The following is an essay I submitted to the St. Gallen Symposium's 'Wings of Excellence' Award; it was selected as a finalist for the award:
The St.
Gallen Symposium Leaders of Tomorrow have posed the question, What are alternatives to economic growth? In
this essay I draw on ideas from technology strategy and systems theory to put
forward a vision for sustainable improvement in human well-being which does not
depend on economic growth, as it is currently measured. First, I discuss just
why we need a new approach to progress. Then I will describe a new way of
thinking about ‘progress’ which transcends the traditional growth-orientation.
Three key concepts—platforms, modularity, and the circular economy—suggest ways
to create value without transactions,
to stimulate innovation at low cost,
and to inject sustainability as a design feature of the economy, not an
afterthought. After introducing each concept in turn, I discuss the synergies
between all three which mean that together they offer a compelling alternative
to the present narrow focus on economic growth.
The Challenge
The
prevailing paradigm of growth-oriented capitalism has several intrinsic flaws.
Here I highlight two.
First, there
is the issue of resource sustainability. Much of today’s economic activity is
generated roughly as follows: we unearth some raw material from the ground,
process it through a multitude of steps, use the finished product, and then
throw it away at which point it gets put into landfill. Before the industrial
revolution, this system worked because the quantities of materials and waste
were miniscule compared to the overall system. Nowadays, due to population
growth and rising living standards, we face the very real possibility of finding
key resources in short supply.[1]
Our waste outputs—in the form of greenhouse gases—are now having geologically
significant effects on the planet.[2] As
many have observed, perpetual growth is a physical impossibility because of the
limitations of the planetary system.[3]
Hence, we require an alternative.
Second, there
is the issue of poverty. Growth-oriented capitalism has failed to solve the
problem that hundreds of millions of people cannot afford many things which
those of us in developed countries take for granted—such as food, clean water,
housing and household comforts, access to education. ‘Trickle-down economics’ has
failed; growth has increasingly benefited those who are already wealthy.[4]
Moreover, innovation is directed towards things people or governments in the
rich world will pay for, such as smartphones, medical devices, and military
hardware. The spending on so-called frugal
innovation, to create novel products for the world’s poor, is a fraction of
what is spent on high-end innovation. To benefit the majority of mankind,
innovations in the future will need to be dramatically lower cost than those of
today.
Platforms
The concept
of a ‘platform’ has emerged in the last two decades from studies on the
economics of technology. In a technological system, a platform is a central
component which other complementary components can attach to. For example, in
the software world, an operating system (OS) is a platform on which individual
pieces of software can be installed; it is the joint package of OS plus
software that creates value for users. More abstractly, in market systems a
platform may be a central organization with which other individuals and/or
organizations interact. For example, eBay is a ‘two-sided’ platform which
brings together sellers and buyers of physical goods. In the words of
management professor Annabelle Gawer, a platform ‘acts as a foundation upon
which other firms can develop complementary products, technologies or services.’[5]
The power of
platforms is that they bring together people to allow mutually valued
interactions. Some of these may entail transactions—such as a good being sold
on eBay—in which case they show up as contributing to economic growth. But much
of the time the interactions that platforms facilitate involve no money
changing hands. For example the website ‘Quora’ is a platform on which people
can post questions or answers, exchanging
valuable knowledge, without any price attached. This can create tremendous
value, but does not generate economic growth as measured by GDP.
Platforms
benefit from a phenomenon that economists call ‘network externalities:’ the
value of joining a platform rises the more other people there are already using
it. For example, social media platforms are more attractive to use if they have
an active community of users to interact with. This results in dramatically
increasing returns to scale, captured by ‘Metcalfe’s law,’ which states that
‘the value of a network goes up as the square of the number of users.’[6] In
many cases only a small fraction of this value is accounted for as ‘economic
growth’ in national statistics.
Platforms
are especially well suited to digital technology, which enables fast, cheap
information flows, and makes a platform easy to scale up. Digital platforms
make efficient use of raw materials: once a fixed investment is made in
hardware, the only ongoing resource a digital platform uses is the electricity
to run its servers. Digital platforms therefore create tremendous value with
very few natural resources. This makes them an essential pillar in a future
that transcends growth-oriented capitalism.
Modularity
The concept
of modularity is closely related to the idea of a platform. Modularity is a
property of a system that means it is partitioned into constituent parts that
have clearly defined interfaces. A product system is modular if its components
can be easily swapped out and interchanged with others. For example the
traditional PC has a modular architecture: its internal components (e.g.
graphics card, sound card) and peripheral components (e.g. keyboard, monitor,
mouse) all plug in through standard interfaces and can be individually upgraded.[7] An
organization can be said to be modular if it is made up of subdivisions that
operate in a relatively self-contained manner, such as the academic departments
of a university.
The essence
and importance of modularity was first articulated by Herbert Simon in his
seminal essay, ‘The Architecture of Complexity.’[8]
His observation: a modular architecture allows a system to evolve, through
trial-and-error experimentation with alternate components. When a new component
enhances the value of the system, it can be retained, and if it detracts from
the system it gets discarded. This general observation reads across directly to
modularity and evolution of technological products; the modular architecture of
the PC is credited with catalyzing innovation in the computer industry.
In a recent
essay, Carliss Baldwin and Jason Woodward observe that by their nature
platform-based industries exhibit a modular architecture: ‘In essence, a “platform
architecture” is a modularization that partitions the system into (1) a set of
components whose design is stable and (2) a complementary set of components
that are allowed – indeed encouraged – to vary.’[9]
Platforms therefore have the potential to be highly ‘evolvable’ systems. They
allow new designs and product permutations to be tried out at low cost, with
little waste. In other words, platforms can facilitate efficient innovation,
enhancing value creation without entailing massive resource expenditures.
The Circular Economy
A third key
concept I wish to highlight is the notion of the circular economy. As noted
above, our present economic paradigm entails extracting natural resources from
the ground, and burying our waste products, which in systems dynamics terms
creates an ‘open loop.’ Proponents of a circular economy, such as the Ellen
MacArthur Foundation, argue we need to close this loop. In the first instance,
we should recycle waste as a source of raw materials. More deeply, we need to
redesign our products and our industries to close the resource loop. When a product
is decommissioned at the end of its lifespan, not all its components are
useless. Many, in fact, may be in a good enough condition to use in a new
product, but under the present system they can end up in landfill or in an
incinerator. If the original product were designed with disassembly in mind,
then retrieving reusable components becomes a real possibility.
The building
industry provides an exemplary case study. Construction accounts for around 15%
of global greenhouse gas emissions.[10]
Construction is carbon intensive because the chemical process for manufacturing
cement, an ingredient of concrete, releases large quantities of carbon dioxide.
When a concrete structure is demolished—either at the end of its lifespan, or
(more commonly) to make space for a newer building—the rubble is typically
shipped to landfill. New concrete is then poured, meaning new cement is used
and new emissions are generated.[11] Efforts
to close this wasteful loop are vitally important, given the need to build
quality housing in the rapidly growing urban centers of the world’s emerging
economies. One step will be increasing the degree of recycling of old concrete
rubble, which can be used as an input to building processes, thereby diverting
it from landfill. But the truly ‘circular economy’ approach will entail
designing building materials with re-use in mind. Reinforced concrete slabs
will be treated as components that can be recovered and reconfigured, instead
of scrapped, when a building needs to be replaced. This has been an architectural
dream at least since the ‘Metabolist’ movement in post-war Japan, and modern
researchers are getting nearer to creating it as a reality.[12]
Synthesis
Individually,
these three concepts are each powerful levers to improve quality of life.
Together, the complementarity between them makes for an even more potent
recipe.
The aim of
this essay is to advocate that we move towards a model of capitalism based on
circular resource flows and rising quality of life driven by modular
innovation. By itself, a circular economy may imply stagnation in living
standards. It has echoes of Schumpeter’s ‘circular flow’ in which every year industrial
activity looks much like the last.[13]
And by itself, evolutionary innovation based on experimentation with modules
can be highly resource intensive; we can waste a lot of resources to produce
modules we don’t use, and there is a strong temptation to throw out a module
once we find a better one. This is clearly visible in the huge amount of
electronic waste that developed countries pump out every year.
We need to
move towards an industrial infrastructure based on stable long-lasting
platforms and interchangeable modular components that can attach to the
platform but which themselves conform to a closed-loop production process. This
abstract idea can apply in numerous realms, from the now-familiar electronics
and software platforms, through manufacturing—using technologies such as 3D
printing as the base platform—and built-environment, in which modular
skyscrapers could provide a housing solution to the world’s growing urban
population. The synergies between platforms, modularity, and a circular economy
are several; I enumerate four here:
1.
Economies in
design. By
letting a common platform underlie a variety of modules, we can avoid wasting
the effort of replicating something that has been designed elsewhere. In other
words, platforms allow us to converge on a set of common standards, which makes
design much more efficient.
2.
Economies in
production. With a common underlying platform we obtain economies of
scale in the production process for both the platform and the modules. This
will play a big role in making innovations accessible to the world’s poor.
3.
Rapid
scalability of improvements. When a better design for a module is
invented, the use of a common underlying platform will allow the new design to
be diffused and adopted widely with great ease. Many new designs will be
distributed royalty-free under an ‘open source’ license.
4.
Re-use of
modules.
Modules can be designed such that they can be disassembled and altered, rather
than disposed of, if a better design for that module is developed. This is also
a process that benefits from economies of scale in the infrastructure for
module renewal.
Consider, by
way of illustration, a world with a commonly agreed upon standard for 3D
printing, with widely available devices that can print with a small number of specified
materials. The material feedstock for the printer would be derived by
disassembling used products. The printer is the platform, and the products it
makes are the modules. Creative designers anywhere in the world would post
designs online that others could download and use: there would be rapid,
evolutionary innovation in the modules. Replacing a physical good with the
latest, updated model would become much like updating a piece of software today.
Together,
platforms, modularity, and the circular economy work in synthesis to make
economic activity more environmentally sustainable, and make innovations
accessible to the lowest income people on the planet. They offer a compelling
alternative to the narrow focus on economic growth that prevails today.
References
Bajželj, B., Allwood, J. M., & Cullen, J. M. 2013.
Designing climate change mitigation plans that add up. Environmental
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Baldwin, C. Y., & Woodard, C. J. 2009. The
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markets and innovation. Cheltenham, UK: Edward Elgar Publishing.
Bresnahan, T. F., & Greenstein, S. 1999. Technological
competition and the structure of the computer industry. The Journal of
Industrial Economics, 47(1): 1-40.
Gawer, A. 2009. Platforms, markets and innovation: An
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Cheltenham, UK: Edward Elgar Publishing.
Graedel, T. E., Harper, E. M., Nassar, N. T., Nuss, P.,
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Meadows, D., Randers, J., & Meadows, D. 2004. Limits
to growth: The 30-year update Chelsea Green Publishing.
Rios, F. C., Chong, W. K., & Grau, D. 2015. Design for
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Saez, E., & Zucman, G. 2016. Wealth inequality in the
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Cambridge,
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[4] For example, since the
financial crisis wealth gains in the United States have predominantly gone to
the top 0.1% of households in the wealth distribution; average wealth of the
bottom 90% of households has fallen (Saez & Zucman, 2016).
[11] Concrete production has
been accelerating, and the scale of production is immense. Geologist Colin
Waters and colleagues point out that concrete is now a geologically significant
material in the stratigraphy of the planet: ‘The past 20 years (1995–2015)
account for more than half of the 50,000 Tg of concrete ever produced,
equivalent to ~1 kg m−2 of the planet surface.’ (Waters et al., 2016)
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