Who: Professor Vijay Govindarajan, co-founder, $300 House Project
What: The genesis of the idea, his hopes, and what could come next
What if: You could build a house for $300?
The takeaway: Think in terms of economies of scale, mass production and local, culturally appropriate customization. Also get lots of people involved, and it doesn’t hurt to run an online contest.
Two Indians living in the U.S. have teamed up with a host of experts and volunteers to crowdsource designs for houses they believe could be built for US$300 (Approx. €213/£188/INR13,870 as of the time of publication), excluding land costs. For the housing industry, it could signal a quantum leap toward recognition that the world’s poor need housing at a price they can afford, and could potentially yield a huge impact in terms of spurring innovation. But it’s only a beginning.
Professor Vijay Govindarajan, a professor of international business at Dartmouth University’s Tuck School of Business and Christian Sarkar, a marketing consultant, have executed an impressive operation that managed to draw scores of experts enthusiasts into the fold. Exemplifying a “hybrid value chain,” (explained in our interview, above) they teamed up with academics, architects, big business, potential funders, notable thinkers, and eventually, it seems, almost anyone with a name who wanted to lend that name to the $300 House Project (like reggae musician David “Dread” Hinds of the band Steel Pulse, now an advisor to the project).
It began with five questions in a post on the Harvard Business Review blog:
They’re the right questions, and it seems the right people were asking them, too. Govindarajan and Sarkar have demonstrated an exceptional ability to involve and invigorate people and get things done. In 2010, students at Dartmouth’s Tuck School of Business created a business plan for communities of $300 houses in India. Govindarajan and Sarkar teamed up with Jovoto, a mass-collaboration website, to run a contest to source actual designs, and from there, momentum just snowballed.
The creators of the top six winning designs will now participate in a prototype-making workshop in the U.S., and eventually they will help create a model village in Haiti, a step to possible later commercial development. Submissions came from individuals, teams and even big business names like India’s automotive and industrial powerhouse Mahindra group (one of the top six winners).
The $300 House team have made a number of smart moves thus far, and they’ve got some very big names talking about how economies of scale can be applied to housing technologies in order to bring costs into the affordable realm for millions upon millions of people. Their work on this project may well yield a $300 house that sees widespread adoption, housing people who otherwise would never have owned homes. But that may not be the main outcome of their endeavor. The technologies, innovative materials and business buzz generated will go on to serve not just “at the bottom of the pyramid” but in the middle and even at the top, as well. It’s what Govindarajan likes to call reverse innovation — need- and cost-based innovation driven by markets in the developing world that “demand new, high-tech solutions that deliver ultra-low costs and ‘good enough’ quality.”
KIM GREEN: You’re listening to Housing Revolution. I’m Kim Green—
PETER ARONSON: And I’m Peter Aronson. Owning a home is not just the American dream — it’s almost everyone’s dream. Home prices in the United States have fallen by a third since their high point in 2006. But if it’s still hard for working-class Americans to afford a home, the dream of owning a house is completely out of reach for people near the bottom of the income pyramid just about everywhere. I’m talking about the people who live in shanties or slums, basically miserable ramshackle shelters, because those are the only options they can afford. Now there are charities working to create houses for the poor — Habitat for Humanity, for example, sends volunteers to construct houses for poor people. But while Habitat for Humanity built homes for 75,000 families last year, in the grand scheme of things, that doesn’t make much of a dent in the humongous demand. According to the United Nations, there are 1 billion people around the world living in slums. By 2050 there will be three times as many people stuck in slums if nothing changes. Three billion. So last year two friends, a business professor and a marketer, were sitting around and talking, maybe over coffee, and started pondering the problem. And they said:
VIJAY GOVINDARAJAN: —we said, “Why can’t we create a house for $300?”
KIM: Yeah (laughs) — the whole house?
PETER: The whole house. Top to bottom. Front to back. For just $300 bucks.
