Connecting the Dots: From Financial Crises to Water Management – Lessons in Proactive Solutions

On March 14, 2008, the U.S. stock market seemed to be sitting on a razor’s edge. Was the whole market about to crash? It felt that way, but nobody seemed to agree on how things would shake out. The broader public was starting to ask questions of companies like Merrill Lynch, Citigroup, and Bear Sterns—organizations that had previously been considered above reproach. Sure, Bear Sterns’s subprime hedge funds had collapsed in June 2007, but most industry insiders were still shrugging off the public’s concern as paranoia. “Outside of blatant criminal conduct,” the thinking went, “investment banks do not fail.” That had been the consensus to date. On Friday, March 14, 2008, the market began to change its mind. 

That same morning, Steve Eisman, a prominent investor who had been predicting the collapse of the housing market since 2005, was set to debate the famed investor Bill Miller, who happened to own $200 million of Bear Sterns stock. It ended up being incredible timing. 

Miller spoke first, briefly discussing the wisdom of his investment in Bear Sterns. Next, it was Eisman’s turn. 

“The minute Steve starts to speak, the stock starts to fall,” said Vinny Daniel, a member of Eisman’s team. 

Eisman railed against Wall Street’s failure to see what he and his colleagues found so easy to identify. He criticized the industry’s myopic focus on short-term profits at the expense of long-term stability, highlighting how reckless behavior and lack of oversight had created a ticking time bomb within the financial system. “The banks in the United States are only beginning to come to grips with their massive loan problems,” he warned. As he made his way back to his seat, Steve Eisman passed Bill Miller and almost sympathetically patted him on the back. 

As the Q&A session began, someone in the back of the room stood up to ask a question. “Mr. Miller, from the time you started talking, Bear Stearns stock has fallen more than twenty points. Would you buy more now?”

A stunned Miller stammered, “Yeah, sure, I’d buy more here.”

With that, people began to run from the room. No one could believe what was happening. 

By the end of the day, everyone in the country knew that Bear Sterns was in serious trouble—its stock had dropped from $57 to $30 per share. By Monday, Bear Stearns was gone, sold to J.P. Morgan for just $10 per share. 

On the morning of March 14th, the hot topic on Wall Street was, “Are the banks in real trouble?” The following week, the conversation became, “The banks are going down; how could we have missed the warning signs?”

Not everyone had missed them, of course. Leaders like Steve Eisman had been sounding the alarm bell for years. In 2002, the economist Dean Baker warned about a growing housing bubble; in 2005, Robert Shiller at Yale updated his book “Irrational Exuberance” to include his concerns about overvaluation in the housing market; in October 2007, Meredith Whitney, an analyst at Oppenheimer & Co, issued a report predicting massive losses for major financial institutions due to their exposure to subprime mortgages. Despite all the warnings of the previous years, financial officials were largely caught by surprise. Why couldn’t they connect the dots? 

Rory Sutherland, the vice chairman of Ogilvy UK, has famously distinguished between the results of seeking to win arguments and seeking to solve problems. Sutherland’s claim is that most business activity today is oriented around winning debates rather than truly moving towards better solutions. The distinction is not a trivial one. 

The argument winner begins by using available data to arrive at a reasonable answer, but the problem-solver asks what data would need to exist for them to design a meaningful solution. 

If you were to look at the 2008 global financial crisis through the lens of winning an argument, you would likely agree with the consensus opinion at the time. Some of the smartest and most trusted people in the United States publicly endorsed the housing market as fundamentally sound in the years leading up to 2008. Jim Cramer, host of CNBC’s “Mad Money,” told his audience on August 3, 2007, “Bear Stearns is not in trouble. Don’t move your money from Bear. That’s just being silly. Don’t be silly.” Henry Paulson, the U.S. Treasury Secretary, was quoted in April of 2007 as saying, “I don’t see (subprime mortgage market troubles) imposing a serious problem. I think it’s going to be largely contained.” These individuals were using the data they had easy access to, and the data told them that everything was fine. If, instead, you were to analyze the situation from a problem-solving perspective, you would have done what Steve Eisman and his team did. You would have gone on the ground and talked to real homeowners with multiple homes they could not afford. You would have visited the neighborhoods of empty homes in suburban Florida. And you would have concluded like Eisman did, that something was very wrong with the state of the housing market. 

