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Big Think Interview With Robert Eccles

Question: What is Living PlanIT? 

Robert Eccles:\r\n Living PlanIT is a company that has developed the most interesting, \r\ninnovative, radical business model I’ve seen for creating new, \r\nsustainable cities and for retrofitting existing cities to improve their\r\n performance. There are various tag lines that are used for new cities; \r\nsome people call them smart cities, some people call them green cities, \r\nthere’s nuance of those. What Living PlanIT is doing for its pilot \r\nproject is creating a research setting, so it’s a city where the \r\neconomic model is based on research and innovation, that will be the \r\neconomic driver, it is being built to the highest standards of \r\nsustainability, defined in terms of environmental issues, social issues,\r\n governance issues, but it’s not a green city, per se, the way I think \r\nyou could say Masdar is. So it has a strong and viable economic model. \r\nThe current title for this city, or name for this city, is Planet \r\nValley. It is being built on 1670 hectors of land in the municipality of\r\n Paredes, which is outside Porto, about 20 minutes outside Porto. \r\nThere’s this remarkable man named Celso Ferreira, who is the president \r\nof Paredes, like Steve and Malcolm, is a visionary. The way these people\r\n all found each other is an interesting story, has been very supportive,\r\n so there’s a strong relationship between the company and the Portuguese\r\n government, both at the municipality level, the regional level, and the\r\n national level—though it’s not in the classic sense a public/private \r\npartnership because all of the funding that is being done is coming from\r\n the private sector. And they will begin building this, as they say, \r\n1.0, because they’re software guys, it’s a software metaphor, Planet \r\nValley, this year. And the intention is to then replicate this model all\r\n over the world. Where clearly the major markets from a new cities point\r\n of view, where many new cities have to be built are emerging markets \r\nsuch as China and India and Brazil. 

The foundation of their \r\nbusiness model is an ecosystem of a variety of companies including \r\ntechnology companies. Cisco is one of the key partners in this and \r\nthey’re working out the business model with them. I have a Harvard \r\nBusiness School teaching case, which describes the business model, \r\ndescribes who some of the partners are that are involved. And for my \r\nresearch on sustainable urbanization that I’m doing with Professor Amy \r\nEdmondson, who’s a colleague of mine here at Harvard Business School, \r\nLiving PlanIT, the company, and then Planet Valley, the project, are \r\nbase line, sort of research sites right now and we’ll be studying that \r\nover time and then looking to study other so-called smart cities or \r\ngreen cities. There’s a place called New Sangdo in Korea, there’s a \r\nMasdar in Abu Dhabi, which I mentioned, there’s a city that’s now kind \r\nof on hold for political reasons called Dongtan in China. So this area \r\nof sustainable urbanization is an incredibly, it’s an important issue \r\nand it’s a big market opportunity. 

The issue around sustainable \r\nurbanization and part of Living PlanIT’s business plan, is a radically \r\ndifferent approach to construction. The construction industry has showed\r\n negative productivity growth, 30 to 50% of the materials are wasted, \r\n40% of carbon emissions come from buildings. If these new cities are \r\nbuilt the way the old cities had been built, the process doesn’t \r\ncontribute to sustainability, the outcome doesn’t contribute to \r\nsustainability. So a key part of their business model is a radical new \r\napproach to building and construction on which they’ve developed \r\nintellectual property, so that’s an important part to cover as well. 

It’s\r\n interesting to note, thinking about our previous discussion on \r\nintegrated reporting, that Living PlanIT, as it gets established, is \r\ncommitting to publish an integrated report. They’re a private company, \r\nthey’re under no pressure to do so and all the partners of Living PlanIT\r\n and Planet Valley will also be producing integrated reports. So there’s\r\n a clear, conceptual linkage between sustainable urbanization and an \r\nintegrated reporting. And for anybody that’s interested in sustainable \r\nurbanization and the impact of the built environment on the planet, I \r\nthink that following and understanding what Living PlanIT, and others \r\nare doing I think is an important, interesting, and useful thing to do. 

Question:\r\n Do we need to rebuild our cities, or retrofit existing infrastructure? 

