It’s been observed plenty of times, under experimental conditions and in the wild. It’s macro-evolution that is the problem... and convincing observation of its mechanisms in action remains elusive.
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So what’s the better explanation for the variety of life we observe?
That is the question, isn't it? That's why we do science. This question requires more investigation before we can decide we have the answer.
The current model probably gets a good many things right, but it isn't perfect. That's a classic sign of science-in-proress.