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Visionary

Toronto

May 30, 2023

Canada has opened its arms to immigrants. We tried to build a wall. This is how that decision plays out.

Drive just 5 hours directly north from Pittsburgh, and weave around the Great Lakes a little, and you’ll be in Toronto, perhaps the most multicultural and multi-racial city in the world.

With the foreign-born population in Toronto now over 50%, New York City is in the rear view mirror. Pittsburgh is not even a speck on the horizon, with only 4% foreign-born residents. This multi-cultural population gap plays out in so many visible and important ways that it’s impossible to even begin to list them here. But what’s most visible when you visit Toronto is that minorities are fully-integrated into every walk of life. They are economists, real estate developers, taxi cab drivers and business owners. They have turned Toronto into a very colorful mosaic indeed. Every corner of Toronto is a thriving, vital metropolis.

And then there is the construction. There is not a block that has escaped. The foreign-born population is expected to rise by another 500,000 immigrants over the next year. As Ontario works to add 1.5 million new homes by 2031, construction in Toronto is unrivaled by any other North American city. According to the RLB Crane Index for North America, Toronto, at a count of 238, has more cranes in use than all U.S. cities combined. And while Seattle (in second place) has a commendable 51 cranes, Pittsburgh is not on the list at all.

This dynamic metropolis with a core of soaring skyscrapers is not shying away from immigration. In India, Canada is hailed as pretty much the holy land. Adverts abound in Punjab urging one to “Study English, move to Canada.” Along the way, someone (collectively) decided that an immigrant is an economic driver and will bring prosperity. And that decision defined the remarkable course of Toronto and Ontario.

They decided to encourage immigrants. We decided to build a wall.

Waste to Energy.

May 24, 2023

Samuel Alemayehu is an experienced global serial entrepreneur and active angel investor. His work in the
past two decades has been guided with an obsession to empower the individual and sustain the village.
His current focus is running Frontier Resilient Capital (FRC) to incubate or invest in companies who are
developing or commercializing breakthrough technologies that empower the individual (personalized
web) and sustain the village (biomanufacturing, renewable energy, carbon capture and circular
economy).

Sam started his career in Silicon Valley as a serial entrepreneur launching two companies from his college dorm room. He first got introduced to venture capital at Venrock Associates, where he focused on consumer media investments. He then moved to Africa, founding and investing in numerous companies across the continent and in a range of industries through Cambridge Investment Group and most recently FRC. Sam incubated 4AFRI at Venrock before growing the platform in 12 African countries with over 25m customers. He then built a mobile gaming platform, LotoPhone, in 18 countries with millions of customers before exiting the startup in 2013. He also created Sen Sante in partnership with leading investment banks to help develop large health infrastructures in Africa with a mobile based universal health insurance. Sam created mobile solutions aimed at empowering the individual.

Over the next decade Sam incubated Cambridge Industries Ltd, East Africa Electric Ltd, and Contingent Technologies Inc. to accelerate the implementation of pioneering infrastructure projects in emerging cities. He set up the first locally manufactured wind study program in over two dozen sites throughout East Africa. He oversaw the planning, design and construction of the first municipal waste-to-energy facility in Africa, located in Addis Ababa, Ethiopia, as part of a pan-African sustainability city park project to industrialize the circular economy with the initial facility built at a cost of USD120m. The full project has created over 20,000 jobs and aims to employ over 250,000 before the end of 2030 in ten cities. Each facility is designed as a multi-purpose plant with numerous functions, including metal recycling, brick production, industrial steam, producing biodegradable plastic, and modern insect farming. Sam has recently invested in commercializing breakthrough technologies through projects in Uganda, Kenya, Cameroon, Nigeria, Ghana, Senegal, DRC, Somaliland, Djibouti, Botswana, Angola, Namibia, and South Africa.

Sam is an active angel investor globally and sits on the board of numerous companies as an investor. He also sits on three non-profit boards: the Ron Brown Scholars Program, KID Museum, and VC Include. Sam is a founding partner at Pitch and Flow, an innovative storytelling platform that uses the global appeal and power of hip-hop to showcase and celebrate the next generation of entrepreneurs. He is a graduate of Stanford University School of Engineering and a World Economic Forum Young Global Leader.

Read the podcast transcript here

Eve: [00:00:14] 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. 

Eve: [00:00:54] Today I’m talking with Samuel Alemayehu, born in Ethiopia and educated in the US, Samuel is a serial entrepreneur and investor focused on deploying technology as an equalizing force. “Let’s change the world to technology and products that empower the individual and sustain the village” says Samuel. Through his work with Cambridge Industries, Samuel is revolutionizing the way we think about sustainable energy and infrastructure. He built the first waste to energy plant customized for sub-Saharan Africa in Ethiopia, the Reppie Waste to Energy project. The project takes 80% of the city’s garbage and turns it into 25% of its electricity. Samuel has boundless energy and a lot to tell. So, listen in. 

Eve: [00:01:53] 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: [00:02:24] Hello, Samuel. Thanks so much for joining me today. 

Samuel Alemayehu: [00:02:28] Thank you for having me. Excited to be here. 

Eve: [00:02:30] Very excited. So, you have said “let’s change the world through technology and products that empower the individual and sustain the village”. And I’m just wondering how you’re tackling that? 

Sam: [00:02:44] Exactly. So that has been our mantra as long as I remember. And whenever you’re building any kind of product and services, it has to focus on the individual, kind of be usable. Does it improve our life? And most importantly, does it improve the community that we live in sustaining our village? And at the end of the day, this is a global village and we’re doing it one waste trash at a time and starting in emerging markets. And we have evolved to do many things right now. Um, but our focus has been how can we take something that has been a headache, a nuisance and convert it into a treasure, convert it into something of value and do it in a way that really addresses water treatment, sanitation, and most importantly, a vibrant circular economy in every city. 

Eve: [00:03:42] So this you’re referring to the Reppie waste to energy plant, I think first and foremost, right? 

Sam: [00:03:48] That’s the first facility we’ve done. 

Eve: [00:03:50] And that was, where is that located? 

Sam: [00:03:53] That is located in Addis Ababa, Ethiopia. 

Eve: [00:03:56] And that’s where you were born, right? 

Sam: [00:03:59] I was born and raised there, and I left when I was 14. 

Eve: [00:04:02] So what goes around comes around, I think. So, tell me tell me why. Why did you start this waste to energy plant? 

Sam: [00:04:12] So, a lot of people start projects or entrepreneurial endeavors for something they love. A labor of love. For me, it was a labor of hate. Hated the garbage in Addis Ababa. I, it’s just, it’s everywhere. Um, you know, you would think if you live in a wealthy neighborhood, it’s collected and taken out, out of sight, out of mind. But no, not for me. Not where I grew up. Like I remembered the garbage was everywhere. We picked around, it really annoyed you. And even in the area where it’s being dumped, it used to be the outskirts, but it’s smack in the center. It is not a modern, even, you know, landfill site, but it is something where we’re digging the ground and throwing this garbage. And it’s in a country that imports metal, that imports plastic, and we’re not recycling it, we’re not reusing it. And we’re not trying to come up with a way, want to address the health impact, the direct sanitation impact of the garbage, but also when this could be an opportunity to create something of value. And I, you know, I left Ethiopia when I was 14, did my high school in the D.C. area and then went to Stanford and then was a software engineer, did a bunch of different companies around software. So, when I came back to Ethiopia, I was like, okay, we need to do something about this and it needs to happen, and started working with those that have addressed it in Europe. But we wanted to create something unique for Africa because the waste was unique, the challenge was unique, the community was unique. 

Eve: [00:05:54] So how does the plant work? 

Sam: [00:05:58] So the first facility, because the overall concept is how do you build a facility that takes in garbage and creates value? That’s a purpose. And have minimal garbage out of it as possible? The very first facility that we built in Ethiopia, does combustion, but with a flue gas treatment, the same flue gas treatment that allows you to capture the nasty gases that would come out from burning it, because that allows you to reduce the significant amount of the waste and capture those gas through flue gas treatment as per the EU standard that allows you to be located within 100-meter radius of residential areas all over the EU. So that’s the standard that we followed. Then over time, when we’ve been implementing other projects, we started to add, hold on, for the food waste, how can we separate the food waste and what is the optimum value we could get out of food waste? And that was doing insect farming and that is taking the food waste, separating it and feeding it to black soldier flies that grow 230 times their weight within ten days. 

Eve: [00:07:06] Whoa.  

Sam: [00:07:07] And making that into chicken feed and fish feed and organic fertilizers. 

Eve: [00:07:12] Whoa. 

Sam: [00:07:13] So it becomes really, really incredible value-add. And then for the waste and then we say, ooh, what about the plastic waste? How can we separate plastic waste and recycle it in the most exciting way possible? So, we started working with scientists around the world that have been using new type of enzymes that break down the plastic, and that allows you to filter it and separate them. And then you say, what about once it has gone through the system? And if you are to use combustion and you’ve burned it, the ash that comes out, we could turn the ash into bricks. What about the metal that is in there? We use super magnets to separate out the metal. This facility in Addis right now alone is separating 3.8 million kilograms of metal every single year. 

Eve: [00:08:02] Wow! So, this plant does a lot more than one thing. 

Sam: [00:08:08] It does a lot of things within one facility. It is how do you take garbage, but how do you turn it into value? And one of those values is electricity. So, it is able to generate 185,000,000 kilowatt hours of electricity, which is the equivalent of about 20% of the household energy generated in a city of 5 million people. 

Eve: [00:08:31] Wow. 

Sam: [00:08:33] And then you have other byproducts, be it making interlocking bricks, recycling plastic, being able to create food waste and converting that into chicken feed, fish feed and other. So, currently, we’re in the process of building a new facility in Kinshasa, which is a city of 18 million people. It’s actually the largest French-speaking city in the world, double the size of Paris. 

Eve: [00:09:01] Wow. All these things I didn’t know. 

Sam: [00:09:05] You never know. And Kinshasa is this vibrant place. But we’re not using incineration and with the flue gas treatment, but instead, it’s fully entirely set up with what’s called anaerobic digesters. And we’re able to capture the gas and use the gas for energy generation as well as to replace household charcoal usage. 

Eve: [00:09:26] So what’s the… It’s a lot. So, what’s the long-term plan? I mean, how many plants, how much garbage are you tackling? I mean, how much more is there to tackle in Ethiopia? Are you seeing cleaner streets? I have lots of questions. 

Sam: [00:09:42] We are. We have seen cleaner streets, one, in the program that we implemented in order to collect garbage better. But most importantly, the challenge has always been disposal. So, our core goal is to continuously evolve and change with advances in technology so that, how can we create the maximum value from the resource? To us, the waste is not garbage or a waste. We like to call it feedstock. So, to us it’s a raw material that comes in and we say, how can we maximize the highest amount of value from this garbage and, or from this waste, from this feedstock? And the goal is to be left with almost no waste whatsoever. Right now, we still send about 2% of the garbage back into landfills, but everything else gets to be used to different values, but within one central facility. So, in Addis, it’s a city of 5 million people, it’s processes 500,000,000kg of garbage a year. And that’s the only facility we want to add other additional facilities next to it.  

Sam: [00:10:52] We partner with others as well. And it is a facility that we’ve built in partnership with the Ethiopian government. In Kinshasa, we’re fully owning the facility and we will be processing 3,000,000,000kg of garbage a year and really creating over 35,000 jobs in collection as well as disposal and, and other projects. But there are other cities, so we have feasibility studies in Gabon. We’re also working in places like Guatemala, Honduras, Nicaragua are the three places that we’re exploring in Latin America. We have a partner we’re working with in Bangladesh. We think the technology that we’ve put together, the system and it’s allowing even other innovators and entrepreneurs to plug in, into our existing infrastructure because we have the waste, if they come up with a better way to deal with, let’s say, battery waste or another type of waste, they could easily plug into our platform and be able to service and provide a circular economy solution. 

Eve: [00:11:57] So any plan for the US? 

Sam: [00:12:01] Uh, Eve, that is a good and interesting question. We do think we have come up with even better solution that could work for the US. But the US is tough. The US, because it really is bureaucratic. You have two companies that totally dominate anything that has to do, to be done with waste. That is Waste Management and Republica. If they want it done, it will be done. If they want to block it, they will block. 

Eve: [00:12:28] And if they want to hike up prices, they hike up prices. I bet they do that. Yeah. 

Sam: [00:12:32] Look at their stock! Their stock, for the past 20 years, they’ve performed better than many companies. 

Eve: [00:12:38] Oh, yes. 

Sam: [00:12:40] It’s a multi-billion-dollar enterprise.  

Eve: [00:12:40] I fired them on my little buildings because it was so expensive. It was outrageous. And… 

Sam: [00:12:47] I mean, one of the challenges there is the US is on track to have landfill that is the size of the state of Rhode Island. Throughout the US. And this is land we’re never going to get back. This is land where, you know, it’s just continuing. And they talk about, oh, we have landed the right way or the different… But this is a permanently wasted land. If you want to re-mine it, it is really challenging. But instead of coming up with newer solutions, they’re continuously rebuilding more landfill. But all is not lost. There are some companies that are doing some exciting projects, specifically around anaerobic digesters and the recycling of plastic waste. 

