30 Jan3 must haves for great infrastructure: Stuff worth knowing from The Bankers’ Plumber

Delays, strikes, chaos, misery. Four words that belong in any sentence that starts “Trains in Britain”. Air travel, French air traffic control, strikes, delays.  Four words that anybody who travels by air in Europe will be familiar with.

The impact of shortcomings in national infrastructure goes a long way beyond whether we get to work on time. To borrow a phrase from Bob Rubin, former head of Goldman Sachs and Treasury Secretary under Bill Clinton: “… the best social policy is a strong economy, equipping people to be effective in the modern economy.”

I have the good fortune to live in Switzerland, where things work generally and our train service specifically is as legendary as the chocolate. Last year, the new Gotthard base tunnel, a major upgrade to the North-South infrastructure was completed. Click here for more.

Whilst the impact will be felt in many ways and beyond the borders of Switzerland, one statistic demonstrates the value to travellers: the North-South run form Zurich to Lugano has been shortened by 30%. 2 ½ hours is now 1 ¾. That project was given the go ahead in 1992. Success required the long-term view, from the Swiss people and the Swiss government.

In Britain, the impact of those well known shortcomings has now gone well beyond people turning up late for work or getting home late. Fares are so high and service so poor, that people are giving up their jobs. See: “Rail fares six times higher than in Europe“, Jan 3 2017, Graeme Paton, The Times (subscription required), The article quotes research by Sainsbury’s Bank that estimates  230’000 commuters have given up jobs in the last three years with a further 800’000 thinking the same step might be needed in next 12 months.

Wired magazine almost unfailingly has something worth reading in every issue. In the January 2017 edition, an article on how access to the Internet impacts inequality. “Let’s Close the Inequality Gap, One Router at a Time”, by Garrett Neiman piqued my interest. Neimann makes the case that access to a good Broadband service enables the poorest parts of society to properly participate. This is a perfect complement to the point about commuting. Any society needs both things; if people have to travel to work, that needs the right infrastructure. At the same time, as the Internet opens up new work options, we need that broadband infrastructure for those who do not need to commute.

There is rarely a week in which I am not on a plane and most of my flights are short-haul in Europe, so I was intrigued by coverage of research by PWC on the impact of air traffic control (ATC) strikes in Europe.

Two facts stand out from commentary on the report (In German):

  1. The sheer cost of strikes, at some EUR 2 billon per year. Ni surprise that the French lead the pack in terms of strike days.
  2. Without a single European ATC authority, every flight is 42km longer than it needs to be. That happens 27’000 times a day in Europe. 42km has to represent some 8 to 10% of every intra-European flight.

This says that even when the French are not revolting, things are costlier and take longer than necessary. When the French are revolting, it costs the rest of us a real load of money.

At the European level, the EU has clearly failed. Infrastructure matters, yet those who would be Kings in Brussels have not proved able to sort this particular issue out. Too busy are those Eurocrats meddling in smaller things.

There are failing too at national level. The misery of the mess on Southern Rail in Britain was also a result of failings of governance. See: “Southern Rail fiasco ‘caused by ministers’ failings”, Jan 28 2017, Graeme Paton, The Times (subscription required).

The newly elected US administration is on the brink of kicking off a massive infrastructure programme. Money alone is not the answer. A recent New York City subway project cost over 3x what similar projects cost in London and 7.5x of the costs in Paris. Sacre bleu; being outperformed at anything is grating for Uncle Sam, being outperformed by that margin by a nation celebrating the  3-hour week, has to be truly gauling (sic). In “The US Is Getting a Really Bad Deal on Infrastructure”, from the Feb 1 2017 issue of Fortune, the author Stephen Smith cites pandering to special interests, union strong-arming and bureaucratic protection of fiefdoms as root causes of the cost bloat.

Lessons Learned: 

Lesson #1: Time 

Infrastructure requires the long-term view. This is at odds with Wall Street, investors and quarterly numbers. Buffet and Berkshire Hathaway are an exception; an exception which confirms the rule. And, by the way, look at how much they invest in infrastructure.

Lesson #2: Poor infrastructure fuels more inequality 

Without reliable and affordable commuting options, people either can’t get to work or can’t do the job they want to do. Without access to proper broadband at affordable prices or even free, many sections of society will be excluded.

Lesson #3: A proper Target Operating Model and Strong Governance

Successful infrastructure operation requires solid infrastructure, an optimised target operating model and strong leadership. This is not a case of state vs. private, good vs. bad.

It is not necessary that the State dictates what gets done, rather the job needs to equip us with the ability to make choices.

We need to enable people to do the job they want to do. Make it easy to commute, make it easy to fly, make it possible to work from home and enable this at a price that encourages work.

Strong leadership is necessary to ensure that the tolerance of the nefarious practices cited in the Fortune article do not prevail.

The lessons here apply as much to infrastructure in banks as they do to our national infrastructure.

About the Author: I help banks master their post trade processing; optimising, re-engineering, building.

I understand the front-to-back and end-to-end impact of what banks do. That allows me to build the best processes for my clients; ones that deliver on the three key dimensions of Operations: control, capacity and cost.

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