What a $300 House Teaches Us About Big Business

The Economist magazine ran an article this week on an initiative to develop a $300 house to replace the slum dwellings of over 800 million people. Reading the article, I considered how impossible this task would be without profit-seeking corporations catering to the needs and desires of the poor.

A $300 House
Designing a $300 house that the poor will buy is not easy. Since $300 represents a huge investment for the very poor, the houses must be much better than their current arrangements. The Economist explains the design guidelines:

The houses should be built of mass-produced materials tough enough to protect their inhabitants from a hostile world. They should be equipped with the basics of civilised life, including water filters and solar panels. They should be “improvable”, so that families can adapt them to their needs. And they should cost no more than $300.

What I particularly like is how the designers are seeking to make a product the poor will want to buy. It respects the poor as intelligent consumers who aren’t going to buy junk. The market for cheap houses could be worth $424 billion, and the profit motive urges firms to seek a piece of this pie.

Big Business Builds a House
Technology provided by the profit-sector for the developed world will be the key to meeting the house’s specifications. Our lives have greatly benefited from the unrelenting stream of technology coming to market since the Industrial Revolution.

Now, much of this technology will help the poor live in quality, affordable homes. The tough structure will require synthetic materials and modern manufacturing processes. Water filters and solar panels – greatly improved in recent years – are available because of profit-seeking efforts. Even delivering the materials to build the homes efficiently will require modern transportation.

Like it or not, a $300 house cannot ultimately be built by for-profits or governments. The technology that goes into these homes will by and large be products of the profit-sector.

Not An Anomaly
Profit-seeking businesses fulfilling the poor’s needs is not new. In fact, it is the rule rather than the exception. Business has a way of bringing the costs of goods down when it sees a profitable, untapped market. By making a house less expensive, a firm makes a poor person richer because now they can afford to live in a proper structure.

In the United States, this has happened repeatedly. Henry Ford’s introduction of the assembly line made cars affordable to millions of families. Today, Wal-Mart and IKEA work tirelessly to reduce the costs of their products. They then pass some of this cost savings to their customers. Wal-Mart and IKEA both have made lower-income Americans wealthier. Now, it looks like for-profits are going to try and meet the needs of the world’s poor too. That is a great thing.