The Modern City - it’s all down to intelligence and intelligent investment

  • 15 May 2020

  • Infrastructure

Reading time: 7 minutes

How smart is your city? City-living can be demanding at the best of times but if your home metropolis just doesn’t function intelligently its citizens will rapidly lose faith and maybe look elsewhere to put down new roots. Cities are home to more than half of the world’s population, and they are expected to add another 2.5 billion new residents by 2050 making two-thirds of the globe’s inhabitants city dwellers. Our cities will have to become smarter to accommodate this explosive increase without grinding to a halt - literally and metaphorically.

Truly smart cities will have to resolve the questions about the nature of the relationship and interactions between private players and public authorities. Constant measurement to see what’s working and what’s not going so well is important. But the key questions are ‘who collects the data and owns it? Who shares what with whom?’

Pauline Thomson, Senior Investment Manager at Ardian

Data is the answer

Cities are faced with increasing environmental pressures and infrastructure needs—and growing demands from residents who want a better quality of life but at a sustainable cost. Smart technologies can help cities meet these challenges. It all starts with data. Cities, in all their complexity and scope, generate terabyte oceans of it. So, what do investors need to look out for in this space?

The modern discipline of civic analytics is quite recent and has come about through a host of technological changes: the Internet of Things (IoT), cloud computing and modern sensors which transmit data in real time on everything from pollution levels to traffic flow, and from water usage to energy consumption.

Finding the insights in all that data helps municipal governments respond to fluid situations, allocate resources sensibly, and plan for the future. But in the here and now, putting real-time information into the hands of individuals and companies empowers them to make better decisions and play a more active role in shaping the city’s overall performance. Thus, we have smartphone apps such as Citymapper which enables citizens of cities to maximise the use of that data to help them move around. When the Metro is out you hop on an electric scooter.

When McKinsey conducted a 2018 Smart City study it found that existing available applications if used to their full potential have the ability to improve quality of life indicators by 10-30%.

No city gets smart overnight. “The smart city isn’t so much a thing as a process,” says Theo Blackwell, who in 2017 was appointed as London’s first ever Chief Digital Officer. “It basically describes our ability to harness digital data in a tech ecosystem to meet civic outcomes. It’s something that will not be ‘achieved’ as such, we will just get smarter.”

Pauline Thomson, a Senior investment manager at Ardian Infrastructure in Paris, acknowledges. “Truly smart cities will have to resolve the questions about the nature of the relationship and interactions between private players and public authorities. Constant measurement to see what’s working and what’s not going so well is important. But the key questions are ‘who collects the data and owns it? Who shares what with whom?’ We need to give municipalies the ability to leverage on the right data and the right tools for them to best manage all the different interactions between private players and citizens. That way   cities can function in a way that is both inclusive and environmentally sustainable. When it comes to data sharing, it is important to maximise people’s ability to interact with each other. But over and above all of this we have the sense of climate urgency - cities will have to tackle the carbon issue head on.” A combination of private and public investment is clearly the way to go.

Less room for the private car

How the car is dealt with is a central issue to any city wishing to improve its efficiency. Jonathan Hampson was until recently CEO of Zipcar, the car sharing company, in the UK: “It’s increasingly clear that modern city dwellers will soon have outgrown the private car,” he notes. “Far from giving us freedom it now restricts how we live our lives. However autonomous vehicles - which cause such excitement and column inches - are in reality not the answer to all our challenges and way off. I predict shared, electric fleets as the future. As far as the rise of the first and last mile micro mobility is concerned it will grow despite all the photos we see of dumped piles of bikes in China and scooters in the US. For these companies to succeed they must collaborate with city authorities - they cannot impose their tech on a city without collaborative engagement.” The investment pile-in that has occurred in the electric scooter market will rightly make many wary.  

This sense of collaboration is emphasised by Mariano Majan, Remix’s Head of Europe Growth. Remix is an urban transport planning specialist which began life five years ago in San Francisco. “It’s a critical time for cities right now and they have the data-based ability to take better decisions about their future. Take the example of Tampere in Finland. The city realised it needed a new tram line running North-South. It was a big challenge for everyone   But the city made sure it democratised the process - it went out and sought feedback for 8 months. Those running smart cities need to communicate all the time to bring citizens along. Transparency is very important.”  

For most cities an attempt to smarten up has to be made within existing infrastructure . However the supremely self-confident Big Tech companies of Silicon Valley  have long dreamed of creating their own city from the foundations and fibre optic cable up pipes up.  On October 31 2019 a Canadian government agency called Waterfront Toronto gave provisional permission to Sidewalk, a division of Google, to move forward with its plan for a $1.3bn “smart city” on the land by Lake Ontario.

The smart city depends on huge amounts of data being transmitted and analysed, and the citizens themselves will create much of this data. Not surprisingly, worries have been expressed about potential misuse and threats to our privacy. Public authorities also need to tackle this issue head-on and always keep citizens’ privacy rights as a key priority in order for smart cities to remain respectful of their constituents. This issue has emerged during the coronavirus emergency in South Korea where the government has successfully relied on mobile carrier data to track everything from patients who should be isolated to how well people are following limited-movement edicts.

South Korea’s health authorities have even been sending detailed text messages ranging from reminders about handwashing to specific information about people who have tested positive and where they are. The Guardian newspaper in the UK has reported that an example text message read, “A woman in her 60s has just tested positive. Click on the link for the places she visited before she was hospitalized.” The link directs to a list of locations the person visited before she tested positive.

Investment opportunities abound in the area right from early stage VC money right up to huge mature infrastructure businesses. If you think your nearest city is already bustling, just wait. Bank of America Merrill Lynch says the USA alone faces an estimated $3.8 trillion infrastructure gap by 2040. Globally that gap is $18 trillion. Capital is increasingly now being drawn to an area traditionally born by taxpayers.

Mariano Majan, Head of Europe Growth at Remix

"Transportation is not a problem it is an opportunity". Cities must take a step forward and make better decisions for the climate and for the citizens, to design a future that is equitable, safe, sustainable and accessible to all.