Enterra Insights

A Thought Probe Series on Tomorrow's Population, Big Data, and Personalized Predictive Analytics: Part 3, Where Things Stand

"What makes a city?" That is a question asked on IBM's Smarter City website. The company believes that a city is "an interconnected system of systems" that rests on three pillars: infrastructure, operations, and people. The site goes on to state that a city is "a dynamic work in progress, with progress as its watchword. A tripod that relies on strong support for and among each of its pillars, to become a smarter city for all." That definition may be a bit too cheery for some because they know that for years many inner cities have not progressed but languished or deteriorated. That entropic trend must change, because the world is becoming more urbanized every day. If tomorrow's cities are not going to become vast areas of poverty and decay, we have to be smarter about how they are planned, managed, and maintained. In a special issue about smart cities, the editors of Scientific American wrote:

"Many otherwise lucid thinkers, from Tho­mas Jefferson to Frank Lloyd Wright to President Gerald Ford, tended to think of cities as centers of poverty, crime, pollution, con­gestion and poor health. In recent years, though, the thinking has shifted along with the demographics. Many experts have come to realize that people are better off when they live in a city. This is not to dismiss the problems of urban life; cities, particularly fast-growing ones in the poorer parts of Asia and Africa, can be places of great human suffering. But even a city slum has benefits that you won't find on the farm or in the village. The move from the country leads, for instance, to dramatic changes for many women. As Kavita N. Ramdas of the Global Fund for Women notes in Stewart Brand's Whole Earth Discipline (Penguin, 2010), 'In the village, all there is for a woman is to obey her husband and relatives, pound millet, and sing. If she moves to town, she can get a job, start a business, and get education for her children.' Indeed, the city has come to look less like a source of problems than as an opportunity to fix them. Investments in sanitation and water have turned many cities in the developed world from places of disease and pestilence into bastions of health. City folk are at lower risk of death from motor vehicle accidents and suicide by firearms (although they are overstressed). From the stand­point of the metropolis, climate change also seems less intractable. Because city residents rely less on cars and live in more compact dwellings than suburbanites, they tend to leave smaller carbon footprints. The challenge is to extend the efficiency of the urban center to the wider conurbation, embracing the city center, suburbs and satellite towns. Although climate is bigger than any one fix, how we build our cities, and how efficiently we live in them, is going to factor large in our response." ["Street-Savvy," 17 April 2011]

In Part 1 of this series, I discussed suggestions from experts on how to begin smart city initiatives. One of those experts, Dr. Boyd Cohen, created a model he calls the Smarter Cities Wheel. IBM has also developed a model that is reminiscent of Dr. Cohen's Wheel. The IBM model shows how it believes the three pillars of a city discussed above are interconnected.

Like most organizations involved in smart city initiatives, IBM believes that data collection and analysis is the undergirding that makes such initiatives useful. IBM's site states:

"As demands grow and budgets tighten, solutions also have to be smarter, and address the city as a whole. By collecting and analyzing the extensive data generated every second of every day, tools such as the IBM Intelligent Operations Center coordinate and share data in a single view creating the big picture for the decision makers and responders who support the smarter city."

In Part 2 of this series, I noted that participants in a study published by the Institute for the Future expressed some concern that companies like IBM are trying to establish data monopolies that could be used to hold cities hostage in the decades ahead. IBM obviously sees itself as providing a much-needed service that cities can't provide for themselves. The company offers a nifty interactive Smarter Cities experience that can be explored at your leisure. Of course, IBM isn't the only global company that sees business opportunities in helping cities operate more efficiently. Oracle has its own interactive website that highlights its solutions for smart cities. The launch page for that interactive site also shows how Oracle sees connectivity within an urban setting (with business and citizens being the focal point).

Although the site explains that "Oracle offers a complete, integrated set of solutions to meet the complex needs of local government," some people, like Greg Lindsay, believe that companies like Oracle, IBM, and Cisco are "offering 'smart city in a box' solutions" that don't take into account the nuanced complexities that make each city unique. ["The Battle for Control of Smart Cities," Fast Company, 16 December 2012] See Part 2 of this series to learn more about Lindsay's concerns. Cisco's offering is called Smart+Connected Communities. Cisco's Shane Mitchell explains, that "the main barrier to adopting [smart city] solutions is the complexity of how cities are operated, financed, regulated, and planned." ["Smart City Frameworks: A Systematic Process for Enabling Smart+Connected Communities," Cisco Blog, 10 October 2012] Rather than offering a set of solutions, Cisco begins with "a 'Smart City Framework' designed to move the Smart City debate from merely an academic or esoteric discussion to a call for action." The framework is shown below.

Mitchell explains, "The Smart City Framework ... describes a potential process that will help key stakeholders and city/community participants 1) understand how cities operate, 2) define city objectives and stakeholder roles, and 3) understand the role of ICT within physical city assets." I agree with Mitchell that all stakeholders must be involved in smart city initiatives. As I wrote in Part 2 of this series, the only way to move forward is to embrace public/private partnerships that benefit both sectors." Terry Kirby agrees with that position. He writes, "When it comes to achieving the high-tech, sustainable, and smart cities of the future, there is one word that sums up the pathway to success: partnership." ["Getting smart cities connected," The Guardian, 2012] He continues:

"Imaginative and collaborative partnerships between local authorities, utilities, universities and the private sector – whether it is bus companies or software providers – are the defining characteristics of 'smart thinking', according to leading figures in cities around UK and Europe. All agree that so-called 'smartness' – which at its most basic level is about using new technology to improve lives – is necessary to adapt to the demands of urban growth. ... These kind of partnerships can range from multi-agency infrastructure ventures aimed at transforming the lives of millions, to simple projects improving digital access for everyday users of public services. They include new ways of using mobile phones and smartcards to pay for a wide range of goods and services, to schemes designed to recycle waste water for heating."

The editors at Scientific American conclude:

"The most hopeful impact of city life may be its effect on the mind. Humans are social animals; we draw stimulation from other minds close at hand. Plato and Socrates both lived in fifth-century b.c. Athens, a city-state. Galileo and Michelangelo lived in Renaissance Florence. Steve Jobs and Steve Wozniak grew up in a western U.S. conurbation that includes Silicon Valley. The young, agile minds at work on the next Big Thing are probably tweeting—they live, as author William Gibson points out, ... in a kind of digital meta city. Chances are, they are living in a physical city, too. Technology is reshaping city life and making it more intellectually productive, but it will not soon replace the easy interchange of ideas that comes from casual proximity, the cornerstone of city life."

While some pundits believe that smart city initiatives may drain city centers of their vitality, I agree with the editors at Scientific American that making cities more livable will actually increase the vitality of cities and make urbanization a boon rather than a bane to mankind. Gerd Leonhard, chief executive of the business thinktank The Futures Agency, agrees. He told Jemima Kiss, that "the more digitised our lives become, the more we will value real experiences. 'The landscape of the cities of the future will be a huge place to do the things that don't work in digital form – food, culture, contemplation. Digital tools drive us to want to have the actual experience much more than before.'" ["City design: A digital revolution," The Guardian, 2012] The thing I appreciate most about the smart cities movement is its optimism. There are enough Cassandras in the world warning us of impending doom. Optimists bring about progress and, as the IBM website states, progress is the watchword.

Food Security Requires Implementing Complementary Strategies

Mankind has been trying to control the weather since the dawn of time. Historically, this intervention has taken the form of sacrifices, offerings, dances, and prayers to the gods who supposedly control such matters. There have also been more scientifically-based attempts to make rain, such as cloud seeding. Needless to say, these attempts have generally fallen short of the desired goal. Yet, as Keith A. Wheeler, chairman and CEO at ZedX Inc., reports, "All farmers, no matter their size, depend on the weather to the grow crops that feed the world, while providing a livelihood for their families and communities. This makes them among the most vulnerable to the changing climate. By 2050, if farmers are not assisted to meet these changes, agriculture yields will decrease with impacts projected to be the most severe in Africa and South Asia, with productivity decreasing by 15% and 18% respectively. Therefore, strategies to adapt to the significant shifts in weather patterns are greatly needed." ["Building resilient food systems in a world of climate uncertainty," The Guardian, 21 December 2012]

In other words, if we can't change the weather then the weather needs to change us. The irony of this situation is that "agriculture today accounts for 14% of total greenhouse gas emissions, with another 17% attributed to land use change linked to deforestation." That means that farmers are in some measure contributing to the climate variability with which they must contend. So one of the first strategies recommended to help shore-up food security involves empowering "farmers with the knowledge, practices and technologies needed to adapt and reduce agriculture's contribution to global warming." Fortunately, Wheeler reports, "Amidst these colossal challenges there is hope." He explains:

"Technological innovations are at the forefront of meeting the world's growing food demands, while reducing carbon emissions. High tech methods such as Precision Agriculture, for example, calculate the exact amount of fertilizer required by the soil on your farm, preventing over application and the release of unnecessary greenhouse gases, while simultaneously improving yields. Other practices, such as integrated pest management and pest information systems, improved training for farmers at all levels and new finance and risk management tools for smallholder farmers will all go a long way to building more resilient food systems. The thread that ties all of these innovations together is greater access for farmers to research, information and extension."

