The landscape of innovation in bacteria, battleships, and beyond.

We draw lessons from microbial experimental evolution and naval warfare to improve the understanding of innovation in financial markets. Major financial innovations often arise without explicit societal planning because novel approaches can be favored by markets, in a manner strikingly parallel to natural selection. We utilize the concept of an adaptive landscape to characterize environments that increase the speed and magnitude of innovation. We apply this adaptive landscape framework to innovation in portfolio management. We create a general taxonomy for understanding and nurturing innovation.