Redesigning Enterprise Resource Planning for the Circular Economy
Transcript of a talk Vinay Gupta, CEO of Mattereum, gave at PHX: New Prometheans in Amsterdam in September 2019. In it he describes how Mattereum’s technology can improve our relationship with the things we own and with the world around us. Mattereum Asset Passports are digital identities for physical objects. They help asset owners realize full value for their assets, starting with our collectibles project with William Shatner.
[TRANSCRIPT BEGINS]
I am going to attempt to describe how to fix industrial civilization, in a way that I think gives me real legitimate reasons for a hope about the way we’re handling the environmental crisis. Now, that is a big claim, that is a genuinely radical starting point for anything at this point in the situation, but I think I’m going to justify it.
A bit about me, for context. In 2002, I realised we were going to be dealing with hundreds of millions of climate refugees, and I started work on a project that I expected to take 30 years, to build the global capacity to rehouse hundreds of millions of people. I worked on the shelter first, developed a shelter system called a hexayurt, very widely used in places like Burning Man, which became the foundation for a second shelter technology called Shiftpod, which is on refugee camps. I worked on energy policy, I worked at the Department of Defense, really, really dug into a whole bunch of these fundamental problems. I worked really, really hard on the environmental stuff when I was working in energy policy, and I have a good understanding of that set of topics; this is not coming from a place of naive, utopian optimism.
Let me start with a sense of scale. A fair number of people think we’re over five times sustainable consumption. That means that to reach sustainability, we have to cut our environmental resource consumption by 80%. Can anybody imagine living on 20% of your current income? Because that’s roughly what it’s like to live on 20% of your current environmental consumption, and this seems unimaginable. Our job is to visualise a world in which you could maintain roughly your current standard of living, or a better one, on 20% of your environmental footprint. That sounds impossible at first, doesn’t it, but I’m going to point to some historical examples of where we have achieved those kinds of results in other areas, and then I’m going to suggest why those same things could work for us now.
Let’s think of something that’s super popular here [in the Netherlands], which is the bicycle. How much more efficient is a bicycle than walking or riding a horse? It’s basically the most efficient system for transport, in terms of calories of energy per kilometre of travel that’s ever been invented. It’s vastly more efficient than cars, and you have a country that runs pretty much entirely on bicycles for short commutes. Is anybody in the Netherlands suffering because you ride bicycles so much? Would you all be much happier, if you rode cars everywhere instead of bicycles? Generally speaking, you’re not suffering because you’re on bicycles rather than cars.
The Americans are really suffering, because their cities are totally broken by cars: you have the cars, you have the garage, you have the parking space on the street… Huge amounts of their urban land is taken up by the car, and their cities have incredibly expensive real estate, largely as a result of the amount of space reserved for cars, that can’t be turned into housing and office and schools and workplaces. That’s an example of the situation where if the Americans went to a mass conversion to bicycles, in the places where you don’t freeze to death in winter if you fall off a bike… If you went through that mass conversion in the temperate bits of America, they would be just as happy with the bicycle solution as you are, and it would cut their environmental consumption over transport from car levels to bike levels. It’s not that these things are completely fixed and we can’t change them; there are a lot of solutions in place, and there are good examples of them.
Does anybody live in old house that takes a ton of energy to heat? I had always lived in old houses that leaked heat like a sin. Four years ago I moved into a modern house that was really well insulated, and it’s a whole different experience! You get up in the morning and the house isn’t freezing! And the heating isn’t running; it’s just the sun is coming in the windows and it’s heating the place up, and it works even in winter because we’ve got a nice, big, south-facing window. And that’s a totally different experience of what it’s like to be in a house like that than being in a house which continually attempts to settle to the temperature of the outdoors. Am I miserable because I live in an insulated house rather than an uninsulated one? No, everything is fine. So, it’s not that there are no solutions. We know there are areas where the bicycle is 10 or 100 times more efficient than a car, an insulated house will have a quarter of the heating consumption of an uninsulated house… We know this stuff is there. But, we have to think in much more radical terms, if we’re going to get the whole of the industrial system down to 20% of the current impact, which is a reasonable goal.
A lot of this covers blockchain, because the blockchain provides some of the tooling that we need to get this to work. Roughly speaking, for our purposes, the blockchain is a database which is efficiently shared between any combination of individuals or organisations. If you think of something like a hospital, typically all of the information inside of a hospital sits inside of a single computer system, and if you go to another doctor, they have to pull your record manually and they get them faxed or emailed to them; those systems are very bureaucratically inefficient, and those are these systems the world currently runs on. In a blockchain world, everybody is sharing the database that stores for example your medical records, so anybody that’s providing medical care will be connected to the same global database, and use cryptography to make these systems private. You could also do a bunch of crazy stuff to make them censorship-resistant, that’s where you get things like Bitcoin. When we get on to the technical bit, what we’ll be discussing is the use of shared databases which extend across many, many different people working together to manage environmental impact. If you think of when we started talking about the blockchain and how it works for that, just think of it as a database, shared across all the people that are working together to do something.
