Natural Capitalism – Conversations with History

(upbeat music) – Welcome to a Conversation With History. I’m Harry Kreisler of the Institute of International Studies. Our distinguished guest
today is Amory Lovins, the Rocky Mountain Institute co-founder, chairman and chief scientist. He is a consultant,
experimental physicist, educated at Harvard and Oxford. He has received an Oxford
MA by virtue of being a don, 10 honorary degrees, a
MacArthur Fellowships, and numerous awards
from all over the world. He’s an honorary member of the American Institute of Architects, foreign member of the
Royal Swedish Academy of Engineering Sciences, Fellow of the Royal Society of Arts, and honorary senior fellow of
the Design Futures Council. He’s lately led the redesign
of over 30 billion dollars worth of facilities in 29 sectors for radical energy and
resource efficiency. He’s been a visiting professor
at numerous universities. He’s briefed 19 heads of states. The Wall Street Journal named Mr. Lovins one of 39 people worldwide
most likely to change the course of business in the ’90s. And Newsweek praised him as
one of the western world’s most influential energy thinkers. Amory, welcome to Berkley. – Thanks for having me. – Where were you born and raised? – Washington D.C. – And, go ahead, please. – Lived just outside there
in Silver Spring, Maryland for eight years and gradually
trickled up the coast, went to high school in Amherst. And then lived in Cambridge a few years, then 14 years in England. – And looking back, how
do you think your parents shaped your thinking about the world? – Profoundly. My sister, Julie, is
a linguist, and I were part of the adult conversation
from the beginning. We were just small adults. And there were a lot of interesting people discussing the affairs of the day. And we were raised with the ideal of helping make the world better. And given lots of choices. So I read voraciously. Being sick a lot in childhood, I was home reading most of the time. And ended up, I think,
much better equipped than I would have been through
a conventional education. I’m actually a Harvard and Oxford dropout. Harvard wanted me to specialize too much. And Oxford wouldn’t let me
do a doctorate in energy, ’cause it was two years
before the oil embargo of ’73. And they said, “Energy? What’s that? It’s not an academic subject is it? We haven’t a chair at it. Pick a real subject.” But I did it anyway. They now have a chair in it. – Yeah, and I’m gonna talk to
you about that in a minute. Namely academic rigidity. But I’m curious. Was it that your reading was eclectic and crossed disciplines? – Yeah, I mean, my formal
education, such as it was, was largely in physical sciences. But then I had a parallel track. It went, chronologically,
music, classics, math, linguistics, some law, a little medicine, a lot of mountain photography. And then I started to diversify, because, in our line of work, you have to pick up a couple
of new disciplines a year. And I figured out pretty early one of the great unwritten secrets. That there’s hardly any subject that a smart, motivated person can’t learn as much about in six months as most people in the field know. Not all, of course. But most. Enough that you can rattle
around in other people’s turf and do some serious damage. – And what is it that
is a key impetus here? That is, namely, you
suddenly realized that you need to know
something about some stuff that you don’t know anything about? Or is it just one thing
leads you to another? – One thing leads to another. All kinds of knowledge are useful. There’s still a lot of stuff which I have a rapidly expanding
frontier of ignorance. But, after a while, as
they say in linguistics, everything reminds you of something. And I think the world has way
too many narrow specialists and not enough vision across boundaries. So, many of our problems
are self-inflicted by narrow vision trying
to do just one thing and not understanding connections. Do you know our guiding
parable about parachuting cats? – No, no, please. – Well, it’s an essentially true story. I’m still nailing down some
details in the archives. But, in the ’50s, the
Dayak people in Borneo, especially up in the Kelabit
Highlands, had malaria. The World Health
Organization had a solution. They would spray DDT all
over, which they did. They killed the mosquitoes,
so the malaria declined. So far, so good. But there were side effects. For example, the roofs of people’s houses started to fall down on their heads. Because the DDT had also
killed tiny parasitic wasps that had previously controlled
thatch-eating caterpillars. So, the colonial government
addressed this problem by giving people sheet metal roofs. But then folks were driven
nuts by lack of sleep because of the din of the tropical rain on the tin roofs at night. Meanwhile, though, the DDT-poisoned bugs were eaten by geckos,
which were eaten by cats. And, as the DDT built
up in the food chain, it killed the cats. But, without the cats, the
rats flourished and multiplied. And, soon, the World Health Organization was threatened with potential outbreaks of typhus and sylvatic plague, which it, itself, would have created. And therefore had to call up RAF Singapore and ask them to come
conduct Operation Cat Drop. Parachuting large numbers
of live cats into Borneo. So, this nicely shows that, if you don’t understand
how things are connected, quite often, the cause
of problems is solutions. Most of our problems are like that. So, what we try to do at
Rocky Mountain Institute, and, really, in my life’s work, is to understand and
harness hidden connections so that you can solve or,
better still, avoid a problem in a way that solves or avoids a lot of other problems, as well, without making new ones
before somebody has to go parachuting more cats. – Yeah, and I think the thrust
of your analyses is that, too often, we focus on the little problem that is part of a chain. So, you’re suddenly
presented with the problem “How do we fix the roofs
in the middle chain?” And you put the tin roofs in. And so, nothing is really solved. – Yeah, you’re just creating more problems or swapping one for another. Or making it somebody else’s problem. – I see a lot, in your writing,
