Summary:
- Infrastructure’s value goes beyond the physical asset: When it works well, infrastructure creates predictability, enabling people and businesses to plan, invest, and build trust in the systems around them.
- Infrastructure that exists is not necessarily infrastructure that works: Its usefulness depends on what people can reliably do because of it, not simply whether an airport, road, port, school, or other asset has been built.
- Market-creating innovations can help make infrastructure useful: By expanding access, creating demand, and strengthening the systems around infrastructure, these innovations can turn underused assets into engines of greater economic participation, productivity, and predictability.
My team and I recently returned from a trip to Nigeria where we worked with an organization over a few days to design an innovation program. During the trip, we experienced and observed that virtually every session began and ended late, many attendees had flights delayed or cancelled with minimal notice, and what struck me most was how normal this seemed. Predictable planning was almost impossible.
I have thought about this since the event and it has made me wonder what makes infrastructure truly useful in a country?
In The Prosperity Paradox, we define infrastructure as the most efficient mechanism a society has developed to store or distribute value. What we didn’t describe, and what we have since learned, is that infrastructure builds predictability into an economy and it fosters trust. Consider the following example. When two cities build airports and airlines offer passengers flights from one city to the other, that instantly increases the predictability of socio-economic activity between those cities. Thus, over time, as people experience predictable flights between cities, their trust in the system that fosters air travel grows. They can plan. They can invest. They can predict what future travel might look like.
The same thing happens with any other infrastructure built. From schools and healthcare systems to roads and ports. These infrastructures are designed to store or distribute value. But they are also designed to build and foster trust in the economy. This, in effect, is the invisible usefulness of infrastructure. It provides comfort to citizens, investors, and entrepreneurs. Infrastructure, when designed properly, can promote growth and foster investment.
The important distinction, then, is between infrastructure that exists and infrastructure that works. An airport may be a physical asset, but its economic value depends on what it enables people to reliably do. If travelers cannot count on flights departing, businesses cannot confidently schedule meetings, workers cannot reliably get to jobs, and investors cannot plan around the movement of people and goods, the infrastructure is failing at one of its most important functions: creating predictability. Infrastructure is only as useful as the trust it creates in the system around it.
And this is exactly the case with much of the infrastructure we encountered in Nigeria, especially air travel. The existing infrastructure is not useful for planning. I observed people’s flights getting delayed by hours or getting canceled altogether. Some lucky ones got a message from airlines. Many didn’t. Perhaps the most surprising thing is that most people had come to expect it. This has become the norm.
In a system where infrastructure cannot be relied upon to foster trust and predictability in an economy, it loses much of its value.
Making infrastructure useful
In a recent piece in Semafor, Bright Simons describes the missing link in Africa’s infrastructure boom. Simons writes, “I’ve become increasingly convinced by the idea of “corridor finance” because it offers a compelling explanation for why so many continental megaprojects struggle. Serious investors are beginning to realize that individual mega-assets in Africa struggle because, without various other pieces of infrastructure — call them dependencies or feeder nodes — these assets take much longer to fully come onstream, if at all.”
In our research, we call these dependencies, market-creating innovations. These innovations transform complicated and expensive products into simple and affordable ones. They make them more accessible to a whole new set of the population called nonconsumers. When this happens, there is enough demand to fill the capacity of the infrastructure.
For example, before standardized shipping containers, moving goods between ships, trains, and trucks was slow, expensive, and labor-intensive. The container was a market-creating innovation because it dramatically reduced the cost and complexity of moving goods, which expanded the market and made complementary infrastructure, from ports and cranes to ships, rail lines, and highways far more valuable. The innovation and the infrastructure reinforced each other. All this led to more predictable shipping. One can now make something in Germany and reliably have it shipped to South Africa.
I have learned that the outcome we want is not necessarily the solution we need to achieve it. More infrastructure is not the outcome; greater economic participation, productivity, and predictability are. The real opportunity is to design the innovations, markets, and systems that make infrastructure useful, predictable, and trusted. For infrastructure developers, a simple question worth asking is: does this piece of infrastructure make our society more or less predictable?
