Can the population of wolves in Yellowstone National Park teach us something about markets?

Source: Flikr. CC0.

The Grey Wolf used to be the dominant predator in North America. Running in packs, wolves are formidable. The largest species of the dog family, the average wolf weighs over 80 pounds, and they primarily feed on large grazing animals.

In the 19th century, as settlers moved west, wolves were ecological competitors. The cattle, sheep, and other livestock provided targets of opportunity. Why bother running down a lean and wary white-tailed deer when a large, well-fed cow is grazing placidly in a nearby pasture. So western states established bounties on wolves, paying $20 to $50 per pelt. By the middle of the 20th century, grey wolves had been nearly eliminated from the Lower 48 States. Only a small population in northeastern Minnesota remained.

This had consequences across the North American ecosystem. The population of elk and deer soared, especially in the mountains. With soaring populations came mange, parasites, and other indigenous diseases. The overpopulated herds would overgraze their range, and hard winters would leave the landscape littered with hundreds of elk carcasses that had starved to death. In the spring, elk who normally fed mostly on grasses devasted stands of aspen, willow, and other browse. This impacted the populations of other animals that depended on those plants – like beavers. In 1990, there were no wolves and only one beaver colony in all of Yellowstone.

In 1995, however, researchers released 31 Canadian grey wolves back into the Park. Since then, wolves have recolonized the area, the population of elk has declined, willows and aspen have grown taller and more abundant, and beaver colonies have multiplied. By 2019 there were at least 19 colonies with four active dams in use.

Source: National Park Service. Public Domain.

But it didn’t just happen right away. It’s been almost 30 years since wolves were reintroduced. While the population of elk fell by over 70% in the first decade, the willows and aspen didn’t just sprout up along the river and stream banks. Beavers need willows, but willows also need beavers. The swampy, marshy ground around a beaver pond is ideal for willow growth, but the beavers have to move there first. And to move there, the beavers need to have willows and aspens available to them so they can successfully over-winter. The beaver (and willow) population may be recovering, but it will be decades before they recolonize their prior domain.

The story of wolves, beavers, and willows illustrates a couple truths about economies and markets.

First, everything is connected. China’s entry into the World Trade Organization wasn’t designed to decimate wages in middle America, but the flood of inexpensive goods had that effect. The growth of open source software and the API revolution wasn’t designed to raise global productivity, but the ubiquity of cloud computing and mobile apps means software can perform tasks that used to take a full team of people. Marc Andreessen wrote his op-ed, “Why Software is Eating the World” ten years ago, and it’s still true.

Which illustrates the second lesson of the wolf reintroduction: things take time. Andressen’s article anticipated the ubiquity of Netflix, Airbnb, Uber, and crypto assets. Facebook went public in May of 2012 and has come to dominate, with Google, the advertising market. But none of these things were inevitable, and many seemed like they would fail shortly after they started. And for every multi-trillion dollar Amazon, there have been dozens of, Webvan, Friendsters, and Sun Microsystems – companies that also tried to ride the SaaS wave, but ultimately crashed.

Photo: Shalom Jacobivitz. Source: Wikipedia. CC BY-SA 3.0.

So don’t get impatient, but don’t be complacent when you see changes that should affect the global markets. It may take decades for us to understand the implications of Russia’s invasion or the Fed’s flexible policies or Apple’s new privacy policy. Like wolves and beavers and willows, we live in a complex, independent world where changes lead to changes with long and variable lags.

For investors, Shakespeare says it best: “The readiness is all.”