a kind of a holistic view, which you just mentioned. Is this a… Are you at all interested
in human studies, basically? I mean, does literature inform your sense of the whole at all? – Sure, yeah. I mean, in cultural, as in other affairs, I’m still wandering in the wilderness. But I do try to be broadly informed. And, if I didn’t do that, I couldn’t possibly be effective or try to do the right thing. – You talked a little
about your education, your disappointment with Harvard. You go to Oxford. You’re at Oxford. You want to do energy studies. At the time, it’s ’74… – [Amory] ’71. – ’71, ’71. Talk a little about that time, ’cause what was coming was the oil embargo by the Middle Eastern states. – In ’73, yeah. – ’73, right. And you wrote a very perceptive article, prophetic article, in Foreign Affairs. Talk a little about that. Yeah, well, in the late ’60s, I’d been reading the writings
of John Holdren and others about the nexus, the tangle of population, environment,
resource development, security issues. Realizing we were headed
for serious trouble with things like climate change
and nuclear proliferation and oil dependence. And these were all interlinked. And it seemed, to me, obvious that energy was a kind of master key for unlocking many of these puzzles. Or for learning how to deal with other resource issues, like water. And, meanwhile, I was transferred
from Harvard to Oxford so the administrators
would get out of my hair. I had some in those days. – We still have the administrators. – I had hair, too. In ’67. And, initially, as a grad student at Magdalen College, Oxford, just through a series of
coincidences of whom I knew that could help me get in. And that was great. And then I was running out of money again. And my squash partner, Sudhera Naan, said “Well, I’ve got
this nice thing at Murton called a senior scholarship
that’s expiring. So, they’ll advertise it again. Why don’t you apply? It pays your expenses and a stipend.” So, I did. And, halfway through the
short list interview, discovered I was being interviewed for a much more exalted thing called junior research fellowship, which I’d gotten and became a don. And, initially, in Magdeline, I’d been doing theoretical physics, but I wasn’t really a theoretician. And then I was trying to
switch into biophysics. And then realizing the old
Stokely Carmichael line that, if you’re not part of the solution, you’re part of the problem. And the academic work I was doing was intellectually fascinating, but not terribly important. So, I wanted to make more of a difference. And, meanwhile, fell in with David Brower, the greatest conservationist
of the 20th century through, of all things, mountain photography. Which I’d been doing in North Wales with Philip Pell Evans, the unsung great British
landscape photographer. And we ended up together doing one of Dave’s exhibit format books on the mountains of North Wales. That got me involved with him. So, when Oxford didn’t recognize energy as an academic subject and I couldn’t find a way
to do a doctorate in that… I resigned in ’71 partway
through the fellowship and went to work for
Dave as his British rep initially for, I thought, a year or two. It turned out to be 10 years in London. Although he had, meanwhile,
left Friends of the Earth. And so, I was living by my wits in London cross-pollinating the energy
grapevine across the Atlantic. Because, at that time,
the technology leadership was more in the US. Policy more in Europe. They needed to talk to each other more. And, meanwhile, I’d come back and got in the White
Mountains every summer. It worked quite well. And then, eventually, my
then wife Hunter and I… We had married in ’79. Moved back in ’81. And, within a year, we’d found some land
to build on in Colorado and gather a handful of colleagues. Which soon got out of hand. We now have about 100. She left in 2002. And Rocky Mountain Institute
is now 26 years old and making a difference. – And so, what was the
reception of this article that you wrote for Foreign Affairs? – That article actually
came out of some concepts that first took shape on a roll
out shale blackboard in ’75. They’d called me in around ’73 at the time of the oil embargo. Dennis Gabor, the inventor of holography, said they should talk to me. And we got along well. They had, at that time, the best strategic planning
capability in the world. So, I found their planning methodology that Piervoka developed very
valuable and educational. And I had some unusual ideas. I’d already, by the time of the embargo, written a book on energy. So, I had a little headstart. And was gradually realizing,
through the early ’70s, that the whole problem had been misdefined as where do we get more energy? More of any kind from
any source at any price. But people don’t actually want barrels of sticky black
goo or lumps of coal or raw kilowatt hours. They want the services
the energy provides. Like hot showers, cold
beer, mobility, comfort. And it seemed to make more sense to start at that end of
the problem by asking what end uses do we want the energy for and how much energy of
what kind or quality at what scale from what
source will do that job in the cheapest way? So, this end use leased cost question turned out to be a very fruitful way to look at energy and
a lot of other things. And, indeed, in ’75, ’76, I wrote this article that
ended up in Foreign Affairs. And then a book a year
later, Soft Energy Paths. And it stills reads pretty well. It laid out what happens, what answer do you get if you
ask that different question. And you end up using energy
far more productively. We’ve already more than doubled our energy efficiency
since ’75 at a big profit. And you end up shifting supply to more diverse, dispersed,
renewable sources that provide the right kind for the job. And that revolution is
now well underway, too. It was delayed by policy
meddling for 20 odd years. But, finally, it’s
happening in the market. In fact, the developments
are really revolutionary. And very few people realize the
revolution already happened. – I’m curious. We’ll talk about the Rocky
Mountain Institute in a moment. Because I think that
organization is really critical to the way you view the
