Christopher Marquis | Negative Externalities... How Corporations Privatise Their Upside By Socialising The Downside

Youtube - https://youtu.be/TQVWUdFibC8

The Profiteers - https://www.amazon.com/Profiteers-Business-Privatizes-Profits-Socializes/dp/1541703529

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Christopher Marquis spent 10 years as a professor at the Harvard Business School, he’s also worked as a professor at Cornell, the Harvard Kennedy School and is currently a professor at the Judge Business School in Cambridge, where I was lucky enough to record this in person with him.

It was quite a neat experience actually, after we did the interview, Christopher treated me to a lunch in one of the Cambrdige college halls where in proper Friday British fashion, a perfect Fish and Chips was served.

Christopher has authored three books, but the subject of this interview was his latest… Profiteers, How Business Privatizes Profit and Socializes Cost.

Some of you may have noticed a recurring question around ‘negative externalities’ in several of my interviews this year… particularly with Johan Norberg most recently. Well, Adam Lantz, who listens to this podcast reached out to me in response to the JOhan interview and said. If you really wanty to talk externalities, than you’ve got to talk to this guy.

Johan Norberg Spotify - https://open.spotify.com/episode/4ujVUlq3BbhTDBhBFnaR5S?si=46b8333b866341da
Johan Norberg Apple - https://podcasts.apple.com/us/podcast/johan-norberg-does-capitalism-fail-to-price-in-negative/id1540424160?i=1000671395087

And so I wrote to Christopher immediately, read his book, booked the flight and was greeted with so much generosity and hospitality it was a bit of a pinch myself moment, because even though this podcast creates 0 dollars in revenue, it’s instead introducing me to a wealth of experience.

This episode with Christopher is negative externalities all the way down… with specific attention to plastics, agriculture and clothing.

00:00 - Christopher Marquis
02:27 - The Externality Iceberg
07:57 - The Plastic Iceberg
14:47 - Can A Free Market Price These Negative Externalities?
26:04 - Agriculture Iceberg
41:07 - We Consume Via Our Means Not Our Morals
42:41 - Clothing Iceberg
52:33 - Egregious Cases Of Greenwashing
54:39 - Zoom & Netflix? Externality?
1:07:22 - The Jevons Paradox
1:08:43 - Just Speed Bumps On The Way To Prosperity?
1:12:35 - Hitchhikers Guide To The Galaxy, What Are The Right Questions?
1:16:57 - Serendipity In Christopher's Life

🍻☕: https://www.buymeacoffee.com/ryanhogg
Follow me on Instagram – @ryanfhogg

Transcript

SPEAKER_01 0:00

Christopher Marquis spent ten years as a professor at the Harvard Business School. He's also worked as a professor at Cornell, the Harvard Kennedy School, and is currently a professor at the Judge Business School in Cambridge, where I was lucky enough to record this in person with him. It was quite a neat experience, actually. After we did the interview, Christopher treated me to a lunch in one of the Cambridge College Halls, where in proper Friday British fashion, a perfect fish and chips was served. Christopher has authored three books, but the subject of this interview was his latest: Profiteers, how business privatizes profit and socializes cost. Some of you may have noticed a recurring question around negative externalities in several of my interviews this year, particularly with Johann Norberg most recently. Well, Adam Lance, who listens to this podcast, reached out to me in response to the Johan interview and said, if you really want to talk externalities, then you've got to talk to this guy. And so I wrote to Christopher immediately, read his book, booked the flight, and was greeted with so much generosity and hospitality that it was a bit of a pinch myself moment because even though this podcast creates zero dollars in revenue, it's instead introducing me to a wealth of experience. Experience which, since it's the end of the year and I might be getting a little bit reflective, I don't fully know yet how is changing me. This is the second last interview I will publish in 2024, a year where the cadence has been lower due to increasing pressure at quarter, which is my job. But I think a year where the guests and interviews have gotten ever so slightly better. I've never taken this podcast for granted, but I think now four years in, I'm starting to take it a whole lot more seriously. It's Christmas in a few days, so if you're feeling generous, I would ask that you please be ever so kind to leave a nice, shiny five-star review with something written, if you've got the time, for both Apple and Spotify. This is the one big public-facing metric alongside who the other previous guests might have been that potential guests review to determine the quality of the show that they might be devoting some of their time to. And I hope to get exactly the guests that I want in 2025, who sometimes are unattainable for a show as small as mine. So anything you can do here moves the needle most. This episode with Christopher is negative externalities all the way down, with specific attention to plastics, agriculture, and clothing. I recorded this on video, so it's the top link in the description on YouTube. Have a wonderful Christmas to all of you. You'll hear from me again before the new year, and with absolutely no further ado, here is Christopher Marquis. Walk us through the externality iceberg.

SPEAKER_00 2:31

The externality iceberg. Oh, that's a great way to put it. I had hadn't I hadn't thought about that uh metaphor before. Yeah, so an iceberg, you think about sort of the top part above the the sort of sea, so to speak, is what you can see. And that is a really good way to think about externalities because you know, so much of what actually the costs of production, the societal and environmental costs, end up being sort of out of sight. So both so they are very much sort of below the sea part of the uh you know, part of the iceberg. And I think that an important thing to think about is that beyond just it being an iceberg where you can see or can't see, actually, in some ways, the top part, which I would think of sort of maybe as the costs that actually companies sort of can see, actually, in many ways sort of thrives on the bottom part. So the more that can be in the bottom part, under the ocean, sort of unseen, in some ways, the larger that the top part uh can be. So the profits of the company.

SPEAKER_01 3:33

What is what does that mean? I don't fully understand that.

SPEAKER_00 3:36

Sure, sorry. Yeah, you the the you start off with an abstract uh question, you get an abstract answer. Apologize. So uh so the subtitle of my book is how business privatizes profit and socializes costs. So the idea of privatizing profit is that you know the owners of the company, the shareholders, you know, can have higher higher profit. And in many cases, this is because of this idea of socializing cost, which is sort of akin to this sort of below the iceberg in many ways, because some externalities we can see, you know, or or or even have sort of public knowledge, like carbon emissions, you know, there's a lot of discussion around you know, needing to price or have markets, and that's a way to deal with the externalities. But many externalities, you know, things like um, you know, other forms of waste or even things like inequality in supply chains uh are much less visible. Uh and so, yeah, so if we can obscure all of those externalities, you know, the the the top of the iceberg or the privatized profits can actually be bigger.

SPEAKER_01 4:42

Totally, because it's an entire cost base which they don't have to pay for. Exactly. Um but return to the iceberg metaphor. On top of the the horizon, what are the externalities that we can see and are priced in? Sure.

SPEAKER_00 4:56

So um so I guess maybe I'll start with just a little bit more of a formal definition of an externality and just put very simply, it's the costs, uh be they sort of impact to the environment, impact to society, of a company's uh production or some, it doesn't have to be a company, it could be just you know a city or or or whatever, that actually do not end up falling into the you know profit and loss statement, um, uh so to speak. So so things that are internalized uh are the things that actually the company is sort of paying out for. So think about um, I'm not sure what it's like in in Australia, uh, but in the US, actually things like trash collection typically there's not like an incremental charge for those. I know a lot of places in the world actually have to pay for you know the trash that you throw away.

SPEAKER_01 5:53

Through one city tax or another.

SPEAKER_00 5:55

So well, yeah. So in the US there is th through some sort of city tax usually, but in some places actually there are trash pickup fees where company where where you know if you're a business and you want to have your trash picked up, you have to pay a certain certain number of dollars or whatever for certain bags of trash.

