Rethink Real Estate. For Good.

PropTech

Net zero building.  It’s a boom!

“A mix of high-tech and old-fashioned energy efficiency tactics can deliver carbon-neutral buildings, right now. But the U.S. needs to pick up the pace” writes James S. Russell for Bloomberg.

Oil shortages are a hot topic since Russia invaded the Ukraine, prompting the International Energy Agency to release a 10-point-plan for cutting oil use. But the plan only focuses on transportation and overlooks substantial energy savings that might be found in the built environment. Buildings consume about 40% of our energy in the US, but reducing fossil fuels is still seen as a detrimental impact to our comfort. In reality, we could pretty quickly decarbonize by implementing some simple measures already available to us. These include better insulation, energy star appliances and more efficient heating and cooling. The technology sector has also provided us with sensors, controls, and advanced energy modelling.

Paul Schwer, is the president of PAE, an engineering firm that designs mechanical, electrical and plumbing systems for low emission buildings. He dramatically reduced the energy emissions of his own home by electrifying everything. And his company built a 58,000-square-foot net zero building in Portland through the use of natural lighting and ventilation (lots of windows that open), radiant floor heating, good exterior insulation and a solar array. Paul is convinced that the majority of buildings in the US are good candidates for retrofitting for energy reduction.

The high performing energy-efficient ‘Passiv Haus’ is the gold standard for new construction, achieving energy reductions of up to 75%. But even without following the exacting Passiv Haus methodology, energy efficiency can be accomplished through the use of freely available passive measures, such as natural daylight, sun shading, wide overhangs, sun louvers and natural ventilation.

But what about the carbon footprint or embodied energy of buildings themselves? The materials used to construct a building, such as steel, concrete and aluminum, are a large proportion of a building’s carbon footprint. KierenTimberlake, an architecture firm known for its innovative approach to energy efficiency, devised a digital tool to calculate the carbon emissions embodied in the manufacturing of an existing building’s materials which they intended to develop. When they compared it to how much carbon would be emitted by building a new net zero building, they found that it would take 186 years to reach parity. 

Embodied energy is one of the reasons that mass timber, or cross-laminated timber (CLT), has become so popular. Mass timber is more environmentally friendly as it’s made from small strips of timber, can be locally sourced and can replace carbon-heavy materials such as steel and concrete. US building codes will soon allow mass timber buildings of up to 18 stories to be built.

President Biden’s March spending bill includes $3.2 billion for retrofitting homes to make them more energy efficient. That’s a good start. But to achieve scale in the reduction of energy in the building sector will require much more. If all new buildings were net zero, as well as our transport vehicles electrified, we could cut our emissions dramatically by 2030.

Read the original article here.

Image of New US Embassy facade by Images George Rex from Flickr CC BY-NC-SA 2.0

Building efficiency.

Adrian Washington says that until he was past 30, he had never even heard the term ‘real estate developer.’ Today he is known for over two decades of experience in urban real estate development, construction and management and the startup of several companies, the most notable being Neighborhood Development Company, founded in 1999 in his hometown of Washington, D.C. 100% minority owned, NDC is a triple-bottom-line company, responsible for over 1 million sf of completed residential and commercial projects, and about 1 million sf waiting in the development pipeline. Adrian also served for 18 months as the head of the Anacostia Waterfront Corporation, charged with leading the $10 billion, 20-year redevelopment initiative of the city’s Southwest and Anacostia Waterfronts.

Having started in management consulting, Adrian shifted gears after he bought an old brownstone in a run-down, but up and coming part of town. He started fixing it up, and found that he loved the process, as well the potential impact on the neighborhood, and eventually he found himself asking, why not try doing something you’re really passionate about? He has said, “I think disrupting is almost always good for an industry,” and true to that Adrian just launched a new business, Platform, to “revolutionize the way that buildings are built.” The idea is simple – integrate all the services required to build the platform (foundation structure) of a building to provide a ‘one stop shop’’ for this critical part of any construction project. Plus, they want to leverage ‘green technologies’ and are aiming to be carbon neutral in five years. It’s ambitious and challenging, but we wouldn’t expect any less.

Read the podcast transcript here

Eve Picker: [00:00:09] Hi there. Thanks for joining me on Rethink Real Estate. For Good. I’m Eve Picker and I’m on a mission to make real estate work for everyone. I love real estate. Real estate makes places good or bad, rich or poor, beautiful or not. In this show, I’m interviewing the disruptors, those creative thinkers and doers that are shrugging off the status quo, in order to build better for everyone. If you haven’t already, check out all of my podcasts at our website RethinkRealEstateForGood.co, or you can find them at your favorite podcast station. You’ll find lots worth listening to, I’m sure.

Eve: [00:01:05] Adrian Washington is determined. A veteran developer with a pedigree that includes a Harvard MBA, Adrian became a developer out of his love of cities. He founded the Neighborhood Development Company in Washington, D.C. over 20 years ago and has built 50 projects to date. Even early on, his goal was to provide affordable housing opportunities. His deals grew from four units to 100. And then the housing crisis hit. His biggest challenge was the rapidly rising construction costs, which make the job of building affordable extremely difficult. So, in 2021, he launched another company, Platform USA, which is focused on providing efficiency and affordability for the messiest, most inefficient part of constructing a building, the platform that supports the building above. This portion of a building amounts to 25% of a building’s cost but takes up 40% of the construction time. And Adrian’s company is on a path to create much more efficiency and therefore cost savings in this critical part of the structure. You’ll want to hear more.

Eve: [00:02:45] Hello, Adrian. Thanks so much for joining me today.

Adrian Washington: [00:02:48] Good morning, Eve. Thanks for having me.

Eve: [00:02:51] So you’ve been a real estate developer for decades, one of a pretty rare breed of Black developers. And I’m just wondering, what led you to become a real estate developer?

Adrian: [00:03:02] I became a real estate developer because I loved cities, I love housing, I love the interaction of all the energy that goes on in cities. And I wanted to provide opportunities for people to have affordable options to live.

Eve: [00:03:16] Okay. So that was the biggest problem to solve back then. And it sounds like it’s bubbled up to be one of the biggest right now. And then you went on to found your own company, Neighborhood Development Company, which you’ve owned for over 20 years now. Is that right?

Adrian: [00:03:32] That’s right. We were founded in the 1999 and exactly, as you said, Eve, that back then the challenge was sort of attracting people to cities. Cities still had a bad reputation, but I think we’ve become a victim of our own success. There are so many people flocking to cities and rents have gone up. Prices have gone up. So the challenge has become a totally different challenge than the one we started with.

Eve: [00:03:54] Yeah, actually, that’s a really good perspective. I remember when the word urban was a bad word, but it’s definitely not anymore, is it?

Adrian: [00:04:02] No, no. It’s quite a desirable place to live.

Eve: [00:04:05] Yeah, what a big shift. Okay, so tell us about the projects that you typically tackle. How big are they and what type of projects?

Adrian: [00:04:15] Okay. Well, we started with very small projects and as we’ve grown over the years, we’ve progressed to much bigger ones. So back in the beginning, our projects were very small buildings, four-unit buildings, six unit buildings, and we grew to now the typical building size that we do is somewhere plus or minus 100 units of housing.

Eve: [00:04:34] That’s pretty large and only housing or they mixed use, or commercial?

Adrian: [00:04:38] It’s primarily housing, but we have done several mixed-use buildings. We really focus, in terms of mixed-use of the commercial side, on neighborhood-serving commercial properties. So, for instance, we’ve done charter schools, we’ve done exercise studios, we’ve done fresh food markets, we’re doing a farmers market sort of marketplace in one of our current projects, we’ve brought medical care, health care. So housing is our main thing, but we’ve tried to provide retail and commercial options that help serve the neighborhoods we work in.

Eve: [00:05:13] And where do you find those?

Adrian: [00:05:16] We found this all over. I mean, primarily now because of the scale of projects we do, our projects are ground up. So typically, we will find vacant land in underserved parts of cities, and we’ll take those and we’ll develop what’s there. Sometimes we have to rezone them to make them more suitable. Sometimes we can just build on what’s called a ‘as is’ basis, but we find them in a variety of ways and a variety of places.

Eve: [00:05:40] And so over the years, like, how many buildings have you developed now?

Adrian: [00:05:44] We developed over 50 projects now.

Eve: [00:05:47] Oh, that’s pretty substantial. And you know, I forgot to ask you, where are they located? I know you live in D.C., but are all your projects there, or do you go further afield?

Adrian: [00:05:57] Primarily, most of our projects are in Washington, D.C. proper. We have a couple under development now in suburban Maryland and we’re expanding to suburban Virginia for future projects. So primarily this area. We looked at other areas of the country to expand. We have some, sort of, places that we’re interested in and I think in the years ahead we’re going to be there because we see the need, not just in the D.C. area, but in other areas as well.

Eve: [00:06:22] So what’s been the greatest challenge in doing this work over the years?

Adrian: [00:06:27] I think there’s been, I wish it was just one challenge, Eve. It’s really a number of challenges. I think that the big challenge we’re seeing now is the economics. Land prices have gone up somewhat, but really its construction costs have gone up tremendously. And the cost to build a building has gone up maybe three-fold since when I started. And also, the time it takes is increased as well. So, we’re constantly looking at ways to reduce that cost and reduce that time to build.

Eve: [00:06:59] And of course, that trickles down to the tenants, doesn’t it?

Adrian: [00:07:02] It absolutely does. I mean, the economics are hard to modify. If it costs you more to build, you’ve got to charge more rent in order to pay for the building.

Eve: [00:07:13] So the affordable housing crisis seems almost impossible to solve with all of this going on. It’s a little depressing, isn’t it?

Adrian: [00:07:20] Well, I mean, it’s not impossible. It’s challenging, you know, and we’re working on different ways. So, we’ve been able to overcome those challenges and we continue to try to get better in finding new ways to do that to meet the need. And we’re not going to be deterred. We’re going to make it happen.

Eve: [00:07:35] So that brings me to your new company which you just founded last year, I believe, called Platform USA. So what is Platform?

Adrian: [00:07:46] It’s called Platform because we’re really focused on the building platform, the part of the building that you really don’t see once the beautiful vertical part is built. But the platform is an extremely important part of the building. It’s where about 25% of the cost is, and it’s about really 40% of the time it takes to build a building is in that part of the building that’s scheduled there. So, we found that there were tons of money, tons of really smart people, lots of focus on the vertical part of the building but almost no company and no company that we’ve seen has a single-minded focus on the underground part of it. So that’s where we focus Platform.

Eve: [00:08:23] What are all the things that go into that underground part? You know, what sort of skills?

Adrian: [00:08:29] Yeah, there are five or six, primarily, components or trades that go into it. There’s the excavation actually digging the hole. There’s sheeting and shoring, holding up the hole before you pour the concrete in. There’s a concrete portion of it that’s part of the structure going up to what’s called a podium. But then there are things like underground utilities, there are things like testing, there’s environmental aspects. So, there are parts that are both what you typically consider the hard cost, construction and excavation, etc. But there are all these other types of things that are in the soft cost and what Platform does uniquely, it provides a one-stop shop for all of those things.

Eve: [00:09:09] And probably a lot of engineering, too, right?

Adrian: [00:09:12] Absolutely.

Eve: [00:09:13] And so how is that handled today and how are you hoping to shift that?

Adrian: [00:09:19] I mean, it’s a mess right now today. I mean, right now it’s just a forgotten backwater of the industry. And developers and contractors they have to go out and, you know, trade by trade, company by company, discipline by discipline, you know, handle all of those individually. So, you’d go out to a geotechnical company to do your drilling. You’d go to a structural engineer to design the underpinnings. You’d go to a excavation contractor to do that. And all of these entities have conflicting desires. There’s a lot of finger-pointing, it’s really a big mess. And so, I think our key innovation in platform is that you can go to one person, one company, a one-stop shop that can deliver all of that, and there’s no finger-pointing. You give us your specification for the platform, we give you a price, and we deliver on that price. One contract, one guarantee. This is much simpler, it’s much faster and it’s much cheaper.

Eve: [00:10:15] Interesting. So how are you going to build those capabilities?

Adrian: [00:10:20] We build them in a couple of ways. In the early phases, we’ve assembled a team of specialized one, who work with us project after project. We do that. So that’s phase one. But phase two, we’re going to acquire companies because we believe that the key to really getting the savings that we need to get is to have all those elements directly under our control. So, we’re going to do acquisitions, what’s sometimes called as a roll-up strategy to acquire these different companies. We have one company right now that we’re in discussions with and we’re going to add more as we go on. So, after year two, year three, we’ll have a fully integrated company with all these components under one roof.

Eve: [00:11:00] And what’s your progress so far?

Adrian: [00:11:02] So far, we’ve started construction on our first project. We are wrapping up our contract negotiations to start in the second. We have two more that we’re slated for later this year. So, we have very aggressive growth goals and right now we’re right on track for meeting this.

Eve: [00:11:20] Interesting. So, are the projects you’re going to focus on like the projects you build?

Adrian: [00:11:25] Well, that’s one of the great advantages Platform has. I mean, we have a sister company, my real estate development company Neighbohood Development Company and platform is going to be the exclusive platform provider for that. So, we’ve got a robust pipeline in Neighborhood Development Company. And so that provides a great underpinning, no pun intended, for Platform’s growth, but we’re also going out to third parties. So, we are negotiating several third party contracts right now, and we’re going to do both NDC’s projects and a much greater volume of third-party projects.

