This document summarizes a presentation on myths, realities and money related to long term infrastructure management. It examines societal myths that impact infrastructure, such as beliefs that countries like the US and Canada are declining. However, data from indices on development, prosperity and competitiveness show these countries remain among the best in the world. The realities of managing infrastructure over its lifecycle, including service levels, growth, risk and lifecycle costs are discussed. The impact of money and difficulties funding the over $1 trillion per year estimated global infrastructure gap are also covered.

1. 2016 International
Deighton User Conference
Ross Waugh, July 2016
http://inframanage.com

2. Myths, Realities and Money
• Societal Myths and Impact on Infrastructure
• Realities of long term infrastructure management
• Availability of Money and the willingness to pay for
infrastructure

3. Societal Myths
Examining the Societal Myths our Politicians and we tell
ourselves and the impact this has on Infrastructure
Management

4. Gap Minder Ignorance Study
Hans Rosling
Why so ignorant? 20-30 years out of
date
1. Your own experience is not
representative i.e. Personal bias
2. Outdated facts (taught at school)
3. News Bias
= skewed information + intuition gives
upside down view of the world
http://www.gapminder.org/ignorance/

5. “Last one out turn off the lights” - NZ
Recession 1987-1995 (8 years)
• Unemployment 12%
• House Interest 20.5%
• NZ Govt. Debt 50% GDP
• People moved to Australia
during this period (2%pa)
• No Training – gap now
• Minimal Infrastructure
investment
• Infrastructure capital
consumed
• Took a decade + to recover

6. New Zealand Now – 30 years later
• One of top 10 countries across a range of indicators
• Generally a very good lifestyle
• Prosperous and safe
• Well governed
• Infrastructure getting better (still a young country)

7. Societal Myths
• USA and Canada going down the gurgler!!!!!
• Long decline from now onwards for USA and
Canada
• The best is already past us
• We have had it better than our children ever will
• USA is becoming a 3rd World Country
Is this in fact true??

8. USA is 3rd World – no that would
be Haiti
• US Presidential
Candidates and
Congressmen –
“USA is becoming
3rd world
country”
• 10 signs the USA
is becoming a
third world
country (Google
fills in the search)

9. Not even close – USA 25% of
World GDP
• The United States, the
world's largest economy, is
approximately 25 percent of
world GDP, while the seven
largest economies, including
the European Union,
compose 75 percent of the
total.
• By Zach Vega - Own work, CC BY-SA 4.0,
https://commons.wikimedia.org/w/index.php?curid
=49064021

10. USA and Canada G7

11. UN Human Development Index -
2015
HDI - Life Expectancy, Education,
Income per capita
• 1 Norway (.944)
• 2 Australia (.935)
• 8 USA (.915)
• 9=Canada (.913)
• 9=NZ (.913)
• 14 UK (.907)
• 163 Haiti (.483)

12. WEF Global Competitiveness US
3, Canada 13

13. WEF Global Competitiveness -
Infrastructure
• 1 Hong Kong – 6.7
• 2 Singapore – 6.5
• 3 Netherlands – 6.3
• 5 Japan – 6.2
• 9 UK – 6.0
• 11 US – 5.9
• 14 Canada – 5.7
• 16 Australia – 5.7
• 28 NZ – 5.2

14. 2016 IMD World Competitiveness
• USA 3rd overall
• Canada 10th
overall
• NZ 16th overall
• Australia 17th
overall
• USA 1st Economy
• USA 1st
Infrastructure

15. Prosperity – Legatum 2015
Prosperity Index
Categories
• Economy
• Entrepreneurship and
Opportunity
• Governance (NZ=2)
• Education (Australia=1)
• Health (US=1)
• Safety and Security (US=33)
• Personal Freedom
(Canada=1)
• Social Capital (NZ=1)
Rank
1 Norway
2 Switzerland
3 Denmark
4 New Zealand
5 Sweden
6 Canada
7 Australia
11 United States
15 United Kingdom

16. Legatum Prosperity Index 2015

17. Global Middle Class:
Annual Disposable Income
per household member,
2005 PPP
• Canada #1 $16,394
• USA #2 $15,732
• Australia #3 $14,759
• UK $13,867
• Russia $7,641
• China $3,204
• India $859
http://www.economist.com/blogs/graphicde
tail/2016/04/daily-chart-17

18. Social Progress Index – Canada 6,
USA 16
• Blue dot, basic
human needs
• Brown dot,
foundations of
wellbeing
• Green dot,
opportunity
• NZ 5
• Canada 6
• Australia 10
• UK 11
• USA 16
http://www.socialprogressimperat
ive.org/data/spi#performance/cou
ntries/spi/dim1,dim2,dim3

