Fifth Annual University of Oregon Sustainable Business Symposium

I'm Laurie Power. I'm the Environmental Manager for the Eugene Water and Electric Board and it's it's my distinct privilege this evening to introduce our keynote speaker, Amory Lovins. Yesterday I wrote two checks. The first was to Texaco, as I filled my Mazda. The second was to a charitable organization that helps refugees. I wondered if my Texaco check will wander eventually to Saudi Arabia to help pay for oil that is fueling the airplanes flying over Afghanistan, dropping bombs that force families to seek refuge in tent cities that my second check is helping pay for. These, my point is, these are confusing, painful times and I look for, and perhaps you do too, look for leaders among us who can help clear the confusion and ease the pain.

Amory Lovins is such a leader. About twenty years ago, along with Hunter Lovins, he founded the Rocky Mountain Institute, a resource policy think tank based in Colorado. He and Hunter authored a book that maybe you've, you're familiar with, "Brittle Power: Energy Strategy for National Security," which expressed concerns over the vulnerability of our nation's energy strategy. Because of the recent terrorist attacks, this book is being re-released. Amory is well known for his vision for energy futures that reduce our dependency on oil and gas and bring about a more sustainable energy future. So, it is by grace, or happy coincidence, that we have as our keynote speaker, Amory Lovins, who brings as gift to us this evening, his wisdom, experience, creativity, and insights. May his counsel help each of us continue to do wisely,

to act compassionately, and to live healthily. Please help me welcome Amory Lovins. [applause] Thank you very much. And thank you all for being here, and thanks to EWEB for making it possible for me to be here. I'd like to talk about a different way of doing business, which Paul Hawken, co-author of our book of this title calls "natural capitalism." And maybe I should start by explaining what that's about. Capitalism is of course the productive use of and re-invested in capital but, what's capital? Well, there are at least

four kinds of it, and industrial capitalism deals with only two, namely money and goods. But there also are people and nature. Without people, there's no economy. Without nature, there are no people, and indeed there's no life, and therefore no economic activitity, so leaving those two out is a rather important omission. and when Paul picked the title "Natural Capitalism," it was partly to say well, this is the kind of capitalism that plays with a full deck. It deals with all four kinds of capital, and you actually make more money that way But also, I think he was slightly suggesting that industrial capitalism is un- natural, is a temporary aberration, not because its capitalist, but because it's defying its own logic by liquidating and not valuing its largest source of capital, namely the natural world. Now, the importance of natural capital was re-emphasized almost a decade ago when a two hundred million dollar investment, and a lot of good science put into this Biosphere

Two structure in the Arizona desert, failed to provide breathable air for eight people, one of the many nifty services the Biosphere One, outside these walls, provides every day for six billion of us, for free. [laughter] And the chemical cycles that we get for free from nature through the normal functioning of ecosystems are very numerous they provide many, many kinds of services whose value is often estimated to be at least that of gross world product, but we don't know exactly what they're worth, we just know it's a very big number, and we know for sure it's not zero. [inaudible name] says it's as it's better to be approximately right than precisely wrong. Now, we could spend decades arguing about what natural capital is worth, but maybe there's another way to go about this. There are a lot of nature's services

that are on the whole very mysterious. We don't know have a cycle nutrients and manage pests and pathogens, regulate the atmosphere, the climate. All we know how to do is mess that one up. There are a few ecosystem services we do know how to deliver like pollination. That's good cause bees are dying all over. But if you do try hand pollinating in the planet, you'll find it quickly becomes tedious. [laughter] as does assimilating and detoxifying society's waste. Well, as ecosystems fall into decline worldwide, nature of falls behind on delivery of these ecosystem services and therefore the human prospect is starting to be limited, not by how many boats and nets we have, but by the fish in the sea. Not by chainsaws, but by forests. Not by pumps, but by fresh water. Not by plows, but by fertile land. The last time human prospect was being limited by a shortage of something was a quarter millennium ago

at the dawn of the first industrial revolution. At that time, in England for example, there weren't enough weavers to make enough cloth to be affordable for most people, and yet the notion of increasing labor productivity was unknown. So if anybody had come into Parliament around 1750 and said, "Don't worry, we'll just make weavers a hundred times more productive, nobody would have understood this concept, let alone thought was possible. But it soon happened as profit maximizing capitalist teamed up with technical innovators. Soon a Lancashire spinner became able to produce the cloth that had previously required two hundred weavers, and as that kind of innovation spread through once sector after another, it created affordable mass goods, purchasing power, middle class, and all these artifacts that we see around us and we call them the fruits of the first industrial revolution. Now, it's logic was simple and correct that at a time when the relative scarcity of people

was limiting progress and exploiting seemingly boundless nature, the obvious solution was to make people a hundred times more productive, so we did. That logic remains perennially valid. Economics teaches us to economize on our scare resource, but in the next industrial revolution now underway, the pattern of scarcity has reversed. We now have abundant people and scarce nature, not the other way around. So it's now not people, but nature we need to be using far more productively, ringing four or ten or one hundred times the benefit from each unit of energy, water, materials, top soil, whatever we borrow from the planet. Now, that radical increase in resource productivity is the first of four interlinked principles of natural capitalism, but it's not the only one, you need all four of them, and I'll explain later how they're linked together. The second one is to design production on biological lines with closed loops, no waste, and no toxicity.

