The Frugal Economy, Part 1: Share Everything, Waste Nothing

Building a better world with less

Our dysfunctional and wasteful capitalist economy needs a significant overhaul
to become socially inclusive and ecologically virtuous. Sadly, most proposed
strategies for ‘fixing’ capitalism — including a circular
economy,
stakeholder
capitalism,
ESG,
decarbonization
— while well-intended, have limited success in fundamentally shifting the mindset
of businesses, reshaping cross-company interactions, and restructuring entire
industry value chains.

To effectively address the triple urgency — exploding social inequalities,
worsening climate
change,
and growing resource
scarcity
— facing our societies, we can’t rely on point solutions to fix our economy. To
use a tech analogy: These point solutions are great apps — but they run on a
clunky, resource-intensive operating system.

A brand-new operating system — which I call a “frugal economy” — is urgently
needed to build and sustain revolutionary new business models and transformative
industrial value networks that are truly beneficial for society, as well as the
environment.

A frugal economy contributes to human development and creates more economic,
social and ecological value synergistically, while optimizing the use of all
available resources. The frugal economy uses ingenious ways to “do better with
less” by maximizing the value for all stakeholders using minimum resources —
in contrast to capitalism, which seeks to ‘do more with more’ by gobbling up
ever more resources to create value for a select few.

A frugal economy addresses the needs and aspirations of thrifty and socially
conscious consumers who seek simpler, healthier and eco-friendly lifestyles and
strive to deepen their community ties through active local involvement.

But this frugal economy is no utopia. Drawing on more than 100 real-life
examples from around the world, my upcoming
book
chronicles the rise of the multitrillion-dollar frugal economy, powered by
three megatrends that will deeply reshape our societies in the next decades:

• business-to-business (B2B) sharing

• distributed (decentralized) manufacturing and hyper-local value
  networks, and

• triple regeneration.

The three core qualities stimulated in a frugal economy — sharing,
distributing and regenerating — are diametrically opposed to the three
flaws of a capitalist economy known for hoarding (assets and profits),
centralizing (operations), and depleting (nature and communities).

In this series of four articles, I will examine these three megatrends — which
form the three pillars of the frugal economy — and show their transformative
impact on businesses, industries, communities and the environment.

Share everything, waste nothing

Digital platforms including Uber, Airbnb, BlaBlaCar and SpotHero
already enable millions of individuals to share their underused cars, homes and
parking space with others — thus, earning additional income while boosting the
value and usefulness of their assets. According to PwC, this peer-to-peer or
consumer-to-consumer (C2C) sharing
economy
is poised to grow from $15 billion in 2015 to a whopping $335 billion by
2025.

We don’t associate “sharing” with the business world, where companies compete
ferociously and amass and hoard resources. Yet, progressive firms are starting
to share their physical and intangible resources with one another — hence,
maximizing the value of their assets and reducing waste. In doing so, these
vanguards are giving rise to the business-to-business (B2B) sharing
market
— which could be worth trillions of dollars, dwarfing the C2C sharing
economy.[^1]

B2B sharing could dwarf the C2C sharing economy in volume and value. | Image
credit: Navi Radjou

B2B sharing boosts efficiency, agility, innovation, curbs waste

Let’s examine the big business benefits of B2B sharing. By sharing resources,
business can:

Reduce capital expenditure

Instead of wasting valuable capital to build new factories and warehouses,
manufacturers can quickly and affordably expand their supply chain
capabilities by utilizing on-demand industrial marketplaces such as,
Fictiv, Protolabs
Network and Xometry.
These digital platforms virtually connect hundreds of highly specialized
machine shops with global companies, which helps small firms stay in full
production — especially during recessions or pandemics.

Cut operating costs

Instead of committing to a costly long-term lease, businesses can get extra
office space on demand from workplace sharing services such as
Deskpass and
LiquidSpace. Having flexible office space
satisfies freedom-seeking employees who want to be able to work from
anywhere. Likewise, hospitals in the US, Canada and the
Netherlands rely on Floow2 and
Rheaply platforms to share their underused medical
equipment, materials and services — thus, keeping these assets fully used,
cutting operating expenses and improving patient care.

