Thank God It’s Friday! May 15, 2015

In today’s high-tech digital world we live in, an age old-low tech issue has become too critical to avoid.  It’s all about WATER and how it’s managed.  In the West, there’s not enough.  In the East, after a record winter snowfall, there’s too much.  So no surprise, there’s actually talks of shipping excess snowpack and water from the New England states out to the dry west.  Water is not just a US issue.  Over 70% of the earth’s surface is covered by water, with the oceans representing over 95% of total supply.  The major issue is that less than 1% of the water on earth is drinkable.  The vast majority of water usage around the world is for agriculture.  Population growth plus less water to drink is a big problem.  Pollution is also a major problem, especially overseas.  

A big part of the water issue in the US has been greatly influenced by the massive population growth out west, where abundant water supplies didn’t exist.  The Colorado River, with its headwaters in the Rockies, flows 1,500 miles and provides water for nearly 40 Million people in 7 western states.  It’s been the lifeline to the southwest for 100 years.  Since the 1960’s, it no longer reaches the Pacific Ocean.  The Colorado River is viewed as an engineering masterpiece and a crime against nature at the same time, depending on the view.  Unfortunately, its flow has slowed.  According to NASA, California has just 1 year left of water.  That’s an attention getter.  If that doesn’t force change, nothing will.

Modern solutions are being tested.  One of which is desalination, which is the process of producing drinking water from the ocean.  The process can be quite expensive, but innovative technologies are making it happen.  Desalination plants are providing solutions for many nations overseas, that don’t have enough of the most precious natural resource for life.  It’s happening in parts of Africa, Australia and the Middle East.  Did you know that 50% of the drinking water in Israel comes from the Mediterranean?   The largest “de-sal” plant in the western hemisphere is under construction in Carlsbad, California, which is expected to pump 50 Million gallons of drinking water per day from the Pacific to San Diego County residents next year.

Consumer behavior has changed substantially over the years.  In 1976, Americans on average consumed 1.6 gallons of bottled water.  Today, it’s nearly 40 gallons per year. We need to re-think how we use our water supplies.  We still water plants and lawns with drinking water!

We have been studying the issue quite a bit of late, and having fascinating debates in our investment committee meetings.  The water industry is a highly fragmented institution, which is largely driven by government.  Our thesis is a Silicon Valley approach will be applied to the industry which will provide innovative ways to recycle, treat and manage our earth’s most valuable resource in a much more efficient and sustainable manner. Technologies could be around the corner that will catch freshwater runoff from storms that can be saved for human use before they develop pollutants.   Perhaps water runoff from the shower will be diverted to a backyard source for landscapes rather than sewage.  Crisis breeds opportunity.  We are always on the prowl, trying to detect the next big thing in high-tech, and see it in the simple compound of H2O.  We’ll be invested there.

Have a nice weekend.

BY: Mike Frazier

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