KIM: You probably can’t even paint a house for 300 bucks these days.
VIJAY: Assume we just landed in Mars. We know nothing about a house. Let’s create one.
PETER: That’s Vijay Govindarajan. He’s a Professor of International Business at Dartmouth’s Tuck School of Business. It was easy for him to assume he knew nothing about building a house, because for one thing—
VIJAY: I don’t even know how to handle a hammer and a nail. I am not an expert on housing. In fact my naïveté about this topic may well be my advantage — because I’m so naive, I used a non-linear approach.
KIM: And by non-linear, basically he means he asked a bunch of people for help.
PETER: Right. So he and his friend started about a year ago, with that question—
VIJAY: “Why can’t we create a house for $300?”
PETER: —and then fleshed it out into a more detailed challenge, which they wrote about in a post on the Harvard Business School blog.
VIJAY: And then we took an ecosystem approach to creating this project. What I mean is: I and Christian Sarkar first asked the question, “Who do we know?” and we contacted them, and asked them to put us in touch with who they know. And soon we have 2500 people who are on our network.
PETER: People from many professions and walks of life, participating in this online dialogue or offering advice behind the scenes, trying to do their part to answer the question: Can we build a house… for 300 bucks? Is it possible? How can we do it? What’ll it look like? How can we get the costs down so low? But what I wanted to know was: Why $300?
VIJAY: I would say there are probably three– three reasons. — as you can tell, I like 3′s a lot! Because my father told me that even if you have ten things to say, if put them in groups of three, three they can remember. Nothing more.
PETER: So his three reasons for picking $300 as his goal are, first:
VIJAY: It’s an attention-grabber. $300 is not the point. The point is to think out of the box. You have to think as though you know nothing about the houses that exist today. So that’s the first reason. The second is: This is similar to the hundred-dollar laptop, or the $2000 car—
PETER: —which Tata Motors, in Govindarajan’s native India, has been selling for more than a year now.
KIM: Actually it costs more than two thousand dollars.
PETER: Well, a little more. I should say it costs roughly two thousand dollars—
PETER: OK, the car costs approximately two thousand dollars.
KIM: I’m just saying.
PETER: And that two-thousand-dollar mark is what Govindarajan calls
VIJAY: an aspirational goal. And the third is if you look at Dr. Mohammed Yunus, when he did the poverty index study, when people came out of poverty in Bangladesh, they want house costing about $375, so I kind of rounded it off to $300. But the main thrust here is: Really put an aspirational goal that forces us to forget about the concept of house as we know.
PETER: In other words, start with a completely clean slate
VIJAY: Because 2 years ago, if someone asked me, “Can you create a car for $2000?” I would have just laughed that person out of the room. And they made it happen! So therefore it really requires that kind of imaginative approach and that’s what is needed in the housing sector — let’s just start to create something radically different.
KIM: OK wait a minute. You know, I would love to believe in that. But I just— I don’t see what’s so radically different about this. Are we just talking about more cheap housing that’s just cheap? Because “cheap” usually just means worthless crap!
VIJAY: I think there are three very important differences between what we’re talking about here and cheap housing, which has been around for a long time. The first is we said private sector should get into this space. I firmly believe, ultimately, poverty can be eradicated — and housing is one element of that — only if we bring innovation and entrepreneurship to the table. And that’s what private enterprise can do. Second, we said the poor should participate in capturing some of the value and profits that are going to be created in this venture, as consumers but more importantly as producers. We want to actually co-create this housing with the poor. Therefore they actually capture some of the value, being employees as well as consumers. Third is I think in the past we have tried to attack poverty, various elements, one at a time. Somebody worked on schools, somebody worked on health, somebody worked on sanitation, somebody worked on clean water, somebody worked on solar energy, somebody worked on house. We are saying house becomes the delivery mechanism to deliver a variety of services to the poor: Services like schooling, health, food, sanitation, clean water, solar energy, etc. So those are the 3 big differences. So we are proposing an integrated approach.