Eve: [00:13:32] I’m actually, I’m a little shocked to hear that, you know, that the management of waste is actually controlled by two companies in the US. 

Sam: [00:13:42] A supermajority of it. That’s correct. 

Eve: [00:13:45] That’s kind of crazy. 

Sam: [00:13:47] Well, a lot of things in the US are either a monopoly or a quadropoly. I mean, be it… 

Eve: [00:13:53] That’s a monopoly, isn’t it? That’s… 

Sam: [00:13:56] Yeah, that’s a duopoly. You know, and you look at grain supply. You have four companies, the ABCDs, you know, Archer Daniels, Cargill, and a few others that dominate, like there’s various sectors. 

Eve: [00:14:14] But if you were to go to a particular region or a city and say, we want to try this in your city, could those monopolies stop you? 

Sam: [00:14:28] If, because it’s long-term contracts. So, when it comes to the waste collection, they have a long-term contract. 

Eve: [00:14:36] I know, I fought with them about that. That’s actually why I fired them because I refused to sign long term contracts. Interesting. 

Sam: [00:14:44] There are places where the cities, because it’s regional, you don’t need something that needs to be done fully. Vermont, New Hampshire. California has put in requirements. So, EU does a lot of innovative work because regions make a requirement saying you cannot throw to a landfill, or the amount of money we give you is not going to be as much. Like if you pay less, it will actually will lead to more innovation. Because if they pay them enough, they can just throw it in there and they don’t have to worry about monetizing it in order to be competitive. In Ethiopia, we have to come up with all these monetization schemes because we are not making that much money. Like they would make about $100 per ton of waste, on average, it really does vary in different places. So, they don’t have to worry about it, but we do because we make less than $2 per ton of waste. So, we have to come up with as many ways as possible to generate revenue from the waste, and that is recycling it, that is putting it through a circular system. 

Eve: [00:15:44] That’s innovation, right? You get complacent when you make too much money. 

Sam: [00:15:49] Necessity is the mother of innovation. 

Eve: [00:15:51] Yes, I know. That’s exactly right. The city that, what city is this first plant in? 

Sam: [00:16:00] The one that we’ve done is in Addis Ababa, Ethiopia. Okay. 

Eve: [00:16:03] So what do the people who live there think? 

Sam: [00:16:07] That’s a good question. So, as the main facility, we do have great support because one of the things, Eve, is building the very first facility of its kind in Africa. I have as much challenges, I don’t think we have enough time on the podcast of the challenges that we have faced as implementing projects. 

Eve: [00:16:26] I’d love to hear about them. 

Sam: [00:16:28] But a lot of it is artificial challenges, as bureaucracies and when governments change, you know, they make it very, very, very tough. But what it has done is it has been able to remove garbage from just piling up in landfills. Landfills take a large amount of land, usually for a city of this size, it would be around 200 hectares every 20 years, every 25 years that you have to dedicate for that. And it needs to be within close proximity of the city or it’s going to cost you quite a lot to transport that garbage. So, with the city, we have gotten incredible support, but when bureaucratic changes happen, we have to continuously provide support and program for the community. So, those are some of the challenges that we’ve faced, is bureaucracy and government changing rules on you. But right now, it is going in the right direction. We’ve gotten a whole lot of support because at the end of the day it is providing much needed electricity, significant amount of job creation, but also turning something that was, you know, a problem into a significant amount of a solution and a treasure. 

Eve: [00:17:47] How many jobs have you created? 

Sam: [00:17:50] So when it comes to waste collection, in a distributed way, it’s 11,000 jobs have been created in Addis Ababa. 11,000. And then with the waste disposal system and the ancillary works, it’s about 850 jobs. 

Eve: [00:18:05] That’s quite a lot. So how quickly do you think, you know, the others that are in planning will emerge? 

Sam: [00:18:13] We do see half of those facilities up and running. 

Eve: [00:18:17] Okay. This is amazing. I’m sort of stumped for asking questions. So, what were some of the most unusual challenges that you’ve had? So, we all know about bureaucracy and you know that rules changing. 

Sam: [00:18:31] Let me give you a couple. One was initially. So, when we started operating the facility, a lot of the waste collection that was done, we implemented a per kilogram. That’s the international standard for waste collectors. And what we realized was as soon as we implemented that system, initially it was used to be just a monthly fee. A lot of the waste collectors would fill up the weight, so the weight all of a sudden increased. Oh, and it was a bit suspicious. And within a week we had to shut down the facility because half of the waste that we’re collecting was rock and dirt that have been dug up on the ground. 

Eve: [00:19:11] So those are all the entrepreneurs out there being entrepreneurial. 

Sam: [00:19:15] You do the incentive this way. So, we had to bring them back in and create a different set of incentives that really aligned with all of us and that had a trust-based system and a support system. So that was one of them that happened with waste collection. And another one that you face is there’s a lot of misconception around waste to energy. So, the typical incinerator of the past is not good for the environment at all because anybody could start a fire. Burning waste by itself is the worst thing you could do to the waste. But a modern flue gas treatment, the flue gas treatment alone costs us about $40 million of capex. And you see them all over Europe. There are over 400 of these facilities in Europe. In Denmark, over 95% of all the waste is processed through these facilities. But what they do with the flue gas treatment is a modern facility that is able to capture what would have been emitted and convert it. And so, educating that part was quite important. But the more work that we continue to do, we even found more innovative solutions that were way more superior, both financially and environmentally, to even the combustion process that even Europe uses right now. Which is being able to separate the waste as much as possible, using enzymes to break down those wastes to their individual values, to include projects like insect farming. That allowed us to really maximize the value of every single bit of that waste. And so those were some of the innovative projects that came out from the challenge of this legacy brand that incineration had addressing that, but also really growing away from it because of a lot of the innovations that are out there. 

Eve: [00:21:18] So when you separate out the trash, how do you do that? And I’m asking because I interviewed someone in Norway who had created these robot waste pickers that were just fascinating for large objects and small ones. 

Sam: [00:21:35] So, we use humans and kind of separation systems because we need to employ. You could use robots, we have systems, we can employ robots as well. But in Africa we need as much of the jobs as we could get. We provide safe environments and usually we do it three ways. One is to separate them at source as much as possible. Two, once they have arrived on site conveyor belts and to be able to separate them. The first facility that we did is bulk, so we didn’t need to do the separation and the separation is done using super magnets or other parts at the end, but earlier is using as much of human power as possible. But when it comes to, for example, metal, we use super magnets. For non-ferrous metals we use eddy current technologies. With plastic, once we have plastic waste, we actually have, you’ll like this. So global plastic recycling in the world is abysmal. It’s 8/10% maximum. A lot of the waste makes it to landfills and waste disposal sites. The reason that Europe and US have a higher calorific value, meaning its ability to generate energy is higher, is mainly because of the amount of plastic and paper that makes it to those waste to energy facilities as well as disposal facilities. A huge number. Because it doesn’t get recycled and it’s a shame that it doesn’t get recycled. It makes it to waterways as well. It’s a detriment for different things. So, what we have done is we take out plastic waste separately together and then all of the plastic, we don’t separate the plastics. We introduce an enzyme. This is a technology that was developed in University of Texas Austin and a team out of University of Nottingham. And this enzyme that they have breaks down the plastics to its individual components and then we’re able to use a specialized membranes that allow us to filter the different chemical compounds of the plastic individually, separately. And you can maximize the recycling process to up to 80/85%.  

Eve: [00:23:49] Wow.That’s a big difference. 

Sam: [00:23:51] And something, once it’s scaled, could be a game-changer. 

Eve: [00:23:54] Yes. So you must have a lot of scientists and software engineers and other people involved in this project. 

Sam: [00:24:03] We do. We work with scientists both as subject matter experts that advise us, but also in our team. We’ve also been early adopters for a lot of scientists that are working in the waste sector, because one of the advantages of emerging markets compared to Europe or US, usually is, when you want something to be adopted in the US, you go head-on into legacy companies that are usually well capitalized and very powerful. So very hard to change it. Or as a legacy infrastructure that is already a sunken cost that somebody will lose money to adopt a new technology. So there quite a lot of hesitation. But for us in an emerging market, that infrastructure hasn’t been built yet. So, when somebody comes up and say, I have the solution, it’s new. It’s like, we raise our hands quickly and say we will adopt. Can we work? So, we have been early adopters to a lot of this technologies that allows us to start working with them to even invest in them. So, when they come back into Europe, US, we’ve had an opportunity to really have a seat and be a player in a lot of these emerging technologies. 

Eve: [00:25:17] It’s really fascinating. It makes me want to go to Africa. 

Sam: [00:25:21] You’re welcome. We would love to host you. 

Eve: [00:25:25] So, yeah, it’s very difficult when you’re up against a system, right? And you’ve probably seen that in your other work as a VC because, you know, I’m the 1.9% that you would invest in, a female, right? And then if I were black, I’d be the 1%, right? And that’s just, you know, that’s a system that’s very difficult to break through to. There’s so many of them. 

Sam: [00:25:52] Oh, absolutely. Yeah. 

Eve: [00:25:54] And zoning, like in my world, in real estate, you know, zoning has really shaped the physical landscape in the US and not always, sometimes in a good way, sometimes in a very bad way. Right now, it’s a detriment to really building new affordable housing quickly. But breaking through it, there’s so many layers, there’s so much to go up against so I totally get it. But you’ve also been, you’re also part of something called the Power Africa Initiative, which was set forth by the Obama administration to work on large-scale wind farms in Africa. Can you tell us about that? 

Sam: [00:26:30] Yeah, so the Power Africa Initiative was something, as you said, that the Obama administration spearheaded, and it’s to support and assist renewable energy adoption throughout the continent of Africa. So, our collaboration with them is in the support of wind farms in a place called Aysha, and different parts of Ethiopia. But we’ve also worked with them in putting up wind mass to select and identify the best wind locations. So wind is one of those renewable energy technologies where location matters, just like real estate, location, location, location. And if you have the right type of location, the investment return on it, as well as its impact, its ability to generate electricity, you can go to a site where it’s generating maybe 15% of the time effectively, or you could have some of the sites that we’ve worked with in Aysha and another site called Lake Turkana in Kenya, on the border of Kenya and Ethiopia, they have plant factors as much as 65 to 70%. 

Eve: [00:27:38] Interesting. 

Sam: [00:27:38] That means for the same one wind farm that you have in there, it is operating and generating electricity at full capacity for 65% of the time. 

Eve: [00:27:48] That’s amazing.  

Sam: [00:27:50] That’s a significant amount of return. So, it’s identifying those sites where what we’ve worked on and what we have realized is, you know, especially with climate change and climate adaption, it has to be incorporated with where humans are located. Where are the load zones, how can we get them, how can we help them with energy transition? How can we use waste problem as a means of addressing the environment problem? Because one of the things is, you know, the same way you could emit a significant amount of carbon dioxide through gas fired power plants or, you know, diesel fired power plants, you also generate a significant amount of greenhouse gases in a landfill. Landfills around the world are responsible for that. So, the way we looked at it was energy transition, circular economy, they’re all very similar in addressing climate change. And if you are to do it where the development is happening, so that when energy, when new housing is built, you plug in. Hey, it needs to have a waste solution. If you have a good waste solution, if you have a reliable energy source, then the quality of living in those new housing projects becomes very attractive. So, we work with developers very closely to make sure that we are their partners, both for recycling and circular economy waste management as well as renewable energy supply. 

Eve: [00:29:17] I was going to ask you how could your model be improved? But it sounds to me like you’re thinking about that every moment. 

Sam: [00:29:24] No, because you can always improve. You know, Eve, the one thing that just heartens me right now, given all of the challenges that are out there, is advances in science and technology. Everybody’s talking about AI, ChatGPT, but what AI has done to plastic recycling, to the way we’ve been able to create a lot of these enzymes is because of AI. The ability to simulate the right type of wind locations, steady multiple sites at the same time. So, a lot of technological advances have made it very, very attractive to start addressing things. So, what we do is, we always have our ears, so as you alluded, my day job now, I’m still on the board and a majority owner of Cambridge, is in a new VC fund called C1 Ventures. Our work is, how do you continuously find, identify and collaborate with entrepreneurs and scientists that come from different environments? Because a lot of solutions, as you said, women get less than 2% of the global VC funding, minorities because… But at the end of the day, female entrepreneurs have performed better than any other entrepreneur out there. But if we want to find a solution, so how do we use the technologies? How do we bring individuals from different fields and put them in the right location, connect them with implementation projects, connect them with the right services? And if you could do that, innovative solutions are going to come up. Some of them, they use technology, some of them they’re going to innovate socially, business model innovation. But you need the diversity of thoughts. You need the diversity of experience. 

Eve: [00:31:14] Yeah, I agree. So, tell me what’s going on with real estate in Africa? 

