Category Archives: Business Analysis

PETA: Their doing it right

I always questioned the effectiveness of advocacy groups means to promote their agenda like PETA members throwing red paint onto fur coats  or Greenpeace members tying themselves to a tree to keep foresters from harvesting for wood.  In these cases, it has been hard for me to take them seriously.  Even with their more pragmatic solutions, it still seemed like they didn’t get it.   Now it looks like PETA finally understands how they can truly make an effective, meaningful change to advance their advocacy: embracing the new corporate stakeholder model for business organization.  PETA realized that the best way to make a change was to meet eye to eye with those they advocate against.  Profit is the driver of many corporations and why they do the things they do that many PETA members criticize.

So what did PETA decide to do? They decided to become major shareholders in companies such as McDonalds and Kraft.  Their aim is to have some weight in future decisions of the companies.  Unlike their previous attempts at trying to push their agenda on individuals to make a change, PETA finally realized that the best way implement change was a more pragmatic, top down approach.  With PETA realizing that the ethical treatment of animals was an easier fight to win rather than changing peoples dietary habits, PETA may be able to make a meaningful and effective change.   Coming to terms with the fact that other individuals chose to eat meat must have been a tough sell for PETA but on the upside they can now work together with food companies to help humanize our food production system – something that any compassionate person would support.

In many cases, shareholders were “horrified” when they learned of some of the production methods used by their companies’ suppliers, Byrne said.

“Many shareholders are average people who are compassionate and who don’t want to be supporting practices that are inhumane,” she said.

I hail this as a groundbreaking achievement for advocacy groups moving away from their radical paradigms and more towards the center as they meet eye to eye with the average, using the capitalist system to their advantage.   Making political change is hard since the currency is votes.  Cash is a much more effective means of making system wide changes for the better.  And apparently, the organization is already making waves:

“It gives us a new forum in which to present the research we’ve done to company executives, their shareholders and the public,” said Ashley Byrne, a senior campaigner for PETA.

PETA tries to negotiate agreements with companies behind closed doors, but if that fails, the group submits shareholder resolutions with its proposed changes at shareholder meetings.

Companies don’t always change their policies, but Byrne said the effort has paid off. After PETA bought stock, Safeway grocery stores and restaurant companies Ruby Tuesday, Sonic and Burger King agreed to give purchasing preference to suppliers that abide by what the group says are more humane rules, such as not confining chicken and hogs in small cages, she said.

I applaud PETA for taking the first step that I hope many should do as well.

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Recycle your cell-phone, its worth a fortune!

Here is why you shouldn’t just throw away your cell-phone, but recycle it! Some say to do it for the environment’s benefit. Save energy this, prevent waste that. But I think a true ecopreneur would look at this statement

For every 1 million cell phones recycled, 75 pounds of gold, 772 pounds of silver, 33 pounds of palladium and 35,274 pounds of copper are recovered.

That’s 75 pounds of Gold X 16 ounces X $1133.600 per ounce which = $1.35 million. 772 pounds of silver x 16 ounces x $18.1 per ounce = $223,571.  33 pounds of palladium x 16 ounces x $501 per ounce = $264,528.  35,274 pounds of copper per ounce x $3.5748 per ounce = $126.10

Total = $1.8 million dollars for every 1 million cell phones.

Yeah, OK, that only amounts to $1.80 per cell phone but imagine bringing economies to scale and legally require citizens to dispose of e-waste to specific collection centers and wallah! A viable business opportunity.  Don’t agree? Multiply $1.8 x 276.6 million cell phones in the U.S.  That’s around $500 million dollars in recycling revenue, and that is only from cell-phones! Imagine what other e-waste would yield…

PS:  $1.8 * 4.1 billion cell phones in the world = $7.4 billion. Yeah, that’s right. $7.4 billion dollars. For cell-phone e-waste alone. Is any CEO right now reading this?

Oh yeah, we get to save the environment too. Forgot to mention that.

Finding Value in Waste

S4 Energy Solutions will be testing a valuable technology for commercial viability by:  (here)

…superheating landfill waste using an electricity-conducting gas called plasma, which rearranges the waste’s molecular structure into a synthetic gas. The end product can be converted into transportation fuels such as diesel or ethanol, industrial products like hydrogen and methanol, or used as a natural gas substitute to fuel electric plants.

The question is: How much quantity at what cost? I also wonder if this becomes economically viable, how it would change the value of waste in the long run?

Moving towards economies of scale for recycling

This just in from the Portlander, emphasis mine:

Recology Oregon Recovery Inc. have signed an estimated $38 million, seven-year contract that will signal considerable changes for the northwest Portland facility that takes in trash and recyclables from commercial waste haulers, businesses and residents.

Following a thorough evaluation by an interagency evaluation team, Metro determined that Recology had the best and most competitive proposal to manage Metro Central. The decision to award the contract to Recology was based primarily on its guarantee to double the rate of materials recycled, the company’s robust sustainability plan which includes reducing its carbon footprint, and improved opportunities for employees at the station – – all without significant increases in operation costs.

While residents who have their garbage and recycling picked up at the curb will not see any immediate changes, and Metro expects little to no impact on disposal rates, modifications will be made to improve services at the station to allow Recology to double the current rate of recycling from 17 percent to 34 percent by the end of the first year of operations, and to 40 percent by the end of the contract in 2017. Stepping up the recovery of cardboard, wood and metal will make up much of that increase. Recology also plans to accept new materials at Metro Central, including asphalt roofing and clean drywall.

If one was to do an immediate case analysis from this statement, it looks like Recology is diversifying its product offering and increasing its share of reusable recyclable materials such as wood and metal. Process innovation and growth in business is the indicator of economies of scale by spreading more of the unit cost across more output.

