(to destroy or restore our economies in a turbulent 21st century)
One of Earth’s most generous lessons for business is to “diversify.” Understanding the importance of diversity in something as complex as an economy is another matter entirely. How do economists measure diversity? And why measure it unless there are clear benefits of diversity to our communities, states, and nations?
The Ecological Insight
Understanding diversity in Earth’s highly complex ecosystems requires several approaches. The most basic approach is to count the number of different species present, what ecologists call richness. The total number of plant species in Colorado—plant richness—is about 3,200. And Colorado has half the richness of California’s flora. In Ecosystems as Models for Restoring our Economies (To a sustainable state),[1] I dedicate a chapter to describe seven forms of diversity: six forms of that have equivalent functions in ecosystems and economies, and one form of diversity that is particular to business.
Besides richness, I address two more forms of diversity here. Functional diversity, as the name implies, refers to the different functions present in an ecosystem. In a redwood forest, for instance, three major functions are the production, distribution, and recycling of energy and biological matter. And each of these functions can be performed by an abundance of species. Forest productivity is provided by trees, shrubs, wildflowers, and other photosynthetic life, to convert raw materials into living matter.
The distribution function is filled by a dense network of consumers like insects, frogs, snakes, and top predators like eagles. Ecologists often partition the distribution function into four distinct levels of consumers (i.e., four levels in the pyramid), each one feeding on the one below, in effect, to distribute biological products from the bottom of the pyramid to the top. This makes five functional groups. A sixth group is the recycling function, provided by fungi, bacteria, dung beetles, and others that break down dead organic matter and waste. These major functions (i.e., trophic levels in ecology) form the biotic pyramid of life (Figure 1).
Figure 1. Biotic pyramid of life, with six functional groups. Image by John H. Giordanengo. Image of frog eating snake by Royland Barrantes.
Informative to our economies, the more major functions that are present in an ecosystem (or economy), the more total diversity the system can support. For instance, within the primary consumer level (i.e., the level just above the plants and fungi), a great number of insects, deer, and other herbivores can exist. Those species serve the critical roll of converting plant matter into fats, proteins, and other biological products, which can now by transported step by step to top consumers. If those primary consumers didn’t exist, the dramatic interruption to the food chain would ripple throughout the pyramid.
Another form of diversity is vital to each level in the pyramid: functional redundancy. For instance, dozens of different insect species can visit a sunflower in your backyard. Should one of those insects suffer a severe decline in numbers (e.g., the honey bees suddenly disappear), several others are available to perform the critical function of pollinating sunflowers, apple trees, etc.
The Economic Insight
While species are the basic unit of diversity in ecosystems (i.e., the things we count), businesses are the basic unit of diversity in our economies. This detail brings us one step closer to understanding how economies and ecosystems are built around the same foundational components: diversity, energy, and trade.
Researchers have been applying ecological methods to quantify economic diversity for many decades. Certainly, our economies also exist via three primary functions: production, distribution (via a series of consumers), and waste-to-resources. Economists simply refer to these major groups as sectors, which can be grouped into a balanced (sustainable) trade pyramid (Figure 2). Multiple industries can exist in each sector, and an abundance of businesses support each industry.
For instance, the richness of America’s service sector is very high, as measured by the number of retailers, consulting firms, accounting firms, etc. And the richness of America’s recycling sector is very low. Regardless, each sector includes multiple industries, and each industry can have functional redundancy. The restaurant industry of San Francisco has very high functional redundancy.
Figure 2. Balanced (sustainable) Trade Pyramid.[2] Blue blocks in the pyramid represent major sectors (in bold), with example of industries in each sector (e.g., agriculture).
Critical Benefits of Diversity
Diversity bestows similar equivalent benefits to both ecosystems and economies (Figure 3) Economic research since the great depression has consistently show that economic diversity is positively correlated with economic stability, job growth, productivity, and other socio-economic benefits.[3] The more diverse a community or economy, the higher resistance it has. That is, it is better buffered against disturbances such as shifting consumer preferences, potentially disruptive technological shifts, a variety of weather-related disruptions, and so on. Communities, industries, and economies with higher diversity also have greater resilience: the speed and degree to which they can recover after a disturbance.
