In 1909 Winston Churchill gave a speech to the House of commons.
In it, he identified a problem that was “not merely not beneficial, but positively detrimental to the general public.”
It is now well over a century since he made that speech.
In that time we have been thorough two world wars and seen almost unimaginable technological innovation. Yet, Churchill’s problem still persists.
In fact, it came up again recently in an interview tech billionaire Peter Thiel had with Yahoo! Finance.
As my colleague Akhil Patel pointed out to me in an email about the interview:
“It doesn’t how much innovation we have, you can’t escape it. Thiel rightly notes that eventually it stifles the investment and innovation that created the land gains in the first place.”
The problem, as Churchill called it, is land monopoly.
“Land monopoly is not the only monopoly, but it is by far the greatest of monopolies – it is a perpetual monopoly, and it is the mother of all other forms of monopoly,” he said.
“No matter where you look or what examples you select, you will see every form of enterprise, every step in material progress, is only undertaken after the land monopolist has skimmed the cream for himself.”
And he illustrated his point with an anecdote:
Some years ago in London there was a toll bar on a bridge across the Thames, and all the working people who lived on the south side of the river had to pay a daily toll of one penny for going and returning from their work. The spectacle of these poor people thus mulcted of so large a proportion of their earnings offended the public con-science, and agitation was set on foot, municipal authorities were roused, and at the cost of the taxpayers, the bridge was freed and the toll removed. All those people who used the bridge were saved sixpence a week, but within a very short time rents on the south side of the river were found to have risen about sixpence a week, or the amount of the toll which had been remitted!
I find it quite strange that it is more than 100 years since Churchill made this speech, yet it is just as big of a problem today as it was back then.
And that for all their world-changing ideas, the tech elites in Silicon Valley are just as much at the mercy of this problem as the people in the anecdote above.
Here’s what Thiel said in his interview:
One thing I’ve been thinking about as a venture capitalist in Silicon Valley is the vast majority of the capital I give to the companies is just going to landlords. It’s going to commercial real estate and even more to urban slumlords of one sort or another. And that’s an odd thing to be doing as a venture capitalist. That’s so disproportionate.
Notice the similarity?
Here’s another line from Churchill’s speech:
The land owner is able to absorb to himself a share of almost every public and every private benefit, however important or however pitiful those benefits may be.
They are making exactly the same point, more than a century apart.
So, what was Thiel’s solution? To move away.
“I think this geographic question is one that we should be thinking about super hard. And even though the megacity trend has been this enormous social, economic trend for the last 40 years, there’s always a question — Is there some point where it’s gone a little bit too far?”
I mean, moving away is the obvious solution, right? If land is too expensive, move to somewhere where it’s cheaper. Problem solved.
Well, not really. You’re still playing the same game with the same rules. Eventually the same thing is going to happen in the new city as it did in the old one.
Plus, moving is a massive hassle. What if you really like your house. What if you’ve got it all decked out just the way you like it?
The only way to “win” in this scenario is to rewrite the rules.
Don’t hate the player, hate the game
In Churchill’s speech, he was quick to point out that he didn’t think the individual landlords were at fault, but the system.
The Landlords are merely playing their best hand in a game that is rigged in their favour.
The question then becomes, how do you win a game you know has been rigged against you?
I was thinking about this problem when I remembered a story I’d read last year about a new company producing flat pack houses in Italy.
These houses are delivered on a lorry and built in less than a day.
Once they’re up, they look like something out of Grand Designs. They are spacious, attractive and full of light. And they can be completely customised to your liking.
These are not static caravans.
They also come ready to hook up to water and electric supplies. Or you can get them made to be self-sustaining. They don’t even require concrete foundations.
And the best part is, if you want to move, you can just have the house re-packed, moved to your new location and reconstructed in a matter of days.
The cost? £25,000 for a small one, or £55,000 for a big one, which can sleep five or six people.
Here’s a concept photo of the inside:
And the outside:
Rewriting the rules
Remote working is already extremely common in many industries, which gives people more options to move around.
So, what if, instead of paying for a house or flat that was built 50 years ago with someone else in mind, you just moved your own house to where you wanted to live.
Sure, you’d still have to rent or buy the actual land you moved it to. But this is much, much cheaper than having to buy the building on top of it too.
And, if the rent went up, you could literally just move. Just move your whole house somewhere else.
By the same token, if you got bored of the location, you could move with a minimum of fuss. You’d just have your whole house shipped, with all your possessions. It would only take a few days.
And when people moved out, it would leave a free plot for someone else to move in.
You could even relocate to another country, with your whole house.
The more I think about it, the more I like the idea. People would just save up to buy their own house, and then decide where they wanted to put it.
What’s more, these houses don’t leave any lasting impact on the land when you move them. They don’t even need foundations. So you can put them in more places than you can traditional buildings.
If this way of doing things caught on, it would completely change the rules of the game. The reason landlords have such an upper hand if because land isn’t moveable.
In a future filled with flat pack houses, whole communities could just up and leave if they saw there was a better deal on land down the road.
Of course, it may never catch on. And I’m yet to see a finished house built by MADi. But if it did…
What do you think about this concept? Does it have legs or am I just being overly idealistic? Would you live in one of these houses? Let me know your thoughts: email@example.com
Until next time,
Editor, Exponential Investor