The need for better food security is becoming increasingly evident. "Pressure on the world’s resources is intensifying," writes Paul Polman, CEO of Unilever. "Increased competition for these resources has been compounded by the effects of severe weather conditions." ["Now is the time for action," Financial Times, 21 November 2013] He explains:

"Since 2000, food prices have more than doubled because of soaring demand, with desertification, floods and drought adding significant volatility to the trend of food price inflation. To make matters worse, it is countries with already high rates of malnutrition that tend to be worst hit. People in Chad, Ethiopia and Angola spend up to 60 per cent of their weekly budget on food – much of it imported. The most vulnerable are hit the hardest by price rises."

Polman admits there are no silver bullet solutions to the food security challenge. But he offers three strategies that he believes should be taken immediately. "First, we should eliminate the use of unsustainable biofuels." By "unsustainable" he means biofuels derived from food crops (such as corn) or feedstock that is grown on ground that could be used to produce food crops. "Second, we need increased investment in those parts of Africa and Latin America where the last remaining serious agricultural expansion potential lies, or wherever current yields are threatened." On this point, he agrees with Wheeler. Finally, he asserts that "developing country governments need to create long-term partnerships with the private sector, donors and civil society, to stimulate investment in commercial agriculture. The Copenhagen Consensus concluded that an investment in fighting malnutrition would benefit people more than any other type of investment – with a return of $30 for every $1 invested. And the World Bank found that an investment in nutrition can translate to a 2-3 per cent increase in a nation's GDP each year, breaking the cycle of poverty that traps families and nations."

Another recommended strategy for creating better food security is reducing food waste. The Institution of Mechanical Engineers asserts "the world wastes from one-third to one-half of the four billion metric tons of food it produces each year." ["The World Wastes As Much As Half Its Food, New Study Finds," by Jeff Spross, Climate Progress, 14 January 2013] If the waste itself is not bad enough, Spross reminds us, "Because any item of food also represents an entire chain of production, wasted food also translates into wasted fresh water, wasted energy, wasted cropland, and further contributions to global warming with no discernible counter-balancing benefit." And one shouldn't forget the amount of wasted money represented by wasted food. With the global population continuing to swell, wasted food puts greater pressure on rising food prices. Although the causes of wasted food are different in the developing and developed worlds, the problem is global. The report explains:

"In less-developed countries, such as those of sub-Saharan Africa and South-East Asia, wastage tends to occur primarily at the farmer-producer end of the supply chain. Inefficient harvesting, inadequate local transportation and poor infrastructure mean that produce is frequently handled inappropriately and stored under unsuitable farm site conditions. As the development level of a country increases, so the food loss problem generally moves further up the supply chain with deficiencies in regional and national infrastructure having the largest impact. […] In mature, fully developed countries such as the UK, more-efficient farming practices and better transport, storage and processing facilities ensure that a larger proportion of the food produced reaches markets and consumers. However, characteristics associated with modern consumer culture mean produce is often wasted through retail and customer behavior."

Since the causes of food waste are different, the strategies for reducing such waste must adapt to the situation. The report points out that controlling waste is beyond the capability of any single stakeholder (i.e., farmer, distributor, retailer, or consumer). Fortunately, it reports, "In most cases the sustainable solutions needed to reduce waste are well known. The challenge is transferring this know-how to where it is needed, and creating the political and social environment which encourages both transfer and adoption of these ideas to take place." Brad Plumer reviews a few of the solutions that could be implemented. ["How the world manages to waste half its food," Washington Post, 12 January 2013] He writes:

"For poorer countries, simply building better food-storage buildings could cut down massively on waste in places like Pakistan or Ghana (which lost 50 percent of its stored maize in 2008). Better harvesting technology and techniques could also help, although the report suggests that some nations like India will need more sweeping societal and political changes to cut down on waste. Meanwhile, wealthier regions like the United States and Europe will need to think harder about not throwing out so much perfectly good food. ... One small step, which Britain has been exploring of late, is to rethink their use of food labels, which often encourage supermarkets to toss out food long before it actually goes bad."

Another irony that we confront when discussing food security involves dietary habits. As food security improves so does the economic condition of impoverished people. As their wealth increases, their eating habits change and that can have a profound effect on food production. For one thing, studies have shown that as people scratch their way out of poverty their taste for meat grows. Raising livestock, however, is not the most efficient way to provide the protein that we need to be healthy. It takes a lot of land, feed, and water to raise livestock. Livestock, particularly cattle, also produce a lot of methane gas. You can't blame (or prevent) those who have struggled to survive from wanting a more varied and enriched diet; but, we need to realize that our dietary choices have an impact. In the end, changing human behavior may be the most difficult challenge we face in striving for better food security.

For an excellent discussion on the challenges that lie ahead and some of the strategies that can be used to meet them, watch the video of a panel discussion held at The Aspen Institute last year. The first speaker, Jon Foley, Director, Institute on the Environment, University of Minnesota, stated that if we don't get agriculture right nothing else really matters. Foley offers five recommendations for improving global food security. The first recommendation he offered is to stop deforestation and halt agricultural expansion. This would help reduce agriculture's carbon emission footprint. Second, he recommended closing "yield gaps" on underperforming lands. There are huge opportunities in Eastern Europe where farms are producing only 20 percent of what could be produced. Third, he recommended improving cropping efficiency. That is, ensure that resources like water and fertilizers are being used to maximum efficiency. Israel, for example, uses water 100 times more efficiently than Pakistan. Fourth, he says we need to shift dietary preferences. Finally, as discussed above, we need to reduce waste. Polman concludes, "Securing the future of agricultural development needs individual commitment and action on the ground. All of us, individuals, companies, policy makers and consumers, have a responsibility to act together, and the time to act is now."

Water, Water, Every Where -- What Can We do About It? -- Part 3

In the final segment of this three-part series, I want to discuss some of the technological breakthroughs that could help mitigate the predicted water crisis as well as some of strategies that have been recommended for dealing with the crisis. Before doing that, however, I thought a brief review of the problem would be in order. For Water Day 2013, the celebrated actor Matt Damon narrated a clever video on the subject. It takes less than three minutes to watch.

In Part 2 of a series of posts entitled "Let's Talk Water," I discussed a number of ideas that were being worked on including: obtaining drinking water from humidity in the air; managing drinking water systems by computer; finding and fixing leaks in existing water systems; cleaning sewage water with diamonds; more cost-effective ways of disposing of hazardous waste water; a bicycle-powered water pump; a low-cost safe water tester; and a student-designed Solarball that can be used to obtain safe drinking water. In Part 3 of that series, I discussed advances in desalination techniques. Desalination is particularly important because most of the world's water is found in its oceans and a growing proportion of the world's population lives along the coast.

"It's been centuries since Coleridge's Ancient Mariner lamented the undrinkable salty seas around him," writes Alex Planes. "Today, it's easier -- but not necessarily easy -- to get fresh water from the vast water reserves of the world's oceans. Over 15,000 desalinization plants now operate throughout the world, but they produce less than 1% of the water the world consumes every day. Population growth and water scarcity often go hand in hand, so anything that could enhance the usefulness of desalinization efforts would be well-received everywhere." ["This Tiny Innovation Is a Giant Leap Forward for Water Services," The Motley Fool, 25 March 2013] The tiny device referred to in Plane's headlines is a Lockheed Martin filter that "makes use of graphene, an atom-thin sheet of pure carbon that's arranged in a hexagonal pattern." The product is called Perforene. Planes continues:

"It's 1,000 times stronger than steel but 100 times as permeable as competing membranes. However, that strength comes on a single-atom sheet, which is still going to be delicate when applied to industrial uses. Lockheed claims to be a year or two away from prototype testing, and by the time Perforene is ready for action there may be 107 million cubic meters of desalinization capacity already at work around the world. That's a doubling of capacity from 2008, and an estimated $64 billion will be spent on this capacity growth. If Perforene can provide the same functionality at a fraction of the energy cost, it's quite feasible to expect the next decade of desalinization build-out to be far more intense. If Perforene proves effective, it might lead to the development of smaller, more distributed desalinization machinery for the developing world."

Professor Nidal Hilal, the director of the Centre for Water Advanced Technologies and Environmental Research (CWATER) at Swansea University, states, "Basically we are taking too much water from water resources, and tapping into the sea is the only option available to address such water shortages. Desalination of sea water increasingly proves to be the most practical – and in many cases the only – solution for many countries across the globe." ["Nano-water technology could be key to relieving water shortages, claims Swansea University expert," WalesOnline, 4 April 2013] Making sea water potable would go a long way towards mitigating potential coastal water shortages. Planes goes on to note that more effective filtration is not just important for desalination. Better filtration systems could also make wastewater treatment more effective and less costly.

