What is govtech? | Water: the new petroleum

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To our Australian compatriots we say: you can sit this intro out. You don't even get what this last year has been like, what with your cinemas, carefree high fives, and cute five-day lockdowns that apparently cause mass debates about government overreach.

Some of us are in month four of the third full lockdown since....

How has it been one year?

Jokes aside, we count ourselves lucky. As the US passes a grim milestone, it's sobering to think that we'll never know the full cost of lives lost and futures abridged by Covid-19. Silly memes about the lockdown blues are just our way of delivering a small dose of mental relief.

This week:

🏛 Time to take ‘govtech’ seriously - why start-ups might hold the key to rebuilding trust in government.

🚰 Water: the new petroleum - but we can avoid conflict over it if we’re smart.

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🏛 Time to take govtech seriously

The nine most terrifying words in the English language are: I'm from the Government, and I'm here to help.
- Former US President Ronald Reagan

Regardless of your politics, you're probably aware of that quote. So effective was Ronny at political sloganeering that I'll bet that when you read 'govtech', your eyes narrowed and you furtively locked the front door.

To be fair, govtech does sound like oxymoronic doublespeak. But we need to get comfortable with the term because we think it is here to stay.

First up, what is govtech?

'Public tech' is the catch-all term used to describe private companies, often start ups, that build technology products in the general public interest. Public tech is then broken into three broad categories:

  1. Govtech (b2g) 👉 tech products sold to governments for the purpose of making government and public services better.

    Eg: Prime Gov - a company that helps local governments run meetings, manage agendas, and engage with constituents.

  1. Regtech (b2b)👉 tech products that help companies comply with regulations simply and efficiently, particularly in the finance industry.

    Eg: Duedil - a tech platform designed to help companies comply with 'know your customer' laws.

  1. Civic tech (b2c) 👉 community centric tech products that help citizens engage with their government and each other.

    Eg: Timecounts - software making it easier for organisers to recruit and organise volunteers for charitable purposes.

Govtech - a huge but frustrating opportunity

Governments spend about US$11 trillion globally on purchasing goods and services from the private sector. That's a 12% share of global GDP, a share of GDP that remains consistent across both high and low income countries.

Govtech presents an enormous opportunity for start ups and early stage investors. So why is the industry 'only' worth about ~US$325 billion, or just a little more than the global bottled water market?

  • 💵 Procurement rules (aka rules about what and how governments can buy things)

Procurement rules are important. They’re designed to prevent corruption, but they’re often needlessly complex. Ironically, that complexity allows space for more corruption, and then helps hide it from detection.

For example, the US reformed its rules around working with cloud-computing companies in 2014, when it managed to shorten the approval time for applicants from 18 months to 4 months, while maintaining security standards. This has allowed innovative start ups to compete for government work when previously they might not have survived such a long approval process.

  • 😵 Tech illiteracy in the public sector

Approximately 40% of global public sector employees are older than 50 - a  percentage that would skyrocket if it counted only 'public sector employees with decision making power'. So it's no surprise that the vast majority of global government employees are not tech literate.

It's unreasonable to expect a generation that didn't grow up with computing technology to handle tech’s integration into the public sector. This problem will self-correct as millennials begin to move into high office, but that won't be a fast process.

  • ⚡ Risk aversion

Governments are famously risk averse and their approach to govtech is no different. And fair enough - government is not the place to "move fast and break things".

But a bureaucracy that still uses a 61 year old programming language cannot look its citizens in the eye and tell us they’re doing their best.

Balancing risk and reward will always be the work of bureaucracies. But too often governments’ default position is to minimise risk above all else, often to the detriment of effective public services.

It's about trust in government, not just easier tax returns

There's a reason we began with a quote from The Gipper. Starting in the 1980s, the political argument for 'limiting the role of government' has been increasingly confused with 'limiting the effectiveness of government'. That's a big reason why trust in government is at an all time low.

A modern, efficient government is in the interests of its citizens, whatever your political beliefs:

[M]oney spent rebuilding democracy’s reputation and ageing infrastructure is not wasted: [it is] constructive, urgently needed and demonstrably in the interests of businesses... which believe high-functioning democracies are good for their bottom line.
- Robyn Scott, CEO of Apolitical

As ideological competition for the hearts and minds of the world re-emerges, models of efficient government and public administration become more important than simple value for taxpayer money.

China's remarkable modernisation and development since the 1980s is a persuasive example of the benefits of an autocratic government. Critics of liberal democracies can also point to the slow pace of progress and the short-sightedness of political leaders held hostage by an electoral cycle.