Alright, let’s get to the good part. There are basically four fundamental metabolic functions in society [investment, production, consumption, and waste management], and the first function is investment; nothing happens, nothing gets built without somebody investing resources in it. There are many, many different kinds of investment and many styles of investment, but in the past roughly 50 years we have started to use mathematics in a much more disciplined way to manage investment decisions. There are three or four different things you could point at: you could point at portfolio theory, you could point at quantitative finance, you could point at high-frequency trading algorithms, and there are probably 50 other examples that really specialised finance people would talk about, but we really started to move math and computers into the financial system in a big way, and over the last 50 years that’s gone deeper and deeper into finance. At this point, roughly half of the world’s commodity trading happens on computerised exchanges, where all the trading decisions are made so quickly that a human being never sees the decisions, the algorithms are established and they just do the trading. That system is fundamental to the global economy, nobody even blinks that that system exists — it just works, and we use it for everything.
Now, that process of using some mathematical modelling to do fundamental processes didn’t just happen in finance. The general way of naming this entire set of processes is statistical process control: you measure everything you can about a process, you build a statistical model of how the process behaves, and if you want to modify the process, you basically can perform experiments because you’ve got a model of how the process works; you change some variables, you see a change in the output, and you’ve got a model that will let you correlate the cause and the effect. And this is sort of common sense stuff, this is how the world works. This whole model of statistical process control was invented in about 1920, it’s an old model, but it’s sort of common sense. If you want to do something and you want it to work properly, at some point you’re going to start measuring things and you’re going to start comparing the results you want with the results you’ve got. The big place for this impact on our lives is not the use of mathematical modelling and investment; it’s the use of mathematical modelling in mass production. Now, this is tricky, I wonder if we could find something…
Does anybody have anything in this room that was not a product of the mass production, in a factory, at any level?
Comment: My hat.
Your hat. Now, tell me why your hat didn’t come out of a factory?
Comment: Because the product had to be handmade, in 1962, and then my grandma found it in a storehouse so she bought it. She made it for my dad, so this was a man’s hat, and my dad wore it for 20 years. And because hats are my personal brand, I found it two years ago, so took it to my hat-making friend, and she modified it for me and added more personality. So it didn’t come from a…
It never touched the system. [laughter] There are a handful of objects in the room that weren’t mass produced; everything else came off a production line. Probably 99% of the objects in the room, or more, came off a production line.
So, that industrial production model works so well that it has displaced nearly all the other models of production. If we’d got asked that question 200 years ago, maybe the pins in people’s hat would have been mass-produced, maybe the thread that sowed their clothes, maybe even the fabric, but the vast majority of the objects would have been made by hand. We replaced this old, made-by-hand world with the mass-produced world. And, for the most part, mass production is more efficient, because what we didn’t do in handmade production is we measure everything. If you have a production line, and you start on one end with steel wires and you end up at the other end with pins, a modern mass-production system will measure how long does it take to sharpen each pin, how long does it take to polish each pin, how long does it take to stick the heads on each pin. Whatever the process is, we measure every step in the process, we watch super closely when it happens, and if it turns out that it’s taking too much time and taking too much worker salary, we start figuring out how much it will cost to buy a machine to make that step faster, and we repeat that process until every step that can be economically efficiently automated is automated, and the production line is the running as cheaply as we currently know how to make it. That process has produced an astonishing amount of material wealth.
If we go back a couple of hundred years ago, people would own one set of clothes, and that would be their clothes, and that would be it. At this point, if somebody did that, they would either be a one-bag backpacker, or they would be wildly eccentric. We’ve gotten into a position where material goods have become so overabundant that often our hard problems are about having too much stuff or having problems making decisions, rather than the absolute availability of goods. And we didn’t wind up there by magic; we wound up there by applying a process which is almost like the scientific method applied to manufacturing. It’s not quite the scientific method, it’s not quite like a repeatable experiment, there’s a certain amount of improvisation in hacking, but the process of industrial mass production owes an enormous amount to the scientific method.