Access to clean water, as mentioned in the first segment of this series and in the video above, is important if populations are going to remain healthy. To underscore this point, The Wall Street Journal awarded its top prize in the 2010 Asian Innovation Awards to "an inexpensive water purifier aimed at households that may not have electricity." ["Tata Water Purifier Wins the Top Prize for Novel Product," by Andrew Lavellee and Emily Veach, 25 October 2010] Another device designed for households without access to power is being developed in Morocco. "In the Sahara, nomads are among those suffering most from limited access to water, particularly during the hotter periods when rising salt levels in water drawn from wells make it undrinkable." ["Desert nomads marvel at water purifying device," MySinchew.com, 8 April 2013] The device, called the "waterpod," is being developed by "Alain Thibault, an ex-sailor who had to confront the issue of fresh water shortages at sea." The article continues:

"The device, which resembles a large letter box, currently costs around 500 euros ($650). But the inventors have already given courses at a college in Tiznit, on Morocco's Atlantic coast, to teach students how to produce them more cheaply. ' The waterpod is made of wood, cork, stainless steel and glass,' said Thierry Mauboussin, who is helping to promote the water project in Morocco. ... The waterpod ... can produce six litres of pure water daily from 12 litres of brackish water, according to its creators. They give it an estimated lifespan of 20 to 40 years, with just a daily clean needed to keep it in good condition."

If you want big breakthroughs in water usage, you have to look to the agricultural sector. Globally, 70 percent of all water consumption is involved with agriculture. The next largest sector is industry (20%). Domestic consumption accounts for only 10% of the total. One suggestion that has been made is to raise more food in so-called "vertical farms." A vertical farm is one contained in a highrise building. There are technological challenges associated with urban farms, but one of the up-sides of such farms is that they can use water much more efficiently and effectively than traditional farms. In fact, much of the required water can be treated wastewater that is often dumped into rivers or directly into the ocean. That creates a real win-win situation. Like it or not, some form of recycling must be adopted if the water shortage crisis is to be mitigated. The following video provides a good overview of the vertical farming concept. You can also learn more on the website The Vertical Farm.

Even if vertical farms do flourish, traditional farms, gardens, and ranches won't disappear. In fact, in developing parts of the world, traditional methods are likely to be used for foreseeable future. Fostering better water usage in these traditional settings is an area where research is continuing and some progress is being made. Techniques like "subsurface drip irrigation systems minimize the amount of water lost due to evaporation and runoff. ... Rainfall harvesting, efficient irrigation water transport, and use of reclaimed water can also lead to more efficient agricultural water use." ["4 Agricultural Practices and Technologies to Reduce Water Impacts," Water Implications of Biofuels Production in the United States, Water Science and Technology Board, 2008]

A number of strategies have been recommended for dealing with the coming water shortage. Some of those strategies were discussed by a panel of experts assembled by Bloomberg Businessweek Chairman Norman Pearlstine. ["How the Experts Would Fix the Water Supply," Bloomberg Businessweek, 21 March 2013] The experts included: Ahmet Bozer, President, Coca-Cola International (KO); Jae So, Manager, World Bank Water and Sanitation Program; Carlos Riva, CEO, Poseidon Water; Thomas Powers, Commissioner of Water Management, Chicago; and Jeff Sterba, President and CEO, American Water (AWK).

Jeff Sterba believes that the most important strategy to pursue is "increasing efficiency of [water] use." Carlos Riva believes that more has to be done in the area of desalination. Ahmet Bozer discussed one the technologies mentioned above -- harvesting rainwater. "India is a perfect example," he stated. "When you have the monsoon season, so much water comes and gets wasted. So how do we fulfill our commitment of returning the amount of water we use back to nature? A rainwater harvesting system. Now these systems don’t cost too much. And we’ve actually placed somewhere around 500 of them. And that water is stewarded back underground, and you’re replenishing the sources. So maybe there are emerging-market solutions that can also be applied to developing markets." Too many people still think in terms of large water distribution systems. I suspect that the developing world will leapfrog large grid systems (like it did when it leapfrogged landline telephone grids and adopted mobile phone systems) and rely on local water solutions. Such solutions will be cheaper to build, use, and maintain.

That doesn't mean, however, that large water systems will disappear. Thomas Powers talked about the leakage problem associated with aging water systems. The United Nations estimates that between 66-132 billion gallons of drinking water leaks from the supply systems in many mega cities each year. Powers reported that Chicago is replacing old pipes. "With our new program, over the next decade, we're going to replace nearly 1,000 miles of water main. And just in doing that," he state, "we conservatively estimate that we’ll be able to provide enough water for an additional 400,000 residents."

Jae So believes that putting more data in the hands of consumers could make a big difference. "We've been talking about how we're going to manage the supply and the service of water," she stated. "But there's a huge amount that we can do in managing customer demand. Just having information, like how much water you use, can be a big signal. Customers will actually look at that. And then there are information campaigns teaching people the value of water." Riva agrees that people need to start appreciating (and paying for) the value of water. "If you really want to have efficient use," he stated, "you need to align the pricing to the value of the usage." Sterba also agreed. "By and large, in the U.S. people don’t pay for water," he stated. "They pay for a delivery of it and cleaning of it, but the molecule is generally provided at no cost. Because the federal government isn’t going to be giving money out as it used to and states are in financial hardship, the communities are going to have to find other ways to raise capital. So I think prices will continue to move up."

The rising cost of water is likely to cause enormous angst around the world; but, "the obvious solution, at least to economists, is: if water has become a scarce good then it needs an appropriate price to properly allocate it." ["Can the World Afford Cheap Water?" by David Biello, Scientific American, 29 March 2013] Obviously, it will be the implementation of a combination of all these strategies that eventually helps mitigate the water crisis. Peoples' lives are going to change as a result. Some of the changes will be for the better and others will likely be unwelcomed. In the end, however, people understand that without water there is no life.

Water, Water, Every Where -- What Can We do About It? -- Part 2

In Part 1 of this three-part series, I discussed the overall problem of predicted water shortages. In this post, I want to discuss the affect that water shortages can have on the supply chain. The most obvious impact perhaps is the affect that water shortages can have on agricultural (a subject touched upon in Part 1). Without enough water to raise crops, the world can go hungry. In this post, I want to look at some of the less obvious impacts that water use can have on the supply chain.

"Supply-chain professionals deal with all kinds of risks every day," writes Jennifer Baljko, "from managing routine shipping delays to second-sourcing products when a natural disaster hits a key supplier. But there are a number of other global issues that should compel supply chain experts and corporate senior management teams to rethink their risks and their potential impact. One of them is the growing scarcity of stable water supplies." ["Water Risks Impacting Supply Chains," EBN, 7 February 2013] Baljko reports that "water shortage was named one of the top global risks for 2013" at the most recent World Economic Forum discussions in Davos, Switzerland. She continues:

"On a global scale, the industry uses 20 percent of water resources, notes the Cousteau Society. And as Bloomberg reported, without available, affordable, and clean water, companies could see disruptions, higher commodity costs, and reduced earnings. Given the data and growing awareness around this, it should come as no surprise that more watch groups are monitoring the world's water situation and groups like the WEF and the Pacific Institute, the U.N.'s Global Compact CEO Water Mandate, are encouraging more government, local, and corporate involvement in monitoring and managing water-related risks."

Baljko doesn't offer any solutions to the conundrum she raises; but, she does ask some pretty good questions: "Will it escalate enough to become something supply chain managers will have to deal with fairly regularly? Will secondary sourcing strategies have to be put in place if factories located in water-risk areas run dry? Will teams of purchasers be dedicated to negotiating spot water prices the way they negotiate prices for gold or copper?" In the Bloomberg article referenced by Baljko, Andrew Steer reports, "CEOs increasingly recognize that water is essential for their business models and economic growth." He added:

"More than half of the Global 500 companies that responded to the 2012 Carbon Disclosure Project Global Water Report cited 'detrimental' water-related impacts. These effects include property damage from drought or flooding, higher prices for water itself, poor water quality requiring on-site pre-treatment, and fines and litigation over pollution. According to the report, the associated costs for some companies ran as high as $200 million, up 38 percent from the previous year. ... Water risks are increasingly compromising businesses. ... In response, companies are realizing they need to work with governments and local communities to improve water management. Some industries are beginning to define water stewardship principles and water accounting standards. For example, 45 major companies representing hundreds of billions of dollars in revenue endorsed the U.N.'s Global Compact CEO Water Mandate, an initiative designed to help companies develop, implement and disclose water sustainability policies and practices.

The biggest threat is to companies whose current water usage is unsustainable. "Unsustainable water use is threatening agriculture, other business and populations in China, India and the US, according to a study by risk analysis company Maplecroft." ["Excessive Water Use ‘Threatening Business in Major Economies’," Environmental Leader, 11 May 2012] The article continues:

"The Water Stress Index calculates the water stress of over 168 countries by evaluating renewable supplies of water from precipitation, streams and rivers against domestic, industrial and agricultural use. The arid Middle East and North Africa region is the most at-risk region in the index, with Bahrain, Qatar, Kuwait, Libya, Djibouti, UAE, Yemen, Saudi Arabia, Oman and Egypt categorized as the 10 most water-stressed countries, listed in order of risk. However, the widespread use of irrigation for agriculture, combined with increasing domestic and industrial water demand in India (ranked 34th in the index), China (50) and the US (61) means that those economies' water resources are coming under increasing pressure – and this may place more of an impact on the wider world, Maplecroft says."