Thirdly, there's a new business model, which Jim Womack? calls the solutions -utions economy, where we shift from occasionally making and selling things, to providing a continuous flow of value and service in a way that rewa- -wards both a provider and a customer for following the first two steps. And what you do remember capitalism re invest profits into productive capital and typically the most productive kind of capital to reinvest in as the kinder shortest of in this case natures of this is something any prudent capitalist would know how to do and rather than spending decades arguing over just what nature services are worth and how to signal that in me prices of things what we just come up with operational principles which it may turn out that i think it does turn out behaviour as in nature and people were properly valued we just behave as if they're very valuable without needing to know the right number and if it turns out as i think it does that we make

more money that way and this can actually be done in the marketplace now and go through each of those four principles and we'll start with the first one and emphasize more you might think that after centuries or millennia of ringing out ways there's not much left but fortunately waste is an ever expanding and seemingly infinite resource as we learn more for example lead flow of stuff that we dig up and process and move around and use throwaway is about twenty times your body weight per person per day in this country that only counts the water the tree turned thirty not the water that's return clean so worldwide this flow of stuff that massive law that doesn't harm to nature it's getting on for half trillion tons a year of which only one percent ends up in durable products the other ninety nine percent is waste also known as a vast business opportunity now we're used to thinking of energy waste in that way we've already cut out about two hundred billion dollars a year

worth of that but were still wasting three hundred billion dollars a year worth of energy for example lee efficiency of converting fuel thermal power plant and light in this room is about three percent of our cars use one percent of their few energy to move the driver our power plants thermal plants throwaway as waste heat the same amount of energy to japan uses for everything and not even japan is even attempt as energy efficient as a lot of those extra that so there's a lot still do and indeed we have very powerful technologies typically make old buildings are four times more energy and water efficient the energy savings into buildings are more like a factor tan it percent less in other words and typically they cost less they give you a few examples and then it'll take on a little closer to my passive solar banana farmer i live it's also are instituted porters where we've harvested twenty seven banana crop so far and temperatures that can on occasion go as low as minus forty seven a half and

they have a ninety percent households electric saving we've actually eliminated air conditioning in another house or show you up two hundred and fifteen degrees and in both cases the house can cost less to build what be more comfortable trent lott in bangkok which is a very tough summer save ninety percent of his air conditioning energy made it more comfortable with no extra construction cost in his new house and in big office buildings you can get your body percent savings but the buildings built faster cheaper and they get better human of market performance i'll give you an example of how you can save three quarters of the energy fixing up one of these days all glass in the windows office towers in chicago with no extra cost and a record so for designing a retrofit for california office of air conditioning system was ninety seven percent savings with good economic similar comfort let's go first to the banana farms another seventy one hundred feet not far from aspen where you might say there are two seasons winter

in july meaning that you can actually get frost any day of the year we've had on the fourth of july we've got thirty nine days of continuous midwinter cloud but if you come in a snowstorm to this atrium in the middle of the building you find her in the banana jungle and you could get your advanced lizard a lesson from senior tutor over here and then you realize there isn't a heating system the reason we don't have heating system is we don't need it and it's cheaper up front not to put one in court well if you ask an engineer how much insulation should you put in your house in a very cold climate but prodi told well just the amount that will pay for itself over the years from the save heating fuel that sounds perfectly logical you don't want to pay more than its worth do but it's wrong because it leaves out something important i don't mean just the environment anyone know what else it leaves out bingo the capital cost of the heating system for those pipes touch

wires controls fuel source are not counted and yet if you it's like no you don't need them it turns out that the extra cost super insulation and super windows which insulate like eight to twelve sheets of glass to look like two and cost less than three and ventilation heat recovery a few other tracks that extra cost is less than the cost of putting in heating system so it's cheaper not to put it and then you take the money just say plus a more totaling a dollar fifty square foot and use it to save also half the water and ninety nine percent of the water heating energy and ninety percent of the household electricity till your household use goes down to about a hundred and ten what's one or fashion bibles worth and that's about five bucks a month or seven separate but before we count or solar production and the extra cost of all that stuff pays for itself in ten months with nineteen eighty three technology in the house comes in actually adjust the market average price for our area

not terribly difficult point understand or here's a hot climate house this isn't quite ordinary looking tract house two thousand square feet with the obligatory dark proof required by the rules of the homeowners association and this particular one was in the climate near sacramento that goes up two hundred and thirty degrees so we did later a hundred and fifteen another place at the end of a three day heat storm the neighbors whose deadly designed houses have three and five ton air conditioners that cannot cope are coming in to take refuge in this house which does good design are no air conditioning no if this house were more widely built and not just a one off experiment figure it would cost about eighteen hundred dollars less than normal to build about sixteen hundred dollars less than normal to maintain over the years is as no heating and cooling equipment and the reason was on would save about eighty two

percent of the energy allow by the strictest energy standards in the country california totally four and as in the case of the cold climate house the last seven things we did to achieve that savings did not save enough energy to pay for themselves but they also got rid of the last time and a half of air conditioner an associated don't work so you counted the capital cost saving is well it was a very good deal by the way the stonewall inn this house was built in an unusual way the davis energy group devised using the engineered wood products from trust rice mill and it turned out they could use a quarter of the usual amount of wood that make the wall stronger it would build faster he would insulate twice as well and it would cost for underdog dollars less so obviously from these examples there's really something missing in the economic notion of diminishing returns that is the more energy or wood or water whatever you save the more more steeply the cost of the next unit of savings rises until it gets too expensive and

you have to stop now this is sometimes true that the level of components it's also often untrue at the level of components for example up to at least three hundred horsepower if you look at the most common kind of industrial motor on the market it turns out there is no correlation whatever between price and efficiency you know you can get this very efficient hundred horse motor cheaper than you can get this very inefficient hundred horse motor st augustine to shop around that you would expect that the more efficient motors would cost more to make because they have more and better copper and iron but for whatever reason they're not priced higher i don't know why but i'll take it and the same is true for a surprising amount of other equipment empirically so in our shop the uk mother was in god we trust all others bring data so don't assume from economic theory that efficient stuff cost more it may not when you go shopping for but where you can make his

own diminishing returns idea definitely untrue is in is when you are fully combined components of the systems because suppose we're insulating your house more well more insulation we have the more we get diminishing returns you were paying more and getting less for it until suddenly we get to the point where we don't need a furnace anymore and then suddenly the whole cost of heating system goes away which was more that we paid to achieve that therefore we get a very big saving ninety nine percent in this case that cost less than small or no savings and why go there the long way round when you can total straight through the cost barrier to this result and eliminate lots of murder which is a wonderful japanese word for waste at a much higher profit that we thought was possible all are two basic ways to do this at least one us to get multiple benefits from single expenditures and something like a very efficient motor a balanced actually gives you that eighteen kinds of benefits

