SYSTEMS OF SUSTAINABLE PROFIT

This is a proposal of numbers and percentages. The data is presumptive at the moment and should not be taken for anything more than a loose outline for framing a new approach to managing levels of sustainable profit while addressing the issue of incorporating urban slums and their communities as part of the architectural marketplace. Let’s get going with the numbers:

6,500,000,000
world’s population

5,800,000,000
world population living below the basic poverty threshold (lacking access to basic shelter, health, water, education, energy or transport). This is what is often referred to as “The Other 90%.

1,100,000,000
world population living in extreme poverty (less than $1 USD/day).

2,700,000,000
world population living in moderate poverty (less than $2 USD/day).

1
percent of the world’s population that gets 80% of the world’s income.

18,000,000
deaths/year (50,000/day) due to poverty-related causes (lack of basic shelter, health, water, education, energy or transport).

270,000,000
poverty related deaths since 1990, the majority of which are women and children; roughly equal to the population of the US.

In economic terms, these numbers represent two critical elements that infer a successful business model: capital and need. If we look at only the world’s population living in moderate poverty and below, this equals 3.8 billion people; and if we assume the average income is half of the category to which they belong (> $1 or $2), we have an estimated income of $4.6 billion. Naturally, this income is spread across a variety of needs, including shelter, health, nutrition, education, energy and transport. Let us assume that the average person in poverty spends 5% of his or her income on shelter and urban infrastructure. This then gives us a global market of $230 million, and this does not include philanthropic funding, sweat equity, or volunteer efforts for those above the poverty threshold. (Data for these categories, while difficult to determine precisely, is forthcoming). The capital therefore exists, as does the need for an architectural market in the various forms of shelter (which can be assumed to bleed into education, health, water, energy and transport, since all of these needs require shelter of some sort). So we have a new number to add to the list:

230,000,000
global market in USD which can be assumed to be designated for an initial architectural market in urban slums.

But while $230 million might seem like a sizable market, it is actually quite small give other global economies, let alone the infrastructural needs of urban slums. Let us therefore imagine a potential professional model that might bolster these figures. This model is composed of elements that can be drawn from existing models outside the practice of architecture. The first element in this professional model pertains to free, or pro bono work. Pro bono publico (often shortened to pro bono) is a phrase derived from Latin meaning “for the public good.” The term is used to describe professional work undertaken voluntarily and without payment, as a public service. It is common in the legal profession and is increasingly seen in the practice of medicine and technology services. Unlike traditional volunteerism, pro bono service leverages the specific skills of professionals to provide services to those who are unable to afford them. In the legal profession, pro bono counsel may assist an individual or group on a legal case, and if the case is won, occasionally the judge may determine that the loser should compensate the pro bono counsel. Lawyers in the United States are recommended under American Bar Association ethical rules to contribute at least fifty hours of pro bono service per year.

The next element can be taken from international fundraising tactics, such as the 1% principle. This principle has been applied to various causes throughout the world, most notable the environmental. We consider this element for its potential incorporation into a model of practice where a portion of the profession’s services are devoted to pro bono causes, just as they already are in law and medicine. The architectural profession n the United States is regulated by an organized consortium of governing bodies, such as the AIA and NCARB. If these organizations were to build into their structure a system of certification for practicing firms in the United States, where each firm is required to contribute 1% of its annual capital in pro bono services, the global market figure listed above would jump significantly based on a bulk factor of in-kind, service-oriented contributions. The firms, themselves, might be required to contribute their efforts as such, or they might be given incentive in the form of federal tax-breaks and promotional advertising.

One of the main problems within this system, meanwhile, is the issue of sustainable profit. For this, we should look at the existing economic model of micro-loaning and the self-sustaining profit structure for keeping an organization financially afloat. Institutions such as the Grameen Bank, for example, use micro-lending as a system for generating profit based on interest on loans, sometimes upwards of 20%, and the bank reports 98% of loans repaid in full. The structure of this model indicates that a population in poverty can be a responsible body of lenders, and that a business servicing this population need no operate only as a non-profit of non-governmental organization in order to be financially viable.

The notion of a self-sustaining profit-driven model suggests another element in the professional model we are proposing. If firms in the United States are required to contribute a percentage of their annual capital to pro bono, slum-oriented causes, there will need to be a regulating body of organizations that manage the dispersal of effort. To this end, we intend to research specific models of collaboration where this level of financial organization and dispersal of effort might be reintroduced into the professional structure of the practice model.

 

 

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