SEE THE SHOW NOTES AND LISTEN AT: Moving to a Circular Economy with Walter Stahel (Part 1)

Katherine Whalen [00:00:10] Hi, I'm Katie Whalen. And join me each week as I talk with experts around the globe about Circular economy. You'll find out what's being done to make it a reality and if it can really solve the problems it promises. It's time for Getting in the Loop. 

[00:00:31] Welcome back to the Getting in the Loop Podcast, I'm your host, Katie Whalen, and today I'm talking with the founding father of the performance economy, Dr. Walter Stahel. Walter is the founder and director of the Product Life Institute, based in Switzerland, which is the oldest established consultancy in Europe devoted to developing sustainable strategies and policies. He is also a visiting professor in the Department of Engineering and Physical Sciences at the University of Surrey and is a full member of the Club of Rome. I had originally planned our interview as a single episode like all of the Getting in the Loop Podcast episodes so far. But after recording with Walter, I decided to break it into a two part episode because I found it so rich and interesting that I didn't want to cut any of it out. So today you will hear part one of my discussion with Walter. In this episode, we learn about Walter's background, how his work on the performance economy began, and his experience finding arguments to convince people that buying performance rather than products makes sense for business as well as the environment. Before we get into today's show, it's time to announce the winner of our book giveaway. Over the past few weeks, I announced that Catherine Weetman from Episode 08 and I had teamed up for a second and final giveaway of her book, Circular economy A Handbook for Business and Supply Chains to be considered for the giveaway. All you needed to do was leave a review of the Getting in the Loop Podcast on our items page. So after selecting one review from all existing reviews at random, I want to say a big congratulations to listener JSCMoss97 from the Netherlands who wrote: "Great podcast to get a deeper understanding about the circular economy and steps towards integrating it globally. I especially enjoyed Episode one and the example of the World Wars. Also found the Policy and Asia podcast very insightful. I would recommend this to a friend for sure." Well, JFCMoss, I hope you have recommended the podcast and if you haven't yet, then you might have an extra reason to do so since you're now our lucky book giveaway winner. So thank you for leaving your review. And please send me an email. It's Katie@InTheLoopGames.com and I'll make sure that you get a copy of your book. Thank you again to everyone who has taken the time to leave a review and a big extra thank you if you have recommended the podcast already to a friend or colleague. I also have to give a thank you to Catherine for making this giveaway happen. So if you haven't listened to her episode yet, it's episode eight and you can listen to it wherever you listen to our podcast, be it Spotify, iTunes, Stitcher or even our website, GettingInTheLoopPodcast.com. And if you haven't recommended getting in the loop to a friend or colleague, how about taking a second to do so now, either sending a direct text or email or just sharing a link on LinkedIn or Facebook? Enough of my talking. Let's dive into today's show. 

[00:03:40] It's definitely an honor to to have you on the Getting in the Loop Podcast and to start us off, are you calling from Switzerland? 

Walter Stahel [00:03:50] Yes, I'm sitting at my office at home in Geneva, Switzerland. 

Katherine Whalen [00:03:55] Yes. Yeah. Not not Geneva, New York, where I grew up for a little bit. 

Walter Stahel [00:04:03] No. 

Katherine Whalen [00:04:03] Yeah. So I hope that most of my listeners are familiar with your work on performance economy. But for those you may not so much be aware just yet, could you give a little bit of a background on how your thinking and initial work began over, you know, I think it's now 330 years ago if I'm if I'm correct. 

