A review of MOVE: Putting America's Infrastructure Back in the Lead by Rosabeth Moss Kanter
325 pp. W. W. Norton & Company. $26.95.
Book Description: America’s transportation finance system has a broken business model. It needs to be fundamentally changed to adapt to the world we live in today. Glib but ambiguous calls for “vision” and “leadership” do nothing to fix the structural flaws in the way we choose, finance, maintain, and use transportation infrastructure.
So, here’s a case study for Harvard Business School.
You’ve got a legacy business with trillions of dollars invested in fixed plant and equipment, yet your current revenues don’t even cover your operating and maintenance costs. Moreover, the demand for your services has been declining overall, and younger consumers (the prime 25-44 age demographic) are using this far less than their parents. Your customers, who have grown used to being charged very low prices, tend to stop using your product when it becomes even slightly more costly. The company’s been building more capacity based on internal predictions of increased demand for years, but consumption of its product has been declining for a decade, and is languishing at late 1990s levels.
What’s your prescription for this struggling business?
You’d think a HBS case study would critically assess cost and revenue drivers, and look to see what parts of the business were working and why. It would recommend triage, focus on improving the company’s value proposition, and seek actual areas of growth that reflect emerging customer interest, and right-size its physical plant. And it would push to make sure that it wasn’t needlessly penalizing the value-adding components of its business by cross-subsidizing value-destroying money losers. It might shift its focus to the things customers say they want.
Transportation is rife with business model problems: It gives much of its product away for free, heavily cross-subsidizes money-losing operations, is subject to predictable cost-overruns, routinely overestimates revenue, imposes huge social costs, and creates perverse incentives to overuse the system in ways that worsen congestion and pollution.
The Harvard Business School’s Rosabeth Moss Kanter is one of the nation’s most visible, prolific, and well-connected business scholars. She’s written extensively about leadership, innovation and business management. Over the past two years, she has devoted her personal attention to infrastructure, expressing her views in a new book, “Move,” and an accompanying media campaign. Move is a very accessible, conversational tour of the horizon, recounting “as told to” stories from Mayors, CEOs and technocrats about the problems they’ve faced and overcome in building everything from ports and highways to airports and bike share systems. Kanter touches on every infrastructure topic under the sun, from potholes and collapsing bridges, to the nation’s outdated air traffic control system, to bikes and peds, and all manner of technologies from parking apps to flying cars and hyperloops.
What’s disappointing is that a scholar with such a strong pedigree in business strategy would devote so little attention to the fundamentals behind the the problems she outlines. While “Move” is a fair compilation of the conventional political wisdom about transportation, it simply fails to look under the hood at the financial and economic aspects of the industry to understand what drives costs and revenue and consider opportunities to reduce costs or better serve markets. A hard-nosed, business-like analysis of a highly complex industry ought to make use of the copious data on travel trends and transportation finance. But “Move” seems uninterested in that kind of evidence-based analysis. In fact there’s not a single table of data or chart in the entire book.
The omission of hard data is compounded by the fact that the book takes little note of the extensive scholarship in this field. Despite its pages of footnotes and references, “Move” is conspicuously missing citations to some of the most thoughtful and provocative analyses of our infrastructure system and its investments. For starters, there is a long history of scholarship at the author’s institution tracing its roots back nearly a half century to Mayer, Kain and Wohl’s “ The Urban Transportation Problem” (1966). Similarly, there’s no reference to the Brookings Institution's Tony Downs, or his seminal diagnosis of transportation issues, “Stuck in Traffic”. Nor is there a reference to Nobel Laureate William Vickery’s analysis of pricing and congestion. Kanter mentions, without attribution, some of the key findings of Don Shoup’s High Cost of Free Parking, but largely ignores pricing parking as a key element in making urban transportation systems more efficient and cities more livable.
Absent some theoretical basis for diagnosing the causes of our problems, it’s little wonder that Kanter proposes precious few specifics on how the problem might be solved. Especially in the case of transportation infrastructure, the existing business and economic models and management strategies are deeply flawed - and those flaws are at the heart of nearly all the problems she’s identified. Unless they’re correctly diagnosed and fixed, Kanter’s vague advice will come up short.
Transportation Infrastructure: A Broken Business Model
A solid analysis of the infrastructure business might examine what’s causing revenue to fall short of what is needed, to ask why projects are becoming increasingly expensive and unmanageable, and talk about fundamental issues of pricing.
- Over-estimated demand. State highway departments have consistently over-estimated the demand for additional highway capacity. This leads them to spend money on projects for which there is little or no demand, like Louisiana’s $400 million Audubon bridge that carries just 3,400 vehicles per day and Alaska’s famed “bridge to nowhere”.
- Underfunded Maintenance. Highways don’t cover their costs of maintenance. The Center for American Progress reports that, in the aggregate, 25 percent of the cost of maintaining highways is paid with subsidies from non-user revenue, and that this amount varies widely by type of highway.