And it’s not just that you develop that technique in a lab and you take that out and scale it, and it’s not just that science turns into new machines; it’s the attitude about measuring and comparison. Statistical process control, and systematic improvement by analysis, is how we built the production system that we’ve got today, which is the source of a huge amount of the world’s problems. Because the production system is so incredibly good at turning raw materials into stuff that people want that we’re just crunching through the world’s supply of raw materials super, super quickly to make all of this stuff. It takes energy, it takes time, it takes labour, but most of all it takes materials. Everything we own was made out of something that somebody took out of a hole in the ground, either recently or a long time ago, or they made it by chopping something down and throwing it into a machine, and that’s basically where stuff comes from. It’s either grown or it’s mined, and both of those things take land; or it comes out of oil, which is a whole other story, but it’s essentially mining.
Does this broadly make sense so far? Because this is a kind of funny angle to look at the world. You don’t really think about all the invisible people measuring things that made this shirt. But the fibres are really, really fine, they’re tiny, and it’s all very precisely made, the stitching is… Machines did all of that, and machines get designed by engineers, and engineers measure things, that’s how they know the machine works, and that’s where everything we have comes from: measure and refine.
Investment, production, statistical monitoring, process control, stepwise improvement. As soon as I walk into a shop and buy the shirt, it loses all visibility to any kind of statistical analysis. Everything in this room that came out of mass production was represented in a computer system as a set of records, right the way through the process: there will be CAD files that it was manufactured from, contracts, quality control parameters, specifications, every component will have a CAD model somewhere… all of that stuff was digital. The stock control levels, the order levels, the shipping, the boxing, where it’s supposed to be placed in a warehouse, the numerical models, database records — the whole thing.
As soon as a consumer walks into a shop and buys it, the last time that object is digital is when somebody makes a payment to pay for, and then after that it falls into the analogue black hole and becomes completely invisible to computers. No measurement, no statistical process control, no ability to optimise because we stop gathering data. We essentially go blind at the point of consumption, and that’s where the trouble starts.
Because we can no longer use the mechanisms that we use to hyper-optimise investment and production, to manage consumption and waste. The consumption process and the waste process are in pretty much the same pre-industrial condition that they were in 300 years ago. We’ve taken the first two parts of the process and we’ve ramped them up to become thousands of times more effective than they were in the old days, but we haven’t done anything to equally retool the consumption and the waste processes so that they can keep up with the efficiency of the production processes.
Comment: But the thing is, who has an interest in us knowing exactly what happens with consumption and waste?
That’s a great question! We do! [laughter] And I will come to that.
One way of seeing the whole environmental crisis is that it’s a crisis of overproduction resulting in overconsumption. I wrote a long blogpost about this, called How Post-Industrial Capitalism and a New Type of Big Data Will Save the Planet, it really digs into the history, and a lot of the history that it digs into is the creation of artificial demand. The Americans are the first people to hit this problem, that the factories can produce more than the population will buy, if you just pile it up and they come and collect it. In the old days, things were so rare that if you had a pile of things, selling it was, generally speaking, not the hard part. The Americans began to produce so much stuff, because their economy went through massive industrialisation, and then at that point they were just overproducing what they could economically manage, and the rest of the world was so poor that there wasn’t that much point in them exporting. They certainly did export, and they could saturate the export markets they had access to as fast as they could saturate the domestic market, pretty much.
So, at this point, the Americans, and it is largely the Americans, begin to develop what we think of as being consumerism, and consumerism is the creation of a pattern of psychological needs which cause people to shop when they’re emotionally uncomfortable. And that process of shopping when you’re emotionally uncomfortable, once that’s well-understood in a population and we use terms like retail therapy, then at that point all you need to do is make people uncomfortable when you need them to buy more. [laughter] Now, has anybody ever seen an advert that was designed to make you uncomfortable so you would buy something so you became comfortable again?
Comment: Never! [laughter]
“Hey, are you taking care of your kids properly? Maybe you should buy our product. Because people who take care of their kids buy our product!” and that’s like 30% of adverts, because parents are really psychologically vulnerable to the questions about whether you’re taking care of your kids properly, particularly if it’s your first kid, and you don’t realise that you could drop them on their head a few times and they’re fine. [laughter] Not that I have kids. [laughter] People who have children tell me these things. [laughter] That kind of psychological vulnerability, and the creation of psychological vulnerability, has become a critical part in how things are sold. Adverts which are designed to attack male psychological vulnerability: car adverts. “I have 100,000 euros worth of car, and I’ve got so much time that I could drive to the middle of nowhere for no reason!” [laughter] Does anybody know anybody that’s got a 100,000-euro car and any free time at all? If you’re a person that works hard enough to have a 100,000 euro car, typically you’re working a 90-hour week! It’s crazy!