Walter Stahel [00:04:32] Well, actually, I'm by training. I'm an architect. And as an architect, I know that renovating buildings or refurbishing buildings is much more labor intensive and uses much more creativity than drawing something on a white sheet and building it from scratch. So when in 1973, we had the oil at first oil price shock, accompanied by already quite high unemployment, especially youth unemployment in Europe. My simple idea was working in those days for an American research organization. But to foundation, my idea was simply that we should treat substitute what we have too much manpower for, what we have to lacking oil. So I wrote the proposal to subsidize the potential for substituting manpower for energy. And when chopping with that, different governments and also several at that the European Commission. It took me two years to finally find somebody to, as the general director of social affairs in Brussels, to give me a small budget to analyze this potential, because any economist knows that you cannot turn that turn back the wheel, because the economic development has always been substituting energy, substituting people for machines, because that is more efficient that is. That's the way it goes. And so when I produce my report in 1976, which showed that extending the service life of objects or buildings actually is as he is substituting manpower for energy, employing more labor and less energy then the reaction of most economists was: but you haven't solved the problem because you are not talking about the production, you are talking about something else to the point of saying. 

[00:07:11] And that's when I realized that for economists, the economy stops at the point of sale. What comes afterwards is no man lands of services. And of course, it's this. It's the circular economy that comes after the point of sale. So this was in 1976. And then there were periods of who a lot of interest and periods of absolutely no religious interest in these ideas have never understand what the reason is for these fluctuations. But definitely one. Once I got involved in this, I had to face off. OK, now what are the business voters? What? Who are companies doing it? And then I got more more familiar with the same ones, Medium-Sized Enterprises and corporations like Xerox or Coke, Eastman Kodak who are doing it, but who were normally fighting big problems in-house. The same problems I had been fighting for with that, it cannot economists in Brussels that this did circular economy is not what is taught at business schools. So if a manager comes forward with the crazy idea that will be judged by traditional economists, they would say, forget it, it doesn't work. And that's the interesting thing was then to give arguments to some of these companies, including Caterpillar and Xerox, of how they could better defend their ideas and what they were doing that day. And so I got more and more involved in in finding arguments to convince managers and convince politicians why they should get involved. In something that was not manufacturing. There was another economy of maintaining stocks of assets, which is basically common sense. But but it's not how the economic theory defines wealth creation, because it's actually not to its creation. It's maintaining wealth and taking care of friends. That's something that is not taught at universities. 

Katherine Whalen [00:10:07] You are essentially challenging the status quo. 

Walter Stahel [00:10:11] I'm saying that there is or maybe another way to create wealth and welfare without or with much less resource consumption and much less CO2 emissions. And of course, I am-- if you want to take it on the revolutionary side, I'm also pretending that today's economy, where the jobs is the outcome of that kind of economic success, could be redefined, taking people as the main resource and then seeing how the economy can develop by putting emphasis on using human capital, using people as a resource which is then really reversing economics. And the reason for to justify this is a complete change in. In his view is that if you go to the extreme, people are. The base of the economy and of society is without people. There is no economy and there is no society. There will still be the environment, the planet there's only one. But without people,  society doesn't exist. And so that's another mental or philosophical reason. If you want to say, okay, not only is our people the ground, the basis of economics and society, but also of all the resources in the world, people is the only resource with a qualitative edge. In other words, through education and training, we can improve the quality of this research resource we can create. We can increase the creativity and then exploit this creativity. But if we don't do it, then this case is the knowledge of people is very quickly degrade until at some point they may may become an unemployable. So for moral reasons, I think that product policy makers, governments have an obligation to give preference to using people as a resource. If you leave a tonne of oil or coal in 10 years in the ground, it doesn't change a quality. If you don't play people for 10 years, the quality can withstand the train. 

[00:13:20] The problem with the Circular economy is it really a holistic way of looking at society and economy and making a multiple choice, basically optimization, whereas as you know, academics, academia and governments and industry are organized in silos in order to be efficient. That means people people don't talk to each other from people from different sectors, don't talk to each other, because what's philosophy got to do with with the return on investment? Things like this. But but I'm saying no, it's the other way around. It's only if we optimize the whole thing that we get the best solution. 

