Posts Tagged: Phase 1 Dilemma



The Phase 1 Dilemma

In city building, there’s perhaps no greater challenge than what we here like to call The Phase 1 Dilemma.

The essence of the problem is this:

Finding $50,000,000 to fund a ready-made and demonstrably profitable project is (relatively) easy.

Finding $50,000 to develop, study and analyze said ready-made and demonstrably profitable project is (virtually) impossible.

(Substitute whatever numbers you think appropriate — you get the picture.)

The reason this is a problem and not just an annoyance is that to get to Phase 2 and 3, you typically need to go through Phase 1. Yet funding typically only exists for Phase 2 and 3. It’s a paradox.

The matter gets complicated further still as going through the study process doesn’t guarantee that a strong project will result. What if the numbers come back bad? What if the fundamental idea behind the project turns out to be sour?

Relatively speaking, this isn’t as much a problem in the private sector as in the public sector. As private sector players have a vested interest in developing ready-made and demonstrably profitable projects, they’re far more likely to take on the risk associated with going through the project development process. Think about the pharmaceutical industry: Vast sums of money are spent there with only a small percentage of the products and ideas bearing fruit – yet still they spend the money.

You also have young start-ups and people lower down the value chain willing to invest considerable sweat equity in such study, research and development in the hopes of realizing future rewards – but again, that’s tends to happen at the private sector level.

In the public sector realm, solving the Phase 1 Dilemma can be difficult beyond belief, greater still if you’re dealing with a Pre-Phase 1 Dilemma.

As the behaviour of our electorates increasingly force our politicians and policy-makers to act with a degree of risk aversion that borders on the absurd, the availability of resources to develop new public sector projects in the city building industry is as rare as ever.

Meanwhile, the lack of clear vested interests and profit incentivization further dilutes people’s willingness to assume the risk associated with project development. And the sheer volume of stakeholders competing for scarce funds to develop projects only dilutes motivation further.

Which in turns leads us to the No City Wants To Be First Problem — a situation whereby city building becomes a conservative act of doing as everyone else does and shunning all but the tried-and-tested.

Ironically, however, doing as everyone else has been doing doesn’t quite seem to be working out as planned. Despite having more than half the world population defined as ‘urban,’ our cities are increasingly bankrupt, congested and polluted.

Perhaps it’s time we dedicate some time and energy to solving the Phase 1 Dilemma?

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