problems of the world. But I’m curious. Students might be interested
in classifying you. You’re a consultant, a physical
scientist, an engineer. And what does it take… You can answer that. – Recovering physicist. – But what I am curious
is what are the skills do you see that are really important for doing the kind of out of
the box thinking that you do? – The same ones that I
look for in people I hire. I want people who are literate, numerate, self-starting or self-propelled, fun, intensely curious, have
a vision across boundaries, are passionate about our mission, and have a high tolerance of ambiguity. – So, quite a number of skills. But necessary if you’re
gonna think out of the box. – Yeah, and realize there is no box. So, I don’t hire by discipline. I hire by aptitude. I look for all around athletes. – And so, frustrated
at Harvard and Oxford, you moved to the US. You start this institute. What did you see that
institute being able to do that you couldn’t do in
these other settings? – My then wife Hunter and I thought we could be more effective
with a handful of colleagues than just mom and pop. And Dave Brower was gradually getting into an untenable position with his board at Friends of the Earth, as he had earlier at the Sierra Club. He used to say, “If
you’re an environmentalist and have a balance in your bank account, it means you haven’t realized
the urgency of the situation.” (laughter) So, it was obvious he was
going to be forced out and probably we would, too. So, we started to think “What sort of institutional
home could we devise?” There weren’t, at the time,
companies or government agencies or other groups that we
found very attractive. And, eventually, we
came up with the notion of starting our own. Which we did with $10,000
out of our back pocket. Just grew it from there. And, you know, I said, “Oh,
horrors administrivia.” And Hunter said, “Don’t worry. I’ve been running TreePeople for Andy Lipkis for some years. So, I know how to do that. You just get the ideas and do the research and quality control.” So, that worked for a long time. And, gradually, we became
more institutional. And now fully so, because, in March ’07, we finally got a real CEO, Michael Potts, who’s a tech entrepreneur. So, I was then able, belatedly, to move up to chairman of chief sciences. So, I can just do mission,
stewardship, and evolution, thought leadership, special projects, cultural transmission, and
mentoring strategic influence. Rainmaking, rolodex, all of the stuff that goes with being elder, although not yet venerable. (laughter) – And, if you had to give
a short mission statement for your institute, what is it? – We’re actually in the
process of rewording it. But it’s currently to foster the efficient and restorative use of resources to make the world
secure, just, prosperous, and life sustaining. I won’t give you a sneak preview of what we’re coming up with, which, I think, is even niftier
but says the same thing. The short version is we
create abundance by design. – And so, the question becomes, obviously, you think ideas matter. And so, how do you make
them effective in the world? – We implement our ideas
largely in mindful markets by an unusual variety of techniques. Things like institutional acupuncture. We figure out where the business logic and what ought to happen is congested and not flowing properly. We stick needles in
carefully selected sites to get it flowing. This works very well. We have pretty good convening power, because we’re fiercely independent. Known for saying, honestly,
exactly what we think and backing it up with good scholarship. So, we’re widely regarded
in industry and military and can pull together people that need to talk to each other
as kind of an honest broker. We use an architectural charrette process, which is an intensive round table, transdiciplinary design workshop with very ambitious deliverables. So we’ve applied that to redesigning hundreds of buildings,
industries, vehicles. You name it. Just about anything. And we have, really, a
quite extensive toolkit. We don’t try to take our work to scale by turning into a huge
consulting firm or whatever. We try to ally with powerful partners who already have those
capabilities and need our content. Which we’re happy to have
them brand and spread. And we’ve evolved a rather
unusual hybrid mechanism as an entrepreneurial
nonprofit that’s had, in 26 years, 11 different revenue models. 10 of them entrepreneurial. And they’ve all worked. Most of them are still going on. Including five for-profit spinoffs. So, much of our revenue
actually comes from private sector consultancy
to carry out our mission. This creates very rapid learning with a smart, highly motivated partner. It creates, also, teachable case studies and competitive pressure for emulation. That is, we help early adopters get so conspicuously successful with resource efficiency
and natural capitalism that their rivals are forced
by competitive pressure to follow suit or lose market share. – You told the Manchester Guardian… It was a snappy quote in
a list of snappy quotes. “I’m not an environmentalist. I’m a cultural repairman.” Was that just a zinger for the moment? But it sounds like it’s true. Explain that. Explain what that means. – We’re trying to help things work better. And RMI is not an environmental group. It’s a think and do tank that
advances resource efficiency. Because that turns scarcity into abundance and relieves a lot of the basic problems of environment, development,
security, and prosperity simultaneously without compromise. So, we think it’s not
exactly a magic elixir, but pretty close. It solves lots of problems at once and doesn’t make more. – You, in acting in the world,
so to speak, with ideas, you had a choice and you
identify that choice. You work with business. You work with government. You work with the environmental movement. I’m sure you work with all of them. – [Amory] We work with everybody. – But your main focus has been with consulting with business. And why was that? Did you see the
possibilities for doing this cultural repair work? That that was a better