Katherine Whalen [00:14:21] Yeah. Yeah, definitely. I'm I'm I'm curious. I wanted to ask a follow up question in terms of. Well, you were talking about Kodak and Caterpillar and how you were trying to find arguments to convince convince them that, you know, they should believe in your idea of sort of what you said were reversing economics. Could you expand on on that sort of the arguments that you used to can to convince these people in companies? 

Walter Stahel [00:14:58] Well, actually, they were normally convinced that they were doing doing the right thing, but they didn't have the background knowledge to justify and in that sense, I could give them this. If we take, let's say Caterpillar first. Caterpillar started-- they were forced by General Motors to remanufacture their engines because they were selling engines to GM. And in talking in the states, that's always been remanufacturing. And so GM said that is one of the conditions. And Caterpillar opened a first three manufacturing shop to prove to GM that they were wrong and that three manufacturing was not economically feasible. And when I visited this factory. Which the first section was in the Bible Belt. So our people have a very, very philosophic attitude to work, maintaining values. This is very important. They they were fighting constantly with Peoria, with the headquarters. Because they had this huge warehouse full with broken engines. And every time some consultants came around to look at this factory, they came to the same conclusion, close down this warehouse, for God's sake, you are paying a fortune to rent a warehouse and there's nothing of value in there. So sell the engines for scrap and and sell the house or stop the warehouse. Stopped renting it. And the managers said no, but that's the broken engines are our resource, our. We doubt that the Camp David Packard doesn't exist. And so when I talk to the people, I ask them or gave them incentives to put the emphasis on the engineering quality of free manufacturing, on the resource savings of our resource, the very legenda resource consumption and the fact that the manufacturing an engine was 40 percent cheaper than manufacturing a new one. 

[00:17:43]  And then finally, the killing argument was found by a consultant, but basically against his will. He analyzed the return on investment of doing manufacturing factory then discovered that the ROI was five times the return of investment of a manufacturing company, and then of course, that argument then convinced the CEO of Caterpillar then, okay, you know, it's all about money. So let's do it in a Kodak, Eastman Kodak. There was another problem because they were running the Single-Use cameras. You may remember seeing news cameras that in Germany were absolute taboo because it's a disposable thing made of plastic. There's nothing worth worse for a German green than disposable goods or made of plastic. Nobody questioned because you not to biasing this camera and then you realize what you do with the film. I mean, you want the pictures to get, the pictures you have to send to Single-Use camera to a laboratory. And what do you think the laboratory is doing? They are sending the. Empty cartridge to empty box. To Kodak or Fuji, hundreds, you think Kodak is doing a food tasting with the empty Single-Use camera? 

[00:19:33] Well, I say it put in the new film and send it again. And the problem there was that according to almost any legislation in industrialized countries, you are not allowed to sell that, that an object that contains only one used to reused component has new. So Kodak and food, you were not allowed to tell people or tell the public that this was an ecologic solution. The most ecologic solution there is to take pictures. Because they were breaking the law. Wow. 

[00:20:20] And then, okay, then I said, let's look at the process and put the emphasis on something else. And then I discovered or they they taught me that I had to do a film in. This camera is naked. Normally the film. You have to win back to the film in those Single-Use camera, you want to me naked and you blinded back every time you take a picture. So at the end, there is no problem. You can open the camera. But in the beginning, you have to put the naked color film into this box and that you can only do in absolute darkness. Carla, that doesn't tolerate any light. So the problem now was team. Their working conditions. I mean, you can imagine the working conditions working eight hours in the dark. Most people would get nuts. But Eastman Kodak had thought about this and they employed blind people. Because blind people don't. It doesn't matter if they work in the dark or not. They are always in the dark. So this was actually a very highly paid, very skilled job for blind people. Wow. Putting putting that thing in in the public eye candy. Talking about it. Then people suddenly thought, well, seeing these cameras is, you know, it employs blind people and there are some other aspects. So it's a good thing. So, so very often I. I didn't invent or didn't change that thing. But people were doing the right thing. But they they were lacking the arguments why this was the right thing. 

