Good Product Stewardship

Good Product Stewardship legislation is like good surgery. It can be a lifesaver, something no one in their right mind opposes. And it is not unprecedented: end of life electronics recycling is just the latest in a long history of product stewardship regulations. The manufacturers of products have a role to play in warranty, in recalls, in product safety, in supply of replacement parts, in fair competition, and increasingly in environmental stewardship. It's what they call "a good thing." The right regulation protects consumers, and the marketplace, and the manufacturers themselves over time. It's true I've been to Christian Science services, but I take medecine and I've had elective surgery.

I would have trouble simply saying I am "pro surgery". Especially before Halloween.

Surgery on an arrow wound is a matter of life and death, even (if my education in westerns is reliable) if done with a pocket knife and a steak fork. You have to sterilize the knife with fire or alcohol, and give the patient a sedative or a glass of whiskey. But gettin that darn arrowhead out of the patient's body is critical, in conjunction with a process called "stopping the bleeding".

However, the human body is a delicate, multilayered organism. If the bullet is right next to the heart, but not in it, the patient has a pretty good chance of surviving. But here is where "medical school" comes in. You see, if you dig at the bullet this-a-way, you smash the aorta and the patient kicks the bucket. If you pry that-a-way, you slice the left lung, and your buddy the patient commences to cough up blood for the rest of his life. If you forgot to sterilize the knife, it's too late to go "oops" and take it out and wash it and go back in.

Now a lot of cowboy doctors could be forgiven if they are out in the badlands and they are forced to experiment with steak knives, pancreases, and arrowheads.

It seemed kinda like an emergency at the time, ol' Gus was a bleedin' and gettin' purty sleepy and what not. When I get back to the City, I'll go to med school and do my cypherin' and figure out what that gosh dang squishy pink thing was that the arrowhead was all lodged into.

Can't blame you, you done good, pardner. Get out the white linen.

Or what the heck, maybe you saved ol Gus. He wound up paralyzed from the waist down, and sure he only got one lung, but he was a goner and you and your steak knife will be braggin' to your grandchild how you saved his life up on Pokemup Flats that night.

When it comes to surgery, the question is, what is the emergency? The "precautionary principle" is that you need to weigh the actions before you take them. Chinese philosophy says that if you take action, like saving Gus's life, and he goes on to murder some innocent school marm, you share responsibility. That doesn't sit right in the West, and may be one reason that Western Medicine is more advanced than Eastern, despite a lot of evidence that Chinese and India residents are "wicked smart".

As western medicine has advanced, we become less tolerant of amateur medical practice. Today, if I operated on my son in my house with a really clean, really sterile, really sharp pocketknife, I'd go to a well lit prison, one with heat and air conditioning and a TV in my cell. This is because the "precautionary principle" requires that I weigh the true risks of not operating (the time it would take an ambulance to get my son from the back yard to the emergency room). I could not state as a defense that "doing nothing" would have killed the boy. I'm not in the badlands and it's worth taking a few minutes to get the surgery done right.

Product Stewardship is a great concept.

Two people at Vermont Agency of Natural Resources recently remarked to me thatGood Point Recycling "doesn't want to be regulated". That's kind of like saying I "don't like surgery". Hey, I could like surgery. Many of my best friends have hinted that cosmetic surgery has made great strides.

I just don't want to be experimented on.

The free market has a certain harmony to it. Most Americans pay their taxes, most Americans don't swear at toll booths, most Americans donate to charities. We have found that about 80% of Vermonters will pay about $5-10 to recycle a computer or TV about once every 5 years or so. We have found that getting convenient access to recycling to 85% of Vermonters (TVs collected 6 days per week in at least one place in their county) has increased Vermont's per capital recovery rate to 2+ lbs per resident, from zerosih six years ago. There is steady improvement, we have a few towns and districts still relying on a "one day" event once a year, but that's usually boiling down to a personality trait at the town manager level.

The 15% which don't have access... that's an interesting number in economics which I won't go into but which any Ph.Ds in econ can follow up with me by email. It has to do with diminishing returns, and what the costs are of addressing the last 15% of anything in any economy.

Anyway, how do we decide between good surgery and unnecessary surgery?