Eve: [00:11:57] Pretty fabulous. It’s a really interesting company. It’s got to cost a bit of money to buy these companies and scale up. And full disclosure, you’ve just started a crowdfunding offering on Small Change. So what’s your plan for the financials for this company? How do you think it will grow?

Adrian: [00:12:14] Clearly, the reason that we launched our crowdfunding campaign on Small Change is to provide equity for those acquisitions. I mean, the way our economics are set up, we’re going to be profitable very early on in terms of our base business where we’re predicting profitability for 2022. So, the equity need is not to fund the base operations of the company, but it’s to fund the acquisitions that we’re going to do. And so, we’ve built it into our budget. The money that we hope to raise on Small Change will fund the first couple of acquisitions. And then as we grow, we may go back to crowdfunding or we may use institutional equity to fund that acquisition growth.

Eve: [00:12:51] So what’s the ultimate goal here, Adrian?

Adrian: [00:12:53] The ultimate goal is to change the industry. I’ve been in the industry for decades, both on the development side as well as construction side, and there’s just like a crazy lack of innovation, particularly on underground components that Platform is going to address. So, our goal is nothing less than to change the industry, to change the way that platforms are created, to make the creation of platforms better, cheaper and faster. And by doing that, to lower the cost of housing to address that critical need in housing.

Eve: [00:13:25] Well, kudos, Adrian. It’s a really fascinating company and you’re tackling a super messy problem. So, I wish you great success.

Adrian: [00:13:35] Thank you.

Eve: [00:13:35] Can’t wait to see what happens.

Adrian: [00:13:37] Me too.

Eve: [00:14:00] You can find out more about this episode or others you might have missed on the show notes page at our website RethinkRealEstateForGood.co. There’s lots to listen to there. A special thanks to David Allardice for his excellent editing of this podcast and original music, and thanks to you for spending your time with me today. We’ll talk again soon, but for now, this is Eve Picker signing off to go make some change.

Images courtesy of Adrian Washington, Platform USA

Next Gen recycling.

A bit of a technology ‘man for all seasons’, Harri Holopainen started his career in computer graphics on a Commodore 64. He worked on smart card payment systems, co-founded a small graphics software company, and even designed and implemented a prototype online gaming world, a subject he did his university thesis on. Upon graduating, he and his partners grew their computer graphics software company, Hybrid Graphics Oy, until NVIDIA stepped up and bought the company in 2006. Harri later struck out on his own again, as a partner at Love of Technology Strategies, and co-founder of Microtasks, a microwork company.

In 2013, Harri stepped into the world of machine learning and robotics, at ZenRobotics, a company that builds smart robots for waste sorting and recycling. Founded in 2007, they are at the cutting edge of applying AI-based (they call it “ZenBrain”) robotics to sorting all kinds of trash. Their mission is nothing less than defining Next Generation Recycling. They have two main products, a ‘fast picker’ that is aimed at traditional mixed recycling streams, and a ‘heavy picker’ that can sort construction and demolition waste materials. The latter makes up to 6900 picks per hour using multiple sensors and can be found in Scandinavia, throughout mainland Europe, China, Japan and Singapore, and even in the U.S. There is even a system running on wind power, in Sweden.

Over the last nine years, Harri has served at ZenRobotics as Robot Lab Head, Head of Technology, and now, CTO. He describes himself as a generalist, having worked on VC rounds, defined product strategies, negotiated licensing agreements with Ericsson and Nokia, headed R&D development teams, and even hand-built critical robot components. But as he notes now, “Lately I’ve also been up to my elbows in trash.”

Read the podcast transcript here

Eve Picker: [00:00:09] Hi there. Thanks for joining me on Rethink Real Estate. For Good. I’m Eve Picker and I’m on a mission to make real estate work for everyone. I love real estate. Real estate makes places good or bad, rich or poor, beautiful or not. In this show, I’m interviewing the disruptors, those creative thinkers and doers that are shrugging off the status quo, in order to build better for everyone. If you haven’t already, check out all of my podcasts at our website RethinkRealEstateForGood.co, or you can find them at your favorite podcast station. You’ll find lots worth listening to, I’m sure.

Eve: [00:00:53] Harri Holopainen has a mission. To define Next Generation recycling. A bit of a technology ‘man for all seasons’, Harri started his career in computer graphics on a Commodore 64. He moved onto smart card payment systems, co-founded a small computer graphics software company, and even designed and implemented a prototype online gaming world, a subject he did his university thesis on. But in 2013, Harry stepped into the world of machine learning and robotics at ZenRobotics, a Finnish company that built smart robots for waste sorting and recycling. And there he helped build their A.I. based ZenBrain robots, which sort all kinds of trash, first as a robot lab head and now as CTO. Harry describes himself as a generalist. He’s worked on VC rounds, defined product strategies, negotiated licensing agreements, headed R&D development teams, and even handled critical robot components. But lately, he says, “I’ve been up to my elbows in trash”. You’ll want to hear more.

Eve: [00:02:23] If you’d like to join me in my quest to rethink real estate there are two simple things you can do. Share this podcast and go to RethinkRealEstateForGood.co where you can subscribe to be the first to hear about my podcasts, blog posts and other goodies.

Eve: [00:02:55] Hi, Harri, thanks for joining me today.

Harri Holopainen: [00:02:58] Hi Eve, glad to be here.

Eve: [00:03:00] So I was really fascinated reading about your career. You did early work on a Commodore 64 and technology has defined your career. So, like everything from computer science to online gaming, I’d really love to hear about this trajectory and what the common thread is for you.

Harri: [00:03:22] Well, I think the common thread has always been in working with technologies that at some point will have an impact in everyday life and that sounded quite sort of absurd actually when we started to work with computer graphics, but then along the way came computer game consoles that started to bring home computer graphics into living rooms. And then you’ve got PCs and finally, you got mobile phones and I remember the first things, when there was a big customer asking for us that they would like to have these graphics very advanced graphics on a cell phone display that had, maybe, I don’t know, 80 times 60 black and white pixels. And we were thinking kind of like, yeah, like, what’s this is never going to go anywhere. But then again, a couple of years later, we realized that it’s the user interfaces of these mobile phones that actually will require quite sophisticated graphics. And this sort of graphics portion of my life ended in 2006. We sold the company that we founded to Nvidia, who was then and is still the number one graphics software and hardware company. And also the movie Avatar came out. And I remember seeing Avatar, and my first realisation was that, OK, so I have been in computer graphics long enough, so my work is done. Time to find something else to do.

Eve: [00:05:13] Interesting. So, you moved on to many other things and you have ended up in machine learning at ZenRobotics.

Harri: [00:05:26] Yes. And I’ve been here now for eight years, and this is, well, I would say that the primary sort of thing that comes to mind is that nobody really is against robots picking up our trash, and everybody agrees that there’s quite a lot of trahs out there and it ain’t going to recycle itself. So, it’s kind of a no brainer thing to do to apply robots there. And that’s also another kind of technology, which has been in people’s imaginations for over 100 years. But then this idea of smart robots actually doing something useful outside assembly lines, it still hasn’t quite happened. And I feel that this waste sorting is one big step towards that direction.

Eve: [00:06:24] So ZenRobotics sorts waste, all sorts of waste. And what’s your role there?

Harri: [00:06:33] My current title is CTO. The first thing that I did in the company was that I made the first prototype of the current type of robots that we currently use. Made it big for the first time. And then after that, I have been working in basically, since we are sort of a smaller company and need to move fast, so the research is very fast paced activity. So the research is the things that you think you can sell in 12 months’ time. And basically, those are the projects that I’ve been spending almost all of my time in, and it involves things like mechanisms for grouping waste and, of course, mechanisms that actually can survive in a waste plant and then also a lot of higher-level software to make the robots really earn its pay at the customer site.

Eve: [00:07:32] Let’s step back a bit. So ZenRobotics is a company that basically sorts waste using robots.

Harri: [00:07:40] Yes.

Eve: [00:07:41] And I read somewhere about the ZenBrain. What’s the ZenBrain and what are the products you’ve developed to sort waste

Harri: [00:07:52] ZenBrain is basically the collection of technologies that use a variety of sensors to look at the waste on a conveyor belt and then recognize the objects on the belt and then figure out how the robot could actually grip the objects on the belt. And then finally, the pieces of software that tell the robot to move over. So that the object from the belt actually ends up in the correct place, and the first application area was construction and demolition waste. And there are the objects can be quite large. I think we are talking about maybe 30 kilograms of maximum weight for pieces of concrete and stuff. And then the second robot that we have done is a robot designed for handling packaging and light waste. And the difference there is that that robot is much faster. But of course, it doesn’t need to lift 30 kilos because most of the things that it picks are things like hamburger cartons and plastic bottles and things like that.

Eve: [00:09:09] So they have different brains. So, what’s the problem that Zen Robotics is trying to solve? Why was the company launched?

Harri: [00:09:17] The company was founded by two old friends of mine and then some waste sorting experts. And the first slogan for the company was that’s basically “let’s do something cool with robots and A.I.” And then they try to figure out what that might be. And they actually did quite a lot of, sort of, small-time projects. I think there was discussions about going to fisheries and make a robot that picks up the dead fish from those containers before they make all the other fish sick. And that’s an interesting challenge in gripping that fish. And then there was another project done for a nuclear power company where the challenge was to, Recycling of these fuel rods that was apparently required some, some high level A.I. So then, at one point my friend, who has often trouble getting sleep in the evening, he was basically just at his home watching TV and there was Discovery Channel on showing images about these staggering piles of waste that’s, that you can find in all around the world. And then he realized that how about applying A.I. to make a robot that actually can sort waste? And it sounded very easy because, of course, you have these industrial robots, and they are not really that expensive. So that’s problem solved. And then there’s already, back then there was equipment that was used to identify materials on a conveyor belt. So, just put those two things together and we will have a robot that sorts trash. And it didn’t turn out quite, to be quite that simple.

Eve: [00:11:16] Simple, yeah, that’s what I was going to say. Sounds simple, but probably not.

Harri: [00:11:20] Yes.

Eve: [00:11:21] So I’m really fascinated by the whole construction industry and how this might impact it. And have you seen a change in approach to recycling materials over the years? And how readily is this being adopted in real estate projects or demolition projects or anything like that?

Harri: [00:11:42] Back when we started, the idea of using robots to sort construction and demolition waste was quite sort of novel. And when we were discussing people, then there was this category of people who were forward-looking. Back then they quickly realized that, actually, this makes a lot of sense and also so that it’s, it should be also quite profitable. And today we are in a situation where pretty much all the recycling industry agrees that robots are one important piece in this puzzle of getting circular economy work. So there’s quite a big, sort of, change in overall attitude. And of course, on the practical side, the waste industry is, first of all, it’s quite conservative. It’s not really the kind of an industry that immediately jumps into all the new things out there. And also the existing waste processing plants are quite large and expensive. So, even if today we would invent something completely sort of ground-breaking, then it would take quite a lot of time before the customers could actually employ it because these new breakthroughs, they don’t make any practical difference. If you have a 20 million, year old plant that you just built last year, and it’s incompatible with that. But now, actually this year, we have seen an opening of two new plants, one here in Helsinki. It’s about 30-40 million Euro plant, and it’s designed around robots. And most of all, the plant is designed to recycle waste so that none of it goes to landfill. And that’s quite a fantastic sort of starting point.

Eve: [00:13:43] That’s amazing. Yeah!

Harri: [00:13:45] And there’s also another plant in Switzerland that’s opened, also this year, and they are employing robots to recycle actually concrete and other inert materials. As you may know, cement industry is one of the biggest CO2 polluters. And the point of their plant is that they will take in concrete, stone and all the other inert mineral materials and then recycle it into something that can be used to make a concrete with less cement in it.

Eve: [00:14:18] Interesting.

Harri: [00:14:19] And that’s also a kind of plant and process that you can’t have without robots because there’s no other way to sort that kind of material.

Eve: [00:14:29] So what countries are at the forefront of this Next Gen recycling trend?

Harri: [00:14:35] I think that the waste industry itself is quite interesting because it’s especially, in C&D, it’s quite a regional industry and there’s a lot of regional differences. And that means that there is not that much competition globally. Because obviously, if you do C&D sorting in Finland, it would be completely unfathomable to just not be competing with companies in the US, for example, because you can’t transfer the waste itself, nor you can really transfer the end results of the recycling. And so, our customer, first customers ended up being the first adopters, essentially, all around the world, which is and has been quite challenging because we are a small company in Finland and our then first customers were, well, one of them was, well, a couple of them on in Central Europe, then one in the U.S., then I believe we have one in Australia and then one in, I think, Singapore or Japan.

Eve: [00:15:49] Oh, interesting. So, I’m Australian, you know, so that’s thumbs up for Australians. So, your company is in Finland, but when you say that customers, do they buy these robots from you? Is that what you’re selling?

Harri: [00:16:03] Yes, we sell the, basically the robots and then our customers are the companies that operate waste sorting facilities. And of course, we are in close cooperation with the companies that design these waste processing plants and processes and equipment.

Eve: [00:16:27] Ok. It’s really interesting. So, you have a fast picker and a heavy picker. And you describe, the heavy picker is really used for the construction industry, and the fast picture is for light boxes and things and like, what’s next? I mean, there must be other pickers in the, I’m a Picker too, but that’s not what we’re talking about. There must be other pickers in the works, right?