For the govtech industry to be successful, finding ways around the vagaries of the electoral cycle will be key. Few politicians will gladly accept the short-term risk of new technology going wrong on their watch.

But over the long term, govtech can reform the way public services are provided, delivering more for less and increasing citizens' trust in government. If, 50 years from now, democratic governments around the world are thriving, govtech will be a key reason why.

🚰 Water: the new petroleum

A wise (mer)man once said: ‘water is the essence of wetness, and wetness is the essence of beauty.’ 💦

Turns out this poetic line was incomplete. Water, or lack thereof, will also be a big driver of global political and economic woes this century.

But there’s good news. We think that water management might be one global issue we can... manage – as long as we’ve got the political will to do so.

Water, water everywhere, nor any drop to drink

Only 1% of Earth's water is actually liquid freshwater. The rest is frozen freshwater (2%) or seawater (97%). 👎🏽

Most liquid freshwater runs through underground aquifers, making it difficult and expensive to access.

From the liquid freshwater we are able to access, a whopping 70% is used for agriculture, 22% for industry, and only 8% for personal uses e.g. drinking or sanitation – stuff that the UN thinks is a basic human right.

Population growth, increasing demand, pollution, unsustainable water use, and climate change-induced droughts all contribute to the increasing scarcity of water.

In fact, scientists believe that half of the world will live in water-stressed areas by 2050. Some clever activists have branded water as the ‘new petroleum’ because of its growing scarcity.

The map below shows the risk that a country will face significant water shortages by 2040 (bright red = highest risk):

Geopolitical hot waters

Access to water has shaped nations for millennia (Ed: this is a fascinating timeline, even if it starts with Noah’s Ark 🤔).

Throughout history, countries have gone to war over water sources. Control of water sources was often leveraged in pursuit of military and political goals (the ol’ well poisoning trick was a favourite of the Assyrians).

Thanks to water scarcity, there has been a startling increase in the number of water conflicts in recent years.

Most conflicts are between domestic groups over issues like unequal access to water. But there’s also an increasing number of disputes between countries over shared water sources such as rivers.

Countries with control of rivers upstream make decisions about water use with little regard for the impact on downstream neighbours.

For example, China’s damming of the Mekong Delta Basin for hydroelectricity restricts the river’s natural flow at the expense of downstream Mekong countries (and the endangered Irrawady river dolphin 😢).

Here are three other river disputes to keep an eye on:

  • 🌊 Indus River: India and Pakistan have a treaty for shared use of the river, but Pakistan says India violates the treaty by building dams to stop its water flow. Oh, and both countries have nuclear weapons.

  • 🌊 Tigris-Euphrates River: Turkey’s extensive use of the river reduced water flow to Syria and Iraq. All sides accuse the others of poor water management - yet another potential trigger for conflict in an unstable and arid region.

  • 🌊 The Nile: Egypt thinks Ethiopia’s dam construction on the Blue Nile is a threat to its national security. Egypt depends almost entirely on the Nile’s downstream flow for household and commercial water uses.

Zooming out: a way out of choppy waters

We’re still optimistic that humanity can get better at managing water and avoid conflict. We’ve got the technology to more efficiently use water, which in turn can help resolve the root causes for tensions around the world.

Some ways forward:

  • Use ‘hydro-diplomacy to promote cooperation and resolve water conflicts. There are also opportunities to help poorer countries to build their economies, i.e. Afghanistan through productive use of its Kabul River source.

  • Repricing water to better reflect its value and prevent waste. Big companies can be incentivised to reduce water waste when money is involved.

  • Reduce water-intensive farming in dry areas that make zero economic sense to farm. (Ed: Us millennials' insatiable tastes for avocado have been a drain on water. 🥑)

  • Fix old water infrastructure and utilities to prevent water loss. For example, India and Cuba estimate almost half their drinking water is lost via leaky pipes.

  • Build a ‘blue economy’ that helps countries move away from farming towards ocean resources for economic growth (there are big opportunities for Africa).

  • Build water markets and tradable water rights that allow farmers in developed countries to better allocate their resources. Australia has been pretty good at this.

  • Continue improving water reuse and desalination technologies so these practices become cheaper and more accessible.

Of course, all this takes political buy-in from nation states and big corporations. And it also takes time, which is slipping away from us.

To paraphrase Benjamin Franklin, we’ll only know the worth of water when the well is dry. Sage advice, because no one wants petroleum to become the new water.

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📰 Looking for more great newsletter content?

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