Marginal thinking and waste

You would think that finance and economics were a little distant from waste management. Or at least, any theory beyond "get rid of this rubbish at the lowest cost".

You'd be wrong. Reading a summary of Clayton M. Christensen's book How Will You Measure Your Life, you might get some sparks of new perspectives.

Christensen looks at how marginal cost theory is misapplied - a series of incremental decisions based on marginal costs leads to a bad overall outcome. It inevitably leads to the status quo being maintained, even in the face of fatal changes in circumstances. The example used is nimble Netflix devouring the Blockbuster behemoth.

In private lives, according to Christensen, a similar "marginal cost" slippage in values can be catastrophic.

If the principle can be transferred out of economics and into private life, it can also be transferred to waste management. Indeed, on reflection, it transfers very well.

After all, what is waste other than a long series of marginal cost decision that lead to an outcome that is illogical and undesirable, even for the decision maker? 

Only in a marginal cost world can it make sense to recover only 15% of the estimated $21 billion of gold and silver incorporated in electronic goods, leaving the remaining 85% to go to landfill in concentrations 40 to 50 times the concentration of the ore originally mined for the metals.

It is a world where each decision is a little disaster, where the benefits are small and barely realisable by the decision maker, but the path embarked upon is stupid for society. 

It is a world that suggests the standard economic theory unravels, where even if people did make individual decisions in perfect knowledge (which they don't), the aggregated decision would still be dumb because each self-optimised marginal cost decision slips further and further from a sensible outcome.

Christensen suggests that the way to overcome the outcomes that arise from marginal cost theory is to look at things from a sort of "Ground Zero". Consider the world as if you were a disruptor. Ignore your "assets" on the ground. What would the decision be then? If it would be different to what you are doing, change what you are doing.

This has powerful resonances with waste management, and reinforces why entrepreneurs (and perhaps intrapreneurs if they can find the necessary internal support) are so important to overthrow the status quo.