Act I: Finding Urgency
The first step in the journey that brought me to write Water was the realisation that there was a problem.
In 2008, I had been working at McKinsey & Company on the transition to a low carbon economy, in the firm's Climate Change Special Initiative. Two Swedish colleagues had produced a global marginal cost curve for carbon abatement. The cost-curve synthesised in one picture the scale of the challenge, and the micro-economic costs of a large selection of solutions.
Like all great narrative simplifications, the abatement cost curve was profoundly flawed, but extraordinarily robust in the intellectual framework it offered. Seduced by its efficacy, my colleagues Lee Addams, Sheila Bonini, and I asked whether we might be able to produce a similar global economic fact base for water security.
The application of the marginal cost curve framework to water supply and demand.
When we first presented the idea, to an almost empty room at McKinsey, it didn't feel like we were on to much. Reactions were lukewarm.
Nevertheless, my colleague Martin Stuchtey and I were able to assemble a small team to produce a first prototype. With that, I travelled to Vevey, Switzerland, to discuss our results with Peter Brabeck-Letmathe. At the time, Peter was the CEO and Chairman of Nestlé.
He also knew that businesses were beginning to feel the impact of water security on their operations around the world, and could see how the curve might facilitate an important discussion across sectors. He encouraged us to continue.
The first water curve was for India. We divided the country into large river basins and catchments, based on work done at IWMI, and for each calculated the potential and cost of interventions. On the horizontal, is the measure of potential increment in water availability, on the vertical is the cost per unit of water. Each block is an individual measure. Overlayed is the projected gap between demand in 2030 and supply.
Martin Stuchtey, Dominic Waughrey, me, Usa Rao-Monari at Davos in 2010, when the 2030 Water Resources Group was launched
We began collaborating with Usha Rao-Monari at the International Finance Corporation. Usha was an investor in the water sector and saw the curve captured the problems the sector was facing. Dominic Waughray of the World Economic Forum had been working on private sector engagement on the topic and had the same reaction.
We named the initial core of companies and organizations that supported it, the "2030 Water Resources Group", a reference to the focus on the time horizon of the curve, a direct imitation of the carbon curve. The 2030 Water Resources Group has since become an institution in its own right.
The central insight of the report was that water resource issues are not just another environmental concern, but are foundational to the structure of society and its institutions, touching every sector of the economy.
The report made three important claims.
First it pointed out that the world's demand for water resources was growing at an alarming rate.
We calculated that by 2030 it would exceed most countries' ability to supply reliable, accessible water by roughly 40%.
This statistic got a lot of press, ultimately making its way in the UN water assessment.
Calculating a global gap between supply and demand required producing a model in which demands within each of 154 major river basins. In each, supply and demand could be simulated separately .
The point was deceptively simple. This was not a statement on the absolute finiteness of water on Earth. It was about the ability of society to meet its own demands.
This vast gap would have to be closed: people would have to either build new supply infrastructure, curtail economic uses of water driving demand, or make the use of water far more productive, so as to do more with the same amount of water.
The second important insight was that closing that gap was not, technically, difficult. We estimated cost and potential of different ways of doing it and our conclusion was that existing solutions were enough.Unlike, say, carbon, which required switching the entire energy system to different sources, possibly electrifying the entire transport sector and so on.
Even rapidly industrialising China could find more solutions than needed. The difficulty in water lay elsewhere.
The water cost curve team in South Africa: me, Steven Van Helden, Selam Daniel, Anne-Titia Bové, Catherine Snowden, Mike Kerlin, and Lee Addams.
The third key insight was this: most of the solution did not reside in the water sector. Water supply infrastructure proper was the more expensive, marginal option. Efficiency and productivity improvements in all other sectors—but principally agriculture—represented the vast majority of the cost effective opportunity.
The conclusions of the report were a central planner's dream: the problem was quantifiable, solvable, affordable, and predictable.
But the issue of water security had almost nothing to do with the availability of technical solutions. It had everything to do with how society organised to interface with its landscape and make decisions on this fundamental resource.
The problem was a failure of institutions.