KIM: Okay, call me a skeptic, but that sounds pretty ambitious. I mean how’s he gonna do all that? How, specifically? What are the actual ways?
PETER: Wait, wait wait wait — we’re coming to that. So Govindarajan and Sarkar lined up some sponsors, set up a design contest online, and asked people — anybody, really — to submit their plans, as long as they met a few basic requirements:
VIJAY: Of course with $300 we are talking about a basic house. However, the basic house has got to be a lot better than what the poor have today. It’s got to be something that helps them to move up. But the house itself has to have sustainable energy source, clean water, it has to withstand weather, earthquake, if it is earthquake-prone. It has got to have proper ventilation, it has got to be high enough that people, you know, don’t have to, you know, bend when they come in, it has got to have enough light in the house. So those were the requirements we put.
PETER: All that for 300 dollars, when piling in all those features could easily cost $300,000 or more. Govindarajan calls it “radical—
VIJAY: —“radical or extreme affordability.”
PETER: He wants to create a house that’s radically affordable yet also radically… sustainable.
VIJAY: Everything about this house and the village which will consist of several of these houses have got to be sustainable. That means water usage, electricity usage, waste per capita — all of them have got to be brought dramatically down. Otherwise the Earth cannot sustain so many houses coming if the consumption of water and electricity is at the current level.
KIM: Yeah, everybody agrees with that, but how do you actually do it? I mean, it’s like saying, “We need to master cold fusion.” Yeah, of course! But oh, the details…
PETER: Well isn’t that why he was asking for help? I mean he said himself he doesn’t know how to create the housing equivalent of cold fusion on his own—
VIJAY: I don’t even know how to handle a hammer and a nail.
PETER: So he said, “Hey, let’s see if anybody else can figure it out.”
KIM: So is he offering a solution, or just pointing out the problem?
PETER: I think the point is that he’s trying to highlight the problem to hopefully get at some answers. But anyway, there’s more, and that’s the third key point: scaleability. Mass production and harnessing the power of economies of scale to bring costs way down.
VIJAY: Because we are talking about a global problem, and a global problem cannot be solved just by constructing a single house or few houses in one area. That’s just not going to do it. Therefore scaleability is very important. When you produce something on a much larger scale, the cost comes down. That does not mean the house will look identical across all parts of the world, but if some core components in a house can be standardized and therefore mass-produced, those core components bring the cost down. And using the core components, you can still customize the house somewhat for your requirements. I think we need to get away from 2 important notions here, that is: one-size-fits-all. Because house is a very emotional topic, and people want something that is unique. We are not talking about just building the same house everywhere. That approach will not work. The second approach also will not work, which is to say “Every person’s house has got to be different, and therefore only local designers can do it and only it’s got to be made locally.” That also is not a way to solve this problem, because we will be reinventing the wheel, and the cost structure cannot be brought down. Wherever global designs and global components can reduce costs, we should adopt them. And we need to keep local adaptation wherever that makes sense. It is this combination which is ultimately going to create something which is low-cost, but also meets the customer’s requirements.
PETER: Those are three pretty big requirements. So they put the criteria out there—
VIJAY: We had exactly 300 submissions for the $300 house — I don’t know how, we didn’t orchestrate it that way, that just happened.
PETER: Those submissions came from architects, computer-design types, amateurs, even a team from one of India’s major automakers.
VIJAY: We have picked 16 winners, of which six we’re going to invite for a prototype workshop. They’re all available on the web — anyone can go see it.
KIM: Actually I’m looking at it right now, and there’s something here made out of recycled plastic block. There’s one that seems to be made out of bags of dirt, something called a “stone dome” that looks kind of like a teepee, geopolymer — whatever that is — and something made out of rubble gabions.
