Where will people live after the Big Bubble pops?

If the Big Bubble proposition turns out to be true, the world could be faced with hundreds of millions or even billions of people homeless or under-housed. Where might people live if they lose their incomes and can’t pay rents and mortgages?

Some might have the ability to live off the land, join with relatives, or form intentional communities. But it’s easy to imagine large displaced populations lacking housing.

(Note: I don’t necessarily think the Big Bubble is going to pop inevitably. It’s entirely possible that those who are trying to keep the economy running will find ways to do so in spite of the human and environmental consequences. Bubbleconomics is in the way of an exploratory project, so the ideas presented here are tentative.)

When it comes to housing, I think it’s useful to look at alternatives that are emerging in various corners of the earth where people are already suffering from scarce resources. Interesting solutions often arise from such conditions.

Recently I learned about a housing solution being developed by Tata Group, a $62.5 billion Indian company that operates in multiple businesses, including IT, communications, energy, chemicals, and other industries. Tata is the company that has developed the Nano, an auto that sells for as low as US $2,800.

In that same spirit, Tata Housing is building a “nano-housing” complex consisting of very small units designed for affordability. The project, called Shubh Griha, is in Boisar, a suburb accessible to Mumbai. The living units advertised by Tata are 283 square feet, 360 square feet, and 465 square feet.

Here’s a link to a floor plan for the smallest unit:

From Tata’s price list, it looks as if the smallest unit would sell for about 400,000 rupees, or about US $8,500. Tata describes Shubh Griha as “an integrated township with all the basic amenities” and “a clean and green environment.” The development is planned with a footprint allowing 70 percent devoted to common area.

In the U.S., “tent cities” have received some press over the past year as increasing numbers of people become homeless. In some areas, such communities have received assistance from governmental and non-profit organizations — for example, see information here about tent cities in the Seattle, Wash., area. Dignity Village in Portland, Ore., is an example of a former tent city that has evolved into an established intentional community with its own administrative and security infrastructure.

Here’s a link to an image of one of Dignity Village’s common buildings:

The organization says it has five basic rules:

  1. No violence to yourself or others.
  2. No theft.
  3. No alcohol, illegal drugs or drug paraphernalia on the property or within a one block area.
  4. No continuous disruptive behavior.
  5. You must contribute to the maintenance and operation of the Village.

One of the scariest outcomes from lack of housing is the development of huge “shantytowns” around many large cities in the world. These communities are called favelas in Brazil, which lays claim to some of the best-known of such areas. Here is a link to an image of Favela de Rocinha in Rio de Janeiro:

A few years ago I read in Awake! magazine about the cage apartments in Hong Kong, where where over 53,000 people live, according to Christopher DeWolf writing on his blog UrbanPhoto — see his article “Life in a Cage.”

In Awake! (“A Day in My Life in Crowded Hong Kong,” Nov. 8, 1991), Kin Keung writes about

thousands who live in Mong Kok district and who rent “cage apartments,” stacked three high and measuring six feet [1.8 m] long by 30 inches [0.8 m] deep and 30 inches [0.8 m] high. They have space for a mattress and a few personal belongings. No furniture.

thousands who live in Mong Kok district and who rent “cage apartments,” stacked three high and measuring six feet [1.8 m] long by 30 inches [0.8 m] deep and 30 inches [0.8 m] high. They have space for a mattress and a few personal belongings. No furniture.

Here is a link to DeWolf’s photo of someone living in a cage apartment:

A non-profit organization called EDAR Inc. has developed a portable shelter for the homeless called the EDAR unit. Here is a link to a video that demonstrates how EDARs are used:

All of this is written not to scare the pants off of people, but to point to the issues that arise for individuals when their personal bubbles deflate, and what could happen to masses of people worldwide if the Big Bubble collapses.

The need for housing alternatives points to an area where innovation could benefit millions and where an opportunity exists for governmental agencies, non-governmental organizations, and entrepreneurs.

