Connectivity of the future: A new lens on infrastructure

Connectivity is destiny — and the most connected powers, and people, will win.

From my interview with KPMG Insight:

Ed: In your opinion, why is connectivity so important today?

I believe there are two main megatrends shaping the world we live in today: urbanization and connectivity. And, together, they dictate human behavior every bit as much as — maybe even more than — any other force or factor we’ve seen previously. Connectivity really comes down to the enablement of supply chains, both physical and digital, which are now the conduits of our economies. What we have seen is that — in a very uncoordinated, unsynchronized yet simultaneous decision-making process — billions of people are gravitating toward infrastructure and the supply chains they enable. That’s why functional geography, what I call ‘connectography’, has become so critical today. 

Ed: So is functional geography now more important than physical or political geography?

Not at all. They are all layers through which we interact with the world around us. There is no more fundamental a layer than our natural or environmental geography. And, until now, our political geography has dictated geopolitics, economics and competitiveness. Today, we are entering a new era dictated by functional geography and its impact is influencing our decisions at a pace we have never seen before. But if you want to truly appreciate the complexities we are facing today, you really need to take all of these layers into account at the same time. If your goal is to build a resilient society, for example, you need to consider the ecological uncertainties, the political realities and the functional geography that is available to that society when they need to cope with the various environmental scenarios they may face. Looking at the political geography alone certainly won’t tell you whether this society will survive environmental disruption. We really need to be able to appreciate all of these different layers if we want to peel back the challenges we face and understand the complexities we need to overcome in solving them. 

Ed: The debate about the benefits of globalization continues. Is greater connectivity good for society?

Absolutely. And, frankly, it’s an unstoppable force that has been around since the dawn of time. Cobblestones in Roman roads were the first building blocks of connectivity, and we have been increasing our global connectivity ever since. 

"Connectivity really comes down to the enablement of supply chains, both physical and digital, which are now the conduits of our economies." 

The problem isn’t greater connectivity. It’s the way governments are responding to the changes that connectivity brings. At some point, we have to be clear about where the responsibility for helping society cope with these universal phenomena like globalization and connectivity lies. And that is with government. There are governments that have done a great job at helping their societies adjust and compensate for the rise in globalization and connectivity and there are governments that have not. If you ask me what the greatest risk facing our society is today, it’s that governments will take a laissez-faire approach to managing connectivity. 

Ed: Does that mean that connectivity is creating winners and losers?

There is certainly a perception that it is. Connectivity is what allowed manufacturing jobs to be offshored to the Asian Tigers in the 1990s and that has led to the hollowing out of the manufacturing sector in some countries. Where governments have done a poor job managing that evolution, there have certainly been some losers.

Then there are places that have been without even basic infrastructure and, in many cases, digital connectivity can help them solve that. Platform solutions, energy-saving utilities, mobile broadband, telemedicine — these are all ways that governments can leverage connectivity to reduce the cost of their infrastructure while still delivering basic government services. And these would be the most obvious winners.

But I would argue that — particularly in today’s political environment — there is far too much talk about who gains and who loses from connectivity. All evidence suggests that, when properly managed, everyone gains. 

Ed: Are we seeing the rise of a new world order led by those with the best connectivity?

I think we are seeing the rise of regions rather than nations. I always use the Trans-Pacific Partnership (TPP) and the Asian Infrastructure Investment Bank (AIIB) as two examples of regional connectivity. These initiatives involve dozens of countries working together to improve physical and social connectivity, to enhance supply chain integration, and to create trade and investment opportunities.

There are two ways you can look at these types of initiatives. On the one hand, you can take the functional perspective which would argue that more cross-border infrastructure and initiatives promotes national development and the fulfillment of competitive advantage, and this, in turn, makes the world a better and more secure place. On the other hand, you could take the national perspective and argue that these agreements weaken existing institutions and national borders and therefore pose a threat to society.

Yet I would suggest that organizations like the AIIB wouldn’t exist today if our existing institutions hadn’t dropped the ball on infrastructure investment and financing in the 1960s. Over 60 years of management by our existing institutions has led us to massive multi-decade market failures in infrastructure finance. 

So I don’t know if I’d classify it as a new world order. But I would argue that any initiatives that promote regional integration are inherently good.

Ed: Can you measure the value that connectivity adds to an economy or city?

At a project or program level, it’s often possible to calculate the return on investment for a specific piece of infrastructure and the value it creates for society and the economy. But at a macro level, it is almost impossible.

The reality is that our cities and our national economies are already so interconnected through trade, investment, supply chains and technology transfers that you simply can’t separate what is endogenous economic value and what is a result of connectivity. You can’t strip out all of the inputs and outputs, all of the movement of people, ideas and resources, all of the value of the physical and digital flows in and out of a city or a country.

You’d be better off studying quantum physics than economics if you want to try to untangle the intangible and pervasive role that connectivity plays in our world today.

Ed: So how can infrastructure decision-makers improve their chances of becoming winners in a connected world?

I think infrastructure planners and owners need to be doing two things. First and foremost, they need to continue looking after the basics. They need to be investing, encouraging PPPs and maintaining their assets. Part of that is making sure that infrastructure assets are properly accounted for and that sufficient investment is being made into their renewal. 

They also need to be thinking about their active strategy — what they want to achieve, what assets they need and how they plan to pay for them. But the goal shouldn’t simply be to improve connectivity. You need to think carefully about how much connectivity you need, where you need it and what value it delivers. 

Ed: What should developers, contractors and suppliers be doing to respond to the shift toward connectography?

They are the real agents of connectivity. So they have no reason to rethink their value proposition in this equation. Particularly in this golden age of infrastructure.

There are certainly things that the industry could be doing to improve the value of connectivity. They could be thinking more about the longevity and adaptability of their assets and then creating bundles of assets that are as cost-effective as possible. But, overall, I think the industry — particularly the bigger global players — is at the center of connectivity today.  

Ed: You seem very optimistic about connectivity and connectography. What is your vision for the future?

As I say in my book, I see connectography as a hopeful vision for the future. I see a world where new energy discoveries and innovations have eliminated the need for resource wars, global financial assets are being deployed to build productive infrastructure that can reduce inequality, and frail regions such as Africa and the Middle East are unscrambling their fraught colonial borders through ambitious new transportation corridors and power grids.

Beneath the chaos of a world that appears to be falling apart is a new foundation pulling it together. And that is our collective connectivity.

This interview was originally published in KPMG Insight. Click here to download the entire article.