Harri: [00:16:58] At this point we have about, I think, maybe 60 arms around the world in production and we are currently scaling up. And it’s really no problem for us of identifying potential new use cases because there’s basically one new potential use case coming up every week. And there’s the, yeah, there’s like, for example, textile recycling is one big area where there are very few existing solutions. And then there’s obviously scrap metal and all that entails.

Eve: [00:17:38] Salvage yards, yeah.

Harri: [00:17:40] Yeah. And then recycling processes for cars and electronics. And there’s the recycling process for used batteries. Like practical problems like if you have a facility that recycles lead acid batteries, then it’s rather straightforward because you strip out the plastic shell and take out the lid and then basically, you’re done. And but then again, in that pile of batteries, you have a used lithium-ion battery, if you put that battery in that process, it may explode there, and that’s going to be a big problem for them. So that’s a typical kind of place where this added complexity of basically the everyday products out there will pose these interesting new challenges to companies that are already recycling things. And then there’s obviously, there’s a potentially very large amount of waste categories that are not really yet recycled at all because there is no economic way of doing it.

Harri: [00:18:51] And construction and demolition waste, there are other ways to do it than with robots. One thing to separate, for example, wood and light plastics from stones is to dunk them in water and then skim what floats. And that kind of works but of course, it makes everything wet, and soon that pool of water itself will be contaminated. And then, of course, there’s manual waste sorters are what are currently used in the quality control of municipal waste and also in construction and demolition waste and pretty much every sort of waste process where there is a significant sort of operation going on. And of course, one of our entries to the market has been that we will reduce the number of manual sorters required. Well, the possibilities are, of course, endless and unlimited. So that has never been our problem. So this picking and sorting is the easiest thing that makes a difference and has commercial value. But of course, after you have a robot that’s good at picking these things, why not use the robot to tear them apart as well?

Eve: [00:20:10] One thing that springs to mind, I saw a amazing show where a woman had an architect design a house for her and they used the wings of a decommissioned airplane for the roof, which was just fascinating, you know? But the fields of decommissioned airplanes are just crazy. I don’t know if anyone’s tackling those.

Harri: [00:20:30] Yeah, that’s also, and I would think that that entails a massive amount of manual labor. I guess a similar use case is decommissioning of ships, which I believe basically happened by, I don’t know, stranding them on a beach somewhere and having them [???]

Eve: [00:20:49] And then they just rust.

Harri: [00:20:51] Yeah. Or then there’s like 200 guys that come with, I don’t know, pliers and angle grinders and that, and put it into tiny pieces and.

Eve: [00:21:02] Interesting.

Harri: [00:21:03] Very, very manual, intensive, and very hazardous work.

Eve: [00:21:07] So I have to ask, what is the economics of this look like for someone who wants to deconstruct a building manually using a robot? Is it cheaper than sending out a crew?

Harri: [00:21:17] Well, I think if you have a building that needs to be decommissioned, then today I’m not really sure if our customers use the robots as a unique selling point, because the point of the robots for our customers is basically just to be able to give you a better price because there’s less, the operation has less cost. And of course, especially in the municipal waste, the regulatory bar is obviously rising constantly, and that obviously applies also to C&D sorting. That means that there are higher sort of regulations for the total operation of demolishing a building because you can’t demolish a building and then just dump it somewhere. So at the end of the day, that, at least it will mean that the prices of putting stuff in landfill, they are quite steeply rising and that forces the operators of these recycling facilities to make their processes more efficient.

Eve: [00:22:30] Interesting, so can you tell me what your team looks like? And you said you’re a small company? What does that look like?

Harri: [00:22:38] In the early, earlier days when a lot of the stuff that we had to do was quite sort of exploratory in nature, then I think I maybe had a 10-person team at that point. And I think we are about 60 persons at the moment. And then nowadays, when our focus is on delivery and maintenance and making sure that our customers get basically, professionally built and maintained equipment, then that means that the role of sort of rocket science is something that is luckily less needed today than five years back, when we still had problems in making sure that the robots actually keep working. And now, at the moment, we are focusing on making sure that our first about 50 customers are happy. And also, my team is now basically focusing on measuring and estimating the performance of the robot. And that’s actually quite a fascinating problem because one thing that people really don’t realize about waste is that waste is extremely hard to measure. The only thing that is easy to measure is to drive a truck on a weigher and notice that there’s 20 tons of waste in the truck. But then again, measuring what’s inside that container. The only known way of measuring it is actually to have some guy come over and take a peek.

Eve: [00:24:10] Interesting. That’s the manual bit, right?

Harri: [00:24:14] Yes. And that’s currently a quite a massive blocker in the waste industry, because if you think of an industrial process, it works because it’s measured. Whereas in the waste industry, it’s a bit difficult to even notice whether the process is actually working well or not. So, if you have a facility that sorts plastic, let’s assume, let’s say that this facility provides 10 tons of HTP plastic a year. So how do you know that there’s actually 10 tonnes of plastic instead of nine tons of plastic and one ton of other stuff? Well, you don’t really know. And of course, you will know if you have a process that really dislikes these contaminants, then you notice that something went wrong when you put into that HTB plastic in the process and you notice that there’s an explosion, then you notice that maybe there was a couple of these nice lithium-ion batteries inside that 10 tons of HDP. And of course, that’s too late. And in order to prevent that, there’s manual checks that are done more or less sort of consistently and the problem of this manual checking is that it’s expensive and it’s also very difficult to get a statistically relevant measure of basically a pile of waste by just a guy eyeballing it. And connection with robots is that the robots actually do look at every single object that comes under their sensors, and they take a really hard look at it and they may determine whether it should be picked or not. And that means that the robots actually can tell you quite a lot of what the customer actually had flowing in his waste process. And there are also some other sorting equipment that can tell that but they are not quite widely used yet, and they definitely are not used at the front gate of these waste processing facilities. So whatever people put in the waste basket that will at some point end up in one of these facilities, and no one really knows what the stuff is, we see one glimpse of it, and we are working in making sure that the robot can actually tell something useful of the waste itself. And over time, it may be that the knowledge of the waste itself, that might even be more valuable to the customer than the sorting result.

Eve: [00:27:00] So, yeah, I always wonder about sorting residential waste, which, I can’t imagine is an exact or efficient process, I think most people probably ignore the guidelines for recycling, and everything ends up being dumped in one place, so it feels like all that waste you’ve got to go back to the beginning.

Harri: [00:27:20] That’s an interesting question about how much people should be sorting at home. And I guess the extremes are that, especially in the US, there’s, in a lot of public places, there’s a big container where you dump everything, and it says that it’s sorted somewhere else. And then another extreme was that I was skiing in Austria some years back and that flat that we rented, it had nine garbage bins.

Eve: [00:27:50] You know, that’s very common in Germany, too. My husband has shared photos of me of these recycling bins and even more so there’s limited hours when you can put glass in them because it might disturb the neighbors.

Harri: [00:28:03] And you need to have nine of these in your kitchen. So, they’re under the sink there’s three, and I don’t know beside the sofa, there’s two and there’s a couple of in the cupboard over there and it’s just complete insanity because if you have nine categories to think of then it just, it’s ridiculous. It will just get people annoyed. And it’s also not efficient at all, because the problem is that you need to have nine different trucks visiting your home, or you have, need to have one truck that has nine compartments. And they all fill at different sort of pace,

Eve: [00:28:41] And you have to have someone who’s diligent enough to fill them properly, right? Yeah, the human element.

Harri: [00:28:46] I don’t mind that because of course, we’ll happily sell robots that fix those issues later on at the plant. But I personally, I think that there’s like, first of all, this bio stuff, leftover food and that should be kept separate because that’s really a nasty thing because it will foul up everything else. And then after that, well, I would say that glass is quite straightforward. Uh, in Finland and other European countries, at least we have this, and I guess in the US too, there’s

Eve: [00:29:26] Some places, not everywhere.

Harri: [00:29:28] Yeah. You’ll return empty bottles, and you get some money back.

Eve: [00:29:32] Yeah.

Harri: [00:29:34] And so that makes sense. And then cardboard and paper, probably. But then if you put people starting to sort of recycle different kind of plastics, then it’s just not going to work.

Eve: [00:29:48] But even the paper like, yeah, some people argue that they put the dirty pizza box in the paper recycling, but it’s dirty, it’s got food in it.

Harri: [00:29:58] Yeah, yeah there’s a lot of this. My wife has also lived in Germany, and she also lived in Switzerland for a while, and they are absolutely sort of fanatic about what the neighbors put in the trash.

Eve: [00:30:12] So recycling is a really big business, and maybe your robots have to develop a sense of smell as well. In the ZenBrain,

Harri: [00:30:20] I felt that for a long time we have all the technology that we will ever need. So, the technology is are not really the difficult bit. The difficult bit is actually finding a customer who can make a business out of a process that has a robot. And for these new areas where they are no working large scale solutions, it’s going to be really hard because they would need quite a massive capital to set up a shop that would produce enough of these, whatever resulting fractions that would be, where the volumes would be so high that using those fractions would be a business for someone else. So, if you want to recycle textiles, I guess recycling textiles itself is not necessarily that hard. Uh, but the problem is that exactly what are you going to recycle, what are your fractions and what’s going to happen to those fractions? And that’s, what are you going to do with, for example, cotton that has been reclaimed from textiles. Do you, like, it would be really stupid to like, incinerate it. It would be even more stupid to put it into a landfill. There’s a company that does these sound insulation panels out of the reclaimed fiber.

Eve: [00:31:45] There’s a company in Pittsburgh that makes fabric and is done very well out of plastics.

Harri: [00:31:49] Yes.

Eve: [00:31:50] So actually, plastics from Haiti, so they’re very, very specific. I don’t imagine they have robots sorting that in Haiti, but that’s what they do. Yeah, interesting. So just to round up, what are some of your favorite success stories, you know, people where things really change because of one of your robots?

Harri: [00:32:14] I would really say that this recently opened facility at one of our customers, Remeo, here in Finland. It has 12 robot arms, and the plant is designed not to send anything to landfill. That’s quite a remarkable achievement.

Eve: [00:32:31] Yeah, that is.

Harri: [00:32:33] And the plant is brand new and it’s quite, sort of, well it’s something else. I’ve seen a lot of waste processing plants and all of them are fascinating in their own manner. But this is something new and it’s enabled by robots, and it has taken us basically 10 years of work to get there.

Eve: [00:32:52] Interesting. So that’s a glimpse of the future for sorting waste. Nothing goes to a landfill.

Harri: [00:32:59] Yep.

Eve: [00:33:00] Well, thank you very much. You’ve been heard to say “lately, I’ve also been up to my elbows in trash”.

Harri: [00:33:07] Yes.

Eve: [00:33:08] So I’m just wondering, are you having fun? Is this interesting work?

Harri: [00:33:13] Yeah. Waste is fascinating because going to a waste plant, well, the first thing you notice basically might be the smell, but the big thing in these waste facilities is the conveyor belt. That’s where the waste is flowing and it’s just mesmerizing. And you’ll see all of the, basically, by-products of humans living, and for some really completely inexplicable reason when we go at the site where our big robots sort construction and demolition waste, there’s, like, uncanny amount of shoes on the belt. Yes. And I just, at some, we looked at data on one of our sites in Norway, and that was only for one day, and I just basically had to calculate the rate of shoes appearing on that line. And the conclusion was that if that rate holds for a month, they will have a ton of shoes. And it’s really like, absolutely amazing because if you go on the belt, it goes like half a meter per second and there’s a shoe and then, whoa, that’s a shoe, and then wait for 10 seconds or a minute, hey, there’s another shoe. But you can’t figure out how many shoes there actually are over a one day, or one week, or one month of production. And that’s the kind of things that’s really…

Eve: [00:34:42] Really fascinating.

Harri: [00:34:43] You never get bored.

Eve: [00:34:45] No. So, I have to ask, are there more women’s or more men’s shoes?

Harri: [00:34:50] We haven’t really made statistics, but I’m actually absolutely positive that at some point, our A.I. will have this built in function in detecting shoes.

Eve: [00:35:02] This is really fascinating. Well, thank you very much for joining me. I really enjoyed it, and I can’t wait to see what you scale up to.

Harri: [00:35:11] Thank you.

Eve: [00:35:11] Wonderful.

Harri: [00:35:12] Yeah, me neither.

Eve: [00:35:17] Smart brains building smart robots to sort trash in very smart ways.Eve: [00:35:24] You can find out more about this episode or others you might have missed on the show notes page at our website RethinkRealEstateForGood.co. There’s lots to listen to there. A special thanks to David Allardice for his excellent editing of this podcast and original music. And thanks to you for spending your time with me today. We’ll talk again soon but for now, this is Eve Picker signing off to go make some change.

Image courtesy of Harri Holopainen, ZenRobotics

Running on fumes.

John Liss is running on fumes.  He’s up very early every morning building his company FAST. And he’s doing something important and having fun.

John founded True Footage, with a Harvard business degree in hand, to help a rather sloppy industry get a little more accurate. A real estate data authentication platform built to streamline residential transactions, they provide AI-based residential transaction data for the purpose of reducing subjectivity in appraisals and tax assessments for home buyers, from inaccurate square footage to under-assessment for minority property owners. The company uses video, computer vision, and machine learning to offer products such as square footage certification, floorplan, and property data capture, enabling lenders to save time and standardize data. The company operates in 17 states and is the fastest growing appraisal provider in the country. John started his career as a real estate agent before moving into real estate private equity and development. He has a BA from Harvard where he wrote his thesis on the real estate brokerage industry and an MBA from Harvard Business School. 