1) Define the problem

Several people have exaggerated the number of Vermonters unwilling to pay $5. It has repeatedly been said that high participation in a free event is proof that people won't pay for a non-free event. That's like saying that if I offer free coffee and the line is 10 times longer, that it proves that 9/10 people won't pay for coffee. It is a fallacy.

The real problem is that Solid Waste Districts and municipalities are hurting financially, and legislation which offers a 3rd Party financing system has to be considered as a way to pay for salting the roads in winter. This is a very legitimate consideration.

In Maine, consumers pay the same $5 per item as they do in Vermont, it's called a "transportation fee". See, they tell everyone the recycling is paid for by the manufacturer, but the manufacturer money goes to destroying working items that could ahve been resold, and so that money isn't available. That's like having cosmetic surgery that makes me uglier. So:

2) Propose a system that will work.

The fact that Oregon, Minnesota, Maine, Maryland and California all have different financial regulations has been criticized for being a "patchwork quilt" of regulations across states. For me, that's less disturbing by itself than the fact that five doctors I visit propose 5 different surgeries.

What someone needst to do is sit down and study the systems in place in those states, and compare their actual results to a "Placebo State" (Vermont) with no regulation, and vs. a very traditional treatment like a Waste Ban (Massachusetts and NH). The regulations in MA and NH appear to be working, so the test is whether the consumer and municipality benefit enough financially from the other systems.

3) Draw parameters or precautionary principles.

What are some things that good regulation will NOT do?

- diminish competition
- diminish solid waste hierarchy (reduce and reuse trump recycling)
- pass consumers more costs than they pay now for the same solution
- create a cowboy bureaucracy

We don't want elective surgery that corrects on problem and creates two others.

So am I being overly cautious and overly negative about exciting new types of product stewardship? Or am I helping us to improve so that Vermont's new regulations, when proposed, will be an improvement.

Here are some Product Stewardship laws from past years:

Planned Obsolescence laws. TV manufacturers must by law provide new replacement parts for all TVs they sell for 7 years. Did you know that had to be passed as a law? Did you know that some of the percursers to some of the current recyclers were in the business of taking out 7.001 year old replacement parts and grinding them up the minute OEMs are no longer required by law to stock them?

Product Safety laws. TV manufacturers and computer manufacturers are responsible for the safety of their products. That is why we have bromine mines - to mine the bromine for the brominated flame retardants which are laws dictate must be put into the plastics of electrical equipmment.

Competitive Laws. Free market competition must be protected actively by government. Competition has proven to superior to "redistribution of wealth", because if poor people can economize, they keep their wealth to begin with. It is amazing. The biggest criticism of Japan when I was going to school was that Japan cheated WTO rules by creating "non-tariff barriers" such as local regulation of products at the municipal and regional level which corporations outside of Japan could not effectively compete against. Who every heard of Acer (which bought Gateway) or Lenovo (which bought IBM) ten years ago? Would those brands have been on the list of "allowed to sell" products in Maine and Minnesota? What would the cost have been to the consumer if they had been kept out of the market? Who would Dell be today if internet sales had been disallowed in California following SB20?

Environmental lifecycle laws. There are other environmental laws to consider, including energy star, recycled content, longer lasting products, which represent vital life signs for the planet. If Hitachi is the undisputed champion of repair service, earning kudos from decades of TV repairpeople as being the most supportive and sustainable brand from a warranty perspective, that needs to be considered even if Hitachi is not doing 'takeback' things that other OEMs are doing. For us to pick one vital sign, like blood pressure, as the single indicator of environmental sustainabilty, is reckless and wrong.

So surgery is good.

Malpractice is bad.

I would have trouble simply saying I am "pro surgery". Especially before Halloween.

If you are going to operate on my kids, I am going to ask you tough questions. Just to label me "anti medecine" must surely be tempting. But we have a company here which is doing the right thing.

AND WHICH *** AHEM *** IS REGULATED!!!!!

If you go to EPA CRT Rule you will see that in order to export for reuse, we must keep detailed records demonstrating that the products actually were reused.

You will see that we cannot by law claim to be exempt if we collect CRTs in open top roll-offs exposed to the elements.

You will see that we need to keep records of shipments in and out of the company to prevent speculative accumulation.

You will see that if we do not recycle one of the CRT that we collected, and dispose of it in a landfill (arguably, a landfill in any country) that it is under RCRA a reportable incident and we must keep a record of it.