environment to do this? – Working with business has been a main focus for 35 years. Because it was clear, even then, that, in the evolving tripolar world, where the foci of power and action are in the private sector,
civil society, and government all interacting, government, at least at a national level, is typically the least effective of those. And, in our country particularly, it’s been dreadfully
gridlocked for a long time. And the process of forming
its policy is pretty corrupt. So, why not work with the
more effective sectors? Particularly business and its co-evolution with civil society. Which could be anywhere from
cooperative to adversarial. They form a tight ecosystem. And we found business is, in general, extraordinarily dynamic. It has, of course, its
own hangups and inertias, like every institution. But there is a lot of leadership, top-down, bottom-up, every which way, that can be harnessed in business to do extraordinary things quickly. Other than perhaps the military, it’s about the only really
effective institution we have that can do big, difficult things quickly. – It’s interesting that,
in your life’s work, you’ve often… And I wanna be careful with my terms here. And you can jump on me. But it’s as if you were
perceived as a Cassandra when, in fact, you were
a prophet, basically. And I think that it’s fascinating that you identified a vehicle whereby
you can make things happen. But many people argue that, when we’re looking at the
environmental problems, that capitalism is part of the
problem and not the solution. But what you’re really saying is that you can start at the micro… You have to have the right theory and the right way to think
about engineering processes and changing those processes. But that you can work at
the level of the firm, but, through the market, there will be imitation and competition which will force a general adoption. Is that a fair statement
of the way you see it? – Pretty close. I mean, I’m certainly not
a market fundamentalist. I don’t think markets
can solve all problems. Markets make a splendid
servant, a bad master, and a worse religion. And, if you try to substitute markets for ethics, politics, faith,
you get in serious trouble. I think our country’s just starting to reverse that pendulum swing. But business is very good at what it does. Markets are very good at what they do. We’ve invented probably 20 ways to make markets and save
resources, for example. Really simple ideas. Like, in New England,
you can bid megawatts, saved electricity, into
the supply auction. And, of course, you win, because efficiency’s cheaper than producing more electricity. Then you get the money up front with which to do the savings
and you have money left over. And everybody saves money and emissions. The toolkit we’ve evolved is very much, but not exclusively, led
by business for profit. We’ve also devised a lot of
innovative public policies to help support and not
distort the business logic. I think government has
a very important role, but it should steer, not row. I’d like it to steer
in the right direction. But then I work mainly with the rowers to improve their technique. For example, we’ve figured
out and now demonstrated in 29 sectors how to get
expanding, not diminishing, returns to investments in energy
and resource savings. That is, how to make very big savings, even factor 10 savings, cheaper
than small or no savings. Cheaper up front. Which always surprises the economists. If you look at your career, it’s very clear that your analysis, your theorizing, really
gives one a long term view. And, often, the current situation is not ready for the long term view. So, it’s kind of interesting. Has that been frustrating? The extent to which it really takes time. I’m not talking about
the particular redesign of a particular company. But, rather, the long
term vision that you have and which you call natural capitalism, which we’ll talk about in a minute. – Well, the changes
that my colleagues and I are trying to make take,
typically, a half century or so to come to full flower. And this requires relentless patience and meticulous attention to detail. But you see a lot of progress every day. Which is, of course, encouraging. And we don’t set abstract, long term goals that don’t have short
term practical steps. That is, we’re intently focused on how to get there from here. Not just this far off vision, ’cause we work in a
spirit of applied hope. Which is not the same as theoretical hope and not the same as
mere glandular optimism. – Let’s talk about your
vision in natural capitalism. Let me show the book. And we will also direct people
to your website shortly. Help us understand. Let’s walk through some of the arguments. I think you start with the notion that where capitalism has failed
and needs to be redirected is really in the valuation that it places on natural capital. Tell us what you mean by that. – Capitalism, in a way,
has succeeded all too well in half of its task. Capitalism is conventionally defined as the productive use of and
reinvestment in capital. But what’s capital? Industrial capitalism,
as we have known it, productively uses and reinvests in only physical and financial capital. That is money and goods. But it ignores and often liquidates two even more important kinds. Namely people and nature. Human capital and natural capital. Without people, there’s no economy. Without nature, there are no people. This is a rather material omission. But it turns out, if you productively use and reinvest in all four forms of capital, if you play with a full deck, you make more money, have
more fun, and do more good. So, natural capitalism, which
Hunter and I formulated with our senior author, Paul Hawkin, is a new way of doing business as if nature and people
were properly valued, but without needing to
know or signal their value. It’s not about internalizing
environmental costs. But it has four operational elements. The first is radical resource efficiency. Wringing lots more work out of the energy, minerals, water, topsoil, everything we borrow from the planet. Second, making things the way nature does with closed loops, no
waste, and no toxicity. Third, adopting a business model that rewards those two shifts. By rewarding both producers and customers for the same thing. Namely doing more and