Read the podcast transcript here

Eve Picker: [00:00:08] Hi there. Thanks for joining me on Rethink Real Estate. For Good. I’m Eve Picker and I’m on a mission to make real estate work for everyone. I love real estate. Real estate makes places good or bad, rich or poor, beautiful or not. In this show, I’m interviewing the disruptors, those creative thinkers and doers that are shrugging off the status quo, in order to build better for everyone. If you haven’t already, check out all of my podcasts at our website RethinkRealEstateForGood.co, or you can find them at your favorite podcast station. You’ll find lots worth listening to, I’m sure.

Eve: [00:01:06] John Liss is running on fumes. He’s up very early every morning, building his company, fast. And he’s doing something important and having fun. John has always been fascinated by the real estate industry, but, more often than not, John says people do not realize the true value of their real estate asset because the industry is a little sloppy. If someone enters 1100 square feet instead of 1200 square feet into a sales listing, then when it’s appraised, often using square footage comparisons, one hundred square feet of value is passed along to the buyer for free. Sometimes a subjective decision is made about a neighborhood or a street. And that, too might inaccurately value a property. John has set out to solve that problem with the company he launched in 2019, True Footage. They provide residential appraisals that are super accurate, using lidar and machine language-based software. Not only can they create faster turn times and more accurate underwriting for lenders, they are adding objectivity to a process that is often highly subjective and they are in demand. Over the last year, John has added 200 employees. He’s in 17 cities and he’s only just started.

[00:02:38] If you’d like to join me in my quest to rethink real estate, there are two simple things you can do. Share this podcast and go to RethinkRealEstateForGood.co, where you can subscribe to be the first to hear about my podcasts, blog posts and other goodies.

Eve: [00:03:01] Hi, John, thanks so much for joining me today.

John Liss: [00:03:04] Thanks for having me.

Eve: [00:03:05] I’m pretty excited about what you’re doing, but I wanted to start by going back to your thesis when you were at Harvard. You got a high honors for thesis on steering practices and I would like to know what steering practices are.

John: [00:03:20] Yeah, sure. So, my background has always been in the real estate industry. I started getting interested in it when I was about 12 years old. I grew up right outside of New York, and it was always a running joke in my family that I was going to become a real estate agent, but I actually decided to do that between high school and college. So, I took 15 months off and worked in a real estate office prior to going to undergrad. And so, then when I got to school, I knew that I wanted to incorporate real estate into my studies somehow and wrote my senior thesis on the residential brokerage industry. Doing an ethnographic study of New York City real estate industry. And New York City is a particular real estate market. Obviously, you have the highest prices in the country, but also you have building types that almost operate like country clubs. And those country club buildings are called cooperatives. Basically, it has in history have been very, kind of, drivers of segregation, I would say. And not just racial segregation, but also religious segregation, to the point where people knew which buildings accepted what kinds of people and then brokers would perpetuate those stereotypes by saying, oh, you can’t go to that, you can’t go to that building because they don’t like Jews there. Or you can’t go to that building because you don’t belong to your kids, don’t go to the right schools. And so that was kind of the history of New York. And obviously, over time, the city’s gotten better and the practice has dissipated a little bit, but it’s definitely a major part of the residential story on Manhattan.

Eve: [00:05:03] Interesting. So those are steering practices, right?

John: [00:05:09] Yeah, and you know, there’s been a lot of talk, now we’re in the appraisal industry, and there’s been a lot of talk about kind of what’s going on there. But I would actually argue that it starts in the brokerage space and appraisers have had to deal with kind of historical data that is, you know, punished by redlining and punished by some of these other practices, and it makes the job of the appraiser much more difficult because of kind of all of the upstream problems that are happening.

Eve: [00:05:35] So how did that influence your life? That thesis.

John: [00:05:40] Oh, I mean, I’ve been obsessed with real estate ever since I was little, and I always knew that I wanted to go into a career in the real estate industry. And I think another thing that I noticed in that thesis was just the use of data and how brokers use data and the importance of having clean and accurate data. I’ll tell you another part of the, not in the thesis, but later on in my journey in the real estate industry, I walked around New York City with a 3D camera. It was 23 pounds, so I looked a little ridiculous. And I measured properties and compared them to what was listed on Zillow or StreetEasy, which is the New York City version of Zillow. And I was finding discrepancy of 16 percent on average, and these are people that are buying houses for one thousand two thousand even nine thousand dollars per square foot. So, if you have this discrepancy and the brokers are reporting, you know, misreporting square footage, then you have a lot of people buying things that they don’t really know what they’re buying. And so, that kind of experience also informed my decision to eventually try to start a company that was all about objectivity and all about kind of getting to the right answers and making sure that the people who were determining those answers had all the tools they needed to deliver that service.

Eve: [00:07:01] So, the name is extremely appropriate. True footage is the name of your company, right?

John: [00:07:06] Yeah. So, the name definitely is from the square footage, but we’ve evolved immensely into an entire platform for appraising and beyond, so I’m really excited about kind of where we’ve been, but very excited about where we’re going.

Eve: [00:07:21] What are some examples of what goes wrong? Just, you know, besides in New York. There was an article recently about, in Northern California, about a black couple suing for a really lowball appraisal. They got a better one when they sent a white friend. Is that a problem that you can solve with your platform?

John: [00:07:45] Look, I think it’s important to note that ninety seven percent of appraisers are really, really good at their job. And so, there are some people that are really bad at their job.

Eve: [00:07:55] That’s true in every profession, right?

John: [00:07:57] Exactly. And I think there are people who, you know, have subconscious bias that affects their decision making. And again, that’s true in life. And we need to work hard to get, first of all, get those people out of the industry, but also provide tools to people to make sure that all of these instances are completely mitigated because it’s totally unacceptable, obviously. So, you know, those cases exist, and I think the main problem around kind of why this happens is just a lack of objectivity. Yeah, you can use technology to create more objective reports. So, one thing that we do is we have a ladder-based mapping solution that extracts square footage data using video, and we used adjustment technology that makes sure that our adjustments to the comparables are accurate and we have automated ways in which we report other parts of our data and make sure that some of the data that populates all the forms is done in the most transparent way. Because the problem is, a lot of the times, is the precedent data is terrible. So you have the MLS, where brokers are telling a story and they manipulate data in order to get across their vision of what they want to sell the property. And then you have County, which, you know, especially during COVID, they haven’t been out to assess a property in several years. And so, a lot of this information is extraordinarily stale. So that’s why the appraiser is more important than ever in terms of delivering accurate data to the equation because without them, you’re using data that is just oftentimes either purposely or im-purposely wrong.

Eve: [00:09:40] So that’s what True Footage does. Tell me exactly how it works, like do you have clients who come to you or, you know, how does this little business work?

John: [00:09:50] Yeah. So, I mean, we’re a full-service appraisal business and also a valuation business. So, what that means is we deliver appraisal reports, but we also can deliver alternative valuation reports as well. And we’re live in 17 states. We’ll be, call it in over 25 by next quarter. We have over two hundred employees and we’re working with over two hundred vendors already. So, what was a small little business is quickly resonating with banks and with customers, and we’re really excited about the progress, but really feel like we’re in the top of the first inning here.

Eve: [00:10:28] Wow, so are you in my state, Pennsylvania?

John: [00:10:33] We’re coming. We actually are looking at a Philadelphia office, but I know you’re in Pittsburgh, so we got to get…

Eve: [00:10:37] Oh yeah, it’s a big state. It’s the other end of it.

John: [00:10:40] Well, now that I met you, maybe we’ll get there faster.

Eve: [00:10:43] Yeah, OK. So, but still, who are your clients and how do they come to you?

John: [00:10:48] Yeah, so most of our customers are banks, and we develop relationships with them through all of our appraisers. So, we have appraisers around the country, they are best in class in each of their markets. We identify them, then we sign them on to the platform. And most of their banks are, you know, excited to work with them and continue to work with them. I think the way that the industry works is most banks have a scorecard system where appraisers are scored based on how accurate their reports are, how fast they get work done. And so, at a time like this, where volume is at an all-time high and the appraisals are taking longer than ever, people who are at the top of the scorecard are, continue to get more demand for their work because they’re good at their job. And so, we look for those people.

Eve: [00:11:37] Yeah. And actually, if any of our listeners don’t understand this, when you purchase a building and you go to the bank, the bank will order the appraisal. You don’t order the appraisal. The bank orders the appraisal. So, it’s a third-party discrete appraisal that they have control over, if you don’t provide one for them. So, I can see how banks would be like your most important customer for growth.

John: [00:12:00] Yeah, and I think that’s really important this third-party aspect, because obviously after 2009, what happened was that there was just not enough control, and a lot of the bad things happen. And so, the kind of third party component of the appraiser acting as an independent evaluator is an extraordinarily important part of the real estate engine in this country.

Eve: [00:12:25] So what’s been the feedback you’ve gotten from banks? What are they seeing in your appraisals and why are you growing so fast?

John: [00:12:33] I think everybody’s excited. You know, there’s a lot of change going on in the appraisal industry right now because of kind of, you know, the increased volume during COVID demonstrated a need for just faster and better reporting. I think generally what’s important to note is the appraisal industry, you have to deliver the reports in a way that is within the guidelines of Fannie and Freddie. And so. how the sausage is made is important but delivering the sausage in the fully compliant way is the most important thing, and that’s exactly what we do. So, the output kind of looks pretty similar to what a traditional appraisal model would look like. It’s more just kind of what’s going on internally to make sure that all of our data is done appropriately. The quality is high, and it’s delivered faster than other people in the market.

Eve: [00:13:24] Ok, so any favorite success stories? Any interesting facts on Earth?

John: [00:13:30] Well, that’s an interesting question. I can’t think of something right now but let me come back to you on that.

Eve: [00:13:36] Ok? And how long have you been in business for? You started. True Footage…

John: [00:13:42] So the idea came in business school, but we commercially launched on July 1st.

Eve: [00:13:48] And you’ve got 200 employees?

John: [00:13:51] Yes.

Eve: [00:13:52] Wow. You must not be sleeping much.

John: [00:13:56] I’m so excited, I’m not kidding, I beat my alarm clock by three hours every day. I literally am having the time of my life and more importantly, I think our appraising team is having a lot of fun. I mean, we have people that have been appraising for 30 plus years on the roster that said they’ve never had this much fun. So that’s kind of the best part of this all, is is getting buy-in from people that have been doing it much longer than I have and making sure that they’re super excited and pumped about kind of where this is going.

Eve: [00:14:27] Let me ask you, what did it take to launch? What happened before the launch?

John: [00:14:31] Oh God, a lot. I mean,

Eve: [00:14:33] That’s really what it’s all about, right?

John: [00:14:35] I had bad days. You know, I remembered like calling my ex-girlfriend once. I remember, just like worrying about kind of like, am I on the right track? There’s a lot of squirming. I had the idea originally that it was a square footage calculator. You know, I thought, why is it that, you know, we have our biggest asset in our lives, and we don’t know anything about it? There should be more verification and square footage is the biggest driver of value. And realize that that wasn’t enough of a business, and we needed to expand kind of the product offering. And obviously, COVID hit and what was a hardware product originally became a software product because Apple released their iPad that had Lidar in it. And there was so much literature going on about the appraisal industry around kind of the increased turn times and the issues around bias, which, you know, now the Biden administration is addressing. And I thought, wow, we had spent so much time building this technology. Let’s apply it to a broader industry. And that kind of was a big moment. We signed up. I got to work with my CTO who’s phenomenal, and he has a background in the appraisal industry as well. And we said, you know, let’s go at this and let’s spend the next six to nine months with our heads down building and then launch in the summer. And that’s kind of what we did.

Eve: [00:16:02] How long was that pre-launch period altogether, from idea to launch?

John: [00:16:07] Almost two years when I came up with the original idea. I was also in school. So, the innovation lab at school was an amazing place to bounce ideas and learn. And so that was kind of, I don’t want to say I was dragging my feet because I wasn’t, but it was definitely, you know, I knew once school ended, it was go time.

Eve: [00:16:29] So now you’ve launched, what are the biggest challenges you’re encountering now?

John: [00:16:36] That’s a good question. I think, you know, speed is an interesting one because obviously the incumbent banks have their own processes and just getting everyone on board and fast enough and getting order flow at the pace, we would like it. We obviously are appraisers are incredibly busy, but I think just generally getting everyone to move in sync together with all the different stakeholders is one. And we want to deliver more products. We have over five products in our kind of development phase right now. And so, I think just getting all of those out the door and delighting our customers is kind of our main focus right now. So, the main issue, I would say, is that we just want to get a lot done and there’s only twenty-four hours in the day.

Eve: [00:17:26] Actually, let’s go back to Lidar. What is Lidar?

John: [00:17:30] Lidar is a technology often used in autonomous cars that basically measures depth, and so it stands for light detection and ranging. And what it is is, when it’s embedded in all of the new kind of Apple products for virtual reality. Obviously, we’ve been seeing a lot about the Metaverse, et cetera. And so what it allows for is for using video to measure depth. And so, when you create a video measuring depth, you’re able to extract measurements and get to really accurate square footage data. I mean, you think about traditionally how floor plans are measured, and I had to, when I was an intern in my office, I would have to sit with the floor plan measure and watch him for four hours. And it was really with measuring tape or a single point laser if you were lucky.