Waste products aftermarket: partIII – e-waste in the developing world

The UN  released  a report today detailing the dangers of e-waste in the developing world. (here) This issue isn’t new, but it is good that the UN is starting to realize how important it is to start dealing with this.   Not many of us know where our digital trash goes, but it mostly goes to the developing world.  The issue with this is that because of the valuable components within the waste, many of the poorest have taken the initiative, at the risk of their health, to disassemble the waste in order to obtain these valuable components and sell them.  Some grim details include:

Most of the recycling of electronic waste in developing countries such as China and India is done by inefficient and unregulated backyard operators. The environmentally harmful practice of heating electronic circuit boards over coal-fired grills to leach out gold is widespread in both countries.

The laborious task of doing this is often menial, tedious and most importantly, hazardous to one’s health, making it incredibly dangerous. But when weighing the option between eating and not, some will step up to take the risk and rummage through our e-waste for a few valuable components.

This issue was first brought to light after watching this incredible documentary called Manufacturing Landscapes. It has vivid images of the lifestyle that some Chinese have in taking part to profit from this, and it will either leave you shocked, fascinated or just downright disgusted.

A more deeper  look into the e-waste problem was documented by PBS’s Frontline.  The piece was entitled “Your Digital Trash.” It looks at some of the broad ramifications of e-waste that isn’t entirely environmental.  The most interesting part of this program was towards the end.  It dealt with an enterprising  social entrepreneur from India who built a business by investing in capital machinery that made the separation of parts for e-waste much more productive and less-hazardous to workers.  He hired workers at competitive wages to disassemble and collect the valuable materials from e-waste, all while ensuring a safe work environment.  Those valuable materials, most notably gold, would be then melted down in jewelery and sold on the street for a profit.  Right now the business is only small-scale, but there is potential, especially if India fashions a new law to ban digital dumps.

Before leading into the last segment of the program, the report focuses on a dealer who fills up empty container ships on the way back from the United States after delivering imports, and because the e-waste is loaded at little to no cost, sells them to digital dumps where they are taken apart irresponsibly. His quote certainly resonates when asked about environmental damage:

“I can only say one thing, if you want to do it environmentally, you have to pay. They have to invest in machinery, labor, everything. It isn’t worth it to pay so much money.”

I point this out because this is the real crux of the issue. Our e-waste is being sent to the developing world because residents who have a low-marginal product of labor are willing to take the risk and low pay in order to get the very small amount of value out of this waste. It shows how necessary legislation is needed in order to circumvent this, and jump start the proper investment where our Indian entrepreneur doesn’t need to fashion the valuable metals into jewelery, but is able to sell recycled waste on an open market. If it is possible to do this at Total Reclaim in Oregon, where labor costs are high and able to be sustainable through government support, imagine the type of value the developing world could get by investing in an industry dealing with e-waste responsibly. It will take some time before commodity prices will get to the point when it is profitable to invest in this type of business, but for now, legal intervention is the best way to jump start this industry so that it can innovate and build economies of scale and become a fixture of the industrial ecological web.

Recession shows how recycling shouldn’t be run

This post stood out to me on FreeMarketMojo, linking to an article in the San Fransisco Chronicle about a $4 million dollar budget hole (40% of the total budget deficit)  that the city of Berkeley must endure thanks to their poorly run recycling program.  A combination of misplaced incentives and recessionary forces helped lower the amount of actual waste that consumers could be charged.   Commodities are usually what help recycling programs keep afloat.

The economics of recycling has always been subsidized by commodities’ resale values. But those also collapsed over the past year. Paper went from being worth $187 a ton in July 2008 to $46 a ton in January 2009 and $116 a ton in December 2009. Aluminum went from $1,908 a ton to $679 to $1,200, Clough said.

I want to point this out because it shows how important commodity prices are to the viability of recycling enterprises. While commodity prices during this recession had been depressed significantly enough to deflate their budget cushion, spreading the risk of volatile prices, especially for more valuable commodities, could help reduce budget woes.

Because Berkeley provides its own service, it lacks funds to buy many technologies required to recycle even more products, like certain plastics or concrete.

Surely Berkley will want to look into increasing the rate of waste that is taken to their recycling centers in order to increase the amount that could be processed and sold. Providing proper incentives will help, unlike what Berkley is currently doing. But finding money to invest in other product offerings, like recycling plastic or concrete, or even e-waste, can hedge against depressed prices and provide economies of scale, especially if services were expanded state wide.

I just want to make these comments as they help point out how important a large scale operation is, and how sustainably high commodity prices can help make recycling programs economically viable.

Remember those Google predictions I posted?

Well, they weren’t too far off.  The predictions I posted here, although made jokingly, are starting to have some truth to it:

2011: In other news, Google is creating a health insurance company to insure more efficiently its employees…
2012: Google Oil has announced that the drilling has been successful, production will begin next month…
2013: In an attempt to cut costs and reduce management inefficiencies, Google has proposed to buy the world, the United Nations is bargaining for a higher price…

OK, Google isn’t proposing to buy the world, let alone their own healthcare system, but they are doing something entirely out of their ad business, or software business, however you want to label their core competency as… From the Google blog: (here)

We’re planning to build and test ultra high-speed broadband networks in a small number of trial locations across the United States. We’ll deliver Internet speeds more than 100 times faster than what most Americans have access to today with 1 gigabit per second, fiber-to-the-home connections. We plan to offer service at a competitive price to at least 50,000 and potentially up to 500,000 people.

That leaves one missed prediction:

2010: Google has announced it will begin providing ultra-fast fiber optic networks.