June 21, 2021

Economix: “The Big Thirst”: The Future of Water

Book Chat

Charles Fishman, a longtime writer for Fast Company magazine, is the author of “The Big Thirst,” a new book on water. He previously wrote “The Wal-Mart Effect,” which was an Economist “book of the year” in 2006 and a finalist in The Financial Times’s awards for best business book. Our conversation follows.

Simon Schuster

Q. You call the last 100 years “the golden age of water,” at least in the developed world. But you also say the golden age is over. As you told Terry Gross, on “Fresh Air,” “We will not, going forward, have water that has all three of those qualities at the same time: unlimited, unthinkingly inexpensive and safe.” Why not?

Mr. Fishman: We’re spoiled. Well-designed, well-engineered water systems were built across the United States and the developed world 100 years ago. They worked so well that they literally helped make creative economically vibrant cities possible, and healthy. And those water systems were so successful they became invisible — and they remain invisible.

We just assume when we turn on the tap, the water will be there, and that the water system buried in the ground is doing fine.

Both assumptions are out of date. Population growth, economic development (which changes dramatically how much water people want and use), and climate change are all putting pressure on water supplies — not just in places like Las Vegas or California, but in Atlanta, in Florida, in Spain, across China.

We are going to have to move from an era of unconscious water abundance to an era of smart water — using water smartly (why do we water the azaleas, or flush our toilets, with purified drinking water?), and also modernizing and updating our creaky water systems. They were advanced technology 100 years ago. Now those systems struggle to keep up with our needs, and struggle for resources.

Charles Fishman, author of Lidia Gjorjievska Charles Fishman, author of “The Big Thirst.”

Q. Your discussion of the downsides of free water reminds me of parking. We think free parking is great. But it actually leads to all kinds of problems — like long waits to find a spot in some cities and too much traffic. How would you try to persuade someone that free water is actually a bad thing?

Mr. Fishman: First, let’s agree that water isn’t literally free — people say, “Hey, I pay a water bill, it’s $30 a month, that’s not free!” Almost, though. A half-liter of bottled water costs 99 cents. The average U.S. water bill at home is $34 a month. So for what we thoughtlessly spend on a few gulps of water at 7-Eleven, we get a day’s water at home — 300 gallons, for everything from bathing to cooking. One dollar a day.

Free water — water so cheap you never think about cost when making water use decisions — is a silent disaster. When something is free, the message is: It’s unlimited.

Free water leads to constant waste and misallocation. Farmers and factory managers, hotels and gardeners never consider how much water they are using, and whether they are using it smartly — because the water bill itself sends no signal to be careful. (Half the water used by farmers worldwide is wasted.) There’s no incentive for efficiency.

Cheap water also means that the organizations we rely on to supply water — utilities, irrigation districts — never have the money to modernize, to replace crumbling systems, to find the “next gallon” of water supply.

Meanwhile, the poor pay the highest cost of all — hundreds of millions of people spend half of every day walking to fetch water that usually isn’t even clean. That water is “free” in that they don’t pay for it — except in terms of their health, their children’s health and their economic opportunities.

If you could change one thing that would fix almost everything about water — from better environmental stewardship to getting water to people who don’t have it now — it would be price. We can afford a bit more for our remarkable water system. We’ll be in trouble if we let it slide into obsolescence.

Q. I assume charging more for water would not solve the developing world’s problems. Doesn’t the increasing access to clean water require some other policy change? Or am I missing something?

Mr. Fishman: The key point about the pricing of water is this: People will pay for water that is safe, reliable, convenient, and liberates them from being slaves to walking or standing in line.

I visited a very poor neighborhood in Delhi named Rangpuri Pahadi. The 3,500 residents there live on $100 a month.

They got so frustrated standing in line hours a day at neighborhood pumps for water that didn’t even come at a regular time, they created their own miniature water system. They collected money — “capital” from people whose income is $3 a day — drilled wells, used their own labor to lay pipes from a storage tank to each each family’s shack.

Those who want water pay about one day’s wages a month, and the residents are thrilled. Their “upstart utility” gets them better water than the public standpipe, it comes on schedule, it liberates them to have jobs, liberates their kids to go to school. They pay the equivalent, for a U.S. family, of $150 a month for water. And they did it themselves.

Money isn’t the only solution to water — the cost of the Iraq war, alone, is enough to provide water systems for every village, every person, on Earth. The real problem is human — helping people get a water system they understand, can run and sustain themselves, and have confidence in. That’s harder than it sounds. But the problem isn’t technology, or resources, it’s political will and cultural understanding.

Q. Has any place in this country figured out how to use water more efficiently than the rest of us?

Mr. Fishman: I think there’s good news all over the country that doesn’t get enough attention. U.S. farmers use 15 percent less water than 30 years ago, and grow 70 percent more food. Farmers have doubled their water productivity since 1980.

Power plants use less water than 30 years ago and generate more electricity.

