JFS Newsletter No.92 (April 2010)
http://www.japanfs.org/en/mailmagazine/newsletter/pages/029931.html

"Ceilings" Appear in Global Resources

"What are your thoughts about the current global economic depression, after the collapse of the U.S. financial giant, the Lehman Brothers?" When I pose this question to business people, I discover two types of opinions. One is that "This is just part of an economic cycle. Things will return to normal after we get over the recession;" the other is that "Even if we survive the downturn, things will not return to normal. We have entered a new era." I personally sense that the current downturn is not an ordinary recession, but rather we are at the stage of a "transitional phase."

When I was a member of Japan's Advisory Panel on Climate Change (established by former Prime Minister Yasuo Fukuda), Toshihiko Fukui (former governor of the Bank of Japan and also member of the panel) said he viewed the recent global economic downturn as a global economic mess stemming from the subprime loan crisis, and that he viewed it basically as a phenomenon of the global market starting to recognize an absolute ceiling in terms of constraints at the global level on natural and energy resources. He felt that the market was putting the brakes on the prevailing kinds of economic activities -- or at least on its excesses -- and encouraging efforts to find a new long-term equilibrium.

The absolute ceiling for global warming is said to be "3.1 billion tons of carbon dioxide (CO2) emissions (or 3.1 billion tons of carbon), the maximum amount that can be absorbed by forests, soil, and oceans in a year," as stated by the Intergovernmental Panel on Climate Change (IPCC) in its Fourth Assessment Report. On the other hand, globally, humans are emitting 7.2 billion tons of CO2 every year by burning fossil fuels, and the emissions continue to increase. (Even if emissions decrease, carbon sequestration also decreases -- a mechanism called a feedback loop -- which is thought to make the ceiling continue to drop.)

With regard to energy resources, many researchers point out that "peak oil" will occur in several years. The International Energy Agency (IEA) also announced its estimation in August 2009 that world oil output will reach its peak in ten years, admitting that its 2007 estimate of the annual decrease global oil production (3.7 percent) was overly optimistic (actual rate 6.7 percent). According to the IEA's survey of 800 oil fields, accounting for three-quarters of the world's total reserves, oil output has already peaked in most of the world's major oil fields.

As it becomes more apparent that the world is going beyond the limits of the Earth, people's sense of values is changing, especially in the deep psyche. How much does the business world understand this change?

An increasing number of Japanese consumers is reportedly staying way from buying goods. For example, data show a decreasing number want to buy an automobile, once a social status symbol many wanted to own. Whenever I have a chance to speak with high school or university students, I ask them about wanting to own a car. Few answer, "I want a car," while an increasing number are saying that "owning a car is not cool." And I found quite a few young people saying, "All I need is my mobile phone."

If people are sitting on their wallets simply because the economy is slow, then the problems will be solved after the economy recovers. However, there are many people who think that some changes are happening at much deeper structural and psychological levels. In fact, numerous books focusing on this point have been published in Japan recently.

Among them are "Rebellion of the 'Simple Lifestyle Clan,'" "No Brand Japan -- The End of Twentieth-Century Consumer Society," "The Young Generation That Doesn't Want Much," and "The Lifestyle and Consumption Behavior of the Young Generation -- Are Young People Really Not Spending Money!?" On the cover of a book titled "Study of the 'Anti-Consumption' Generation -- 'The Young Generation That Doesn't Want Much,' Shakes the Economy," a phrase in big, bold letters, "Aren't you being stupid to want to buy a car?" jumped off the page at me. (All English titles are provisional translations.)

It is certain that the parameters of consumerism are decreasing as Japanese society experiences a declining birthrate and aging population ahead of the rest of the world. In addition, as public opinion surveys show, a growing number of Japanese value "spiritual richness" more than "material abundance," and this fact, I think, lies behind the major structural change. (The surveys show that people, particularly those in urban areas and more women, compared to men, consider "spiritual richness" as being more important.) Would people who regard "spiritual richness" more important be willing to buy new products launched every few months?

The younger generation is particularly seen as having little desire for material ownership. They would simply say, "When I have to go from point A to point B, I would drive a car if that's the only option, but the car does not have to be mine. I could rent a car or use a car-sharing service, since that's now available, or maybe I could catch a ride with somebody. Or I would go by bicycle if possible."

From 'Owning' to 'Sharing'

In my opinion, people's value systems can change rather easily. Let me give an example. In 2000, when car-sharing services started to become popular in Europe and the United State, I introduced the movement to Japanese people in my e-mail magazine covering environmental topics. At the time, the majority of Japanese subscribers reacted, saying, "We like things clean and tend not to want to use things when we don't know who used them before us. So, a car-sharing service will never be popular in Japan."