Figure 3. A few key benefits of diversity. Data from Ecosystems as Models for Restoring our Economies (To a sustainable state).
Insightful for our economies, ecosystems typically reach a peak in productivity with a peak in diversity.[4] When a great diversity of plants exists in the same patch of land, a greater variety of leaf types and root structures penetrate the air and the soil, allowing the community to extract a higher degree of limited sunlight, water, and nutrients—compared to a scenario whereby that patch of land is covered by one plant. That is, a more diverse ecosystem can attain a higher level of productivity with a fixed quantity of energy and physical resources (i.e., higher resource-use efficiency).
Numerous examples from business and industry show how diversity-driven strategies reduce energy consumption.1 A few examples include:
- Sustainable forestry operations that thin overly dense forests, increasing the productivity of grasses and wildflowers to support a greater number of domestic and native animals. A diversity of timber products is produced, and residual branches are used to power biomass-electricity plants, or for compost, landscape cover, and other end markets. If the forestry operation, biomass energy plant, or sustainable grass-finished grazing businesses did not exist in the watershed, that lack of diversity would not allow for an efficient use of energy. Instead, tremendous energy would be expended to import those resources.
- Ecological clusters, whereby two or more businesses in a region consume fewer raw materials, when the waste product of one becomes an input for the other. Odell Brewing Company (OBC) of Fort Collins sends its spent grains and hops to a local dairy farm, which reduces the amount of imported grain to support cows.[5] OBC also uses carbon dioxide from fermentation processes to carbonate their cans of beer. Only, they produce more than they can use. The surplus CO2 can be used by other breweries, soda manufacturers, or in hydroponic operations, reducing the need to import or manufacture that CO2 via energy-intensive processes. The more business diversity that exists in the cluster, the more effectively the waste of one can be used to supply the inputs of another.
- An economy that lacks a thriving recycling industry cannot take advantage of the tremendous energy efficiencies that come with manufacturing recycled products (compared to manufacturing from raw ore).
Research at the level of an entire economy is limited, but some studies do show that more diverse economies consume less energy per unit of output.(Templet, 1999) Increases in diversity can also lead to raw increases in productivity. The rationale is rudimentary. Economic diversity promotes innovation, via knowledge and technology spillovers across sectors.[6] Innovation, in turn, is a key means to productivity gains.[7]
The Eternal Tug-of-war Between Diversity and Energy (America’s Great Economic Extinction Event)
Significant ecological research shows that transferring exogenous energy into a prairie, forest, or other terrestrial system leads to declines in species richness, summarized in Giordanengo (2025).1 Similar trends exist in our economies, but the decline tends to happen at the base of the balanced trade pyramid: in agriculture, forestry, waste-to-resources, and manufacturing. As an ever-increasing quantity of fossil fuels (exogenous energy) have been transferred into the American economy (Figure 4), a great extinction event has occurred. Since the early 20th century, some of the most prominent declines include:
- 300,000 bakeries lost (per capita basis)
- 500 paper and lumber mills closed
- More than 600 grain mills closed
- 700,000 total manufacturing businesses lost (per capita basis)
- 5,000,000 farms lost
An infamous example is the dramatic diversity decline in America’s auto industry from 1920 to 1980, followed by near collapse of the industry in response to increasing global trade, producing a ripple effect across the seven-state “rust belt” of America still felt to this day. In the U.S., increases in the diversity of retail, services, and other up-pyramid sectors have helped to fill the void. However, there is an unequal impact on employment. Job losses are amplified by diversity losses in manufacturing, as this sector provides high value-added revenue and job creation.[8]
In total, manufacturing businesses generate 7.5 indirect jobs for each direct job.[9] Agriculture and other extractive industries create about 3.1 indirect jobs for every direct employee. For perspective, the food service and retail industries create about 1.2 to 1.5 indirect jobs for every direct employee. Perhaps more importantly, citizens who are fulfilled by manufacturing work have reduced opportunities to pursue that work.
