The Resource Revolution

Teak Plantation
One year old Acacia and Teak, “pioneer trees” begin the
process of transforming cattle rangeland back into forest.

Editor’s Note: When we founded EcoWorld back in 1995, one of the editorial missions of our online magazine was to support the goal to “double the timber mass of the planet within a 50 year period ending 2045.” Since then we’ve learned a lot – we’ve learned that global forest mass, overall, is not diminishing any more.

We’ve observed several encouraging trends – in 2007 for the first time in history, over 50% of the world’s population has moved into cities. It is now clear that the world’s human population will probably max at around 8.5 billion people, and that urbanization is already removing people, voluntarily, from rural and forest areas faster than population increase is adding them to those places.

At the same time we’ve witnessed the emergence of new trends – the rapid industrialization of China and India and other nations, putting a greater strain than ever on some of the finite resources in the world such as tropical forests which are prized for their hardwoods. We’ve also seen the popularity of biofuels translate into devastating new pressure on tropical rainforests, as they give way to plantations of oil palms and sugar cane, to harvest biodiesel and bioethanol. That China and India are industrializing is a good thing. That we have discovered a new source of energy, biofuel, is also a good thing. But it will make our hope to protect and restore forests all the more difficult.

Also since 1995 the concerns about climate change have become nearly all-consuming to the environmental movement. In some respects this is dangerous – climate change worries have taken all of the spotlight, and even led to more rainforest destruction, since the conventional wisdom has it that biofuel is better than petroleum, no matter if it is grown on land that used to be rainforest.

A few years ago we learned about Finca Leola, a company in Costa Rica that has quietly begun purchasing cattle ranches to turn them into tree plantations. But not just any tree plantations – Finca Leola’s operations are designed to systematically bring original forest back. First they plant “pioneer trees” such as Teak, fast growing with high value as timber. Then as these trees are progressively thinned, they are replaced with original native trees, which themselves are harvested sustainably. By underharvesting and increasing the timber mass, Finca Leola is able to increase the size of their timber harvest each year, at the same time as they sustainably and profitably harvest timber, and use the proceeds to purchase new land to convert.

Operations like Finca Leola are encouraging because they work in the real world. They create good jobs for local citizens, they deliver high yields of high value timber to burgeoning world markets for these products, and they do it while restoring forest, instead of diminishing it. Here is another installment in what has become an ongoing and inspiring saga. – Ed “Redwood” Ring

The Resource Revolution, or the End of the World As We Know It
by Fred Morgan, January 2008
Fred & Amy Morgan
Fred & Amy Morgan – pioneers of a business
model that profitably restores forests.

A new revolution has begun. As with all changes of great magnitude, the status quo is resisting for as long as it can, but inevitably, the Resource Revolution will push aside the old way of life and bring in the new.

When the world stopped having to rely on manual power and animal power, the result was the Industrial Revolution. Until that time, if you wanted a horseshoe, you would ask a blacksmith to make one for you and he would custom make it to fit your horse. When industry could make thousands of horseshoes per day, the price dropped and often the quality increased, helping create a market for the thousands of horseshoes. Much of the affluence of the modern world is due to the efficiency of industry.

Each revolution sows the seeds for the next. For example, without the Industrial Revolution, the Microchip Revolution would have been impossible, because manufacturing at the micro level cannot be done by hand. And without cheap computers and the microchip, the Information Revolution or Information Superhighway would never have happened, with its profound impact on the world. Now a smaller company can compete effectively against large companies because of the efficiencies brought about by computers and the Internet.

There are people left behind in the Information Revolution, as in any revolution. There are jobs that have gone away, just as blacksmithing became nearly an extinct occupation as a result of the industrial revolution. No longer does someone dictate to a secretary who takes shorthand. Draftsmen who did not learn to use CAD systems lost their jobs. In the publishing industry, in the early days, computers helped tremendously by replacing old typesetting processes. But now, because of the Internet, most old-style publishing companies are feeling the pressure. No longer do you need a publisher to get your ideas out, just a website. I can be sitting in Costa Rica typing this while those who will read it can be anywhere. The amount of time invested for me to write and disseminate this is very little compared to the time and cost of publishing it.

