John Macomber is a Senior Lecturer in the Finance unit at Harvard Business School. His professional background includes leadership of real estate, construction, and information technology businesses. At HBS, Mr. Macomber's work focuses on the future of cities, particularly as aided by the private finance and delivery of public infrastructure projects in both the developed and emerging worlds. His teaching combines infrastructure finance (including public-private partnerships), investing in resilience (notably in the face of sea rise in some areas and drought in others), economic development, and the impact of new technologies in delivering new infrastructure and making old infrastructure more efficient.
Mr. Macomber is the Faculty Chair of the HBS Africa Research Center. He is also engaged in the Business and Environment Initiative and Social Enterprise Initiatives at HBS and is a member of the Executive Committee of the Harvard University Center for African Studies. He teaches Finance, Real Estate, Urbanization, and Entrepreneurship courses in the elective curriculum and in Executive Education.
Mr. Macomber is the former Chairman and CEO of the George B H Macomber Company, a large regional general contractor; and remains a principal in several real estate partnerships. He serves or has served on the boards of Young Presidents Organization International (YPO), Boston Private Bank, Mount Auburn Hospital, and the WGBH Educational Foundation.
Mr. Macomber is a graduate of Dartmouth College (Mathematics in the Social Sciences) and Harvard Business School.
The world, the real estate industry, and individuals continue to be rocked by the direct impact and resulting shock waves from the COVID-19 outbreak. The pandemic’s costs to public health and economic activity are colossal. We are worried about our families and communities, we fret about our investments, and we want to know about the near- and long-term prospects for returning to work and repopulating buildings.
How will we know what qualifies as an objectively healthy building? How will we analyze investing in resilience for public health with the same rigor we apply to investing in resilience against fires or earthquakes? And how will this new awareness in the public realm influence the real estate industry in the future?
This article discusses three areas of focus: Health Performance Indicators, Investing in Health and Resilience, and Sensors, Analytics, and the Democratization of Data.
The pandemic spawned by the novel coronavirus has forced a global reckoning with the awesome power of infectious diseases to grind economies to a halt. The forced lockdowns and retreat into home isolation has also given us a heightened awareness of the role our surroundings play in our health and wellbeing.
Locked in a global battle for talent, the business leaders we spoke with were eager to find new ways to attract, retain, and enhance the performance of their employees. Few of them realized that their buildings could play a vital role in the health of their business. In response to Covid-19, that’s rapidly changing. CEOs from companies large and small have come out of the woodwork to engage with us on how to design, operate, and manage better buildings. Calls are also coming in from groups that run medical offices and dental clinics, hotels, schools, airports, and theaters, as well as mid-size law firms and small businesses in both small towns and major metropolitan areas.
The ways people use and interact in commercial buildings—particularly office spaces—will likely be changed significantly due to the COVID-19 crisis, with building and workplace health being a top concern,
Changing populations due to the large migration to cities;
Changing cities due to increased densification;
Changing resources, with urbanization making resources scarcer;
Changing climate that requires adaptation to rising seas, frequent floods, and other environmental impacts;
Changing definition of health, in terms of a heightened awareness of the need to protect and promote human health;
Changing role of the private sector, with the private sector becoming more involved in funding strategies for healthy buildings and communities;
Changing buildings, as reflected in the “mainstreaming” of buildings that are both green and healthy;
Changing work, as underscored by the widescale shift to telecommuting during the coronavirus crisis;
Changing technology, including advanced systems to improve the health of buildings; and
Changing values, with the focus on sustainable and socially responsible investment possibly being sidetracked by the need to stay afloat during the current economic upheaval.
The key to determining the effectiveness of healthy-building strategies, Macomber said, is to monitor indicators that measure both the building’s performance and the user experience. Health performance indicators can be used for short-term purposes such determining when to repopulate the building or longer-term purposes such as enhancing investment appeal, he said. “It’s not just that healthy buildings are not that expensive, it’s that sick people are really expensive.”
COVID-19 will change the nature of our offices, apartments, hospitals, schools, and government buildings. Concern about the spread of this and other communicable diseases might fade after this contagion, but there will probably be more outbreaks in the decades to come. This means that we can expect our physical structures to change, too.
Think of the extension of today’s airport and courthouse security screening: not just what weapons you may be carrying, but also what infections you may be carrying. Many of us have experienced health screening in Asian airports for years as technicians viewed our facial temperatures, checked our passports and vaccination histories, and asked questions. This will become a more permanent component of entry to office buildings, schools, and transit hubs.
As fires, floods, and droughts increasingly threaten homes, businesses, and other institutions, climate risk has become financial risk. Mortgages written on homes in exposed locations are being shed by banks and absorbed by Fannie Mae and Freddie Mac, government-backed mortgage guarantors. This implies that homeowners and investors have been making location decisions without properly pricing the cost of potential peril, and that the government has been enabling the oversight. Some are even warning that this market failure could lead to a repeat of the 2008 financial crisis, which was also triggered by bad mortgages.