Robert\r\n Eccles: Cities are being rebuilt all the time. I think the notion \r\nof “tearing down” existing cities and building them from scratch, \r\nclearly, you know, isn’t a practical one. But there’s a question about, I\r\n talk about this with my students, my MBAs, when I taught the case to my\r\n doctoral students, existing cities, the so-called urban retrofit \r\nmarket, could be an even bigger opportunity. It would be approached in \r\nthe somewhat different way, but the services, the products, the \r\ntechnologies, the sensor technology, and in particular, a core aspect of\r\n the Living PlanIT business model is something they call the urban \r\noperating system, could be used in existing urban environments, as well \r\nas it is in new cities. So the basic notion is that you go into existing\r\n urban environments, incorporate the new technology, smart building, \r\nsmart grid mobility, look at the information in an integrated way in \r\nterms of how the city is functioning economically and socially and \r\nenvironmentally in a way that would improve performance. And then I can \r\ntell you—and I can’t give you the names—but right now Living PlanIT is \r\ntalking to existing cities, this is a major area of focus for Cisco and \r\nthey’re as interested in existing urban environments as they are new \r\nurban environments. And so just as Planet Valley will hopefully become a\r\n showcase for how to build new sustainable cities, there will be one or \r\ntwo existing cities, and there’s some fairly major and prominent cities \r\nthat they’re in discussion with now that could become models for how to \r\nuse these new technologies and this new way of thinking to create more \r\nsustainable urban environments. 

The other thing I should note, \r\nand it’s relevant to both existing urban environments and new urban \r\nenvironments, what’s interesting about their business model is that it \r\nis not primarily a real estate development play and that’s been the case\r\n so far. People say none of these new towns, none of these experiments, \r\nnone of these smart cities, green cities, have been successful and I \r\nthink that’s largely true. And that’s true because the business model \r\nthat has been used is a real estate development: try and get the land \r\ncheap, have deep pockets, you know, build it, you know, lease it, sell \r\nit. It’s the classic thing that happens, you have a couple of guys with \r\nan extraordinary team of people from all over the world really, and it’s\r\n a longer story than I can get into here, it’s in my case, but they’ve \r\ncome at a problem through a different lens. So they’re looking at a \r\nproblem really through the lens of the software industry. And so they’re\r\n framing the problem, they’re framing the opportunity in a different \r\nway. Clearly there’s real estate, there’s real estate development and \r\nthat’s being incorporated into it. But they’ve just kind of looked at it\r\n in a different way and I think they’ve come up with something very \r\ninteresting and very creative and an example of that right now, here we \r\nare in Boston over the last two or three days, the Urban Land Institute \r\nhas had one of their—I think they meet bi-annually—so this is real \r\nestate developers from all over the world, one of the main sponsors for \r\nthe ULI Conference taking place in Boston this week, is Cisco. IBM is \r\nvery focused on smart cities. Oracle has developed software for smart \r\ncities. Siemens has a number of products and services for smart cities. 

So\r\n you can see major corporations have identified this opportunity. What \r\nLiving PlanIT has come up with is a business model that integrates the \r\ncapabilities of all of these different companies through this ecosystem \r\nand then the representation or the integration really of the \r\ntechnologies that these other firms have through the urban operating \r\nsystem is the, in a sense, kind of mental, not mental, kind of the, it’s\r\n like the nervous system, is probably the best way to think about it. \r\nThe nervous system for what will make these cities be sustainable. \r\nBroadly defined sustainable, not simply in environmental terms, but in \r\nsocial quality of life and financial terms as well.

Question: What do you make of the outcome of the Copenhagen \r\ntalks, as discussed by Peter Brabeck? 

Robert Eccles: I\r\n was disappointed in the talks in Copenhagen, I think there was a lot of\r\n expectations, maybe expectations were greater than they should’ve been.\r\n This is not an area of expertise of mine, how things get negotiated on a\r\n global basis. So whatever views I have would be those of a reasonably \r\nwell-informed citizen and somewhat casual observer. But I can say that \r\nin looking at the tape at Peter, and there’s always the danger that \r\nsince I just wrote a book on integrated reporting, I’m a hammer and \r\neverything looks like a nail. But as I watched his tape and he made a \r\ncompelling argument for why simply jumping to bio-fuels was not a \r\nlogical conclusion. He discussed the difference between oil and \r\nbio-fuels in terms of the amount of water that needs to be used and for \r\nbio-fuels, the plant matter that could be food and used in another way. I\r\n was saying to myself, "If we were thinking about climate change, just \r\nclimate change, in a more integrated way, and we weren’t just focused on\r\n carbon, but if we were thinking carbon, we were thinking water, we were\r\n thinking food, we were thinking about what the relationships are, what \r\nthe trade-offs are..." because there’s tough choices that have to be \r\nmade. It’s easy to say we can optimize across every environmental \r\ndimension while we’re optimizing across financial performance and \r\nquality of life, but that’s not the world we live in. I think in some \r\ncases, we can do better on all counts. In other cases, tough choices \r\nhave to be made. 