SPEAKER_01 6:15

So it's not an individual in the household, it's rather a corporation that has tons of waste per week.

SPEAKER_00 6:20

Uh I mean, or I mean, so I I uh one example where I learned about this that sort of I talk about a bit in the book is uh a company that got started in Toronto uh called Green Circles. Um it's not Green Circles Salon. I'm I'm I'm not sure what the what the whole full name is. Uh apologies, Green Circles for some folks if you listen to this. Um but um but the founder actually was getting their haircut one day and saw that actually the sort of clippings, etc., were sort of put out to the curb. And so, you know, that's something I think he said it was like, told me it was like three dollars a bag that the company had to pay for for their trash pickup. And I think presumably individuals probably had to pay for their trash pickup as well. And he realized actually if he could create a way to recycle uh and reuse many of the things that that get used in in hair salons, be it sort of excess hair, be it things like the chemicals or other sort of plastics, etc., uh, that this could actually end up saving money for the hair salon, but then also uh ends up being better for the environment too. So this is something where you know this in many instances, in many places, is a bit is an externality. You know, if you know, if there's not actually a charge per bag for the trash, I mean there's really no incentive to actually low it lower your trash and let and let trash unless you just want to be sort of more environmentally sustainable. But actually putting the price on that, you know, makes people think a little bit more about um about you know being more careful.

SPEAKER_01 7:57

If we just stick for as long as we can to this iceberg metaphor, sure the the part of the iceberg we can see, this is some expression of actually a fair market price because their consequence to the environment, to um the degradation of the public utility that they're consuming is all priced in.

SPEAKER_00 8:16

Right.

SPEAKER_01 8:16

But it's everything underneath, which your book gets into, that is really the profiteering. Yeah. Um, and I think you do define in the book really, really well. You say that externalities, and this is the ones we can't see, are a corporate theft of public resources. Right. So let's forget the externalities that are priced in now because they make up what 1-2% of the total externality? Probably small, yeah. And let's start talking about the externalities that are not priced in to the products that we actually consume.

SPEAKER_00 8:46

Sure, that's great. And I and I want to say too, and and why I really, really like uh the iceberg metaphor is that you know, so much of the work on externalities has been done, you know, from an economics or accounting perspective, and focuses a lot on price, on quantifying, on calculating, on ways of addressing via via markets, um, etc., like like carbon. And I think that that is really, really important. I think that this trash example you know sort of illustrates that. But I think what all in why I wrote the book, what frequently gets missed is that actually companies and industry, sort of industry associations, work very, very hard to actually obscure the fact that that many of the things that maybe they should be taken care of and should be part of that top part of the iceberg, um, you know, end up being sort of staying staying below the surface. Um so, you know, plastic is one that I talk a bit about in the book that I think is a good illustration of this. And, you know, my understanding of this came about from an entrepreneur, uh, a company called Grove Collaborative, uh, that's the company, the founder I talked to once, and he talked about his social mission and environmental mission of the company, and even used the term externalities. He said, you know, the key thing that we're focused on as a business is eliminating plastic because that the that is the biggest externality of our business. And if you think about um, you know, that they make sort of home care, beauty care type of type of products, you know, a lot of those are liquids. And for liquids, you need like a non-porous container. You can't sort of, you know, be shipping shampoo and paper containers. I mean, that would that wouldn't work very well. Um so so, anyways, I had not thought about plastic per se as an externality, but then he said to me, he said, you know, just think about, well, first of all, using recycled versus not versus virgin material. It's actually, you know, more expensive to use recycled material than it is to use virgin material just because of the, I guess, the properties of, you know, sort of of the of the plastic. And so that cost of choosing, you know, virgin over plastic is in many ways an externality that's getting passed on to the public because and virgin.

SPEAKER_01 11:06

Yeah, just defined virgin material.

SPEAKER_00 11:07

Sure. That's just that is just the um the plastic that is created and anew. And you know, the way the plastic is created is usually through some sort of petrochemical um, you know, process that is environmentally damaging. And then I should say too, so both you have, if you do use the virgin material, uh, you know, that that you know petrochemical uh burning uh uh process, but also you end up having the issue of plastic being recycled, because that is something that we think is happening in many cases, uh, but it's but unfortunately it's not. Uh I don't want to sort of disparage recycling too too badly because we should we should all be a pretty big attempt at it in the book, though. We should all be doing uh we should all be recycling and things like glass and metals like aluminum and paper. You know, actually the systems do work relatively well, but plastic does not work very well.

SPEAKER_01 12:09

Um you have a fantastic, whether it's a paragraph or a chapter, but into the three arrows triangle recycling and the whole PR effort behind convincing the consumer that you're actually you're not the bad guy here. You're buying recycled plastic, you're buying something that can be recycled, but it's a perfect illustration of just how the company's profiteering off the hidden part of the iceberg. Right.

SPEAKER_00 12:34

And getting away with it. And and creating that hidden part of the iceberg so we don't actually realize it. So, you know, things like the term litter bug, um, which has been used to sort of you know help, you know, you know, that's from the plastic lobby. That's from the packaging lobby. Um, things like individual carbon footprints are from the fossil, you know, sort of really popularized by the fossil fuel industry. Uh, and many of these things, sort of, sort of, you know, campaigns really, uh, are things to shift the the blame and shift the responsibility from the companies onto um onto consumers. And you know, you see, you see it uh pretty endemically, you know, plastic, uh, you know, you mentioned, but a lot of the um, you know, there's been some lawsuits where a lot of internal documents from India industry associations have come out, and they say very explicitly in there, you know, let's actually put a number inside the chasing arrows because people, if there's a number in there, people will be more likely to think that it's recyclable. But actually, you know, aside from the number one and number two, number, number two, uh, a lot of the other plastic is not either not recyclable or really, really expensive to recycle. So most places it actually isn't happening.

SPEAKER_01 13:55

And just to really hammer the point home, the reason why this, what you've just explained, is one of the unpriced in negative externalities is because there is the assumption that, sure, even if I buy one-time plastic every single time, that cost has been reflected through the whole supply chain, that it's not actually going to negatively infect affect the environment, the labor that produced it, the country where the petrochemicals came from, how it was synthesized, but because of these efforts from the lobbying and also just a total failure of accounting for the true price of the good, it becomes this huge cost on the environment and society, which in a proper fair market would have been priced in.

SPEAKER_00 14:40

Right, totally. And I think um in, you know, you you mentioned a perfect free market, and I sort of, you know, I wonder if that is possible is possible to exist. Um, you know, the carbon pricing in markets is a is a good example of of this. And a lot of, you know, so obviously there's a difference between a price and a price that is set by some authority um, you know, maybe as part of a tax situation or or a market itself. But a lot of assumptions can go in into these calculations. So, you know, carbon emissions is probably the externality that has been most studied and actually most likely to, or you know, most commonly priced and or a market set. And in the Obama administration in the United States, there was the first US attempt to actually price carbon. Okay, what is the cost to the broader society and the environment? And they came up with $42 a ton. Well, it turns out that actually when Donald Trump became president, actually changing just a very few of the assumptions, that price got lowered to just a few dollars a ton. So so this idea of actually pricing the externalities is a huge uh huge challenge.

SPEAKER_01 16:01

I hate to be cynical about it, but is it also insurmountable, just given the insane complexity of actually making sense of it?