super windows give tam why are we just having one of the parts that holds up a little by house those twelve different things but only pay for it once the other way you can total through the cost carriers to take advantage of renovations retro fits that are doing anyway for some other reason so let's go to the example of that big glass chicago office tower remembering chicago's both very hot and very cold and this is a twenty year old building so as happens at that age the seals around the windows are failing and you have to replace all the glass in the building but normally you just replace it with more of what's there that's a very dark heat observing last only nine percent of the daylight comes in it's as gloomy as a cave but it turns out we could instead expect a super windowpanes krypton feel and special thin film coatings inside are essentially perfect and letting in line without heat so it actually get in almost six times as much visible light but attempts lesson wanted heat

and we were blocked the unwanted flow of heat and noise across the glass four times better because an extra seventy eight cents per square foot plus we couldn't use modern techniques to balance that live all the way into the inside of the building and put in very efficient lights the dim according to how much daylight is coming in very efficient office equipment and three quarters michelob and goes away well what about the air conditioning system that's also twenty years old so it needs renovation it turns out instead of renovating it he put in a new one that's four times smaller and four times more efficient it's also two hundred thousand bucks cheaper than renovating the big old one and that turns out to be exactly enough to pay for the better windows and better lives of song so you end up saving three quarters of the energy for dollar ten per square foot per year and it's more comfortable and across essentially the same thing as the normal renovation that saves nothing open way to do it not because of the stupid owner this

is this building was actually owned by the biggest of usury owner of commercial property in the country but they didn't know and we didn't know that this particular building was controlled by leasing agent incentivized and deal flow every time she leased up before she gets mission and she didn't want to wear your cashflow few months i'll commissions by doing a retrofit so she didn't but then the building proved so costly and disagreeable nobody wanted to be there so they had downloaded on a bottom feeder a distressed price that's ok i think it will work with their competitor across the street no figured out that it's a nice example of market failure in action there are about two dozen parties in the commercial real estate value chain they hardly talk to each other and i'll speak different languages and each of them with with just perfect perversity is systematically rewarded for inefficiency and penalized for efficiency which is why for example we've misallocated about a trillion dollars of capital of this country to air conditioning equipment and power supplies to run at that we were not a lot of cleanup that we design the buildings in the first place to get the best comfortable least cost that's another interesting conversation but you can do

better than that for example in the conde nast building four times square which was the big stuff like ships back office that started to revive manhattan the town offices a few years ago that's a forty seven story building that saved half the energy it could even have done better that the guy was enough to cut enough capital cost out of the chemical budget that they could instead put that money into solar cells on the south and west side of the building and fuel cells up on the roof and then the developer doug hurst that when the real estate market is he was able to attract premium tenants quickly a premium rents and the argument which they very much liked was that whatever happens to the utility your computers will stay on because the two most reliable power source is known are right in the building and that is starting to become part of the high end real estate value proposition and financing package and building came in just as the market average cost

by the way interesting thing just turned up his tenants seem less anxious than might be expected in a tall building in manhattan these days because the building is so open it so full of natural light that you don't feel kind of trapped in a box so the psychology is a lot less depressing than if you think you're in the next version of the world trade center now if you start putting together some of the technical elements i've described i as we've been doing in designs for the developer gary kinds of the architect art gensler you get a very interesting result if you combine everything i've described plus the european fashion of under floor displacement that elation with no drop ceiling unless you just won't cover up the sprinklers cosmetically at a few other things you pay attention to them here's what you get if you cannot influence the lighting in office equipment stuff that the tenants put in a new save about half the energy

compared with with strict standards on the other hand if you can influence the things you say that these three quarters of the energy in any event he put in six stories within the seventy five foot high limit on rote low rise structures rather than the usual five stories and extra story makes a really big difference to the economics and yet the ceilings are six inches higher is useless they settle for the news to use below the ceiling move the air around and you have terrific lighting quality and thermal comfort in air quality and building silent the each worker can control her own your flow and temperature and the cost of moving people around is almost eliminated the building cost the same or slightly less than usual to build and build six months faster us lot simpler so we think that will redefine expectations in the office park about industry well there are thirty five things you can do the motor systems for example

to save about half of the electricity they use without counting machine they're driving empty return on investment for those retrofits approaches two hundred percent a year the reason it's that she does if you do the correct seven think first to get twenty eight more as free byproducts we got a similarly large returns sitting over half the energy that it takes to make chilled water and clean air and shook vets because they're designed by infectious rather titus which is the opposite of continuous improvement there are radical improvements in process designed like micro fluid it's an art that can often condense a very large chemical plant about the size of a watermelon and then there's the revolution in making things that last longer and use less stuff for example for thirty seven years i've had this little folding stainless steel cup in my pocket which by now has saved a great many throwaway to paper and plastic cups and so probably keep on doing that longtime around and also get some very valuable side benefits

from these kinds of improvements so for example it turns out in buildings that are officially designed people can see that are what they're doing here themselves think feel more comfortable and breathe cleaner air so guess what they doing more and better work about six to sixteen percent well into the office you're paying a hundred times as much for people as for energy so they one percent gain in labor productivity would have the same bottom line effect as completely eliminated your energy bill are actually seeing an effect about six to sixteen times that big so that's a video they're similarly impressive gains in industrial output and quality get about forty percent higher retail sales pressure and well tailored stores twenty odd percent faster learning in well tailored schools these kinds of things are often one and sometimes two orders of magnitude more valuable than the save energy resources and can be marketed accordingly you know when you start putting efficient techniques together they breed make new ones i drive a little

