How a less energy-intensive and more regenerative economy will allow the developing the world to advance without breaching ecological boundaries.
In this episode you’ll learn:
- What is the difference between circular and linear supply chains.
- What is doughnut economics.
- What are adaptive preferences and how they led David to trade in a BMW 650i for a Toyota Prius.
- How electric vehicles and the proliferation of solar panels are leading to a less energy-intensive economy.
- How the reduction of litter is an example of changing culture.
Show Notes
Small Is Beautiful: Economics as if People Mattered by E. F. Schumacher
The Next Evolution in Economics: Rethinking Growth by Stan Stalnaker—Harvard Business Review
Accelerating Circular Supply Chains for Plastic—Closed Loop Partners
Closed Loop Partners About Page
Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist by Kate Raworth
2017 : What Scientific Term Or Concept Ought to be More Widely Known? by Steve Fuller—Edge
Off-grid Electricity is Reaching into the Remotest Homes by Nick Butler—Financial Times
Sting-Ray Afternoons: A Memoir by by Steve Rushin
A Handmade Life: A Search for Simplicity by William Coperwaithe
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Episode Summary
The global economy is shaped by our personal economies—the choices that each of us makes regarding what we invest in, spend our money on, and what we consider to be valuable. In this episode of Money For the Rest of Us, David explores why bigger is not always better when it comes to the growth and development of the global economy. Many of us are consumed with the drive to earn more and be more productive, but maybe what we should be striving for instead is a life lived fully and well. Instead of partaking in an economy that creates with wasteful abandon, why not invest in a regenerative economy—one that only creates what needs to be created, fulfilling only what the economy needs.
Trading a linear global economy for a circular one
While the U.S. economy is mostly made up of a linear economic model—one that pushes ever upwards in size and offerings—there are many other economies in the world that pursue a circular model. Reducing waste and promoting a healthy social atmosphere, it is possible to give to the environment as much as is taken from it, creating a sustainable and environmentally-conscious economy. In some aspects, the U.S. economy is incredibly wasteful when compared with others around the world. Instead of recycling our goods, we simply create new ones and throw out the old ones. While recycling certainly exists in the United States, Americans don’t utilize it to its full potential, keeping the economy on a linear track instead of a circular one.
While a circular economy should be the goal, it is important to identify the limiting growth factors of a circular economy. There are constraints. David shares the concept of a “donut economy,” wherein you have the small circle made up of the world’s needs—food, shelter, water, education, health, and energy. The outer circle represents the boundaries set by nature—what the environment can provide. The goal is to create a regenerative economy that satisfies the needs of all the people in the world without penetrating the boundaries set by nature’s capacity for provision.
What are you aspiring to?
Can what we eat, drink, and purchase really make a difference in the global economy? Certainly! David explains that much of what we invest in and purchase has its roots in what we aspire to be and have. The decisions we make influence the world around us—including the economy. Our spending and lifestyle decisions can be disciplined and curbed by the voice of prior experience. Instead of always reaching for the newest thing or latest fad, taking time to question the impact of a decision on a regenerative economy and planetary boundaries will help shape the global economy. David uses the example of a poor purchase choice he made and how it affected his decision later on to make a healthier and wiser purchase. Buying a Prius ended up being a much better decision than buying a BMW 650I. Taking into consideration the cost per mile of each model and the impact each model had on the environment, he reshaped his aspirations and desires to reflect a more regenerative mindset.
Energy transitions can help create a stronger global economy
One of the most needed resources is one of the most wasted in the U.S. economy—energy. Renewable energy sources are best—investing in wind and solar technology will help propel a regenerative global economy mindset forward. Consider how much energy an electric car will use compared to a gas car. The goal is to create an economy that is more efficient, one that uses less energy per dollar of goods produced. The well-being of each individual in the global economy should be the overarching goal of the circular model. Taking part in recycling programs, installing solar panels for renewable energy, and making conscientious purchases can all help build the health of the global economy.
How then should we live?
We have the capacity to change—to retrain our mindsets when it comes to shaping our aspirations and rediscovering beauty. What we consider desirable and beautiful is often influenced by the culture we live in. Our perception of what is good and beautiful is bombarded by what the beauty industry tells us. But who is to say that Hollywood’s idea of beauty has to be the defining opinion. David encourages listeners to define for themselves what is beautiful and to make conscientious decisions based upon whether or not a purchase is helping humanity and the planet or harming it. Invest in quality, not quantity. Consider the “pedigree” of a purchase. Where was the product made, by whom, and at what price? Is your purchase helping foster a beautiful, simple, and regenerative global economy or is it fostering a linear economy? Each person’s decision counts. Each has the power to shape the world.
Episode Chronology
- [0:20] Creating a global economy that is better—not bigger.
