An Irresistible Sustainable Business Model

Breaking the Thirty Year Deadlock: Essay 3 of 3

Executive Summary - The second part of the problem to be solved is How to properly couple the economic system to the greater system it lives within: the environment. This is known as The Proper Coupling Problem. Analysis shows that presently problem solvers are attracted to what are in fact low leverage points, such as quotas, regulations, and tradable permits. This has failed for decades, because the dominant agent in the system, the modern corporation, pushes back just as hard. Better would be to find the right high leverage points and push there. The analysis shows it is possible to do exactly that, in a manner so financially irresistible that the dominant agent in the system would now work as strongly to solve the sustainability problem as it previously worked against it.

It was Adam Smith's The Wealth of Nations that laid the foundations for today's free market economies. He persuasively pointed out that if buyers and sellers were allowed to trade freely, an "invisible hand" would cause buyers to receive the best price and quality it was possible for the system to produce, while at the same time allowing sellers to receive the highest possible profit. By and large this has worked, and has led to the best of all possible worlds for the greatest number, with one glaring exception: free market economies, as envisioned by Smith and others, are inherently unsustainable.

What might happen if we could design a new sustainable business model that was so financially attractive that its rapid adoption by the business community would properly couple the economic system to the environment as quickly as is realistically possible?

An analysis at Thwink.org shows that it is possible to do exactly that. Whether it will actually work or not is in the early stages of concept refinement and experimental investigation.

The analysis is presented in a paper titled The Proper Coupling Package. The basic premise is that presently the human system is improperly coupled to the greater system it lies within: the environment. This situation has become greatly aggravated by global reliance on an economic system ruled by what Adam Smith called an "invisible hand." As civilization has recently discovered, the free market system, as presently designed, suffers from a soon to be fatal flaw: it is inherently unsustainable. This is the environmental external cost problem, long the bane of economists.

The paper presents an easy to understand diagram showing why the present system is biased toward unsustainability. Page by page, it builds the argument that there is a better way that is breathtakingly simple. First it shows why the sustainability problem is occurring. Then it identifies the low leverage point that most popular solutions have been pushing on, such as tradable permits and pollution taxes. Pushing there will not work, because the system pushes back just as hard.

Next the analysis pinpoints the two high leverage points that problem solvers would do well to push on instead. Pushing there would result in a system response that did not push back at all, because there would now be so many corporations benefiting from the solution that they would strongly support it. Three solution elements that appear to have the ability to do this are presented. Together they form the Proper Coupling Package. In the jargon of economists, they internalize what are currently externalized costs.

The present coupling between the human system and the environment evolved. It was never engineered. Thus it should be possible to analyze and reengineer this coupling so that it is sustainable, using the same tried and true tools that have worked so well on so many other problems. The key strategy is to analyze the system from a high leverage and dominant agent point of view, and restructure the system so that the system's dominant agent, the modern corporation, now works as strongly FOR sustainability in the future as it previously worked AGAINST it in the past.

Of all the concepts at Thwink.org, this paper has recently generated the most serious actual work on solving the sustainability problem. It is available here.

Image Credits - The cover of Adam Smith's The Wealth of Nations is from here.