Make additional revenue (and save the planet)

In the US, heavy-duty trucks represent 25 percent of all greenhouse gas
emissions
from transportation — a sector that accounts for nearly 30 percent of all
emissions in the country. Yet, the trucks on US roads run empty up to 35
percent of the
time
as drivers can’t find sufficient shipments to fill their trucks. These
“empty miles” represent tens of millions of tons of CO2 each year.
AI-based freight networks such as Convoy,
Sennder, Trella,
TruggHub and
Vahak connect shippers with
carriers to maximize truck fill rates by aggregating several shipments into
a single task for a driver — reducing freight cost for shippers, creating
more revenue for truck operators and significantly reducing emissions
related to empty miles.

Although the world’s top companies spent a whopping €1.3 trillion ($1.42
trillion) in R&D in
2022
alone, only 5 percent of all patented
inventions
are successfully commercialized or licensed — meaning, intellectual
property (IP) worth hundreds of billions of dollars goes to waste each
year. Thankfully, online brokering services such as
NineSigma and
yet2.com enable firms to better monetize and make
more profit from their unexploited IP such as patents by licensing them to
innovation-seeking businesses.

Increase agility and resilience

When customer demand plummets due to recessions, pandemics and other
disruptive events, small businesses are stuck with underemployed workforces.
Talent-sharing platforms including Hydres,
Hyver and
Teambix enable companies to temporary “lend”
underused workers to other businesses seeking extra human resources. These
digital platforms also ease the professional mobility of workers who wish to
leave their existing employers to pursue a career elsewhere.

In March 2020, as COVID-19 swept over France,
Kolmi-Hopen — the country’s biggest
producer of face masks — was urged to increase mask production at its
factory near Angers, yet it lacked the necessary in-house expertise
to do so. It used an employee-sharing
platform
to promptly identify and borrow experts in industrial processes from
Scania — a heavy-vehicle manufacturer nearby.
Thanks to this talent sharing, Kolmi-Hopen was able to quickly reconfigure
its manufacturing processes and double its mask production in record time.

Innovate faster, better, cheaper

95 percent of new consumer products
fail
right after they hit the market, because they don’t fulfill real customer
needs. The result? Brands are stuck with expensive unsold inventory. Rather
than speculate on what consumers want and mass-produce the wrong products
faster, brands could use retail-space-sharing platforms such as Appear
Here and The
Storefront to establish pop-up stores in
several key locations. In these temporary micro-retail sites, brands can
test a large variety of new product concepts with customers and gather their
feedback. Brands can then selectively ramp up production of those concepts
that customers highly favor — hence, launching maximum-viable products
that yield greater profit and less waste.

As these examples demonstrate, by sharing physical resources (equipment,
facilities, vehicles) and intangible assets (employees, IP), businesses can
do better with less — boosting revenue, agility and innovation capacity
while slashing operating costs and waste.

Major social, ecological benefits

Beyond turbocharging companies’ economic performance, B2B sharing can also
generate positive societal value — especially in underdeveloped communities
— for several reasons.

First, B2B sharing networks and platforms catalyze new employment
opportunities while also safeguarding local jobs and critical expertise in
regional economies. For instance, industrial symbiosis
(IS)
is a system in which multiple nearby companies partner to share materials,
waste and energy in a mutually beneficial way. IS projects (such as
FE21 in northeastern France, NISP in the
UK and
Canada,
WISP in South
Africa, and Washington State’s Industrial
Symbiosis program hire hundreds of individuals, often from marginalized groups, to
recycle their waste — revitalizing local communities both economically and
socially.