slower sixty seven mile a gallon to see aluminum hybrid car call hundred inside and that's a very good start but to really show you won the ways the same but handles five adults comfortably because it's made of carbon fiber not medal and this is played an example of where technology can take us it's illustrative concept car that has manufactured low and production costs of the zion bible for much are called hybrid car in ink for a few million bucks in eight months and it's it has some rather unusual properties which add up to it's being completely un compromised for example it will comfortably handle five adults an up to sixty nine cubic feet of cargo were two adults and two kayaks will go inside it'll all have a ton of a forty four percent grade it weighs less than half as much as a normal core of this class like alexis are its three hundred because of the carbon fiber

but carbon is so strong and crushes so smoothly that you can run this car says the simulation head on into a wall at thirty five miles an hour with no damage to the passenger compartment most cars get total of about fifteen or twenty or you can run it head on into a ford explorer or twice its weight each going thirty miles an hour and still be protected from serious injury and has quite brisk acceleration service sixty eight point two it does the equivalent of ninety nine miles a gallon which is five or five and half times normal efficiency for this class about actually doesn't use any gasoline at around three hundred and thirty miles on seven and a half pounds of very safely stored compressed hydrogen gas and actually within two tanks now awaiting regulatory approval it would be getting on for six hundred miles range and the reason it uses that little fuel is that the fuel cell was several times as efficient as an engineer in the car is so white and has so little resistance moving

through the year long road that it could cruise at fifty five miles an hour on the same energy that the lexus uses just rich air conditioner ha ha ha ha the only emission from the fuel cell his hot water so i'm tempted to put a coffee machine arabia china she knew the dashboard that the us should talk to heller about franchise arrangements and it has a body up to twice a stiff was a good sport sedan smart semi active suspension and very fast digital traction control on each will independently so it should be released forty it could be made with one that none of the top twenty causes of breakdowns in today's cars but all the flexibility and customize ability of a car that puts its functionality and software so you can do things to it in software so you know think of it like a computer with wheels not a car

with chips it could even do its diagnostics upgrades and tune ups wirelessly and background they can be designed for two hundred thousand mile warranty the body does not roster fatigue and it can bounce off the six mile our coalition without damage we believe it can be made in that volume had a competitive cost but about a tenth the normal amount of capital assembly and parts so early adopters when why does this matter well a full suite of such cars in all shapes and sizes would worldwide ultimately save about as much oil as opec that sell ailes and in the united states it would save as much as saudi arabia now sells to everybody about eight million barrels a day of crude oil so it's not like we went trolling in the detroit formation and just found a saudi arabia down there this can also the couple driving from climate and smoggy although not from congestion and it makes possible a rapid transition to a climate save hydrogen economy in a way that's profitable

at each step started now in fact we only found out a few weeks ago said to thomas that actually building a the centralized hydrogen fueling infrastructure based on the major natural gas reformers would have half the capital intensity that we are now paying to sustain the existing gasoline fuelling infrastructure you know another interesting thing you can do with it with direct hydrogen fuel cell cars is designed them as power plants on wheels because they're parked about ninety six percent of the time you've already paid for the fuel cell and you can pay a little more to make it extremely durable so quite oddly some first of the people working in or near the buildings were you've already put fuel cells are combined heat and power and that when you drive to work you can plug into the spare off peak hydrogen production capacity that's already in the building to run its fuel cell and use your otherwise ninety six percent idol's second biggest household asset as a profit center so long to set your desk it is selling back to the grid enough power

ancillary services turn back much or most of the cost of owning a car and it turns out it doesn't take many people doing this to put the coal nuclear plants out of business because of full suite like this would ultimately have at least five or ten times the generating capacity that all power companies now own stuff about ten billion dollars has been committed to this general line of development of ultra light ultra low drag hybrid cars since i sneak a leap to me a basic idea in the public domain and it three so no one could have that kind of like a free software model and then got everyone fighting over professor services cars could enter reduction in about five years depending on the pace of capitalizing a little start up that is doing the designs licensed lawmakers could be nominally about ten years ago when making cars to the toast about twenty years so that this is actually and it could be the biggest change in industrial infrastructure since

its ships because it could be the end as we know the look of the car oil steel aluminum nuclear coal electricity in the street but also the beginning of a successor at the industries that are more benign and profitable and probably more fun now in case you're having trouble believing six impossible things after dinner i used to work for the inventor edwin land who said that people would seem to have had a new idea to have often just stopped having a whole idea so in that spirit perhaps you'll allow me to rearrange or metal furniture a little bit you've probably seen this classic problem that's in many many books on creative thinking it's been around for thirty years or so and it usually framed as find the solution that will connect these nine dots with only four lines without lifting your pen and paper so maybe you think of us as dr warren two three four groups five while it didn't work who would try that let's try warm

to work at first what you're supposed to do is think outside the box like this well one day according to the great interpol mccrady professor teaches us that he had blown out came in rather because one of the students had just said she figured out how to solve this problem and only three lines and i didn't see this either first as i was thinking of these dots as little tiny mathematical bumps but actually see their pickup that's as long as your papers wide enough you can always do that but then saying this the students started to feel rather liberated and you know what happens then they started to solve the problem in one line there great one line solutions ultra show you a few of them and i ask you to think its more on your own the japanese teachers the oregon in that and really just fold up the paper until all the dots come together in one line or there is the geographic

net that just draw a line around here three times or the mechanical engineers being tool using triggers just get out the scissors and cut out all about some film of a pencil or the statistician crumples up the paper and says if i stay at this paper over and over again with a pencil benchley i'll go through online dots at the same moment and i show the one i like this came from a nine year old girl who says you didn't say it had to be a thin line so i used a fat fly and went right through all of a paint brush so we see the original was on assignment was misstated as find the solution with four lines and that journey of the word put us back in the box and kept us from being properly creative and coming up with more elegantly frugal solutions as we might have done if we'd have a design problem of five years many solutions as possible with as few lines as possible well in that spirit one of the companies we work with had one lamp called a southern cessation

