The End of Ownership
Posted on July 10, 2012
Over the past couple of years I have slowly come to the conclusion that owning assets, large or small, is nothing more than a hassle and a waste. Homes used to be a good investment when prices were rising to the giddy heights we now know to have been a fiction. Those days are over. Ownership reduces flexibility, ties up capital and gives one headaches. So much better and more convenient to pay for use through renting or leasing.
I was therefore excited when I recently became aware of and met the people behind The Circle Economy. Moving away from the ownership model is a core part of their philosophy.
Ownership involves a lot of waste and a lot of risk. And these days we’re trying to get rid of both.
Durable goods that we own tend to get discarded as waste once they are past their useful life. OK, some parts may be plundered and re-used but, by and large, this represents a small proportion of the whole. In a world running out of resources, this does not seem wise. What if we didn’t buy anything but just paid a fee for service? Why do you want to own your laptop computer or your iPad when you could pay a small monthly fee for using it and, when a new model came out you would simply return your old model to the manufacturers and get the new one instead – maybe with a modest increase in the monthly fee. The manufacturer would re-cycle the parts into new computers.
This is one idea behind the Circle Economy. What gets discarded and goes into landfills is minimized. What gets re-cycled is maximized. Once such a system gets going, manufacturers will start to design their products in a way that maximizes the opportunity for re-cycling. This idea of making product specifically for re-cycling has been around for some time. Walter R. Stahel first used the term ‘cradle-to-cradle’ in the 1970s and a book of that name was published in 2002.
The concept was targeted at creating more efficient manufacturing. Little has been done to focus on the fact that this approach can bring us, everyday consumers, significant lifestyle improvements and reduction of financial risk.
Making Financial Sense
We use computers all the time so our fee for service is likely to be continuous. But what of cars? A car is usually the second largest purchase for most households after their house. Yet, for many people, cars stand idle for hours and sometimes days on end. No business would make such sparing use of a major asset and stay alive. Efficient use of funds requires that one sweats one’s assets 24 hours a day. If use is limited, one only rents those assets only when one needs them. Why is it that, as households, we have habits that are so financially inefficient?
Owning assets increases financial risk. These days job security and financial stability cannot be taken for granted. An asset, once purchased, becomes a financial liability. It reduces flexibility and creates anxiety. We end up working in order to pay for our accumulating assets instead of being able to adjust our use of assets as we see fit – reducing our expenditures when times are hard and increasing them, if we wish, when times are good. In this economy, so many people would be in a much better position if they didn’t have mortgages and other monthly payments for cars, appliances, entertainment systems and whatever else hanging over their heads.
We Don’t Want Goods – We Only Want Services
We don’t really want a car, we only want the services that a car provides – easy and convenient transport in a manner that suits us and suits our self-perceptions. We don’t really want a computer – only what the computer enables us to do. What if we could pay for these services as and when we wanted them – and we could modify them as we wished. For a fun Summer weekend with your girlfriend, you might pay for a fancy cabriolet. To attend a boring meeting in the city, in the rain where parking will be a problem, a Smart car may do.
Of course we are already seeing the world move in this direction. Cars can be rented by the hour. Software and data are shifting from a programme installed on your own computer to services available in the cloud. Xerox has been designing copiers to be disassembled, re-manufactured, and recycled for years and estimates gains of over $400 million annually. Other manufacturers such as BMW, Pratt and Whitney and others are following suit. However, it all depends on being able to break us out of the ownership habit.
Governments can help by altering tax structures to incentivize pay-for-use over ownership. Financial services companies can develop further their leasing products and make them more flexible. Companies will need to alter their business models while ensuring that they pass on to their customers some of the savings they will make. All this will move us in the right direction. But what will make the most difference is when we realize that the liberating benefits of flexibility can far outweigh the pride that we have learned to have in ownership – a pride that can easily turn into a personal prison.
As I was writing this, I walked over to another room to look for something in a drawer. What did I see, lying there? My previous laptop computer sitting there, a useless wasted asset.