Second, B2B sharing allows artisans, small farmers and SMEs — some of the
most important and at-risk players in our economy — to enhance their
resilience, flexibility and efficiency by accessing resources and
expertise from other businesses at reduced cost. For example, in
Africa, Hello Tractor functions as an “Uber
for small farmers” — offering them access to tractors and farm equipment
with pay-per-use options. This cost-effective, customized tractor-rental
service allows financially struggling African farmers to do better with
less: They can plant 40 times quicker and 2.5 times more
affordably
with a tractor than manually, resulting in 63 percent savings and a triple
growth in crop yield.

Third, B2B sharing can enhance the wellbeing of all citizens. Tired of
drug shortages and price gouging from the pharmaceutical industry, 55 health
systems representing over 1,550 US hospitals came together in 2018 to create
Civica
Rx — a
nonprofit ensuring affordable, reliable drug supply across the US. Civica
pools the buying power of its 55 members to strike a long-term deal with
specialty pharmaceutical firms such as Xellia and generic drugmakers
including Hikma to manufacture over 80 crucial drugs in the US at a
consistent and equitable
price,
and ensure uninterrupted supply for many years. Civica’s frugal medications
have been used to treat over 60 million patients in the US; the company is
now building its own manufacturing
facility
in Petersburg, Virginia to produce insulin in large volume and slash its
cost from $300 to $30 per vial.

B2B sharing could also considerably benefit the environment. If all
companies could just share their waste and recycle it collectively — a
pillar of the circular economy — we could cut global greenhouse emissions
by nearly 40
percent.
If companies were to also share their underused physical assets — inventory,
machines, buildings, vehicles — the ecological benefits could be humongous.
For instance, B2B carpooling and ride-sharing services including BlaBlaCar
Daily, OpenFleet,
Free2move and
Socar can help businesses drastically shrink
their vehicle fleet size, provide flexible and cost-effective transportation
options for employees, and massively curtail their carbon emissions.

Broadminded firms are boldly sharing their sustainability-focused
proprietary technologies even with rivals to boost the environmental
performance of entire industries. For instance, Unilever’s R&D teams
developed “compressed
deodorants”
that require 25 percent less aluminum and half the propellant — resulting in
a 25 percent decrease in the carbon footprint of each aerosol. Unilever’s
scientists also reformulated its ice cream
so they stay stable at a warmer freezer
temperature.
Likewise, Levi Strauss invented 20 techniques to reduce the water used
during denim
finishing
by up to 96 percent. Once these two companies effectively implemented these
changes within their own supply chains, they made the inventions open source
to improve the overall environmental impact of their industry.

Innovative initiatives leverage the power of B2B sharing to generate
simultaneously more economic, social and ecological value that benefit both
corporations and underserved communities. For example, online marketplace Solar
Stewards enables
companies to purchase solar energy directly from historically excluded
communities where they do business. The company aggregates modest solar projects
set up at local schools, universities, parishes and townhalls into portfolios of
scale that appeal to corporate buyers of clean energy. Holistic B2B sharing
programs such as Solar Stewards’ can foster an equitable energy transition in
each of the 3,143
counties
across the US.

In capitalist systems, companies function with a scarcity mentality and compete
aggressively in a zero-sum game governed by the formula 1 + 1 = 0. As we enter
into a
VUCA
world, however, businesses must avoid rivalry and learn to cooperate. As Indians
say “ek aur ek gyarah,” — meaning, 1 + 1 equals
11.

By sharing physical and immaterial resources, companies can co-create far
greater economic, social and ecological value than they can on their own. B2B
sharing is a core pillar of a frugal economy that can help build inclusive and
sustainable societies in the 21st century.

[^1]: B2B transactions – whether offline or online – are much larger in volume and value than B2C transactions. According to Statista, the global B2B e-commerce market was valued at $17.9 trillion in 2021 — more than five times larger than the B2C market.

Published Aug 28, 2024 8am EDT / 5am PDT / 1pm BST / 2pm CEST

Navi Radjou

Navi Radjou is a French-American scholar and advisor on innovation and leadership.