AB — 6 June 2009

The Value of Extremist Economics

An article by Justin Fox in the June 1, 2009, issue of Time called my attention to the economic commentary and libertarian views of Peter Schiff, president of brokerage firm Euro Pacific Capital. (Justin Fox writes the column “The Curious Capitalist” for Time. The article I’m referring to was called “Excluding the Extremist” in the print magazine but is called “Why We Should Listen to Peter Schiff’s Bad News” in the online version.)

While most other economic commentators were trying to prop up the smiley-face view of the economic prospects during 2006 and 2007, Schiff was warning that the economy was heading into a serious recession because of too much debt and a broken banking system, and that the stock market was due for a crash.

Commenting as part of a panel for Fox News on 18 Aug. 2007, Schiff said the following:

The worst is yet to come, the fundamentals are not sound, they’re awful. If the fundamentals were sound we wouldn’t be having these problems.

This to the derisive laughter of the other Fox panel members. In the following video you can see fascinating clips of Schiff during that period going up against the prevailing optimistic wisdom of the time:

Even now in 2009, says Fox, Schiff has not changed his tune:

He thinks the “phony economy” of the U.S. is headed for even harder times. He believes that the crisis-fighting measures coming out of Washington are merely delaying the inevitable, debasing the dollar and loading future taxpayers with huge debts.

Doomsday prophecies aside, though, one of the most interesting aspects of Fox’s column is what he has to say about the value of diversity of opinion, even extremist views. Fox refers to the work of University of Michigan Professor Scott E. Page, an expert in complex systems, political science, and economics.

Including a diversity of views in a set of people working on a problem, writes Page in his book The Difference, increases the possibility that a crucial “savant” will be included in the group and that that is the person who will contribute the nugget that solves the problem:

If we sample widely, we’re more likely to find the one person who can solve the problem or who can make the key breakthough. We did not get the theory of relativity from a crowd. We got it from a diverse, novel thinker in a patent office.

Page’s book explains the research that backs up this assertion.

Some of our research at the Institute for Innovation in Large Organizations (ILO) jibes with what Page is saying. In our 2007 report “Effective Cross-Functional Innovation Groups,” we cited research by Harvard business professor Lee Fleming, who studied 17,000 patents. Fleming encountered an interesting tendency when studying the diversity of innovation teams:

The financial value of the innovations resulting from such cross-pollination is lower, on average, than the value of those that come out of more conventional, siloed approaches. In other words, as the distance between the team members’ fields or disciplines increases, the overall quality of the innovations falls.
However, he adds a big but:
But my research also suggests that the breakthroughs that do arise from such multidisciplinary work, though extremely rare, are frequently of unusually high value—superior to the best innovations achieved by conventional approaches.

The financial value of the innovations resulting from such cross-pollination is lower, on average, than the value of those that come out of more conventional, siloed approaches. In other words, as the distance between the team members’ fields or disciplines increases, the overall quality of the innovations falls.

However, he adds a big “but”:

But my research also suggests that the breakthroughs that do arise from such multidisciplinary work, though extremely rare, are frequently of unusually high value — superior to the best innovations achieved by conventional approaches.

We wrote:

Fleming comments that “when members of a team are cut from the same cloth,” as with a group of all marketing professionals, “you don’t see many failures, but you don’t see many extraordinary breakthroughs either.”

As an example, Fleming says that economists and physicists seem to be able to “team up and innovate efficiently and produce many moderate-value innovations, because their fields are fairly well aligned,” sharing “the common foundational tools of mathematics.”

However, as team members’ fields begin to vary, “the average value of the team’s innovations falls while the variation in value around that average increases. You see more failures, but you also see occasional breakthroughs of unusually high value.”

To me, this emphasizes the value of giving more extreme views a place at the table when tackling complex problems, rather than just laughing them off.

AB — 1 June 2009