It’s not just homeowners investing recklessly — many businesses have been equally short-sighted in where they place new assets, and what to do with existing assets in once-safe areas now threatened by these perils. We can’t just keep piling sandbags, pumping basements, dousing flames, and expecting government bailouts forever; a methodology is needed for homeowners, businesses, mortgage holders, governments — all of society — to figure out which assets to reinforce and what other courses of action are available.
Are there immediate steps business and government should take to address climate change? Somewhere between trillion-dollar solutions and the next eco-calamity are opportunities to take action. My research indicates we need to go beyond observing wreckage and pondering trillion-dollar plans to attempt to mitigate carbon. Businesses, homeowners, and local governments must focus on what can be done today to address these direct threats to people and property. There are three major tools in the "what to do next" approach: probability, selection, and migration.
When most people think of urban tech and the rise of “smart cities,” elite metros like Boston, London, or Tokyo come to mind. However over the past decade, technology has also made substantial inroads—and contributed to rapid development—in emerging markets. Cities like Bangalore, Nairobi, and Bogota are poised to take advantage of unprecedented access to capital and information to create and seize new opportunities. But in the context of extensive institutional voids, unequal access to resources, and an often lethargic state, the way that technology is leveraged looks very different in emerging markets than it does in the developed world.
A truly smart smart city investment requires looking at three dimensions: characteristics of cities, capital requirements for various initiatives, and the decision-making process. I suggest decision makers in these initiatives follow an analytical sequence of situation, solution, and sovereignty.
Following the election of Donald Trump, spending on American infrastructure appears to be one area where Democrats and Republicans can agree—at least in principle. Trump has pledged to push for $1 trillion of new spending on roads, bridges, and more; but some Democrats (and some conservatives too) have criticized how Trump plans to find the money. John Macomber, a senior lecturer in the finance unit at Harvard Business School, has studied infrastructure financing around the world. In a written email exchange, he shared his thoughts on the future of U.S. infrastructure spending, investment, and delivery.
Addressing Sprawl, the Footprint Problem, and Finance with Pay-for-Success Tools
Today’s mega-cities have a footprint problem. They are developing horizontally, not vertically, with vast areas of low sprawl reaching out for miles from Sao Paolo, Lagos, New Delhi, Guangzhou, Jakarta, and many others. A central question our civilization must address is how we can avoid becoming a planet of informal slums.
Pay-for-success may not be a universal panacea to address the footprint problem and its underlying causes. But it’s a potentially powerful way to mobilize vast pools of global capital toward multisector thinking, working toward a common good that none of the parties currently seems able to finance.
Technology can help balance the cost / revenue equation
The MBTA faces the same problems that confront every transit system in the world: Riders want to pay less in fares and taxpayers want to contribute less in subsidies. In exchange, everyone wants to receive more safety, more reliability, more frequency, longer routes, and later hours.
These opposing financial forces never add up. But new technologies and modern business models, many invented in Massachusetts, could vastly improve the balance of this age-old equation
The prospect of urban innovation excites the imagination. But dreaming up what a “smart city” will look like in some gleaming future is, by its nature, a utopian exercise. The messy truth is that cities are not the same, and even the most innovative approach can never achieve universal impact. What’s appealing for intellectuals in Copenhagen or Amsterdam is unlikely to help millions of workers in Jakarta or Lagos.
To really make a difference, private entrepreneurs and civic entrepreneurs need to match projects to specific circumstances. An effective starting point is to break cities into four segments across two distinctions: legacy vs. new cities, and developed vs. emerging economies. The opportunities to innovate will differ greatly by segment.
Rapid urbanization and rampant resource scarcity pose problems – and opportunities – for businesses and governments all over the world. The world’s existing population centers cannot absorb all the migration, prompting the need for hundreds of new cities. This raises the question of who can best lead the building and developing of these municipalities. One course of action is development, promotion, and regulation by the private sector. Harvard Business School Senior Lecturer John Macomber discusses the keys to making this model work, based on his recent investigative visits to nascent privately-funded municipalities in Saudi Arabia and Vietnam.
By 2050 the number of people living in cities will have nearly doubled, to 6 billion, and the problems created by this rampant urbanization are among the most important challenges of our time. Of all resource-management issues, the author argues, water, electricity, and transit deserve the greatest focus. Every other service a competitive city provides—functional housing, schools, hospitals, stores, police and fire departments, heating, cooling, waste management—depends on a reliable infrastructure for those three resources.
Many corporations and investors assume that fixing cities is the purview of government. But governments around the world are stuck—financially, politically, or both. Implementing solutions to the problems of urbanization requires large amounts of capital, exceptional managerial skill, and significant alignment of interests. All these abound in the private sector.
Thus major opportunities exist for businesses that can create and claim value by improving resource efficiency. The products and services that new (or legacy) cities will require, and that provide the return investors and entrepreneurs need, optimize both technological sophistication and financial sophistication—approaches designed to attract capital by offering different levels of risk and return, different cash-flow priorities, and opportunities for both short-term and long-term investment.