The greatest challenges for businesses are going to be in areas where their interests are in direct conflict with the interests of the community. "Companies ... have for the most part made progress on managing water resources," reports Suzanne Zweben. "Largely they recognize that access to water will be one of the greatest challenges of our time." ["Behind the Brands: The Human Right to Water AND Supply Chain Responsibility," Oxfam America, 18 March 2013] Zweben continues:

"It's projected that by 2025, just 12 years away, that 1.8 billion people will be living in countries or regions with absolute water scarcity. Two-thirds of the world's population is expected to have limited access to clean water. This is one sustainability issue food and beverage companies grasp as core to their business; it will impact their ability to make products and touch the lives of their employees, consumers and the communities where they operate and from which they source."

In addition to physical risks associated with water (such as, not having access to enough water to operate), there are also reputational risks. Organizations, like Oxfam, are now ranking companies with respect to how well they manage water resources. Of Oxfam's so-called "Big Ten companies," none were given a good score (although Nestle came close). Below is how Oxfam assessed three main aspects of its scorecard relating to water.

(1) Human Right to Water: Has the company recognized the human right to water as defined by the UN? Has the company committed to consult communities on plans to develop water resources, i.e., before a project has started? Have grievance mechanisms been established in cases where water rights have been violated? (A recent report by The Special Rapporteur on the human right to safe drinking water and sanitation, On the Right Track, addresses good practices in implementing the human right to water. See Chapter 3 especially.)

(2) Transparency: Does the company disclose information on water withdrawals, discharges (i.e., the quality of water released into lakes and rivers), water-stressed regions where the company has operations, regions where the company operates that are at risk for water stress, and raw materials that come from regions subject to water-related risk? (Seven of the ten companies companies assessed through the Behind the Brands scorecard disclose information through the Water Program of the Carbon Disclosure Project.)

(3) Supply Chain Management: Does the company require its suppliers to report on their water use, risks and management? Are requirements on water rights and use specified in a company’s supplier code? Has the company set a specific target to reduce its water use along its whole value chain?

Zweben reports that "food and beverage companies have played a central role in the CEO Water Mandate ... yet no one company has taken significant steps on both the human right to water and supply chain management." Ramit Plushnick-Masti predicts that self-interest will keep beverage companies, in particular, involved in water conservation and best practice programs. ["Beverage Companies Pay Millions To Conserve Water," Manufacturing.net, 8 August 2012] He writes, "For Dr. Pepper and other beverage companies engaged in similar work, the impetus is their bottom line — conserving water guarantees long-term access to the most crucial ingredient in their products." He continues:

"The biggest players — from Coca-Cola and Pepsi Co. to Miller and MolsonCoors — as well as smaller, regional beverage companies list water as a risk in long-term plans. In 2006, 18 companies created an alliance called the Beverage Industry Environmental Roundtable to tackle water, energy and other issues that could affect the industry's growth. There is no total available for how much has been invested in water conservation projects in the past five years, but experts believe it's more than $500 million dollars. Thomas Lyon, a professor at the University of Michigan who researches connections between industry and the environment, said three factors have pushed beverage companies to conserve water: future markets in developing countries don't drink enough soft drinks, from their perspective; the impacts of climate change are starting to become more apparent; and some of the countries targeted for growth are the same ones experts believe will be most affected by climate change."

With Asia predicted to be the focus of the global economy in the decades ahead, experts are concerned that water issues could have significant impacts in that region. ["Supply Chains in Asia Run High Risk of Water Shortages, Study Finds," by KPMG, SupplyChainBrain, 5 April 2012] The article notes:

"Of the sectors with the highest levels of water use, the share consumed by suppliers is greatest for food & beverage, personal & household goods and automobiles & parts companies. They could be affected by pressure on water resources through water pricing or scarcity driving up commodities costs. Companies are at the starting blocks of understanding financial risks and opportunities from water-related challenges in operations and supply chains. Companies that assess water risks will be well placed to strengthen water management strategies, secure supplies and stabilise input costs."

If all that is not enough for companies to worry about, Jonas Kron, an investment advisor at Trillium Asset Management, told Bloomberg "that he thinks the world's dwindling supply of fresh water may soon impact results at the companies the fund invests in." ["Water Risks Becoming Investor Concerns, as New Interactice Tool Helps Companies Assess their Own Risk Levels," The Green Supply Chain, 11 January 2012] In other words, if companies don't manage water resources better, they may find access to investment capital difficult to find.

The bottom line is that potential water shortages are going to affect private and public organizations as well as individuals. The problem is international in scale and will require widespread private/public partnerships to address it. In the final segment of this series, I'll look at some technological breakthroughs as well as some strategies that have been recommended for dealing with water challenges.

Water, Water, Every Where -- What Can We do About It? -- Part 1

In the Part Two of Samuel Taylor Coleridge's "The Rime of the Ancient Mariner," the bard discusses the distress of mariners floating upon a windless ocean under a withering sun and running out of supplies (including water). One of the most famous stanzas from that poem is:

Water, water, every where,
And all the boards did shrink;
Water, water, every where,
Nor any drop to drink.

More than one analyst has used that poetic imagery to portray the plight of the world's population in the years ahead. We sit on planet covered by water and yet the predictions about the availability of useful water are dire. Water is one of the rare topics that touches almost every category covered by this blog: globalization, innovation, supply chain, risk management, resilience, manufacturing, big data, smart cities, food and drink, and so forth.

In this first segment of this series, I'll discuss the general future of water and how it is likely to affect the world in general. In the second segment, I'll discuss how water (or lack of it) can affect supply chains. In the final segment, I'll discuss some of the innovations that are being made to mitigate the dire predictions of water shortages.

First, and foremost, the world needs potable water. "If water has the capacity to enhance life," writes The Economist, "its absence has the capacity to make it miserable." ["Enough is not enough," 20 May 2010] The article goes on to note that the sanitary habits of many developing nations add to current problems by polluting potentially drinkable water. As a result, disease increases, mortality decreases, and development is stifled. The article explains:

"Clean water is crucial for children with diarrhoea; they need rehydration and electrolytes to survive. Even then, they may still be at risk of malnutrition if they continue to suffer from diarrhoea, which will prevent them from absorbing their food properly. This usually has long-term consequences. Malnutrition in the womb and during the first two years of life is now seen as causing irreversible changes that lead to lifelong poor health. Poor health, bad in itself, translates into poor economic output. ... The problem is not strictly a matter of water scarcity. Indeed, expanding the availability of water may actually increase disease, since it may lead to stagnant pools in which mosquitoes breed, and then spread malaria or dengue fever; or perhaps excess water will run through human or toxic waste and thus contaminate the ground or a nearby stream. So hygiene and protected storage are essential. Yet there is a shortage of safe water for drinking and sanitation in many places, not least in the cities to which so many people are now flocking."

Water is so crucial to life and good health that the article notes, "One of the development goals set by the United Nations at the millennium was to halve the proportion of people without basic sanitation and a decent source of fresh water by 2015." That goal is unlikely to be met. "Progress is slow," the article states, "especially for sanitation, and particularly in Africa, and increasingly policymakers are finding that heavily subsidised projects are failing." Water is still predicted to be a scarce commodity and thus a valuable commodity. In fact, it is predicted to become so valuable that Bloomberg BusinessWeek asks, "Is water the new oil?" ["How the Experts Would Fix the Water Supply," 21 March 2013] The BusinessWeek article continues:

"Population growth and agricultural demand, combined with aging infrastructure and waste, have produced water scarcity in many countries. Prices are rising, and the lack of a dependable water supply is a massive health and economic issue."

Climate change has always played a role in the water picture. If you have too much water, you get flooding. If you have too little water, you get drought. Both situations can wipe out crops and create a cascading effect felt around the globe. Alan Berjga notes, "When rain doesn’t fall in Iowa, it's not just Des Moines that starts fretting. Food buyers from Addis Ababa to Beijing all are touched by the fate of the corn crop in the U.S., the world's breadbasket in an era when crop shortages mean riots." ["Drought Stalks the Global Food Supply," Bloomberg BusinessWeek, 5 July 2012] Berjga added:

"In 2010 a drought that withered Russia's wheat crop sent consumer prices in North Africa and the Middle East skyward, contributing to unrest that fed the Arab Spring. More than 60 food riots occurred worldwide between 2007 and 2009, when rapidly rising commodity prices wreaked havoc on family budgets, especially in poorer countries, where 70 percent of a household's income may go to food. An extended U.S. drought would have a 'tremendous' impact on world food prices, as a higher cost for one dollar-denominated export crop cascaded into others, [Abdolreza Abbassian, a senior economist with the United Nations’ Food & Agriculture Organization in Rome,] says. 'The world looks to the U.S. as the safest source of supply,' he says. 'Everyone watches the U.S. because they can rely on it. Without it, the world would starve.'"

This is not the first time that I've addressed the subject of water. Back in 2007 I wrote post entitled The Coming Water Wars? In that post, I cited several experts who noted that climate change will bring more rain to some areas (maybe too much rain) and less rain to other others. It is the very unpredictability of these rainfall totals that create such concern. As I wrote back then, "The trick, as it has always been, is getting the right amount of water to the right place at the right time." One of the articles I cited in that blog post was written by Doug Struck. ["Warming Will Exacerbate Global Water Conflicts," Washington Post, 20 August 2007]. Struck reported that such attempts to redistribute water have not always been successful or welcomed. He wrote:

"Humans have long attempted to reconcile nature's inconstancies with giant plumbing: reservoirs and dams that hold back floodwaters for more gradual release; dikes and other barriers to protect developed areas; canals and pipelines to take water from wet areas to dry. But that kind of infrastructure is expensive, especially for Third World governments. Environmentalists decry the impact on wildlife. And building dams in earthquake zones tempts disaster."