19. So if it is not true - US/Canada are doing great,
Why does it feel like it is all going wrong?
Why, when all the objective evidence points to USA
and Canada being great economically and socially do
we feel that it is all going wrong:
• Megaphone effect of media and internet
magnifying problems and extremes
• High unemployment during the recession
• Higher inequality during the recession (US, UK,
Japan, NZ)
• Diminished Expectation (but end of recession)
• Geopolitical considerations

20. US Unemployment high, earnings flat
(U6 part time due to purely economic
reasons)
• http://www.macrotrends.net/1377/u6-unemployment-rate
• http://www.economist.com/news/briefing/21699910-arguments-state-stipend-
payable-all-citizens-are-being-heard-more-widely-sighing

21. Equality – really big
recessions don’t help
• Society more unequal
• Rich getting richer
• Poor getting poorer
• System unfair
• Can’t get ahead
• USA 0.06 Gini change 1985-
2013
• NZ, Sweden 0.07 Gini change
1985-2013
http://www.economist.com/news/briefing/21699910-arguments-
state-stipend-payable-all-citizens-are-being-heard-more-widely-
sighing

22. Expectation – the world is getting
worse? I can’t get ahead
• Safety and security – felt
issues
• Employment – felt issue
• Pace of change – will I
have a job?
• Cost of college
• Will there be jobs for my
children?
• On-going wars
• Civil issues, inequality

23. Reaction - Technological
Revolution, Recession and War
• Industrial Revolution 1760 – 1840
• Luddites (skilled textile workers) rioted and
broke machines 1811
• Technological Revolution 1980’s+
• Internet Age 1990’s+
• Massive ongoing structural shifts in society
• 2008-2016 Massive recession - effects 8
years
• Ongoing wars worldwide (megaphone)
• Creates huge societal uncertainty

24. Niall Ferguson, US Recession
Inflection Point – February 2016
Barron’s: The U.S. economy has been growing by only
2% to 3% a year. Why isn’t it firing on all cylinders?
Ferguson: There are at least three theories.
• The seven-year hangover theory – Feb 2016
inflection
• The secular-stagnation theory -the economy is in a
depressed state (low interest rates support this)
• Geopolitical - growth in modern American history has
tended to be high at times of national strength and
low at times of national weakness. Because, US
weakness affects whole world
US growth isn’t low based on a pretty long-term
average, but it is sluggish compared with the glory days
of the Cold War

25. US Presidential Election 2016
Political Slogans
• Bernie Sanders:
“A future to believe in”
• Donald Trump:
“Make America Great Again”
• Hillary Clinton:
“Hillary for America”
2 out of 3 remaining
candidates touch on this
subject – tapping into
popular sentiment

26. Last Word: Warren Buffett, BH
2015 Annual Report
• Berkshire Hathaway serious money
invested across the US economy
• Energy, Rail, Housing, Consumer Goods,
Insurance, Food, Beverage, Finance
• Spent $5.8b capital on rail 2015
“For 240 years it’s been a terrible mistake to bet
against America, and now is no time to start.
America’s golden goose of commerce and innovation
will continue to lay more and larger eggs. America’s
social security promises will be honored and perhaps
made more generous. And, yes, America’s kids will
live far better than their parents did.”

27. Why does all this matter for
Infrastructure?
• If society believes it is all
going to get worse then it
won’t invest in
infrastructure
• If society believes the best
is yet to come it will invest
in infrastructure
• Infrastructure
professionals have to deal
with the impact of these
societal myths/directions
with a 20 year fact lag

28. Realities of
Infrastructure
Management
Levels of Service, Growth, Risk and Lifecycle Management

29. Service Levels, Growth, Risk,
Lifecycle Management

30. Simple IAM Diagram – gap
analysis

31. Simple IAM Diagram – Review as
necessary

32. Unpacking Service Levels
and Risk
Some alternative ways to look at service levels and risk to stimulate your
thinking
Demand – would be a whole keynote on its own
Lifecycle Management and Optimisation, others will cover this conference

33. Service Levels – Ross new 22LR,
January 2016
• NZ, Firearms not political, big mass shooting in 1990,
tight regulations on ownership and use, NZ = hunting
• Firearms licence – 4 mths, seminar, checking interviews
SERVICE LEVELS
• Boys safe and accurate shooting (bolt action not semi-
auto)
• Teach my younger girls to shoot
• Target shooting
• Varmint shooting
• Practice for hunting calibre rifle
• NZD $1000 budget – rifle + accessories

