Our country is at an inflection point, a time of enormous technological and economic potential in which the economy has the capacity to astonish in terms of increased productivity. Think of 5G networks; smart cities; seamless, driverless vehicle clusters; and the explosion of new jobs that entrepreneurs would create around these investments.
What is the key to reaching out and creating that future, driving growth and sustaining new opportunities? We must urgently identify strategic infrastructure projects and make investments as quickly as possible in these projects — highlighting that investment as a national security priority.
There is no Republican or Democratic infrastructure. There is only the past (“doing things the way we’ve always done them”) and the future — having the courage and will to change the infrastructure business model and create budgetary channels that match our love of country with our obligation to the future.
The outline of the infrastructure plan released by the Trump administration goes a good way in recognizing these facts — and admits at the same time that there are not enough federal dollars to address these increasingly urgent strategic priorities.
We need to get moving by answering three questions:
First, how do we create new sources of investment in our strategic infrastructure? For the U.S. to double our infrastructure investment — add another $150 billion a year for 10 years — the answer is straightforward.
As much as two-thirds of the total, or $100 billion, must come from states, municipalities and federal agencies shedding or recycling their assets. Detroit doesn’t need to own and operate its waterworks, and Washington, D.C., doesn’t need to own its transit system (or its rail cars). Tactical sales of the $6 trillion to $7 trillion in capital assets controlled by the public sector (86 percent owned by states and municipalities) should pay for upgrading our old infrastructure and for investing in new, imaginative and transformative projects.
The remaining $50 billion in annual investment will come from more direct private investment — public/private partnerships, performance contracts, long-term leases. These investments will prioritize areas in which new technology is transformative in terms of the user experience: transit and water systems, public lighting and hospitals, and land value capture (think of the real estate and air rights controlled by Amtrak).
Second, how can we modernize the roles of the public and private sectors to enable that investment? There is almost a textbook answer from the “thinking fast, thinking slow” paradigm.
The public sector makes the best decisions about long-term performance — including how that is priced, what we get, and the speed and reliability of enforcement of agreements. A smart, competent and strategic public sector is critical. “Thinking fast” is what the private sector does best, especially technology, the new player on the infrastructure block. The infrastructure universe of the future will look nothing like our parent’s universe. It will be different in everything from the design of projects we prioritize (getting health and mobility right, creating opportunities) to who owns projects (you and me) to the overall driver of innovation (the user experience).
So “who does what?” is critical — and smartly summed up in what an enlightened public official once told me, pointing at a half-filled glass of water: “Before, we prescribed to the private sector everything about that glass, including the type, thickness, conditions, etc. Now we just tell them what it has to do; we tell them the performance metrics and then enforce that.”
The public sector prescribes and enforces; the private sector does. Every single year for the 30 to 40 years of a project’s life, a new generation of technology will be available. The public sector will have to be fleet in gathering and organizing performance information while the private sector will need to constantly make the investments required to improve performance and efficiency of operation.
Third, who should own our infrastructure? This is a high-level issue that is not settled and the answer transforms infrastructure into an opportunity for all of us. Right now, we think we own our infrastructure, but it’s actually owned by what might be called the “cold hand” of a public trust managed by professionals who are starved of resources and hamstrung by miles of red tape.
Ownership drives accountability, which drives performance, and we have too little of all three. As the CEO of a large city transit system (one of the many unsung heroes of U.S. infrastructure) told me when pointing out a new ticketing system: “Because of public procurement, the best I can do is buy 3-year-old technology; the company almost couldn’t supply the technology since they don’t make it anymore.”
Who should own our infrastructure? We should. There are three new channels that we need to build for private infrastructure investment to take off: (1) for pension funds, including union pension funds, investments mirroring the life cycle and return profiles of the assets; (2) for engineering/construction and infrastructure management firms, since ownership of assets will enable these firms to deepen their balance sheets, invest robustly and innovate aggressively; and (3) perhaps most interesting of all, for retail investors — you and me — should be able to directly acquire assets like the I-495 managed-lanes project in Virginia or LaGuardia Airport in New York. Skin in the game matters. We need to tell our public officials that we want ownership.
So why is this relevant? If we answer these questions with boldness and creativity we will start an infrastructure revolution in our country, one that will double our level of infrastructure investment, consistently add a point to our GDP, create enormous opportunities for all of us, and symbolize for our citizens — and for the world — the enormous power of optimism that honoring our obligation to the future creates in all of us. What are we waiting for?
• Norman F. Anderson is the Founder and CEO of CG/LA Infrastructure, a global infrastructure strategy firm. He also founded Blueprint 2025, a 100 CEO initiative to build the next generation of U.S. infrastructure. He is a member of the BuildCoin Foundation advisory board and a regular contributor to CNBC, Bloomberg and Fox Business News. Follow him on Twitter @anderson_norman.