SPEAKER_00 16:09

Yeah, I I think that's uh I mean I I didn't say that explicitly in the book, but I think also one of the reasons why I I wrote the book in some ways is to argue that that I think that so many of the solutions where people say, oh, there's some negative externality, that's the gov we need to just price it and make it the and maybe tax the company and make it be, you know, the government's, you know, should should should be the one that takes care of this. I think is a little naive because it actually is really it is both very, very hard. I mean, the sort of different examples you went through with plastic, I think illustrated how many different areas get touched, um, but also this fact that companies are actually actively trying to, you know, sort of mislead us is a strong way to put it, but but sort of make us think that us as individuals should be taking care of it as opposed to them, I think is really, really important. And in many ways, um the implicit sort of underlying idea of behind the book is that when we think about companies responsibility, we should be thinking about their negative effects as much as their sort of selective positive effects. So, what I mean by that is so many um companies really talk about their various ways they engage with stakeholders, like their great work they're doing, you know, in their with their employees or communities. And that's important, but I think that also in some ways, these sort of selective positives are ways to distract from what from basically the negative aspects of the supply chain.

SPEAKER_01 17:56

Are you placing more of the blame at the feet of the companies who willingly engage in these practices, or actually the appetite of the consumer and the politics to not be vocal enough in insisting for change?

SPEAKER_00 18:12

I I I I think you know everyone could do better in this uh situation, but I really do think the uh the companies are where I would start. Uh, just because uh it's been, you know, we see this now, a lot of stuff's coming out around the fossil fuel industry and all the misinformation around climate change. That actually the the research departments in places like Exxon and BP knew that we were gonna be facing many of the issues we've but but actually deny, deny, deny.

SPEAKER_01 18:43

Cigarettes is very famously. They did that for so long. And I kept thinking about that example as I was going through the book because, like you just mentioned, the um big oil and then big plastic, exactly big agriculture, and then any sort of big super heavy consumption industry, it turns out, they are actually the first to properly understand what the consequences of their actions are, and then they kick into legal and lobbying gear and hope it's a few decades before the rest of the world finds out.

SPEAKER_00 19:15

Yeah, uh exactly. I mean, and I think that um, yeah, in PR campaigns and and everything else, I mean it's uh yeah, I mean, on the sort of sort of how how they're able to actually h try to in some ways, yeah, use PR to really shape our our understanding. So we were talking about plastics earlier, and I don't think I sort of cited the the figure, but it's less than 10% of the plastics that gets put into the bins actually ends up being recycled. Uh, but what do companies like Pepsi and Coke do? I mean, they have advertisements about how they're doing all this great work with recycling, and I think that is really a sort of sneaky way to continue to reinforce the fact that, oh, you should be trusting recycling and we're helping you to do it instead of actually trying to do like this company Growth Collaborative I mentioned is doing. And like, let's actually fundamentally take responsibility for this and rethink uh the way we do business.

SPEAKER_01 20:19

It sort of goes against my small government instincts, but when you are faced with the complexity of the problem around plastic, 10% of it gets recycled, 90% of it is either burnt into the worst type of emission or dumped in the ocean. My feeling is big, big legislative change that just imposes this insane cost throughout the entire society, but maybe is the is the net good.

SPEAKER_00 20:44

Yeah, yeah. I think it in solutions, I think the you know, the the government is hugely, I mean, really, I think the key uh the key lever. I think I and I think I think though that you know I'm not someone who necessarily just reflexively jumps to like, okay, government solution. I think, you know, I mean, I do teach at a business school and I do a lot of the work I do is with companies and their sustainability and ESG. And I think that, you know, corporate action is so important as well because it actually can identify like ways to innovate and pathways to responsibility. So, you know, many companies might be like Pepsi and Coke, um, and really trying to sort of sort of hide and and avoid these responsibilities. But then companies like Grove Collaborative, we can learn from, you know, so uh what they did when they sort of took on this responsibility is they actually realized it was a way to to innovate and they reformulated a bunch of products, some of which have won sort of pretty major awards. So moving from like a liquid shampoo to a bar shampoo is one example. They have some bar shampoo product that is, you know, now you know really, really doing well. They also took It on themselves to innovate in their internal business processes. So the managers, sort of a business line, now have a PL that that reflects plastics. And so this provides sort of a management incentive to actually lower it. And they also do some work with consumers on sort of badging around sort of what actually, you know, you know, how much plastic, what type of plastic actually is in products to help consumers understand things too.

SPEAKER_01 22:28

So if you really impose uh legal accounting measures, there'll always be chicanery, but it's definitely a step towards the right direction. Because incentives just drive it all at the end of the day. And if you're uh not even a huge company, a thousand employees or something, and you've got stiff competition and your staff are complaining, and you've got all these problems, and you realize okay, if I self-impose this cost to me while my competitors don't, I might go out of business. Right, yeah, yeah. You know, so one can also be sympathetic at the same time. But yeah, again, it's the whole question of uh we have one planet, we can't A B test it, you know, for the net good. It probably just needs to be devastating regulation. Right.

SPEAKER_00 23:15

Yeah, yeah. And and I think, you know, be there is a lot of work on companies to sort of evade and get around rules, but but if you can actually build it on systems that companies have sort of innovated with and come up with, it becomes a little bit more closer to reality and something that that can be, you know, that can work.

SPEAKER_01 23:35

What growth collaborative are doing, I do also feel like is probably the outcome that we will eventually adopt, which is that it is in fact just a business that innovates to a more uh cost-efficient and better product at the end of the day, right that just redirects all the consumer capital towards it. If you look at Spotify, they make you pay for a service, which I could do for free, right, and did do for free for a very long time. But through the sheer convenience and discovery and all the amazing things that Spotify is, they now have I think 250 million paying subscribers around the world. And it's an incredible example of how an industry shifts. Now they're software, so they they have a it's harder to solve that when it comes to plastic. The insane complexity of all of those supply chains now shifting to a new raw material, but even when it comes to energy production and stuff, I still feel like in our lifetimes that will end up being what shifts our carbon emissions rather than regulation and so forth.

SPEAKER_00 24:44

Yeah, no, I think I think I think you're right. I mean, I think there is tons that that um of room for really thoughtful innovation. And part of it too, you know, I think that the um the one of the reasons I like the Glow Growth Collaborative story is that, you know, sure, there was in some ways um like a physical product aspect to it around um, you know, sort of around this reformulation of products, but also there is like a a a redefining business model aspect to it as well, around sort of their internal P ⁇ L and how they engage with consumers, which I think is a little more akin to um, you know, the the Spotify example that you gave or with software, where I think there's you know, we all think that there needs to be some sort of technical silver bullet. And I think that, you know, I think we need some really amazing innovations in sustainability, but also just thoughtful changes to business models or things that um you know don't necessarily always require a lot of upfront, you know, you know, sort of you know, investment.

SPEAKER_01 26:01

But it'll be bloody hard. The journey Spotify had to go through. Everyone else failed.

SPEAKER_00 26:06

Yeah, it is it is it is very hard, yes.

SPEAKER_01 26:10

So let's um shift to a few more stark industries that produce significant negative externality. I think we've done plastic. Um agriculture. I was surprised to see that feature here.

SPEAKER_00 26:24

Yeah, I mean this is something, and I've learned a lot about this too. And it's and it and it's so interesting. And again, you know, I'm so glad you started with that iceberg metaphor, because we don't think, you know, in our sort of global north slash develop developed more developed countries about agriculture that much. Actually, when I wrote the book, the sort of first draft of the book, and I sent it to the publisher, the editor came back and said, Why why is this chapter on agriculture in here? Who really cares about agriculture? Well, uh a couple reasons why we want to cut you know, even just for impact, I think about 25% of emissions is from agriculture, which is huge. Uh I think also sort of a horizon issue that we're going to be dealing with similar to um you know carbon emissions is going to be biodiversity and nature risk. Uh, I attended recently uh an event, uh we're in the UK recording this, but I just came back from the US where I was, and I had attended an event of the United Nations on sort of uh biodiversity in the coffee supply chain. And I mean it's a real risk given climate change uh in particular, that actually the areas where coffee can be grown are are shrinking uh dramatically.