In a more recent three-part series on water (Let's Talk Water, Part 1, Part 2, and Part 3), I discussed many of the issues raised above. In Part 1, I noted some of the reasons that experts are fairly confident in their predictions that there are going to be water shortages. First, they note that glacial ice, which many parts of the world depend on as a source of fresh water, is not being replenished. Second, an equally important source of fresh water, water found under the ground, is also being depleted faster than it can be replenished. Both of those sources of water take years, if not decades or centuries, to replenish. In other words, mitigating water shortages in areas dependent on glacial or underground sources of water won't be easy or quick.

All of this, I admit, sounds pretty gloomy. The picture won't look too much brighter in the next segment of this series which will discuss the impact of water shortages on the supply chain. Hopefully, however, the future will look a little brighter after you read the final segment that discusses some of the breakthroughs that are being made and strategies being discussed to address the water challenge. In my 2007 post, I concluded, "Like other global problems, dealing with water control, collection, and distribution is going to take global leadership, global vision, and global solutions." That certainly hasn't changed.

Globalization's Bed of Nails, Part 3: The Transformationalists and Traditionalists

In the first two segments of this series, I looked at the optimistic and pessimistic sides of globalization. In both of those posts, as in this one, I used a post by an anonymous British blogger as the basis of each sides' various arguments. ["Theories of Globalisation," realsociology, 9 February 2013] In this post, I'll first look at what he (or she) calls the "the Transformationalist View of Globalisation." By that, I believe he means the views of those who believe that globalization has transformative qualities (both good and bad). I assume that transformationalists want to encourage good qualities and discourage bad ones.

The first argument that the blogger says is made by transformationalists is that "'Trade' has many complex formations. So it is difficult to say that it is either good or bad. Besides Free Trade, Fair Trade is expanding, and there is also illegal trade – in drugs for example." He goes on to note, "The Fairtrade Foundation has many examples of how trade can benefit people the world over in all sorts of different ways." On the other hand, he notes that all of the technologies that have fostered international trade can also be used by criminal and terrorist organizations to pursue their nefarious activities.

The second argument addresses the topic of transnational companies. The optimists saw TNCs as a force primarily for good and the pessimists saw them as primarily a force for exploitation. The blogger writes, "TNCs operate in dozens of countries. Clearly there are going to be winners and losers in different cases. Also governments the world over regulate international companies in different ways." I'm not exactly sure what transformationalist argument he is trying to make. I'm assuming the point is that global corporations are transformative because they operate somewhere on the globe 24 hours a day, 365 days of the year. They have their own cultures, policies, agendas, and so forth. They are also the source of many of the challenges associated with globalization, such as, pollution, working conditions, infrastructure stress, and so forth.

Transformationalists also point out that globalization has forever changed consumerism. Like trade, however, in and of itself "consumerism isn't just good or bad." The blogger claims that increased consumerism has affected global culture, which he says "is characterised by hybridity – new brands come into contact with local cultures and they are modified by those cultures, creating new products." He notes that some people refer to this as "glocalism" or "glocalization." As I noted Part 2 of this series, this is particularly true in the food and drink sector. Successful international companies learn to adapt to local cultures.

One of the strongest arguments that transformationalists make about the transformative powers of globalization is in the area of politics. "Globalisation is characterised by new political formations, not just the spread of democracy or the spread of American dominance." U.S. politicians have learned that you can encourage democracy, but you can't control the direction it will take. Elections in Egypt, for example, certainly didn't achieve the results that U.S. politicians had hoped for. Economics is another area in which globalization has a significant transformative affect. The blogger points to China and the fact that it has transformed from a closed, highly-centralized economy to a hybrid economy that now embraces capitalism.

The next transformative aspect of globalization involves technology. Africa surprised the world by leapfrogging over telephone landline infrastructures and embracing mobile phone technology. There are now more mobile devices in the world than there are people. Technology has also fostered activities like crowdsourcing, microfinance, mobile banking, and a myriad of social media outlets that have empowered many previously disenfranchised segments of society. With advances in alternative energy sources, like wind and solar, bringing down costs, it is not inconceivable that some developing countries will also be able to leapfrog large electrical grids and rely on smaller, more affordable, local or regional distribution systems.

The final transformative aspect of globalization that the author discusses involves the shattering of traditional ideas and behaviors. He writes, "Anthony Giddens argues that 'detraditionalisation' is part of Globalisation – People increasingly challenge traditions as they come into contact with new ideas." As with most other aspects of transformationalism, challenging traditions is not inherently good or bad. Some traditions need challenging and some deserve to be protected. The blogger concludes, "Read KT’s blog post on 'detraditionalisation' and summarise Gidden's view of what effect globalisation has on culture – Is this closer to the optimist or transformationalist view of globalisation?"

The final view of globalization that the blogger examines is the Traditionalist view. According to the author, adherents of this viewpoint believe that the effects of globalisation are exaggerated. In fact, some people refer to all the hype as "globaloney." ["The case against globaloney," The Economist, 20 April 2011] The Economist article notes that much of what journalists write involves simplification and/or exaggeration. It claims that assertion is certainly true when it comes to what has been written about globalization. It states:

"There is a lively discussion about whether it is good or bad. But everybody seems to agree that globalisation is a fait accompli: that the world is flat, if you are a (Tom) Friedmanite, or that the world is run by a handful of global corporations, if you are a (Naomi) Kleinian."

The staff at The Economist claims that at least one academic has managed to "keep his head" on the subject of globalization. He is Professor Pankaj Ghemawat of IESE Business School in Spain. It explains:

"For more than a decade he has subjected the simplifiers and exaggerators to a barrage of statistics. He has now set out his case—that we live in an era of semi-globalisation at most—in a single volume, 'World 3.0', that should be read by anyone who wants to understand the most important economic development of our time. Mr Ghemawat points out that many indicators of global integration are surprisingly low. Only 2% of students are at universities outside their home countries; and only 3% of people live outside their country of birth. Only 7% of rice is traded across borders. Only 7% of directors of S&P 500 companies are foreigners—and, according to a study a few years ago, less than 1% of all American companies have any foreign operations. Exports are equivalent to only 20% of global GDP. Some of the most vital arteries of globalisation are badly clogged: air travel is restricted by bilateral treaties and ocean shipping is dominated by cartels. Far from 'ripping through people's lives', as Arundhati Roy, an Indian writer, claims, globalisation is shaped by familiar things, such as distance and cultural ties. Mr Ghemawat argues that two otherwise identical countries will engage in 42% more trade if they share a common language than if they do not, 47% more if both belong to a trading block, 114% more if they have a common currency and 188% more if they have a common colonial past. ... Mr Ghemawat also explodes the myth that the world is being taken over by a handful of giant companies. The level of concentration in many vital industries has fallen dramatically since 1950 and remained roughly constant since 1980: 60 years ago two car companies accounted for half of the world's car production, compared with six companies today. He also refutes the idea that globalisation means homogenisation. The increasing uniformity of cities' skylines worldwide masks growing choice within them, to which even the most global of companies must adjust. McDonald's serves vegetarian burgers in India and spicy ones in Mexico, where Coca-Cola uses cane sugar rather than the corn syrup it uses in America."

The article concludes, "People seem to have a natural tendency to overestimate the distance-destroying quality of technology." If you are optimistic about globalization, there is a lot more that can be accomplished. If you're a pessimist, apparently there isn't too much you have try and undo. Considering those facts, it's remarkable that globalization has accomplished as much as it has over the past few decades.

Regardless of your point of view, there is a set of arguments that supports your position; and, there probably isn't a competing set of arguments that is going to convince you that another point of view is more correct. Pessimists only focus on the dark side of the subject (and, unfortunately, there is a lot to write about). Nevertheless, globalization's proponents have a good tale to tell (and the good that has been accomplished has far outweighed the bad). Can we do better? Of course we can. But we should face the future armed with a broad perspective of the benefits and pitfalls associated with globalization (or with whatever scheme eventually replaces it).

Globalization's Bed of Nails, Part 2: The Pessimists

In my last post, I looked at the optimistic side of globalization. I used a post by an anonymous British blogger as the basis of arguments presented in that post. ["Theories of Globalisation," realsociology, 9 February 2013] In that same post, he (or she) also presented the arguments raised by globalization pessimists, transformationalists, and transnationalists (the latter two categories will be discussed in the final segment of this series). This post will look at the arguments presented by individuals who are not so keen about the concept of globalization.

The first argument they make is that "increased trade has had unequal benefits." Even globalization optimists admit that globalization has been uneven and the result has created a spiky world. Optimists, however, would argue that dissing globalization because it hasn't benefited everyone equally would be throwing the baby out with the bathwater. Globalization's first beneficiaries were developed countries as multinational corporations moved into new markets; but, it has been Asian countries that have ultimately benefited most. Spreading the beneficial effects of globalization to the rest of the world certainly needs to be a priority.

