November 18, 2015 | permalink
I was honored to participate in last month’s Abraaj Group Annual Forum, held this year in Singapore. The Dubai-based private equity firm is the largest investor in the Global South outside the BRICs, with $9 billion under management. (Forbes recently published a nice profile.)
One of the Abraaj Group’s central tenets is to invest in cities, not nations or regions, and so I was asked to participate in several panels discussing the growth of cities and the logistics networks needed to serve the world’s emerging middle classes. Several photos from the event are below; the group also published a summary report that you can read in its entirety here. I’ve republished the section on our cities panel below – I’m pleased to say I was the one who argued that cities “are where the magic happens.”
Globally, there are now more people living in urban than rural areas, and by midcentury two-thirds of us will be living in cities. The scale of this shift cannot be underestimated – 2.5 billion new urbanites are expected by 2050, nearly 90% of whom will be African and Asian. Neither should we underestimate the implications for how we live our lives – what values we have, what food we consume, what education we desire, and how we vote. Importantly, the urbanization trend we’re seeing play out today differs from that of previous times – it is accelerated, and is largely taking place in growth markets. Today, it is not just about megacities but notably also middle-weight cities that are increasingly driving global growth.
This megatrend is therefore one to watch – for policy makers, investment professionals and business operators alike. Cities matter for a variety of reasons – notably, they are the economic engines of the modern world, with today’s 300 largest cities responsible for roughly half of global GDP. Cities create a critical mass for businesses to grow; and for government spending to be more effective and efficient. At the same time, cities face enormous challenges. Urbanites need infrastructure, housing, transportation, energy, andsanitation – but frequently encounter a significant demand-supply gap.
Ultimately, cities are about people and responding to urban challenges is about understanding what citizens need and want. How do the different pieces of the urban puzzle fit together? Responding to these questions requires truly engaging with urban citizens. As one participant pointed out, one size does not fit all – youcan’t bring Rio to Kabul. Dealing with cities that have developed haphazardly is particularly challenging and necessitates social engineering and an innovative use of technology.
On the bright side, several participants touched on a developing convergence of policymaking, technology, and the investment community in response to ‘emerging cities’. Policymakers are increasingly focused on private-sector solutions to improving energy, healthcare, education, and other hard infrastructure. Not every country is there but a momentum is building where policymakers realize that incentivizing investment is key to economic growth – and to staying in power. Similarly, we’re seeing an increasing appetite among investors – and different types of investors, in some cases with different motivations – to work together to find ways to buy, build, and deliver infrastructure while making very attractive returns.
‘Smart cities’ were presented as a solution to future waves of urbanization. Starting from scratch allows for careful planning, sustainable solutions, and avoidance of the most typical urban problems – notably the entrenchment of inequality that is so common across today’s cities. Understanding the “nexus” of urban needs is decisive to the success of smart cities– notably how energy, food and water interrelate in the urban ecosystem. Once the nexus is addressed, other practicalities can be solved for. Whilst some participants expressed skepticism about the potential of smart cities, there was agreement that they can provide a useful framework for thinking about what makes up a good city. One participant pointed out that it is about community – “great cities ultimately have great communities”.
Whilst urbanization clearly poses challenges, participants were largely optimistic about the future of cities. Referring to cities as compressions of human social networks in space and time, one participant argued that at the borders of these networks “is where magic happens!” Canny solutions are indeed coming out of cities, often driven by sheer necessity. The idea of a “fun city” was discussed, highlighting the importance of thinking about cities from a human perspective rather than as abstract entities. Cities are not just ‘investment destinations’ or ‘infrastructure challenges’ – ultimately, they are about the people that inhabit them.
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Greg Lindsay is a generalist, urbanist, futurist, and speaker. He is a non-resident senior fellow of the Arizona State University Threatcasting Lab, a non-resident senior fellow of MIT’s Future Urban Collectives Lab, and a non-resident senior fellow of the Atlantic Council’s Scowcroft Strategy Initiative. He was the founding chief communications officer of Climate Alpha and remains a senior advisor. Previously, he was an urban tech fellow at Cornell Tech’s Jacobs Institute, where he explored the implications of AI and augmented reality at urban scale.
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