- MegaProject Cost Overruns. Transportation projects have become prodigiously expensive, and from Boston’s Big Dig to San Francisco’s Bay Bridge and, as Bengt Flybvjerg has documented, are subject to their own special perverse incentives that predictably lead to cost overruns in a majority of megaprojects. Kanter doesn’t acknowledge these problems, and unsurprisingly, doesn’t offer any recommendations for dealing with them.
Declining Demand for Highways
Kanter offers no acknowledgement that the demand for car travel is actually declining, with Americans traveling an average of 8 percent less today than a decade ago.
Ultimately, infrastructure is an economic problem, and Move doesn’t actually provide a coherent economic analysis of any of the central questions we face: Why do we have congestion? How do we create incentives for people to use our expensive assets more efficiently? Where should we invest our scarce resources?
Fundamentally, there’s no recognition that all of our principal problems in infrastructure stem from under-pricing infrastructure to consumers. Because we charge road users (and water users) far less than the marginal cost of providing additional infrastructure, they demand and use more, and we have insufficient revenue to maintain, let alone judiciously expand our current overtaxed systems.
If our concern is reducing congestion and improving travel times, we have a market solution that works. But Kanter doesn’t mention any of the successful examples of road pricing experiments in London, Stockholm and Singapore, which have produced measurable reductions in travel time.
And it's also striking that Move offers no discussion of how the mispricing of energy is a primary contributor to congestion and excess demand for transportation in the US. Kanter does not acknowledge that the price of gas in the Netherlands or other European countries is a primary reason why they have such high rates of cycling and walking, drive more efficient cars and generate far fewer greenhouse gases per person.
The social and environmental effects of a mobility fixation are devastating
Kanter has a single minded focus on moving. We constantly need to move more and faster. But trying to do just that by adding more road capacity has simply generated additional trips and fueled more far flung sprawl. In urban centers, according to Nathaniel Baum-Snow, each additional radial freeway caused city population to decline 18 percent. And in smaller towns, highway expansions have blighted main streets as successive generations of retail and service businesses have decamped to bypass highways and freeway exits.
Yet Kanter’s book makes only passing references to urban sprawl, and has no mention at all of “induced demand,” the phenomenon by which increased capacity simply generates more traffic, eliminating travel time savings. The process is now so well documented that it's referred to as the “fundamental law” of road congestion.
Delphic Policy Advice
“Move” is maddeningly vague when it comes to actual policy recommendations. It has dropped in brief, tantalizing references to pricing for parking and road use, argued that the gas tax is too low and outdated, and approvingly cited estimates that we ought to spend hundreds of billions additionally on transportation infrastructure annually. But while Kanter disparages the cowardice of political leaders, any of them who read through “Move” would find few specific policies to adopt.
The only thing that Kanter seems unequivocal about endorsing is more borrowing: state and local governments should issue more municipal bonds, the federal government should offer loans and loan guarantees, and we should have more public private partnerships (PPPs). But borrowing has to be repaid, the private partners in PPPs will want a profit, and those monies have to come from higher taxes and fees, which Move conspicuously does not recommend. Plus Kanter omits the fact that some states like Washington have borrowed so heavily against their current revenues to fund new construction that they’re spending 70% of their road taxes on debt service and can’t afford maintenance.
Had Kanter suggested doubling the gas tax, or implementing per mile road pricing, civic leaders might have an idea of what to do. But if you’re looking for firm financial details or definitive recommendations about how to overhaul a broken financial system, you won’t find any help in these pages.
Instead, you’ll find a vague exhortations: “We’re in a mobility race”. There are precious few details beyond a repeated repeated calls for more leadership, more followership, more borrowing, and the magic of “public private partnerships.”
Above all, we’ve got to move. This book’s title is its clarion call. We’re told:
“To move is to thrive.” (p.11)
“The goal is to move.’ (p. 24)
“Mobility is opportunity. Mobility is freedom. Mobility is choices.” (p. 25)
“American needs to move.’ (p259)
“Mobility is opportunity . . . we’re in a mobility race.” (p. 279)
If this kind of simplistic rhetoric seems familiar, it should. We’ve been down this road before.
Half a century ago, another prominent American gave voice to a sweeping, call for dramatic investments in the nation’s infrastructure in the name of moving us faster. This great builder’s name, like so many others, is conspicuously absent from Kanter’s Move: Robert Moses. Moses had vision, leadership, and enormous resources. Here was a man who wanted America to move--and in his view to make this happen, freeways had to “must go right through cities, and not around them, . . .When you’re operating in an overbuilt metropolis you have to hack your way with a meat axe.” (Moses, 1954, quoted in Mohl, 2002).
We’ve run the experiment of empowering leaders to single-mindedly pursue the “vision” of getting us moving faster. Our nation’s cities are still struggling to repair the damage they wrought. Its not a model we should mindlessly repeat.
Poetically, it turns out that “Rosabeth Moss Kanter” is an anagram of “Thanks, Robert Moses.’ That may be really all you need to know about this book.
Joe Cortright is Director of City Observatory, an urban policy think tank in Portland supported by the John S. and James L. Knight Foundation.