The author cites a number of companies that have moved toward or into what he calls “the efficiency frontier.” These include Sarvajal, in India, which saves money and eliminates waste by selling direct to customers through its “water ATMs”; the Boston-based EnerNOC, which manages electricity production and consumption to reduce spikes in demand; and EMBARQ, based in Washington, DC, which coordinates the interests of business and government to organize city transit services.
Why a Harvard Finance Instructor Went to the Kumbh Mela
In this first-person account, Senior Lecturer John Macomber shares his first impressions and explains what he's doing there.
I'm in a winter coat and hat in the January pre-dawn cold and dark, standing on sandbags on a riverbank in the middle of Uttar Pradesh, India. Pilgrims and the faithful and the respectful come to the river this morning by the hundreds, clad in the minimum, praying and splashing and releasing marigold wreaths and rafts of small oil lamps into the river. This is not like any field research I've done before.
Thirty-five Harvard colleagues and I are at the Kumbh Mela in Allahabad, India, a mass pilgrimage in which tens of millions of Hindus gather to bathe at the confluence of the sacred Ganga (Ganges) River, the Yamuna River, and the mythical underground Saraswathi. Legend says that on his return to the Himalaya, Vishnu flew over this spot and dropped sacred nectar from a pitcher—a kumbh.
Six months ago this land was under 30 feet of water. Three weeks from now this will become the largest city on earth, the largest single-purpose gathering of humanity in history. Every 12 years, when the moon and stars are aligned, this becomes the most auspicious spot in Hinduism, and there is a six-week-long festival, or mela, for the millions of pilgrims. The Maha Kumbh Mela is happening right now. It's expected to draw close to 200 million people over almost eight weeks, and as many as 30 million in a single day. The Harvard team is here to learn about why and how.
Although there is no such thing as a truly "smart city", today's cities do exhibit different degrees of smartness in how they are designed, developed and run. These differences have real consequences for global society. With a global urban population estimated to top 6 billion by 2050, the world needs cities that are liveable, competitive and sustainable—environmentally, financially and socially.
The most effective smart-city initiatives are focused on the fundamentals: the flow of water, electricity, cars and people. Today, old and new cities alike are struggling in these areas, particularly as natural and financial resources become ever scarcer.
There is a lot of noise around potential climate change. How can businesses cut through the commotion and do something? Based on my experience as a real estate and construction CEO and my academic research on urbanization, new cities, and the finance of sustainable infrastructure, I propose these simple ABCs (actually A-F) for business leaders to address climate change. These are approaches, business models, and concrete steps to describe an element of what financiers, governments, and even households must do to combat climate change. Some are close to home, some are in emerging markets. All are in the built world of infrastructure, buildings, and property.
(Q&A with the editor of Metropolis magazine) Best practices going forward will, in my view, be driven by a couple of important concepts. First, thinking about multiples of buildings (instead of one at a time) will have multiple levels of impact. For example, a minor innovation might be exterior sun- screens on a Houston office tower. But the tower stands alone without benefit of shade from other buildings, and everyone drives miles to and from the tower. The big opportunity for multiple layers of energy savings and impact thus lies in situating buildings where they shield each other from solar gain, they benefit from breezes, and where they are close enough together to allow for comfortable walking or mass transit. Some of the most successful cities in the world are very dense and efficient in this way; for example Hong Kong, Singapore, Tokyo, London, and New York.
Second, much discussion of sustainability revolves around “more supply:” for example, more electricity from renewable sources. The other side of the equation should be around “less demand:” or more benefit from using fewer inputs.
President Trump’s infrastructure plan and a counterproposal by Senate Democrats are rising toward the top of the national agenda. All agree that there is a pressing need to fix the collapsing bridges, potholed roads, crashing trains, and embarrassing international arrivals terminals at airports in the great cities of America. But there will likely be massive arguments about how to raise the money and how to invest it.
The solution may lie in finance models that have proven successful in several nations across the Atlantic Ocean—not in Europe, but rather in Africa. American policymakers, investors, and builders can learn from the African experience, where public-private partnerships and deployments of new technologies are illuminating new ways to approach the task of funding infrastructure despite a scarcity of government funds.
In our lifetimes, the number of people living in cities will more than double – growing to over six billion, according to UN projections. The world already faces shortages of water, electricity, clean air, land and food; too much garbage, too much dirty air, and too much time wasted in transit. Rapid urbanization will only make this situation worse. What is to be done?
Many people hope that “better government” will address these problems - where politicians wake up and suddenly applying long term thinking based on evidence and logic to make fully funded investments that benefit all of society. I’m a skeptic – I don’t think governments will be able to do this. All over the world, governments are stuck politically (like the US and India) or they are out of money for public investment (like China and Indonesia).
This means that private companies and investors have both an obligation – and an opportunity - to do something big. I’m interested in how firms and bankers use sophisticated financial tools – coupled with connected technologies – to build businesses that make money and which make a difference in sustainable cities.
