Business lingo is packed with terms borrowed from the animal kingdom—bull markets, bear raids, fat cats, and more. But when it comes to understanding human money habits, animals have a lot more to offer us than colorful industry jargon.
Indeed, market principles often assumed to be unique to humans—competitive pricing, monopolies, or home rental agreements—are observable in the natural world too. Behavioral ecologist Ronald Noë and theoretical biologist Peter Hammerstein have even developed an academic framework called “biological market theory” to explore these analogies.
So if you'd like some solid money tips you can apply to your personal life, here are three wildlife strategies from Mother Nature’s most enterprising species.
Always have an emergency fund
Financial advisors typically recommend people set aside three to six months’ worth of expenses in case of unexpected hardships. The wisdom of this approach is also widely observable in nature; many species store food in caches to be consumed at a later time. These animals generally fall into two camps: Larder-hoarders, like bees and hamsters, that accumulate food stores in one location, and scatter-hoarders, like wood mice and marsh tits, that distribute food in many small caches.
While it’s convenient to store food in one location, larder-style, it also exposes animals to theft, according to evolutionary ecologist Anders Brodin, whose 2010 study in Philosophical Transactions of the Royal Society B outlined scatter-hoarding in nutcrackers, squirrels, and other animals. “If a stronger [animal] finds the stores, the hoarder risks losing it all,” he said. “Small birds such as passerines tend to be scatter-hoarders while raptors and owls may pile up prey around the nest.”
Likewise, it is not a good strategy to keep your net worth in stacks of cash and coins at home like Scrooge McDuck, unless you have a really good security system. Scatter-hoarders ward off these risks by, essentially, diversifying their portfolio. You can apply this strategy to your own savings by investing in an index fund, which typically has hundreds of holdings, rather then sinking all your dough in, say, bitcoin. And before you do any investing, it's smart to have an emergency fund to cover any unexpected expenses like your last trip to the dentist or those $500 plane tickets to New Orleans.
Don't fall for overpriced crap
We humans can be easily fooled into wasting money on flashy brands or avoiding cheap items because we assume they are low quality. Capuchin monkeys, meanwhile, are wiser about pricing, according to a 2014 study in Frontiers in Psychology in which monkeys were introduced to jello and flavored ice treats with various colors, some of which were priced higher than others.
Even after learning the pricing for each treat, the monkeys did not favor the more expensive option when they were given the chance to freely choose it. They seemed to understand that the quality was the same, regardless of the cost, which contrasts with similar studies on humans. So the next time you want to splurge on an expensive product simply because the cost implies high quality, you might want to ask yourself: What would a capuchin do?
Understand your gambling risks
Capuchins may be be able to see past branding bullshit, but they do share at least one bad financial habit with humans: the reflection effect. Like humans, monkeys are risk-averse if they start with a small fund and bet on the possibility of increasing that initial amount. Conversely, they are more open to risk if they start with a large fund and have to bet on possible losses to that amount.
In a 2011 study in the Journal of Experimental Psychology, monkeys started out with one grape, and were given the choice to receive a bonus grape or place a bet that could result either in two bonus grapes, or no bonus grapes. In this case, the monkeys tended to take the first safe bet of one bonus grape.
But the results were different when vendors presented three grapes to the monkeys. The first vendor removed one, leaving the monkeys predictably with two grapes, while other vendor repeated the bet that could end with all three grapes, or just one. Even though the outcomes of the tests were the same, the monkeys preferred the risky vendor in this case.
It seems that some primates are more willing to risk everything if they start out with more, which could explain why people are so susceptible to the “sunk cost fallacy.” If you’re resistant to selling a stock that’s dropping in value, or scrapping a project that hasn’t broken even, you may be falling victim to some deep-rooted monkey wiring.
“Merely learning about these biases (sadly) is not enough to shut them off,” author Laurie Santos warns. “To circumvent these biases we need more than self-awareness—instead, we need to set up situations and policies that use these biases to our advantage.”
In other words, you need a financial plan so you won't get sucked into making bad money decisions on the fly. And while cute critters can teach us some lessons about saving for the lean times and not falling for overpriced goods, in the end we're all just animals struggling to get by.