SPEAKER_01 27:49

They've got to go to higher altitudes.

SPEAKER_00 27:51

They've got to go high higher altitudes and maybe you know find some other um you know, find some other uh locations. And this is creating, you know, a lot of risk around um, you know, whether whether you know those plants can survive at you know given the different different conditions. And so, you know, we we the um the amount that the natural world underlies our you know sort of daily life. I mean, coffee is a is it is an example where you know so many of us, myself included, um, are are really addicted. I woke up this morning actually actually, why do I have a headache uh this morning? It's because, you know, actually, with coming back from the US recently, my you know, sort of the timing of when I have caffeine is not is not um you know is not um is is it is is a little out of sync. So um, but you know, you think about the fabrics in the clothes we wear, uh also grown through, you know, typic, you know, sort of cotton natural fibers, a lot a lot of them. Uh you think about uh all the things we eat. And I think because so much of agriculture has been, you know, it's now around the world, mostly these large sort of mega mega farms that are in places where there's very low population. So we really don't see uh most people, the fact that actually there's a tremendous amount of work. And and also the, you know, you know, when I uh even before I was I was growing up, but probably when my parents and grandparents were growing up in the US, you know, a huge percentage of the population worked in agriculture, you know, maybe 20 some percent. Uh but now, because of mechanization and having all these huge uh fields, I mean, that's a very, very low percentage of um of the workforce. So anyway, so yeah, so very, very so the industry itself uh I think is really underestimated as to the impacts it's having on the world. And so, you know, some of the externalities, I mean, there's a lot of um, a lot of them sort of thinking where to start. So one one uh just thinking about within the developed, uh, more developed countries, you know, there's a huge amount of environmental damage that is done, uh, given, you know, there's um the way that most crops are grown these days are through these sort of engineered type seeds, where you know they they um they will sprout for one season, but the companies, you know, I I I always say Monsanto because that name sort of sounds bad, but now they're owned by Bear uh and other, you know, sort of other uh ADM, uh Archer Daniels Midland, all these giant agri-chemical businesses. So they don't want people to do what for centuries people had done or millennia people have been doing, where you know, you save a little bit of your sort of seed corn, so to speak, and that sort of you know is what ends up um you know you can plant the next year.

SPEAKER_01 30:56

Economically, that fucks the farmers, but why is that a negative externality to the environment?

SPEAKER_00 31:02

Oh, sure, sure. So so um it's the the chemicals mostly because they have sort of health and pollution type type of uh you know impacts. Also, you know, if you look at not just growing crops per se, but also animals, uh, you have issues with um, you know, a lot of a lot of pollution from you know the waste and the runoff from the animals. And you know, it's it's interesting to think about you know the way, again, sort of if you think about just how how actually farming and agriculture and animal husbandry were done for millennium, you had this wonderful sort of natural cycle of you had small farms, things were grown, they may have had some cows, pigs, uh, chickens, etc. You know, the manure from those cows, pigs, chicken would sort of be put on the farm to sort of help enliven the soil and and bring things back. Um and what we've done is we've instead of having this great cycle, natural cycle between sort of animals and and crops, we've specialized and totally divided those industries, and we just have these gigantic sort of cornfields and soybean fields, and then we have these gigantic, you know, sort of pig, um, I don't even know what they're not called farms. I don't know. Sty's. Yeah, the styes are, yeah, big gigantic pig styes. Um uh and as a result, there's not that, you know, uh sort of reciprocity or natural cycle, and then we just have tremendous amounts of waste, and that waste is really a big part of the externalities.

SPEAKER_01 32:47

And uh from the book you speak specifically about the negative externality from downstream of monoculture. Yes. Uh I was in Mexico a few years ago um visiting a friend who ran a cafe there, and he took me up in the mountains behind Veracruz to where he got his coffee from, which was uh, you know, barely profitable living by the skin of their teeth, group of about 20 different small farmers who handpicked the coffee, but then also grew it in a pretty dense forested area. So it was a true opposite of monoculture, whatever that's called. What is that called?

unknown 33:22

I don't know.

SPEAKER_00 33:22

Diversiculture.

SPEAKER_01 33:24

It's my makeup of word. But it was it was it was it was an incredible experience because next to them was a entire hillside of Nestlé.

SPEAKER_00 33:33

Oh, okay.

SPEAKER_01 33:33

And we walked up to the border of it, and you could see the difference in the soil colour, the the the styrations throughout the soil of where the water could just run completely down, versus these small finkers on the other side, which were rich and and moist and green, and the other was organized as such because you can take a machine through there efficiently, and therefore it all comes back to the bottom line. Whereas these guys, you know, are all in their 50s and 60s and still handpicking on the side of a hill high up in a mountain. Um, but it was just an incredible example, and so I'd after that long-winded anecdote, I would ask you to explain what are the negative externalities of monoculture and how can we reprice them into the final product that we're having.

SPEAKER_00 34:27

Yeah, good well, I and you know, an issue with always sort of thinking about externalities is that it really depends on what I mean, it's very idiosyncratic to the specific application that one one would uh be talking about. So, so one issue um with monoculture is I think you know, night pretty nicely expressed by your little anecdote and in Vericruz. Um, you know, you have issues of resilience and biodiversity um uh in the you know, sort of in in in the whatever the opposite of monoculture is uh example. And this is something, and this is why, you know, in many ways, again, sort of I think that it's so important to um uh you know think about externalities beyond just the bottom line pricing, but about you know, a more a more sort of holistic idea of actually resilience for the for the future. So, you know, you think about if we have everything like the Nestle example, uh, you know, if there's some disease that comes, uh it that you know, that actually targets that that particular whatever strain it is, I mean, that's totally gone. Whereas, you know, if it's actually in a much more diverse type of set type of setting, you know, that that won't have that disease uh effect. I mean, the famous example, you know, that gets talked about a lot. I mean, coffee is is one because there is limited genetic variety from what I understand, but also bananas, you know, there's this Cavendish banana, which is what ever, you know, it's like I've been hearing hearing a lot, you know, like, okay, if there's like one sort of um, you know, sort of parasite or something that that actually targets these Cavendish bananas, I mean, we're gonna be we're fucked with bananas, exactly. Exactly. So um, yeah, so in many ways it's about you know creating greater resilience. Uh, and I think that um yeah.

SPEAKER_01 36:30

There is a very sympathetic view to this as well, though. You know, having living in Stockholm, I can walk into my grocery store and literally buy anything. Yeah, the the effectiveness and the the total feat of humanity that is big agriculture all around the world, we can buy a lot of stuff. There's more food than we'll ever need, and we're eight billion people.

SPEAKER_02 36:50

Yeah.

SPEAKER_01 36:51

So, you know, it's not all bad news. These negative externalities that haven't been priced in for so long have also allowed for where we've gotten to. So are you always straddling this line?

