Wamura’s Legacy - The Time Value of Value
In a previous blog, we explored how the value of infrastructure often remains invisible until a moment of crisis reveals it. Today, we travel back to 1960s Japan to examine another crucial principle: how the timing of infrastructure investment affects the value it delivers.
Meet mayor Kotoku Wamura;, he spent billions of Japanese Yen (approximately $40 million AUD) on constructing a massive floodgate in Fudai-mura.
The opposition was fierce. Critics mocked the project as a huge waste of public funds. But Mayor Wamura had the courage to see it through, despite the political cost.
When Wamura retired in 1987 many people still harboured resentment about his decisions, and the floodgate cast a shadow over Wamura's legacy.
Fast forward to March 11, 2011. The Great Eastern Japan Earthquake struck, triggering the disaster that would infamously destroy the Fukushima Nuclear Power Plant. There was also a tsunami that brought waves as high as 38 meters, devastating entire communities and claiming tens of thousands of lives across many towns and villages.
Except for... Fudai!
Fudai-mura was left virtually untouched. Wamura's controversial floodgate protected the village. After the tsunami, villagers brought flowers to the former mayor's grave — and they are still bringing them today.
The floodgate Wamura invested in stood for 35 years before seeing action. During that time, it required ongoing maintenance, and many argued that $40 million could have been deployed elsewhere.
Someone viewing this from a financial lens might agree with the above claim. After all, there is a "time value of money": money available today is worth more than the same amount in the future.
But they would be forgetting the other side of that logic: Time Value of Value.
Just like money, the value generated by asset management — in this case, environmental resilience — has the same time variant value. The floodgate wasn't "doing nothing" for 35 years. From the moment it was installed, it was actively providing value by mitigating flood risk. Negative risk equals positive value.
We often misconceive value as instantaneous; something created only in moments of crisis. In reality, infrastructure assets like Wamura's floodgate hold value from the moment they are built, much like how the whale tail sculpture we discussed in our previous blog always held aesthetic value, even before it accidentally provided safety value.
While the 2011 tsunami was unpredictable, in our asset networks we can often simulate and predict the likelihood of failure and how risks change over time. This means the value we create through infrastructure investment changes depending on timing.
Ideally, we want to address risks at optimal times, not investing too early when risks aren't significant or leaving it too late either. The longer we delay addressing a risk, however, the longer we must endure the possibility that the risk event might occur.
To get the most value and confidently time your asset investments, consider these questions:
- What invisible value are my assets providing right now, even if it hasn't been "tested"?
- How can we consistently measure the effect of prioritisation/deferral of asset investments?
- How do we account for the "time variant" resilience, sustainability, and societal value of our assets of their entire lifecycle?
- What organisational changes, tools, and frameworks would enable us to shift from lifecycle cost optimisation to lifecycle value maximisation?
To reflect on the parallels and contrasts between the two stories we’ve talked about so far, the Whale Tail’s value was accidental and discovered through crisis, while the floodgate’s value was intentional but had to weather years of scepticism before mayor Wamura was proven right. This goes back to the first principle of how value in asset management is often invisible.
That means, unfortunately, good asset management can go unnoticed, because its value is invisible! So how do we ensure the value we generate as asset managers are noticed and appreciated? Stay tuned for the next blog!
