The ecology and the economy

Charles Darwins’ Natural selection theory explains how the ecological balance is maintained on planet earth. Natural selection theory is an overarching biological algorithm and it operates across the spectrum of living organisms, from bacteria to blue whales. Gravity to physics is Natural selection to Biology.  So it sort of takes care of the extreme vetting when it comes to what/who stays on the planet and what/who leaves the planet, because everything needs moderation at some level. This is in fact taken care of automatically without any manual intervention.

Why isn’t there a natural selection for the economy? Chronicles of biology will show us how natural selection applies itself elegantly: Certain living forms like dinosaurs became extinct at some point. Similarly, chronicles of modern economics will show we are at an exponential age now. Companies which are not embracing exponentialism are disrupted and fast disappearing.  While organisms becoming extinct and companies becoming disrupted are directly comparable, there is a big opening to look at another important and interesting aspect of capitalism – the quality of goods and services produced and released into the market by the incumbent companies. Nobody really is moderating the overall quality of goods. Marc Anderson of Anderson Horowitz opines otherwise, he thinks historically “how products and services came to market” worked either based on supply or on speculation, but by the time you discover whether the market likes something or not, it’s too late. Crowdfunding reverses this model, you don’t come to market with something unless people already liked it or pre-bought it, which is a good validation. While it’s a fair point there a couple of problems: one, not every product goes through crowdfunding, in fact, crowdfunding is hardly mainstream. Two, vetting at the funding level isn’t sufficient, because anyone could promise (advertise) a great product and bring it to the market, consumers won’t have an educated opinion until they have tried it. Even if the consumers are willing to moderate, i.e disseminate feedbacks, the information revolution has left them with more misinformation than information. The Internet has become a distraction machine. Capitalism and its poster child Industrial revolution have been using the entire world and the environment as a playground to experiment without worrying about its limits and negative impacts for more than a couple of centuries now. 

The status quo of capitalism and what’s so wrong about it?

Capitalism and the free economy are based on laws of self-interest, laws of supply & demand and laws of competition as noted by Adam Smith a Nobel Prize-winning economist in his book Wealth of Nations. 

“Capitalism is a system in which the factors of production are privately owned and money is invested in business ventures to make a profit. Businesses follow their own self-interest by competing for the consumer’s money”

So by design governments aren’t supposed to intervene. So who will moderate capitalism? 

Choice has never been so daunting ever since the dawn of time due to the drastic change in the physics of information diffusion, about 90% of all the data are created in the last 2 years [1]. Consumer buying decisions aren’t exceptions to this universal phenomenon. A deeper look, reveals a startling aspect of this problem, that it has a potential to worsen climate change. A Buying decision has two folds to it 1.) Buying a right product (choice, given the preferences and constraints) 2.) Buying a good product (based on quality, overall lifespan). Not having the ability to pick a right product and/or a good product ends up a bad buying decision and leads to human waste. I argue that our ability to make informed buying decisions not only can minimize waste but also can offer climate stability by eventually eliminating substandard products because every stage of a product’s lifecycle—extraction, manufacturing, distribution, use, and disposal—indirectly or directly contributes to the concentration of GHGs in the atmosphere and affects the global climate.

The linear idea of taking, making, consuming and dumping is the so-called linear economy. There are a lot of brilliant alternative solutions to fight climate change, for instance, clean energy capitalism ideas like emissions trading and circular economy, manufacturing innovations like additive manufacturing and other ideas like colonizing Mars. I am not against these ideas, but here’s a simple thought experiment: if we are smart enough to figure out colonizing Mars, then shouldn’t it be easy to make it work on Earth? Hey! I am no astrophysicist and I know nothing about terraforming Mars, but I do know we can make it on Earth in 1/100th of $ and effort.  We need new socio-economic systems to regulate the dark sides of capitalism for climate stability. Here is a Guardian article that claims clean energy alone won’t do it for us without a new economic system. Naomi Klien concludes her book, This changes everything, capitalism vs the climate with this powerful message.

“our economic system and our planetary system are now at war. Or, more accurately, our economy is at war with many forms of life on earth, including human life. What the climate needs to avoid collapse is a contraction in humanity’s use of resources; what our economic model demands to avoid collapse is unfettered expansion. Only one of these sets of rules can be changed, it’s not the laws of nature.”

Also, Ideas like Emissions trading (Cap n trade in the U.S) are libertarian paternalism ideologies and simply means, do whatever you want but within your carbon budget but after the limit, you will have to pay to offend. These solutions come with major loopholes as they are centralized approaches muddled with layers of bureaucracy, socio-economic policies, and proceduralism.  This technology review article claims that it would take 400 years if we continued at the current pace to transform energy solutions.

We need solutions to fight climate change at pace and scale. Because, for a challenge this overwhelming, we can neither let only governments, politicians, councils, and scientists work towards it nor we can chug our way.

How can extreme vetting for capitalism help?

Extreme vetting and background checks aren’t new. Countries have been long doing extreme vetting before welcoming refugees for pure safety reasons and to protect the homeland. Now, universal background checks are proposed to reduce gun violence in the US. These are few forms of extreme vetting but they involve the government, policymakers and certain policy changes. It is a very centralized approach towards extreme vetting, so it comes with all the disadvantages of centralization and concentrated power.

I am proposing a decentralized variant of an extreme vetting to keep the producer’s aisle of the capitalism responsible and accountable for every carbon molecule they emit into the world. We should put the power of extreme vetting in the hands of the consumers of the goods, a crowd-sourced vetting if you will. The economics of computing and physics of data diffusion are changing at warp speed, the world is hyper-connected. Now is the best time to equip consumers with tools to make better-informed data-driven decisions about what they are going to consume. Soon they have the right information to make informed decisions, producers will know their B.S will be called out rather quickly, it is a form of extreme vetting and it can be a powerful deterrent to sub-standard capitalism. This power to make informed decisions can create a notion of consumers being quasi-dictators of what can come into the market and what can not, a consumer-driven ‘natural selection’ or a pair of ‘invisible hands’ if you will. To make this happen we need better and faster ways in which consumer experiences and sentiments about goods reaching across the globe. 

I am working on making this happen, big idea is to remove the information asymmetry, put the consumers at an advantageous position and enable them to wield the natural selection for the digital economy.

It’s time we tilted the axis of capitalism!

What are your thoughts?