SPEAKER_00 37:03

Like, yeah, totally. I mean, and I and I and I'm not I mean, I'm someone who um, yeah, I mean, I, you know, so many people might, you know, I teach at a business school, you know, a lot of the work that I do with companies is around their sustainability. And there is certainly a segment, a segment of folks that think like, oh, well, you know, really that's actually just enabling uh the sort of long, you know, uh the struction, but just maybe extending it out over a longer period of time. Uh and I'm not someone who necessarily, I mean, I think that actually that sort of markets um and you know how they how we've developed economically, the innovations that have happened have been hugely important for you know living a good a good life. Um and but you know, to to your example about being able to get sort of everything sort of that's out of season, transported to you in, you know, in in Stockholm, uh, you know, there's a lot of environmental issues with that uh as well. And so that's another thing that's really not seen. I mean, we go to the market and you know, it's yeah, some sort of maybe blueberries from Mexico. Uh, and it's crazy to think, you know, maybe you have blueberries in Mexico, you know, for very, very probably, you know, three euros a tin. Uh uh, you know, it's amazing to think that is possible. But that's actually because, like, I'm not sure about Mexico, but in the U.S., a lot of agriculture also is a lot of the a lot of this sort of monoculture, agriculture is subsidized by the US federal government because of the of the sort of lobbying and power of these large ag agrochemical companies. Uh, and then, you know, it because it's cheap, they can sort of send it all over the world, and it's like a double whammy sort of.

SPEAKER_01 38:59

Uh one more point on the monoculture because you just mentioned soil biodiversity. There was a very famous documentary a while ago called Tipping Point, and one of the episodes was on soil biodiversity. And it's very alarming if what they're saying is truly the case. Uh, and on this same Mexico example, as we were driving up, we drove past acres and acres and acres of avocado trees. And he was explaining to me that uh these are so they they they they demand so much of the soil that after a couple of years of growing them, the soil just grows nothing for a decade. You know, this is if we're gonna take the negative externality seriously, that long-termism on the soil biodiversity somehow needs to be priced into that thing that has grown there on that day. Yeah. But then you return to the impossibility of the accounting of it.

SPEAKER_00 39:48

Yeah. And I think too, uh, I mean, I'm I'm not someone who like I think a a lot of attention in the sustainability space has been a little unfairly put on consumers. Like, you know, consumers, you know, or the one, you know, consumers want this. So, you know, like I think a big reason why there's all that avocado being grown in Mexico is because you US consumers now love guacamole and having having a coffee. It's the best. An avocado toast. I mean, it's like it's crazy. It's uh so um, yeah, actually, strangely enough, uh the event I attended at the UN on the coffee actually had avocado toast as as as this little snack that they um they gave people. Um but but yeah, so I do think that consumers, if we can get a better understanding of some of these impacts and trying to eat sort of in-season and more local, uh, and sort of understand that you know actually the con having be having everything at the corner shop is is convenient for us, but actually has a lot of costs for other people.

SPEAKER_01 40:59

But again and again, it has been proven that the consumer will purchase according to their means, and rightly so, fair enough. Sure. Um, but unfortunately, yeah, you look at chocolate, for instance. No one is living in some fantasy world where they realize that slavery is not in the chocolate butter. Yeah, I still eat chocolate. I've interviewed guys who have explicitly researched this, you know, and there's a guilt there, but also it's just like a hardcore reality. We we we sort of, you know, we consume via our means, not via our morals.

SPEAKER_00 41:33

Yeah, sure, sure. I think that's that's uh I I very I think that's well put. Uh I don't think that actually people, I mean, I think people like us that are sort of in broadly in this space understand about all the abuses in the chocolate supply chain. But I'm I'm surprised when I actually, because that's an example that I I give in the book, and Tony's Chocolonely, and they've done a lot of work to try to quantify um and try to price in some of the some of the externalities. Uh and when I tell people about the fact like this sort of origin story of Tony's and how the sort of founder actually realized that there was slaver in the supply chain, and this led to the you know, so the founding people are aghast. I mean, it's just a general public. So I think there could be more education on that, but but again, I'm like you, it's so distant and so far from our experience in more developed type of countries. Actually, what that means, I think is hard for people to conceptualize. So yeah.

SPEAKER_01 42:40

You mentioned you don't want to put too much blame at the feet of the consumers, and you know, we've both just agreed that people will will consume according to their wants. But clothing is potentially the worst, especially when you factor in the labor negative personality. Nowhere is more rife with slavery, human trafficking, right, and so forth. Um, but fast fashion has never been stronger. Yeah. And people are consuming, you know, 20, 30 different types of clothing per year. It's amazing. It's nuts.

SPEAKER_00 43:13

Yeah. Yeah. I mean, when I was growing up, I mean, yeah, people had very limited uh number of I mean I I saw some statistics. I grew up in the 1970s in the in the US. And nowadays it's like 10 10x the amount of clothing that people have. And I've I have kids that are teenagers. Um and yeah, they're sort of they're they're TikTok and and Sheehan, uh you know, the sort of the fast fashion company Shein, uh, you know, and they know and understand. I try to sort of talk to them and educate them, but it uh it doesn't do much much good, unfortunately. Yeah, I mean I think I think that um there's so many ways that fashion, and I think this you know is part of the complexity. Because part of it is the materials. You know, some of you know some of these are made through synthetic, you know, sort of plastic, basically, uh, type materials. Uh, even the more natural materials like cotton are usually, you know, they're they're actually the growing conditions for the people that are working in those supply chains are not not great to put it um to put it mildly. And you mentioned as well, just the actual the sort the the sort of manufacturing uh you know is another sort of case where you know there's just tons of of you know human rights and labor abuses. I mean, there's a reason, I mean, why these clothes are so cheap. I mean, it's uh yeah, it's it's uh it's really unfortunate. I shouldn't I shouldn't laugh.

SPEAKER_01 44:53

What work has been done in to try doing accounting of the negative externalities of for say a H ⁇ M?

SPEAKER_00 45:01

Yeah, good question. You know, I don't um there must be some companies that um look at this in detail, but this really requires a company to say, okay, we're gonna we're gonna go deep in our supply chain and understand and account for in an end-to-end way, um, you know, what what actually our impacts are. You know, one company, it's not HM, but it's it's a smaller company, but Albirds, which is a shoe and apparel company based in the US, they've done they've been very, very thoughtful, particularly around carbon, in how they actually can work, can can can can create a system in their um through their production, through their entire value chain, really, from you know, way upstream to the materials all the way down to actually consumer impact. You know, if you think about uh the externalities, actually shaping consumers and consumer purchases like this fast fashion is one way to actually, you know, try to try to put a break on some of these, you know, environmental effects that are coming, uh, is actually if we can we can change consumption patterns, if we can actually create secondhand marketplaces, which some companies are doing, create repair, you know, so much, you know, you know, fashion, I shouldn't even call it fashion, so much apparel just gets sort of thrown thrown away because it, you know, there's a rip or something. If we, you know, back when I was growing up, you know, sort of darted socks and you repaired things. I mean, nowadays, I mean, I'm guilt as guilty of this. I mean, if I ever get a hole in my sock, I mean it's I throw it away. I mean, I'm not who's repairing a sock, exactly. Yeah. Um so uh so yeah, so Alberts is an example, and they they took a real end-to-end approach, which is what I really like. So they started with their materials. So a big um material for them is is wool. So, you know, they worked directly in New Zealand uh with some farms that that grew sheep and actually sort of understood how they could create systems where you know it was sort of like the old days where there was a more regenerative system where it wasn't just a bunch of sheep in a pen, but actually, you know, grazing in much more natural conditions and in sort of this uh symbiotic fashion with the land. Uh, one of the reasons why I focus on accountability within companies is a very important lever for sort of understanding and change, is that when you actually try to measure and account for and report on some of these environmental and societal impacts, it actually creates learning to that you can actually become a better company. And the Growth Collaborative example is one of that. But what Alberts did when they realized that actually the majority of the negative environmental externalities in their product was in the soul. So if you think about you know the shoe, the athletic shoes that we wear, you know, typically, you know, the sole, it's like it's made of plastic, basically. Uh and they actually worked to create a new material made mostly out of sugar cane, which in the way that it gets sort of farmed actually, you know, creates positive externality, so actually is you know, sort of sucks carbon uh from the air. And one of the things and one of the reasons why I like this example is that you know, what they realized is that you know, if they really want to affect the natural environment with their work and be a leader in this, they shouldn't just make it their proprietary IP where they say, okay, we've got this special soul. Um, you know, the consumers, you know, may or may not appreciate appreciate, but actually they open sourced this technology and actually have worked with a lot of other leading shoe brands to actually introduce it into their products. So, like other 100 companies, you know, Adidas being the most sort of well known, there's actually now a shoe that's co-branded, All Birds and Adidas, that uses this material and is, I think, the lowest carbon shoe around.

