The hunt for oats and income


Andrew Evans

Andrew Evans

Fund Manager, Equity Value

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Quantitative easing and other extreme measures employed by central banks in the years since the credit crisis struck have often has been described as ‘a great experiment’ or similar – and it now appears that might not simply have been a metaphor. So could it really be that, all along, central bankers have been treating us like slime mould? 

According to Jordan Ellenberg’s book How not to be wrong, slime mould – or Physarum polycephalum, to give it its proper name – spends most of its existence as a single-celled organism. Under the right conditions, however, thousands of these organisms can join together in a bright yellow mass that is visible to the naked eye. 

When it is in the wild, slime mould’s snack of choice is rotting plant matter but in laboratory conditions, scientists have discovered, they cannot get enough of oats. What is more, while slime mould may not boast a brain or central nervous system to speak of and does not have feelings or thoughts, it does make decisions. 

These are great in neither quality nor number but they are decisions nonetheless. Effectively, Ellenberg tells us, they break down to ‘move away from things I do not like’ (light) and ‘move towards things I do like’ (oats). Should you have the inclination – and enough time and oats – you could persuade slime mould to move through a maze or make an exact copy of a map of the London Underground. 

Anyway, this sort of decision-making ability, which stems from slime mould’s decentralised thought process, means it could help biologists “open a window into the evolutionary dawn of cognition”, as Ellenberg puts it – hence why the organisms spend so much time in laboratories having their fondness for oats indulged. 

In one experiment, researchers put three grams of oats, in the dark, on one side of a petri dish and five grams on the other but in bright light. They wanted to see which the slime mould would prefer and, it turned out, about half the time it went one way and half the time it went the other. After the oats in the bright light was doubled to 10 grams, however, the slime mould went for that pile every time. 

Where things grew odd was when the slime mould was faced with three decisions. Given the option of one oat in the dark, three oats in the dark and five in the light, it avoided the one in the dark – as you might expect – but was no longer split evenly between the other two choices. Instead, its decision-making process apparently clouded by the extra option, it was far more likely to choose the three oats. 

Bringing this all back to investing – as you knew we eventually would – there is, we would suggest, something similar going on with income-seekers and their post-crisis options. Into their petri dish of ultra-low interest rates, central bankers have started adding an unattractive ‘one-oat’ option of negative interest yields – and suddenly hitherto less attractive alternatives start looking a whole lot better. 

To continue our analogy then, the three oats in the dark might be the shares of stable, low-volatility businesses currently so beloved by the market – leaving the five oats, which you just knew were going to be value stocks, completely out in the cold. The distraction of an extra choice, no matter how poor, apparently serves to diminish the overall decision-making process for slime mould and investor alike. 

If that sounds far-fetched, consider an environment somewhere in between slime mould and the world of investment – the nightclub. In such a situation, we understand, it has been known for people to seek the support of a wing man or woman and the slime mould experiments tell us the ideal choice would be someone who is pretty similar but just a little less intelligent, fun and attractive than them. 

As long as they pick someone who is slightly inferior to them, they could well be on for an interesting evening. Come to think of it, rather than slime mould, maybe this is where central bankers got the idea.


Andrew Evans

Andrew Evans

Fund Manager, Equity Value

I joined Schroders in 2015 as a member of the Value Investment team and manage the European Value and European Yield funds. Prior to joining Schroders, I was responsible for the UK research process at Threadneedle. I began my investment career in 2001 at Dresdner Kleinwort as a Pan-European transport analyst and hold a Economics degree.

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