of stupidity they were designing a factory for which they needed to move some fluid around in a circle rafferty transferred to very standard thing to do in the top engineering firm in their business that optimize that use ninety five horsepower pumping and after rhee decided to seven horsepower and it costs less to build and it worked better in every way how on earth do you get a ninety two percent reduction from the supposedly optimize design of a standard thing to make it work better cost less well there weren't any changes in the technology same motors and controls but there were two important changes in the design mentality the first was to use big pipes and small parts rather than small pipes and big pumps because of friction in a pipe it goes down is almost a fifth hour of its diameter how big should the pike be to get the right amount of friction well the engineering books they make the pipe just as big as will pay back its greater costs out of the

say pumping energy over the years but of course this leaves out and you get the capital cost of the pumping equipment the pump and motor inn bert are like rebels all have to be big enough to overcome the friction and yet they're not counted but their size and roughly their capital cost will go down as almost a fifth hour a pipe diameter as of friction goes down and yet the cost of the fatter pipe will go up is only about the second tower pike diameter so where we optimize the pipe by itself as a component as we did before with house insulation were really personalizing the system where we count them all together as a system it becomes obvious that we are huge relief that bites a little tiny pumps that will save more money making the pumping equipment store that we pay extra to make but there well that was sort of obvious once it became obvious that then the second thing was even simpler and therefore more difficult and as to lay out the pipes first then the equipment

we learned all this stuff by the way from the wizard mr lee and singapore and when i was once congratulating him on particularly elegant kind of engineering he cooked up it's not like chinese cooking use everything he defeats as annie no it's b when when you lay out the pipes first you're really doing the opposite of the traditional method which is we've plucked down the tanks and boilers and stuff and some traditional place and that we call a pipe fitter to command connect point a point b but by then of course a and b have gotten kind of far apart other stuff got in between and they're the wrong hide they face the wrong way by the time the pie gets all the way from a to be being dressed head need right angles as a teacher in trade school has gone through some events that friction was about three to six times what it would have been with a straight shot but there are still mind they're not paying for bigger electric bill or better pumping equipment effect a love that you're paying by the hour and mr to get the extra pipes and fittings but from your perspective

it would really be smarter to have short straight pipes that long crooked pipes it uses not rocket science this is the victorian engineering rediscover and you what you get there if you just count the two benefits of ninety two percent was pumping energy and lower capital costs but then you start discovering other benefits illness or like you already saved at the same time seventy kilowatts of heat loss because it's easier to insulate short straight pipes that was a three month payback and then we start to say oops we left out a bunch of benefits we didn't properly count that this whole thing is smaller and lighter and quieter those have a value it has wonderfully cleanly out for maintenance accessible it doesn't need much maintenance there's less to go wrong so it's more reliable it'll last longer if you don't have those pipe elbows being worn away by fluid turning a corner if we properly count those benefits we would have you steven founder pipe and maybe save more

like ninety eight percent said it to run not sure why what the number is we need to redo the analysis but rees not welcome this example is not just the pumping is the beast uses motors which is most of the roles electricity and every unit of friction we save and the pipette saves ten units of fuel cost of pollution and global warming up the formal power plant i should do this example for another reason it's an archetype guarnieri everything in our society including our buildings has been designed by optimizing components for single benefits rather than a whole system for multiple benefits if we get that right we will typically increase our resource efficiency by a factor of about three to ten and things work better cost was we have shown that in kurt lieber institute in a wide range of technical systems they give you a different kind of example just to cement the concept it's a real estate example from one of the early green residential development called build homes near sacramento and davis like judy corbett

put this out in the late seventies early eighties and unless it has a kind of unusual way out there these narrow tree shaded streets coming in from the east side it or did it at a not quite touching the western network of it bike and pedestrian green ways they come in from the left side here and they go in between the fronts of the houses are full of many edible landscaping well different way out turned out to cut crime by about ninety percent compared with jason subdivisions laid out in the dead were no pattern no designed around cars rather than people but i like particularly to call your attention to this little dab in the middle of the green way that runs between the fronts of the houses is that a natural drainage soil after a rainstorm and fills up with water most of which soaks in saving irrigation and dry season unrest which runs off on a faster the mosquito larvae hatch it was

very hard to get permission to do this because they you know for many civil engineers water is cubic meters of nuisance to be removed rapidly to some other place in large concrete pipes and for these developers water was habitat water is life and when the engineer said well we better not have those will still attract vermin fortunately developers realize that berman is the engineering term for wildlife may so we hope so and then they had to post a bomb so that when there's wells didn't work they would rub them up and put the pipes and but a few years after installation they had a hundred year flood and pipes in the case of divisions backed up into positive their water into the subdivision but the swells handled everything and i got the money back by not putting those pipes in the ground initially they save about eight hundred bucks for house which was quite a bit in those days and then they leverage that they reinvest that money and parks open space tortures community gardens cropland and then they found i could cover a lot of the cost of daycare center the park's upkeep through the proceeds of the organic almond harvest was the only subdivision

i know that's noted for the quality of its organic vegetables and they found a microclimate got so called elders greenery around that quite often leo even with most of these technologies the house that made the air conditioner would stay off and summer quality of life was terrific in fact these houses which were initially considered so weird to realtors would show them are now the most desirable place and have lived there usually snapped up by word about before they're listed on it was that they moved in about a third the normal time and they sell for eleven bucks a foot over market i this is one of a hundred percent of the two hundred and fifty k studies in the cd rom houben are my screen development services puts out along with an end and textbook for developers and designers called green development integrating cultural state and what those many cases of these show quite comprehensively is that the same design integration giving him all the boat multiple benefits from social expenditures only gets you better environmental and resources into human performance that also typically gets better market and financial performance

just as you'd expect and the secret to this kind of success is to design with that compromise we're often told the design is the art of trade off and compromises if it were somehow way of negotiating with yourself to make sure you don't get what you want compromise is a respectable political process but it's of their design that that as our friend jay baldwin realized one day when he was being taught as nonsense well he was was looking out the window watching a pelican catch a fish they said look this can't be right nature does not compromise nature optimize is that pelican is not a compromise between a seagull and a crow it's the best possible pelican so far after ninety billion years it's really very good elegant so when you find yourself needing to compromise between desirable design objectives it typically means you haven't yet quite found the right statement of the design problem keep at it he'll get there welcome back to that well with all its scope for saving energy saving fuel cheaper