Figure 4. U.S. energy consumption 1776 – 2024. Very top line indicates total energy consumption. Source: US Energy Information Administration (2020).[10]
The near exponential increase in exogenous energy inputs has made possible a commensurate increase in long-distance trade.(Figure 5) This in turn requires a homogenization of production (fewer producers, but each producer producing a larger quantity of products), to reduce unit costs in a highly competitive global marketplace. Counter to intuition, this does not necessarily lead to productivity growth. As the U.S. has increased exogenous energy transfers—mostly fossil fuels—and increased global trade volumes since the 1970s, innovation returns on investment have declined.[11]
Over this same period, per capita GDP growth has declined from over 8% in the 1970s to about 3% in the twenty-teens.[12]
Figure 5. Trade Policy and Key Economic Metrics: 1970 to 2022. Graph by John H. Giordanengo.
A Wild Wild One (The Silent Strength of Sauvage Spectrum)
The diversity of Colorado’s wine industry—more than 150 wineries—is essential to its success, and was the focus of a 3-part article series in Eco-Nomics on substack.[13] For Sauvage Spectrum, an award-winning estate in Colorado’s Grand Valley, diversity means growing not one, but dozens of grape varieties. Their Teroldego received a gold medal in 2023. Another variety I’d never heard of until chatting with Sauvage Spectrum’s winemaker, Patric Matysiewski, is a century-old red hybrid from Austria called Zweigelt. It hit the streets in 2025 under the name Zweigelt, whichI look forward to sipping at the Colorado Uncorked event this October.
The power of diversity often reveals itself best in the face of great turmoil. For Sauvage Spectrum, this was the ruthless fall frost of 2020 that struck Grand Valley growers particularly hard. Trunks split wide open, buds burst, and the cells of vine canes erupted. Vine canes are essential to next season’s growth.
“We had to cut them off at the ground and re-tie new canes onto the wire the following season. In addition to an immense amount of labor we lost a whole year of production.”
~ Kaibab Sauvage
Fortunately, Sauvage Spectrum applied the primeval rule of functional diversity. Their wine grower, Kaibab Sauvage, recalled that “…all of our cold hardy varieties came through the freeze relatively unharmed: Aromella, Chambourcin, and others. These were planted as safety nets after our devastating 2014 frost that wiped out nearly 90% of our vines.”[14]
Sauvage takes diversity even further by growing a wide variety of fruits across the estate. “We need a diverse selection of fruit for the entire season—color on the table, as they say at the market.” Six varieties of apricots, 20 varieties of peaches, 12 varieties of plums, as well as prunes, nectarines, and more. The French word sauvage translates to “wild,” so I would expect nothing less than a highly diverse landscape here.
The most enduring business is not the one that amasses the most possible revenue in a single year, but the one whose strategy yields adequate revenue year after year. Since no two years are the same, diversity is a critical part of that strategy. For Sauvage Spectrum, diversity also translates to a steady harvest from June to September—more continual work for Kaibab’s crew. “There are days in early September when the crew pick peaches, pears, plums, and grapes all on the same day,” Kaibab relishes.
A Peculiar Diversity Challenge
Patric raised an odd challenge for Colorado wines. About 90% of the world’s wine market is dominated by five varietals. Among them is Cabernet Sauvignon. I have to admit, it was the red wine I used to reach for on the shelf. The other four are Merlot, Chardonnay, Sauvignon Blanc and Pinot Noir. “Nobody knows Teroldego,” Patric bemoaned. Nor do they know Chambourcin, Petit Verdot, and dozens of other varieties thriving in Colorado. The collective consumer palate lacks adequate diversity. But just as Colorado’s beer palate has been expanded over the years, it’s a matter of time that we diversify our palates to enjoy some of the finest underdog wines of Colorado.
Implications for Economic Restoration
Regions and nations desiring to maintain (or even increase) the critical benefits of diversity have much to gain from nature’s wisdom, especially in this turbulent century. But to stoke diversity requires wholesale shifts in how we manage energy and trade. Those shifts are the focus of the Economic Restoration Institute. For more information, or to get involved, send us a note at info@EconomicRestoration.org. Or visit www.EconomicRestoration.org.
The team at Sauvage Spectrum, Grand Valley, CO. Photo courtesy of Sauvage Spectrum Estate Winery & Vineyard.
About the Author
John Giordanengo is the author of Ecosystems as Models for Restoring our Economies (To a sustainable state), and the president of the Economic Restoration Institute. His research and investigative interviews from around the U.S. and the globe also support his blog, Eco-Nomics. John’s work is inspired by the awe of nature, music, and our shared human struggle.