The positions we take in life, and the solutions we design depend upon which information we examine—and, critically, which information we do not examine. 

This is an obvious point that nonetheless bears repeating, particularly when designing solutions for more effectively managing freshwater globally. 

In the spring of 2023, researchers at the Global Commission on the Economics of Water released a study titled “Turning the Tide: A Call to Collective Action.”

The authors warned of a looming 40% shortfall in freshwater supply by 2030, with severe shortages anticipated in water-constrained regions.

This alarming projection was not entirely new to those familiar with the issue. Concerns about water scarcity have been escalating for decades:

• 1965: The U.S. Geological Survey (USGS) reported groundwater depletion in the High Plains Aquifer, highlighting unsustainable water extraction rates.
• 1992: The Dublin Statement on Water and Sustainable Development, formulated during the International Conference on Water and the Environment, emphasized the finite and vulnerable nature of freshwater resources.
• 2012: The Water Resources Group’s “Charting Our Water Future” report outlined the economic risks of water scarcity.
• 2020: The UN World Water Development Report projected that by 2050, over half of the world’s population would live in water-stressed regions.

The general response to these escalating water scarcity issues has often focused on increased measurement and data collection rather than comprehensive management strategies. 

While improved measurement and monitoring capabilities through sensors, data loggers, and other devices are critical for understanding the scope of the problem, they fall short of addressing the root causes and implementing effective solutions. 

The psychologist Daniel Kahneman is famous for saying, “Nothing in life is as important as you think it is when you are thinking about it.” I propose that the opposite is equally critical for those of us in water management today. 

“Many things in life are not nearly as unimportant as we think they are when we are not thinking about them.”  

A holistic management approach is needed. One that integrates and quantifies how much water is available to a given site and how much of it that site utilizes. Despite numerous warnings and data-driven insights, efforts have largely centered on quantifying the crisis rather than taking decisive action to mitigate it. For example, the USGS reports and subsequent studies provided detailed assessments of groundwater depletion, yet policy responses have frequently lagged in promoting sustainable water practices. Similarly, international declarations like the Dublin Statement emphasized the vulnerability of water resources. However, translating these principles into concrete, actionable policies has proven challenging because we have not had effective tools to quantify the impacts of our actions. 

Just like the 2008 financial crisis, we need tools and strategies that help us move from asking, “What water data do we have?” to “What water data do we need to examine to create meaningful solutions?”

This is the step change from analyzing resource depletion to proactively managing resource efficiency. It’s moving from guessing at impact to provable ROI. It’s moving from measurement to management.

It is why we built SWAN Systems. 

In today’s world, very few water managers adopt new technologies because the solutions are too tedious. They already have too many apps. They spend too much time managing their current technology stack. And what they have in place still isn’t telling them what they need to know: “Does my operation have the water it needs at the right time?…or not?” 

Despite all the spreadsheets, PDF reports, scouting, tissue sampling, soil testing, and connected sensing, water managers still don’t know their water status at scale - until now.

We’re delivering irrigation technology optimization. The industry is tired of disparate sensor readings, confusing reports, and systems that fail to communicate. We see an opportunity here—an opportunity to integrate, upgrade, and enable. We take every point in your water supply chain, every water signal, and convert it into action. 

Helping you make the shift from measurement to management, from babysitting complex technology to optimizing business outcomes.

The lesson from 2008 is clear: understanding the right data and acting on it is crucial. In water management, just like in finance, we must look beyond the obvious and question the assumptions. It’s time to connect the dots and move from merely recognizing problems to solving them.

By embracing comprehensive management strategies and leveraging advanced technologies, we can shift from simply measuring water scarcity to effectively managing our resources. This proactive approach is essential for ensuring a sustainable future in which water is used efficiently and responsibly. As we learned from the global financial crisis, the key to avoiding disaster is not just in the data we collect but in how we interpret and act on it. The future depends on our ability to turn insight into action.

Contact us to learn how our water co-pilot could help you stop managing your water in the rearview mirror.