Have you seen the ad where a guy with tiger stripe tattoos attempts to get a tattoo shop to take them off, and they tell him it’s impossible, just like they told him before? The guy objects saying, “well, now I’m on my digital phone, so…the call should go better.” He expects swapping out one technology will make everything behave differently than it did previously.
Something similar happened back in the days of the Dot Com boom–and subsequent bust. People imagined that a flawed business model + The Internet would mean the laws of economics could be reversed. It didn’t matter if you had a company providing a service no one was willing to pay for. This was on the Internet, dammit! Hell, a centralized pet food delivery service + The Internet = a good idea! Well, we all know how that turned out.
I suspect, based on a former colleague’s report of a Thailand conference of “social entrepreneurs”, that we’ve achieved Pets.org, or in this case, toilets.org.
As targeted by the Millenium Development Goals, over two billion people suffer disease, water pollution, and economic woes because of inadequate sanitation. And promising solutions in some cultures and economies are inhibited from scaling larger because producing appropriate toilets takes time. Especially if we’re talking millions and millions of locally appropriate toilets!
But this group of entrepreneurs gathered in Thailand this week, sponsored by Ashoka, has a new idea: Start producing the toilet components centrally at a huge scale rather than in scattered places around the world. Then use the web to give local groups in any country access to this single global source, through a single portal or marketplace. The massive global demand channeled through a single web marketplace will justify entrepreneurial investment in the huge volume, high quality, low cost supply side to begin with.
Pets.com, the above-mentioned poster puppet for Dot Com failure, was trying to solve the wrong problem. It assumed that the problem with pet food was that it was too hard to get, so aggregating demand would allow personalized delivery. It turns out there was a perfectly good existing model for delivering dog food. You ship them in a truck to the local grocery store, and people buy them along with their own food. The problem wasn’t on the demand side. As it turns out, there wasn’t really a problem until production was outsourced to countries with insufficient quality control to eke out a few percentage points more efficiency.
Could It Work?
So, let’s consider the problem of toilets. The first question I ask when given a new proposal is, “if this works, will it really solve anything?” There’s a reason to doubt that. Water-borne diseases arise from inadequate clean water supplies, and toilets don’t directly address this problem. Segway inventor Dean Kamen, whose entrepreneurship is of the plain vanilla variety, unmodified by the adjective “social”, does have an innovation that directly addresses this problem.
Now I’m not a water quality expert, and certainly one thing that affects water quality is keeping sewage out of it, and one component of that is to make sure that human waste goes into the sewage system in the first place, so we’ll grant that toilet availability could address one part of the problem. Though as a veteran of the concrete hole-in-the-floor style toilet in Russia, a country not known for water-borne diseases at the time, I’m not sure it’s the largest factor in disease prevention.
That’s a Lotta Water
Another question I ask is, “Is this going to create another, even bigger problem if implemented as specified?” As anyone who tried to get an old-style, flushes-for-sure toilet in recent years in this country knows, the amount of water used to flush toilets is considered a problem. With experts warning of a growing fresh water shortage and developing world water systems already not as robust as their developed counterparts, I wonder if first increasing toilet ownership won’t cause supply issues that outstrip the problems toilets solve.
So, let’s look at the proposal itself.
How Do We Make Money? VOLUME!
Remember, the problem is that “producing [locally] appropriate toilets takes time.” OK. So we have local variations on the toilet. So each culture will demand its own toilet design. That means there is a limited opportunity for standardization. When Henry Ford made the automobile affordable, he did it by standardizing the designs so they could be mass produced on an assembly line, what economists call taking advantage of economies of scale. And as far back as Adam Smith, economists have realized that by doing the same thing over and over in bigger batches, you can produce things more cheaply, be they Smith’s infamous pin factory, Henry Ford’s Model A, or the Standard company’s, well, toilets.
Yet the solution is to “start producing the toilet components centrally at a huge scale rather than in scattered places around the world.” But these toilets aren’t standard, at least not above the cultural level. So where do the economies of scale come from? There are potentially some savings in sharing common supplies (the base components for ceramic or plastics), but again, these savings are limited if there is no standardization.
If the idea is that multiple factories create redundancy, and by eliminating wasteful competition we’ll create savings, then I have to say, that idea has been tried. It was not as successful as initially hoped.
Additionally, by placing the point of production further from the point of consumption, you’re going to increase shipping costs. Now, modern shipping is very efficient from factory to customer port. Where many developing countries have problems, however, are horrific import tariffs, out and out bribery and corruption, theft, and a bad infrastructure once the goods leave the port. All of these serve to make (in some cases, by design) foreign goods vastly more expensive than domestic products. If you’re living on a few dollars a day, a foreign toilet may be simply out of reach.
This all assumes that production goes off without a hitch. But if you centralize production to one facility, you also create a single point of failure. As I indirectly referred to above, the Soviet system was noted for shortages, while basic goods are rarely in shortage in capitalist economies. The price mechanism has something to do with it, but the “wasteful competition” also creates redundancy so a work stoppage, natural disaster, or supply problem in one factory doesn’t mean production of that good completely stops. But in this case many more eggs would be in one, er, toilet bowl.
Now With More Web!
So what’s the magic incantation in this proposal? “The massive global demand channeled through a single web marketplace will justify entrepreneurial investment in the huge volume, high quality, low cost supply side to begin with.” Someone hasn’t been following the story of the One Laptop Per Child (OLPC) project very closely. It turns out, access to computing power is not the primary stumbling block or most pressing need in developing countries. First, they need reliable infrastructure, including, well, clean water supplies. The OLPC has been tough to even give away.
I’m not sure people in developing countries sit around thinking, “You know, buying a toilet is so time consuming, taking away from my busy day of walking several miles for buckets of clean water. If only there were some kind of web site I could log onto, order the toilet, and then be on my way to the next town for my turn at the water pump.”
Disintermediation was a neologism bandied about during the Dot Com boom. The idea was, you could cut out the middle man–the distributor, the guy who used to aggregate demand for certain items–and cut the cost of an item. But no one in this exercise has suggested middlemen are the problem–at least, not the kind of middlemen you can disintermediate via a website. Governments, as always, want their cut, and corrupt governments want even more. And they don’t even aggregate demand!
But as Pets.com proved, even in low-tarrif, low-corruption countries, aggregating demand through a web site only achieves disintermediation savings if distributors cost more than individualized shipping. So unless Lenny at DogFoodRUs adds on more than $10 per bag of dog food, shipping direct to your door isn’t going to be a savings.
Aggregating demand, by itself, is only important if that demand is too diffuse for a distributor to be in business. Dog food demand is ubiquitous. Demands for, say Swedish progressive rock is just a little more spread out. There are professional Swedish progressive rock bands now because the Internet has given them a market for CDs and a vehicle to distribute samples to people who might come a great distance to see them play at a festival in the US.
But toilets–well, as the Japanese say, everyone poops. Demand for it isn’t scattered among a few nerdy white guys. It’s even more ubiquitous than dog food. So a website really is a solution to a problem that doesn’t exist.
Down the Drain
So, what are we left with? We’re left with an idea that may or may not address the problem it purports to solve, that may create problems as bad or worse than the problem it purports to solve, that ignores basic microeconomics, and that even gets its web strategy wrong.
I’m all for innovative solution to developing country problems, but I think this one has a potential to rival Pets.com in the world of misapplied technology.