Digging Deep — Beyond Published Reports — To Truly Understand the Data-Supported Investment Opportunity
Is there truly “gold in them thar hills?” as Mark Twain famously coined incorrectly?
That’s the question on the minds of a growing number of investors and entrepreneurs, as a seemingly burgeoning sector known as “e-waste” was recently reported as growing “five times faster” than the world’s recyclers’ capacity to process and remove it from potential landfills.
According to a March 2024 report published by Unitar, The United Nations Institute for Training and Research, “The world’s generation of electronic waste is rising five times faster than documented e-waste recycling, the UN’s fourth Global E-waste Monitor (GEM) reveals today.” Following a worldwide study and analysis, the report goes on to conclude that “…less than one quarter (22.3%) of the year’s e-waste mass was documented as having been properly collected and recycled in 2022, leaving US $62 billion worth of recoverable natural resources unaccounted for.”
On paper — and well-respected paper such that a published U.N. report is — that sure seems to suggest there is, in fact, a substantial amount of proverbial gold in them thar hills of unprocessed e-waste. However, as with any project The Martec Group takes on, there is much more to know…and the deeper you dig, the more precious gems of intelligence are mined, perhaps painting a much different picture.
How Much of an Opportunity is “Fool’s Gold?”
First, some background, for those unfamiliar: The report cited above defines e-waste like this:
E-waste, any discarded product with a plug or battery, is a health and environmental hazard, containing toxic additives or hazardous substances such as mercury, which can damage the human brain and coordination system.
But among that waste lies a significant amount of untapped resources as well: precious metals and natural minerals that represent a financial resource as well: gold, silver, palladium, platinum, iridium, aluminum, copper and more. Taken together, and when calculated using raw numbers that translate potential value to dollars, the report indeed paints a very rosy picture:
The value of viable recovery was assessed per type of metal for aluminum, copper, lead, tin, nickel, zinc, gold, platinum, silver, bismuth, cobalt , iron, germanium, indium, iridium, osmium, palladium, rhodium, ruthenium and antimony by multiplying the quantities under viable recovery by the metal prices. These metal prices were sourced from either the World Bank commodity price database 297 or multiple online sources.
In real dollars, this is calculated to be a $28 billion-dollar opportunity in the United States alone. Naturally, bullish investors and opportunistic entrepreneurs are taking a close look at what appears to be an opportunity with huge untapped upside and relatively few competitors at present. But are they looking closely enough?
Put another way, how many industry observers are taking the triangulated approach that my colleagues have written about in the past: yes, taking into account published reports and publicly available information, but also engaging in both top-down analysis and bottom-up analysis of the e-waste market. This is where the true “gold” lies.
What Might a Closer Look Reveal?: Leaving No Stone Unturned…
Forgive me for returning to an analogy I’ve used before, but the comparison remains apt. If the Gold Rush produced this inaccurate but oft-referenced trope, “There’s gold in them thar hills,” what these would-be investors need to know in today’s modern equivalent is:
- Is there “gold” — financial upside and market share to pursue in the domestic e-waste space?
- Which “hills” — where do the opportunities exist from vertical and value chain standpoints along the complex supply and production chain in an increasingly diversifying market for e-waste processing: suppliers, processing capacity, requisite infrastructure, among other interconnected opportunities?
- Where is “there” — where does the greatest opportunity present itself from geographic and economic standpoints, and where are the proverbial land mines and blind spots that should be avoided?
Additionally: Who else is heading for them thar hills? What does the competitive landscape reveal, and how is it evolving in real time, so there are no surprises once investments are committed to?
When thorough and complete research is conducted, what’s revealed is that the opportunity is more complicated than what the top-line U.N. numbers might suggest. Raw numbers, such as they are, suggest only a potential opportunity value — not an addressable market value, nor (more importantly) a realistic attainable value.
For example, the U.N report, in its analysis, applied the E.U. system for the classification of e-waste, not the one used in the U.S. The American system for evaluating how much e-waste is accessible and recyclable among overall waste is far more robust and entirely more scrutinizing. By simply translating the E.U. practicology to the United States methodology, one would dramatically reduce what’s considered recyclable e-waste, thereby significantly downsizing the financial opportunity calculus, to cite just one potential inconsistency.
Methodologies and Findings
As with most things data-related, context matters. And the best way to find and apply that context is to dig deeply into the subtext. What is the actual truth, the whole truth, and nothing but the truth?
In this and other examples, we would likely want to (and often have) apply sophisticated and exhaustive research methodologies to uncover additional insights that might not be obvious when looking at the high-level data published in a given study or report, such as:
Competitive Intelligence: It is critical to conduct secondary research on said published data, as well as to investigate the regulatory requirements and other external factors that might impact competitors already pursuing a given opportunity. Knowing various states’ — along with federal — statutes that govern how e-waste is collected and/or processed would provide valuable input into how much of the overall opportunity is actually addressable. Then, placing this into the context of who else is participating currently, who else is likely to enter, and who has exited the space becomes much more relevant.
For example, we’ve come to learn that the e-waste space has a survival rate of industry participants that might suggest the market is much more competitive (or even limited) than prior entrants had anticipated, and that would certainly be information to consider when assessing the market opportunity. If others have exited the opportunity after only five years, say, what were the specific headwinds that led to their exit? Do those realities still exist? Do we have the means to overcome them ourselves?
Targeted Qualitative Research: As referenced earlier, the answers to complex questions often lie in the insights and experiences of industry analysts, veterans, consultants, specialists, and so on. Despite the fact that these individuals can often be difficult to reach, it is important to gain their unique perspectives and hands-on intelligence. This requires digging deep, doing extensive relationship-building, and understanding how to access seemingly impenetrable firewalls. But we find that this is truly where the “gold” is, if you want the most precious and valuable insights extractable.
Researching the Entire Value Chain: The calculus is much more than a matter of supply, demand, and competitive landscape, when analyzing the size of a market or assessing a particular opportunity. One needs to explore the enter value chain.
In the case of the e-waste recycling and processing sector, one needs to study matters such as channel throughput (how much can the existing supply chain of smelters actually process in a given timeframe and geography?) It’s not safe to assume that, if there is 80% of supply capacity being generated to meet the current market demand, then there is a 20% available capacity. The reality may very well be that the 80% supply throughput relative to market demand has topped out at whatever capacity is currently available from the smelter side of the value-chain equation.
Again, context matters; anyone considering entering a space such as this (and others) needs to clearly understand the precise demand, the true channel throughput, and the actual supply/competitive realities — in the recent past, what is currently existing, and what is most likely to be true in the future.
Don’t Shoot the Messengers; Embrace Them
The impulse to pursue seemingly untapped potential and apparently abundant upside is understandable. But it should also be conceded that getting it wrong can be very expensive — even more costly than missing or being late to the party. Context matters…situationality matters.
Sure, there may be “gold in them thar hills.” But there may also be landmines. The only way to find out is to dig deeply enough that the true picture of reality reveals itself.
It might be difficult. It might slow things down. Trust the ones who have read the cautionary tales in the past and have proven processes and experience to help you better read the tea leaves of the next opportunity that presents itself.
