July 8, 2025

Lessons From the Squirrel

Last week I watched a squirrel in my backyard diligently burying nuts—despite the mid-summer heat. While I saw it eat a few, it was really preparing for a future season of scarcity. In other words, wintertime. It struck me: isn't that exactly what investors should be doing? Navigating changing conditions, building reserves, and adapting strategies so they not only survive but thrive.

While human ingenuity certainly drives much of our economic progress and innovation, sometimes the most profound and insightful lessons on handling the basic concepts of investing come directly from nature's most resilient innovators. The animal kingdom, through thousands of years of evolution and countless adaptations, offers compelling examples of strategic resource management, remarkable flexibility, and ingenious problem-solving—principles that hold remarkable relevance for successful investment practices and achieving sustained financial goals.

Think about that diligent squirrel, tirelessly burying nuts. These unassuming creatures truly embody the essence of prudent preparation and foresight. Squirrels don't just consume all available resources immediately; they meticulously gather and distribute their hoards, always anticipating future periods of scarcity. What's truly surprising is that they don't remember the precise location of every single nut they bury—some estimates suggest they forget about 70 – 80 % of them. This "forgetfulness" is actually a crucial ecological service, as those forgotten nuts often sprout into new trees, making squirrels unwitting, yet vital, forest planters.

Despite this apparent imperfection, their ability to find enough food to survive the winter, relying on their excellent sense of smell and memory for general areas, is remarkable. They even employ a clever cognitive strategy known as "spatial chunking," where they group similar types of nuts together in specific hiding spots, making retrieval more efficient later — a similar approach to methods computer scientists have long used to store and retrieve data efficiently.

For squirrels to survive harsh winters it takes the power of proactive resource management. For us humans, a relevant analogy is the value of consistent, long-term contributions to our investment accounts and the wisdom of diversifying our assets across various investments. Not to mix metaphors, but squirrels are adept at not putting all their eggs in one basket.

Another example of adaptation from the animal kingdom is the majestic bear, whose adjustment to winter provides a compelling lesson in strategic patience and cycle recognition. Rather than trying to tough out the full brunt of winter's extreme scarcity and cold, bears enter an extended period of hibernation, dramatically slowing their metabolism and relying on vast energy reserves accumulated during more abundant seasons. It's a truly incredible physiological feat: during this deep state of sleep, a bear's heart rate can drop from 40 – 50 beats per minute to just 8 – 12. Their body temperature lowers, and they amazingly don't eat or drink for months. Yet, unlike some deep sleepers, they can still be roused relatively quickly if necessary—just one reason why they say, "don't poke a sleeping bear."

Perhaps even more astonishing, female bears often give birth during hibernation, nursing their cubs from their stored fat. This entire process, from the prehibernation phase to their eventual appearance in spring, is not a sign of weakness, but an incredibly intelligent, energy-conserving survival mechanism honed over millennia. They emerge with renewed vigor when environmental conditions become favorable again, ready to forage and replenish their resources. This behavior should remind all investors of the importance of disciplined patience and strategically managing through market downturns, rather than reacting impulsively when market conditions are unfavorable.

Moving from land to sea, another example of nature's ability to adapt comes from the octopus - an extraordinary creature renowned for its intelligence and unparalleled physical adaptability, offering insights into navigating complex, and ever-changing, environments. With its astonishing ability to instantly camouflage, squeeze through impossibly small spaces, manipulate objects, and use simple tools, the octopus truly exemplifies intelligent flexibility and continuous problem-solving.

An octopus has three hearts – two that pump blood through its gills, and one larger heart that circulates blood to the rest of its body. And its blood is a distinctive blue color, thanks to a very rare copper-based protein. This, naturally, plays a factor in how an octopus is able to camouflage itself in the ocean. These creatures are masters of disguise, able to change both their skin color and skin texture in mere seconds to perfectly blend with their surroundings or mimic other marine animals. Their problem-solving abilities are advanced, with documented cases of them successfully opening jars, navigating complex mazes, and even learning by observation. This remarkable creature, with its decentralized nervous system (think diversification) comprised of a central brain and "mini-brains" in each arm, serves as a great reminder of the crucial need for adaptive thinking and continuous learning in environments that are constantly evolving.

The animal kingdom, in its diverse forms and through its myriad evolutionary triumphs, provides a compelling and timeless framework for understanding resilience and success in dynamic environments. From the squirrel's meticulous preparation and foresight in managing resources, to the bear's patient wisdom in conserving energy during lean times and understanding cycles, and the octopus's intelligent flexibility and capacity for continuous learning in the face of new challenges, these natural examples serve as powerful reminders. They show us that thriving in the financial markets, much like in the wild, often hinges not on brute force or knee-jerk reactions, but on a combination of strategic flexibility, thoughtful foresight, and a disciplined, evolutionary approach to navigating change.

The article above is an excerpt from the Q3 Quarterly Market Commentary. Here is a link to the most recent issue. Complete the form below if you would like to get this emailed to you each quarter.