34. Savage Model 30, Single shot
22LR, Used. $150

35. Norinco JW15S 22LR, 5 shot mag,
new. $300

36. Marlin XT-22R, 22LR, 7 shot mag,
new. $450

37. Ruger American Rimfire 22LR, 10
shot rotary mag new. $550

38. CZ452 American 22LR, 5 shot
mag, new. $870

39. Service Level: Heirloom Quality
• If I add one service level
– Heirloom Quality
• Heirloom quality,
walnut stock, high
quality components
• Plan to hand down to
children, grandchildren
• Price and quality
changes from previous

40. Ruger 77/22, 22LR, 10 shot rotary
mag, Heirloom quality, new. $1,800

41. Service Level: AR Trainer
• If I add one service level – AR
trainer
• 22LR AR configuration
• Pick to match AR being used
• Price and quality changes from
previous
Cpl Willie Apiata, VC, NZ SAS, Kabul

42. S&W M&P 15-22, 22LR, NZ
configuration, 10 shot mag, new.
$1,350

43. Service Level: Olympic Biathlon
• If I add one service
level – Olympic
Biathlon rifle
• 22LR match
configuration
• Price and quality
changes from
previous
Jean Philippe Leguellec, Canada

44. Biathlon - Model 1827F ANSCHÜTZ
Sprint nitrided, 22LR, new. $6,000
approx.

45. Service Level Spread, Cost $150 -
$6,000

46. Actual Rifle Purchased – Ruger
American Rimfire 22LR, Scope,
Suppressor, Bipod, Bag
• $1,080 (bare rifle $550)
• Extra items doubled price

47. Operators = Ammo
• Cheap bulk
• Subsonic
• High velocity
• Match grade
• Load your own
• These decisions affect the result of hitting the
target. What do you need? Do you understand the
trade-offs ?

48. Service Level: Olympic Biathlon
• Not going to use
cheap bulk ammo
• Match grade
• Very carefully
selected

49. Infrastructure Manager = Rifle
operator
• You need to know your system
• You need practice
• You need good technique
• You need skills
• You need to be able to see (scope or sights)
• What you see needs to be properly calibrated
• You need to know what you are aiming for
“If you aim for nothing you will surely hit it”

50. NZ ONRC Service Levels

51. ONRC Service Level Categories
• Value for money
• Safety
• Resilience
• Amenity
• Travel time reliability
• Accessibility

52. NZ Utility Service Level Categories
• Safeguard public health and safety
• Management of environmental impacts
• Response to system / network issues
• Customer satisfaction
• Financial Performance

53. Infrastructure Service Level
DiagramDominimum
Interstate
ServiceLevel
$$
Normal LoS variation
Specialty-Bridge
Do we ever model this?

54. Heritage – US Interstate

55. Speciality – Iconic Bridges
• Boston’s new bridge
• Te Rewa Rewa footbridge

56. LOS-Cost-Risk Diagram

57. What happened in Flint? (1)
LoS
$$
Risk
(Hidden)
ChangeAxis

58. What happened in Flint? (2)
LoS
ChangeAxis
LoS
$$
$$
THRESHOLD
SAFETY AND TRUST
Risk
Cost 10x
or more

59. Follow up effects for Flint & Industry
Risk
ChangeAxis
LoS
$$
$$
THRESHOLD
SAFETY AND TRUST
· Legislation
· Regulations
· Cost of alternative
action
· Litigation
· Societal Cost
· Inspect/Investigate
TRUST LOST

60. Factors of Safety and how to model
and communicate risk trade-offs
• I-35W Mississippi River Bridge
• Built 1967, 140,000 VPD
• Collapse August 1st 2007, 13 died, 145 injured, cost $M 100’s
• Multiple inspections over many years documented risks, issues

61. Walkerton, Canada 2000 WS Incident,
7 die, Half town ill. NZ Impact - $1bn
• NZ Water Safety Plans
• NZ Small WS Treatment and
Source Protection upgrades
(About NZD $1bn capital over a
decade)
• Increased long term operations
and maintenance cost
• Increased level of service (equals
increased cost)

62. Money
The impacts of money and finance on infrastructure
acquisition and management

63. Problem – Infrastructure is taken
for Granted
• Transportation, Water Utility Infrastructure is
‘just there’
• Service Levels ‘generally’ ok - consumers
• Users / Customers don’t see the hidden risk
• More concerned about mobile phone plan,
streaming data, unlimited wifi
• So…..how to express the issues and risks to
decision makers and communities
• Current methods aren’t working as well as
they need to – $ competition is fierce