Eve: [00:18:19] Right. Oh, a little tool that you roll on the ground, right?

John: [00:18:23] Exactly. You’re an architect, so you must have seen it before, right? And so, I mean, it’s crazy. So obviously with Lidar, you’re taking millions of points. It’s not just one point, and we like to think that all rooms are rectangles, but the truth is they’re not. And so having access to this lidar where you can create a map that’s much more dense in terms of the amount of points it’s collecting, is a huge value add, and also helps the appraiser save time. So, the appraiser is really happy because a lot of their risk has been mitigated. There’s nobody that’s going to come after them about the square footage because they know that it’s been validated by this technology.

Eve: [00:18:59] So tell me then, an appraiser’s job. I know what an appraiser does, but maybe most people don’t. It’s pretty tedious. What’s the job for you look like?

John: [00:19:09] Yeah, I think appraising is really cool and it’s something I wish, honestly, when I chose to be a broker, I might have chosen to kind of start as an appraiser because you really learn how to value things in the market. I mean, we have people that have leveraged their appraising career and gone into other parts of the real estate ecosystem on the side, and I think that’s really cool. What does an appraiser do? It’s all about valuation, so think of each property is almost like a little puzzle and you have to kind of get to what the value of that puzzle is. So, it starts with getting an order in and you have to bid on how much you think you should get paid for that appraisal, basically. And then you drive to the site or someone in your, your trainee drives to the site. And you conduct the inspection. You record all of the information around quality, condition, size and then you drive around, and depending on the bank, you have to shoot comparable properties for that. And then you go back to your desk and you kind of fill out a grid. And that grid is pulling comparable properties and then adjusting those comparable properties back towards the subject property to make sure that the subject property if you’re looking at [???]

Eve: [00:20:26] So you get like, I actually did an appraisal course and I passed it, but so, if you have two properties that are the same and one of them has a porch with a view, there’s going to be extra points for that. It’s going to have extra value or one of them has a garage and one does not. All of those things come into play, right?

John: [00:20:45] Exactly. And so, then you kind of arrive at an appraised value for that property and then based on what the contract price is for the house. Or if it’s a refi, you either get approved or not for that amount. And then if you’re under, you have to come up with cash in a purchase situation to kind of squeeze, fill that gap.

Eve: [00:21:07] And so, now with this new tool, everyone has an iPad?

John: [00:21:12] Yeah, all of appraisers have the Lidar iPad.

Eve: [00:21:15] And so they go out and they take a video of the space inside and they can get very, very accurate, true footage.

John: [00:21:22] Exactly. And I think also they can go back to that video and refer to it. If they forget, if they’re doing multiple inspections in a day and they’re like, oh, wait, which one was that? And so it’s much more kind of ability to check back.

Eve: [00:21:35] So your business is really, truly built on this new technology. You really couldn’t do it without it.

John: [00:21:40] Oh, absolutely. And I think, you know, there’s so much we’re adding on the data science side as well for the dust portion of the job that is really going to standardize and automate the report with the appraiser fully in the driving seat. I mean, we’ve seen what happens when big companies try to ignore the human at the end over the past couple of months, and it’s a disaster. So you’ve got to have an appraiser in the driving seat, otherwise your accuracy is going to be seriously doubted.

Eve: [00:22:08] Ok, so I’m going to ask, the other services that you’re planning. Can you talk about them yet?

John: [00:22:14] Yeah, I mean, it’s more just around different products within the valuation services umbrella, right? So, you know, an appraisal is the gold standard, but it’s not the most appropriate valuation in every instance. Sometimes people just need kind of a refresh of their valuation quarterly or something like that, and so we’re looking to expand the menu of offerings so that our customers can say, for this house, I need this type of report and for this house, I need that type of report. We’re building technology that will allow banks to spit in and address and then let us tell them what kind of report they might want.

Eve: [00:22:52] What about larger commercial buildings? Are you focusing on them at all? Because, you know, you just made me think about when I have to do refinancing or after five years when my mortgage expires on my 25,000 square foot little commercial building. The bank orders another appraisal from scratch, and that person has no information about the first appraisal.

John: [00:23:15] You just told me I’m not sleeping, and now you’re asking me to go into commercial. I think commercial is coming, but I think we’re really focused. Residential is awesome because it’s over a hundred and forty million properties. And so, let’s get that right. And then we can think about kind of next.

Eve: [00:23:33] Ok, so one last question what’s your big, hairy, audacious goal?

John: [00:23:40] My big, hairy, audacious goal. I’ve never heard it asked like that…

Eve: [00:23:44] It’s a BHAG. You don’t know what a BHAG is? A big hairy audacious goal?

John: [00:23:50] Is that an Australian?

Eve: [00:23:51] No, I don’t think so.

John: [00:23:54] Well, it shows what I know.

Eve: [00:23:55] It’s probably an older generation actually, John.

John: [00:24:00] We want to rebuild the residential data sector. We think that there’s a lot of, a lot left to be desired, and we think that appraisers are kind of in the prime position to be the leaders of that change. And that’s why we’re focused on appraisers being a part of the story and really kind of the cornerstone of that story. And we believe that access to accurate data is in the best interest of everybody involved. It’s in the best interest of the consumers and the homeowners. It’s in the best interest of the lending industry. It’s in the best interest of the U.S. government who’s backstopping all of this activity. And nobody solved the problem yet, and we’re on our way.

Eve: [00:24:42] Well, I’m super excited just listening to you. It sounds, I think it sounds fantastic. Thank you very much for spending some time with me today.

John: [00:24:50] Thank you so much. I really appreciate it.

Eve: [00:25:08] John is unpacking a tiny little piece of the real estate industry that could have a dramatic impact for everyday people. True Footage promises equitable appraisals no matter what neighborhood your house is in.

Eve: [00:25:33] You can find out more about this episode or others you might have missed on the show notes page at our website RethinkRealEstateForGood.co. There’s lots to listen to there. A special thanks to David Allardice for his excellent editing of this podcast and original music. And thanks to you for spending your time with me today. We’ll talk again soon, but for now, this is Eve Picker signing off to go make some change.

Image courtesy of John Liss, True Footage

It’s the data, stupid.

Joseph Minicozzi is an urban designer who wants to help communities understand the economic impact of development. Like demystifying tax codes, government jargon and municipal finance data.

In 2012, Joe created a data-focused consulting company called Urban3. Based in Western North Carolina, Urban3 was spun out of Public Interest Projects, a non-profit focused on reinvigorating downtown Asheville. For over a decade Joe had worked there as New Projects Director, including a two-year stint as executive director of the Asheville Downtown Association.

Urban3 embraces data and GIS mapping to highlight land value economics, property and retail tax analysis while wedding that to community design. While they have a vested interest in Asheville, Urban3 has consulted for cities both in the U.S. and abroad.

Previous to U3 and Public Interest Projects, Joe was a founding member of the Asheville Design Center, a non-profit community design center. He also worked as independent consultant on urban design and planning issues for many years, before which he was the primary administrator of the Form-Based Code for downtown West Palm Beach.

Joe holds a Bachelor of Architecture from the University of Miami and a Master of Architecture and Urban Design from Harvard University. In 2017, Joe was recognized as one of the 100 Most Influential Urbanists of all time.

Read the podcast transcript here

Eve Picker: [00:00:08] Hi there. Thanks for joining me on Re-Think Real Estate for good. I’m Eve Picker and I’m on a mission to make real estate work for everyone. I love real estate. Real estate makes places good or bad. Rich or poor, beautiful or not. In this show, I’m interviewing the disruptors, those creative thinkers and doers that are shrugging off the status quo in order to build better for everyone. If you haven’t already, check out all of my podcasts at our website. Rethinkrealestateforgood.co. Or you can find them at your favorite podcast station. You’ll find lots worth listening to, I’m sure.

Eve: [00:00:58] Joe Minicozzi has been recognized as one of the 100 most influential urbanists of all time. Although he trained as an architect and urban designer, that honour was not bestowed for designing buildings or places. Joe’s influence comes through data. Joe helps communities understand the economic impact of development. He does this by tracking data in the built environment. Demystifying tax codes, government jargon and municipal finance. Stuff that most developers and governmental entities don’t think about when planning their next development project. Joe’s deep dives have uncovered some astounding and important truths about the cities we live in. I’m fascinated by his work and findings, and I’m sure you will be too.

Eve: [00:01:50] If you’d like to join me in my quest to rethink real estate, there are two simple things you can do. Share this podcast and go to Rethinkrealestateforgood.co, where you can subscribe to be the first to hear about my podcasts, blog posts and other goodies.

Eve: [00:02:12] Good morning, Joe. I’m really delighted to have you on my show today.

Joe Minicozzi: [00:02:15] Thank you for having me. I’m glad to be here.

Eve: [00:02:18] So,I trolled your website a little and I found a really, which is actually a really interesting name. Your business Urban3. I found a really interesting quote that I want to understand. Don’t fly blind. Visualize and reshape your economic reality with Urban3. What does that mean?

Joe: [00:02:39] Well, the visualizations and visualizing your reality is, basically we use Esri software. GIS software to make maps of cities to reflect their economic position. What’s going on from a cash flow standpoint and what you find in that, is different building types actually produce more wealth than other building types. Or once you see the picture, it helps people realize that there’s policies that are actually affecting cash flow. And the name Urban3 is kind of a funny thing that we did that originally was supposed to be Urban Cubed because the three-dimensional environment is cubic. It’s the 3D world. You and I are both urban designers. So, I wanted to kind of play on urban design in the name. But the IRS wouldn’t accept the cube is a part of our name, and they dropped it to the 3 after the name, So,they were stuck with it. So,that’s where we’re at.

Eve: [00:03:40] They don’t accept the at the beginning too, you know? Yeah. Very strict rules.

Joe: [00:03:45] Very big rules. Yeah.

Eve: [00:03:47] Yeah. So, OK, So,you’re visualizing the three-dimensional shape of cities to determine the economic reality of the cities?

Joe: [00:04:01] Sure. Or to think of it is, you know, for the real estate developer folks on this podcast, you’re playing with the cash flow, right? Things cost money and you have to pay for them. You have to make money on rent to pay for the building. And it’s really simple cash flow and you need to make more money than it costs or else you’d be out of business. You wouldn’t be a real estate developer or even in business as a person, you know, I can’t sell donuts at a loss, you know? So,cities are the same thing. Cities are really big real estate development projects and counties more so. Counties are are fixed. You can’t annex the next county over. So,when you have a city, it’s got a cost of roads, the cost of pipes, the cost of infrastructure, infrastructure that real estate wouldn’t be worth anything until somebody ran a pipe and a road to it. So, the question I ask is, are you paying enough taxes to cover the cost of that expense? And what we demonstrate with these models is we show it. We show how financially subsidized certain development patterns are.

Eve: [00:05:03] And So,and how do you create these models?

Joe: [00:05:07] That’s math and fancy software. It’s a geographic software, So,it’s got networks within it. You know and cities already have the data. That’s the thing that’s kind of crazy. They alSo,have the software. We’re just we’re just innovating the use of the software.

Eve: [00:05:25] So,for people listening, I’m sure they’ve seen spiky charts which show huge spikes of activity in urban areas. And so, it’s kind of like 3D charting of data.

Joe: [00:05:38] Exactly.

Eve: [00:05:39] Okay.

Joe: [00:05:40] Or do you think, there’s for more people who are into, I guess you call it BIM in the architecture world, or they are doing feedback systems of HVAC and all this stuff, and you’re starting to see way more sophistication on running your thermostat differently and particularly in green technologies. This is taking that same type of technology but applying it at a macro level across the city.

Eve: [00:06:03] So,we’re living in a data driven world and you’re applying data to helping cities become healthier economically.

Joe: [00:06:13] That and getting people to realize the consequences and costs of sprawl. So, we’re not going to change sprawl habits until people are aware of the true destruction that it causes and the defense of people that live in that, who wouldn’t take the deal when a house is a single family detached house in Eugene, Oregon, is subsidized to the tune of 1,400 dollars an acre. You know, it’s like…

Eve: [00:06:35] Right.

Joe: [00:06:35] You’d be stupid not to take that deal. So, if we want to see it, if we want to see…

Eve: [00:06:39] Call me stupid.

Joe: [00:06:42] Well, me too. I live, I bicycle to work.

Eve: [00:06:48] I walk down two steps. I’m in downtown.

Joe: [00:06:50] Ok, that’s even better. So,anyway, it’s and this isn’t to say that we shouldn’t have suburbia. It’s just, allow people to see the real consequences and people will make different choices. I know that if I, I’m Italian, my family has a history of heart disease. I like to eat pizza. I know because of my family history I can’t eat pizza every day. I would love to eat pizza every day. But because of the saturated fat content, I know that eating one slice is my caloric intake for like a week, So,I’ll still eat pizza, but I’ll exercise the whole rest of the week, you know, it’s just keeping things in balance.

Eve: [00:07:26] So,who? Who comes to you for help?

Joe: [00:07:29] Initially, it was activists that were doing conservation and community planning at large. The Sonoran Institute in Rockies. And over in California, the local governments commission. Now it’s we get finance officers, city managers, planning directors, mayors, politicians. Our clients are all over the place. And it’s because our work is more well known.