Comment: I know some Ether people that… [laughter]
Occasional lottery winners… But for the most part, if you didn’t inherit your money, that just doesn’t exist, there is no such person, apart from a few people that bought Bitcoin… and most of them can’t drive. [laughter]
Similar processes around women. How do you target women to make them buy things? Well, you show them prettier, younger women who are wearing the things that “you should buy”, and it’s like “Hey, you don’t want to be not the prettiest girl in the room, do you?” These fears are super primal, and we’ve got entire industries dedicated to using very old instincts to cause us to buy more stuff. All of the demand signalling has become completely distorted, because we generate huge amounts of oversupply, and then we poke people with psychological sticks, to make them absorb the oversupply and buy crap they don’t need.
Now, where does all of this crap go?
Comment: India. India is one of the biggest markets for second-hand clothing imports.
Yes, absolutely.
Comment: They just get the clothes from the West, usually the West, and then they just rip it up by hand and then they get the thread and then they reuse.
And they reuse, and that’s a good story, that’s a good thing for us to do. But for the most part, the first place this stuff goes is storage, and then the second place this stuff goes is landfill. The storage thing is very much an American problem, it’s a bit probably less of a problem here because your real estate is more expensive, but the Boomer generation in America, the people that were born in the ’50s and ’60s, they typically have quite big houses, because America was quite rich at that point, and typically those big houses are packed with boxes that haven’t been opened in 20 years. The basements, the cupboards, the attics, they’re all packed with tons and tons of stuff that was accumulated over decades of overproduction, resulting in overconsumption, resulting in a storage problem, and that storage problem is gigantic! Because once the goods are out of immediate circulation, once you’re no longer using the thing every day and you kind of put it somewhere, there’s a real big cost associated with taking that object back down again and then selling it.
Getting things on eBay probably takes half an hour or an hour per object, because you’ve got to take pictures, write the description, figure out what you’re going to charge for it, and that time cost often exceeds the economic benefit of actually just leaving the object where it is, because it’s just more expensive in time to sell it than it is to keep it. And that equation where it’s more expensive in time and effort to sell it than to keep it results in this tendency for us to just wind up with these huge archives of stuff. Does anybody feel like they own too many things? Show of hands?
An entire roomful of people, probably two-thirds of hands feel like they own too much stuff. So, here, let me ask the magic question: why don’t we have statistical process control involving computers and databases to help us manage our stuff? The stuff was invested using a computer, it was manufactured using a computer, it was sold using a computer… Why is it so damn hard to manage it using a computer? Why don’t you have an application on your phone that’s like your personal bank application but it’s for all of your things? “Hey, you own 31 pairs of shoes. Are you sure you need another pair of shoes? That pair of shoes looks just like a pair of shoes you already own! Would you like me to sell the old pair automatically on eBay right now?” and we could really do this.
If you just think, as a mental model, is it possible that we could see a future world where every time you purchase something, it’s automatically transferred to an application that you own, so the money goes in one direction and the ownership record goes in the other direction, and now you’ve got a digital record of all of your possessions, and then you can do statistical process control on your ownership stuff…
You do it for personal finance; why shouldn’t we do it for personal spending? Imagine how much easier our lives would be, if we automatically had a record of every single object that we had ever spent money to acquire, and we could begin to look for patterns where we had more stuff than we needed in some areas, where we had things we hadn’t used for a long time in other areas, and if all of that stuff is nicely digital and the records are properly managed and properly secure, we could then do automatic listing on platforms to get rid of this stuff. If I decide that I have too much stuff in my cupboards… “Hey, what’s in this cupboard? Well, this, this, this, this and this,” I just pass them in front of my phone, scan the little tag, it tells me what the objects are and it tells me what I could get if I sold them on eBay… it might even have some agent come and pick the damn stuff up and get rid of it for me… If we had those kind of digital models and digital control over material inventory, how much less stuff would we own? Could we actually conceivably get rid of a lot of things without really noticing the impact, if we had good ways of tracking what we owned and what we used? I think that’s obviously yes.
What about the mixed level of that? If we’ve got really good digital records that track what the thing is… Does anybody shop on eBay? A couple of people. You have equivalent platforms here? Who shops on those kind of platforms? Most people, right? How good are the product descriptions on those platforms? Generally speaking, they’re terrible: the pictures are usually really awful, the text descriptions are kind of random, you have no idea what the thing originally was, unless somebody lists a model number, and often it’s wrong… It doesn’t really work. And there’s no way of searching semantically. If I say I want a remote control that will work with this television, there are probably 50 remotes that will work with that television. But if I type in the model number of that television on eBay, and say, “I just want the remote control,” there might be one remote control that comes up, because eBay doesn’t know that 50 models of TV all use the same IR signalling, it just doesn’t know that these things are interoperable because it’s got no semantics. I can’t express my need “I want a remote control that will work with this TV,” I can only say, “I want a remote control that came with this TV,” because eBay doesn’t know what goes with what. The same thing with colour matching. Has anybody ever tried to buy two things that were of the same colour on eBay? Nightmare! Because it doesn’t use a mathematical description of colour, it doesn’t use RGB; it just says, “Light green” and then there’s a photograph! And you don’t know what kind of colour the light was in the room that the photograph! Was it daylight, was it LED? Whatever it was.