[00:22:31] So I think my main there were other people like Robert London with MIT and we all basically supplied arguments to companies to convince them that they were doing the right thing, even if the CEO didn't understand what the heck was going on in these places, because the CEOs, most CEOs are educated from business schools so they know the only way to create wealth is manufacturing. Which is one way to create. Which is important in the industrialized countries, if you are in a society where you don't have enough hospitals, you don't have enough roads, you don't have enough railway schools, then it's absolutely important to build these infrastructure, to build these things. But once you have them, then it becomes more important and cheaper and more sustainable to now maintain the quality of these infrastructures and and buildings and objects. And also, it is creating jobs, saving resources and preventing waste. 

Katherine Whalen [00:23:58] Yeah. Wow, fascinating. What a fascinating story, especially about the Eastman Kodak and Fuji and the single use cameras, because I think it goes back to what you were saying earlier about that people are the center of the economy. And I think you really highlight that with the name of your your new book, The Circular economy a a user's Guide and how we're going to explore the book in depth in a minute. And this is a book that came out this year a couple months ago in June, I believe, and is being also released in other languages. You were saying maybe, maybe Swedish at the end of August or the the end of September? 

Walter Stahel [00:24:46] Yeah, at the moment it's an Italian, Spanish, Norwegian and English. 

Katherine Whalen [00:24:52] Okay, so that's many languages and counting. But yeah, and congratulations, of course, on this. Before we explore the book a little bit in depth. I just was really curious. I would love to hear a little bit about your your thoughts on this growing interest in Circular economy over the past, you know, eight or so years. You've said that, you know, this idea of the performance economy has been, you know, kind of up and up and down over the last 30 or so years. But in terms of really the last, you know, eight years with, of course, the Ellen MacArthur Foundation championing this move forward. What has anything surprised you the most about people's acceptance or lack of acceptance about Circular economy? Just I'm dying to know. 

Walter Stahel [00:25:47] The the thing that has flabbergasted me last 40 years is the the fact that do create jobs of all skill levels and regional jobs because the circular economy every every use repair remanufacturing has to be done with where the clients are and where get the goods, the broken goods are. And so it has to be in a decentralized troye everywhere. So you create jobs, you can reindustrialize the region. And that has not really found any interest from governments. For example, jobs are basically everybody. Every politician talks about creating jobs before the election, but after the election, nobody's interested in because now we have to get the economy going after trade, growth, economic growth, not jobs. And people simply turn to the link. And the second aspect, which is equally frustrating and where I would like to talk once too great tune Baako from from Stoeckle is the fact that the circular economy, the aero fa re re reuse free Rick Perry, Manufaktura especially maintains the capital CO2, which is embodied in objects or infrastructure or buildings. So to under three man and Christians come back from Stockholm have done-- They've analyze six or seven countries with an input output national model to see what what happens if the economy would really shift to a circular economy. And in each case, the result was the CO2 emissions on a national level would go down by two thirds, by 66 percent. And the jobs would increase by, I think, about four to five percent. And a trade would be positively affected. But the fact that everybody talks, cop to cop meetings, COP 21 in Paris and all did things afterwards or go back to Kyoto, Kyoto in the last century. Everybody in politics says we have to reduce CO2 emissions. And then you showed them away. But can reduce almost instantly CO2 emissions by 66 percent. And nobody's interested. Because, of course, it means changing the economic structure. Of course, what people always would like to have is the benefits of something, but without having to change anything. Unfortunately, you cannot do that. You have to-- f you want something a different result, then you also have to change to the process which achieves this result. So these are my two astonishment over the last 40 years. 

Katherine Whalen [00:29:34] Thanks for listening to part one of my two part interview with Walter Stahel. I've linked the resources that Walter mentions in the show notes of this episode, which you can find at GettingInTheLoopPodcast.com. Be sure to tune in next week for part two, where Walter will share more about his current work on Circular economy. I'm Katie Whalen and see you next week.