Sam: [00:31:20] I am glad you asked that. Let me give you two stats to just show how real estate is extremely important in Africa and very dynamic. One is, for the next 15 years, the top ten fastest growing cities in the world are all in Africa. 

Eve: [00:31:37] Oh, interesting.

Sam: [00:31:39] We have…  

Eve: [00:31:40] Except for Melbourne, Australia. 

Sam: [00:31:43] Well, no, as a city it doesn’t even come close. 

Eve: [00:31:46] Oh, I think it ranks, it’s really. No, I read somewhere it was the second fastest growing city in the world, so I’m not sure… 

Sam: [00:31:52] For the next 15 years – I’ll share with you the UN study. 

Eve: [00:31:55] Okay. 

Sam: [00:31:56] Exactly. And I want everybody to take a look at that. But it is, it’s incredible. 

Eve: [00:32:02] It’s exploding. 

Sam: [00:32:04] It’s a young population, but a lot of the cities have the infrastructure and the housing. So, for example, take Addis Ababa. It is, it has the infrastructure and the housing made for 500,000 people. But it’s a city of 5 million. It is growing at a much faster pace than the city was ever designed for because we’re talking about Ethiopia as a country in 1990 had a population of 42 million. Right now, we’re a population of 120 million. 

Eve: [00:32:33] Wow. 

Sam: [00:32:34] So, a much, much faster growth where infrastructure hasn’t kept up. So, there’s a huge demand for housing. And the more housing you just patch in, that is a strain on the infrastructure because the infrastructure needs to also be designed for that. So, you have an opportunity to build smart cities, to build self-sufficient communities. You’re starting to see innovative solutions that are trying to adapt local building materials instead of importing building materials or using traditionally Western building materials and steel or cement. There are modern mud houses that are incredibly beautiful and well designed for insulation, in country. You will see adoption for modular construction. You’re starting to see, and we have supported and funded a project, for example, in Nigeria, a project called Butterfly Island. 

Eve: [00:33:33] I’ve talked to him, yeah. 

Sam: [00:33:35] Yeah, a small city where they’re building really exciting communities of, a community of 100,000, a community of 50,000. But anybody that is working on modern building technologies, brand new way of building, building materials, they need to go to Africa. We have more cement factories, more building material factories being built every day. You have companies like, Brimstone Energy that have reinvented the way we make cement. So, Brimstone is, has designed, and this is a couple of scientists from Caltech, that have taken instead of having limestone, because when you want to make Portland cement, limestone is your raw material. Limestone, you heat it up, it automatically generates calcium oxide, which is what you need for, Portland cement, but also carbon dioxide. But they replaced it with calcium silicate, which is black rocks. And they’re are 200 times more abundant than limestone. But when you process calcium silicate, you’re able to produce Portland cement and silica, but in a carbon negative process. 

Eve: [00:34:46] Interesting. 

Sam: [00:34:46] We’re starting to see more of those type of cement facilities that are entirely reimagining, again, the same identical Portland cement, but reimagining the way it’s made. They will get adoption in Africa. The housing demand in Africa is high. Every government, every government that is going through an election, the one thing that they’re asked, the one thing that they keep on promising, is affordable housing, affordable housing, affordable housing. Jobs and affordable housing are the bottlenecks but they could also be an innovative linchpin for some of the most exciting business models, some of the most exciting building materials companies to come up and build housing the right way. 

Eve: [00:35:29] So, for a real estate entrepreneur like myself, I love seeing new things. I’ve never been to Africa. I’ve traveled all over the world, but not Africa. What would be the first place you’d suggest I go? I love cities. 

Sam: [00:35:41] I’m biased, of course I’d like you to go to Ethiopia first. Ethiopia, Addis Ababa and explore what Addis Ababa has done. I mean, this is an open invitation. We would love for you to also go to Kigali. They’ve done a really good job of being a welcoming environment, specifically for housing entrepreneurs. You get tax benefit, tax holidays like ten, 15 years, tax holidays. Gabon is another really exciting place, Senegal. And we could share information around, kind of, the governments that are being quite open to attract investment, to attract entrepreneurs to come and build their creative solutions. I’ll be remiss not to mention, for example, what Habitat for Humanity is doing, Jonathan’s leadership there with innovative platforms to attract and bring in building technology innovators together and accelerate them, but also collaborate with them to build. So, it’s an incredible place. Africa is very, very beautiful and welcoming, and we would love for you to come there. 

Eve: [00:36:52] Well, it’s risen to the top of my list after this conversation. 

Sam: [00:36:56] We need, yeah, we need to get you out there quickly. 

Eve: [00:37:00] So I’m going to go back to your background. You were born in Ethiopia and you emigrated to the US. I watched the little video clip when you were accepted to, I don’t know how many universities just four years after you arrived. That was pretty amazing. So, what took you from that early beginning to where you are today and the path you’ve chosen in your life? 

Sam: [00:37:24] Oh, that’s a really good question. You know, one thing I would say is, for me personally I have been the beneficiary of the generosity of strangers. I have asked for help. It’s just all of us need luck. My story would not have been possible if I had stayed just in Ethiopia. The American opportunity was incredible. But even my opportunity in the US would not have been possible if it wasn’t for individuals that are just asked and that have transformed my life. So let me give you just a couple of examples. One was, so when we came to the US, my dad used to be minister, uh, head of transportation in Ethiopia, and he was a prisoner there as well, a political prisoner and came here and was driving a taxi in DC. 

Eve: [00:38:17] Oh. 

Sam: [00:38:18] And he was also a Parliament member. From being a Parliament member and as minister to being a taxi driver. But but one thing he wanted for us is to get a good education. He was like, I’ll do my work and my mom as well. When my mom was a teacher in Ethiopia, became a parking attendant. But when he was driving his taxis one day and this was like six months after we have arrived, this was in 2000, I was 13 turning 14 in 2000. And a passenger in his taxi, a random white guy, was having a conversation with him. And and my dad was like, I want my kids to go to the best schools. He didn’t even know which one was the best schools. And this guy said oh, that’s wonderful, like, does he like engineering? And he was like, yes, yes, yes, he does. And he was like, oh, I read in my alma mater at MIT, there’s this Ethiopian kid that did his undergrad at MIT. Now he’s about to do his PhD. His name is Solomon Assefa. You should reach out to him. And my Dad writes the name, comes home to me. He’s like, you need to call this guy. So, I went to the MIT database, found his name, send him a random email saying, oh, you don’t know me, just arrived in the US but would love to go to this place called MIT. 

Sam: [00:39:31] I wasn’t even sure. And guess what? 24 hours later I get this two-page, like detailed, what became my blueprint of like, good thing. If you’re very serious, this is what you need to do. Take the most challenging classes. These are the various things that you need to do – da, da, da, da, da. Boom, printed it, put it on my wall, and that was my blueprint. And the fast forward, four years later or three and a half years later, I was fortunate enough, and there are so many others, my teachers at my high school and others I said, I want to do this, can you help me? Boom, they were there. After school. Then, became valedictorian of my school and got accepted to all of the top schools and then I reached out to him saying, you don’t remember me, but three and a half years ago, you really changed my life. You told me it was possible and that I could do it. I followed that blueprint. It worked, and I’m about to come for an admit weekend at MIT, would love to meet you. Then the guy goes oh, my God, [inaudible] I’m so glad. So, we met and we’ve been kind of really good friends ever since. And he’s… 

Eve: [00:40:40] That’s wonderful. 

Sam: [00:40:41] Yeah. My partner in our venture fund now, again, the generosity. Going out there and asking. He had, for the projects that I did when I was at Stanford. Nobel Prize winner Dagga Shroff, who won the Nobel Prize in 1992 for Superfluidity of Helium, became my partner in a project that we did where we helped kids. In East Palo Alto, learn science and technology by transforming golf carts. 

Eve: [00:41:08] Right. 

Sam [00:41:09] And so a lot of time the key thing is going out there and asking has been has been the thing for me and giving back. 

Eve: [00:41:16] Do you think that generosity is unique to America.  

Sam: [00:41:21] From strangers? No, it’s not. But America, the opportunity merged with the generosity to help. Unlocks incredible opportunities. 

Eve: [00:41:31] But speaking to you, Samuel, I’m sure they got a lot out of it, too. It wasn’t just generosity. So, but… 

Sam: [00:41:39] But for most of them, it came out with no currying favor, or looking ahead. Yes, they really wanted to help. And yes, like, we became great friends and we’ve invested together and we’ve done stuff. And, you know, a good mentorship is rewarding for the mentor as well as the mentee, the sponsor. And we all need to do that out there. But in the US, the opportunity, taking advantage of those really generous connections and supports have been very, very helpful for me. 

Eve: [00:42:14] A couple more questions. What’s the entrepreneurial space like in Africa? 

Sam [00:42:18] Again, another really good question and want to be careful in how I answer it because everybody, like a majority of Africans, are entrepreneurs by necessity. Every subsistence farmer is an entrepreneur, that owns his own little land. You go to the city, be it the shoeshine boy or others, they’re all entrepreneurs. There’s a difference between entrepreneurial by necessity, because there are a lot of them that will tell you, I won’t trade that for a steady job and for a predictable way that could support my family. But it’s built that entrepreneurial spirit. It’s about survival. Life is challenging in many parts, but there is ingenuity.  

Sam: [00:43:02] Incredible ingenuity, sadly, is not met with resources. So they are not able to scale up what they could do. But recently you’ve also seen entrepreneurial spirits flourishing in the tech sector, in the mobile sector. Where, you know, the best mobile money project came out of Africa with M-Pesa out of Kenya. You have a lot of innovative solutions from farm tech, agritech and insurance tech that are just flourishing all over the continent. And it makes the continent have a very dynamic path, and it’s entrepreneurship that will take it to the next level. But what it lacks is the resources, funding, mentorship from other businesses. There’s angel investment and risk capital from those that have done it. It’s not there as much. It’s still family and friends, and it’s very, very challenging expecting somebody to be able to do that. 

Eve: [00:44:03] Yes, it is. 

Sam: [00:44:03] Structures need to be in place, but that, it’s there. It’s the entrepreneurial and it’s a young, young continent. More than 50% of Ethiopians are under the age of 15. 

Eve: [00:44:16] That’s really interesting because, you know, necessity is the mother of invention. I grew up in Australia when it was, I think, much more entrepreneurial, now Australia has become very wealthy. It’s an amazing place, absolutely gorgeous. But I think with wealth comes complacency and less entrepreneurship. And that’s, there’s this is wonderful sort of balance, right, you’ve got to get to to keep new things happening, I think. 

Sam: [00:44:45] No, you’re absolutely right because I mean, take the US, you have places like Silicon Valley and Austin and parts of pockets of the US that have been quite entrepreneurial in the tech sector. But we need entrepreneurship everywhere. We need, and you’re right, like, it does breed complacency and we’re starting to see climate change is really putting a bit of a fire on many people. You know, scientists that would have been comfortable working in a big company are very much demanding to go out there, and they’re quitting to start their own companies. 

Sam: [00:45:29] So I think we want innovation to happen in every sector. You know, sadly a lot of Internet based or software-based innovation limits itself in a few sectors, but we want to transform the way cement is made. We want to transform the way steel is made. Agriculture has been stuck. It’s a 10,000-year-old technology. If Jesus is to come back, we still make things exactly the same way, our protein and carbohydrates. But there are better ways and we’re starting to see them and we’re starting to see this extremely unprecedented excitement to reinvent the way we do things. 

Eve: [00:46:04] So one more question for you, and I’ll leave you alone. What keeps you enjoying it? What keeps you up at night? 

Sam: [00:46:12] So, well, the main one is am I being a good dad? So, I’ve got three kids. Dad, that has been the biggest job, the biggest project I’ve ever undertaken. 

Eve: [00:46:23] It’s A very big job, yeah. 

Sam: [00:46:24] That keeps me up at night. The other one is, you know, I kind of, I’ve been extremely fortunate in my life to have traveled a lot to really call the US and Africa and even parts of Europe, my home and at the end of the day, we are a global citizen. But at the end of the day, a lot of innovations and advances, there’s a lot of waste in certain places, but shortage in many other places and there’s this disconnect and you feel hopeless. It’s like, how do we connect it? Because it’s just even food production there’s excess here in the US and Europe and there’s shortage in many parts of the world, but there’s enough that is already being made. 

Sam: [00:47:11] How do we create that equality and equitable sharing and innovation and growing together, but connecting and shrinking our village to this global village of the human tribe. It’s something that we all, you know, aspire to see. Sometimes you get, you’re very proud that things are going in the right direction, and at times you’re really depressed because we’re really separating even further. 

Eve: [00:47:39] Yeah, it’s not really a global economy yet, is it? No. Well, this has been absolutely delightful. Thank you very much for joining me. I’ve thoroughly enjoyed myself. 

Sam: [00:47:48] Thanks for having me. 

Eve: [00:47:50] I can’t wait to hear more. 

Sam: [00:47:52] Absolutely. We’ll be looking forward. Thank you so much. 