I went to an I.B.M. semiconductor plant in Burlington, Vt., that has cut water use 29 percent over 10 years, while increasing production 33 percent (and while the chips themselves, of course, double and double again in speed). That one factory has increased water productivity more than 80 percent, and inspired IBM to create a water division as a business.

Two communities I found have made dramatic changes. Orange County, Fla., where Orlando is located, started mandating use of purified waste water 25 years ago, in all new construction, for watering lawns, parks, schools and ball fields. That’s a purple-pipe system — Orange County cleans its waste water, and pumps it back to customers. Today, the amount of re-use water Orange County pumps each day is almost equal to the amount of potable water. The county has doubled in size, but it hasn’t had double the amount of potable water it provides. In new developments, in fact, it’s illegal to water your lawn or your park with drinking water, and Orange County residents have come to regard using drinking water to water lawns as silly. It’s a whole change in attitude.

And Las Vegas, which gets so much criticism for being a completely unsustainable city in the middle of a desert, Las Vegas has quietly become the most water-smart city in the U.S. By outlawing front lawns in new homes, by paying residents and businesses $40,000 an acre to remove grass, by imposing water budgets on golf courses, Las Vegas has dramatically changed water use patterns. Las Vegas now recycles 94 percent of all water that hits an indoor drain anywhere — cleaning it and sending it back to Lake Mead. No U.S. city matches that. And water use in Las Vegas has fallen 108 gallons per person in two years. Las Vegas today uses almost exactly the same amount of water as 10 years ago — but it has grown 50 percent in population. The fountains, lagoons and topless swimming pools notwithstanding, that’s an incredible achievement — something every U.S. city could learn from.

The best news, in fact, is in the biggest picture. The U.S. as a nation uses less water in 2011 than it did in 1980. We use less water to produce an economy of $13 trillion than we did to produce an (inflation-adjusted) economy of $6 trillion.

That’s incredible. The country over all has doubled its water productivity — which means that it’s possible to continue to grow and modernize, while actually reducing the amount of water we use.

And we did it even though most of us still run the water while we brush our teeth.

This post has been revised to reflect the following correction:

Correction: May 3, 2011

The introduction in an earlier version of this post misstated the distinction received from The Financial Times for an earlier book, “The Wal-Mart Effect.” It was a finalist, not a winner, in the paper’s awards for best business book.

Article source: http://feeds.nytimes.com/click.phdo?i=8a48e12e5892e6d64326d4e90ffe6c13

DealBook: Deal Lawyer Accused of Insider Trading Scheme

Paul Fishman, United States attorney for New Jersey, announces the insider trading arrests.Matt Rainey for The New York TimesPaul Fishman, United States attorney, discusses the charges.

8:55 p.m. | Updated

As a lawyer at three of the most prestigious merger and acquisition law firms in the country, Matthew Kluger stood at the center of the deal-making universe for nearly two decades.

Now, he stands accused of using his position to run an insider-trading scheme that earned more than $32 million. The reported plot relied on tactics ripped from a television drama, including disposable cellphones, code names and a plan to burn $175,000.

On Wednesday, federal prosecutors in New Jersey charged Mr. Kluger with stealing private information about pending deals from his law firm, the Silicon Valley powerhouse of Wilson Sonsini Goodrich Rosati, and sharing it with Garrett Bauer, a trader, who was also charged. Mr. Bauer, according to the government, used the insider tidbits to buy the stocks of companies involved in the deals. Prosecutors also charged the men with trying to hide their actions by ditching cellphones and destroying a computer and an iPhone.

“It amounts to nothing short of a highly organized criminal enterprise designed and carried out by industry professionals and fueled by intense greed,” said Daniel M. Hawke, market abuse enforcement chief of the Securities and Exchange Commission, which brought a civil complaint against the two men as well. “It was not an opportunistic act but a deliberate deed.”

Calls seeking comment from Mr. Bauer’s lawyer were not returned. Attempts to reach Mr. Kluger’s lawyer were unsuccessful. Judges in Virginia, where Mr. Kluger lives, and New Jersey ordered the men detained until a hearing on Friday.

The case comes amid a sweeping federal crackdown on insider trading that is playing out on multiple fronts. The biggest insider-trading trial in a generation, now under way in Manhattan, has zeroed in on a hedge fund manager accused of netting millions of dollars by trading on inside information. At the same time, the government has stepped up its examination of so-called expert networks, in which matchmakers connect hedge funds with the employees of public companies and other industry experts.

“There certainly seems to be a huge uptick in our discovery” of insider trading, Paul Fishman, the United States attorney for New Jersey, said Wednesday at a news conference in Newark. “Insider trading has real consequences for the markets and investors, and today it has real consequences for people who try it.”

The two men who arrested on Wednesday were charged only with trades made in the last five years, when Mr. Kluger worked in the Washington offices of Wilson Sonsini. But prosecutors say the plan dates back to the 1990s, when Mr. Kluger was a lawyer at two of the biggest Wall Street law firms, Cravath Swaine Moore and Skadden, Arps, Slate, Meagher Flom.