So, if we took these really high quality information records that describe what things are, and we transferred those records through every step of the supply chain, from personal ownership, to your software says you should get rid of that, to your software lists it on eBay for you and then somebody buys it, if the record that the person gets when they buy that thing is the same record the manufacturer gave the first owner when the thing was sold to them, now we could talk about making these secondary markets really efficient. Less time to list the things, less costs to list the things, much higher liability of the information in the secondary market, and therefore higher prices and more liquidity. More stuff on the secondary markets, greater access to the secondary markets. What if you even had a system where almost everything that you owned was just kind of floating around on the secondary markets, and once in a while somebody would give you an offer for it, even if hadn’t consciously listed it? “Hey, that pair of shoes you haven’t worn in two years, somebody would like to give you $75 for those shoes! Yes or no?” We could begin to use software to persuade people to put their stuff into the secondary markets so other people could use it. All those clothes you were describing earlier on, that wind up scrapped in India, why are we taking them apart for the thread rather than having people wear them? Well, it’s a problem of analysis. We can’t figure out who wants to buy a 1970s tweed jacket. But I bet they’re super fashionable in Nepal or Malawi, there’s got to be some place that wants these things… but we’ve got a problem of matching supply with demand.
Comment: Even when we’re working, the hours we put in… When we were savages, we would hunt for one day and have food for a week, but today we work one day, and then the next day we need to go back to work and we’ll work for a whole month to have food for a week. So we’re not trained to understand the power of that one hour that we put in, and yet we have recycling it reusing it in a different way. It’s very hard for people to understand “Okay, why don’t I just use this person’s jacket?” for example.
Comment: How will this reduce consumerism?
My suggestion is it might not reduce consumerism, but it might increase the efficiency of consumerism, to the point where if you accidentally buy something you don’t need you sell it again a month later, and that object doesn’t wind up stored, which is just dead environmental impact and no human benefit, it winds up used by somebody else, at which point the resources that went into creating it are now fully efficiently used.
Comment: So it’s the Airbnb model. Fill up the unused space.
It’s the Airbnb model, fill up the unused space, but also build the knowledge about the actual use of objects in the material world so we could do statistical process control, so we could figure out what objects are producing tons of impact for very little human benefit and redesign the damn things. Because if we don’t build these really deep models of how the physical world is used, we can’t make anything work properly. And this applies also to the disposal step, the waste step. If I have a digital record about what the object was through its entire life, when it finally hits waste because the thing is just broken, I could go back and retrieve a record of exactly what’s in it — 16 T47 screws, this much stainless steel, a piece of plastic shaped like that — and at that point it becomes feasible to strip it for parts rather than just junk it. It becomes possible to reuse components, rather than simply ripping it down for raw materials, or what we usually do, which is landfill, and that becomes vastly more efficient in the final step.
And when we start talking about concepts like circular economy, it’s almost impossible to build a circular economy, unless you’ve got excellent data about the materials which are going around in the circle.
When you get to that final stage and somebody says, “Right, I want you to put this back into the value chain… Well, I know exactly what this is. If I could find a buyer for it in its current condition… Hey, does somebody want to take this tweed jacket, make two patches where there’s a moth hole and then wear it? Great, sell it to them. Nepalese love tweed and it’s really cheap, send it to Nepal — they love that stuff! (I’ll deal with the transport logistics and the environmental cost of transport another year.) [laughter]
But, in principle, very many things that hit end of life in Western societies could be reused exactly as they are in other places which are poorer, or indeed poorer people in this society, problem one. Problem two, if you really can’t find a buyer for the thing as a whole, strip it to pieces and then sell the parts, and if you can’t find a buyer in that instance, now you’ve got this decision of whether you store it or whether you recycle it or whether you landfill. But all of those processes would be radically more efficient, if we had exact information about what a thing was and how it was made and what all the pieces were. Why can’t I get a manifest from my laptop manufacturer that shows me every single component in my laptop right down to the screws? Because that’s what you need, if you’re going to effectively have a circular economy.