Eve: [00:48:06] I hope you enjoyed today’s guest and our deep dive. You can find out more about this episode or others you might have missed on the show notes page at RethinkRealEstateforGood.co. There’s lots to listen to there. Please support this podcast and all the great work my guests do by sharing it with others, posting about it on social media, or leaving a rating and a review. To catch all the latest from me, you can follow me on LinkedIn. Even better, if you’re ready to dabble in some impact investing, head on over to smallchange.co where I spend most of my time. A special thanks to David Allardice for his excellent editing of this podcast and original music. And a big 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 Samuel Alemayehu

It’s all about walking.

May 3, 2023

Jeff Speck is a city planner and urban designer who advocates internationally for more walkable cities.

As Director of Design at the National Endowment for the Arts from 2003 through 2007, he presided over the Mayors’ Institute on City Design and created the Governors’ Institute on Community Design. Prior to his federal appointment, Mr. Speck spent ten years as Director of Town Planning at DPZ & Co., the principal firm behind the New Urbanism movement. Since 2007, he has led Speck & Associates, a private design consultancy serving mainly American cities.

With Andres Duany and Elizabeth Plater-Zyberk, Mr. Speck is the co-author of Suburban Nation, which the Wall Street Journal calls “the urbanist’s bible.” His 2012 book Walkable City was the best selling city-planning title of the past decade and has been translated into seven languages. He is also the writer of The Smart Growth Manual and Walkable City Rules.

Jeff Speck has been named a fellow of both the American Institute of Certified Planners and the Congress for New Urbanism. He is the 2022 recipient of the Seaside Prize, whose former awardees include Jane Jacobs and Christopher Alexander. His TED talks and YouTube videos have been viewed more than five million times.

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.

Eve: [00:00:43] Ten years ago, Jeff Speck wrote a book called Walkable City: How Downtown Can Save America One Step at a Time. Since it was published, the book has become one of the most popular titles in urban planning. His blunt assessment of the state of the planning profession, along with ten steps for improving street design, have forever influenced livability across US cities. Basically, it’s all about walking for Jeff. Listen in and learn. After all, Jeff’s TED Talks and YouTube videos have been viewed more than 5 million times.

Eve: [00:01:34] 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: [00:02:01] Welcome to the show, Jeff. I’m really honored to have you here, especially because I’m a bit of a Walkable groupie myself.

Jeff Speck: [00:02:09] Well Eve, Thank you. I didn’t know that I was getting into real estate when I was studying design, but that is kind of where I’ve ended up.

Eve: [00:02:17] Yes. Yes. So, you’ve written a very famous book called Walkable City, which is now ten years old. And in it, you tell us how downtown can save America one step at a time. Isn’t that a really radical claim?

Jeff: [00:02:34] I didn’t realize that when I wrote it. You could say it is. I’ll try to explain why it makes sense to me. First, I’ll mention that the book is ten years old, but what’s relevant to you and your listeners is that in honor of the ten year anniversary, we’ve issued a new edition that has 100 pages of new text. So actually, I spent a month or more, well, of course, gathering the information took years, but I spent some time about a year ago doing what I usually do when I write, which is saying, what’s all the stuff that I’ve heard about that I’ve witnessed that, you know, is noteworthy and that I’ve got really ardent feelings about that I need to share. And so, there’s obviously, so much has happened in the last decade. And those 100 pages that I’ve added to the book talk about such things as the promise of autonomous vehicles and Uber and Lyft, which weren’t around to comment on when I was writing the first edition. And of course, COVID and the housing crisis and so many other things. So, it’s in some ways a new book. And I’m very pleased to hear you say it’s very famous. I know it sells well. I know it pays for my breakfast, which is pretty good for a book, but it’s a book that has, I’d like to think that it’s played a role in changing the conversation around cities and focusing on walkability as a key goal, but also a measure of success and just something that if you put walkability at the top of your list and you start to reorganize your city around being more walkable, you end up making all the right choices for your city. So, getting to your question, the book begins with a large segment that’s called “Why Walkability.”

Jeff: [00:04:24] And I would say it’s expanded in the last decade, but essentially what I did or what I tried to do was to bring to everyone’s attention three different issues impacting cities and impacting America that had been brought to my attention. And it was interesting as a city planner to be arguing for better urbanism, better urban design, which we called traditional town planning for a while, and then we called it the New Urbanism, which kind of we still do, but realizing that we were getting kind of a limited response and that arguing for good city planning in the terms of city planning wasn’t really getting the audience that it needed. And that’s when I kind of discovered these three other groups, the epidemiologists, the economists and the environmentalists. All of whom were arguing for the exact same stuff that we wanted, but from their own terms and much more effectively, and really made me think that, yes, if we make our cities more walkable, they will make America a much better place.

Eve: [00:05:25] It’s really not a radical claim then. I mean, it’s radical along with everyone else who’s making the same claim, right?

Jeff: [00:05:31] Well, it’s not radical, but the prescriptions that it then leads you to are not considered exactly standard practice in many of the cities in America and in much of the world, certainly the developing world or other places that imitate America. So, in a nutshell, the Economist’s argument was pretty straightforward. And I know you’ve had Chris Leinberger on your show, but much of the economic argument I learned from him. And it was essentially how, of course, value is generated much more strongly in mixed use, walkable places, and that, in fact, there’s kind of two sides of the coin. One is that we’re bankrupting ourselves with the individual car ownership mandate and that in the US, poor people are paying more for transportation currently than they are for housing. Many of them are paying 40% of their income just to get around, and that’s a tremendous burden on society. And of course, the typical car is costing us $10,000 a year. People talk about affordable housing. They don’t really talk about affordable living. And actually, if you don’t need a car for every adult, that makes it living much more affordable.

Jeff: [00:06:34] But then on the more optimistic, ambitious side, which is what Chris Leinberger talks about, just the fact that the same number, you know, the same square footage of living space in Greenwich Village rents for three times or sells for three times what it does in Greenwich, Connecticut. And if you know Greenwich, Connecticut, it’s an extremely lovely place. But essentially that if you create walkable, dense places, your values and your investment will be so much stronger. But then also just simple discoveries about how, you know, the denser your city is, the more patents per capita you create. And just acknowledging that we come together in dense mixed-use communities because that benefits us economically in so many different ways. The book outlines the money that Portlanders save by actually commuting less, Portland, Oregon. By commuting less, spending less time in traffic because they invested in bike lanes, because they invested in density and transit and the billions of dollars that they save annually by virtue of having made those choices a couple of decades ago. There are many more economic arguments. The epidemiological argument is essentially something I learned from a book called Urban Sprawl and Public Health, and then getting to know the authors of that book, three epidemiologists who were basically saying they studied disease and they studied the health of the culture as a whole. And they said, you know, we have the first generation of Americans who are expected to live shorter lives than their parents. And the average child born after 2000, you know, half of them are expected to get diabetes. It’s just a horrible situation that they say is due to the fact that we have engineered out of our daily life the useful walk. So, you know, there’s a bunch of doctors and others who point to our unhealthy American diet and other aspects of life in America, like car crashes that shorten our life expectancy. But the biggest factor is that walking used to be just something we did every day that made us healthy that we’re not doing because we’ve designed our neighborhoods to cause us to not do it.

Jeff: [00:08:31] And of course, The fix is an urban design fix. And then I do talk a lot about car crashes and their impact. And then finally, the environmental argument is in part not entirely taken from a wonderful book by David Owen, who’s a New Yorker writer called Green Metropolis that you may have seen about 15 years ago. That was going to be called Green Manhattan when he wrote it. Acknowledging that the place in America where people have the lightest carbon footprint is New York City and then asking why? Acknowledging that New Yorkers use a quarter of the electricity to people in Houston, they use one tenth of the gasoline of people in Houston. If you really care about the planet and love nature, if you love nature, the best thing to do is to stay away from it and live in an urban place. The denser, the better. And just wonderful arguments about, in fact, how the maps that show carbon output per square mile are so incredibly misleading. They look like the night sky photographs of the US. You know, they’re hottest in the cities and cooler in the suburbs and coolest in the countryside. But if you if you look at carbon output per capita, those maps entirely flip. And it’s urban dwellers who have the lightest footprint. Now, I should say that in the update, I’ve added two other things that I neglected to focus on enough in the first edition. One, of course, is the social impacts of living in a more walkable place. And there’s been tons of great evidence.

Jeff: [00:10:02] In fact, one sociologist, you know, it was almost like she was doing it for me, did a study that demonstrated that there was no factor that had a greater impact on how sociable people are as how walkable their community is. It’s like the number one indicator of sociability and participation in community activities is living in a walkable neighborhood. Wow. Well, that’s nice to hear. And then something I’d neglected to talk about adequately at all was the equity impacts of living in walkable and unwalkable places and how the ownership of the automobile is a great divider, creating haves and have nots. But more to the point, how with the suburbanization of poverty and a lot of poor people now living in places that were designed only around driving and people who don’t have cars. We have a tremendous epidemic underway. And now, believe it or not, compared to 14 years ago, 82% more pedestrians are dying in car crashes and it’s a function of a number of factors we can discuss. But those trends skew very much towards people of color and poor people. If you’re Native American or African American, you’re twice as likely to be killed as a pedestrian than if you’re not. And then of course, transit, which we advocate for and walking, which we advocate for, and biking, which we advocate for disproportionately benefit those who have less. Particularly people look at biking, people look at biking as some sort of elite activity when in fact, fully 38% of the people who commute for work or school are from the lowest 25% of income earners.

Eve: [00:11:41] That’s really interesting. But I want to know how the walkable theme came to take such center stage in your professional life.

Jeff: [00:11:49] It’s a funny question that I’ve asked myself. I don’t remember any moment or a decision that happened around me becoming the walkability guy. As I suggested, my colleagues and I were always just looking at best practices or better practices in urban design, and we were trained as architects. My mentors, Andrés Duany and Elizabeth Plater-Zyberk, who designed the famous town of Seaside back in 1980, which kicked off the whole New Urbanist movement. And then they started the Congress for New Urbanism with some other like-minded individuals. In 1993, I was there. We talked about New Urbanism, we talked about what we call neo traditional town planning because it was a return to the traditional ways of making cities independent of architectural style, right.

Jeff: [00:12:36] We’re talking about streets and blocks and squares as opposed to the tower in the park or any of these other kind of modernist reinventions of the city, which suburban sprawl is one model of. And it’s really just best practices in urban design. But we’re like comedians who go up on stage and you try your material out, right? And you see what floats and what doesn’t float. And one way or the other, I realized, first of all, that everything that I was advocating for was making places more walkable, but perhaps more significantly, that when you framed it in terms of walkability, which is not a word I invented, but I may have helped to popularize, that people really got it. People understood it and it became a main street conversation. And I would say by making the choice, not the invention by any means, but the choice of calling what we do walkability planning or walkable centered planning, we’ve been able to popularize it much more effectively. Now it’s interesting, though, because it’s not just, you know, as someone who’s into communication, you’ll be curious to know, these things reinforce themselves.

Jeff: [00:13:41] So, it’s not just a communications tool. Because actually, when I started to use the term walkable, I began to see everything through that lens, and it actually modified my practice, and I started doing something for cities. I’ve done 15 of them, called walkability studies. So, if that’s the name of your study, what are you trying to accomplish? So, I would, you know, we’ll come to town, we’ll spend a week, we’ll have about a dozen meetings with all the different constituents in that week. And I’ll begin each meeting the same way. I’ll say my purpose of this study, what you are paying me for, is for us to figure out together in the, you know, how in the least amount of time and spending the least amount of money we can visibly witness the largest number of people, more people walking and biking in your neighborhood. And it’s almost always the downtown of a city when that’s the problem you’re trying to solve, you make a whole bunch of decisions that are a little more straightforward and clearer and more complete perhaps than you would make if you’re just trying to make a good urban plan. So, you know, my general theory of walkability, which is a fun term, talks about how, for people to make the choice to walk the walk has to be simultaneously useful, safe, comfortable and interesting. And each one of those categories then puts forward a series of changes that you can make around improving mixed use, around bringing more housing downtown, subsidizing it if necessary, to have a lot of bodies in your downtown around where we spend most of our time, which is the reconfiguration of streets. And I studied architecture for, you know, years and years and years, I have ten years post-high school of studying architecture.

Jeff: [00:15:20] Now, what I do mostly is measure and design lanes in streets, because that’s where you can have the most impact on the success of a place. Because most of our downtowns in America, the places that are useful, comfortable and interesting, still aren’t safe to walk around because of the speeds that cars are traveling because of the way that they’re designed, and we fix those in cities. So, that’s become a huge part of my practice. And then comfort and interest. Comfort implies space making, spatial definition, giving proper edges to spaces because we like to be in outdoor living rooms with our flanks covered from attack. It’s something we, you know, we’ve inherited along with all animals. The evolutionary biologists tell us all animals are seeking prospect and refuge. So, we’re seeking refuge, we want to know that our flanks are covered. That means that you want to hold the edge of the streets with buildings that are near the street, tall enough to make a space. That’s something we spend a lot of time on. And then finally, interest is a little more straightforward. You know, no one wants to walk past a surface parking lot, past a structured parking lot, past a blank wall or, and this is important, past 100 yards of the exact same thing. So, we have, for example, we introduced into cities the concept of demise lines, which I’ve done in many of my projects, where you take one big building, and you actually get three architects to do the facade and make it look like three different buildings. Then when you walk down the street, something interesting is happening.