better with less for longer. And, fourth, you reinvest
some of the resulting profits back into the kinds of
capital you’re shortest of. Particularly nature. Together, those interlocking principles turn out to confer a stunning
competitive advantage and help, of course,
attract, retain, and motivate the best people, which is what business
competition is, at root, about. And this is really not
a novel set of ideas. It rests on very orthodox
economic concepts and historical experience. If you go back to the roots of the First Industrial Revolution in the 18th century in England, just to oversimplify a bit, there weren’t enough
weavers to make enough cloth for most people to afford. But, if you’d come into
Parliament around 1750 and said, “Don’t worry. I know how
to solve this problem. We’ll just make weavers
100 times more productive.” Nobody would have understood this concept. Let alone thought it was possible. But it’s what happened. And, soon, as technological
innovators teamed up with profit maximizing capitalists, you had a Lancashire spinner that could produce the cloth that previously had required a
couple of hundred weavers. So, we started spreading
this through the economy and soon you had affordable mass goods, purchasing power, middle class, and, ultimately, all the
artifacts we see around us as the hallmarks of an advanced
industrial civilization. Now, to summarize, then, the history, we hadn’t enough… We had scarce people. Relative scarcity of people. Not enough people to exploit
seemingly boundless nature. So, we made people 100
times more productive. Well, now, the logic is the same, but the pattern of scarcity has reversed. We now have abundant
people and scarce nature. So, now, it’s not people but
nature we need to be using four, 10, 100 times more productively. I think that’s an idea
everybody can get behind. Particularly because it’s very profitable. Efficiency’s cheaper than
the resources it saves. Therefore, for example,
it’s profitable, not costly, to protect the climate. Because efficiency’s cheaper than fuel. – Let’s look at a concrete example, because what you’re… You have a very interesting example in both the book and the
article in the Harvard Review about a carpet maker. And, basically, it comes
down to rethinking design, rethinking our notion of a product, looking at not having a product, namely a carpet on your office floor, but the services that provide it. Talk about that. Because it’s really… You’re taken aback by how, if
you look at the whole picture, you really have to look
at the world in a new way. – Yeah, most offices are
still carpeted with broadloom. Big, wide rolls of stuff. And, every 10 or 20 years, it
starts to looks pretty awful. So, you have to shut down the office, move everybody out, roll
up the partly worn carpet, which is made of oil, send it to landfill, where it sits for 10 or 20,000 years, and lay down a new carpet, move back in, maybe get poisoned by the
fumes from the carpet glue. This is really pretty dumb
when you think about it, ’cause you never wanted to own
a carpet in the first place. What you wanted was to
walk on it and look at it. So, Ray Anderson at Interface went beyond just the first principle
of natural capitalism, eliminating waste and wringing more work
out of his resources… He did pretty well with that. Hundreds of millions of
dollars extra profit already. – If he had different materials… – And, already, the company has cut its greenhouse gas emissions 82% while growing the business. It has the most oil
independent cost structure in the industry. It’s doing really well with this approach. But he said, “Wait a minute. Let’s invent a kind of carpet that has essentially no waste, no toxicity. You can remake it into itself
with no loss of quality. And it has good aesthetics
and acoustics and durability and so on. And takes a lot less energy
and material to make.” But then he said, “Let’s
deliver it as carpet tiles. Not as broadloom. And we could even do it
through a service lease. So, we lease you a floor covering service. And, every month little
elves come in the night and remove only the worn carpet tiles to be recycled into new ones.” And they put down fresh ones. So, you have an always
fresh looking carpet. But there’s no disruption
to your operation. And then you only need to replace about 1/5 of the carpet tiles, because the rest of them are
in places you’re not walking. So, you save another factor of five on top of the factor 20 something from greater durability and
less materials intensity. And then, you’ve saved about 97-98% of the flow of stuff to
have a nice looking carpet. And, when you actually remanufacture it, you’d end up saving 99.9% or so. So, imagine that you’re the
old kind of carpet maker and you’re trying to
compete with this new kind. So, you’re using 10 times more capital, 1000 times more oil. And, by the way, your
competitor is leasing a floor covering service. That’s a tax deductible
net operating lease. It’s actually a financial product. Whereas, you’re selling
square yards of carpet, which is an idle balance
sheet item doing you no good. It’s pretty obvious who’s
gonna win that competition. Now, in the event, there
was one technical problem. And there were some
institutional challenges with the marketing on the
particular product I described. But the concept is perfectly sound. And this so-called solutions
economy business model is taking over pretty quickly
in areas like chemicals where Dow, for example, instead
of selling you a solvent, leases you a dissolving service. So, the more trips they
can put the solvent through with different customers
and not lose much each time, the cheaper the dissolving
service becomes. Cheaper for you. Cheaper for them. More profitable for everybody. And the more elegant
frugality they can achieve in using the solvent molecules, the more money you both make. This is a very subtle and powerful concept to lease the service
people want from the good rather than selling the good. And it gets into areas as obvious as Schindler liking to lease you a vertical transportation service instead of selling you an elevator. Then the more durable and