The Information Revolution has permitted us to have a global perspective like we’ve never experienced before, helping bring us into the Resource Revolution, wherein for the first time we are starting to view the earth as a closed system.

Now that we can see the world as a closed system, we have to learn how to treat it like one. With few exceptions, man has removed the easily available resources, and when those were depleted, we moved on to the next place. Land was left fallow to recover from the wastes. Our species always migrates toward resources. In the USA there is a grave problem with illegal immigration. In truth, there may not be a political solution. This is because we are dealing with the fact that it is always easier to migrate toward resources than to create them. It is the perception in many countries that the USA has an abundance of resources still remaining and all that is necessary to have a better life is to get there. You might as well try to hold back the waves with your hands as to try to stop a migration to easily available resources.

Much of the tropics have been deforested in recent years due to slash-and-burn farming (). A farmer stakes out land and removes the forest. After a few years, the soils and fertility have been used up and so he moves to the next section of land. It angers the average farmer when I try to explain why this is a problem, because I’m attacking what they perceive as their only means of earning a living. Besides, if it was good enough for dear old dad, it’s good enough for them.

I can remember a time when it was considered okay to dump your trash in the nearest stream. The ability for the streams and rivers to accept it seemed inexhaustible until rivers started to catch fire and fish started dying.

In many ways, we as a species have functioned like children. Leave children with no training alone in a home, and they will eat whatever is in the refrigerator and the pantry and, if you are lucky, fill up the trash baskets. We have been doing the same; we have been consuming all the resources of the planet without being worried that someday we would run out. The magic refrigerator and pantry were filled with all manner of good things and we have eaten like there was no tomorrow. We didn’t think about the need to deal with the trash pile growing up around our ears. Mother Earth has been like the adult who comes home to replenish the larder and tell the kids to take out the trash, but we are rapidly running out of easily available resources, untapped frontiers, and places to dump the garbage.

Cradle to Cradle Book Cover
Cradle to Cradle
Remaking the Way
We Make Things

Those who do not learn how to treat the world as a closed system will be left behind in the Resource Revolution.

Much of the profitability of old-style companies is based on resources whose only cost is that of extraction. This has left other costs not calculated. For example, to be healthy, a company needs to calculate the cost of resource replacement and the cost of cleanup of any unwanted byproducts of using the resource or creating products with the resource.

As resources become more and more dear, the nature of business is changing. Since I am in the business of wood and reforestation and it is a subject I know well, I’ll use it as my example.

Before the Industrial Revolution, if you wanted to use wood, you went out and cut the tree down yourself. Since you literally created your home from the sweat of your brow with the power of your body, you built small unless you were very rich. Log cabins required very little wood processing. The only planks that were necessary were for the floor, if you didn’t just have a dirt floor. The roof was made by splitting wood for shakes.

It was a challenge to make much of a dent in the forest. The population was relatively small, and the time involved to take a tree and make wood from it was long. In truth, most of the time the forest recuperated faster than trees could be removed. Most of the clearing for farms was done with fire, not with ax.

When the Industrial Revolution came about, not only did saws and axes become of better quality and cheaper, but motorized means of cutting trees came into play. Sawmills were invented that could process thousands of board feet of wood a day. If you wished to build a home, you could merely go and buy the processed wood. About this time the USA moved away from post and beam construction that produced homes and barns that lasted for hundreds of years to homes built using framing construction that do not last nearly as long. But it was faster to build with precut framing wood than to build post and beam, and if the homes didn’t last as long, at least they were easier to repair or replace, since there was always more wood available down at the sawmill or lumber store.

Now we have machinery such that a single crew can clearcut a square mile of forest per day. In the past, for a person to drop ten large trees in a day would be a good day’s work; now tens of thousands is more normal. This is considered progress.

