More Than You Know - by Michael Mauboussin

[HenryTo]

On "Fitness Landscapes" on page 131 to 132:

There are three broad landscapes for companies, namely stable, coarse , and roiling. Quoting Mr. Mauboussin (who runs money with Bill Miller):

1) Stable: These are industries where the fitness landscape is reasonably stable. In many cases, the landscape is relatively flat, and companies generate excess economic returns only when cyclical forces are favorable. Examples include electric and telephone utilities, commodity producers (energy, paper, metals), capital goods, consumer nondurables, and real estate investment trusts. Companies within these sectors primarily improve their fitness at the expense of their competitors. These are businesses that tend to have structural predictability (i.e. you'll know what they look like in the future) at the expense of limited opportunities for growth and new business.

2) Coarse: The fitness landscape is in flux for these industries, but the changes are not so rapid as to lack predictability. The landscape here is rougher. Some companies deliver much better economic performance than do others. Financial services, retail, health care, and more established parts of technology are illustrations. These industries run a clear risk of being unseated (losing fitness) by a disruptive technology.

3) Roiling: This group contains businesses that are very dynamic, with evolving business models, substantial uncertainty, and ever-changing product offerings. The peaks and valleys are constantly changing, ever spastic. Included in this type are many software companies, the genomics industry, fashion-related sectors, and most start-ups. Economic returns in this group can be (or can promise to be) significant but are generally fleeting.