#58: Have we done our homework?

Billionaire founder of KB Homes and SunAmerical, Eli Broad has a reputation for being unreasonable and going against the grain. 

Shortly after being fired from his accountancy job, Eli decided to go into the construction business and build single family homes in Detroit. 

He picked out a large potential pool of buyers (baby boomers) and as a way to shorten the building cycle and keep costs low, he decided that his homes would not have a basement. 

All the other builders thought he was either crazy and/or naive – even some going as far as saying:

“Young man, I’ve been in this business for 20 years and you just don’t understand the market like I do” 

But little did they know that Mr. Broad had done his homework … and lots of it.

From his research, Eli had noticed a trend in neighboring states that people were, in fact, buying homes without basements.

What the old guard of the industry failed to notice was that the need for basements no longer existed. 

As it turns out, basements were ‘mandatory’ in Detroit because at one time, homes were heated with coal and basements were used for its storage until needed.

However, natural gas lines had since been installed in the area, which meant that homes no longer needed a basement. 

Since this allowed KB Homes to build homes quicker, cheaper, and with less money out of pocket … 

They passed the savings on to the end user and sold out their first 15 homes in less than a day, and went on to sell 120 in their first year. 
So once again, what looked like craziness from the outside, was thoroughly researched and understood by this ‘unreasonable’ entrepreneur.