SPEAKER_01 49:17

So force some type of economies of scale for access to that sugar cane.

SPEAKER_00 49:21

Exactly. Thank yeah, good, yeah. Thank you for connecting connecting the dots there. Yeah, so it's so it's one of these things that, yeah, if they just keep it as their proprietary material, it'll always be expensive because the volume will be low. But if it's something where they open it up, uh yeah, and and high yeah.

SPEAKER_01 49:37

So it's a phenomenal example, and a s a cynical or skeptical person might say that Adidas getting on board is a measure of ESG, but is the sugar cane sole better than a polyester sole?

SPEAKER_00 49:53

You performance-wise? Performance-wise, durability-wise, cost-wise. So I think so, I think probably the the the very short answer to all those is no, no, no. Okay.

SPEAKER_01 50:04

It's such a shame because you want to hear yes, yes, yes.

SPEAKER_00 50:07

However, uh, I mean, I think that, you know, so I've been tracking all birds for a while, and you know, and I and I had talked to them actually when they were in the process of you know, sort of working on this material and before it actually was in production. And then watched, I mean, actually, they originally just one of their shoelines sort of featured this. And it was, it's it was it was actually a little a little crappy looking to be to be honest, not not to use a uh not a good term to describe it. Uh, and it was more expensive. Uh, but these are things that I think economies of scale and working with these brands will help help fix. So I think that clearly the cost curve is working in a way that actually, you know, it it's at some point it hopefully will be cost parity. And also by working with these leading brands like you know, Adidas and others, you know, the performance in in other aspects also will be improved. So I think this is something where it's it's the trajectory is it's not there a hundred percent yet, but it's actually you know improving.

SPEAKER_01 51:21

Aaron Powell So it's good ASG from Adidas in this case.

SPEAKER_00 51:25

Well, I think that it's good ESG. Yeah, so so if if by that you mean they're just doing it from some social responsibility um motivation.

SPEAKER_01 51:35

Uh a genuine effort rather than a greenwashing effort.

SPEAKER_00 51:38

Yeah, so so it's definitely definitely a genuine effort. And I also think that it's something where, you know, we're not all sort of running, you know, two two and a half hour marathons or two-hour marathons. I mean, actually, the per, you know, we don't need the the top performance um gear. I mean, I I think that so they see this as, you know, there there is a market segment, and it's not even just the sustainability market segment per se, but it there that a lot of the market segments that they're that they're dealing with, actually, this is a very even in the current state where it's actually they haven't fully uh you know met the quality and performance, um, uh it's still a really, you know, really effective and and material, maybe and probably as good as what they would be using using normally.

SPEAKER_01 52:32

What are the most egregious examples of greenwashing that you've come across?

SPEAKER_00 52:38

Oh, geez, this is uh yeah, this the the there there is so much greenwash. Uh and I should also mention people probably know this is the idea of you know just saying you're doing good environmental things and communicating, you know, putting sort of a green veneer on on things that actually not are not happening uh within the company. Um like an oil company saying they're going net zero. Like an oil company saying they're going net zero. Exactly, exactly. That's a very good one. I mean, so um I mean, I think the the examples we gave around the packaging industry, you know, saying that they're sort of, you know, recycling is is is one example. Um there's been a lot of cases recently that have been the news because the EU and Canada actually have both introduced recently anti-greenwashing legislation where companies can be sued for greenwashing. Right on. Yeah, so some some of the examples that that have sort of hit the news in the airline industry, a number also sort of claiming net zero, uh, but actually, or claiming sustainability, but actually, you know, I mean, it's the airline industry, you know, that's it it's you know, unfortunately, because actually air travel, you know, at times is very essential for us to sort of communicate and and and do our work uh is environment very environmentally damaging from the from the fuel that is used. Um so there's airlines have been called out quite a bit. Uh one company um that I just recently read something about is Keurig Dr. Pepper. Do you know Keurig? They make these um coffee pod um capsules. Yeah, coffee capsules. So they I guess had been saying they were recyclable. Um but actually were not. And they got they got fined um you know millions of dollars and paid the fines. That's another example.

SPEAKER_01 54:39

Yeah, rightly so. Um a two companies that I was very surprised to see feature as examples of companies that have huge negative externalities was Netflix and Zoom. So could you explain why they're gonna be able to do that? Yeah, this is another negative externality.

SPEAKER_00 54:54

And again, I mean it sort of is is our our um our the iceberg that we that you you you started us off with. Uh yeah, so the um and this has come even more to the fore since I wrote the book with it with AI. You know, there is tremendous environmental issues on water, on on energy use of the cloud, so to speak. So, you know, think about sort of Netflix and and uh and Zoom. I mean, these are really about you know sort of bits and bytes sort of transporting back and forth in the ether. And that there's you know, the servers uh and technical technology infrastructure that need needed to support that, there's huge environmental um you know costs for it. You know, there's was a really good article recently, I think it was in the Washington Post, um that actually quantified uh in very sort of evocative ways how much um carbon and um and water gets used from something like ChatGPT. And what they said is actually having ChatGPT answer like one query is the equivalent of taking a regular size bottle of water and dumping it on the ground. Uh so uses that much, and think about there's millions and millions of of these being used. Uh, you know, carbon emissions also very, very huge. And it's interesting that you know, Microsoft, who is a company, uh, you know, I I'm I am usually pretty skeptical, but maybe at some point too naive. Uh uh but Mike, you know, I actually have a pretty positive view of how Microsoft has been approaching this. So the only company, I think, certainly within my knowledge, but I think that that of any company that is actually uh committed to uh uh being net zero uh historically. So they you know founded in 1975, I think, and have calculated the carbon emissions that they have have expended uh you know in its history and said we are going to, you know, in some way sort of offset or or actually, you know, I'm not exactly, I mean, I assume it must be some sort of offset uh technology, all of our past emissions. And this is something, you know, as we're recording this, the the UN COP meetings are going on in Baku, uh Azerbaijan. And this is a huge issue in in uh you know our our situation, environmental situation, the fact that countries like the UK, like the US, um, you know, we uh we have industrialized and have had tremendous carbon emissions over time. And carbon emissions are cumulative, so it's not like you know, it's like year to year. So so our you know, the the worlds we live in are totally based on us being able to have all the, you know, uh have burned all this carbon. Uh but no one wants no one ever talks about accounting for the past, whereas Microsoft, you know, actually says, okay, we should actually be accounting for our past carbon emissions. So anyway, sort of long sort of digression, apologize. Uh but but Microsoft recently said that actually their carbon emissions, because they're very uh involved in AI, obviously, they're a big investor in open AI, uh, they increased by 300%. Uh and you see a lot, 300% over the last uh few years because of AI and because of the incredible technical infrastructure that is needed for that. Like the chips, you know, Nvidia, this company that that that um you know produces these AI chips, apparently those are hugely energy uh hungry. Um you know, in these server farms, there's like tens of thousands of of the of these chips. And it's interesting because a lot of well, I I don't know if it's I don't know if it's a lot, but a lot of press gets covered around companies like Google or Microsoft or Amazon, you know, these huge um you know server farm installations they have, a lot of them have solar power. And you think, well, you know, that's maybe they should be net zero. But actually, the amount of carbon emissions that get expended in making the the sort of physical things that are in there is is actually is way greater than actually the carbon emissions to to run it. So it's um yeah.