And what Peter’s video clip said to me was, if \r\nwe were taking a more integrated view and we were looking at data and \r\nanalyzing data in a more integrated way, I think we could be making much\r\n better decisions.

Question: What do you see as the incentive for the U.S. to \r\ncollaborate with China on issues of sustainability, as depicted in the \r\ninterview with Gro Harlem Brundtland? 

Robert Eccles: \r\nThe issue that she brought up about China, the relationship between the \r\nUS and China, I think is a fundamental one. People talk about the Big \r\nTwo, I think the relationships between the US as the world’s largest \r\ndeveloped economy and China, as the world’s largest developing economy, \r\nis absolutely a critical one. I happen to be spending a lot of time in \r\nChina for work I’m doing at Harvard Business School, both in terms of \r\nsustainable urbanization and executive education programs of various \r\nkinds. What I’m finding is very interesting, is an extremely high level \r\nof interest in sustainability and integrated reporting in China. If you \r\nlook at what the official government agencies are talking about, and I \r\nforget the exact term, but the current five-year plan is essentially one\r\n that says we need to continue to grow, we need to take care of a large \r\npopulation, but we need to do so in a responsible way that takes account\r\n of society’s limited resources. 

My book on integrated reporting\r\n is being translated into Chinese, it should be available in June. When \r\nI’m in Shanghai in June I will be doing a conference in collaboration \r\nwith the Fudan School of Management. Since there’s an extremely high \r\nlevel of interest in sustainability in China, one of my colleagues, \r\nProfessor Chris Marcus, is doing a study of CSR in China and when I \r\nasked him what the topics around CSR core responsibility are, that are \r\nin high on the list, environment is clearly high on the list, you know. \r\nWater’s high, energy, reporting around this is high. SASAC, the agency \r\nthat manages the government’s share, the people shares of the large \r\nstate-owned enterprises, last year required the SOE’s to start issuing \r\nCSR reports. It’s not hard to imagine that SASAC would think about, \r\ntalking earlier, the role of regulation could require the SOE’s, which \r\nare the dominant market cap in China, to issue integrated reports. These\r\n large Chinese companies have the assets, have the ambition. They don’t \r\nwant to just be big companies in China, they want to be global players \r\nand they understand that to be global players, they’re going to have to \r\nplay by global rules and they’re going to have to establish themselves \r\nas legitimate in the global community, perhaps different standards in \r\nthe US, certainly in Europe, around environment, around social, around \r\nlabor. They’re smart, they get it, they’re adaptable, and I think you’ll\r\n see tremendous change in China. In fact, one can imagine in China, \r\nbecause it doesn’t have the same embedded infrastructure that you would \r\nget in places like Europe and the United States around rules and \r\nreporting and regulations, it’s not completely a green field, but it’s a\r\n greener field. 

One could imagine that leadership around things \r\nlike integrated reporting could happen in China and could happen in \r\nChina more quickly than it happens in the United States. In Brazil, for \r\nexample, two of the companies that we talk about in our book are \r\nBrazilian, there’s an extremely high level of interest in Brazil around \r\nsustainability, driven by the great consciousness they have about the \r\nprecious resources in the rainforests and they need to use those \r\ncarefully. 

So it will be interesting over the next couple of \r\nyears to see, as society becomes more and more committed to—I think the \r\nawareness is there—more and more committed to society, you could see \r\nleadership being taken by some of the major emerging market countries \r\nlike China, like Brazil, like India. But I would agree with, Mrs. \r\nBrundtland that the relationship between the U.S. and China is an \r\nextremely critical one and if, from the point of view of my major \r\nmission around integrated reporting, if the US could exercise leadership\r\n here in the developed world and if China could exercise leadership in \r\nthe developing world, I think that would be just terrific. And the rest \r\nof the world would probably bet on board fairly quickly.

Recorded\r\n on April 19, 2010

A conversation with the Harvard Business School professor.

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