Existential Economics
Today’s economic choices are determining the future of mankind. Population trends suggest we are headed toward a planet of 9+ billion people. Recent global political and resultant economic decisions imply a quality of life for many billions ranging from unpleasant to nonexistent. Unless we change course, a “better life” will be the reality for a shrinking and ever more threatened elite.
These problems stem from outdated assumptions about resources, prosperity, and happiness. It starts with the belief prosperity derives from the ownership and control of a set of finite resources, be those land, oil, gas, water, gold, or other substances we deem essential for modern life. It exacerbates that belief by assuming the path to happiness is the ability to consume ever greater quantities of those finite resources. Our current economic model combines a “use it and lose it” mentality (dig it up—burn it – bury it; or build it – consume it – bury it) with a zero-sum business model (because the valuable resources from which to do or make stuff are finite; whoever owns those resources wins). In a world going from 7.3 billion people, to 8.5 billion by 2030 and 9.7 billion by 2050, that economic model means an ever-smaller pool of winners and an ever-greater number of angry and dissatisfied losers. With media and advertising egging us on to ever-greater levels of consumption, less and less of which are affordable to most, it is not surprising most voters in democratic elections are disillusioned and disappointed.
GDP (the sum of consumption, investment, government spending and net exports) is the conventional measure of economic health. But GDP, in its very definition, is an old economy concept because it assumes we must consume a resource to benefit from it. In an ever-expanding world of finite resources, that model will fail.
It need not be that way. There is a different set of economic choices that will provide increasing prosperity and happiness to a planet of 9+ billion humans. Those choices require us to rethink the term “resources.” What does a resourcient economy look like? It focuses on maximizing sustainable, sharable, and expandable resources and measures GDP accordingly.
Sustainable Resources. By “sustainable resources” we mean resources used in a closed loop fashion, where nothing is lost and where the faster and more efficiently we recycle those resources, the greater the number of people that benefit from them. Using resources this way means we can grow the economy by simply increasing the cycle speed by which that resource is again provided for re-use. Renewable energy sources, such as wind, solar, and hydropower, are a good example of sustainable resources. Recycling and eliminating waste are other ways corporations are profiting from sustainable resource use.
Current GDP-based models rarely charge us the costs which our use of finite resources impose on others (such as pollution effects) and they impose no penalty for the destructive use of a finite resource (a use that prevents its ever being used again by others). As a result, we undercount both the costs of and economic benefits possible from a resource because we don’t net them against system costs. A resourcient economy provides greater benefit by increasing resource turns (same as greater inventory turns improve supply-chain economics) and eliminating systemic resource losses.
Sharable Resources. The next way to grow economic benefit is to make sure our sustainable resources are in the hands of those who need them rather than sitting idly and producing no net economic benefit. By “sharable resources” we mean the much more efficient use of things we own but use infrequently. Our cars sit unused for over 95% of their lives. Building highly efficient sharing models for cars is a good example of the sharable resource economy. Car sharing, house sharing, office-space sharing, tool sharing, and job sharing are all examples of making more productive use of a resource. If we can transform what was a consumptve practice into a use and experience practice then a sharing economy can make us happy in ways today’s definition of GDP simply doesn’t measure.
Because our current consumptive business and legal models don’t jell well with these newer more flexible use and experience models, we are experiencing friction in changing to these new modes. Once that friction is ironed out, these systems will provide more human and economic benefit from the same underlying unit of resource. Expanding software and network technologies are increasingly providing tools to support far greater sharing of an ever-broader set of resources and are spreading the ability to “experience” a resource to all corners of the earth.
Expandable Resources. By “expandable resources” we mean a resource that can simultaneously be used by many people at once – software being a great example. Inventing and building such expandable resources means a single product can now reach as many people as we can connect to it without ever “using it up.” Applications software, digital entertainment, digital music, digital photos and art, and educational software are all examples of expandable resources. Once created, these resources can be distributed to ever greater numbers of people, enriching every one without ever using up the original resource. The greater the data and communications networks we have, the greater the economic wealth that can be produced by these expandable resources.
An economy that moves us away from the old consumptive model to a new model of sustainable, sharable, and expandable resources is one that can provide better lives for all of us. Here is how we build that resourcient economy:
Start Resourcient Companies. Job growth comes from new businesses, not existing big or small businesses – so focus on things that allow new economy businesses to be formed in the places you need jobs and make sure they embrace resourcient principles.