Eve: [00:07:55] And when did that shift, do you think?

Joe: [00:07:58] Well, initially, here’s what’s funny, I used to work in a real estate development for a company called Public Interest Projects and we were a for-profit real estate development company in downtown Asheville. It’s like basically think of it as a $15 million revolving fund. 75 percent of the money went into sticks and bricks, the buildings, and we reserved 25 percent of that fund to seed businesses and get businesses going on the ground floor. Our time is the direct opposite. We spent more time with the entrepreneurs than the buildings because businesses need help. And then this thing called the recession happened. I don’t know if you remember that, but and what happens in real estate development? We were dead in the water, So,I was actually going to conferences and explaining to people how to articulate the benefits of urban development in downtown stuff and actually started a presentation in Seattle Smart Growth Conference with a quote from Mark Twain that says a person who won’t read has no advantage over one who can’t read. Right? So,that’s a quote about literacy. If you choose not to read, you’re just as illiterate as somebody that can’t read. And I had my hand in the air and I said, OK, who in this room understands the tax assessment system and how property valuation happens in the United States? And I’m standing in front of a bunch of my peers, urban designers, landscape architects, planners. Not a single person raised their hand, and I was dumbfounded. I’m like, look, I’m trained as an architect. I like to look at pictures, but I read the tax system. It’s not hard and it basically is an incentive to crappy buildings. That’s simple. And people came to me like, we just hire you to do that, and that’s how Urban3 got started.

Eve: [00:09:35] That’s really interesting.

Joe: [00:09:36] Probably five years in. It changed.

Eve: [00:09:40] To what?

Joe: [00:09:41] Then it was seen as like, this is some sort of gimmick that this is just, you know, Joe being cute to, OK, we need to do this stuff. When I when I started doing the value per acre analysis…

Eve: [00:09:52] It took five years.

Joe: [00:09:53] People are slow. Good.

Eve: [00:09:55] Good things take a long time. People are slow.

Joe: [00:09:58] Well, it’s all right. It’s good to be skeptical. The irony about all of our work, this is really simple. When you do a per acre analysis, it normalizes all real estate into a metric unit. Like think of miles per gallon. We don’t see miles per tank. So,we all know the gasoline is what drives the car. So, all tanks are different sizes. Well, the same is true with real estate. The irony is like what we’re seen as like just a cute little trick of doing value per acre analysis. And seriously, economists would tell me that they’re like, Oh, that’s a gimmick. I’m like, Are you high? Like, Is there more land on this planet? And so, if you look at literature from the 1930s and 1920s, the development, I’ve got books, historic books from the 1920s about building small neighborhoods. The whole thing revolves around value per acre analysis. That was commonplace back then. Somehow, in the intervening like thirty interesting year gap, we somehow lost this idea.

Eve: [00:10:54] Interesting.

Joe: [00:10:54] Australia, they do it on a per hectare basis. Like they understand the value of land in Australia, but not here.

Eve: [00:11:00] Interesting.  Thats’ because most of Australia is desert. Probably. Seriously.

Joe: [00:11:05] You’re alSo,reasonable people. Interestingly, we’re cousins, right? Like, we both came from the same parents. Like we like poke mom in the eye. We were the first ones and then the United States were, like, we don’t need to be British anymore. We left with the same damn tax policies. You in Australia, us in the United States and Canadians. In the intervening two hundred and something years, the Canadians, the Australians and New Zealanders all adapted their tax policies. In the United States we didn’t. Ours is the most crude, blunt instrument.

Eve: [00:11:38] Yes.

Joe: [00:11:38] If you tax on value, there’s a perverse incentive to build crappy buildings, period. That’s it.

Eve: [00:11:44] Right, right. Ok, So,I’m going to break this down a little because maybe I’m one of those stupid people. But I mean, I do understand this, but still. I live in downtown Pittsburgh, and the value of residential is pretty high in downtown Pittsburgh. And I take up a very small portion of land because I live in a unit that is in a building that is four stories tall. Many people live in units that are much taller than that, So,they take up an even smaller portion of land. But the city gets substantial taxes from my unit. If I took my unit and I bought something equivalent in an outlying suburb of Pittsburgh, they had the same value, let’s say, to $500,000 value, OK, $500,000 in a building which has a whole bunch of other things going on it that are alSo,taxed.

Joe: [00:12:37] In taxes.

Eve: [00:12:38] Versus $500,000 on a one-acre piece of land in an outlying suburb. The city gets the same return, right?

Joe: [00:12:49] No, they’re getting well. Let’s just say you’ve got, we’ll go with a coffee shop on the ground floor and three stories of condos, right, for your building?

Eve: [00:12:58] Oh, no, no, that’s what I meant. Yeah, no. They get way more return for the little sliver of land downtown than the one acre on the outlying in the outlying neighborhood.

Joe: [00:13:09] And on top of that, keep going.

Eve: [00:13:09] Yes, let’s see if I get this right. It’s a test. On top of that, you know, the infrastructure is already there downtown. The pipes that bring water into the building and Comcast cable and whatever else you need are there. Whereas if it’s an outlying piece of land that’s never been developed before, someone’s got to pay to get that stuff there, right?

Joe: [00:13:32] And…

Eve: [00:13:34] You can finish.

Joe: [00:13:35] Think of the frontage on that one-acre parcel versus the frontage on your parcel. So, the consumption of cost is 12 times for the frontage versus your frontage, So,in addition to the fact that yours is already amortized its way out and paid for itself, probably in two cycles already, their stuff is like you’ve got to run it out there, you’ve got all the infrastructure that gets you to that point that’s not being paid for because of the existing. There’s a lot of suburbs that you’ve got to go through to get to that end of the line, and all of those suburbs still don’t pay for themselves. So, it’s essentially, we do a lot of work with strong towns. There’s a guy Chuck Marohn, who’s a civil engineer, and Chuck calls it the Ponzi growth scheme, and he’s totally right. The only way that we look, we look solid on paper, the more we grow in suburbia because we’re getting new cash flow. And everybody should have caught this when the recession hit. When the recession hit, all of a sudden, cities were broke. It’s like, well yeah, you should be able to cover your cost if nobody comes in the door and buys a commodity, right? I should still be able to pay rent if nobody hires me. I have a reserve account and we should be able to get through, in our case, our business, we can handle about six months of working without new clients coming in the door. With cities, if they don’t have new permits, all of a sudden, they’re broke. Like that should tell you something. We should tax our system to be able to cover the costs of what we’ve got. In the case of Pittsburgh. When you lost your population, you’re essentially carrying all of this extra infrastructure for a city much larger than you, So,you should not be adding more to it. You’ve got to like, find ways to compact a little bit.

Eve: [00:15:19] Yeah. Now in the Urban Redevelopment Authority’s favor in the city of Pittsburgh, they’ve always really stressed trying to fill out the existing neighborhoods in the support they provide. So, and way back, we had a mayor, Tom Murphy, who, you know, probably familiar with, who really went out on a limb and took operating funds and created a development fund, the Pittsburgh Development Fund, to support projects right in the city because I think he got this, right?

Joe: [00:15:51] Yeah, he did. Like in the case of South Bend, Indiana. Now, the Rust Belt, the big expense of an infrastructure, the big, expensive stuff is lift stations and force means. Everything else gravity feed, you just put a pipe in water goes downhill, but the force means we have to push it uphill or something like that and then lift it. That’s the expensive stuff. So,in 1960, they had 130,000 people, and today they have 103,000 people, So,they lost 22 percent of their population.

Eve: [00:16:22] Which is quite a lot.

Joe: [00:16:22] Yeah, So,but in 1960, they had three lift stations and a third of a mile of force main. Today they have 43 lift stations and 19 miles. So, a 1,000 percent growth in lift stations and a 6,000 percent growth in force mains even though their population was going minus 22. That is a recipe for disaster. When you’re, and cities do this, they’re just like, well, people want new houses out at the edge. So, we’re going to build pipes out there for the builder to build housing. It’s like you were basically building yourself off a cliff. Somebody’s got to pay for this stuff and the developers pay for it. But then they fold it into the mortgage and then the city shows up and like, whoa, new infrastructure. Thanks. Thanks. Thanks, developer. They’ve just taken on this huge liability in maintenance and stuff that doesn’t fix itself.

Eve: [00:17:12] Right. Interesting. So, what’s been the best turnaround story for you? Like, you know, can you describe a client you’ve worked with that perhaps was unbelieving and really kind of transformed their city or at least the processes to?

Joe: [00:17:30] It’s yeah, that’s not an easy question to answer because it’s all been different. And you know, one of the things that you’ll see in our work, and this is something you and I probably have a lot in common in this, that we’re both visual people. I’m a visual learner and a visual thinker. And that’s a lot of people that go into design education get that way. And then we then we get indoctrinated full bore into the design world. So, for me, it’s all about pictures and visuals, and in our work, we make it extremely visual, but some highly nerdy stuff like lift stations and tax flow and stuff like that. But if I can make a picture of it, it communicates to regular people. And what I find with politicians, I mean, think about politicians. I don’t mean this in a demeaning way,

Eve: [00:18:19] But they’re not trained in any civic design.

Joe: [00:18:23] No.

Eve: [00:18:24] Or any of this. They’re politicians, you know, this is a career.

Joe: [00:18:28] You win a popularity contest and you’re like, I’m going to help fix the city and then you show up and you’re like, oh my God, this is a disaster. Where do I start? And then you meet, you meet the technicians that run the city and they’re like planners talking about form-based code or whatever. And you meet the engineer and they’re talking about these, you know, whatever TDM models. You have no idea what they’re talking about, they’re talking in this kind of gibberish. And so, it’s actually a professional problem, not a political problem that the politicians really have no idea what’s going on. So, they just basically just go with the flow, and we take the tack in argument that is the professional that needs to visually communicate, so that people understand it. So, what we’ll do is, we’ll take in South Bend case, Mayor Pete was the mayor when they hired us. We put all the pipes on a map and showed them that they had enough pipe that would go from South Bend, Indiana, to Asheville, North Carolina. And I said, like that, you get to fix that every 40 years. Good luck with that. And once you do that, people are just like, oh my God, we don’t need to add more to this. You know, it should. But like, my mom could understand that.

Eve: [00:19:31] I should not be laughing, but it’s just it’s ludicrous. I’m sorry.

Joe: [00:19:36] Well, it’s systems.

Eve: [00:19:37] Right.

Joe: [00:19:37] You know, it’s you know, you and I talked before the recording. For me, like a very influential author for me is Michael Lewis, and the book Moneyball is brilliant. And so, you know, I worked in real estate development. We’re actually still in the developer’s office. But our company was $15 million. Our city is worth, at that time, $12 billion. Ok, that’s Asheville. 90,000 people taxable value of $12 billion. I know our politicians, some of them are friends of mine. I can’t imagine them running a $12 billion company. And then it’s just like, what do people want? Let’s have more trees. It’s like, I got that. But can we think a little bit more sophisticated than this? And in the beginning of Moneyball, Michael Lewis is talking about the Oakland Athletics being in the playoffs all the time, and they’re the cheapest team in baseball. And and then he meets Billy Beane and they talk about Bill James statistics and the data that Bill James was talking about that was an anathema to baseball. So, the Oakland Athletics were basically following this guy who was asking these really crazy questions like why is an error and error? You know, I fail to close my hand on the ball, but at least I stopped the ball. Shouldn’t we be measuring where the ball lands and where the person is that isn’t catching the ball. So, that distance is really what the problem is because somebody could just never be where the ball lands and they’re never going to commit an error like that makes perfect sense. But in baseball, they’re like, you can’t question the error. We’ve had the error forever. And so, the quote that nailed me in that book, baseball is a is a 7-billion-dollar industry operating without mathematics.

Eve: [00:21:21] Oh, wow.

Joe: [00:21:22] Let that wash over you for a second. I just told you my city is twice the value of all baseball.

Eve: [00:21:28] Wow.

Joe: [00:21:28] And it’s just like Pittsburgh is worth maybe 45 billion.

Eve: [00:21:34] Is anyone using math in Pittsburgh?

Joe: [00:21:39] Some people. I’ve done a couple of presentations there. We actually did a valuation of, took all municipal park property and said, OK, what’s how could you cash flow this? So, there’s the HH Richardson jail that’s at the backside of the county building.

Eve: [00:21:55] That’s a beautiful building. Gorgeous building.

Joe: [00:21:57] Incredible. Modeled after the Bullfinch Jail in Boston, a similar kind of like star shaped plan, although the Richardsons one’s kind of like a half star.

Eve: [00:22:07] Beautiful building.

Joe: [00:22:07] Phenomenal. It’s two-foot-thick walls. But anyway, in Boston, they converted that jail into a lobby for a hotel and stuck a hotel on the back side of it. So,it went from a non-taxable building and it’s actually a really cool lobby. And now it’s kicking out about $3 million a year in taxes. So, went from zero value to $3 million of cash flow to the community. You didn’t lose the building. You know, it’s not a jail anymore, it’s a lobby, but people can go into it. So, we just said, Well  let’s just do the same thing with the Richardson jail. The Richardson jail right now, it’s been renovated, but it’s being used for like county offices. It’s like those could be…

Eve: [00:22:49] Family courts, I think. Yeah.

Joe: [00:22:51] Does it need to be in that building?

Eve: [00:22:54] Such a shame.

Joe: [00:22:56] Yeah.