The second argument raised by pessimists is that transnational corporations "pollute [and] extract resources from and exploit cheap labour in the developing world." Have there been abuses? Undeniably. Does that mean that developing countries will be better off if large corporations are forced to leave those countries? I believe that argument would be hard to make. That doesn't mean, however, that large corporations shouldn't be held to certain standards to ensure that they don't conduct activities that pollute and exploit resources (including human resources).

The third argument raised is that "culture may be increasingly global, but this mainly means Americanisation." Although there are concerns about local cultures being lost as a result of globalization, many large companies (especially those involved in the food and drink industry) have found that they must adapt to local tastes in order to succeed. Pessimists point out the ubiquity of McDonald's, Coca Cola, Walmart, and Starbucks as evidence of the Americanization of the world. Bhaskar Chakravorti, director of Tufts’ University's Institute for Business in the Global Context, paints quite a different picture. "He says all these examples represent 'the myth of American global market power' — they are outliers that disguise the real failing of American multinationals to succeed around the world, and especially in fast-growing emerging markets." ["Why Most American Companies Are Terrible At Globalization," by Tim Fernholz, Business Insider, 5 March 2013] Fernholz provides an excerpt from a forthcoming paper written by Chakravorti and his colleague Gita Raohas:

"In 2010, emerging markets represented 36% of global GDP; these markets already account for the majority of the world's oil and steel consumption, 46% of world retail sales, 52% of all purchases of motor vehicles and 82% of mobile phone subscriptions. With two-thirds of global growth coming from these markets, in a decade they will account for the majority of the world’s economic value. Yet U.S. companies derived less than 10% of their overall revenues from emerging markets: about as little as 7%, according to HSBC estimates for 2010. The 100 largest companies from the developed world overall made 17% of their revenues from emerging markets, according to a McKinsey report; in other words, the U.S. lags not only emerging market firms in capturing share in emerging markets, but it lags the developed world overall. By considering the difference between the 'absolute potential' represented by the 36% number or, to take a much more conservative benchmark, the global peer average of 17% and the U.S. share of 7%, we derive two measures of the gap – and the degree to which U.S. industry has not participated in global growth."

In other words, concerns about the Americanization of the world are probably exaggerated. Fernholz has a lot more to say about why U.S. companies haven't done better at globalizing, but that's a topic for another day.

Another argument raised by globalization pessimists is that, rather than spreading democracy like the optimists claim, it has spread "U.S Military power, as outlined by John Pilger in the War on Democracy," and has encouraged the U.S. to spend "almost $700 billion on its military every year." I would suggest that the fall of the Soviet Union had more to do with the spread of U.S. military power than the globalization. That event unleashed former clients to use the military hardware they had received from the Soviet Union (mostly in internecine civil wars) and the world became a much more dangerous place. At the same time, the U.S. found itself the sole remaining superpower capable of dealing with regional conflicts. The September 11, 2001, terrorist attacks on U.S. soil further convinced American politicians that it needed to engage its foes "over there" in order to protect citizens at home. This strategy has certainly been controversial, but laying that strategy at globalization's doorstep doesn't really advance the debate.

The next argument raised is interesting. It claims that "the spread of global media really means the spread of massive media firms such as Rupert Murdoch’s News Corp, with programmes such as Fox News presenting a pro-American view of the world. Also think of popular culture – X factor, and Hollywood and global advertising. The pessimist view on such aspects of the global media is that they lead to increasing cultural homogenisation." This is a companion argument to the Americanization argument raised earlier. What I find interesting about this argument is that it specifically refers to Fox News, a well-known conservative news outlet that is a source of much anti-globalization sentiment. In fact, I would place Fox News among the ranks of globalization pessimists. Unlike most pessimists, who believe that globalization is bad for the world, Fox News and supporters of its views, believe that globalization is bad for America.

The next argument raised by the pessimists involves urbanization. "Zygmunt Bauman argues that global cities are best described as 'fortress cities' – especially in the developing world cities are places of huge inequalities where the rich hide themselves away in exclusive gated communities and the poor are left to the slums." It would be hard to argue with the fact that cities are "places of huge inequalities." Most analysts argue, however, that cities are also places of huge opportunities. To read more about this view of cities, read my post entitled Will Cities Save Us? In that post, I cite an article by Charles Kenny. ["In Praise of Slums, Foreign Policy, 13 August 2012] Kenny doesn't sugarcoat conditions found in urban slums. He writes about "the stench of open sewers, the choking smoke of smoldering trash heaps, [and] the pools of fetid drinking water filmed with the rainbow color of chemical spills" that found in many slums. But he also argues that poor people living in slums are generally better off than poor people living in rural areas. He explains:

"Most people who've experienced both rural and urban poverty choose to stay in slums rather than move back to the countryside. That includes hundreds of millions of people in the developing world over the past few decades -- and 130 million migrant workers in China alone. ... For all the real horrors of slum existence today, it still usually beats staying in a village. Start with the simple reason that most people leave the countryside: money. Moving to cities makes economic sense -- rich countries are urbanized countries, and rich people are predominantly town and city dwellers. ... Slum dwellers may be at the bottom of the urban heap, but most are better off than their rural counterparts. Although about half the world's population is urban, only a quarter of those living on less than a dollar a day live in urban areas."

For a really pessimistic view of globalization, read what Gail Tverberg has to say. ["12 Reasons Why Globalization is a Huge Problem," The Energy Collective, 24 February 2013] In a nutshell, she says that globalization is a huge problem because it negatively affects the developed world -- especially the U.S. (i.e., globalization allows developing countries to use up resources too fast, raises energy prices too high, transfers jobs to lower cost countries, transfers consumption to emerging market countries, transfers investment spending to developing countries, and encourages global interdependence). It's good grist for a Fox News story.

On the whole, the pessimistic view of globalization certainly highlights its shortcomings, but it falls short of convincing me that globalization has been bad for the world. The fact that so many people have been raised out of poverty in the past half century convinces me otherwise. In my opinion, we should discuss globalization without praising or burying it. That also seems to be the view of those who see globalization as transformative. I'll discuss their arguments in the concluding segment of this series.

Globalization's Bed of Nails, Part 1: The Optimists

"The globalization paradigm," David Brooks wrote half a decade ago, "leads people to see economic development as a form of foreign policy, as a grand competition between nations and civilizations." ["The Cognitive Age," New York Times, 2 May 2008] Brooks believes such notions are destructive and counterproductive. He argued that we are entering "the cognitive age paradigm" which "emphasizes ... specific processes that foster learning. It emphasizes that different societies are being stressed in similar ways by increased demands on human capital." Brooks wants the people of the world to move beyond the globalization paradigm so that we can reason together to solve transnational challenges that affect us all. He explains:

"If you understand that you are living at the beginning of a cognitive age, you're focusing on the real source of prosperity and understand that your anxiety is not being caused by a foreigner. It's not that globalization and the skills revolution are contradictory processes. But which paradigm you embrace determines which facts and remedies you emphasize. ... It's time to move beyond [the globalization paradigm]."

In two recent posts (What Follows Globalization, Part 1 and Part 2), I discussed the concerns of a number of analysts and scholars who worry that it's going to be difficult to move beyond the globalization paradigm because no clear model has emerged to replace it. Brooks' cognitive age paradigm doesn't really fit the bill because it doesn't describe how people, organizations, and countries are going to interact in the decades ahead. It simply states that we should be smart enough to reason together. So, for a least a while, we're probably stuck with the globalization paradigm.

I do agree with Brooks that it is unfortunate that the very term "globalization" now stirs deep emotions in some people. While some pundits argue that globalization has been the catalyst that has brought more people out of poverty than ever before in history, other pundits argue that it has been the catalyst that started the developed world on the road to ruin. A British blogger, who posts anonymously, recently wrote an article that provides a pretty good overview of the arguments used by optimists, pessimists, transformationalists, and transnationalists regarding globalization. ["Theories of Globalisation," realsociology, 9 February 2013] He (or she) begins with an overview of the optimistic theories of globalization. The first argument used by globalization optimists, he writes, is that it has resulted in "more international trade" and, in increased "wealth, health, and education for most countries." He points to the following video as evidence that the optimistic view has lots to crow about.

The second argument that the British blogger claims is being made by the optimists is "that Transnational Corporations are a force for good. Companies such as Apple, Sony, etc. bring investment and jobs to developing countries." This argument is not quite as easy to defend as the one above. Ethical companies have indeed helped bring millions out of poverty; nevertheless, we have all heard the tales of sweatshop conditions in which some employees in developing countries are forced to work. Recent factory fires, in places like Bangladesh, only underscore the fact that we still have a ways to go before we can truly label transnational corporations "a force for good."

The third argument offered by globalization optimists relates to the fact that with improved health and wealth "patterns of consumption are becoming globalised. More people around the world are consumers rather than living subsistence lifestyles." As I'll note below and in the next segment, pessimists don't necessarily see this as a good thing. I would have stated the argument a little differently: Globalization has helped millions of people escape poverty and become part of the global middle class. Most economists believe that the future of the global economy will be determined by this global middle class. People in both the developing and developed world will benefit if this trend continues.