Jeff: [00:16:45] As Jane Jacobs says, No one will walk from repetition to repetition or from sameness to sameness, even if the effort expended is minimal. We line the parking with residential. We put some other use on the ground floor, or we just keep it away from the edge of the street. Right? So, there’s all these techniques and from, you know, the biggest scale of mixed use to the smallest scale of the building edge, we don’t leave anything out. And obviously some things are achievable more quickly than others. Fixing streets is often the first thing you can do, which is why I spend so much time on it. And I do a lot of work for mayors who want results within a couple of years because they’re up for re-election. So…

Eve: [00:17:24] Of course.

Jeff: [00:17:25] City planning is notoriously a 20-year phenomenon, right? But the work that that we do for cities, they don’t want to wait that long, and we focus on streets for that reason.

Eve: [00:17:38] Well, that’s a good thing, actually. So, if ten years is enough time to see if your predictions actually came true and I want to know if there were any surprises, if there have been any bad things that have happened over the last ten years.

Jeff: [00:17:53] One kind of smart thing about the book probably is I didn’t make many predictions. I certainly made a whole bunch of recommendations and gave a whole bunch of direction. And I would say, looking back, there’s nothing in that direction. I mean, the book is literally, you know, there’s four categories of the useful, safe, comfortable and interesting walk. But then there’s the ten steps of walkability. And the big part of the book is these ten steps, which include let transit work, get the parking right, mix the uses, make friendly and unique faces, welcome bikes, um, etcetera. And so, each chapter is dedicated to one issue like trees or bikes. But the chapter that I, and I say this in the update, the only chapter I wanted to retract a little bit was pieces of the biking chapter, because first of all, biking is what is evolving the fastest in most, or micro mobility in general is what’s evolving the fastest in most American cities. We are just now catching up with Berlin in the 1990s. I mean literally I was in Berlin in the 1990s and we had the bike lane up on the curb, out of the street, on the edge of the sidewalk. And now when we do new plans in American cities, that’s what we’re doing. You know, I will no longer put a bike lane in the door zone period. Ten years ago, I would because we were lucky to get it.

Eve: [00:19:24] We’re still doing that in Pittsburgh. I just noticed new ones. It’s scary.

Jeff: [00:19:30] I’ll put a bike lane adjacent to two lanes of traffic. If there’s no parking on the other side of it. More often, I’ll pull parking into the street to protect the biking and put the biking either against the curb in an existing street that we don’t rebuild, or if we’re building a new street or rebuilding the curbs, we’ll put the bike up on the curb, separated often from the sidewalk by trees. When I wrote the book, sharrows were respected. In the intervening ten years, a couple studies were done that showed that sharrows, those share the road markings in the roadway, have no positive impact and in certain instances have made streets more dangerous than not having anything at all. So, that’s out.

Eve: [00:20:11] Interesting.

Jeff: [00:20:12] The main thing I wanted to retract was that I was kind of treating the cyclist like any other lobby, bearing in mind I’m a cyclist, I’m also a driver. You know, like most people, I do all those things. I told them, you know, we can’t put bike lanes in every street. I mean, let’s be serious here. You know, if we gave everyone in every street everything they wanted, the streets would all be the size of airport runways. And, you know, it actually isn’t the proper design of a bike network to have bike lanes everywhere. If you go to Copenhagen, you know, the major streets have bike lanes, but the minor streets, most of the streets, almost all of them, are just slow speed, comfortable streets where everyone mixes and it’s better. So, I was a little bit critical of the biking lobby just to be even handed. I’ve now thought better of it. In fact, I’m leafing through my book here and, if you don’t mind, I’ll do a tiny reading.

Eve: [00:21:09] Sure, sure.

Jeff: [00:21:10] And this has to do with my retraction, since you asked. If there’s one passage of this book that I would like to retract, it’s step six’s ‘Don’t get greedy’. Sure, bike advocates are specialists, and we need our cities to be designed by generalists. As I noted, there isn’t enough room in the streets for every specialist to get what they want. But here’s what I got wrong. I’ve yet to see a city do anything requested by a bike advocate that is not made that city better for everyone. I’ve finally been to Copenhagen and biked miles of downtown without the slightest fear for my eight- and ten-year-old boys in front of me. If you haven’t had that life changing experience, don’t begin to think you know what you are doing when you deny a cyclist anything. The cycling city is the city we all need. And remembering Copenhagen fills me alternately with joy and rage. Just today, Milan announced $271 million in funding for a 466-mile citywide bike network. Paris recently upped its biking investment to half $1 billion.

Eve: [00:22:10] Wow.

Jeff: [00:22:11] In order to achieve an 100% cycling city, in quotes. Meanwhile, the Boston Cyclists Union clamors enthusiastically for an increase in the city’s bike budget to $2.6 million. And Boston’s one of the good ones. Don’t get greedy, don’t settle for scraps, demand more, 100 times more, and don’t stop until the very last bike hating motorist throws up their hands and decamps permanently for the suburbs.

Eve: [00:22:37] Or gets a bike, right?

Jeff: [00:22:39] Yeah. So, that was the only real retraction. But I have to say, you know, the book was written to be somewhat timeless and there were a few things it didn’t anticipate, like COVID. It also didn’t anticipate the housing crisis properly enough and was also not fully aware. You know, and I co-wrote and was the principal author of the book Suburban Nation, which is, was with my mentors, which was the best-selling planning book of the previous decade, 2000s. And in that book as well, certainly in Walkable City, I did not pay enough attention to or share enough of the information that people need to know about how racial prejudice has shaped our cities and particularly has shaped our housing crisis and how there is still a crisis for folks of color. And a wonderful book that informed that was Richard Rothstein’s The Color of Law. I presume you’re familiar with that book.

Eve: [00:23:34] Yes. I did also interview him.

Jeff: [00:23:37] I would love to get a chance to talk to him. I haven’t yet, but I read that book with great interest, and I excerpt it within my update. I think a lot of that was eye opening to me. Probably the thing that most people don’t know that I didn’t know. I learned it before I read his book, but I didn’t know it until more recently. People always talk about redlining like it was some sort of thing that the banks did, right? Oh, those evil banks redlining, not granting loans for mortgages in mixed race or neighborhoods of color. In fact, that was the federal government. That was Fannie Mae, Freddie Mac. You know, that was that was that was our leaders who said, no, we will not guarantee a loan in any neighborhood of color and also any investment the federal government made in housing development, which was huge, particularly with affordable housing neighborhoods, was mandated to be single race. It’s absolutely incredible.

Jeff: [00:24:35] And then, of course, the strong evidence that Rothstein collects about how the single-family zoning as a concept was basically created as a way to perpetuate race based zoning when the Supreme Court ruled that that was illegal. And then finally, the understanding that the way that the typical American family has built wealth, the typical middle class American family, if it has built wealth, it has built wealth probably through the ownership of a single-family house that got that mortgage deduction.

Eve: [00:25:08] Right.

Jeff: [00:25:08] And that that wealth building opportunity was only made available to white Americans for many decades. You know, as Martin Luther King said, you can’t expect a man to lift him up by his bootstraps if he has no boots. And so, the constant deprivation of opportunity to a portion of our population, I’m getting off topic of planning, but it’s all.

Eve: [00:25:30] But it’s all part, it’s all part and parcel of it. Definitely. I want to drag you back to the suburbs because, you know, in recent years there have been talk about making suburbs pedestrian friendly. And I’ve noticed the suburbs I drive through, you know, I get a little scared when I’m in the suburbs because I don’t know where there is. Yeah, there’s no there there. But I’ve noticed that little pieces of sidewalk emerge. They don’t necessarily go anywhere. It’s amusing to watch. Have you seen any successful attempts to urbanize the suburbs? And is this the future for suburbs?

Jeff: [00:26:12] Well, I think it’s important to understand that most American suburbs, most American post, all American post-war suburbs and most American suburbs have the wrong bones, right? It’s like chipmunks versus dinosaurs or, you know, mammals versus lizards, whatever you want to say. And when you’ve got the wrong bones.

Eve: [00:26:34] You need a lot of surgery.

Jeff: [00:26:36] Well, when you got the wrong bones, you actually, it’s impossibly expensive to change your nature. So, these giant blocks, these arterial highway, arterial collector, local road networks with a major intersection every half mile that constitute probably 50% of the American landscape right now, the built environment. They can’t be changed in a way that will make them walkable. They can be changed street by street, intersection by intersection, you know, roadside by roadside into places that are safer. They can be changed into places that are more bikeable, but they will never have a condition in which walking is a favored means of getting around. Except as we’ve seen, and I’ve participated in several of these, when you get a chunk which is big enough to become a new mixed use town center. And so, you find in places like it’s called City Center in Houston, it’s nowhere near the downtown of Houston, but it’s in the geographical center. That’s a place where a developer got a big enough piece of property and said, let’s have shopping and housing and offices and hotel and cinema and everything in one place. And eventually what you get is a little bit of a town center, and it might be what you call a park once environment, right? But people end up living there. People who work there end up living there, and certain people really reduce their carbon footprint and have a much better quality of life living in those places.

Jeff: [00:28:01] And many of our cities have this. There’s one in Alpharetta, Georgia, called Avalon. You know, they’re all over the place. And they’re, some are better than others. Some are not much better than exterior malls with a main street down the middle instead of pedestrian. But once you get significant housing, hotel, office above the main street, then it’s almost nothing that distinguishes it from being a real town center.

Eve: [00:28:28] Interesting.

Jeff: [00:28:29] The other hope for suburbs is the pre-war suburbs. I was in Tigard, Oregon, which is a suburb of Portland, and they want to be more walkable. And they were almost entirely a driving suburb, but then I discovered, like struggling, but there this germ of a main street, like it was a pre-war main street. And many of our suburbs have these old centers that were disinvested but are still there, are still zoned for mixed use. And if you can get more people living there or allow more people. Change the rules, often to allow more people to live around that old main street, then you get that little walkable downtown core that becomes the heart of the community. And still, most people are driving to it, but not everyone is. And those who do drive to it have that lovely experience when they get out of their car of walking around.

Jeff: [00:29:11] Now, I want to mention I have something to say about this, too. I have a book I’m showing you called Walkable City Rules. That is a book that I recommend mostly to professionals. So, your audience, the realtors, the real estate developers or others in your audience. Walkable City is the book that people read for entertainment. They read it to get convinced. Mostly they distribute it to get to convince other people. And I’ve worked in a lot of cities where they’ve given it out by the box to the city councilors, to others. It’s a great tool for winning converts, but if you’re already doing the work and you just want all the information, you know, all the stuff you need to know, including such little tidbits as when you remove the center line from a local street, people drive seven miles an hour slower. Like that’s good to know. That’s get rid of some center lines. Or when you replace a signal with an all way stop sign, severe pedestrian injury crashes dropped by 68%. Well, that’s a nice thing to do. So, that’s all in there. But there’s one. So, it’s 101 steps to making better places, Walkable city Rules.

Eve: [00:30:16] I’m going to buy that book.

Jeff: [00:30:18] Each rule is two pages. It has a headline, it has a rule at the end, it has a photograph or a chart. Step 100 is Don’t give up on sprawl, it’s where most Americans live. It talks about these two conditions. The opportunity to create a mixed use town center if the economics are there to support it and you have a chunk of land or to find the, you know, the moribund main street that was once there and the rule 100 at the end of the page says, in sprawl, invest in old Main Streets where they exist and otherwise focus on safety for all road users because that’s the main thing that you can accomplish. And I’ll do a tiny reading from this book, which is the sad conclusion. But then there are the newer places like Chandler, Arizona, 250,000 humans doomed to scuttle around perhaps the most utterly placeless landscape in America, 65mi² of entirely car dependent nowhere.

Jeff: [00:31:14] Without the full-scale insertion of a large new town centre, what can be done to make the denizens of the purest sprawl less isolated? While true walkability is out of the question, the most essential improvements would seem to surround safety for pedestrians, cyclists and drivers too. People are dying in these landscapes at an alarming rate, thanks to high-speed road geometrics, inadequate crossings and rare and dangerous bike lanes. Such places can’t really be fixed, but they can and should be made safer using many of the techniques contained in this volume. So, that’s my conclusion for the sprawl.

Eve: [00:31:48] I’m going to I’m going to order that right after this because I want to see those rules. That’s interesting. So, let me ask you, what’s one of your favorite places or cities in the US or elsewhere where you feel really happy walking and why do you love it?