efficient the elevator gets, the more money you both make. – Now, how do you envision this model changing the world? You just suggested that, when a competitor looks at what’s going on in the other operation, they seem to have a losing proposition. Is it? – It’s happening already. Look at the zip car/flex car model for personal mobility. Your car, your second
biggest household asset is parked 96% of the time. It just sits there eating
interest and parking fees. Well, if you arrange, instead, to have the car of your
choice available by the hour and then you leave it
at any convenient place or, in some countries,
they’ll deliver it to you and pick it up afterwards, this means you can go have a four by to haul drywall on Wednesday and a sports car to pick
up your honey on Saturday. And you don’t need to
own either one of them. And the business model
works for the provider, because there’s diversity of need and very low asset
utilization by each customer. It’s also great for society. It’s a lot cheaper. And you take about half the
vehicle models off the road to provide the same or better mobility. – How do you see the
present financial crisis impacting on your set of ideas? It would seem to offer
a great opportunity, because what the old system
had going for it was waste. A system built to produce waste and to not think about the natural capital or the people capital in the way you’re talking about. So, is this an opportunity? Are things, in a way, so serious that it’s gonna fast forward the time that people see the changes that we need? – Well, at RMI, we’re
practitioners, not theorists. We do solutions, not problems. We do transformation, not incrementalism. And times of crisis like this are wonderful transformational
opportunities. If what you want is a world
without waste or want or war, then all the principles
of natural capitalism are just what you need. And the more hard-pressed you are, personally or in your
business, to meet your goals, the more elegant frugality and
abundance by design you need and the better you need
the business models that reward provider and
customer interests together. That align those interests. So, I think this could
be a great opportunity. Just as a small example, I do a lot of work in
the automotive industry. – You had designed a car, actually. – Well, I figured out, in ’91, how to do factor three to six more efficient, uncompromised
cars at about the same cost. And the industry wasn’t ready. In particular, GM wasn’t
ready culturally at that time to work seriously with outsiders. Especially a little nonprofit. So, we opensourced the idea in ’93 so nobody could patent it. Got everybody fighting over it. And, by 2000, the industry
had committed over $10 billion to this line of development, which is more than a 3,000-fold multiplier for our R and D investment. And then we’d done a couple of spinoffs to provide a manufacturing solution. And now a plug-in hybrid
commercialization. But I think, now that this
tsunami of creative destruction is washing over Detroit, minds are opening quite wonderfully. The competition is changing
the managers or their minds. Whichever comes first. And they now are starting to realize that incrementalism is the high risk strategy. You know, imagine you’re in the sumo ring with the world champion
sumo wrestler, Toyota-san. Do you keep training to try to get a little faster and
stronger than Toyota-san or do you maybe, halfway through, just quietly switch the game
to aikido and not tell him? This might be more promising. – You’re something of a pessimist when it comes to government. Although you’ve worked
a lot with the Pentagon. And, as I go through some of
the stuff that you’ve written, I have the sense that you
worry about subsidies. For example, in the soft energy path, subsidies can be a
problem in the sense that, in the short term, the government giveth. But, in the long term, it takes away. So, I’m curious, in the present crisis… We’re talking about the
automobile industry. We’re in a situation where the government has already given 25 billion. Is promising another 15
billion to the auto… How would you like to
see things come together so that the kind of
natural capitalism ideas that you have on the
table would be implemented without government being
an obstruction in the path? – Well, I think an interesting
bit of history to look at is how, at the start of World War II, the automakers who were then making four million cars a year, switched completely in six
months to making no cars, but to making the Jeeps,
tanks, planes, munitions. The stuff that won the war. If you take seriously, as I do, the security, prosperity,
and climate implications of our oil dependence, the economic collapse of
automaking in this country is a wonderful opportunity to do something more in the spirit of that wartime urgency in retooling, retraining,
rejigging that industry to use its wonderful skills to produce the kinds of vehicles we need. Which can be big, sporty,
but also super efficient. I’m not talking about incremental gains or even what’s in the present law. I’m talking about what the market and other conditions on us require. Factor three to six
improvement is straightforward. At least factor three
improvement doesn’t cost anymore with modern techniques. We already have lightweighting and electrification revolutions
starting in the industry. But they are normally
assumed to come in slowly because of all of the constraints on how little money we have to retool with. Well, if we’re going to have
to rebuild this industry anyway to get it back on its feet, let’s jump to the best stuff. Because that’s what foreign competitors are going to be bringing to us anyway. And we really have a
choice whether we’re going to keep importing
efficient cars to save oil or whether we’re gonna make efficient cars and import neither the oil nor the cars. And there’s one or two million
jobs hanging in the balance. – So, the elements here
of really moving forward on some of these ideas that we have climate change and the
energy crisis coming together at a time of a really
serious economic collapse. – Well, what we need to do in energy to solve our economic and
security and climate problems are all the same thing. You have exactly the same set of actions to solve all those problems at once. There’s no compromise or tradeoff. And you said earlier I’m
pessimistic about government. Not natively so. I have a great admiration
for many of the institutions and individuals in government. And there is often very
effective government, particularly at more of
a state or local level. At the federal level, we have the best government money can buy, because we’ve been
proceeding, for some years, on a one dollar, one vote system. I think there’s a whiff
of change in the air. And, you know, we can’t go on this way. But Churchill said,
“You can always count on the Americans to do the right thing once they’ve exhausted
all other alternatives.” We must be pretty near the
bottom of the list by now. – Let’s take the example of nuclear power, because that’s a case
where private capital, you point out, has not
put its money on the table for building more nuclear power plants. – There isn’t a penny of
private investment at risk in any new nuclear plant in the world. Other than that of the vendors. – Whereas there has been
a lot of private capital down the soft energy path. But the question is… – $148 billion of clean
energy private capital last year worldwide. – Are you worried that government
will make the wrong choice in this regard? I’m trying to understand… ‘Cause you have a set of ideas. We have the moment of opportunity. I want to anticipate the
way things could go wrong so they won’t. (laughter) – Well, nuclear’s already died of an incurable attack of market forces. 100 plus percent new subsidies in the US have failed to elicit a
penny of private investment. That was before the
capital market went away. And I think, now that it has gone away, it’s even less possible to imagine financing 10 or $15 billion plants that are big, slow, lumpy. Therefore, high risk investments that are guaranteed obsolete
before they can be built. That’s true not just of nuclear, but of coal plants, gas plants, any kind of big thermal plant
is already uncompetitive. It’s too late to build those. And the market is rejecting them rapidly. I mean, just in 2007,
the US or China or Spain added more wind power than
the world added nuclear power. And the US added more
wind power, led by Texas, than we’ve added coal plants in the last five years put together. I don’t know what part of the story anyone who takes market
seriously doesn’t get. But the last four years data… We have 2006. Nuclear worldwide added less capacity than photovoltaics did, a
tenth what wind power did. 30 or 40 times less than micropower did. And that doesn’t even
count electric savings. Altogether, the big thermal power plants we’re told are so indispensable are now minority market share. They’re providing less than half of the world’s new electrical services, ’cause they cost too much and they have too much financial risk. So, the revolution’s already happened. Sorry if you missed it. And governments can have, regardless of their level
of nuclear enthusiasm, only as many nuclear
plants as they can force the taxpayers to buy, because investors aren’t that dumb. – So, what do you worry about in terms of not seizing this opportunity? – Well, if we spend our
money on the wrong stuff, we make all our problems worse. For example, if you buy
a new nuclear plant, you’re gonna get about two to 11 odd times less carbon displacement
to protect the climate. And you’ll get it 20 to 40 times slower than if you’d bought efficiency
in micropower instead. The market winners. In fact, if you buy nuclear
instead of efficiency, you will thereby cause
more carbon to be released than if you’d spent the same money buying a new coal plant. But this little problem with not picking the cheapest, fastest method
of protecting the climate has gone largely unnoticed. And the nuclear industry
is desperately keen that you not notice it. Because they say, “Well,
we’re carbon free.” Well, that’s not good enough. You have to be also cheaper and faster than other ways to protect the climate. And they’re not. So, I think there’s
this prevalent myth that energy policy is like a
Chinese restaurant menu. You know, the big old kind where you select one thing from
column A and one from column B and so on until everybody who contributed a lot to your campaign is happy. Well, if you actually order that way in a Chinese restaurant, you’ll probably have indigestion
and possibly bankruptcy. And, if you actually spend all your money on the delicacies, you may not get enough rice
to avoid going away hungry. So, you really have to choose judiciously, not indiscriminately, from our
big menu of energy choices. And pick the right
combination of best buys that will solve your problems quickest, fastest, cheapest. We have a lot of other things
we need to spend money on. And energy doesn’t need to be one of them. I think, more broadly, we need a transideological
and, in some ways, a deeply conservative
approach to energy policy. What I would love to see is for all ways to save or produce energy to compete fairly at honest prices regardless of which kind they are, what technology they use, where they are, how big they are, or who owns them. Let’s see who’s not in favor of that. Well, let me venture a prediction. It’s going to be the incumbents who have paid a lot of money to install large troughs shoveled
full of public money and they have their snouts in the trough and are very happy with this arrangement. – One final question. Looking back at your career, how would you advise students
to prepare for their future? – Fearlessly, adventurously,
and with complete disregard to any suggestions about how
to structure their curriculum. They’ll probably do a lot more good if they’ve studied chemical engineering, cultural anthropology, and Chinese history than if they are deep and narrow. And, if your advisor raises eyebrows looking at your proposed course of study and says, “I don’t see what
this has to do with that.” Then you’re probably on the right track. (laughter) – On that note, I wanna thank you for coming to the campus to be the Weinstock Lecturer later today. And thank you for taking the
time to have this conversation. – Thank you. – And thank you very much for joining us for this Conversation with History. (upbeat music)

