Look how fragile! Let’s spend a bunch of money and make it better!
A Word on Sustainability
If someone tells you they’re a sustainability consultant, or expert, your reaction should be to ask, “in what industry?”
The reason I say this is because sustainability is not a profession with a defined industry, it’s a specialization. It’s similar to being a lean manufacturing expert or a talent acquisition consultant. They’re both specializations within larger industries i.e. manufacturing and human resources. Sustainability is a skill set within a large realm of thinking, much like creative writing would be to grammar. However, the realm that sustainability exists in is a strange mix of management consulting, environmental analysis, and politics. It’s tough to really pin down.
Sustainability has become a leviathan-like specialization because you can apply its principles to nearly everything, which is good. But, what makes it dangerous is that you can tie everything you analyze back to some life threatening environmental hazard. This is the sustainability marketing technique used to grab your attention and then reel you in. Everyone is worried about their health and well-being, so of course everyone worries about the world becoming uninhabitable. This is why I say most of what you hear coming from sustainability experts, most often entrepreneurs cashing in, is lies or damned lies. They’re just looking to get you worked up; ever heard of Al Gore?
It’s All Lies
Fossil fuels aren’t running out, the weather is different every year no matter what we do, and that Al Gore fellow is the only thing on this planet full of hot Green House Gas. That’s what you want to hear right? Well, all of those are all lies. Or are they? In fact, if you’re a sustainable thinker none of that matters. Are you confused yet? Good, because that’s exactly what I want.
Sustainability is just like statistics. There are lies, damned lies, and sustainability. Sustainability is an overly complicated opportunity cost methodology backed with statistical and environmental analysis, which is usually quite shoddy, used to confuse average people into feeling guilty so they spend more money. A common tactic used in sustainability is the butterfly effect.
If you don’t recycle, this puppy will die. How do you sleep at night? Don’t you feel guilty and want to spend some money on sustainable stuff.
“If you take that plastic bag from your grocer, you’re killing an endangered species in Namibia.”
You’ve either said something like this before or heard someone say it. Perhaps not to this extreme, but I bet it’s closer than you think. Arguing a point like my Namibia-Plastic-Bag-conundrum can be very effective if you’re dealing with an overly emotional audience, but in reality it’s almost impossible to actually prove. If you’re a statistician you’re familiar with the term “spurious relationship”. Just because two things are statistically related doesn’t mean they are causal. This is something sustainability speakers don’t want you to realize when they’re hammering home their point about how your poor choices are ruining the earth and more importantly our economy.
But, it’s not Sustainability’s Fault
There are two cold, hard truths here to consider: 1) We are terrible at global thinking and 2) we want all of our issues in life to be black and white. Neither are true.
We, as humans, are ill equipped for global thinking. Earth’s systems are far to complex for us to handle as individual thinkers. The reason climate change can’t be irrefutably proven is because climate models can’t predict all the factors affecting localized weather events. I use that example not to poke fun at climate scientists, but to illustrate that proving a butterfly effect is nearly impossible because Earth’s systems are so very complex.
All those things that happen outside our realm of understanding are called externalities. As an example, pollution is an externality in standard business decision making. We don’t really understand and can’t predict how pollution will affect a company’s ability to operate down the road. We can’t understand it, so we don’t use it in decision making.
So, Earth is difficult to understand and here’s the second truth. We like our answers to be 100% correct or 100% wrong. Grey areas are not our specialty. A former real estate mentor of mine had a great saying he used each time he entered a room to discuss a new deal with investors. This, for those uneducated, is that last place you want to be unsure of an outcome. He would say, “The numbers we’re going to show you today are incorrect and the financial result of this deal will not look like this. But, we’ve done our best to analyze the risk and we think we have a good one on our hands.”
And, he was right. The actual numbers never reflect our predictions because externalities are roughly impossible to predict (we don’t understand them, remember). He didn’t know it at the time, but that’s my favorite saying both for finance and also for questions of sustainability. He had a great understanding that life happens in the grey area.
Let’s recall my first proposition here. Sustainability isn’t an industry; it’s a specialization.
Perhaps a cleaner definition for sustainability is to say,
“it seeks to define and analyze risk associated with externalities to improve long term decision making.”
Like the premise that there is no such thing as a free lunch, sustainable thinking seeks to show how costs add up on a grander scale. There will always be winners and losers no matter how anything is produced and sold. Sustainability attempts to reduce the number of unforeseen future losses caused by the winners today (there’s no accounting for the damage caused by Charlie Sheen however.) It’s pretty much impossible, but it’s worth trying. Not all of sustainable thinking is a lie and in fact I think it represents a new wave of analysis for capital investment. The hoopla created by greedy greenies seeking to make a quick buck makes proving the validity of that a bit more difficult.
Keep reading here to learn more about what environmental risks should be considered to improve our understanding of investment and economic development.