Embrace Creative Destruction. Accelerate, don’t resist creative destruction – stop trying to save dying old economy industries and focus attention on growing new resourcient businesses. Part of accelerating creative destruction is rapidly weeding out the failures—substitute diversification and experimentation for protectionism. Rapidly kill what doesn’t work and rapidly replicate what does. Let people make mistakes, especially lots of small ones rather than waiting to make big ones. Enable, don’t resist, newer better business models.
Focus on Diversity. Resourcient businesses are smaller, more diverse, more modular, more interconnected, nimbler, and have more rapid iteration cycles.
Build in Resilience. Businesses that are diverse and sustainable are also more resilient. Resourcient models for resilient energy include renewable, distributed, networked, diverse, and non-polluting. Resilient factories include leveraging new technologies and modern supply chains. Resilient buildings incorporate live/work/play spaces that are energy-efficient and self-sufficient. Resilient agriculture includes leveraging new technologies, big data analytics and more sustainable farming practices.
Build Infrastructure that Pays Back. Build the things that support the resourcient economy, such as a smarter grid, smarter cities, or smarter transport networks – the same kind of infrastructure we used in building out the Internet and broadband communications. Don’t build bridges to nowhere, airports for no one, or other local “dig-a-hole, fill-a-hole” jobs local politicians support, but make no policy sense.
Leverage Growth into New Places. Leverage job and company growth from places like Silicon Valley, New York, and Research Triangle into smaller, more affordable, and up-and-coming communities by combining those displaced by high-cost of living with those needing new jobs in the new communities. Take the resourcient economy from the places it exists to those where it is needed.
Focus on New Business Models. Focus on businesses like the new apparel companies springing up everywhere – they are high style, diverse, local, use new high speed global supply chains to enable small new, local businesses selling over the Internet to compete nationally with global brands. Focus on what is happening with microbreweries, small coffee roasters, and new local slow food restaurants. Focus on Kickstarter campaigns to manufacture cool new locally built products. Here too, don’t protect jobs in the big national chains, grow new small businesses. These new jobs incorporate smarter resource use, sustainability, design and style, support more relaxed lifestyles, focus on quality of experience, and incorporate human-to-human services interactions with the products they sell.
Leverage Low Energy Costs. Take advantage of low natural gas prices to bring back factory jobs that leverage low energy costs; do the same with wind and solar. We benefitted hugely from bringing data and communications costs to near zero; imagine what doing that with clean renewable energy can promote in terms of economic growth.
Support New Workstyles. Focus on new urban lifestyles like shared work spaces and live/work/play integration – move these concepts from the city to smaller communities. Encourage rather than discourage the gig economy because it makes people entrepreneurial and allows the unemployed to enter jobs more gradually and be entrepreneurial. Focus the pushback on companies like Uber and Airbnb on making them pay their fair share rather than on killing them.
Use Local Government. Drive these programs through state and local governments to allow for and encourage local experimentation, but also to encourage the inclusion of local attributes that make life in the local community more attractive – including better eating and drinking, better entertainment and arts, and healthier sportier lifestyles that also reduce healthcare costs – make our lifestyles as resourcient as our businesses.
Focus on Capital Gains and Dividends. Focus not on income tax credits but on long-term capital gains – create incentives to investors to invest in these resourcient new companies, new infrastructures and vibrant communities but make them commit to 5+ years rather than annual tax credits. Create business models that encourage owners to build more resourcient real, energy and infrastructure assets and reward them with the higher wages, rents and yields these resourcient assets produce.
Encourage Long-Term Investment. Involve pension funds, family offices and other long-duration investors by creating programs that focus on long-term value and wealth creation (particularly in resilient businesses) and on dividend-paying new infrastructure.
Resourcient is an investment firm founded to invest in resourcient businesses and communities -- those that are prescient about where they are headed, resourceful with their people and assets, efficient in the way they utilize scarce resources, and resilient in their ability to thrive in a rapidly changing world.. We are focused on maintaining an active and open dialogue with like-minded individuals and organizations and on sharing lessons learned as we collectively explore the best ways to make all of us more resourcient.
