Tom Szaky, founder of the high profile eco-venture, TerraCycle, may have dropped out of Princeton University before he finished his sophomore year, but Princeton still plays a major role in his unusual corporate success story, chronicled in his new book, “Revolution in a Bottle.”
Szaky, who will appear at Labyrinth Books on Nassau Street on Thursday, May 14, at 5:30 p.m. to promote his new book, had the first of several “a-ha!” moments as a college freshman. On Thanksgiving break he visited old high school friends in Montreal, where one of his buddies was growing marijuana plants inside his house. Szaky may have been the only guy in the room more fascinated by the fertilizer than by the leafy vegetation it produced. The marijuana grower was producing the fertilizer in a worm box, or home composting system. The kid threw leftover food and other scraps, including shredded newspaper, into the box and hundreds of worms consumed it, excreting a poop that worked wonders on the pot.
“That moment,” writes Szaky, “the proverbial lightbulb went off in my head, and it hasn’t gone out since. We could take people’s garbage (a service for which we could get paid), feed it to tons of worms, get beautiful work poop, and then sell it to the masses! The idea for TerraCycle was born.”
Szaky returned to Princeton and began to create an entry in the university’s Entrepreneurship Club’s Business Plan Competition, the first of several plans that helped Szaky and his young associates hone their approach to business.
Szaky’s book is full of references to central New Jersey people and places, including Rutgers solid waste specialist Priscilla Hays, the Eco-Complex in Bordentown, and his first office at 20 Nassau Street, and his move to Trenton;s TK street, where U.S. 1 caught up with him for a cover story (November 10, 2004) around the same time he was also featured in Inc. Magazine.
While TerraCycle’s story is a primer for any green-oriented business, it’s also a window into the dynamic mind of a nimble entrepreneur. Among Szaky’s other a-ha! moments, as recounted in “Revolution in a Bottle:”
Cash From Trash: “With the concept of the waste stream being redefined as a resource stream, we moved a step beyond being environmentally friendly capitalists. We were now able to make a profit by taking things out of that waste stream, with the by-product of improving the environment. . . Without question, re-using a bottle is way cheaper and more eco-friendly than making one (no matter what you make it from). In the end, we had fused profit making with environmental consciousness.”
Garbage as Commodity. Szaky’s second “aha!” moment was “when we saw that the soda bottles people were discarding, or perhaps recycling, were also a perfectly good raw material. We had always been Dumpster diving for our office furniture, but that was the first time we realized that greatly expanding our Dumpster diving could fuel our production line. We had discovered that contemporary America is a vast Dumpster of industrial products that manufacturers are constantly throwing away or recycling — even when they’re in perfect condition. The opened the floodgates for TerraCycle, and discarded spray tops, packing material, and so forth.
“In looking at waste as an entirely modern, man-made idea, I stopped viewing garbage as garbage and instead slowly started to see it as a commodity. A commodity with some very unique characteristics: It has negative or very low value (typically people pay to dispose of it), it is always a by-product of some other function, it is all around us, it is created in almost every part of our lives, and there is a tremendous amount of it.
“Part of the reason I started looking at the world of waste differently is that we were beginning to hit a wall with TerraCycle Plant FOod. Even with the all the new lines we were offering, the simple fact is that the plant food market, especially the liquid plant food market, is small. If we were gong to become a billion-dollar company, we would need to apply our model to products beyond liquid plant food.”
Branded Waste. “Over time I started to discover another element of waste that could lead to another way to classify it. This has to do with how much people care about the waste that is being produced. For example, every business produces office waste. Because every business produces this form of waste, they feel relatively little ownership or responsibility. Then there is industry-specific waste, such as plastic foam packaging for electronics. Here people care only if everyone in the industry starts to care.
“Then there are all those candy-bar wrappers and plastic cartons and coffee cups. They have a unique characteristic: They all have a company’s brand on them. Think about a product — Stonyfield Farm Yogurt. Yogurt containers are made of a certain kind of plastic that is not recyclable in today’s national recycling infrastructure. So a container of Stonyfield Farm is bought, eaten, and thrown out. But up until that container is thrown out, it serves as an advertisement for Stonyfield Farm. If it winds up as a piece of litter crushed on the sidewalk, it will serve as a negative advertisement, undoing the millions of dollars of marketing that was invested behind that brand. Stonyfield Farm, like many companies, would pay to avoid negative advertising.”
From a Vicious to Virtuous Cycle. “The idea that inspired me in 2001 in a basement in Montreal has fostered some of the fastest-growing and ground breaking private companies in America. I’m excited by TerraCycle’s momentum and potential, but for me the goal isn’t growth for growth’s sake but rather growth to reduce — or even eliminate — the very substance on which our business is based: waste.
“Waste is simply any commodity that we are wiling to pay to get rid of. It is he only commodity in the world that has true negative value. Waste exists partly because of economics, because in many cases it is cheaper to throw something out than to reuse it or properly recycle it, and companies have yet to be required to maintain responsibility for the entire life cycle of their products. Many major companies have now voluntarily contracted for sponsored waste programs with TerraCycle, taking responsibility for their packaging waste in cooperation with their consumers who collect it.
“So what happens if TerraCycle grows and creates more and more demand for waste? What happens if other companies do the same? As with any commodity, when demand increases, the price for it goes up. So if waste starts at a negative $50 per ton (that is, that’s what people will pay to get rid of it), increased market demand for the waste would drive the price up to negative $40, then negative $30. With more and more demand, the price would continue to increase — that is, be less negative. Eventually, there would come that magical moment when the price would go above $0 and become positive. At that moment, the commodity has stopped being waste.”
TerraCycle, 121 New York Avenue, Trenton 08638. 609-393-4252; fax, 609-393-4259. Tom Szaky, CEO. www.terracycle.net.