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The Power of Water: A Key Resource of the 21st Century

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In light of my upcoming trip to Asia in April, I read much of David McCullough's book on the Johnstown Flood. For those unfamiliar with the flood, some history: During a very wet period in 1889, a private dam burst on a reservoir high above Johnstown, Pa. and the resulting torrent of water destroyed virtually everything in its path, including several villages and the city of Johnstown. More than 2,000 people and even more animals were killed. Residents saw the situation as Judgment Day and the destruction wrought by the water, the debris it carried and a massive fire that ensued was attributed to the power of God.

The power of water has been experienced in Asia, too. The Asian tsunami of 2004 was estimated to have killed 230,000 people while devastating the countryside throughout South Asia. In 2011, an earthquake and resulting tsunami caused a major radiation discharge when the Japanese nuclear plant at Fukushima Daiichi was damaged. This disaster dramatically reduced people's confidence in the nuclear power industry worldwide.

In the future, water shortages created by climate change, population growth, pollution and waste will have many implications. Asian powerhouse cities in China, India and Thailand are located in places where water is vital to the economy and prosperity. Yet, even where water is abundant, its accessibility is limited. Over time, this will limit economic growth and development; for example, the western United States relies heavily on the Colorado River basin for water -- so much so that the river is virtually nonexistent at the point in Mexico where it meets the Pacific Ocean.

In my discussions with alumni and executives in South Asia, one of the interesting questions raised was about water and how governments will meet the needs of residents and industries while coping with population growth. Much of the available water in these regions is not fit for consumption, and climate change will likely generate national security issues as governments seek to ensure a supply adequate for national needs.

Many budding entrepreneurs have seized on the notion that water will become the key resource of the latter part of the 21st century and conflict will likely arise between nations without an adequate supply. In the United States, it is estimated that the Colorado River has insufficient water to provide an adequate supply for many major western cities. A similar situation exists in India, China and many Asian countries. It is not clear whether this makes regions with abundant water prosperous, but it does suggest the importance of investment in the water sector.

My purpose is not to identify places or companies in which to invest; instead it is to point out that the power of water -- as demonstrated by floods and tsunamis, as well as the capacity to support commerce -- is going to be seen in a different way in coming years. Water will be increasingly important to commerce.

Business schools need to look at the subsequent challenges and prepare students to find solutions and opportunities to generate profit and support society. Some will do so through creation of investment vehicles in which people will support water infrastructure, treatment facilities and desalination plants. One group will do so through consulting jobs aimed at improving management and use of water. Some will focus on sustainable practices and educate students to adopt approaches that offer optimal ways to use available water. Others will make assessments regarding the impact of water on agriculture, trade and shortages of food and agricultural commodities.

Business schools in the developed world will have an additional challenge of getting students to appreciate the available water supply without taking it for granted. It will also be necessary to re-think approaches that treat water pollution as an externality that firms may choose to ignore. The water challenge is one that will worsen because of current trends. At the same time, it will provide an opportunity for today's and tomorrow's leaders to anticipate how it will change patterns in the economy and affect people's lives.