than buying it it must be obvious to all the tennis balls that protecting the climate is not costly profitable entity for companies do that all the time because the biggest chemical company in the world saying that in this decade it's gonna cut its raise its revenue six percent here but not increase its energy use of all visible get officially steadfast and it'll be getting a tenth of its energy a quarter of its raw materials from renewables and will cut its greenhouse gas emissions to sixty five percent below the nineteen ninety two level and the fourth biggest hit maker in the world is to michael atomics has set a goal of zero carbon emissions by the end of this decade when they expect to make forty times the chips they made in nineteen ninety eight israel to figure out how to cut their carbon project by ninety two percent profit we now ninety eight or nine percent profitably soon and by the way this makes their fans work better animates the new ones built faster and cheaper which is the real way to get ahead

in the semiconductor business so these things are being done in the name of shareholder value or companies are behaving as if the us had ratified the kyoto protocol washington will be the last to know well let me move quickly through the other three principles that trip that was the second one you'll recall is redesigning production on biological lines with close lose no waste and the toxicity the green architect john mcdonough tells a lovely story about this he was asked to redesign take off to cover the backs of chairs they so i'll do it if you'll let me redesign the production process so they had a look into that and it turned out that the instruments had just been declared by the swiss government to be a toxic waste because of heavy metals and other bad stuff used in treating and i think the cloth write music called it it makes you wonder gee at the edges of this

claw for toxic waste what's the middle that were sitting on so no reports of a michael brown got permission from the chairman of ceded it to go in a look about a thousand chemicals used in the cloth business and they eliminated from consideration any that caused cancer mutation birth defects in the great disruption by ok relation or persist in toxicity also another level when stuff was eliminated they were left with thirty eight chemicals that were safe now it gets better from those it turned out they could nicely make every color although black took a little longer to figure out and they could make a clock out of natural materials in a way that would look better and feel better in your hand and last longer and guess what it cost less to produce because you are now using ordinary gazans are the chemicals and you no longer needed to have those embarrassing conversations with ocean epa because there was nothing in the process that could harm the workers were the neighbors can take off the masks now and he reports that when the swiss environmental inspectors then came to the factory their thoughts are measuring equipment

was broken because the water coming out was a bit cleaner than the city's drinking water going in that is of course because the clock product was acting as an additional filter a nice example of what happens when you take the filters out of the pipes and put them where they belong in the designer's heads and it's also close to the production because as bell puts it when you're through with this cloth you can composted in your vegetable garden or if you have a fiber deficiency comedic those loops no waste low toxicity or another example at the university of tennessee ken webb elementary lab course every years was turning six thousand dollars worth of pure simple chemicals into sixteen thousand dollars worth of hazmat disposal costs until professor hans fisher had a lovely idea he said hey what we teach the same lead techniques will turn some of these exercises around backwards so will take a nasty toxic do we made

in the previous experiment and separated back into the pure simple chemicals we started with what's to stop this was really neat and they devoted so many volunteer evenings weekends to separating ways that they ran out of ways to separate waste went down ninety nine percent cost went down twenty thousand dollars a year and those students will be very much in demand because what they were learning in this new pentagon she was not linear wants through thinking of closed loop cycle thinking and that i can go out and see the chemical industry that what he's buying ears are up to is adopting and adapting the three point eight billion years of experience out there in biosphere one during a time of zany experimentation and rigorous testing in which everything that didn't work than it or ninety nine percent of stuff that didn't work already got recalled by the manufacturer is wonderful book about this fire board member julie in venice called by a mimicry innovation inspired by nature but she asks well what a major figure out in this report it going years how has

nature solved design problems for example how the spiders like silk which can be stronger than steel it can be tougher than the kevlar in a bulletproof vests and yet when we go to make of war we require a fafsa boiling sulfuric gas is a high pressure mixture of hers spiders don't do that they make a silk somehow in their bellies and ambient temperature pressure out of digested crickets and flies how do they do that added trees turning air and water and soil in some like into this sugar called cellulose which is actually as strong as my lawn but three times lighter and then how do they make it into this natural composite called wood which can be stiffer and stronger than steel or aluminum alloy or concrete trees do not have blast furnaces smelters and kills haven't they do that hat his abalone assemble self assemble in seawater and four degree c and enter shallots twice as tough as our best this almost cone ceramics that one has

just been figured out by the way said the air is really cool well where is that going to buy a mimicry buy him a medic design texas is a world where the successful businesses take their values or their customers their designs from nature and their discipline from marketplace everything the genetically modified crops forgot to do which is why they came unstuck in the market that's also a world where conventional environmental regulation starts to look like a great anachronisms because the firms that need it will mainly be out of business already having spent too much money and time making things that nobody wants things that in the twentieth century we used to call our waists and emissions we have a much better name we call them and saleable production because this makes his focus on the women why are we making this thing nobody wants but stop making it let's design it out and then you get really important innovation that we will get there faster if we had better feedback

systems without feedback or stupid by definition for example how clean air corps would you buy if its exhaust pipe instead of being into pedestrians were just fun back into the passenger compartment probably pretty clean how safe would you make your explosives factory if you built your house next to it i dare say very safe that's exactly what mr tupac did in his firm's been a leader in industrial safety ever since how do you suppose that were recovered solidly rather important problem of insuring really high quality and the wells in the halls of the nuclear submarines he just told the ceo of the construction company and all the welders that they would be aboard laden died very effective cyber attacks but that the most effective kind of feedback we can get and businesses to change the business model so we change what we reward and specifically in the solutions economy the third principle of natural capitalism which is that there's a small