The fourth argument provided by the blogger is a bit frivolous. He writes, "Sporting events such as the world cup and the Olympics have become more popular." Globalization, especially the spread of technology, has certainly played a role in sporting events like the World Cup and Olympics being seen by more people; but, it hasn't necessarily increased global interest in sports that did not already have an international flavor.

The fifth argument that the blogger asserts is used by globalization optimists is that it has helped "spread ... Democracy and respect for human rights since the end of WW2." As evidence, he points to "the end of colonial rule in Africa, the collapse of communism and the Arab Spring." New technologies that have connected the world through satellites, cell phones, and the World Wide Web have clearly had an empowering effect. Whereas people used to talk about the course of history being changed primarily by military engagements, today we often read about super-empowered individuals who use social media to change the world. And that is a good segue to the sixth argument optimists offer, namely, "the growth of social media (Facebook and Twitter) have lead [to] more freedom around the world."

The seventh argument optimists use is that "globalistion increasingly means global cities [and] urban centres ... have highly educated, politically engaged middle classes." Whereas New York Times' columnist Tom Friedman argues that globalization has made the world flat, others argue it has made the world spiky -- making it look more like a bed of nails than a playing field. Thejas Jagganath explains it this way:

"Contrary to popular belief that globalisation is a worldwide phenomenon leading to a leveled world, Richard Florida in his book ‘Who’s Your City' argues that this is far from reality. He states that the world is 'spiky' with innovation and global ideologies largely spread across certain cities more than others. This concept of the world being uneven and spiky is in relation to Thomas Friedman’s concept of the world being flat. In his book, Friedman writes 'when the world is flat, you can innovate without having to emigrate.' Florida argues that this is not true, and rightly so." ["Globalisation in a Spiky World," Urban Times, 26 February 2013]

Just because globalization has been spiky doesn't mean it hasn't provided benefits. Globalization optimists argue that you should rejoice whenever you see people being raised out of poverty, even if it is accomplished unevenly. I would classify Bill Gates among the optimists. Since retiring from his day-to-day role with Microsoft, he has dedicated himself to help solving global problems ranging from food security to health to education. He believes that a combination of technology, big data, and measurement will help us solve the world's biggest problems. ["Bill Gates: My Plan to Fix The World's Biggest Problems," Wall Street Journal, 25 January 2013] In his article, Gates specifically focuses on the importance of measurement. He begins his article by citing a book entitled The Most Powerful Idea in the World, written by William Rosen. In that book, Rosen relates how new, precise measuring tools helped foster the industrial revolution. Gates continues:

"There's a larger lesson here: Without feedback from precise measurement, Mr. Rosen writes, invention is 'doomed to be rare and erratic.' With it, invention becomes 'commonplace.' In the past year, I have been struck by how important measurement is to improving the human condition. You can achieve incredible progress if you set a clear goal and find a measure that will drive progress toward that goal — in a feedback loop similar to the one Mr. Rosen describes. This may seem basic, but it is amazing how often it is not done and how hard it is to get right."

Gates provides a litany of anecdotal examples of how finding the right measure has resulted in significant gains. He continues:

"There are plenty of other areas where our ability to measure can improve people's lives in powerful ways — areas where we are falling short, unnecessarily. In poor countries, we still need better ways to measure the effectiveness of the many government workers providing health services. They are the crucial link bringing tools such as vaccines and education to the people who need them most. How well trained are they? Are they showing up to work? How can measurement enable them to perform their jobs better? In the U.S., we should be measuring the value being added by colleges. Currently, college rankings are focused on inputs — the scores and quality of students entering college — and on judgments and prejudices about a school's 'reputation.' Students would be better served by measures of which colleges were best preparing their graduates for the job market. They then could know where they would get the most for their tuition money. In agriculture, creating a global productivity target would help countries focus on a key but neglected area: the efficiency and output of hundreds of millions of small farmers who live in poverty. It would go a long way toward reducing poverty if we had public scorecards showing how developing-country governments, donors and others are helping those farmers."

Measurement and data go hand-in-hand. In an earlier post entitled Data Philanthropy and Global Resilience, I discussed how important is that policymakers have access to the right kind of information so that they can establish policies and programs that will make the world more resilient. Gates concludes:

"If I could wave a wand, I'd love to have a way to measure how exposure to risks like disease, infection, malnutrition and problem pregnancies impact children's potential — their ability to learn and contribute to society. Measuring that could help us quantify the broader impact of those risks and help us tackle them. The lives of the poorest have improved more rapidly in the past 15 years than ever before. And I am optimistic that we will do even better in the next 15 years. The process I have described — setting clear goals, choosing an approach, measuring results, and then using those measurements to continually refine our approach — helps us to deliver tools and services to everybody who will benefit, be they students in the U.S. or mothers in Africa. Following the path of the steam engine long ago, thanks to measurement, progress isn't 'doomed to be rare and erratic.' We can, in fact, make it commonplace."

If I had to choose a camp into which I must be placed, my first choice would probably be the optimists' camp. I do believe that international transactions provide more benefits than ill effects. As I noted earlier in this post, not everyone is an optimist when it comes to globalization. In the next segment of this series, I'll look at what the pessimists have to say.

Supply Chain Resiliency: A Vague Concept?

"Supply-chain resiliency is something companies in the high-tech sector and other industries have been talking about for years," writes Jennifer Baljko. "Even with all the talk, it still remains a relatively vague concept mentioned in the same dreamy way people discuss supply-chain flexibility and agility." ["Rethinking Supply Chain Resiliency," EBN, 21 February 2013] For many companies, actual supply chain resiliency may remain elusive; but, I'm not so sure that the concept remains vague. The remainder of Baljko's article leads me to believe that she has a pretty good concept of what supply chain resiliency is as well. She even defines it:

"As elusive and ever-changing as resilience may be (mostly because changing world circumstances require companies to stay flexible in how they construct and reconstruct resilient supply-chain practices), it certainly remains top of mind for many executives globally, according to a recent report from the World Economic Forum. In the most basic sense of the word, according to dictionary definitions, resilience is the ability to spring back into shape; it's elasticity, and a capacity to recover quickly from difficulties. The aptitude and skill needed to rapidly bounce back is more frequently being tested as companies confront many more complex risks and supply-chain disruptions."

I do agree with her that defining a problem and solving it are two very different things. With all of the supply chain disruptions that have occurred over the past several years, supply chain risk management (SCRM) has certainly crept up the priority list for a lot of organizations. They recognize the problem, know they need to do something about it, but, either through ignorance or procrastination, haven't acted. When I talk about companies being ignorant, I don't mean that their leadership is stupid. I mean that they don't have enough information about their supply chains to make decisions intelligently. Last year Bill McBeath wrote, "Firms' knowledge of their suppliers and the environments they operate in is often limited and out-of-date, crippling their ability to successfully manage the dynamics of their supply base." ["Supplier Risk and Compliance Management in Practice: Part One," ChainLink Research, 1 May 2012] One of the reasons that companies don't know as much as they should about their supply chains and the risks they face is that there is so much to know. McBeath included the following graphic in his article to give readers and idea about how complex this subject can be.

McBeath argues that "managing supplier risk and compliance is very important, but unfortunately that importance is often under-recognized." He explained:

"When a marketing executive or engineer does a great job, everyone sees the increase in sales or a great new hit product launched with a big bang ... and with those successes, the bonuses and praise flow. When a supplier risk and compliance manager does a great job, then what happens is ... nothing goes wrong. Everything goes smoothly. And most of the time, nobody notices. Of course if they mess up, all hell breaks loose."

One of the reasons that "all hell breaks loose" when something does go wrong is that company valuations are dramatically affected following a disruptive event. McBeath indicated research conducted by his company "found that the stock price fell on average about 25% as the result of each single disruption" and that "the effect persisted and the stock price barely moved for a full year after the event." Baljko reports that more recent research indicates that stock price drops aren't quite that steep (currently about 7% on average), but that is still a big enough drop for stockholders to be upset (see my post entitled Risk Management Concerns Continue to Draw Attention). Of course, not just company valuation is affected. "The average cost [of a supply disruption] is £200,000 [approximately $300,000], according to a new study by Zurich Insurance which surveyed 500 businesses with annual revenues of between £5 million and £300 million across manufacturing, technology, food and beverage, sport leisure and entertainment and wholesale businesses." ["What is supply chain disruption costing your company?" by Malory Davies, Supply Chain Standard, 3 July 2012] That may sound like a relatively small number, but that is for all kinds of disruptions not just those associated with major natural disasters. That same report "found that nine out of ten organisations had experienced significant disruptions to their supply chains" and that "the top three common causes of disruption were product quality incidents (57 per cent), adverse weather (45 per cent) and unplanned outage of IT (39 per cent). The average length of disruption was five weeks." Baljko concludes, "Given these issues and the fact that supply-chain volatility isn't likely to lessen anytime soon, maybe it's time to rethink resiliency and put a more common framework around it."

She suggests that a good starting point for building a framework can be found in a report issued earlier this year by the World Economic Forum (WEF) entitled "Building Resilience in Supply Chains." She writes:

"Under its Supply Chain Risk Initiative, the WEF aims to bring together leading cross-industry experts 'to explore the most critical threats facing supply chain networks, and to apply new risk response tools that can promote efficient risk management, security and resiliency in the complex global trading environment.' Ultimately, it wants to do noble things like 'strengthen the framework for global risk assessment' and 'improve collaboration and transparency across supply chain actors.'"