7 thoughts on “Natural Capitalism – Conversations with History

  • You hear that guy go over all those awards, but not once do you see Amory Lovins Smile…

    Yes, the cheaper the service comes, the better they come, the more the competitors will lobby congress/federal government, the more the government/congress will step in to f**k things up to make it "fair" for everyone; To put it bluntly.
    Which if you check out mises(dot)org there's a story about how our rail road system started up that shows an example of this perfectly.
    Great Video!

  • So…Lovin's claim to fame is coming up with way & means for capitalists to make a higher profit margins whilst raping other countries and peoples resources, by the avoidance of having to parachute in…. cats…

    ..and for all this, the 'system' heaps doctorites, diplomas and ribbons on he and his ilk. thereby deluding academia further.


  • Interesting topic. Tho almost nothing new was said. It would be very exciting to get deeper into mentioned subjects and speculate on possible solutions to some serious current and future obstacles. I fully support the idea that leading researchers and advisors should be curious and passionate jacks-of-all-trades capable of grasping the whole rather then autistic specialists no mater now genius or dedicated they are.

  • i don't understand people who insist on commenting here from uptop their perceived moral mountain and damn lovins, and others, as being nothing but greed mongering dirty capitalists..

    if you think you can convince everybody in the world to give up all their material goods and denounce capitalism you are kidding yourself. by all means have these sociological, philosophical discussions between your like-minded friends, but when someone proposes a realistic, effective solution……

  • ……. to one or many of the world's woes, do not shoot them down.

    At least Amory Lovins and people like him are doing something rather than just philosophising and spitting empty rhetoric.

    Capitalism as it operates around the world at the moment may be far from perfect, but it's all we have to work with right now…

  • This man makes sense. Efficiency in moving and producing liquid capital will peak off at near nil at the nano age, however the factor missing from this naive scientist's mind is pure greed, AKA the Federal Reserve. Business is led by a few hundred people who hold the key to all "value", people who charge interest on capital…….

  • Have you seen "Occupying Chairlifts" on youtube? Curious if you buy into this discussion's premise, that an inheritance cap would course correct humanity's direction, or if it's a dangerous and flawed notion. Interesting angle anyway, worth consideration? Watch "Occupying Chairlifts" on youtube!

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