios.

Passive investing stands in contrast to active investing, which requires managers to take a more hands-on role with the intent of outperforming the market.

Index funds fit this model nicely because they base their holdings on the securities listed on any given index. Investors who purchase shares in index funds gain the benefit of the diversity represented by all the securities on an index.

This protects against the risk that a given company will lower the performance of the overall fund. Index funds also more or less run themselves, as managers only need to ensure their holdings match those of the index they follow. This keeps fees lower for index funds than for funds with more active trading.

Finally, because index funds require fewer trades to maintain their portfolios than funds with more active management schemes, index funds tend to produce more tax-efficient returns than other types of funds.

The Arithmetic of “All-In” Investment Expenses

In this article from 2014 – FAJ-All-In-Investment-Expenses-Jan-Feb-2014 –  Bogle backed the efficiency of the index fund investing vehicle via several tables comparing the index fund all-in expenses against actively managed funds:

For more insights into John Bogle and index funds see this video: Jack Bogle on Index Funds, Vanguard, and Investing Advice – YouTube

For more insights into John Bogle and index funds see this video:

How to mimic Nature and efficiently “shape” your investment portfolio

3 thoughts on “Build maximum wealth by having minimum costs or the magic of the honeycomb hexagon”

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