Now, I should talk a little bit about where the blockchain fits into this. I have sort of suggested a kind of magical thing, where data is shared across the investment, the production, the consumption and the waste stages of an object’s life. Right now there’s tons of software in the first two stages which manages those first two stages: specialised financial modelling packages, enterprise resource planning, there’s all kinds of manufacturing optimisation software… Everybody has got their own set of tools. We have no tools at all for effective consumption, we have very little tooling for effective waste management. What the blockchain gives us is the potential of having a sort of interoperable base layer. In the same way that email is like the fundamental primitive of communication when you’re operating across organisations, you could have the blockchain be with the kind of fundamental primitive that allowed you to connect the investment, the production, the consumption and the waste stages of an object’s life, because the records that describe the object are on the blockchain.
However, you’re still going to want tons and tons of specialised software that handles all the detailed work, and that’s kind of the equivalent of attachments when you send an email. The email will handle text and maybe bold and formatting and a few links, but if you want send anything complicated, you’re going to attach a spreadsheet or a CAD file or a video. The same with the blockchain: the blockchain just gives you this very thin layer of connectivity, and then all the really detailed stuff gets clipped onto it, kind of like attachments. What my company does is we’ve got a set of legal machinery to make sure that the additional information you attach to an object on the blockchain is true, and if it’s not, you could get money back, and that’s what we do for initially things like collectibles. We’re working with William Shatner, the actor who played Captain Kirk in the original Star Trek, and Shatner is very, very interested in using the blockchain to manage things like memorabilia — it’s a nice starting point.
But what we’re driving towards is an understanding that the natural function of the blockchain is to have electronic records which are as durable as the goods that the records refer to. If you’re going to have a nice pair of shoes which will last for 20 years, the electronic record that describes those shoes should last as long as the shoes do and longer, and right now most of our database systems aren’t architected that way; they continually get rid of information, to try and free up room for other information. Amazon is not going to store records on what it sold 20 years ago in a way that will make those records accessible to the public, so if we need really long-term data record storage so that at end-of-life disposal we can know what the thing was at the beginning, we need a new way of thinking about the storage of data, and the closest thing we have is the blockchain.
My suggestion is that we could see the creation of a new set of practices which would be as transformative for a civilisation as the invention of mass production was, which involve correctly instrumenting and measuring what happens in the consumption phase of society, optimising the heck out it, using the same mathematical techniques that we use in investment and in the production systems, we manage the data so that you could connect the production, the consumption and the waste step together properly so that nothing is unnecessarily wasted, and all of that information goes back to investors so they can figure out where to put the money more accurately. Now, that process is not like an industrial revolution, it’s not like you have to start from scratch and invent statistical process control and invent mass production. We’re already starting with statistical process control and blockchains and mass production.
So, my suggestion is that this is actually not that bad a job. It’s probably less complicated than building out the Internet was over the past 20 years. The evolution of the World Wide Web, from a single document describing… was it a band playing in CERN that was the first website, all the way through to Facebook, Amazon, Google and all the rest of that… That process only took 30 years. It’s a really, really short period of time, compared to how long it took us to invent things like mass production. So my suggestion is the next one could be faster.
We could get all of the information from manufacturers, and we could get that information stored in some kind of objective global register, and we could tie that information together with consumer purchasing behaviour, and we could store those records in a way that gave consumers control of their data, and a set of rights, and we could wire it up to the secondary markets, like eBay and all the rest of those markets, and we could get those records into the hands of people that were doing waste disposal of these objects, even if they’re in countries like India or China or Thailand, and we could wire all of that stuff up in maybe 10 or 20 years, from a standing start to a system that’s completely seamless. Because almost every single step in that process is already controlled by computers.
Your credit card company knows exactly what you’re buying, it just doesn’t put that information into something that looks like a bank record so that you can see what your stuff is. It’s not that hard to imagine somebody doing that. Similarly, it’s not that hard to imagine that you scan the object, tag on the object when you’re about to throw the thing into the landfill, and it tells you that there’s somebody on eBay that will buy it. “Great. Why are we throwing this away? Let’s just sell that damn thing.” So, I think that there is a very sensible plan for joining together all of these disparate pieces of information to a single unified whole. Now, here’s the question: do we believe that if the world worked that way, we could get greater satisfaction, with half the amount of material goods consumed?
Comment: As consumers? Yes. But I don’t buy the investor side. It makes sense, it’s sensible, but we need sensible investors who are in it with us, or us being the investors.