But now we are seeing something: All of this great productivity has destroyed streams, rivers, and the land itself in runoff, degradation of soil, and erosion. Where before was an ecosystem that could easily regenerate itself, now it gets harder and harder to regrow the forest. We’ve tried replacing trees in monocrop plantations, but this has created very serious disease and pest problems in many areas.

Not only that, as the supply dwindles, there is not enough wood to keep the very expensive sawmills and harvest equipment busy. The nature of a large capital investment in equipment is that it only makes sense if it is used at nearly full capacity. It is hard to pay the bills on a million dollar piece of equipment if it is sitting idle because there are no trees to cut. Yet as sawmills are closing, for example, in many parts of the USA, there are people elsewhere who are doing very well in wood today.

Finca Leola Woodshop
Finca Leola’s woodshop – because they own their own
sawmill, they can harvest nearly all of the tree

They are revolutionary thinkers who have taken the long view, treating the world as a closed system and buying land with trees on it that had very little value because others had already taken all the good trees.

These people have gone out and selectively harvested just the bad trees. Instead of only taking the best, they took the worst. Even though it is not as profitable to process poor quality wood, when you do it with smaller equipment and use it to make flooring, moldings, and such, you can make more than enough to survive while you allow the forest to recover. Instead of year by year the forest being worse off, it actually improves. This means the owner, instead of being poorer every year, actually is getting wealthier. It is like having a magic pantry that every time you open it, the amount of food as well as the quality increases.

The secret to this business model is to always have a view to the future, because if you destroy the resource, you will destroy your business and your livelihood. You also have to be careful of your waste, because no more can we assume that there is yet another frontier to exploit just over the hill. If you poison your environment, it will be you that you poison, not your neighbors. The good part is that if you have your own source of resources, your business is not held hostage by availability of the resource nor by price fluctuations of that resource.

There is a book worth reading called Collapse by Jared Diamond. Diamond shows how civilizations have collapsed due to various factors, often including abuse of their environment. The author might agree with me that in the coming years, no longer can we view a society as civilized that plunders resources. After all, do we think of societies that are based on robbing and plundering as being civilizations? No, we think of them as barbaric forces against civilization. Now has come a time that if we are not to suffer a collapse of the civilization we have, we must understand that exploitation of anything is not civilization because such action is not sustainable. In the future, we may view companies who exploit resources as no different from a thief who supports himself by stealing. It is not producing to merely take from a common pool of resources. The resources of the world belong to all of us, and those who take and do not replenish are enriching themselves by making all of us poorer. This is not being civilized.

You will notice that those who are against the Kyoto agreement often state that adopting it would wreck our economy. Think about what they are saying: If we have to pay for the damage we cause, our businesses will not be profitable. In reality, since we know that there is no “magic pantry” and no “magic trash can,” businesses like that are showing themselves profitable only because they are not calculating the full costs and are leaving the rest of them for all of us to pay. It’s like transferring your expenses to another department to appear profitable. This is considered fraud in business, and we should consider it fraud in civilization as well.

Natural Capitalism Book Cover
Natural Capitalism:
Creating the Next
Industrial Revolution

When we think of the businesses that have taken resources without putting back and have left the trash for the public to deal with, we need to understand that we are really the culprits.

Any time we buy their products, we are benefiting from their short-term gains, and when we place our money in their companies via investments, we are granting them our agreement with their practices. Unfortunately, it will not be them who pay the piper at the end, but all of us.

We are starting to see new companies that not only do not rape the planet for resources, but manage to actually turn a profit while turning back the clock on resource consumption. We at Finca Leola believe we have managed to create such a company. The reason, I think, is simple: We were never driven by a need for short-term profit and so were able to take the long view, the revolutionary view.