Jeff: [00:32:06] I think the best answer to your question is that any, almost any pre-war city in the US has kernels, pieces that are that are fantastic and a majority that’s probably pretty bad, and that the distinction is not so much among cities as it is among pieces of cities. I would also argue, I think this is important for your audience, that the decision, the contrast also in our work, particularly in Suburban Nation that we wrote about, isn’t about town versus city or town versus village or even suburb versus city, but it’s around walkable versus unwalkable organizational patterns and how there are cities that are unwalkable, there are towns that are unwalkable, there are villages that are unwalkable and the opposite.

Jeff: [00:32:57] You know, I grew up in a suburb. I think many Americans my age did. I’m almost 60. Where I mean, it was a pure suburb. It was Belmont, Massachusetts, next to Cambridge outside of Boston. It was completely walkable. My dad walked to work every day. I walked to the bus that took me into Harvard Square. I walked to school. It’s possible to create cities, towns, villages and suburbs that are fully walkable beyond a certain point, it’s not a question of density. And what’s more important is neighborhood structure. Neighborhood structure means small blocks, small streets, frequent intersections, civic spaces, a sense of center and a sense of edge. You know, the neighborhood and planning terminology is very well defined as being compact, mixed use and walkable.

Jeff: [00:33:43] And so, that’s what really matters. Now, to answer your question and enjoy in my memory some of the wonderful places I love to go, you know, most of those are the places that were not run through with highways that maintain their existing pre-war character. You know, I love to visit the great cities of the South, Charleston, Savannah, New Orleans. Alexandria, if it weren’t part of DC would be another city like Charleston that people would go to just to walk around Alexandria, Virginia. You know, and then there are amazing Western examples, Albuquerque and you know, Carmel by the sea. Carmel by the sea. Excuse me. I’m working in Carmel, Indiana, which is not pronounced the same as Carmel by the sea. But, you know, for big cities, you know, despite the problems with homelessness and other issues, I still think San Francisco is one of the best places in the world to walk around.

Eve: [00:34:40] Yeah.

Jeff: [00:34:41] And in a global perspective, off-season, because the tourists make it hell. But off season would have to say my favorite city is Venice because it has so many wonderful qualities, most of which derive from, independent of its historic character, most of its wonderful qualities derive from the fact there are no cars in it.

Eve: [00:35:00] Yes,

Jeff: [00:35:01] This makes it so amazing.

Eve: [00:35:02] Yeah, but the tourism just almost unpalatable.

Jeff: [00:35:06] But you can truly enjoy it off season and you can live there off season.

Eve: [00:35:10] I’ll have to try that. So, I’m going to put a plug in for Australia because you know, that’s where I grew up and those cities really sprawl. I mean, Sydney has a huge sprawl, a lot of land area compared to a city like New York. But I, when I was a kid, I could walk everywhere. I could catch a bus. I lived in what you would consider a suburb. There was sidewalks on always on one side of the street, if not both. Every neighborhood had, and has to this day, a main street. And those main streets have survived.

Jeff: [00:35:43] I spent some time in Sydney, in Melbourne, in Adelaide, lovely town, in Perth. I have to say clearly Sydney is the most spectacular and most exciting to visit. I found Melbourne to be the place where I wanted to live.

Eve: [00:35:57] Oh, Melbourne’s fabulous.

Jeff: [00:35:59] So much character. But here’s what I observed about Melbourne. Street after or I should say neighborhood after neighborhood of almost endless main streets with no chain restaurants or chain stores on. Mile long. And I think what does, that is the trams. So, you’ve got streetcars in the middle of your main streets throughout, I mean the parts of Melbourne that I enjoy, and that combination of, you know, moderate density. But the streetcar corridor is what allows for all these neighborhoods in Melbourne to not only have Main Streets that are successful and continuous, but have character and unique establishments of, you know, avoiding the chain stores which aren’t a blight, but they sure make places boring. It’s really remarkable.

Eve: [00:36:53] It is remarkable. You know, Australia was a coffee culture well before Starbucks happened and somehow Starbucks could never get a foothold there because you have flat white. And so, yeah, but I think it’s a very, very different expectation about how you’re going to live your life. Not that people don’t have cars and drive a lot, but I think what you said before that I wanted to hang on to is the fact that you’ll walk if there’s something interesting along the way and interest can come in all sorts of shapes and forms, or if you have a destination to go to, you won’t walk if there’s nowhere to go. And so, is that what you think about when you’re designing a place? It’s like a it’s like an anchor on a mall, right? There’s an anchor at each end.

Jeff: [00:37:36] Well, you need to do everything you can to change the zoning and to direct the city investment through tax increment financing or any other tool at their disposal to impact what real estate developers are building. So, If a place needs more housing, then you find a way, which most places do, most urban places do need more housing in the US to be successful or more successful, You reorient the zoning and the investment around that. But that does that takes time. So, you know, the useful, comfortable and interesting walk are all a function of almost entirely the private market which the government can influence. But the safe walk is what the government can typically control immediately and invest in immediately. And so, that is where we short circuit the investment as fast as we can to make it happen. I think it is interesting also to compare Australia to the US or Canada to the US, to the degree our cities were undermined by both being reamed out by highways, but also each individual street being reamed out.

Jeff: [00:38:43] If you look at Manhattan, you know, Park Avenue used to have a park in the middle. Now it has a little median that no one would sit in because it’s just a break in 6 or 8 lanes of traffic. It used to be two lanes of traffic on each side and a big park in the middle. And so many American streets have had the trees removed, the parking removed other things to just carry more cars. In terms of highways, you know, you look at the US cities versus Canada cities and Canadian cities have done so much better in their downtowns. Well, in the US, the federal government invested $0.90 on the dollar. If you wanted to put a highway through your city centre in Canada, it was $0.10 on the dollar. So, you know, there’s choices like that that clearly. People say Americans love suburbs. We voted with our feet, but that’s completely false. I mean, there were incredible subsidies between highway building and home loan, insuring that led to the outcomes we now see.

Eve: [00:39:37] So, I have just a couple more questions. And one is, do you still get pushback? Who gives you pushback?

Jeff: [00:39:45] So, there’s this. Inchoate mass called the automotive hordes, that in certain places and certain circumstances will you know, is the specter that’s looming when you’re trying to make changes in a community. I’ve found that to some degree they’re mythological. Like everyone’s worried about what the motorists are going to think. But most places I work, and I’ve got to tell you, in most places I work, I’m not trying to make driving harder. I’m just trying to make walking and biking easier. And there are ways to do that that don’t make driving harder. Like every city, however congested it is, has certain streets that aren’t congested, or you’ve got a main street. This is, here’s a perfect example. You’ve got a main street that’s in a network, and that Main Street is handling 18,000 cars per day. And like in Lancaster, California, it is dismal. It’s five lanes. It’s a highway, 18,000 cars a day, but it’s in a network. They made a decision in Lancaster to make it only two lanes. They put a parking plaza in the middle. So, they use it for farmers markets and stuff. And when there’s no farmers market, people just angle park in the middle of the street, and it’s become a linear plaza.

Jeff: [00:41:04] This like ten block Main Street. It now only handles 12,000 cars a day. But guess what? The cars are moving on the parallel streets, which is fine. The parallel streets aren’t contributing to the social heart of the city. And in fact, most cities, most small cities and towns, they have only one chance to have a great main street. There’s no reason why that Main Street’s design should be dictated by maintaining the existing throughput. That’s the term, like maintaining throughput network wide. Sure. You know, most communities will fight any decision that limits network wide auto mobility. but you can easily make an argument that you’re going to shift traffic over a street or simply take some lanes away from a street which isn’t congested. And that’s how I work. Understanding, in fact, that behavior adjusts that when you reduce capacity, more people walk and bike and that actually the carmageddon that’s predicted by reductions in capacity never comes when you remove a highway or narrow lanes.

Eve: [00:42:10] That’s a much more sophisticated conversation that I’d love to have and that almost never wins, which is that in fact driver demand is not static, it’s not fixed, it’s dynamic, it responds to the environment. And whenever a highway has been closed or a lane has been removed, we’ve never witnessed the gridlock that people predict because people adjust their behavior and they’re often happier for it. But that’s an argument I try not to make in communities because it’s counterintuitive. Mostly I say we’re going to find ways, and I demonstrate that we can find ways to improve walking and improve biking without in any way hampering the motion of automobiles except to get drivers going the speed limit as opposed to 10 to 15 miles an hour over the speed limit, which is how our our streets are designed.

Jeff: [00:42:57] And, you know, I love to rant and I had a recent editorial in the Hill that your listeners can look up under my name, Speck and The Hill talking about how actually in the US engineers as a matter of practice design streets for ten miles an hour over the speed limit because they’ve learned safety from highways instead of learning it from reality and in reality.

Eve: [00:43:22] That’s interesting.

Jeff: [00:43:22] In urbanized areas where people walk, driver speed is not determined by the speed limit, it’s determined by the environment. And therefore, anything you do to create elbow room or forgiveness is actually causing speeding and death. So, that’s a whole nother aspect of how the traffic engineering profession does not acknowledge that environment influences behavior. They don’t understand that environment influences behavior in terms of traffic, and that traffic demand is dynamic. They don’t understand that environment influences behavior in terms of speeding, and that speeding is caused by the very forgiveness that they introduced to our town centres and it’s really angering because they figured it out in Europe. But here in the US they have not figured that out.

Eve: [00:44:04] No. So, I have one final question for you, and that is what keeps you up at night? Or maybe nothing.

Jeff: [00:44:17] I’m fairly convinced that I’m going to lose someone that I love to traffic violence.

Eve: [00:44:24] Oh.

Jeff: [00:44:25] I mean, the odds are very high.

Eve: [00:44:27] That’s a horrible thought to keep you up at night.

Jeff: [00:44:30] The odds are very high that any of us will lose someone we care about to traffic violence. There’s a 1 in 100 chance that is how you will die in America. Um, it’s more than 40,000 people a year. It’s going up every year. And if anything keeps me up at night, you know, those are the only sort of thoughts that keep me up at night. I’m a good sleeper, but, you know, it’s those near and dear. Otherwise, I would say that, you know, I don’t think we’re taking the right measures to stem climate change by any means. This idea of electrify everything is perhaps necessary, but by no means sufficient to solve the climate problem. You know, the idea that Joe Biden is driving around this 9,000 pound Hummer, not to mention that it’s an anti-pedestrian device whose battery weighs more than a Toyota Corolla. And that that’s going to save the planet is just preposterous.

Jeff: [00:45:27] You know, and between 85 and 90% of the airborne particles that come from driving are from your tires and brakes. So, what are we doing about that? You know, so I mean, there’s so many reasons why different better cars is not the answer. And the question, the question people ask in America is always, how can we make cars better? It’s the wrong question. So, of course you get the wrong answer. Yeah, I think electrification is important, but they’re looking entirely at the supply side and not the demand side for energy and pollution. And that was the mistake of, you know, the war on poverty. It was the mistake of the war on drugs. You know, supply side solutions generally don’t work. And you have to look at the demand side. And the demand side is how can we live lives wonderfully enjoyably, you know, delightfully that cause us to use less energy? And the answer is to collect into villages, towns and cities that aren’t automobile dependent.

Eve: [00:46:26] Well, I’m totally with you on that. And I thank you very, very much for joining me. And I’d love to. I’m actually going to go order your Walkable City Rules immediately, so I know what they are. It sounds like a really useful book. So, thank you, Jeff. I really appreciate you joining me.

Jeff: [00:46:42] Both Walkable City and Walkable City Rules are also on Audible. The Walkable City Rules. I do recommend you get the hard copy because there’s pictures. Walkable City, remarkably, for a planning book has no pictures, which is why it’s one reason it’s sold so well is that it’s, you know, it’s written to be entertaining.

Eve: [00:46:59] Well, thank you, Jeff. I really appreciate it.

Jeff: [00:47:02] Hey, I love the attention. I’m grateful for what you do. And I am happy that you are willing to listen to me rant for so long.

Eve: [00:47:26] I hope you enjoyed today’s guest and our deep dive together. You can find out more about this episode or others you might have missed on the show notes page at RethinkRealEstateforGood.co. There’s lots to listen to there. If you like what you heard, you can support this podcast by sharing it with others, posting about it on social media, or leaving a rating and review. To catch all the latest from me, you can follow me on LinkedIn. Even better, if you’re ready to dabble in some impact investing, head on over to smallchange.co, where I spend most of my time. A special thanks to David Allardice for his excellent editing of this podcast and original music. And a big 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 courtesyˆof Jeff Speck

Fix Development.

April 5, 2023

Juli Kaufmann believes in a quadruple bottom line return. Her company, Fix Development, applies this philosophy to each and every real estate project in their portfolio, prioritizing economic stability, environmental stewardship, social equity, and cultural continuity.

Juli founded Fix Development in 2009, and has since developed more than $25 million in real estate projects in Milwaukee. While Fix Development operates as a “for-benefit” company, Juli’s focus is on businesses that generate earned income but give top priority to social mission. The Aux Evanston, a project to be owned 100% by the community, is a great example of this.

