Sunday, May 10, 2009

Companies I Love: Mr. Ellie Pooh

This is the second installment of the Companies I Love Series. "Companies I Love" posts describe why innovative companies and business practices make us all better off, and therefore why they deserve our love. "Companies I Love" is featured every Sunday on this blog.

Everyone knows elephants are an endangered species, but not many people clearly understand why. For example, most people think that elephants are endangered because they are valuable: an elephant's ivory tusks sell for upwards of $200 per kilogram, and a pair of tusks can weigh more than 200 kilograms. That's big money. No wonder poaching appears to be such a big problem.

On the other hand, the fact that an animal is highly valued does not mean that it is doomed to extinction. Take the example of Wagyu cattle. Wagyu cattle produce Kobe beef, a delicacy enjoyed by heads of state and people with too much money. In a restaurant, Kobe beef costs about $100 per pound (that's $220 per kilogram). Yet, there are no groups devoted to protecting the Wagyu cattle from extinction. Despite a lack of representation, Wagyu cattle are treated notoriously well. These cows are so treasured that they are given massages with oil, and regular doses of beer.

What's the difference between an elephant and a Wagyu cow? Ownership. No one owns an African elephant, but Wagyu cattle are owned and cherished. Why does this matter? If someone tries to poach an Wagyu cow, they surely meet stiff resistance from the owner. With elephants, there's no individual who has a clearly defined reason to oppose poaching because no one owns the elephant. More seriously, elephants are a nuisance to locals, destroying crops and livelihoods. Locals may rationally try to eradicate pesky elephants on their own. So, they're happy to see the elephant poachers arrive in their village.

Thus, it is clear that the real problem with elephants is not their incredible value. It isn't even that elephants are hunted by greedy poachers who want them for their tusks. That's more of a symptom. The root problem is that no one has an incentive to be a good guardian for elephants.

The elephant incentive problem is difficult to address, but there have been some innovative attempts to correct these perverse incentives. One interesting solution is to allow locals to sell big game hunting rights for nearby elephants. On its face, this sounds horrible. Why grant rights to kill more of an endangered species? It turns out the effects on locals' incentives can more than make up for the animals lost. Because big game hunting is big business, the revenues brought by hunting can completely offset locals' distaste for having elephants around. In fact, locals may encourage elephant habitat if they are compensated for it by big game hunters. With better habitat and good stewards, elephants can prosper.

This week's Company I Love has an alternative approach for getting locals' elephant incentives right. Plus, their solution does not overtly condone elephant hunting. For those of you who were horrified that hunting elephants can save elephants, this company is for you!

The company is called Mr. Ellie Pooh. Mr. Ellie Pooh sells a variety of eco-friendly products, including notepads, photo frames, journals, paper boxes, art paper, and similar-minded products. What makes these paper products eco-friendly? Most of the paper products sold by Mr. Ellie Pooh use a significant amount of (processed) elephant dung, rather than trees. Being vegetarians, an elephant's digestive tract is an efficient machine for turning shrubery into raw cellulose, which (after scrubbing) makes great paper.

On one hand, Ellie Pooh saves trees (more if more people start buying from Mr. Ellie Pooh), but on the other hand, Ellie Pooh saves elephants by "converting a liability into an asset in conflict areas." Capitalizing on the value in elephant dung can actually give locals appropriate incentives to co-exist with pesky elephants. Mr. Ellie Pooh turns the counter-intuitive slogan "to save elephants, hunt elephants" into one that is even more counter-intuitive: "to save elephants, follow them around with a shovel!"

Acknowledgements

1. My knowledge on the "save elephants by hunting them" draws mostly from my time at PERC, a well-respected environmental and economic think tank. Check them out. They do interesting work.

2. I learned of Mr. Ellie Pooh from reading my friend's blog on this very subject. She has a really cool blog called Making This Home, describing her experience remodeling her home in Germany. Check it out. She has some really cool stories and interesting ideas.

Which companies do you love? If you have ideas for Companies I Love, please let me know. It could never hurt to have more suggestions!

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