But things have changed. People can now find a car-sharing service near any station along the Yamanote Line, a main railway loop line in Tokyo. And we hear news about the launch of car-sharing services in other areas of Japan almost every day.

"Japanese are a people that like cleanliness." "A car is a necessary item for any young adult to own." "To be considered an adult, you must have your own house." These are examples of conventional subconscious assumptions, or a mental model that dictates that "it should be this way." The ability to identify and loosen up these types of mental models, in my opinion, would be an indispensable ability for society and businesses to have in order to succeed in the future.

From this perspective, I want to focus now on three new trends I see that are decoupling people's conventional assumptions. The first one is the "de-ownership" lifestyles. As described above, the number of people, particularly those in the younger generation, who own a car or wish to own one, is declining. And an increasing number of people now simply rent and lend or share books, CDs, and clothes -- even houses.

Image by jetalone. Some Rights Reserved.
Young people buy new books, but after reading they usually sell them to one of the shops of the Bookoff Corp., a major nationwide used-bookstore chain or other secondhand bookshops. They most often purchase a book based on the premise that they will sell it after reading. In that sense, Bookoff and other secondhand bookstores are the modern version of the "book-lending shops" that were very popular in the old days in Japan. As for music, the music industry is going through a tough time, since much fewer people now actually buy CDs. More and more people are downloading music from music websites or borrowing CDs from rental shops like Tsutaya, a major Japanese rental shop chain.

The second major trend is "de-materialization" of happiness. Conventionally, buying and owning material goods was considered to be the best way to be happy. But now an increasing number of people define happiness as coming from person-to-person relationships, involvement with nature, and so forth. More and more Japanese say they are interested in agriculture, enjoy candle-night events, and participate in "Neighbors' Day," an annual event that started in Europe to enhance relationships among neighbors.

"Just a Little Effort" -- A New Approach to Environmentalism Spreads Across Japan
http://www.japanfs.org/en/mailmagazine/newsletter/pages/027799.html
European Neighbours' Day
http://www.european-neighbours-day.com/

The third major trend is the "de-monetization" of lifestyles. In Japan, it was common that people planned their life based on the amount of money earned by devoting much of their time to their companies. But now, an increasing number of people choose a new lifestyle, like being a "half-farmer, half-X," for example. The concept is that people pursue farming to grow food for their own family, while spending the rest of their time on what they want to do. I actually know a "half-farmer, half-writer" and a "half-farmer, half-NGO member." The basic idea of this lifestyle is that it may not be necessary to consider money as being the basis of everything.

"Half-Farmer and Half-X" to Create Rich Relationship between Community and People
http://www.japanfs.org/en/pages/028711.html
Half Farmer, Half Something Else: "New" Lifestyles for an Eco-Friendly 21st Century
http://www.japanfs.org/en/mailmagazine/newsletter/pages/028996.html

'Change' Becomes 'Evolution'

A continued growth of these three trends could turn the tables on companies that persist in an over-reliance on business models of seeking profit simply by selling ever more products. This is because an increasing number of people feel less of a need to buy material goods and actually refrain from buying them.

I expect this trend will gather momentum. If that is the case, how should companies respond? It would be difficult for them to pursue a conventional management style on the premise of ever-increasing sales, with the expectation that consumers will continue buying their products.

Companies can exist only when they are needed by society, and the needs of society change with the passage of time. Every company ought to have been founded for the purpose of providing something to society in response to public demand at the time. However, if the public demand has since changed, it is crucial for companies to find a way to adjust to the new demand.

When the steam locomotive and various types of machinery appeared during the Industrial Revolution, many workers, called Luddites, campaigned to destroy them for fear that the appearance of such inventions would force them out of work.

It seems that in Japan and around the world there are many "modern versions of Luddites" who persist in following the conventional business model without realizing that public demand has changed, and they try to prevent society from heading in new directions. It is often said that now is the time of conflict between the environment and the economy, but the truth may be that now is the time of conflict between the "new economy," which responds to the demands of a new era and society, and the "old economy" that stands in the way of the new economy.

In light of this, I personally have high expectations and am paying attention to the three trends of "de-ownership," "de-monetization," and "de-materialism," which are quietly progressing at the grassroots level deep in people's minds and changing their sense of values, although articles about such trends rarely hit the headlines in economic newspapers. Japan for Sustainability will continue to report to the world on these kinds of changes and trends evolving in Japan