Juli is also the managing member of Riverbee Collective, a collective of over 40 investors who all own a piece of a Milwaukee building formerly known as the Cream City Hostel. This building was redeveloped by Fix Development, and the Riverbee Collective is currently transitioning the building into a housing cooperative meant to support people dealing with losses and uncertainty such as jobs, instability and landlord challenges. She is also a founding member of Fund Milwaukee, an investment group that seeks to match unaccredited local investors with opportunities to support local entrepreneurs, all while focusing on impact. The effort has raised over $1 million in local capital to date. Juli is also a founding member of Bublr Bikes, Milwaukee’s bike sharing system. She also consults on impact-based commercial real estate development projects, providing guidance on real estate and financing development strategies.

Awards include the 2020 Milwaukee Magazine Betty Award, which honors remarkable women in the community: 2018 Woman Executive & Executive of the Year by BizTimes Milwaukee;  2017 Biggest Neighborhood Impact Award by the Milwaukee Business Journal: and a 2013 AIA Top Ten Green Projects in the Nation, for The Clock Shadow Building, in Milwaukee.

Read the podcast transcript here

Eve Picker: [00:00:19] 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. And speaking of building better, I’m very excited to share that my company, Small Change, is now raising capital through a community round that is open to the public. Small Change is a leading equity crowdfunding platform for impact investment in real estate. For as little as $250, anyone 18 and over can invest in Small Change, helping to fuel our growth as we disrupt the old boys club of capital that routinely ignores so many qualified people and projects. Please visit wefunder.com/smallchange to review the full details of our raise and to make an investment if you can. And remember, investing is risky. Don’t invest more than you can afford to lose.

Eve: [00:01:59] People, planet, profit and place. This is the return that Julie Kaufmann believes all real estate should achieve. Less than that is simply not good enough. Julie founded her company, Fix Development, with this explicit goal. She applies the philosophy to each and every project in her portfolio, prioritizing economic stability, environmental stewardship, social equity and cultural continuity. One recent example is The Aux in Evanston, Illinois, a vacant warehouse destined to be converted to a black owned business wellness hub. The goal is for the community to own and manage the building, with investors contributing through a crowdfunded capital raise, and Julie has orchestrated this in the background.

Eve: [00:02:58] Hi Julie, it’s really great to have you on my show.

Juli Kaufmann: [00:03:01] Hi Eve. Good to see you.

Eve: [00:03:04] So, you’ve said that the driving force behind the fixed development business model is your quadruple bottom line philosophy, and I wanted to learn about that. What is that?

Juli: [00:03:16] The quadruple bottom line is sort of a morphing of what’s more commonly referred to as a triple bottom line for people, planet and profit. I think that’s language that got some traction in recent years. I in my work really just, personally in my life really, just care you know a lot about people, a lot about planet and I understand we live in a world where profit or money drives basically everything. So, for me, it was always just more about finding pathways that had to do, had impact beyond just my pocketbook. But the fourth element really is about place or culture. So, people, planet, profit and place, recognizing that, you can’t just drop in something that’s beautiful for the environment and good for a few people. It really has to be of the fabric of place to be meaningful in a way that I think transcends time. And I try to integrate that fourth bottom line in the work I do as well.

Eve: [00:04:17] So, how did you build your development company around that idea? That’s a lot.

Juli: [00:04:24] Yeah, I mean, it’s a lot. It just I think it makes sense in hindsight when people are like, what do you do? Try and creating a framework to make sense. But what I really like to say is I built my company and I called it Fix Development because I was just an individual who was an activist and wanted to fix shit. If I can say that in your podcast.

Eve: [00:04:41] Of course you can.

Juli: [00:04:42] So, I was like, I shortened it to Fix Development to be a little more appropriate. But I think that I’ve evolved as a human, as an activist, it’s my nature. And that started back in college, you know, protesting and being activist around a number of topics, including climate change. We didn’t even call it climate change back in those days. But nonetheless, thinking about, how do I be the change I want to see in the world? And eventually I found my way to entrepreneurship only because I was living in neighborhoods all the time and concerned about what I saw in my own neighborhoods. Why were there toxic brownfields? Why was there disinvestment? Why were there lack of things that I wanted to go to like ice cream shops in my neighborhood? And what can I do as an individual to make that look differently? And so, it really is just around that activism background and a do-it-yourself mentality that the world is not going to change for us and the systems are increasingly morphing against us, if you will, us being the euphemism for the individual and our own self-determination. And so, through that lens, I started to think about what I wanted my little corner of the world to look like, and development became the vehicle I used.

Eve: [00:05:55] So, you know, then Fix Development, what needs to be fixed in development? I sprung that one on you, right?

Juli: [00:06:04] What doesn’t need to be fixed? Yeah. I mean, I think what you focus on in your podcast, are these themes are very common for us change agents in this work and it’s really the financial systems and real estate systems themselves. They’ve been, the architecture of those systems, are built around white male dominance and that’s not always bad but it’s exclusionary and we’re a diverse, multicultural world. And in my community, that’s certainly applies. And in my neighborhood that applies. And when you don’t have all those voices and perspectives and ideas at the table, it changes what the world looks like. And it’s not always for the better. And when you’re increasingly driven by solely economic profit of singular profit, financial profit as a bottom line, it’s no surprise that there’s toxic waste dumps all around us and that people are marginalized in decision making because they’re not valued. And so, I even forget the question, but I think all of that needs to be fixed.

Eve: [00:07:05] All of that needs to be fixed. Yeah, yeah, yeah. And it goes really deep, doesn’t it? Because that filters into zoning and all sorts of things that impact the physical world around us. But what led you to launch Fix Development? What were you doing before?

Juli: [00:07:21] You know, my background is, I started in corporate America. I worked for Procter and Gamble, and I sold like Downy fabric softener. You know, gross right? Sort of sucked the soul right out of me. But it’s useful, I have a business degree background and I think it’s useful as a training to understand the mindset of a lot of smart people in the world and how they apply their intellect. And I didn’t view it as meaningful. And I eventually worked my way through some nonprofits thinking mission driven work would be a solution. But you find very quickly that all sectors of the world have systems that are oppressive and dominant paradigms that are part of the problem and not the solution. And so, you know, I found my way, like many entrepreneurs, to entrepreneurship. And I think the reason real estate was my calling had more to do with just neighborhood activism. Like I could see places and wanted to see places look differently. I don’t have formal training in real estate development.

Eve: [00:08:19] Oh, who does?

Juli: [00:08:20] Yeah, right. I mean.

Eve: [00:08:21] That’s why so much of it is bad.

Juli: [00:08:24] Amen, sister. I think that partly that I recognize that, like, there were a lot of bros in my community who were like, doing some stuff. They just had access to money. And I was like, oh, what are you doing that for? You know, because they can, I guess. And so, what’s beautiful about it is, the flip of it is because, quote unquote, anyone can do it, but can do it badly. Anybody can also do it and do it well, was my belief and I did put that to the test. And so, I do use this DIY strategy in all of my work now, do it yourself. I learned it myself. And then I said, you know, I’m nothing special. Why can’t I collaborate with other neighbors in other parts of my city and teach them alongside me as I’m learning, and we learn together and do it ourselves?

Juli: [00:09:11] So, a big part of the Fix Development model is this co-development model, bringing together spheres of expertise that aren’t necessarily developers but that know communities are, you know, community leaders who are opinion leaders, who can rally neighbors around an idea, bringing together folks who just have lived there forever, who know the real estate and are like, oh, that building is such an important asset in our community. Here’s why. Those kinds of values are critical to successful development. And so, it’s been a mechanism I continue to use now, is just working with quote unquote average neighbors to raise up real estate.

Eve: [00:09:49] Interesting. So, it must be really difficult to balance each project’s financial return on investment to reach that quadruple bottom line goal. What does that look like for you?

Juli: [00:10:03] Every project is different because every project is such, you know, that cultural resonance that being embedded in of the community is so critical that each community defines the project for us and therefore they’re never the same. So, I have projects where, you know, Black leadership, Black equity, Black ownership is a critical social impact of the project, and other projects I have a real driving force around climate change and minimizing environmental impact and celebrating resilience. And those aren’t mutually exclusive. But, you know, in each project, a different set of values emerges as kind of the leading set. And that’s fun. It keeps it interesting. And, you know, in an ideal world, all of the bottom lines are represented, and they are to some degree, just some have different priorities, I guess I would say.

Juli: [00:10:52] And it’s just being true to that and bringing that as a through line, through everything, weaving together those priorities in each decision. So, for example, a project I have in Illinois right now, African American equity is the critical driving factor. And so, they are making decisions at every step. And for example, we’re hiring a Black architect, we’re hiring a Black general contractor, we’re hiring a Black graphic designer. So, it’s not just, you know, who the tenants are, who the leaders are, what the project looks like, who owns it at the end. It’s every step in between where that priority is paramount. But at the end of the day, we’re making strong environmental decisions. It’s going to be a cultural icon and there will be a positive bottom line financially. So, each project is a different tapestry. And so, therefore they’re all extremely hard and take a lot of work. And it’s not easy to cookie cutter these.

Eve: [00:11:41] Well, I’m going to dig into one aspect of it. You mentioned this project that is really all about building an asset for Black people, for African Americans. So, you know, you seen the statistics on investments in Blacks and in women, and they’re like shockingly low. 1% of all venture capital invested goes to Black-owned companies. So, in real estate, that must be really hard. If you’re putting together a project where Blacks have ownership and are the driving force, what does that look like when you go to a financial institution or try to raise money for that project?

Juli: [00:12:17] Yeah, you don’t go to financial institutions because you get what, you know you get, which is no. Or patronizing maybe that’s eventually a no. Or you’re doing it wrong, here’s the way to do it. And I think that for me, in my work, I’m white, but I’m a woman. And when I started, I happened to be a bit younger, too. So, those were a couple strikes against me anyways. You know, people just pat you on the head and say, oh, isn’t that cute? It’ll never work. And I think now I’ve done my work for over ten years, you know, I still get no, but I’m less patronized because I have examples I can show. And in this case, we don’t bother to just waste time on it anymore. We go to a contingency of the willing. And increasingly there are more of us. There are platforms like Small Change that you’ve helped lead that bring together like-minded compatriots. I’m often asked the question, who else out there is doing the work you do? And for the longest time I said, I have no idea. I’m sure there are brilliant people.

Eve: [00:13:13] Yeah.

Juli: [00:13:14] I’m no different in some ways, and there are probably people just like me so frustrated everywhere in this country and beyond. But I’m too busy trying to get this job done to know. But I knew of you a little bit. So, now I think there are mechanisms through the World Wide Web where we’re finding each other, and that means investors too. So, I don’t generally use banks. I can’t. They don’t want to party with me, so I don’t party with them. But we have to find more angels. It’s still the case that a lot of projects that I work on and folks like me and entrepreneurs like me, we’re not just trying to build in suburbs, in affluent neighborhoods and then layer on it something we’re trying to solve way more than that. And we recognize, we want to be in the urban community because density is important to climate change. We want to be in the urban community because equity is important to human existence and there are lack of projects in certain communities. So, we’re already layering on to our developments, so many barriers that most of our traditional colleagues don’t have. So, we still need subsidy if you will. We need angels and impact investors.

Eve: [00:14:14] You know, you need subsidy basically, because the world thinks that Blacks and women are not investment worthy.

Juli: [00:14:21] Right. And that has built up a system of, that the real estate won’t get appraised, even if I can show you that I have a business model that will work, you’re not going to value my piece of real estate in a certain neighborhood because of all the other systemic racism and oppression and all those things. I mean, of course, all real estate development projects have subsidy. They just call them different. They call them tax incremental financing, or they call them, you know, the government will give $1 million handout to our very successful corporation in our town because they asked for it. When we ask for it, we have to do a song and dance all day to the end of the moon. But I think it’s worth it when you see the impact of these projects once they’re built. They are transformative in people’s lives, truly. And now we have ten years of experience in my company where you see the impact of the jobs that have been created, the companies that have been formed, the commercial corridors that have been catalyzed to greater impact, neighborhoods that have become more stable. I mean, it’s very real and very tangible.

Eve: [00:15:19] Can you tell me about 1 or 2 of your very favorites?

Juli: [00:15:23] They’re all my Children and none are my favorites, Eve.

Eve: [00:15:25] Okay, well, 1 or 2 of your children then. You know, I suppose a couple of projects that best exemplify this quadruple bottom line and what you can get out of it.

Juli: [00:15:38] Yes. I have a wonderful project in a neighborhood called Walker’s Point. It’s a historic neighborhood in Milwaukee, one of the three founding neighborhoods of the city. And it was my first project. So, that’s probably why I love it. It’s a very hard-core example of my philosophy in action. I lived kitty corner from a toxic waste dump in my neighborhood, and that just infuriated me. And on that site, I ultimately built my first huge project. It’s an $8 million building called the Clock Shadow Building, and it has a urban creamery on its first floor, and then it has health related businesses on the top three floors. It’s a smaller set of investors. It was my first project before crowdfunding was really even going. It’s over, it’s now 12 years old this year and it had had incredible impact. And now that neighborhood is actually quite transformed. And what I’m proud of is we set the standard and I think we helped catalyze change in that neighborhood. And now it’s actually outpacing, it’s one of the few neighborhoods where change is outpacing the rest of the community.