You will see that if we handle CRTs in a reckless manner which is likely to result in breakage, that we lose the "incidental breakage exemption". We can't tip the TVs in a roll off onto the ground mixed with refrigerators.

In good spirits, I'd suggest that if the current regulations were enforced, I'd have more faith that the proposed regulations won't just result in an out of state company undercutting our prices and undermining what we have built in Middlebury, Vermont.

My first suggestion to VPIRG was to draft the legislation for Televisions only.

- TVs are the financial problem
- TVs don't have as many competitive barrier issues
- TVs are the volume problem
- TVs are big and wind up going over the $5-10 / item charge
- TVs have fewer manufacturers to regulate
- If it works really well with TVs, you can always add keyboards later

"Doc, this procedure, have you ever done it before?"





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Compromise on Legislation

I've written before about the problems with involving manufacturers in a government-OEM-recycler-consumer-takeback-scheme. There are so many more things involved in the grey market, emerging markets, planned obsolescence, non-tariff barriers, etc. that it's difficult to imagine a scenario where the consumer comes away with their trousers still on.

However, as the attraction of "free money" (fees from manufaacturers) collects steam with recycling officials and other government officials, it's difficult to turn back the tide. Vermont's legislation has died not quite a thousand deaths, but it's going to rise again.

My compromise is to apply the legislation to Televisions only.

1) TVs are relatively simpler than computers. There is less of a conglomeration of hard drives made by Seagate, boards made by Intel, software made by Microsoft, CRTs made by Trinitron, and a brand name who contracts out to an assembly company. The "white box" or independent manufacturing market is not as big a player in the USA for TVs.

2) Aside from all the OEMs involved in the "original" manufacture of a single PC, there are fewer brand players to involve in a TV takeback program.

3) The TVs are the biggest cost associated with the electronics or "e-waste" collection system. PCs are worth money, and in Minnesota the manufacturers fell over themselves to sign up tonnage already being collected in the free market - commercial builing PCs.

4) TVs are about to go obsolete, both because of the CRT and because of the digital tuners. That's a bit of an exaggeration, but it is indisputed that the secondary market for TVs is a fraction of the scale of the secondary market for computers.

If the TV legislation worked well, states could always choose to move into computer legislation later, after they have worked out the 'kinks'.

Billion Dollar Solution

How to solve the bank insolvency crisis in two easy steps.

Step One, define the problem. The USA buys stuff from overseas. Countries like China, Japan, and Saudi Arabia get a lot of dollars. They have to do something with them. They send some back as cash to buy electronic scrap, but mostly they bought US Savings Bonds. When they heard about the USA deficits, they tried to diversify where they put the dollars, somewhere else safe... and started to buy big bank bonds which were supported by home mortgages. The banks from these countries didn't issue home mortgages themselves. They just bought rolled up mortgages from USA banks.

The USA banks add a margin, and make billions. Every mortgage was an earner, and they did not actually own any insolvent loans for more than a few weeks or months. So they really had no incentive to turn an applicant down. In fact, they issued a lot of credit cards based on Personal Financial Statements relying on the home as the key asset.

Home prices kept going up and everyone was happy. I financed Good Point Recycling on a second mortgage during the first year.

When the USA trade deficit and federal deficits kept growing, it made the China/Japan/Saudi financial experts nervous. But if they started selling their dollars on the open market, the USA dollar would collapse, and they'd lose even more money. If they stopped selling to the USA, they really had not many better alternatives and would probably go into a financial crisis themselves.

1) So the problem can be defined as "the jig is up".

2) Solution:

One solution is bailout with $700M. After all, if the banks collapse, that wipes out individual savings accounts and IRAs and mutual funds. I'm not into that. But it's normal to require some guarantees.

My solution is borrowed from my uncle Eddie Fisher of Hollister Missouri. He told me the whole Federal Reserve debt would be solved overnight if the US Mint made a single three trillion dollar coin and handed it to the Fed Reserve Chairman. It wouldn't be inflationary because, well, there aren't many thing you can buy with a trillion dollar coin, and not many people will make change for it.

What I like about the trillion dollar coin for the bank bailout is that the banks have already demonstrated they are really good at maintaining an asset on the books which is not backed by anything.