Systems Thinking: Interview with Paolo Pezzotta

Paolo

Every so often, we like to share some visionary, even controversial ideas that explore the edges of what’s possible. This installment features an interview with one of the most interesting systems thinkers in our region. Enjoy!

Paolo Pezzotta is an economist and systems thinker. By trade, he is a market development and systems management consultant. His passion is infrastructure enterprise design, mainly in the area of transportation. His work has supported the financing and refinancing of over $9 billion in new infrastructure systems across the globe.

Paolo is a Wharton graduate. He is President of Integrated Transport Planning, Inc. and has lectured extensively. He has until recently held faculty positions in the graduate departments of city and regional planning of the University of Pennsylvania, and Hunter College, CUNY. 

We asked Paolo to look at some of the global economic trends and their potential implications for us locally, in the Philadelphia region.

Q:  Paolo, as a transportation expert, what trends do you see impacting mobility, globally and regionally, in the next ten years?

A:  I think the biggest new development that could occur would be the seemingly imminent deployment of driverless vehicles. This is a relatively-old technology that was initially demonstrated in the middle 1990s. It has taken a while for the technology to make its way into the market. Only now have new driverless-vehicle initiatives been announced by Nissan, Google, GM and others. While there is motivation on the part of suppliers, dedicated network uses might be seen as the way to go.

The gains, if realized, are in:

  • being able to move far more vehicles per hour, per lane at higher speeds than is currently possible. Increasing infrastructure investment productivity allows gains to accrue to everyone being served by the network.
  • redesign of the urban activity space (city form) to enable higher levels of economies of association and agglomeration and supply chain gains.  The redesigned network will create new higher levels of density and higher levels of profitability.

So the new vehicle drives change in the network, which in turn drives new development at far higher densities. This could have large impacts: on travel demand; travel costs; congestion; productivity of the existing capital base; and on the meaning of vehicles within the larger, multi national markets, i.e., the symbolic value they have in our society, meaning there is a high likelihood that vehicles will be commoditized. The supply chain gains of driverless vehicles will be enormous and will create great amounts of wealth and increases in ongoing income streams.

It would not take much to see chains of driverless, passenger vehicles travelling at very high speeds. The costs for these systems will be very far below what competing High Speed Rail (HSR) systems cost.

Q:  From a systems perspective, what impact will technology have on the next generation’s ability to find meaningful employment?

A:  In this area, we can see a long term trend in the death of human labor: mechanization evolved into automation which evolved into computerization which evolved into global-systems integration and finally cybernetic/artificial-intelligence/robotics. This can be a massive problem or can be seen as a blessing. In reality, it is currently bringing fairly large problems to certain segments of the labor force in terms of lost labor or lost income. With the loss of human labor goes the basis for claiming a share of national production. With the robotization of work, we have an opportunity to make a real leap as a specie or we have a massive risk of a loss of validation for masses of our specie.

This will reach into every crevice of our society. Our market structure, our capital allocation process, the notion of private property, the scale and content of the GDP, the ownership and distribution of means of production and distribution are all fundamentally part of this process. How we manage this process will determine if what we are facing is a threat or blessing.

Q: In what ways can government and the private sector begin to collaborate to steer the system in a new direction?

A: This is all about creating what Michael Porter refers to as ‘shared value’ markets and enterprises. These constructs are effectively amalgams of public and private sector enterprises. We have them in things like PGW or the Philadelphia Water Dept. These are poorly run enterprises and have botched structures, but these can serve as first steps upon which one can build. How they distribute their income and output is the key issue for us to address.

The Chinese are working this model. It appears they have had great success to this point, but I think this is where “the shoe begins to pinch” for them, meaning the answers and results are not so easy any more. We need to confront things like private property, distribution of income and wealth, Etc—meaning: The really hard stuff!!! But I believe this can be dealt with successfully.

Q: What low-hanging fruit, in terms of potential shifts, can we make as a society to restore global sustainability?

A: I do not think there is any easy stuff left. I mean the answers are easy. The solutions are easy. It is the political system we have makes it seemingly impossible to succeed.

I think the only way to proceed in this context that shies away from comprehensive solutions is to take an enterprise approach, meaning put deals together that earn a bunch of money using this approach:

• A real easy one for Philly is to NOT sell PGW and to use it to develop a Chicago to Philly/NYC to DC, CNG/fuel-cell powered, driverless, goods-movement system. It is easily market financeable and would be worth about $50-75 billion over the next 20-30 years. It truly cannot fail.
• Another would be utility financing for transport via trip generation rates at the site. Leave homeowner and the trucking companies to continue to pay via gas tax. All else pay the same unit rate of home owners.

I recently did a redesign of air travel systems that intergrates international travel airports within super regions into single virtual air travel facilities. They are fully fundable from gain sharing. It increases access, increases profits, reduces costs and hopefully reduces prices and it reduces unit pollution.

There is a lot to be done that improve society while reducing costs and increasing income and profits. We have to give up the old notions/prejudices that are preventing us from seeing the way forward.