SPEAKER_01 59:45

But but in all of that, where is the negative externality? Because in I thought it was all priced in here. These huge data centers are incredibly energy intensive, but they're built next SS Hour, the uh sorry, solar power. There's a giant one Google's building right now just outside of Oslo. Hydropower is going to take care of it.

SPEAKER_00 1:00:04

Nuclear, they're they're all investing in nuclear nuclear.

SPEAKER_01 1:00:06

And it's and it's very expensive. So is it the case that these negative externalities are not being priced in here? I th I think Because that has to be the claim.

SPEAKER_00 1:00:15

Yeah, I think so otherwise it's all good, right? So I I th I um I don't know if p anyone's calculated specifically the negative externality, although this you know, Microsoft increasing its uh you know, carbon emissions by 300% does, you know, I mean that could be calculated.

SPEAKER_01 1:00:33

But the cost has also increased massively. These things are super expensive.

SPEAKER_00 1:00:37

Yeah, but I I'm not yeah, they're definitely expensive. And you look at these, you know, sort of they talk about sort of how expensive these the chips are and video chips and video chips. But my again, this is my assumption, and I I mean, I'm based on sort of understanding a lot of other contexts, my guess is it's actually there's still a lot of environmental externalities on the table. And because so much of it is, if you think about, you know, the what it takes to produce the machines that actually are in in and that's where actually nowadays I think because a lot of them are you know solar powered, and you know, um, I'm not sure where where your listeners are from, but a big deal in the United States. And I'm I was born in this in the in the state of Pennsylvania and lived there, and my parents still live there. Scranton? No, no, that's uh that that's Joe Joe Biden, which is from the east part of the state. I'm in the west of the state, which is Michael Scott. Pittsburgh, which is where sort of the steel industry used to be headquartered and sort of in the middle of the of Pittsburgh and you know, Scranton uh area is uh where the Three Mile Island nuclear reactor is set of nuclear reactors is, which had a big in the 1970s, um big failure actually, and and and is now sort of shut down. And Microsoft is paying, I think, two billion dollars to actually restart that nuclear reactor in order to get yeah, um, and there's a number of other examples of this of where tech companies are working directly with you know, sort of legacy nuclear reactors to try to get sort of more power onto the grid. Um uh but but that only that that only supports the actual power to run those. If you think about you know, cars that we have, you know, the big environment a big environmental impact of cars is actually building the car and sort of the engine and the transmission and you know the the raw parts from all over the world. Exactly. Uh, you know, you could we it could be an electric car, which is you know great, and or all the battery, you know, there's although building an electric car is significantly more damaging to the environment than a regular car.

SPEAKER_01 1:02:53

Exactly. Like that that environmental payoff doesn't happen for decades. Right. Uh but the reason why I was pushing back on where is actually the negative accidentality in these data centers is because also as a part of the accounting has to be what the opportunity cost is. What is the trade-off here? And so with Zoom, it is every every meeting I take on Zoom is a meeting that I didn't have to get into a car for or get into a plane for. And so I was this is why I wanted to ask you, particularly with Zoom, you know, is it really the case that despite their insane data usage, these data centers are obviously incredibly steel-intensive, plastic intensive, energy intensive, but it doesn't have the same perniciousness as something like single-use plastic, clothing, runoff from monoculture, and so forth. So, where really is the negative externality?

SPEAKER_00 1:03:44

Yeah, I I think that's a good point that actually the and then it does sort of illustrate the the challenges of accounting because and I think a lot, a big issue that I'm a big fan of is actually finding better ways to account for avoided emissions. So, you know, you think about again to come back to the Growth Collaborative example, you know, by making sort of a shampoo out of a bar, make it in a bar, you're they're avoiding a lot of environmental impacts that they that actually would they would actually have if they put it in plastic and had water and had shipping and et cetera. So I think the Zoom example is a is a good one where, yeah, it it is very much like an opportunity cost of avoided emissions by potentially having travel. And probably there might be incrementally more meetings um, you know, as a result, or maybe more people will dial into the meetings. Or I mean, it again, it sort of would it would take a complicated um uh you know equation, but it's definitely doable. Um uh that said, you know, I'm not sure um where you know, sort of, you know, when you exactly you grew uh grew up. I don't want to age you. Okay, I don't want to age you necessarily. Uh but when I was first working, actually, I was I so you know, I grew up in the 70s and I was working in the 90s in a financial services. And at the time, you know, I mean, obviously computers have been around for a while, but really work starting and the internet was getting going, you know, the the technical infrastructure of business was coming into its own very much. And there was so much discussion of paperless offices and how how you know this was going to save us uh you know so much paper. You know, people saw environment as sort of very paper, you know, or the paper is a big environmental impact. Uh and we've, you know find actually, no, it is not necessarily saved paper. Actually, I pr I might print things more because just the volume of my surely not surely not printing more now.

SPEAKER_01 1:05:56

Yeah, you've got a computer and email and Google Drive.

SPEAKER_00 1:05:59

You you Yes. I I think actually now maybe. Although I do still, I mean I print some things. I mean I have a variety of of books. Um, you know, the the volume of what we do uh is so much greater that that actually be because of all this, you know, there's um this phenomena called the Javon's paradox that I talk a little bit about in the book. It's also known as rebound effects. And this is where, you know, as sort of things get technically more efficient, actually, because of just the sheer volume increasing, there actually ends up being larger environmental effects. And so this was the is why it's called Javon's paradox, is there was in the 1800s an economist um named, I think it's like Sir William Javon or something like that. He was from the UK, and he observed it was the early steam engines that uh people you know were talking about how you know there was a lot of smoke in the early days, but the smoke was going to start dissipating because engines were getting more efficient. And he said, Well, no, actually, I bet you that the smoke is going to increase more and more because as things get more efficient, actually the use will get much, much greater. Uh, and you know, it might be, you know, and this has been shown like LED lighting apparently as well. You know, there it's supposed to be a lot, it's a lot more efficient. Um, however, people end up using it a lot more and actually ends up ends up creating more environmental effects. So, so when you think about Zoom, um, I think you're right, there might be these sort of offset or not offset, uh avoided emissions. However, because it's people are meeting more and more, um, you know, sort of actually meeting is is a better than just calling someone up because you can sort of see them and you can engage. Maybe more people join are joining these Zooms, maybe something having to do with the fact they're getting together more makes them want to sort of get together in person more. So so the there the there are all these uh sort of second-order effects which uh again sort of make it a challenge to to calculate.

SPEAKER_01 1:08:12

Just further doubles down on the impossible complexity of trying to make sense of it. Right. Because then as well, you throw into it uh the phenomenon of less from more. You know, how much raw materials are saved because we all carry an iPhone? Right? Millions of tons, right? But then is the iPhone better for the environment after we take into account all of the other infrastructure we're talking about? It just becomes so impossible. Okay, but we're really running up on time. So I'm just gonna ask, I we we have already touched on it, but I want to explicitly point it to you this way how much of these inefficiencies, the failure to price in then externalities, environmental damage, discrimination of all sorts, and all the rest, how much of it is actually just unavoidable and iterative speed bumps, which get solved gradually along the way to broader prosperity? Because in the last 10, 20 years, over a hundred thousand people a day are lifted out of poverty, and the developing world is industrializing at a fraction of the environmental cost that our country is developed in. So a global marketplace has also allowed for, if maybe not more fulfilling, but at least millions and millions of more working opportunities to people who otherwise would never have had it.