Underpinning the government’s case are secret recordings it said were obtained by a longtime middleman and close friend of both Mr. Kluger, 50, and Mr. Bauer, 43. The government did not identify the man by name, but it said he was a resident of Long Beach, N.Y., and a mortgage industry professional. After years of carrying money and intelligence between the two men, the anonymous co-conspirator began taping conversations with the men, according to the complaint.

As recently as two weeks ago, according to an excerpt of one such conversation, Mr. Bauer sounded an alarm as he felt the government inching closer: “I mean, the fact is we did something wrong.”

The scheme, prosecutors say, began not long after Mr. Kluger, while a law student at New York University, landed a job as a summer associate with Cravath in 1994. He began to funnel information about pending deals, like Johnson Johnson’s $924 million acquisition of Neutrogena, to his friend, the co-conspirator, according to the complaint. The co-conspirator got Mr. Bauer, a professional stock trader, to buy and sell shares in the companies Mr. Kluger leaked information about, the complaint says.

In 1995, Cravath was embroiled in a separate insider trading case when one of its lawyers pleaded guilty to leaking information about pending deals to his brother. At the time, the S.E.C. said it was conducting the most sweeping insider-trading inquiries since the 1980s takeover boom.

Mr. Kluger’s case bridges the 1990s era of insider trading with the current one as it spans 17 years and more than 15 stocks.

Wilson Sonsini, Cravath and Skadden are cooperating in the investigation, authorities said.

Even as Mr. Kluger hopped from law firm to law firm, the basic operation remained the same, prosecutors say. After executing profitable trades, Mr. Bauer would pull tens, sometimes hundreds, of thousands of dollars from many A.T.M.’s across Manhattan and hand the cash over to the unnamed co-conspirator. Mr. Kluger would then meet up with the co-conspirator to collect his winnings.

Most of the profits were pocketed by Mr. Bauer, who bought a $6.7 million home on the Upper East Side of Manhattan and an $875,000 home in Boca Raton, Fla., prosecutors say.

According to the criminal complaint, Mr. Kluger’s scheme grew bolder over the years. At first, he merely tipped his friend on deals he worked on directly. But by the time he landed at Wilson, Mr. Kluger was sneaking into the firm’s databases to glean non-public information about possible deals, the complaint says.

The most profitable action took place in April 2009, when Mr. Kluger tapped the computer system to gather information about Oracle’s proposed bid for Sun Microsystems, the complaint says. Shortly thereafter, Mr. Bauer bought more than four million shares of Sun Micro, according to the complaint. The deal closed in early 2010, and the group made a windfall of more than $11 million, the complaint says.

The complaint describes ways the men tried to cover their tracks: early on, Mr. Bauer and the unnamed co-conspirator went to Atlantic City to create an alibi for the cash Mr. Bauer was pulling from his accounts.

The men began using prepaid cellphones to avoid wire taps, often dumping them once a deal was done. Mr. Kluger and the unnamed co-conspirator deposited small money in their accounts, typically less than $10,000, so as not to arouse suspicion. Mr. Kluger referred to Mr. Bauer as “Mr. G.” The unnamed co-conspirator stowed some of his cash away in safety deposit boxes.

In spite of their efforts, the S.E.C. and the Financial Industry Regulatory Authority noticed trading irregularities as early as 2007, according to people close to the investigation who did not want to be identified because the case was continuing and the information was not public.

In early March, the Federal Bureau of Investigation searched the unnamed co-conspirator’s home, apparently sending the group into a panic. Shortly after, the co-conspirator started recording conversations with his counterparts, the complaint says.

In one exchange cited in the complaint, Mr. Bauer details the steps he went through to avoid detection. He tells the unnamed co-conspirator he went to a nearby McDonald’s to dispose of a cellphone in two different garbage cans. Then he noticed someone watching him.

“I thought it was an F.B.I. agent,” he said. “And I asked him, ‘Do you know me? You look familiar.’ And, like, I was so panicked.”

In another conversation cited in the complaint, on March 17, Mr. Kluger told his friend about a feared investigation: “It’s going to kill them that they don’t have enough.” Later, he adds: “They don’t like to go to court without phone calls.”

The next day, in another recorded phone call, Mr. Bauer told the unnamed co-conspirator to burn a pile of cash that had his fingerprints on it and said, if questioned about his large A.T.M. withdrawals, he would claim he had “bought prostitutes” with it. As an alternative to rid the cash of fingerprints, the men discussed running it through a washing machine.

Mr. Bauer promised to remain loyal to his friend, in a recording cited in the complaint. “I know 100 percent in my mind, no matter what happens, I will never mention you” to the government, he said.

U.S. v. Bauer and Kluger

S.E.C. v. Kluger and Bauer

Article source: http://feeds.nytimes.com/click.phdo?i=d88b42ce431a0fb74f0480057af6c582