Business 3.0

Enlarge

The 6th Annual Fast 50

• Business 3.0
• Q&A: C.K. Prahalad - Pyramid Schemer
• Q&A: Pierre Omidyar - Empower Seller
• Q&A: Arnold Schwarzenegger - The Germinator
• 2007 Readers Favorites

Treasure From Trash

Markets value what they measure, and practicing ecologically innovative capitalism will require us to measure our waste streams much more effectively. If we are to clear the Darwinian hurdle looming before us, we simply must make ourselves accountable for our waste, and make markets for it. This realization is precisely what has made the nascent trade in carbon credits such a success, but even that only hints at the innovations yet to come.

Making markets "tell the ecological truth," to use environmentalist Lester Brown's elegant phrase, will require a complex blend of policy change and entrepreneurial activity. A good start would be reducing the income tax and augmenting it with graduated taxes on ecologically harmful activities, along with federally consistent mandates requiring companies to take greater responsibility for their own waste streams and for their products at end-of-life. These reforms would align both consumers' and businesses' understanding of a given product's total cost to the planet, and allow both to make more informed decisions.

Practicing such "true cost" economics will unlock a powerful wave of product redesign, much of it hidden from the consumer's eyes, as companies seek to lighten their own burden when they get a product back at the end of its useful life. A focus on the total life cycle will amplify an entire nascent branch of creative engineering: Design for low-cost disassembly will become as important as design for low-cost assembly, with elements such as lead-free solders, modular construction, snap-fit rather than epoxy-based joints, and biodegradable plastics becoming the norm. Consumers would benefit from products that last longer, are easier to fix when they break, and become the basic inputs to other industrial processes when they're taken out of commission.

By attaching economic value to the elimination of waste, we also increase the likelihood that innovators will seek out and discover that rarest of capitalist prizes: the twofer. Enterprising 21st-century capitalists will make a name and a fortune for themselves by getting paid twice--once for eliminating some bit of a harmful waste stream, and a second time for spinning that waste into industrially useful gold.

The need--and opportunity--is most acute in today's consumer electronics industry. Americans currently dispose of 128 million cell phones a year, only 1% of which are diverted from landfills. This appalling number isn't even counted in the 2 million tons of used electronics we also discard annually. The waste from such devices contains, according to the EPA, substances that are toxic when burned. Worse, in landfills, they seep into the groundwater and never break down. Somewhere out there, the lead, cadmium, beryllium, mercury, and a dozen other unpronounceable biohazards from your first home computer and your first Miami Vice-era 3-pound cell phone are still sloshing around.

Village-to-Village Networks

One of the greatest challenges in providing consumer services to the world's poorer citizens hasn't been lack of intent or even lack of resources, but the lack of efficient markets--an effective way to connect, aggregate, and deliver services to enough people to create the scale that attracts significant investment.

Now, however, our painfully slow but inexorable progress toward closing the global digital divide is finally paying dividends that, along with new thinking about social networks, will transform the way we think about providing services to consumers at the bottom of the global socioeconomic pyramid.

Consider the case of Internet-based microfinance. In 2006, the Nobel Peace Prize was awarded to Muhammad Yunus, founder of Grameen Bank and a pioneer in microlending--tiny business startup loans made mostly, in Yunus's case, to poor Bangladeshi women. Over the course of 30-plus years, Grameen has helped more than 4 million customers a year escape absolute poverty by treating them like partners and customers instead of mere handout recipients.

The next step in the evolution of such approaches involves digitizing and globalizing them. For example, a U.S. organization called Kiva is combining microfinance with a peer-to-peer Internet platform that allows individuals here in the West (or anywhere) to make direct microloans to qualified individual entrepreneurs on the other side of the world. When the loan is repaid, the money may be reinvested or withdrawn. Run by alumni of TiVo, Google, and PayPal, among others, Kiva (which means "unity" in Swahili) is bringing market efficiency, intimacy, and global reach to the microlending phenomenon. It's also creating new global networks of entrepreneurial and financial expertise and, most important, creating the kind of social connectivity through which other services will be delivered.