Baljko hopes that the WEF initiative isn't all talk and no action. She believes it offers some "good starting points to get more companies involved in the conversation and [it] could provide a framework for companies trying to make clearer sense of all this." She continues:

"While the report outlines common challenges, it emphasizes three 'must-have' requirements to develop a resilience framework:

• The need for a common risk vocabulary;
• Improved data and information flow across supply-chain actors; and
• Building greater agility and flexibility into the supply chain.

"More specifically, the top five measures the WEF named as the roll-up-your-sleeves-and-dive-in focus areas for creating a more comprehensive resiliency blueprint are:

1. Improved information sharing between governments and businesses
2. Harmonized legislative and regulatory standards
3. Building a culture of risk management across suppliers
4. Common risk assessment frameworks
5. Improved alert/warning systems

"These topics ... are big issues, and it's about time that companies step out of their individual silos ... to address the broad impact resiliency, flexibility, and agility has on the entire industry. The supply chain is, in fact, only as strong as its weakest link, and while moving the global conversation from chatter to action may be a monumental task causing its own kind of disruption, it has to happen sooner or later."

Robert J. Bowman, managing editor of SupplyChainBrain, agrees that the sooner companies start addressing this challenge the better. He notes, "Economies might rise and fall, but there's never a slowdown of disasters that impact global business. All that matters in the end is a company's ability to respond quickly. As [Sheryl] Toby puts it: 'Those that move the fastest to gain visibility are going to win in the competition game.'" ["Are You Ready for the Next Supply-Chain Disaster?" 11 June 2012] Brian W. Hagen, managing director of the Decision Empowerment Institute, told the SupplyChainBrain staff that SCRM specialists still are receiving enough respect from the top echelons of corporate leadership. "Anyone who is a practitioner of risk management feels like they're a second-class function in a company," he says. He agrees with McBeath that one reason is that "risk management can't deliver measurable results, in terms of value versus investment." That's a challenge that SCRM professionals will always face.

Given all of the factors that can adversely affect a supply chain, it should come as no surprise that mastering supply chain risk management has proven elusive. Nevertheless, I'm satisfied that the concept of supply chain resiliency is pretty clear in most professionals' minds.

Data Philanthropy and Global Resilience

"The digital revolution of the first decade of this new century has brought many wonders," writes Robert Kirkpatrick, "yet it has also has ushered in a bewildering array of unanticipated consequences. We now find ourselves in a volatile and hyperconnected world where risk has been globalized." ["Data Philanthropy: Public & Private Sector Data Sharing for Global Resilience," Global Pulse Blog, 16 September 2011] Supply chain and insurance professionals certainly share Kirkpatrick's worldview. They know that events thousands of miles away can have cascading effects that ripple around the globe. Kirkpatrick continues:

"Our tightly-coupled systems have become interdependent, creating feedback loops so complex that predictive analysis is of little use. There is a kind of butterfly effect at work in the world. Crises emerge suddenly without warning, interact to amplify one another's effects, and reverberate across the globe, increasing the burden of poverty, disease, and hunger among the world's most vulnerable communities. All too often, by the time we understand what is happening, it's too late to act."

I'm not certain that it's ever "too late to act"; but, Kirkpatrick's point is still valid. As fellow travelers on planet Earth, we need to become more resilient. He believes part of the answer to becoming more resilient lies in big data analysis. He explains:

"The same technologies that connect us to one another have also turned all of us into prolific producers of data, and this new data may hold the keys to mitigating much of the volatility and uncertainty that now confronts us. We are now swimming in an ocean of digital data, most of which didn't exist even a few years ago. The private sector is already using real-time analysis of this data to understand the changing needs of its customers. One of the defining challenges of the second decade of this century will be for the public sector to learn how to tap into this new 'unnatural resource' to understand the changing needs of citizens and respond with agility."

Understanding and insights are certainly important as we look to future. In an earlier post (Going Long with Big Data), I discussed an article by Samuel Arbesman, a senior scholar at the Ewing Marion Kauffman Foundation and a fellow at the Institute for Quantitative Social Science at Harvard University, who argued that we not only need to tap new data, like Kirkpatrick suggests, but also much older data that takes a long look back in history. Arbesman isn't suggesting that we should steer our ship by looking at its wake; he's simply making the point that insights can come from data both new and old. Kirkpatrick may be concentrating on new data because the thrust of his article is that policymakers and planners need access to big data in order to make the world more resilient. Gaining access to new information, he knows, is much more problematic than gaining access to what Arbesman calls long data. Kirkpatrick explains:

"Today there is a tremendous amount of useful data available online, from user-generated content such as news, blogs, and social media, to the structured data being shared through open data initiatives. Yet increasingly, the real wealth of data out there is what is known as 'massive passive data,' or 'data exhaust.' It's the personal information corporations collect about what products their customers buy and about how they use digital services. It is the digital trails we leave behind, merely by going about our daily lives. It is the data that powers business, which the World Economic Forum has described as a new asset class. ... Analysis of this data exhaust holds an even greater potential than public Web content to help policy makers gain a real-time understanding of human well-being."

Paul Doscher, CEO of LucidWorks, calls data exhaust "dark data" because it often hides in places that are inaccessible by most search engines. ["Searching for Dark Data," SiliconANGLE, 11 February 2013] Kirkpatrick notes that gaining access to this data is not just technically difficult but philosophically and legally difficult. "The businesses that collect this data see the value in maintaining exclusive access to it," he writes, "a real-time understanding of their markets allows them to respond to emerging trends with the agility needed to compete in today." Companies don't easily relinquish their assets. Just as importantly, Kirkpatrick notes, "There are often a host of legal constraints related to protection of privacy and secondary use." There is a reason that private enterprises hold big data dear -- it contains treasure that can be unlocked by analysis. Kirkpatrick's argument is that government policymakers should also hold big data dear and start mining it for golden insights that can make the world a more resilient place. The challenge, he writes, is that "the data that could help give them the additional agility needed to meet the challenges of governance in the 21st century is accumulating behind corporate firewalls. When public policy lags household reality by months or years, particularly in today's dynamic socioeconomic landscape, the consequences for vulnerable communities can be severe." What Kirkpatrick would like companies to do is share their data with governments. I'm sure such a suggestion causes many corporate executives to roll their eyes in disbelief. Kirkpatrick, however, believes data sharing can be done in a way that protects both the proprietary information that companies cherish and the privacy of individuals. He calls his scheme "data philanthropy." He explains:

"While, architecturally, it's not clear what form or forms data philanthropy could take, we like the term as it drives home the message that shared data is a public good. We have begun exploring ideas and research that might uncover a viable framework of how data philanthropy actually functions, i.e., how data generated in the private sector can readily be shared with the public sector. At least two ideas are already being robustly debated: A data commons where some kinds of data are shared publicly after adequate anonymization and aggregation; and an alerting network where more sensitive data that can never be shared publicly is nevertheless analyzed by companies behind their firewalls for specific smoke signals. There are other models emerging as well."

To bolster his case, Kirkpatrick provides a few "threads" of evidence from thought leaders that show progress in this area. He then writes:

"Down the road, it's not impossible to imagine some version of each of these converging in an interesting way, but in the meantime, we need a pragmatic approach that can be applied today in both developing and industrialized economies. Private sector participation is central to this effort, and we are eager to engage with potential partners. What has been a pleasant surprise is that, based on our initial talks, the private sector agrees that what we are proposing is not simply a new form of charity or CSR, but a sensible strategy for business risk mitigation, particularly when investing in emerging markets. ... So how do we take data philanthropy from concept to operational reality? We are talking with a number of business leaders in companies that take a sustainability-oriented, double- or triple-bottom-line view of their market, and as I've indicated data philanthropy hasn't been a hard sell—at least conceptually. They have expressed a willingness to engage with us in a series of collaborative research projects exploring what utility their data might have for giving policy makers a real-time understanding of the well-being of communities on the path of economic development, an important goal for both public and private sectors."

While Kirkpatrick is primarily focusing on data sharing from companies, Prasanna Lal Das and Giulio Quaggiotto are exploring "the growing willingness of individuals to 'donate' personal data for the public good." ["Would you give up your personal data for development?," UNDP blog, 25 February 2013] They ask a series of questions they would like to explore, including:

• Could this be a promising venue to explore for development organizations?
• Should we start a 'donate your data' campaign targeting individuals, rather than corporations?
• Is some type of individual data likely to be more useful/practical to start with?
• Should we perhaps steal a page from the corporate book and follow the example of, say, companies like Fitbit that encourage individuals to share their health data?
• And what about the Quantified Self movement: a potential ally?
• Or is a more appropriate role for us to push for policy change so that we can have open, collaborative trust frameworks between individuals, governments and companies that would encourage the (willing) sharing of personal data?

In the end, they admit, "This approach raises a whole range of questions and challenges – from privacy to prior informed consent, all the way to personal safety and security." Nevertheless, data philanthropy is certainly an idea worth pursuing if we are going to make the world a more resilient place in which to live.