64. The World needs more
infrastructure 2013-30
• $57 trillion 2013-30
• 2013 2.7t/year spend 4% world GDP
• 2013 estimate 3.7t/year needed
• 1 trillion/year global shortfall for next 17
years
• How to pay for it?
• Existing financing stretched
• New infrastructure also creates ongoing
operations and maintenance costs
http://www.economist.com/news/finance-and-
economics/21599394-world-needs-more-
infrastructure-how-will-it-pay-it-long-and-winding

65. 1 Trillion per Year Worldwide
Infrastructure Funding Gap
• 2013-30, 1 trillion per year
infrastructure funding gap
• Equal to South Korea GDP per
year
• Gap Growing fast
• What to do, how to fund?
• This is a worldwide problem,
not just US, Canada, UK etc.
http://www.economist.com/news/leaders/21599358-how-
get-more-worlds-savings-pay-new-roads-airports-and-
electricity

66. International Investment in Roads
% GDP
Economist, 2011 data
• US well below comparison countries
• Australia 1.25%
• Canada 1.2%
• Japan 0.85%
• NZ 0.7%
• Russia 0.6%
• USA 0.5%
• UK 0.3%
http://www.economist.com/news/united-states/21605932-
country-where-everyone-drives-america-has-shoddy-roads-
bridging-gap

67. US Transportation and Water
Infrastructure Spend – then and now
Economist Diagram -
• 1960 3% GDP Capital, 2% O&M
• 2007 1% GDP Capital, 1.4% O&M
• McKinsey rich country 2007-12
infrastructure spend 2.5% GDP,
should be 3.5% GDP
• 2014 US spending 416b
infrastructure, 2.25% GDP
• US 2015 GDP 18.5t 1%= 185b
extra, +44% on current
• Canada 2014 GDP 1.6t 1%= 16b
extra
http://www.economist.com/node/18620944

68. US Expenditure on Infrastructure
2014 (CBO) – total 416b

69. Impact of Recession on Infrastructure Spend
NZ huge recession 1987-1995 (8 years)
• NZIER Report Diagram

70. Observation of historical expenditure
– Infrastructure Waves
• NZIER Report Diagram

71. Long Term US Infrastructure
Spend % of GDP (CBO)

72. Recession Impact on US
Infrastructure Spend (CBO)

73. Long Term US Infrastructure
Spend Category of Spend (CBO)

74. US Federal and State/Local
Spending on Infrastructure (CBO)

75. Public Infrastructure Expenditure
Issues US (CBO data)
• Large capital spend 1960’s – will create a renewal echo
now or soon
• Long term average spend about 2.5% GDP –
international research suggests 3.5% GDP required
• 2014 spend 416b, 1% GDP 185b extra, +44%
• 2003-2014 – 9% real decrease in expenditure
• 2003-2014 – 23% decrease in capital expenditure
• Federal spending (about 25%) has dropped more than
State and Local spending
It is easy to underinvest in infrastructure in recessions, as
the results don’t show up for some time

76. How to engage governance and
community?
• Infrastructure taken for granted until it is broken
• Risk and consequences are very poorly understood
• Reluctance to invest – higher taxes, charges
• More pressing societal needs – security, data plans
• Infrastructure getting more sophisticated (more add-
ons to system) = more expensive
• Higher service levels expected (e.g. water treatment)
• Capital investment down, renewals coming, risks
increasing, factors of safety unknown
• How to communicate this?

77. Yes – Good dTIMs model results
• Network Return In Functional Condition (Condition
Index) in 2034 – Various Budget Levels
IIMM 2015 Manual, Case Study 4.15: Using Optimised Decision Tools on a Small Sealed Road Network

78. No – Engineer with too many
parameters

79. All Blacks – France, Rugby World
Cup 2015
• 62-13 full time result, All Blacks

80. Broncos-Panthers, Super Bowl 50,
2016
• 24-10 full time result – Broncos

81. Game 1, 2016 NBA Final Series
• Warriors-Cavaliers
• 104-89 Warriors

82. Sport – Consistent Scoring Wins
the Game

83. Infrastructure – consistent
investment wins, so why do we think
we can do this?

84. Conclusion
Some thoughts to take away

85. Conclusion
• Dealing with societal myths is an issue for
infrastructure managers – 20 year lag
• Levels of service need to be modelled across the
range from least provision to specialist assets
• Risk, cost , level of service trade-off – how to model
and how to communicate?
• Risk Factors of safety and maintaining trust
• Communicating the advantages of consistent
investment at the ‘right’ level

86. Questions
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