SPEAKER_00 1:09:27

Um yeah, good, good question. Um I, you know, I think so. I think in theory, things should work that that way. Um uh, but I so you know it's sort of like um, you know, I the someone on that I draw on a bit in this book is Thomas Pickety, um uh, you know, where he sort of showed about how actually as um wealth grows, you know, there's not necessarily a trickle-down effect. I think a lot of times, actually in the US, this gets brought out, you know, you know, Ronald Reagan was the sort of famous person that advocated this also, you know. I think in the UK here, Thatcher as well, that you know, sort of a rising tide lifts all boats, and that the more and more, you know, you you maybe cut taxes for rich people, you know, there will be greater entrepreneurship, greater economic development, and then there will be this, you know, sort of sort of global, you know, sort of sort of growth. Um what Piketty shows, however, is that the sort of richer the rich get, the great the bigger the the the higher the walls around themselves get get get built, and this actually creates greater and greater economic inequality over time. And clearly a lot of people have been risen out you know out of poverty, although the majority of those are in China, which is a separate case which we we can discuss. Um, but I think that you know one of the things I try to focus on in the book is around the ideas of you know how companies are really being very active in trying to hide and protect their ability to the profiteering. Yeah, the profiteering. And so so I while while while I think that there's a case to be made for what you said, my inclination is that because of just how in some ways power operates and and and and wealth operates, there's an inclination to not let that sort of spill out and over to the broader societies, but actually to try to protect it. And that and by protecting it, it actually leads to this, leads to these externalities and leads to um you know the sort of a you know greater inequality as well.

SPEAKER_01 1:11:55

Yeah, that's a terrific answer. That does really actually make sense, and that comes through heavily in the book too. It's not trying to save the world and get every single negative externality accounted for, but rather that particularly pernicious chicanery of profiteering is solvable.

SPEAKER_00 1:12:15

Totally. Or at least, I mean, I think the more and more we're aware of it, the more and more we can identify and try to mitigate it. And actually, then uh hopefully some of these processes that you describe will be you know more prevalent.

SPEAKER_01 1:12:28

Last question regarding the profiteers, and then a question I ask every guest. Okay. Uh you riff on Hitchhiker's Guide to the Galaxy, I think in the opening chapter. Sure. Um, and the theme there is that it's not actually the answer that matters, it's the right question.

SPEAKER_00 1:12:43

Yeah.

SPEAKER_01 1:12:44

So having lived in this world, done so much research around it, what should be the questions that we're asking?

SPEAKER_00 1:12:50

Yeah, so I so um one of the reasons I put that in there um is because so a whole other topic, which which I don't talk about in the book, but I think about a lot, is the role of business schools and socialization of business leaders on these topics, um, and you know, and what and how they're thinking thinking about it. And so much of the the sort of discourse and thinking is around like doing well by doing good, like how you know, how can we sort of align like our you know being more sustainable with with profitability? That that is really the core sort of question that's being that's being asked. And I think that as you know, general public, consumers, citizens, that's actually how we think about things too. We look at what is the select, what is what are the good things that companies are doing. You know, that's the the question is so you know, what good is a company doing? I think that the question should be what what bad is the company doing, actually? Uh and because that you can get to really understand whether they are like as responsible as they say they are. You know, a company like Grove Collaborative, you know, they're um they're doing, I mean, they're having negative externalities, no doubt. Um uh but you know, their mission and thoughtfulness is on uh trying to avoid those externalities and mitigate them and create systems to actually help resolve them. Whereas a company, you know, like Pepsi or Coke, you know, they're they're doing all these sort of side things, I think, to distract attention from the fact that you know their products are leading to this global obesity epidemic. They're like the biggest plastic wasters in the world. So, you know, if they were really like thoughtful on the in the way the growth collaborative was, those would be the issues they'd be dealing with. They wouldn't be distracting us with these various, you know, regenerative agriculture. Pepsi has this thing called Pepsi positive, which is um I'm maybe the specific things they're doing in that are are good in some ways, but but really it's it's a it's a it's a more sophisticated greenwashing operation where they're distracting from the pernicious um effects of their of their business model.

SPEAKER_01 1:15:19

It's a terrific way to immediately cut to the core. How good is the business? Right. Because if you ask them what bad are they doing, and just a little bit of bad, you know that broadly they're quite good.

SPEAKER_02 1:15:29

Yeah.

SPEAKER_01 1:15:29

But to the point of coke and Pepsi. Right. I mean, what what good do they do? Right. Apart from philanthropic efforts as a measure of ESG. You know, it's sugar water that's addictive and makes people obese.

SPEAKER_00 1:15:42

Yeah. And the amazing thing, I mean, not to sort of pile on this, but you know, there there are well-known like assessments of companies, responsible companies that have companies like Pepsi or or Amazon or Facebook. Uh, and we didn't talk a ton about sort of the online um issues, but all of the sort of misinformation that ex like I'm talking about Facebook um now that that has occurred. Oh my god. That's a whole nother rabbit hole. Totally whole other rabbit hole. But but but but you know, so these sort of rating systems of companies responsibility, they end up just looking at these selective positive things without really assessing the underlying business model and effects of that business model. And that's where I think that we need to be, you know, having scrutiny and putting attention on companies.

SPEAKER_01 1:16:36

That would be for a professor uh in business, that would be such an incredible study to do. You know, what are the cultural externalities of social media? Yeah, yeah. Oh no, that's something is it doable? That would be that'd be phenomenal and so necessary. Jonathan Hayett did it a little bit in his most recent book. Yeah, yeah. Um finally, Chris, uh Christopher rather. Chris apologies. Chris is good. Yeah. What is the role that serendipity has played in your life?

SPEAKER_00 1:17:05

Oh, that's a good question. Um you know, I think that serendipity has played a huge, uh, huge role in my life. You know, I, you know, and in this great job that I love at Cambridge University. And if you look at the path that that took me here, it's all been through sort of little sort of accidents, uh, you know, one way or the other. You know, I mean, one thing that sort of stands out, I mean, I actually ended up going to work. The first job I had uh was at a financial services company, actually in the call center, and just happened through a couple chance being in elevators with leaders or having my desk located where leaders are, got to know people that ended up really shaping my career as an example. Uh, and I again and again, I mean, I can look back and think, you know, I just, you know, I I thought I wanted to get a PhD, and the University of Michigan was relatively close to where I was, you know, work working at this bank. And so I went, so I just sort of drove. I said, okay, I want to get I drove to here, and and that ended up also, you know, taking my life on some very different trajectory. So so a lot. I mean, yeah, so serendipity is under um under recognized as a as a force in the world.

SPEAKER_01 1:18:32

I love that, mate. Thank you so much. And it's a perfect response. And having asked that about 150, 180 times, uh, it's uncanny. Yeah, it really is. There's a the audience will roll their eyes because I say it all the time. But there's a um quote from Sarin Kierkegaard that life can be understood backwards, but it must be lived forwards. That's a good one. Which just encapsulates that. But um absolutely loved the book. Uh there's a guy called Adam Lance who wrote to me and said uh you have to interview this guy if you want to talk about externalities. So thank you to Adam and thank you so much to you for being generous with your time and you know bringing me to Cambridge.

SPEAKER_00 1:19:12

Great. Well, happy to great to talk, really enjoyed it, Ryan.