Around the World in 80 Hours #17: Water is Life

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Well, sort of. Eric Chiang​ and I arrived in Dubai from South Africa late last night for our final and briefest stop on the Around the World tour. One of the first things I noticed when we arrived was this bottled water with the slogan, "water is life." Makes sense, I thought. Dubai is one of the United Arab Emirates on the Persian Gulf just East of Saudi Arabia, so got really salty water on one side and then one of the driest deserts in the world there, so a certain amount of reverence for fresh water is logical.

One thing you need to know about Dubai is that everything is over the top. It's like Vegas meets New York City. The United Arab Emirates are of course extremely rich in oil (the federation is an OPEC country), and Dubai, recognizing that eventually the wells will dry up, has been in the process of reinventing itself as a cultural and banking hub in the middle east. Excess is everywhere, but it was still a bit surprising to find myself staring at a giant aquarium (complete with sharks) in the middle of the Dubai mall:


If that wasn't enough, they've got a man made lake (with boats of course) and fountain shows every hour that put the Bellagio in Vegas to shame.


For what a country with what I figured had a cultural reverence for fresh water, they seemed to be flaunting the water they did had, and that's the point. The reason we were there was to talk about factors of production. I mentioned this in my last post with the lions: basically the three main factors that go into producing anything are land, labor, and capital. Like South Africa, Dubai wanted to solve an economic problem and restructure its economy to not be as reliant on oil.

So how did they do that with the production factors they had? Well they don't have much labor since the country's population is so small. In terms of land, they have a ton of oil which in turn generates lots of capital, but they don't have resources like fresh water to allow their city to grow, and they don't have a decent natural port to facilitate trade. Now there's kind of a 4th factor that's often lumped in with capital, and that's innovation or entrepreneurship, and Dubai has that in spades. Basically, they've done a lot of things right; one of first things the UAE did after its incorporation was to develop a comprehensive education system, including universities. They've also provided incentives for foreign schools like NYU, American University, and even the Sorbonne to set up campuses there. They used their investment capital to develop their intellectual capital (innovation).

Need fresh water? Use both your capital and innovation to build desalinization plants. Need labor? Use your capital to provide incentives for labor forces from India, Pakistan, and Russia to work there (85% of Dubai's population is expats). Want to draw attention to your city as world hub? Use your innovation, capital, and new found labor to build the tallest building in the world (Burj Khalifa):


If you've got enough capital and labor you can even build a port from scratch.

The point is, if you use the production factors that you do have wisely, you can overcome deficits in factors you don't have. With a population of 2.5 million and a bustling tourist trade enjoying world class shopping and even an ice rink and man-made ski mountain in the middle of the desert, Dubai is a success story in that regard.

Up next, planes, trains, automobiles, and the conclusion of this blog.