and such a way that the provider in the customer both make money in exactly the same way by doing more and better with less for longer for example in europe and asia chandler would rather not sell you any of their excellent elevators because they think they're elevators be less electricity less maintenance than competing once so they continued on the elevator and pay the running costs themselves then they can more cheaply and more profitably provide what he wanted which was not an elevator is not a bunch of metal you just wanted the service is being moved up in that survey least you have a vertical transportation service similarly dow would rather not sell you a solvent they would rather lose to a dissolving the surface and once all that is done at work they take it away you never own it that's good and then they re purify it and use it again and again and if they can go through fifty or a hundred trips obviously the cost of dissolving goes way down compared to once through a menu

as that disposal cause and the more trips to stuff makes unless they lose each time the more they can drop the price so you pay less they get more market share they have more margin everybody went and they can help you figure out how to keep apart from getting greasy in the first place they don't need a solvent they get paid for that too there are many examples of this popping up all over and where they're leading us as a world where when you try to sell somebody a product whose ewes delivers the servers they really wanted in the first place spark customers like you to say when i want to try some of this thing if it had the operational advantages you claim for it wouldn't you want to get them yourself by keeping the thing and only recently the service so why are you trying to sell me this thing there must be something wrong with it laurie give you example of how these principles by together when we normally carpet are offices with a big wide role abroad and part of a boil

and after maybe fifteen years or so its first look pretty worn in spots so they have to shut down her office take out all the furniture roll up as partly worn carbonate of oil send it to landfill where it sits for ten or twenty thousand years not a great use of oil or money and then meanwhile back at the office he laid out for target made it more oil will back in resume operations maybe get sick from the fumes and carb gluten now why exactly are we doing this started to preoccupy ray anderson the founder of interface in atlanta now the leading injury or foraging sponges company and he's been turning them gradually undoing natural capitalist company first of all getting a hundred and sixty five million bucks so far to the bottom line by ringing out waste very systematically bringing in as it advanced resource productivity is was a company that had the big pipes and smallpox is was company recently and probably ninety percent saving

on un and us to air conditioning system it million dollars was caused by designing it right and they're now twenty seven percent of his operating profits come from waste has gotten rid of back into the business and the shareholders pockets known as close to the production had developed a new kind of floor covering becomes all sorts of patterns and colors called slave very unusual properties nothing toxic know chlorine certify climate neutral all the climate effects of making and transporting and maintaining your offset before it gets to you and wash it off with a garden hose it doesn't stay in a dozen nail glue that looks good feels good underfoot as the acoustics it's four times as durable as traditional carpet but it uses thirty five percent less material per square yard and those two facts mean that you're using only a seventh as much material per square yard per year you can also for the first time completely remanufacture it into identical product with no loss

of quality so that then makes possible solutions economy business model recently know why are we selling people car but we could releasing them before covering service so we get the benefit of less materials and longer life and a way to do that is to deliver the carpet in european fashion and carpet tiles by the way the latest version doesn't rise by a mimicry you know when you pick up a leaf off the forest floor you can tell it's not there anymore because of patterns fractals o'malley can do that with their carpets are patterns to get over the edges are a waiter you can lease the carpet tiles service the floor covering service in such a way that every month a little elves come midnight they take away only the carpet tiles that are worn and replace them instantly with freshwater carp always looks fresh which didn't before but they're only replacing or wants which is only about a fifth of the scenario have been previously achieved seven full reduction materials times another five fold reduction for not replacing

the tiles are more slots a factor of thirty five as a ninety seven percent reduction in the flow of stuff and when they get enough warning cartels back to the factory they'll set up the re manufacturing line and then they are saving ninety nine point nine percent of the material now how is a conventional once through commodity selling carpet maker going to compete with a company that uses a thousand times less material ten times less capital to produce a higher quality service at higher marginal are caused by the way it's a tax deductible operating leases the customer instead of idle item on the balance sheet short answer you're not god this is a nice example of the kind of breakthrough competitive advantage the natural capitalism offers and you also end up by the way adding more jobs to deliver the service then you lost jobs at the factory making less carpets we are substituting about the people are scarce nature the fourth step which there just embarking upon his they've now shown they can make his carpet out of things like corn cobs and

us to them the idea is you what we buy the corn stover from say poor black sharecroppers in the deep south using organic techniques that rebuild so that we're protecting rural culture and economy and community and we're building soil and the farmers are getting paid for taking carbon out of the air and sticking it back and humus where it belongs so reinvesting a natural and human capital this is very good business the first four years on this new tack interface more than doubled its revenues more than tripled its operating profits and nearly doubled its employment all at the same time and actually when i was there when david okay the designer of swanee him ordered him having just figured out how to do this impossible thing at his country me expression and he said you know douglas be an environmentalist says we figure out the right questions to ask at all fell into shape that we got every actually we wanted and none we didn't want a bunch of cool stuff you never thought to ask for that's a pretty typical result when you finally

find the correct solution of the design problem and then you'll also find much more excited workers because they no longer feel any contradiction the country between what they're doing on the job and what they want for their kids when they go home and at that point neither the managers nor the competitors can keep up her me just review where we've got to sue for his own tie together how the principles on the beach we take from the planet from natural capital things that are grown and things that are mind that extracted flow of stuff goes into manufacturing which makes products in ways the products get used and then either thrown away coming back into nature as waste or they come back to manufacturing is what brown recalls a technical nutrients to create value again or they come back into nature as compost to feed nature they have to go somewhere well in the current system we don't do all this very well we actually grow only seventeen percent and mine about

eighty three percent of what we take it would take a lot of which ninety three percent is lost promptly and extraction and manufacturing so only seven percent of the extract it flow out of the earth's crust comes in the product of which about six sevenths has probably thrown away as consumer from earl's after one use are now uses only about one percent businesses beginning ends up in durable products then what happens too well about ninety eight percent get thrown away in about two percent come back to create more about it so the system is roughly ninety nine point nine eight percent pure waste isn't so like a business opportunity and by the way a lot of the waste is toxic so it comes back into nature there being no other place to put it it harms the regenerative capacity that we need to keep growing by arctic resources and getting ecosystem services without which everybody there is no life and no economic activity so this is a very unpromising facade it's fixed