Let’s talk afterwards about that, because I think I could tell you why it’s more profitable for companies to operate this way, but it’s kind of long and complicated. But in a very small nutshell, if you’re a high-end camera manufacturer like Nikon or Canon, you are completely dependent on the efficiency of the secondary market, because your primary camera purchasers are professional photographers, who will only buy the new camera if they can sell the old camera for nearly what they paid for it when they bought it. The customers that are likely to buy your new gear have to sell the old gear to be able to afford the new gear, so the more efficient the secondary market is, the more new cameras Nikon and Canon can sell, I think. [laughter]
What I think I’ve described here is a fairly plausible plan for halving the environmental, thirding the environmental impact of consumerism, while producing a much higher quality of life for consumers. You buy much better quality things, you sell them when you’re done with them. If you just want a second-hand one, the second-hand markets are really efficient, so you hang on to less stuff because you buy it if you need it… You can easily imagine something that looked like a takeaway food service or an Amazon Prime, where I want a digital camera, I can either rent or buy one, and there are 50,000 of them in the city that I’m in, all of which are accessible because we’ve got electronic records for who owns what. It creates enormous amounts of liquidity in terms of access to goods, which means high-quality, durable stuff gets manufactured rather than trashed, and the high-quality, durable stuff has less environmental impact, because it takes the same amount of natural resources to make a crap camera as a good one.
This model of the future… It’s the first time in my life that I’ve actually had real hope that you could make the world work environmentally, while providing a decent standard of living for 7–10 billion people. Because if we did connect together all of this data, we could produce a system that was so incredibly resource lean that we could actually make it work. Because if you think about it, most things last longer than our desire for the thing, and when the desire is exhausted, because we’re so bad at turning things we no longer want into filling somebody else’s needs, that person is typically in a position where they have to buy a new one when an old one could be just as good. If we can solve that problem, we can allow the consumer goods machine to continue to flood the world with stuff, but we just get rid of the stuff we don’t want, and more and more and more people get access to consumer goods, it’s just the stuff is coming now eighth-hand rather than new.
Comment: Car manufacturing is even closer to this thing than cameras.
Yeah, that’s a good one, great example. And that all relies on having good information about the used car.
So, that’s basically the end of the talk, now we could take lots of questions…
[cross-talk] I think it might actually work, and it solves a lot of the problems that we’ve got with sustainable development, because people in poor countries might wind up buying a whole bunch of stuff that we don’t want anymore, but that is very useful for them. And that’s already happening; we just finish the process and make it super efficient.
Question: It was a great example, the car, you want to track its history. You mentioned the word “tag” I think two or three times in your talk. My big hole in this theory is… Technologically, theoretically, digitally I completely agree this could work, but what hardware medium is so cheap that you stick it on a three-dollar T-shirt?
2D barcodes.
Question: They don’t wash off?
Well, the tags that are inside of the T-shirts are typically in good condition, as long as the T-shirt is. The washing instruction tags? Those things really last. It could be a 2D barcode.
Comment: So it’s like the printed thing about how to iron and wash your stuff. If that’s dynamically printed, if you encode enough information, because maybe 2D isn’t enough, maybe it’s a QR code… But you say if you print it, that’s it.
It’s good enough for a T-shirt. Digital twins.
Question: Maybe for the point he was referring to as well, how do we incentivise all of the big companies that now create one-off products? Even Apple does this, decreasing the life cycle of their product. How do we incentivise them to go along with this program? Because it feels like you would basically piss a lot of people off, if you said you cannot sell stuff anymore.
I think it’s carrot and stick. If one computer manufacturer starts to produce this kind of durable ownership record, a digital twin, then their computers will have higher resale value, which means that people will buy their computers preferentially, which will force the other manufacturers to change. Because if we think about this, if I buy a thing, knowing that I can sell it for 90% of what I paid for it, my feeling is that I’m only spending 10% of the money. Whereas if I buy a thing and I think I’ve got a 50–50 chance of getting 75% of what I paid for it but I might only get 25%… wow, I really feel like I’m paying full price. And this is where we start thinking about things… where the ownership of the thing is inherently temporary.
Comment: But I think there is still little bit of a flaw — I love your logic, by the way. You have to be able to afford the more expensive product. Now you’d spend 100 bucks for a nice tweed jacket instead of 15 at Zara.
If you’re the first buyer, if you’re the first buyer.
Comment: Exactly. The money is only with a small percentage of the population. So there’s still a whole thing about how to make high-quality products cheaper instead of low-quality products very cheap, as we have now. For instance, for furniture, how can you not only construct it but also deconstruct it and construct it again? Because if you move something from IKEA once or twice, it falls to pieces.
So true, so true.
Comment: So I think the weak point is still in the manufacturing part, and how do you get that part along, and they’re not designed for that. When you speak with them, those products are not designed to construct and deconstruct directly, not designed to actually be circular at the end. Because they will just make a design, and then guys bid for the components, so even similar products are of completely different components and therefore are much less circular.