Publication Note
Portions of this article were originally published in Eco-Nomics by J.H. Giordanengo, and are approved for cross-posting here.
Notes and Literature Cited
[1] Giordanengo, J.H. 2025. Ecosystems as Models for Restoring our Economies (to a sustainable state). Anthem Press.
[2] Sustainable refers the ability of a community, region, or nation to meet its economic and social needs into perpetuity, without jeopardizing the ability of other communities or nations to meet their needs, and without impairing the health of ecosystems we rely upon. The terms self-regulating and sustainable are used interchangeably herein, for a self-regulating economy cannot, by definition, exist via continual external resource inputs from beyond its boundary. Nor can a self-regulating (sustainable) economy persist from activities that continually degrade the social and environmental resources required for its survival.
[3] Brown,L. and R.T.Greenbaum.2016. Theroleofindustrialdiversityineconomicresilience:Anempiricalexaminationacross35years. Urban Stud., 54(6),1347–1366. https://doi.org/10.1177/0042098015624870
Dissart, J.C. 2003. Regional Economic Diversity and Regional Economic Stability: ResearchResultsandAgenda. Int. Reg. Sci. Rev., 26(4),423–446. https://doi.org/10.1177/0160017603259083
Felix, A. (2012). ‘Industrial Diversity, Growth, and Volatility in the Seven States of the Tenth District’. Federal Reserve Bank of Kansas City. https://www.kansascityfed.org/
Templet, P.H. 1999. Energy, diversity and development in economic systems; an empirical analysis. Ecological Economics, 30(2), 223-233. https://doi.org/10.1016/S0921-8009(98)00085-8
[4] Diversity-Productivity Note. This is for terrestrial ecosystems. There are several confounding factors that can muddy the diversity-productivity relationship, including the use of different (or incomplete) methods to measure diversity, using too small a spatial scale to measure diversity and productivity, measuring productivity over too short a time period, and other factors.
[5] Giordanengo, J.H. 2025. ‘If a Craft Brewery was a Species, How’d it get to Texas (and then Evolve)?’ Eco-Nomics. April 24, 2025. https://johngiordanengo.substack.com/p/if-a-craft-brewery-was-a-species
[6] Feldman, M. and D. Audretsch. 1999. Innovation in Cities: Science-Based Diversity, Specialization and Localized Competition. Eur. Econ. Rev., 43(2), 409–429. https://doi.org/10.1016/S0014-2921(98)00047-6
Jacobs, J. 1969. The Economy of Cities. Random House.
[7] Ortega-Argiles, R. and P. McCann. ‘The Innovation-Productivity Paradox’. In Background Paper for the OECD-EC High-Level Expert Workshop Series, Productivity Policy for Places, OECD: Paris, France, 2021.
[8] Via demand for raw materials, production of component parts, and other goods and services tied to manufacturing
[9] Bivens, J. 2019. ‘Updated employment multipliers for the U.S. economy’. Economic Policy Institute. https://files.epi.org/pdf/160282.pdf
[10] EIA. 2020. ‘Nonfossil sources accounted for 20% of U.S. energy consumption in 2019.’ U.S. Energy Information Administration. https://www.eia.gov/todayinenergy/detail.php?id=44277
[11] Romer, P.M. 1994. The Origins of Endogenous Growth. The Journal of Economic Perspectives, 8(1), 3–22. doi:10.1257/jep.8.1.3. JSTOR 2138148.
[12] Macrotrends. 2023. ‘U.S. GDP Per Capita.’ Macrotrends. https://www.macrotrends.net/global-metrics/countries/usa/united-states/gdp-per-capita
[13] Giordanengo, J.H. 2025. ‘Chasing Grapes, Shaping Forces, and Crushing Fears’ Eco-Nomics. https://johngiordanengo.substack.com/p/chasing-grapes-shaping-forces-and?utm_source=substack&utm_content=feed%3Arecommended%3Acopy_link
[14] Sauvage, K. 2024. (Winegrower, Sauvage Spectrum Estate Winery and Vineyard). Interviewed over phone by John Giordanengo, 18 November, 2024.