Eve: [00:22:56] So, I just interviewed Jonathan Cohen, who’s the founder of the Society Hotels in Portland, Oregon. And you know, I’ve always thought the riches in jail, like if you had if you had travelers who wanted to stay cheap, you know, what he’s done is he’s created these bunk beds in this old historic maritime building. So, people can stay there for as little as 35 to 50 dollars, pre-pandemic, obviously, and share a bathroom. You know, people who really don’t want to spend $200 on a hotel room. And wouldn’t it be great to stay in a cell like it would be really fun? Maybe not So fun for some people who originally stayed there. But yeah, I’m totally with you. It’s a very weird re-use.

Joe: [00:23:43] And there’s also, there’s a little corner. There’s like a little tiny, little triangular, oddball lot behind it. That’s just this abandoned, weird site where there’s like a memorial out there for something.

Eve: [00:23:57] Interesting.

Joe: [00:23:59] Seriously, you live in Pittsburgh. Go walk behind this, there’s like this…

Eve: [00:24:01] I will. I will.

Joe: [00:24:02] This weird little triangular piece of dirt that’s there. It’s like, really, this thing is abandoned. There’s like a street that is unnecessary. So, what if we just threw the street in in that little triangular lot? And maybe that’s where you put the hotel and you just build a little hotel tower back there and tap it into the jail? Call it a day. The real simple is the quarter acre, which is a huge piece of land in the downtown. We estimated the taxable value of that would be about seventy-five million dollars and that was 2017. So, it’s like, OK, So, you currently have zero on this thing. You can pump that thing up to 75 million. And let’s say you hold it as a ground lease, you say, look, we’re not going to give this to the developer. We’re going to let them lease it for 75 to 100 years. And then we’re going to as the city of Pittsburgh pull that revenue and fund things like Eve. Eve’s doing cool things. We’re going to create a cash flow to fund Eve in equity projects, and she’s going to go off in neighborhoods and help build wealth. We now have a cash flow off this thing. Anyway, we did that citywide. We’re like, we’re not saying get rid of the University of Pittsburgh, but seriously, there’s land all over the city. The current Pittsburgh GDP is $17 billion. We estimated off public assets doing projects like what I just said, or there’s a four-acre police impound lot on the damn river. It’s like seriously.

Eve: [00:25:28] I know I know it. I know it. It’s such a waste of the space.

Joe: [00:25:31] So, yeah, I mean, you could hit it out of the park on a site like that. And it’s like, seriously, this is the best place to put stored cars in Pittsburgh. Anyway, So, your GDP is 17 billion. We estimated you could get about 15.6 billion off existing assets in a way that’s mutually beneficial. Like, that’s a hell of a value game for Pittsburgh. And cities all across the country have that. Yeah, 15 billion is a pretty big deal. I wouldn’t, you know, I would take half that. If you want to give me half that, I’ll be happy

Eve: [00:25:59] And no one would, no one would listen to you.

Joe: [00:26:02] Well, I think they were a little stunned, you know, because it’s just a different way of thinking. And the thing that’s crazy is this is commonplace in Europe. This is commonplace in Boston. This is what you know, Boston. They’re just like, Yeah, we got to use that jail for something.

Eve: [00:26:14] You could basically double the income for the city.

Joe: [00:26:17] It’s double the GDP, the gross domestic product, which is that’s your cash flow of your place. So, yeah.

Eve: [00:26:26] Pretty, pretty significant. And is that what you find in most cities? That you do studies for. Is it a similar? Does it vary greatly depending on the the land available or the history of the city?

Joe: [00:26:40] Yeah. In that and that aspect, yes. Pittsburgh, obviously, you have tremendous riches of these buildings that you can’t reproduce at cost the way that they exist today. So, it’s like you’re in a better position. Places like Phoenix, Arizona, you know, you don’t have buildings like that, but you still have massive tracts of land and surface parking lots and downtown that the city owns. It’s a complete waste of real estate, and they’ll be like, well, Joe, people need parking. It’s like, all right, we’ll build a parking deck and wrap it with a different building that’s producing taxes. You don’t need to. You know, there’s plenty of developers that would kill for that location if you gave it access and you’re actually predictable with the developer. Developer doesn’t want to go through a process of a community design thing where it’s like they have no idea what’s going to happen by the end of it. You know, things cost money, architects, attorneys, all of that. If you drag somebody through a three-year process, they need to make that money back. You know, it’s that simple. And it’s just people just aren’t even thinking that simply about it.

Eve: [00:27:42] Interesting. So, how long have you been in business now with Urban3?

Joe: [00:27:48] 10 years.

Eve: [00:27:50] And how many clients have you had?

Joe: [00:27:53] We’ve worked in four different countries, 40 different states. I don’t, like 150 different cities. We’re slowly becoming like the international tax experts, So, as a by-product of all of this. And there’s really weird things out there like finance departments in government. So, we were sitting down. We were working with Chuck Marohn from Strong Towns in Louisiana. And Chuck and I were interviewing all of the department directors and we sat down with the finance officer. And finance departments keep a depreciation schedule of their roads and pipes and all this stuff. They know what it costs. Yet it’s in a third set of books called the called the Asset Ledger. And Chuck was like, how is a pipe an asset? And they’re like, well, it’s got money, you know, it’s worth money, and so, it’s an asset. And I said, Laurie, can you pick your roads and pipes up? Can you pick them up out of Lafayette, Louisiana, and sell them to Baton Rouge? And she goes, well, no, and I said, that doesn’t sound like an asset to me. I said my computer is an asset to my business, I can sell it, it depreciates. If I had delivery vehicles in my business, those are assets. How is a road an asset? And she’s like, well, that’s just our finance standards and the gap documents that we have to follow. I’m like, who the hell made those? And she’s like, well, I don’t know. So, now you’re the mayor of Pittsburgh and you’re given the books. And your books have costs, expenses and revenues. And then there’s this third set of books called The Assets. You don’t look at the assets, you’re just like, OK, we’ve got a lot of money over, sitting over here. These gifts of gold called roads. It’s like they’re not assets. It’s like this big anchor you’re dragging.

Eve: [00:29:39] A huge liability. Yeah, they’re a liability.

Joe: [00:29:43] So, cities can’t see this because of something as simple as we follow these gap standards. Well, who created the gap standards? The gap standards are created by bond companies. So, bond companies want to know  how much stuff cities have so that they know how to turn you into a piggy bank. Because they want to give you more money. It’s like payday loan scandal or something like that. It’s like, oh, here’s another bond. And so, cities are like, we’ve got a AAA rating. It’s like, are you crazy?

Eve: [00:30:13] Are you telling me the bond ratings are based on roads and pipes?

Joe: [00:30:17] Yeah.

Eve: [00:30:18] Oh. That’s a shocker.

Joe: [00:30:21] Mm hmm. No one ever told you that, did they?

Eve: [00:30:25] No. No.

Joe: [00:30:25] That’s the thing is like, you and I go through urban design school, we maybe learn a little bit about a real estate development pro forma. Taxation, maybe like a half day class or half a class on that and one session about municipal finance.

Eve: [00:30:39] I don’t think I had any when I went through school.

Joe: [00:30:42] Yeah.

Eve: [00:30:42] And what’s more, I don’t think architects get any.

Joe: [00:30:45] Oh God.

Eve: [00:30:46] I mean, architects are woefully undereducated when it comes to both real estate development and finance.

Joe: [00:30:53] I would say wilfully ignorant. I wouldn’t say woefully undereducated because we, and I’m saying putting myself into that bucket, it’s like, Oh, that’s finance. I am a designer. I am above that. It’s like, Oh, really, OK?

Eve: [00:31:08] As a developer, we sit at the table with an architect thinking, please don’t draw that line. It’s going to cost me too much money.

Joe: [00:31:14] Yeah. And it’s and it’s sad because I love architecture and I love the profession. I think the best education you could have is an architectural education because you’re basically given a blank piece of paper and they’re like, OK, now be creative.

Eve: [00:31:27] Oh, I so completely agree with you. I think architects are trained to be problem solvers, to turn nothing into something. It’s an amazing education.

Joe: [00:31:36] And be critical thinkers. And so, it’s like, All right, take that same critical thinking skill and just be a little curious over about finance. And in defense of architects, the language that people use in finance is deliberately opaque. And I think that’s the best thing about that movie, The Big Short, where they make fun of the opacity of financial language. Well, the same is true inside real estate development. We’re going to get some mezzanine financing. I used to sit in meetings with people. I’m like, What’s the mezzanine? And I would just do that just to be an idiot. But I was mostly making fun of the fact that this has created fictitious language, and I’m explain it to me, I’m just a dummy. I only went to Harvard. What do I know?

Eve: [00:32:16] You know? Yes. And what’s a sponsor? There is a lot of secret language in the real estate world.

Joe: [00:32:24] Yeah.

Eve: [00:32:24] And I have to say this about the SEC in the regulation crowdfunding rule, they created one of the regulations, one of the things that you have to do is explain things in plain English. So everyone can understand. And I kind of love that because what is the sponsor? What’s a capital stack? What’s the mezzanine? What’s like, you know, all of this stuff is like for very special people, but everyone should have access. Yeah.

Joe: [00:32:49] And it’s funny when people, you watch people and you’ve been hanging out with people like this, there’s like, oh, I got my capital stack and it’s like, I just picture people with like a big pile of money that they’re walking around with and they’re like, look at me with my pile of money. Like, you’re just like, come off as the biggest fool when people talk that way. But it’s like, I don’t know, I’m suspicious of that because it’s like, what do you really, did you really work at this or do you just know somebody that’s a banker? They gave you access to money, and you’re proud that you succeeded because you have access and availability that John and Jane Doe off the street don’t have that access. Or somebody that, God forbid, is a different color skin doesn’t have access to the same power and wealth that you’ve got. So, let’s talk about that and there’s matters of inequity baked into the system through the whole thing.

Eve: [00:33:36] Yes, I think the real estate industry is probably one of the most inequitable industries.

Joe: [00:33:42] We’ve done analysis of redlining in Kansas City, and we showed them that even today, when you drop the Red Line map onto the model, you see this staircase step down from green to red, So, you know the gradients of redlining.

Eve: [00:33:59] No, I don’t know the gradients.

Joe: [00:34:01] Oh, OK. So, in 1934, the Federal Housing Administration changed mortgages from seven years in the United States to 30 years. Think of that. That’s a huge change to the mortgage industry. And they said, you know, basically the dirty little secret here is these are Democrats doing this and they were doing it because we were afraid of socialism. So, our country was looking at Europe in the depression going, OK, this is a little freaky. They’re becoming socialists. We need to do something to make people homeowners so that when they own something, they’ll be less apt to want to be socialist. So, let’s find a way to make more homeowners in the country. And this is in the middle of the depression. And so, they created this system of we don’t know what Pittsburgh is like. We don’t understand Pittsburgh, but you have to come up with a map in Pittsburgh to map what’s good real estate, what’s desirable real estate, what’s declining real estate and what is hazardous. So, those are the four grades, the hazardous areas were the red areas. And so, arbitrarily you mapped your hazardous real estate, by like if it was next to a train yard or if it had an infiltration of immigrants. Or if it had Negroes.

Eve: [00:35:16] So, who did that mapping?

Joe: [00:35:19] Our local people. So, it was Pittsburgh did it to themselves. Asheville did it to themselves, cities 50,000 and higher did it to themselves. They did it in Kansas City. Incidentally, my favorite one is in Denver, where they took an Italian neighborhood,  because coincidentally Italians were the driving immigrant class of the 1930s and coming in at number two, where Germans. Well, what kind of Germans were coming in in the nineteen 1930s? That would be Jewish people. So, you find Italian neighborhoods and Jewish neighborhoods were redlined as much as is black neighborhoods.

Eve: [00:35:56] That’s interesting.

Joe: [00:35:56] Now what’s interesting about Italians is I can change my name to Smith, you know, or there were Italian neighborhoods in Denver. There was this one neighborhood that wasn’t redlined that was Italian, 50 percent Italians. And they wrote, right in the document, these Italians peddled liquor during the prohibition era. It’s like those are the mafia Italians. We’re not going to redline them. So, but as a black person, you can’t change your skin.

Eve: [00:36:20] No.

Joe: [00:36:22] So, your family wakes up that day that the map is adopted, and they can’t sell the house, right? Because no one can get a mortgage in that neighborhood. That went on for 30 years from 1934 to 1968. And so, for three generations, you don’t get, you can’t get a home rehab loan. You’re basically just disconnected from the financial system of our country.

Eve: [00:36:45] I realized that I just didn’t know how the initial mapping happened, I suppose.

Joe: [00:36:52] Well, we ran the number in one neighborhood in Kansas City, Kansas. Is like a half square mile where there’s just all vacant houses in it. Well, not all, but 700 vacant lots. And we just real simply went back in time, pulled the old values from 1930, glued the houses back on the map and ran a cash flow of if those houses just stayed low value but paid their taxes over time, how much taxes would they matriculate over 30 years? And it’s insane. It’s $30 million. So, when I was presenting to the community, I said, Look you need to realize your great grandparents were racist, period. There’s no way around it. They adopted racist policies. This neighborhood was redlined because it was black, and you basically wrote a check for 30 million dollars and flushed it down the toilet. That’s the cost and consequences of being racist. Now that was just one neighborhood. What did you what did you blow in the entire city?

Eve: [00:37:43] Wow.