In much of Latin America, the way people outside of the cities earn a living is often by raising cattle. They have chopped down or burned the rainforest, planted grass, and put cattle on the land. Much of the meat is purchased in order to supply cheap beef for the northern markets. There is a problem with this model. First of all, if you have to buy the land, you cannot survive this way – it is better to put the money in the bank and receive the interest. So, raising cattle in Latin America is based on having a free resource: land. Secondly, the longer you have cattle on the land, the poorer becomes the land. I constantly hear stories of how rich the land here in Costa Rica was in the past. When the forest was first removed, all that was needed to raise corn or beans was to cast the seeds on the ground and you would have a great harvest! But after a few years of doing this, you have to start adding fertilizer or you will not have a harvest at all.

Finca Leola buys cattle farms and plants trees on them. You can own trees on Finca Leola plantations, and your money will bring back rainforest, improving the world and your bottom line. We raise trees that are pioneer species in order to quickly protect the land and produce a return for the tree owners. After a while, we plant the permanent rainforest trees among the pioneer trees, using them like a nursery. As the forest returns, its products will sustain its protection as well as provide work for the locals so that they value the forest. The forest will be considered a partner, not a free resource to be robbed.

This creates many very good and permanent jobs, because the permanent forest is productive, whereas raising cattle in the tropics is a cycle of poverty for all except a few large landowners.

Every year our lands are more productive and the future looks brighter. The streams and rivers on our land are cleaner and flow with more water. The wildlife is much more abundant, and amazingly, much more comfortable around people. All our workers have health insurance and retirement, uncommon among rural Costa Rican laborers. They have better jobs that pay better than average in the area.

We now have a woodshop that is producing products from the plantations. Since we own the woodshop and sawmill, we use nearly all the tree, not just the easiest part to process. This is because we take the closed-system view that no resource is to be wasted. It takes a lot of effort to grow a tree, and we don’t want to throw away any of it. True, it would be more profitable in the short term if we took the best of the tree and left the rest as waste, but in the long run, it is better to use as much as we can. And since we don’t have many layers (loggers, sawmills, wood brokers, lumber yards, etc.) we can use wood that normally would not be considered profitable.

Sheep: natural weed control & fertilizing.

We also use sheep, small cattle, and horses to keep down the grass between the trees. This produces revenue while reducing our cost to care for the trees. When we have to create a bridge for access, at times we create a pond for fish as well. This produces food for our workers and for ourselves and perhaps some for market.

We don’t run like an assembly line but as a complete system. We try to use all resources efficiently while producing more if at all possible.

No more can industry use up the resources in one location and move on to where there are more. We have finally realized that resources are not inexhaustible. People who have decided to invest in diminishing resources such as trees instead of investing in old-fashioned businesses not only understand that many of the old-style businesses are facing very serious challenges in the future, but that companies such as ours are allowing investors to benefit in the new way of business. They are finding that the returns from the efficient way we grow trees exceed what they would have received from an old-style plantation.

We are entering into a new kind of world where holistic companies are the profitable ones. Green investing is a movement that recognizes this as a market force. Instead of investing in businesses that rape and pillage and are therefore doomed to only short-term success, the smart investor places his money in businesses that work in harmony with the earth and help replenish life.

Success in business and in investing is usually due to recognizing emerging trends. Buy low; sell high, because no one thinks what you are investing in is worth much, but when the trend catches on, your initial investment is worth many times more. Sometimes the trend is so large, it becomes a revolution. These are times when the fundamentals of business changes radically, and during such times there are always winners and losers, the losers being those who either do not or will not accept the change.

Don’t be left behind in this revolution – invest in companies that treat the earth as a closed system. If we are going to advance civilization, our money needs to do more than just earn more money; it needs to buy back the health of our planet.

About the Author: Fred Morgan, entrepreneur and former computer systems developer, turned to planting valuable tropical hardwoods in 2001 as a means to secure his own retirement. Acquaintances asked Fred and his wife, Amy, to grow trees for them alongside their own. By 2007, Finca Leola was growing trees for more than 100 clients from all over the world. Their model is to use plantation trees as a first step to permanent reforestation, with all of the Finca Leola tree farms placed under ecological easements so that the land use can never be changed from forest use.

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