During my recent trip to Asia I read much of David McCollough’s book on the Johnstown Flood. Those living in Pennsylvania still pay a tax adopted to pay for rebuilding after that tragic event. The rebuilding was completed years ago, though the tax continues to be paid – but that is an issue for a different entry. For those unfamiliar with the flood, some history: During a very wet period in 1889, a private dam burst on a reservoir high above Johnstown and the resulting torrent of water destroyed virtually everything in its path including several villages and the city of Johnstown. Over 2,000 people and even more animals were killed. Residents saw the situation as Judgment Day and the destruction wrought by the water, the debris it carried, and ironically a massive fire was attributed to the power of God.
The power of water has been experienced in Asia too. The Asian tsunami of 2004 was estimated to have killed 230,000 people while devastating the countryside throughout south Asia. In 2011, another tsunami caused a major radiation incident when the Japanese nuclear plant at Fukushima Daiichi was inundated. This disaster reduced dramatically the confidence of people in the nuclear power industry.
In the future, water shortages, created by climate change, population growth, pollution, and waste will threaten civilization and cause many changes. Travel to Hong Kong, Bangkok, Singapore, Mumbai, Bangalore, Beijing, Shanghai, and many other Asian powerhouse cities shows their location in places where water is vital to the economy and prosperity. Yet, even where water is abundant, it is often not potable. Over time, this will limit economic growth and development. Water problems exist in many other places, including places in the developed world. For example, the western United States relies heavily on the Colorado River basin for water – so much so that the river is virtually nonexistent at the point in Mexico where it meets the Pacific Ocean.
In discussions with alumni and executives in South Asia, one of the interesting questions raised was about water. In particular, with the population size and growth in Asia, many wonder how governments will provide enough water to meet the needs of people and agricultural industries. Already, it is necessary to drink bottled and purified water in many countries because the available water is not fit for consumption. In the future, because of climate change, it is possible that the availability of water will generate national security issues for many countries, as governments seek to ensure a supply adequate for national needs.
Many budding entrepreneurs have seized on the notion that water will become the key resource of the later part of the 21st century. Nations and places unable to secure adequate water will end up in conflict with others. In the United States it is estimated that the Colorado River has inadequate water to provide an adequate supply for many major western cities. A similar situation exists in India, China, and many Asian countries. It is not clear that this makes places with abundant water new Saudi Arabias. But it does suggest the importance of investment in the water sector.
My purpose is not to identify places or companies in which to invest. Instead it is to point out that the power of water – as demonstrated by floods and tsunamis, as well as the capacity to support commerce – is going to be seen in a different way in coming years. Water will be increasingly important to commerce.
Business schools need to look at the challenges this will create and prepare students to find solutions and opportunities to generate profit and support society. Some will do so through creation of investment vehicles in which people will invest in water infrastructure, treatment facilities, and desalination plants. Some will do so through consulting jobs aimed at improving management and use of water. Some will focus on sustainable practices and educate students to adopt approaches that offer optimal ways to use available water. Others will make assessments regarding the impact of water on agriculture, trade, and shortages of food and agricultural commodities.
Business schools in the developed world will have an additional challenge of getting students not to take the availability of water for granted. It will also be necessary to re-think approaches that treat water pollution as an externality that firms may choose to ignore. Ironically, on a planet that has more water than land, we increasingly find that places with large populations have dramatic water shortages – some of which occur as a result of floods.
The water challenge is one that will get worse because of current trends. At the same time, it will provide an opportunity to those who anticipate how it will change patterns in the economy and affect people’s lives. In a world in which availability of water propels commerce, business students must be well positioned to understand the power of water.
(A shortened version of this post was published in the Huffington Post.)