PETER: Quite a variety of approaches. Some elements of those designs may ultimately be incorporated into a model village to be built in Haiti. But Govindarajan says the purpose—
VIJAY: The purpose is not that the designs, even the winning designs, are exactly the designs that we are going to use to create the prototype. What we placed bigger bet on is to find creative designers. Even if their design itself was not ultimately going to be the ones we may use, we wanted to pick designers who thought out of the box.
PETER: Because, as Govindarajan sees it:
VIJAY: What we have in front of us is an innovation challenge. The $300 house to me is an innovation challenge to corporations, to NGOs, to governments, not to work independently, but to work collaboratively. And try to attack perhaps one of the most fundamental human rights — because to me, housing is a human right!
PETER: Pulling back and looking at the bigger picture, Govindarajan says housing is one link in a chain, part of a cycle keeping the world’s poor poor.
VIJAY: Someone does not have enough money, because that person is poor. Because that person doesn’t have enough money, they don’t build a proper house. Because they don’t have a proper house, they don’t have proper sanitation. Because they don’t have proper sanitation, they fall sick! Because they fall sick, they can’t work! Because they can’t work, they don’t make enough money! And because they don’t make enough money, they got a bad house! It is this vicious cycle we need to fight.
PETER: The sheer complexity and multifaceted nature of the challenge is why it’s not enough to have a product. Governments, citizen advocacy groups, businesses, universities, and the residents themselves — they all have a role to play. It’s what they call a “hybrid value chain.”
KIM: Who calls it that?
PETER: Um, business geeks.
VIJAY: I knew a hybrid value chain is the way to go, because there are a lot of NGOs, lot of individuals, governments, corporations, are all experts, at, little little pieces to this puzzle. And unless you bring all these pieces together, we can’t solve this jigsaw puzzle!
PETER: Govindarajan sees the $300 House as a market-driven product, making money for people along the way.
KIM: People like… I dunno… him?
PETER: You mean does he plan to become a billionaire if the product takes off?
VIJAY: I am not going to create this house, I am not interested in starting a company, I don’t want any money, I don’t— this is not an organization. As I said, we created a website. I started it more as a way for me to learn about this topic and even in within less than 12 months, I think we have achieved something: All these people have come together, they are excited, they’re energized, and my happiest day would be if some large company takes over this project and finds this commercially viable and attractive to do and puts together a coalition of NGOs and governments and other companies and individuals and micro-enterprises and builds a village full of houses. Then, I think that would be called a success.
KIM: A villageful of houses still won’t make much of a dent if we’re talking about one to three billion people relegated to slums.
PETER: Right, right. Okay. You’re right. But he says perhaps the $300 house is just the beginning.
VIJAY: I think, to me, the larger vision is: $300 house. Somebody then says, “Why not a $1,000 school?” another person then says, “Why not a $2,000 hospital?” Companies have divided the world into two: There are three billion who are rich enough, who can afford the products and services we produce today, and the four billion poor we have really left them to charity to take care of, and I think that is a very, very outmoded thinking.
PETER: You’re listening to Housing Revolution. We’ve been hearing about the $300 House from Vijay Govindarajan, a professor of international business at Dartmouth’s Tuck School of Business and co-creator of the $300 House project. You can find out more about the $300 House, find links to the project and other things mentioned during this podcast, and read an extended version of this interview on our website, HousingRevolution.org. Our producer is Kim Green, and our show today was edited by me, Peter Aronson. Our music is courtesy of Headmint: Music for Corporations. Thanks to the folks at Dartmouth’s Tuck School of Business for help recording the interview, and while we’re giving credit where credit is due, a very special thanks to Jad Abumrad and the folks at NPR’s Radiolab for all their great ideas. Until next time, I’m Peter Aronson—
KIM: and I’m Kim Green.
PETER: for Housing Revolution, saying, “Foment!”
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Here’s a video on building a house out of recycled plastic bags (They’re apparently a lot stronger than we’d think.) by Harvey Lacey, who placed 12th in the $300 House contest and who has actually been making sub-$300 houses for quite some time: