Ten things I learned in Madrid
Published April 27th, 2017
GWI hosted the eleventh Global Water Summit in Madrid earlier this week. Here are my key take-aways from the event:
1) Robots and dogs will take our jobs: The opening keynote speaker was Martin Ford, award-winning author of Rise of the Robots. His thesis is that the relentless speed at which computing power is developing is undermining both wages and employment – even in white-collar sectors, and that this will undermine the global economy unless there is a way of dissociating income from work. It was an interesting analysis, but somewhat overshadowed by our second keynote. Water Corporation of Western Australia CEO Sue Murphy has been at the forefront of using technology to engage customers in the challenges the utility is facing as a result of long-term climate change, but she thinks she has found something better than an app: leak detection dogs. Apparently they can sniff out leaks of chlorinated water even in the rain, and dressed in specially adapted Water Corporation uniforms on the streets of Perth, they are much better at winning the hearts and minds of customers than any robot.
2) Digital is a patchwork quilt in the making: I booked Martin Ford because I thought his talk would help frame the discussion of digital technologies that was one of the themes of the conference. My take-away from these discussions was that at the moment there is no such thing as the “digital market”. What we have is a lot of different platforms, protocols and solutions each targeting different areas of utility activity, and selling to a relatively limited number of early adopters. It means that there is a divide between the way utility customers understand digital and the way the technology suppliers understand it. The customers look at it as part of a solution to a particular problem they need to confront (e.g. leakage, billing, customer communications, hydraulic modelling), while suppliers tend to be more focused on the end-game, when all these different digital patches are sewn into a single quilt.
3) Don’t bank on crazy money from China: A handful of Chinese companies attended the summit, and they were much more integrated into the event than they have been in the past, taking part in round-table discussions and fixing up one-to-one meetings with gusto. I detect a maturing of attitudes towards international opportunities. I think the time when Chinese companies enjoyed such stupendous valuations on the domestic stock exchange that they had the firepower to out-gun any other bidder in the pursuit of international acquisitions is over. The pressure to invest overseas is still there (the domestic market is becoming more competitive as it slows down), but there is a much greater interest in ensuring deals are successful in the long term. That said, there was a consensus among summit delegates that the next big water deal – the sale of Evoqua – will go to China.
4) Evoqua probably won’t go Chinese: Although the summit audience voted to say that it will, my feeling is that it has a good future as an independent company. I sat with the Evoqua team at the Global Water Awards dinner, and I think they have a good story to tell, either to IPO investors or to a follow-on private equity investor if current owner AEA wants to sell. They have established good channels to market at a time when there are a lot of small companies with good technologies struggling to reach customers. That makes it a great consolidation play – as long as it doesn’t push things too quickly. 25 years ago, there was a similar opportunity to roll up the water technology industry, which a company called USFilter seized and built an $8 billion company. It never digested its acquisitions, and all that is left of that behemoth today is Evoqua.
5) The situation in Iran is cautiously optimistic: We kicked off the event with a pre-conference workshop on opportunities in the Iranian market. It was a little more upbeat than I expected. The AIIB is investing $600 million in an Iranian wastewater fund, and Donald Trump seems to have forgotten about his plans to re-impose sanctions.
6) There is conditional excitement in Saudi Arabia: The session on Saudi Arabia was overshadowed by the sense that we might have heard the story all before, but despite this, there was a scrum of people wanting to talk to Saline Water Conversion Corporation governor Ali Al-Hazmi when the proceedings where over.
7) Not just yet for Argentina: The session entitled “Transforming Argentina’s Water Sector” was met with similar mixed feelings. On the one hand, the opportunities are huge, but on the other hand, the memories of the catastrophic losses suffered by foreign companies in the wake of the 2001 peso devaluation are still remarkably fresh.
8) The AIIB could be a game-changer: The Asian Infrastructure Investment Bank sent senior staffer Sylvester Hsu to represent it at the conference. He was remarkably engaging to talk to, and although the bank is starting to deploy its $100 billion balance sheet cautiously, one feels that it has much greater freedom to act than the World Bank (which has to worry about pleasing too many different stakeholders, and as a result struggles to be bold).
9) Waste to energy has not gone away: The session which got the highest ratings from the audience was on “Water, Waste, Energy Synergies” – a technology theme which seems to be growing stronger even as energy costs remain low. FCC Aqualia parked proof of this in the foyer of the conference hotel. It was a car powered by compressed natural gas from wastewater biosolids, co-developed with a Spanish auto manufacturer. You could call it a toilet SEAT.
10) If you want to concentrate, work in a café: This year’s Global Water Awards speaker was Nassim Nicholas Taleb. He is most famous for his book The Black Swan, but he chose to focus on another of his books, Antifragile, in his speech. The idea is that systems that normally do well collapse in a crisis, and are thus dangerous because crises are inevitable. Instead, we need to build systems that become stronger when things go wrong. That is why he spends his time doing mathematical puzzles in cafés these days. His hedge fund made so much money during the financial crisis that he doesn’t have to work any more, and he can do what he likes – solve probability problems – instead. And the best place to do them is in cafés, because whenever he is distracted, he has to concentrate harder.