in a natural capitalist investor system we will grow more and mine less of what we take we will take a great deal less because of comprehensively and radically improve resource productivity will be closing loops in manufacturing and extraction and after use things will come back again and get re incarnated we will be de mature realizing our products and making them last longer and faculty doing all the things that are rewarded by the solutions economy business model he's remembered that rewards everybody for doing more and better with less for longer and as we bring our waste we will also design out toxicity so the little bit that comes back into nature is not naturally harm regenerative capacity in fact we will deliberately increased that by reinvesting in natural capital some of the financial profit we made by getting rid of our waste that's how the four principals all reinforce each other briefly to the last of them and the easiest one to follow as nature

does the production all we need to do is get out of the way and let life arash wherever it wants to it very good at that now to re invested natural capital to treat nature's model and measure and mentor not as a nuisance to be baited is something that's being done first on the whole by those whose success depends most obviously on the health of the nature around them allow unsavory the zimbabwean wildlife biologist show that on the arab revolt range lands like this in american west which we thought were under gray's initially thought they were what we thought they were overgrazing actually often turns out that they're under gray's that raise the wrong way and when you change the grazing pattern to mimic very carefully the natural call evolution of grass and rangers you can often have a much higher caring capacity and much healthier grass in fact you can start heading back toward what the pony express riders about witches dress over the riders heads in california i had a problem

of burning dry land rice straw after harvest and it's rich and silica so is creating suspicions of seoul closes down wind and instantly california rice industries association got together with a marvelously try the experiment of flooding the rice field after harvest into a seasonal weapon and inviting in millions of ducks and geese who would then of course provide free for fertilizer free cultivation lucrative hunting licenses you get harvested previously burned high silica straw as a valuable construction material goods but all it did you get paid for recharging the ground water and other benefits of by the way you also still grow and sell rice but now rice is merely a byproduct of these other activities in it so much more lucrative doing all these things than just won their third rice acreage is already switched over to assist and great plains the land institute and sliding kansas is trying to transform agriculture from a monoculture venue rules to pull a culture perennials

the works just like the prairie kerry's been there a long time and knows how to look after itself if there were a better way to use the sunlight it would've been there already started out to be a very good idea where they're strong taunts work using the engineer ian dury to systems like this one to turn raw sewage and seth agenda tertiary water and flowers no chlorine no risk low toxicity no odor was write a residential area the only problem with that is attracts tourists and syrian border collies service from research initiative has published really need examples of how to invest in and with natural capital they point out for example and they're on the web that is very dot org that a billion people have poor housing at least a tenth of those have no housing but many of those live in places where bamboo rose rapidly than those of fast growing grass it's stronger than steel a can do a meter overhangs

and the colombian architects in london us has figured out how to make a hundred pieces of bamboo five meters long into a very strong and beautiful sixty five square meter house and you can grow their bamboo every five years on just a hundred square meters of them do that now if you put in a cement slab and other amenities then they'd catch cost of the house has about seventeen hundred dollars it last a very long time if you smoke the bamboo with ancient japanese are other techniques he's added acid to the surface above stall even and good for five hundred years and left over from smoking it as a parliament charcoal wood makes a very good cooking fuel so you save more deforestation and you end up in these processes sequestering so much carbon that you can sell it to a broker for about seventeen hundred dollars so guess what you just throw your own house and you protected the climate and its self financing the trick they really grounds for hope in the search for intelligent life on earth there's no

grains years has given little pinch of put it are evenly distributed one per person and mostly brains are in the south in fact most of the brain's belong to women and poor people generally press people who are starting to have a voice or starting to contribute their ideas is a global nervous system in mergers far as we know there's nothing in the universe was powerful six billion minds wrapped around a prop and we're starting to see already the potential being realized for south to north discovery and teaching and leadership because of course most brains are in the south and lovely greatest resourcefulness imaginations in the south while in isis examples which is the next last chapter of our book and my favorite chapter is a story of regina rizzo it's a city the size of houston or philadelphia two and half million people and that population has quadrupled in the last twenty years and yet the city's budget or person is fifteen times less than that of detroit's it really doesn't sound very promising does it and yet all is in paradise it still has problems

the city has solved its problems better than any north american city i know this is treated as formidable social and economic an ecological needs not just competing priorities to be trade off between city departments fighting for budget they would rather as integrated inner wing design elements the synergies to be captured in a brilliant design process run largely by architects have largely by women they have from the beginning integrated hydraulic gm land for transport and land use nutrient waste flows education health participation and dignity and they've created one of the world's great cities the private sector did most of the heavy lifting often in partnership with community groups and other roles right so in what's widely considered the world's best public transport system the train competing private bus companies that run it are paid not for how many people they carry but for have a drought they serve so they have an incentive to spread out to serve everybody

there are many other examples of something i'd like you to reflect upon enough corporations rule the world how we have to do it i think we're very fortunate that in a world where over half of the hundred biggest economic entities are not countries the companies are many companies out there that perhaps uniquely among our institutions have the leadership management resources skills motivation agility innovation immigration to solve tough problems and hurry those early adopters of natural capitalism you'll find scores of examples of her book are finding in a stunning competitive advantage greater short term profits and happier workers customers and really finding what edward seventy chair department copies to take such opportunities seriously you said they will do very well while those who don't will be a problem because ultimately that will be around

maybe the big problem with capitalism this extraordinary system of wealth creation built on the productive use of every investment in capital oh for foreign capital isn't really just starting to try it but the early returns are very encouraging and i'd like to come visit natural capitalism dot org or for short madcap dot org you can download the book and the cliff's notes version from harvard business review for free free as cool and i hope you'll add your growing experience of what worked for what didn't work so we can speed up the rapidly evolving global conversation around this new way of doing business as if nature and people were properly counted thank you he's been in the polls