7/ The Future of Ownership – And the World
When it comes to ownership, we rarely think of the environment (i.e., who can lay an ownership claim on nature?). Common ownership works well when resources are abundant, but it often fails as populations grow and technology changes. There’s a huge temptation (and risk) to take too much too soon, killing sustainability.
Lots of things we take for granted not realising that ecosystems are vulnerable to human intervention, and any equilibrium is only temporary. Converting land into productive use invariably limits its uses for previous natural uses (filtering water, slowing floodwaters, etc.).
“As-if ownership” means compensating asset (usually land) owners for its use or misuse as if such use is a service. E.g., paying farmers NOT to clear up their land or drain swamps in order to achieve some benefit for the payee (clean water, protection from the wind).
A well-known example is paying to reduce deforestation (one of the many ways of playing the E/ESG game) in order to preserve carbon capture. Paying loggers not to cut trees assumes that a standing tree is worth more than a cut one. This is a global phenomenon – one doesn’t have to protect forests in their vicinity: carbon capture by trees works everywhere, so protecting a tree in Indonesia has the same environmental effect as protecting it anywhere else. Just the price is lower, providing arbitrage opportunities.
Overfishing started becoming a problem when boats could stay out for longer, and the catch was flash-frozen; fisheries depleted and the race to the bottom led to fishermen’s bankruptcies and destroyed fish habitats. Setting capture limits is part of the solution to recover the depleted stocks, but since within these limits there’s still a race to catch as much fish as possible, working conditions may suffer (watch “the Deadliest Catch” for more).
A modification of the “winner takes all” is the use of quotas: a boat can only catch X tons of specific fish per season. The total catch among all boats can be no more than Y tons per season, and piracy is severely punished. It’s not in the spirit of the traditional capitalism, but beneficial to the working conditions and the poor fish. Y depends on the heath of the fisheries, so all participants are interested in growing them for the future capture quotas (including returning female fish back in the water).
Quotas also make revenue more predictable and costs more manageable, with an opportunity to optimise them by joining operations with others and reducing OH&S claims.
Quotas are not a problem-free solution: the initial distribution of quotas makes all the difference in who gets what. [MK: there’s always a catch, right? Pun intended.] Not all quotas are being used by those who they were allocated to, so the happy owner can simply lease the quota to an actual operator (think taxi medallions). New entrants have to pay their way into the system by buying a quota from a previous owner, which is never cheap for an asset that is worth a predictable cash flow over a long period of time in the future.
MK: this is probably the biggest argument against quotas: they are an asset that was handed by the governments to individual operators for free or at a discount, meaning a value transfer to the private sector. And every value transfer needs to be scrutinised for whether the distribution is fair and whether it unduly benefits certain actors related to the one making the distribution.
MK: to be fair, another side of the argument is that there is no alternative productive use for this asset, so even if the value transfer occurs, it can only be captured if the quota is in the hands of someone who can make use of it.
Quotas only work in Exclusive Economic Zones, so once fleets are out of EEZs, the free-for-all game is back on.
Cap and Trade
The right to pollute is a controversial topic: polluting companies are allowed a certain amount of pollution (say, X tons of sulphur dioxide) per year. Initially the caps were set at the then current level of emissions, and over time they have decreased.
Cap-and-trade creates a secondary market in tradition the right to pollute: if Plant A underutilised its quota, the leftovers can be sold to Plant B. The underlying logic is that Plant A emits less due to cleaner inputs, better technology, or a change in the outputs, where applicable. The ability to sell unused credits creates a business opportunity.
The distribution of the polluters (those likely to buy excess pollution credits) is not random, though. They happen to be clustered in the poorer communities.
The famous abuse of carbon capture is the rapid rise in the production and destruction of the HFC-23 gas that’s 11 700 times more “dangerous” than CO2. Destruction of this gas was a beneficial activity, for which Certified Emission Reductions credits were granted and resold. [MK: any model relying on numbers can be abused, as we see time and again.]
I guess, by now most people understand that anything bought digitally via an ecosystem is not “theirs” to the full extent of the term: songs, movies and books can be deleted from the devices, they can’t be “borrowed” from a friend without borrowing a physical device and there’s limited right to anonymous use (all consumption data is captured and stored indefinitely).
MK: the word is out that Xiaomi doesn’t allow activation of its devices in certain countries despite buyers paying for them.
In the digital world “buy” usually means “gain conditional access”. The usual rights that come with ownership (lease, destroy, mashup) don’t fully apply in the digital world. The terms of the “purchase” are shrink-wrap and not negotiable. Buyer beware.
In the IoT (Internet of Things) ownership becomes even more convoluted: if a Bluetooth enabled toothbrush is bricked, there’s no harm done other than the inconvenience; if a heart monitor or a home alarm stops working due to an ownership claim, this may turn deadly. Possessing hardware is no guarantee that it will work as advertised.
We are led to think we own more than we actually do, and the gap is widening. On the bright side, this gives an illusion of abundance. Is it a problem for most people? Hardly so, as because of the abundance there’s no particular attachment to an individual item.
MK: content piracy for backup purposes all of a sudden looks like a workable solution. Just saying.
MK: song streaming and e-books have transformed our living rooms making huge bookshelves / CD towers unnecessary and allowing us to enjoy larger open spaces or making smaller apartments more liveable.
The Sharing Economy
MK: isn’t it funny that the topic of collective use is brought as the last subchapter of this book?
A famous example of a typical electric drill being used 12-13 minutes over its entire lifetime illustrates that certain things are not worth owning outright and should better be rented. (This works mostly for higher-priced items as buying a cheap electric drill outright for $30 makes renting it for $20 kind of wasteful).
Welcome to the micro-ownership. The ease of allowing strangers to use others’ assets allows one party to save and another party to earn due to the low cost of communication.
Examples of what can be rented are endless: rooms and apartments, wedding dresses, cars and scooters, parking spots, and much more.
The optimistic version of the “new ownership” concept is that we will eventually subscribe to services instead of hoarding things at homes and in garages. Add sustainability to the mix – and not owning something battery-powered starts looking like a won mini-battle for a greener Earth. It’s a shift from owning life to streaming life.
Abundance of offers leads to increased consumption, which looks like more bang for the buck. People also tend to upscale their consumption: rent better dresses, hire better cars than they otherwise would’ve bought. People choose luxury above sufficiency.
Sharing economy thus doesn’t build wealth: the same amount of money spent on consuming rented goods and services could’ve been used to build equity. Traditionally, paid-off homes used to provide a place to live after retirement or an extra cash should the owners decide to downsize. Streaming life doesn’t offer this luxury. [MK: there’s an argument that sharing economy allows to avoid housing bubbles and investing into stocks, but one doesn’t have to look far to notice a bubble in equities, too, so the argument doesn’t hold that well.]
It’s a known fact that Airbnb is killing communities and leads to higher rental prices. It’s yet another tragedy of the commons. It’s no surprise that many councils and owners’ corporations prohibit short-term rentals. The losers are the house rich and cash poor residents who lose the ability to supplement their incomes with the short-term rental ones.
Reducing ownership leads to the cultural shifts, lower attachment to family histories and less sentimental items left. What’s good for consumerism may not be so good for our well-being as citizens. We’re losing the emotional joy of possession, which (joy) for some reason has become unpopular.
Where will the buck stop? Is there anything that can’t be time-shared? And what gift will you give someone who can rent anything?
/ the end