- [3:18] A circular economy is better than a linear one.
- [6:20] The growth constraints of a circular economy.
- [9:08] Being wise in our aspirations.
- [12:55] David’s Tesla experience changed his perspective on investments.
- [14:52] The power of energy transitions.
- [18:02] Making more economical choices concerning energy transitions.
- [20:04] How are we judging our well-being?
- [23:07] Redefining what we consider beautiful.
- [24:17] Making a better global economy begins with you.
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340: Climate Change, ESG, and What Should Investors Do?
351: How to Profit From Carbon Investing While Combatting Climate Change
352: Is This the Key to Wealth, Freedom, and Happiness?
413: What if the World Stopped Shopping?
Transcript
Welcome to Money for the Rest of Us. This is a personal finance show on money, how it works, how to invest it, and how to live without worrying about it. I’m your host David Stein. Today is episode 262. It’s titled, “Better Not Bigger; Circular Not Linear.”
What am I talking about? Well, we’re talking about how the global economy, and our personal economy, is evolving where everything doesn’t have to be about growth, in terms of getting bigger, nor does everything have to be this upward straight line.
Rethinking growth
I’ve thought about this as I’ve read Paul Jarvis’s book, Company of One: Why Staying small is the Next Big Thing for Business. And he was talking about one-person business, something like I run. He mentioned that he lives in British Columbia on the coast. And he surfs every day. He was out surfing with his accountant and his accountant said, “I’m stoked. I just about made enough to take the rest of the year off to go rock climbing.”
The year is 8 only months in and he says he’s done, he’s made it all. Jarvis was shocked by this, wasn’t sure quite what he meant. And the accountant explained that he had calculated what he needed, how much profit did he need in order to cover his cost of living and to put a decent amount away for savings. And once he reached that point, he felt he had enough. He didn’t want to grow to be a bigger company, to open up offices, to hire more employees. Jarvis says, “his focus in his business was being better, not growing bigger.”
This idea of continuing to grow bigger, and I saw this as an investment advisor, we wanted to make our investment firm bigger over time so everyone could make more money, we could give out bigger raises. But there’s a way to grow bigger without necessarily growing revenue, selling more stuff.
Stan Stallmaker wrote an article back in 2009 in the Harvard Business Review. It was titled, The Next Evolution in Economics: Rethinking Growth. He writes, “Growth becomes one of several life-cycle stages that are primarily about replenishment. Instead of growing in size and scope, companies grow in capabilities, processes, and offerings. New ones come along, old ones die. Just like cells, growth becomes regenerative. Only what needs replacing is replaced, reducing waste and improving society along the way.”
He gives an example of a brewery in India that is taking chaff and grain, sort of waste products from the brewing process, to create fertilizer and biofuels. He mentions the Swiss wood furniture maker Katika, that is reforesting at a rate greater than what it produces.
I recently got an email from a woman who is the senior director of design at a large luggage maker. And in her work she says she “actively pursuing a way to address the linear petrochemical conversion model under the thumb of which all of our consumer goods are produced today.”
It’s linear. Inputs go in, outputs— they make luggage and then when luggage is done you throw it away when it wears out. It’s a very linear process. Now she says she’s had some success getting the adoption of recycled polyesters into their lines. But she’s thinking linear: how can this be regenerative?
Circular supply chains for plastic
She sent me a paper by Closed Loop Partners. It was titled, “Accelerating Circular Supply Chains for Plastic.” The listener that sent me this paper listened to it live, the live presentation, and was profoundly impacted by it. She says, “It was the first time for me, I was listening to a qualified person backed by some huge industry players such as Google, speaking about actual financial opportunities via investment in closed loop technologies for plastic and petrochemical feedstocks.”
Closed Loop Partners, they’re an investment firm and they’re focused on building a circular economy. They point out that the linear patterns of consumption have been great, in that we have these big petrochemical pipelines and it gets brought down into single-use plastic that’s cheap and efficient, but they point out, now we need to go from this recycled plastic back to the pipe where the plastics are made. It’s circular, as opposed to just going from making it, using it, and disposing of it in the landfill.
Right now when you look at plastic, 90% ends up in the landfill or incinerated. We’re certainly recycling some. One of the problems is recycled plastic, in its current form often doesn’t perform as well as prime or virgin plastic. And it’s expensive. The whole process now for recycling plastic, reconstituting it, and using again costs up to $1,000 per ton. It’s much more expensive than just buying new plastic.
So in the paper, they go over 60 different technology providers. Purification process, in terms of cleaning the plastic, technologies related to that. The decomposition, breaking it down, in terms of the molecular bonds or conversion, breaking it down into hydrocarbons that could be used in petrochemicals. But the idea is a circular process, regeneration. Going from linear to circular. And we need to, in our global economy.
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