Yeah, absolutely. I think that there’s a really important point here, which is about modularity. Have you seen Grid Beam? Grid Beam is essentially a modular system for building things that look like IKEA: super cheap to make, incredibly flexible, the idea has been around for probably 30 or 40 years… There have been a few attempts to commercialise it, and nobody has managed it yet. I keep trying to get hacker spaces to start Grid Beam libraries, where you can rent a bunch of this stuff, use it, and when you’re done you sell it back to the hacker space. I think it would be a business model for hacker spaces. But the crux of this is we can’t incentivise high-quality, durable goods manufacture until we fix the secondary markets.
Comment: You can also really shift the model and only let people pay for their use.
Service rather than a product model.
Comment: Exactly, but keeping the stuff on the balance sheets of these company, because sooner or later they will get it back, so then it better be durable.
Yeah, that’s right. The service rather than product model works great for corporations that are making these decisions. Consumers are very uncomfortable with a service rather than a product, but they’re increasingly comfortable with second-hand markets. So in terms of getting high-quality, durable manufacture…
Comment: We have bikes now in the Netherlands.
Yeah, that I call fleet property. Fleet property is a fantastic way of handling this stuff, for the things which are fairly impersonal. It works for bicycles, but it doesn’t work for handbags. So, if we’ve got really good documentation and instrumentation about the secondary market performance, the durable laptop that gets used for four or five purchasers winds up with a higher price than the laptop that falls apart after only three purchasers. You can see this with IBM ThinkPads, where nobody blinks when they buy a ThinkPad because they know that the secondary market is super robust.
Comment: It’s the same with cars.
It’s the same with cars: you buy quality. So I think if we’ve got really good instrumentation about secondary market performance, when I look at the price tag in the shop, if I can immediately access what is this worth second hand, immediately I’m mentally discounting, and I think that’s what creates the incentives to get really durable manufacturing. And I’m not suggesting that this happens overnight, three years from now I’m not thinking this. But over the lifespan of the environmental crisis, from here until we have achieved a sustainable civilisation… I can imagine that this would be an ongoing transformation, and that the eventual sustainable civilisation will have to work in this way or something like this, so we might as well get started.
Comment: Yeah — thank you, thank you! [laughter]
I never had a mental model of a sustainable civilisation that supported any kind of consumerism at all. I always assumed that we were going to wind up with sustainability being just gigantic warehouses with 500 identical copies of everything. I think that this model allows for a fully diverse, creative manufacturing economy and also full sustainability, and I never saw that before. This is the first time in my life I’ve looked at the world and have been like “Hey, there is something better than eco-Maoism!”
Comment: I just want to address, I think this is the key point if we’re looking at climate change, is everyone can consistently come up with problems, like why this isn’t going to work, but that’s where it’s also within everyone’s power to just identify parts of the solution and start to do it. Because at the end of the day, I think we can also do a show of hands, who thinks this is a version of reality that should exist. Yes, hands up? So that’s where if everyone comes to this common consensus…
Comment: My point is that I think the technology will go faster than some of the other fundamental changes that need to happen.
Comment: But it starts at the technology layer.
Yeah. The paper that I wrote on this is under this terrible How Post-Industrial Capitalism and a New Type of Big Data Will Save the Planet, it’s on Medium… I will probably find a better title for that post and give it a proper URL, but there’s a really long analytical piece that goes through this in sections and categories, if anybody wants to take a look at more details.
Comment: I heard you speak about the topic last year on the boat and I totally didn’t get it, and I think the discussion that just started today shows how your story and your vision suddenly got… People can touch it, or almost touch it.
Yeah, yeah — it’s much more concrete. I should mention that my company is called Mattereum, and we didn’t start out doing this, but two weeks ago I figured this out and all the pieces came together, so this is probably what we’re doing. Because what I hadn’t figured out was the interaction between durable records for things and consumerism. I’d been thinking of it in industrial uses, I’d been thinking of it for collectibles, I’d been thinking of it for historical artefacts… I hadn’t gotten the piece together where it’s shoes and cars and jackets and couches… That was the point where it clicked.
Comment: And probably in order to finance the thing, you’re probably doing something like Airbnb of things or something so that the investors understand.
That’s right, that’s right. Because we’re going to start by selling Star Trek memorabilia, signed by William Shatner, and the ownership records go to every new owner that buys that Star Trek figure, and that’s how we create good secondary markets for Star Trek stuff. It’s a tiny little problem, but we are essentially talking about building the economic system for Star Trek, using Star Trek figures! [cheering] [applause] What could be better than that?
If you would like read more about Mattereum’s near-term plans, please read about our upcoming project with William Shatner to do authentication and provenance for the collectibles market.
Thank you for reading, and we hope you enjoyed the ride! Want to know more? Here are our whitepaper and our Telegram group.