Joe: [00:37:43] And that’s the thing that we need to. I think I would argue that that’s part of being anti-racist, is you have to point out the racism that happened and make it a way that people can understand it. It wasn’t at all comfortable to say that on stage in Kansas City, but that’s the truth.

Eve: [00:38:00] Interesting. So, I have to ask you, also, what does your team look like? How do you hire people in your office? Do you hire architects?

Joe: [00:38:12] God, it’s funny. We have one urban designer other than me, several planners. Most folks are GIS based. It actually, really, we don’t fully get into design the way that an architect or designer would. We’re information curious and a technically proficient with GIS software. The design side we can train internally, but we’re mostly looking for creative thinkers that understand this technology but are also ridiculously curious about systems in cities and have a sense of humor. We do a lot of joking in our presentations, in our data, is a method of delivering information because it’s pretty depressing to just drop a bunch of redlining stuff on people.

Eve: [00:39:05] Anyway, someone who has a sense of humor has probably a higher IQ, right?

Joe: [00:39:12] Well, it’s also, I don’t know, if you’ve read Daniel Kahneman’s Thinking, Fast and Slow.

Eve: [00:39:16] No.

Joe: [00:39:19] The guy is a psychologist at one. He won a Nobel Prize on behavioral economics or in economics. He and Amos are the godfathers of behavioral economics. And there’s a third one. His name is Richard Thaler, who also won a Nobel Prize in economics. And the three of them did all of these studies about how do people make the wrong decisions economically? And it’s there’s human flaws in the way that our brains operate. But there’s also ways that you could take advantage of those. One is where we’re as a species, we’re oral communicators. We tell stories. So, people need a narrative of understanding the economic data. We just don’t drop like a spreadsheet on somebody. We actually tell stories with the data. The other thing is like simple things like they would put pencils in people’s mouths. And you can see my camera and nobody else can, but. And they put one cohort of students through these tests with pencils in their mouths. In another cohort of students through the same test without pencils. And the students with the pencils in their mouths learn more than the students without. And what they figured out is that So, you watch my face? I’m smiling. You know, if you put a pencil in your mouth, you’re forced to smile, and when you smile, the back of your neck opens up. Your brain operates differently than if I’m sitting in the class with my arms folded and I’m like, looking at you like this, you know, it’s just there’s ways of learning that we have survived with and that we just basically use that. So, I highly recommend actually one of my favorite books is Misbehaving by Richard Thaler. And he’s one of the three Nobel Prize winners. Daniel Kahneman is awesome. His book, Thinking, Fast and Slow is incredible. I find it really hard to read. I much prefer Daniel Ariely’s, Predictably Irrational.

Eve: [00:41:12] These are all great titles, you know?

Joe: [00:41:15] Yeah. Well it’s, look, we deal with humans, you know. And we don’t, we go to design school. Even planners. Planners of all people should have degrees like some subset of psychology, you know, because they have to deal with groups of people. But it’s funny that we go into these professions, and we don’t learn how humans operate.

Eve: [00:41:34] So, I’m fascinated and I’ve lost my train of thought here completely.

Joe: [00:41:39] I’ve taken you off course. We’re supposed to be talking about real estate, aren’t we?

Eve: [00:41:42] No, but this is good. So, if cities adopted, you know, sort of this data exploration, what would cities, what would cities look like in the best of best of all worlds if they really paid attention and adopted, you know, this information that you’ve uncovered to their advantage? And what would we have to stop doing now that we’re doing?

Joe: [00:42:15] Well, it is. That’s a hard question. You know, there’s ultimately, I think we need to change our tax system. And right now, the majority of cities in the United States counties to operate off property tax. And So, think of it this way your building is probably worth what a square foot? Like maybe like 500 bucks a square foot?

Eve: [00:42:42] Oh, I’d be so lucky. Maybe 300.

Joe: [00:42:46] Ok, even 300. Like, what would it, you’d pay $300 a square foot to reproduce your building?

Eve: [00:42:52] No, but I couldn’t probably sell it for more than that.

Joe: [00:42:57] Ok, let’s call it 300. What’s a Walmart worth per square foot?

Eve: [00:43:01] Boy, I don’t know.

Joe: [00:43:02] Fifty. So, per square foot, you’re paying six times the production of a Walmart.

Eve: [00:43:11] Yes.

Joe: [00:43:13] That’s simple math, right?

Eve: [00:43:14] Right.

Joe: [00:43:15] That’s our tax system.

Eve: [00:43:17] Interesting.

Joe: [00:43:19] And it’s just like, what, so architects, of all people, we should be at the front line saying get rid of property tax as a valuation of property value is the indicator of taxation because there’s a perverse incentive to build crap. Wal-mart doesn’t make any bones about it. I actually went to, I presented at the International Association of Tax Assessing Officers Conference. I don’t know if you hang out…

Eve: [00:43:41] That must have been a blast.

Joe: [00:43:43] Oh, it makes it makes an AIA convention feel like Burning Man. It was the squarest thing ever. And but, you know, they’re cool people. I like, I love assessors. And the thing is like, there’s no other designers there. And I’m like wandering around with all of these nerds. I’m like, How the hell does this system work? Trying to learn from them? And the more I learn from them, I’m like, wow, that’s amazing, the way that they think. They like, go into a forest and they’re just like, is, is this a Norwegian spruce or is this a Douglas fir? I don’t quite understand what tree this is. It’s like, do you see the forest that’s around you? And they don’t. And so, they have their biases just like any other profession, and they are completely obsessed with figuring out what kind of tree this one tree is. And they will have an entire week’s long conference about that and not see the forest. And the head of Walmart’s real estate got up there and was the keynote speaker one morning. And I remember this, 3,000 assessors in the room. This guy did this amazing presentation on how cheap Walmarts are. He showed spreadsheet after spreadsheet on how crappy is buildings are. And I’m like in the audience drinking my coffee and I’m like, oh my god, this is brilliant. This guy is the bomb. This is the smartest thing I’ve ever seen anybody do. You’ve got 3,000 assessors in one meeting. You can get all of your property taxes lowered in one meeting, right? And then I’m like having a coronary because as a designer, I’m like, Holy cow, how is he getting away with this? Now, assessors in their defense, they’re agnostic. If it’s crap, it’s crap.

Eve: [00:45:15] It’s not about design. It’s not about, yeah.

Joe: [00:45:18] They’re like, thanks for making our jobs easier. So, I go up to the microphone and I was trembling. I was so, pissed off and I was like, Mr. Tyrrell, what’s the useful life of one of your buildings? And he goes, 15, maybe 20 years. We designed the building to depreciate it as fast as possible. We don’t care about the buildings. They’re throwaway. We’ll design another building, build another building, move into it and start the depreciation cycle down again. We don’t care about the buildings; we care about the transportation system. And once we set up a transportation system of goods and services, the buildings are thrown away for us. And I was like, damn. Like, that’s the life cycle of a cat. 15 years, you know, and so, when I present to people, I actually make fun of that experience and I actually show a big picture of a cat and I tell the mayor I’m like, is that what you want in your corporation? Is the CEO of a corporation that’s worth whatever, $15-billion, do you want a cat? And as long as you’re making that choice, that this is what you need. Awesome. The average Walmart consumes more in police services than it pays in property taxes. So, I tell people…

Eve: [00:46:17] Wow.

Joe: [00:46:18] Don’t hate the player. This isn’t about Walmart. Hate the game. Understand the game is in your control. And until you control it, you’re at the mercy of the game. So, cities that don’t look at their cash flow situation, they have these biases that roads and pipes are assets and not even look at them as liabilities. That’s their own stupid fault.

Eve: [00:46:37] Right.

Joe: [00:46:38] I’d like I wish we could all live in a version of Paris or something or Milan or, you know, I think you go to Europe, and you see these incredible cities and you’re like, what kind of what kind of Martians left these places for these people to live and happily? And then you come to American cities, and we live in such rubbish.

Eve: [00:46:58] Well, it’s partly the culture of the country. Like, you know, I lived in Australia, and I’ve lived in the states. And so, there’s a real cultural divide when it comes to ownership rights. You know, and property rights, and you should have complete control here over whether you can park your car in your front yard. Whether you can cut a tree down because it’s going to make your car dirty. It’s really not about the neighborhood as a whole or even the environment as a whole. You get to cut your tree down. It doesn’t matter if it looks bad like, or it doesn’t matter if it devalues the neighborhood. You can’t do that in Australia. In Australia, if you want to cut a limb off your tree, you have to go to City Council and get approval. Like it is, and people accept that. You know, they kind of accept that as the status quo. So, I think, you know, I don’t know what it’s like in New Zealand or in Canada, but that’s definitely, I think the dividing point I see. Does that make sense?

Joe: [00:48:04] You know, back to the point I made earlier that the interesting thing is culturally, we’re really not that far from you. We’re both basically British descent as countries go. Both about the same size. You had as much land as we did or more. Australia is a big country, but most of it’s desert. In our country, we kind of how do I put this? We have these narratives, and this is where the psychology comes in. So, we talk about freedom and all this stuff. But think about our country. Our country was formed on a tax revolt, right? We were taxed differently about our tea. We weren’t in control of it. So, we got pissed off at mom and dad and started a little fight and separated our country from their country. So, there’s a great old colonial barb in our country that people used to say as colonists, Don’t tax me, don’t tax thee, tax the fellow behind the tree. I love that saying. We’re a country of tax evaders. That’s it. And it’s like, and we’re fiercely independent, which is cool. And you know, there’s I live in Appalachia. You’re part of Appalachia. I was like in a meeting one time I got into this argument with this guy and you know, we went to breakfast the next day and he gave me his political philosophy and he’s like, Look, Joe, I run out in the woods with my gun. I go out with my gun and get out in the woods, and I run around, and he was doing this kind of like sitting in his chair, like he’s Chubby Checker doing the twist or something. He’s like, I run with my gun and I’m so happy. And like, you know, Steve, I don’t care. Do whatever you want with your gun. I don’t care if you sit in your yard and get naked and rub yourself on the belly with a chipmunk if that makes you happy. Knock yourself out. Would I have a problem with is that road to your house? You get to drive on that road every single day and you’re not paying for it? I think there needs to be a toll gate at the end of your driveway and you pay to use that road. And then when I go to drive past your house to go out mountain biking, I’ll pay to use that road too. And everybody should pay their own fair share. And he just looked at me and he goes. You know, that makes a hell of a lot of sense.

Eve: [00:50:16] Interesting.

Joe: [00:50:17] You know, So, rather than, what I find with people is we’re really good at this in our country. More so, now, is we will take our own little tribe and stay in our bucket and blame the other tribe without going across to understand their mindset. So, I understand Steve’s mindset. I understand the freedom because he’s been led down the primrose path that that’s some sort of American mythology until he’s confronted with the cost of that road. He doesn’t know that the road cost money. You know, he doesn’t pay for it. So, what I’d like to do is I’d like to see Steve get a tax bill that shows him his subsidy So, he doesn’t run around thinking he’s thinks he’s paying for himself. So, when we show that model, the reason why we do it county wide is in, particularly in my county, I’ve got two voters out in the county for every one voter in the city. Those folks out there control the place politically. They’re subsidized, So, they hate my city. In fact, they got my state legislator to call us a cesspool of sin.

Eve: [00:51:17] Oh.

Joe: [00:51:17] And that was on the downtown. Seriously and we’re out on the downtown association. And we’re just like, really? How about a thank you card for all the money we’re shelling out? We showed the model showing how much more taxes is coming out of downtown. Remember everybody in the county pays the same millage rate. So, we’re paying. I pay six mills in county taxes. People out there pay six mills. Their value, you can see it in the model is like one 20th what my value is. So, on a per square foot basis, I’m kicking out 20 times the taxes that they are. When you show it to them on the map, you’re just like, OK, so, what you’re saying about that subsidy that you guys have? You know, then they can see it. So, it’s really, it’s all of our responsibilities to try to find a way to communicate. And make a common ground, and that’s kind of why that’s our practice.

Eve: [00:52:06] Well, it sounds like you’re doing an amazing job and I have thoroughly enjoyed this conversation. I could go on forever. I’m such a nerd. I love this stuff. You showed me a pretty fabulous PowerPoint, which I would love to at least point to on our blog post for our listeners. Maybe you can give me a link, or I can post it there.

Joe: [00:52:28] Yeah. We’ll send you a link. We have a YouTube channel with a bunch of videos.

Eve: [00:52:32] Oh, that’s perfect.

Joe: [00:52:33] Some of them are super long. So, just for the audience, just be aware. But, but really, it’s their narratives. They’re all three act plays as far as I’m concerned, So, we do work real hard to make them fun to watch because it’s highly nerdy stuff, but you’ll see the visuals and the presentations.

Eve: [00:52:52] Well, thank you so much. I’ve really enjoyed the conversation and I hope we can continue it.

Joe: [00:52:57] Definitely. Thanks for having me. And anytime you want me back, just let me know.

Eve: [00:53:16] Joe brings energy, passion and a brand-new perspective to the built environment. If you look at the data, good stuff will follow. You can find out more about this episode or others you might have missed on the show notes page at our website, Rethinkrealestateforgood.co. There’s lots to listen to there. A special thanks to David Allardice for his excellent editing of this podcast and original music, and thanks to you for spending your time with me today. We’ll talk again soon, but for now, this is Eve Picker signing off to go make some change.

Image courtesy of Joseph Minicozzi, Urban3