A New Way Of Doing Business – true sustainability

Today I recalled one of my first Business Studies lectures in high school. The lesson was simple:

People (we) have unlimited wants and needs but there are only so many scarce resources that are available to satisfy them.

The lesson was important because it taught me about competition. Because people have a limited budget they will CHOOSE how to spend their money and you, as a business have to compete for their wallets.

But today I realised there was another lesson in that sentence which has taken 10 years to surface:

As long as people have unlimited wants and needs and resources remain scarce, inequality will persist. In fact, I am pretty certain that the more we are able to satisfy our desires, the more inequality we create by doing so.

Let me explain why I think this is the case:

When you are poor you want and need only basic things. You may dream of being wealthy but your limited budget only permits you to have so much and this is usually limited to food, shelter and safety. As you earn more you begin to want more and this comes in the form of education, comfort and at some point even happiness becomes important. It is happiness that is the most expensive good of all because it evolves and grows into an all consuming resource monster by the time you are among the wealthy few (think of the cars, yachts and properties the top 1% own). Along the way, people have been known to steal, bribe, murder, deceive and  manipulate their way to riches. This is true not only of individuals but also for countries and large organisations which fight wars or compete by playing dirty on a massive scale.

All this has happened because “happiness” goods which have now become so much more important (as our basic needs have been catered for), cost a lot of resources. There are now 7 billion people and while the number of those in poverty is very large, so too is the number of people looking for happiness. 

For as long as happiness is primarily fulfilled through products and services that require physical resources to be made, inequality will increase. 

Now think of 10 products or services you really, REALLY want. Write them down. Put a price to them. Think about what was needed to make them. Can you image a world where everyone, all seven billion of us, had those 10 things too? Where would we find all the resources to make them all? Will we have enough resources left for our children? Now imagine if all the things you really wanted could be made out of thin air. They required no resources and everyone could have them. WOW! That would mean that happiness is within reach of anyone who wants it.

You may think this is an impossible dream. But I believe there is only one barrier to achieving this kind of world and that is the problem of imagination. People only want products they know about. How many people wanted an iPad or a car before it existed. None! The only people who can make this dream a reality are entrepreneurs, because WE CREATE PRODUCTS and SERVICES. We imagine them, we build them, we perfect them and we sell them.

Imagine a business that creates products or services that do not consume any resources but for the capital, time and people needed to create them (and even then very little). This business can sell happiness goods to those who have already escaped poverty and are now searching for happiness and self-realization. The money they make can then be spent on helping those who remain in poverty to escape it. Is this possible? I don’t know, but through the internet I believe we finally have a medium where resource-less products are not only possible but also very scalable. E-commerce used to be about taking goods out of the store and putting them on to the internet. Can we now think about creating a new range of products, services or experiences that help people want less of what is physically made and more of what makes them truly happy?

As for an example, think of online dating sites – a good example of a resource-free happiness service. What’s missing is for those profits to not help create one or two fat cats, but rather, to invest them into those countries that are poverty stricken. Perhaps it is when thinking about this last part where even a dreamer like me wonders if this truly is possible?!

Recycle for free Beer

After reading the book Nudge I have been noticing “nudges” all around me. Governments and organisations not making us do things for our own good, but just helping us decide to do the right thing on our own by presenting choices in a different light.

So I was amazed and inspired by the amount of nudges that were on display at the Rock Wercheter festival in Belgium yesterday (see the full awesome line-up that included Blink 182, the Cure and Justice).

Recycle for FREE beer

By far one of the best nudges I have ever seen (in my opinion even worthy of a mention in the Nudge book) is Coca-Cola’s campaign to promote their new “plant bottle”, which is 100% recyclable (DISCLAIMER: I am not endorsing Coke, I hardly ever buy their products; I am simply impressed by their campaign).

In short, the campaign offered you a free bag (made from recycled coke bottles) which you could use to pick up plastic cups and bottles. For every 20 you brought back, they would give you one voucher for a free drink (beer or cool-drink). One beer costed 2.5 euros, so if it takes us 6 minutes to earn one voucher (this is roughly how long it took), then we should be recycling if we value our time at 25 euros per hour or less (because that is the amount of value we could accumulate in an hour).

Of course we have to assume diminishing returns and a trade-off between partying and collecting, but economic theory predicts (very accurately in this case) that there will be an equilibrium because some people value their time differently and others will assign greater value to some rock bands over others – suggesting there will ALWAYS be someone collecting but never everyone (which is ideal because if too many collect or too few then this system fails).

The end result and why this is a great nudge

While for us the value gained was approximately 25 euro’s per hour (at the expense of time we could have spent doing something else) the cost to the organisers is probably one tenth of that (the cost of ten 300ml cups of beer). So, the organisers also have a strong incentive for this campaign to work because the alternative (paying someone to clean) would cost more – at the very least a basic wage. Don’t forget that we have an incentive to pick quickly because we do not want to spend too much time doing this (and because we want more beer) while employees would have an incentive to work slowly to earn more money.

But what about the real nudge hiding behind the apparent one (free beer if you recycle)? In my opinion (watching my brother’s teenage friends collect bottles and cups), the end result was a clear positive association for recycling. The idea not only stuck, it also drove behaviour. It shows that people can be inspired to recycle through an immediate short term gain, at a low cost and without the need of punishment or social disapproval (which are two common ways people are currently motivated to recycle).

By the end of the night not only were there almost no bottles remaining anywhere in sight, but we had saved 30 or so euros in free drinks. We did all this during the intervals so missed none of the sets. Our trade off was between the time spent doing very little and the time spent earning free beer). Coca Cola anchored themselves as a recycling company in my mind and I feel good about recycling in general. The organisers also saved on cleaning costs at the cost of around 5 pints of beer (10 cups) per hour.

This is why I love economics, an effective and beautiful CSR campaign inspired by economic incentives, nudges, sticky ideas and decision making equilibrium.

More about this here:


50 Day Challenge – Getting young people to start an online business

Two weeks ago we launched the 50 Day Challenge, to help young people at university start their first online business. The challenge costs nothing, but requires passion, endurance and creativity. The 20 or so students who come every week have now completed 25% of the challenge and are well on their way to building their first online business.

See why I am doing the 50 day challenge and my thoughts on entrepreneurship below:

The 50 Day Challenge is based on Ed Dale’s famous challenge and encourages people with little or no internet marketing knowledge to complete 7 weeks of video training on how to research a market niche, develop a website, get visitors to the site and right at the very end, make their first sale online. Every day, after completing the video, the students then have to act on what they have just learned.

Week 1 – “We’re all in this together”

Two weeks into the challenge and we’ve got some interesting business ideas brewing in the classroom. I love how even students with very little money are thinking both BIG and BRAVE. Some ideas are for social enterprises and are not financiall motivated. Two groups are looking into developing charities. Others are helping promote some local businesses such as Pie Boy Clothing. Some students are thinking about developing affiliate businesses by creating video and written content on topics they find interesting and hopefully earning money from the adverts they put up.

As we break for the holiday I want to keep this momentum going so next week I will be hosting my first ever Google Hangout and doing a live stream of week 3. Stay tuned for more…