Juli: [00:16:35] And so, we set rents back in the day that are now renewable in long term leases that are affordable. So as the tides raise all ships, our ship is staying anchored. And those tenants remain viable and have a growing base of customers because the neighborhood has grown up around it and it has won international awards for its climate impact, we use rainwater to flush the toilets, we have a farm on the rooftop. So, it’s demonstrated a lot in terms of environmental impact, it’s generated returns for its investors every year, and it has thriving nonprofit and for-profit tenants. So, I’m really proud of that project. And it’s one of my first.

Eve: [00:17:10] Let me ask you about that. You have this anti-gentrification strategy. How does that work?

Juli: [00:17:14] It’s, first of all, it’s community owned, right? So, our neighbors, our owners aren’t looking to flip and get out and make a big profit. They would like a return on their investment, but by definition, they are neighbors who own our real estate and therefore their vested interest is in their neighborhood staying great for them. And they don’t want Applebee’s, you know, they want a local coffee shop. They don’t want all these mega chains come and taking the soul out of their neighborhood. They want our local neighbor who opened a ice cream shop to continue to thrive with that ice cream shop. That’s a literal example. It’s called Purple Door Ice Cream that we got into one of our projects in this neighborhood. So, I forgot the question.

Eve: [00:17:50] No, that’s good. That’s a great answer. Because it’s community owned, it’s community controlled, and decisions are made that keep the project full of the sorts of businesses the community wants. Right?

Juli: [00:18:02] And it comes, those owners have a philosophical alignment with the quadruple bottom line. So, they’re getting a financial return. They’re not looking to increase those rents every year just because they can. They’re looking to ensure those tenants stay. They keep getting return, but they get those cultural, social and environmental impacts as part of their valued return. And if we were to forgo those returns, sure, we could recruit different tenants at this point. But that’s really critical. And I think without owners like this working in combination with tenants, you don’t have that kind of outcome.

Eve: [00:18:34] Right. So, how do you find the projects or how do they come to you?

Juli: [00:18:39] Yeah, there’s an overabundance of brilliance and opportunity and properties in all of our communities that could be developed. So, there’s sort of some special magic and sauce. I started by working my own neighborhood and picking off projects that were meaningful to me. As the model grew and more neighborhoods were attracted to it working in their neighborhoods, I’ve partnered with Co-developers. And so, I usually look to find somebody who’s extremely motivated, who has time and capacity to give to the project that is a recognized leader, and they may not have the business model fleshed out, but they know a lot and they will come as a co-equal to the table minimally. And then we build the project together. And at this point, I’m not taking on any more because I have way too much on my plate.

Juli: [00:19:25] But most of my projects have been in different neighborhoods throughout the greater Milwaukee area, and I now have a, I was recruited to a project in Illinois which I resisted for quite some time because, I mean, it’s so hyperlocal, the work we do. You know, it’s knowing your community that really matters. But in that particular case, there are five other co-developers. So, it’s a really strong local team and I’m able to just bring the real estate experience that that team did not have and add it to their expertise. So, the common threads are that there’s passionate co-developers, that there’s a really cogent idea. In the case of the Illinois project, it’s a coalition of tenants focused around wellness and racial equity. So, they have a common theme they want to get after and that’s it. Then we just build it from the ground up. We do it ourselves. Each one’s different.

Eve: [00:20:10] Have any disappointed you, any of these co-ownership models?

Juli: [00:20:15] Yeah, that’s a great question. I would say the one thing that’s been beautiful and not disappointing me, but it’s restored my hope is that there have been so resilient through pandemic that because of that local ownership, there is such a strong base of community support that buys into these tenants that goes and shops there even during the hardest times or where experts from the ownership community come in and help them pivot from a brick and mortar model to a virtual model so that most of our tenants not only survived but thrived during pandemic. That was an upside. A downside, a hard thing I learned, I guess, one project I’ve had was a hostel project. It’s the first hostel in Milwaukee and we partnered on that project, we had about 80 community owners. We still do. But it was a single tenant project.

Eve: [00:21:01] 80.

Juli: [00:21:01] Yeah. I mean, I think that was that’s one of my larger ownership groups, 80 owners. All in the neighborhood, really excited about the hostel concept. And then it opened right before pandemic.

Eve: [00:21:10] Oh.

Juli: [00:21:12] Hostel is like the worst possible business to have.

Eve: [00:21:15] Oh yeah, that’s pretty bad. How do you pivot from that?

Juli: [00:21:16] So, it died. It died, and then it was our only tenant, so then we had a real tough challenge. We were able to pivot. But the learning there is diversify your revenue streams.

Eve: [00:21:28] Yes. Yes, So.

Juli: [00:21:31] But not too many. Not too many.

Eve: [00:21:32] What are some other influences on your work? Maybe that’s enough. You sound to me, I’m an introvert, you sound incredibly brave for taking on this sort of vast array of new people and always sort of putting them together in this big jigsaw puzzle of development projects. 80 investors in a little project is significant.

Juli: [00:21:56] It’s such an astute insight, Eve. I’m also an introvert, and when people who meet me learn that they’re stunned because you have to cultivate your extroverted and I think I’m shocked by you telling me that as well. I’d say who inspires me are ironically, people. It’s such a hard thing to explain to people who aren’t like us in terms of introversion, but I really don’t want to spend a ton of time with people, yet awe inspired by all of them. And they are the reason the work happens. But I just would like to go away from all of them. And it’s not because hate people so much as it sucks the soul out of me sometimes.

Eve: [00:22:26] It really does. Yeah, I taught for a while and it was just exhausting, and it took me a few years to figure out why because, you know, I gave it my all, but I was so exhausted afterwards, it would take me the whole next day to recover.

Juli: [00:22:40] Yeah, exactly.

Eve: [00:22:41] And other people get energy from that. And we were sucked dry, right. So…

Juli: [00:22:48] Yes, but I think it’s an important point to say that these projects, this work that we do, it requires people with incredible passion and energy and commitment and perseverance to lift such hard things and believe in them for so long. And part of the reason I stand in my two feet and come and be present all the time is because I do see how many people are moved by it. And one by one we turn minds and hearts and I just keep telling others, you can do it too. Please do it.

Eve: [00:23:17] Yeah, yeah, yeah.

Juli: [00:23:18] So I can take a nap.

Eve: [00:23:19] Yeah. No, I feel exactly the same way. So, the big question is, and we know the answer, is this kind of real estate development harder than developing a market rate building?

Juli: [00:23:32] Isn’t that hysterical? It’s a hysterical question.

Eve: [00:23:35] But it’s an important one because, you know, sometimes it’s actually really hard to get to that magical 21% internal rate of return that, you know, deep pocketed investors are looking for. That’s hard.

Juli: [00:23:45] Never get to that. Never get to that. But I guess I will say in fairness, I don’t think I’ve ever done a traditional real estate development. So, what do I know how hard they are? What came to mind to me right now is like what people say to you when they haven’t had children, and then once they have children, they’re like, I had no idea.

Eve: [00:24:02] It’s true.

Juli: [00:24:02] Traditional development is really hard. I get it. I’m sure that it is. Now layer on all these other things and try and do it. You’re really just trying to change systems in this kind of work, and I think people can all understand how hard that is. And what for me at this point in midlife is difficult, is looking backwards and thinking, wow, so many of these things have been amazing. And then while I’ve been doing them, I’ve felt so proud, and I’ve seen the impact. And yet at the same time, it’s crushing to see how little the world has changed.

Eve: [00:24:34] Completely crushing.

Juli: [00:24:36] That’s where I have to look to the next generation for hope and inspiration, because I’m short of it. I feel like I do feel proud of what I’ve accomplished. Yet, I’m just so dismayed at how little progress as a society we’ve made and.

Eve: [00:24:49] We actually seem to have stood still. I think we’re working in this little corner of it, and it feels like progress. But then when I look outside this little corner, I realize there really isn’t any progress at all and that is, it is crushing.

Juli: [00:25:01] Yes, the end. Thank you for coming to our depressing podcast.

Eve: [00:25:06] Well, if you’re going to listen to two women developers, this is what you get.

Juli: [00:25:11] Reality sucks. We’re in it.

Eve: [00:25:14] Yes. My first really significant project downtown. When I went to the first banker, I approached, I got, oh, honey, no one’s going to live downtown. And that was, that just motivated me to go to the next one.

Juli: [00:25:28] Right. I mean, I do think, like, there’s a point at which it motivates you, right Because we’re so wired to not take no for an answer because we can see the vision. And I think that’s the power of continuing to do the work, is helping others continue to see that there is an alternative. It’s like when we had the first Black president in the United States. I know how meaningful that is. One of my other favorite projects we didn’t talk about is called the Sherman Phoenix. What happened in Milwaukee was police shot a Black man, there was an uprising. A ton of buildings got burnt down. One was a bank, and me, together with co developers, redeveloped that into a hub for 30 black owned businesses. All to say, I now get to lead tours where all kinds of folks, not just Black people, come and walk and say, and you can literally see the tears in their eyes saying, I’ve never seen a place like this in my world. And these are Milwaukeeans who live in predominantly Black neighborhoods, who have never seen a marketplace where the business owners and the building owners look like them. And it is literally transformative.

Eve: [00:26:30] That’s really fabulous.

Juli: [00:26:31] Yeah,

Eve: [00:26:32] Will you conduct an Eve Picker podcast tour?

Juli: [00:26:36] Yes.

Eve: [00:26:37] For all our listeners, that’s really fabulous.

Juli: [00:26:39] Of course.

Eve: [00:26:39] So, then how do people perceive you and how do they respond to the work that you do?

Juli: [00:26:44] I think you have to ask them, right? My sense of it is people like you and I have fans and haters, I’m sure. I don’t know. I mean, you don’t get to this point in Systems Change work without ruffling a few traditional feathers. I speak truth to power all the time. It’s increasingly easier for me to do that in rooms where I look different than the audience I’m talking to because I have the power to do that. I try in every speech I now give to talk about my white privilege. I talk about white men, and it’s not an attack. It’s just a statement of reality that we need to keep saying out loud. I date a white man and sometimes I can see how uncomfortable he gets with that conversation. It’s not personal, it’s reality. And until you. When you’re the dominant paradigm, you don’t see it. You don’t see how it affects those of us who aren’t in it. So, I think that that makes people less comfortable with me sometimes. But certainly, I know that there’s plenty of people who view this work as inspirational and I hope that they’ll replicate it in their little corners of the world.

Eve: [00:27:52] Yes. So, I’ve heard you say that much of your work has less to do with construction and more to do with advancing social entrepreneurship and developing new models for social investing. What does that mean and how has that played out in your life?

Juli: [00:28:09] Yeah, I think really real estate is just the vehicle. You know, it’s a tool, but what’s really important is how we change. I don’t even like to say change the narrative, but actual change the reality of the corner of the world. It happens to be through brick and mortar, but the real power of the model starts with co-development. Teaching neighbors that this is a skill set and a power they have that they can access and that they can take control of in their own little corner of the world. That’s number one. Number two is that then you can imagine not only leading a project, but populating a project with your friends and neighbors who have brilliant ideas, who never had access.

Juli: [00:28:48] That guy down the street who makes this new thing he calls a spring roll, but that he bakes, not fries. And it has sweet potato and black beans in it because that culturally feels more acceptable, that idea is brilliant. And it doesn’t have to be that you go to a big bank and get a big loan, your neighbors can pull together and help you start that little business in this little building that’s on your main street. That’s all possible. And guess what? Those banks won’t finance it. Well, that’s great. You know why? Because we don’t want that kind of system oppressing us any further. Look what they’ve done to put us in this position. Let’s do it ourselves together and own this building. So, when I started, there weren’t mechanisms to self-fund and do it ourselves. I mean, learning how to do real estate was somewhat possible because I did it in places where nobody gave a crap, to be honest. And so, there were so many opportunities that we could just take.

Eve: [00:29:33] That’s exactly what I did. Yeah.

Juli: [00:29:35] Get buildings for free here, please take this building for free. And then, oh, no, only a crazy person would do that. And then, right. You know.

Eve: [00:29:43] Oh I know exactly.

Juli: [00:29:44] And then you do it. But then you feel so proud because you did it together and you have this amazing thing that exists in it and it’s a powerful beacon. When we started, there wasn’t sort of a mechanism, there wasn’t crowdfunding, there weren’t crowdfunding laws, believe it or not. I mean, the Internet did exist, but not much more. So, we formed a group called Fund Milwaukee, which in many ways is a precursor to what you have as Small Change or many other platforms that aren’t real estate focused now. But we just looked to a lot of local living economies across the state and country and said, how are you pulling your assets and resources as neighbors to get things to happen? And we built off of that. So, we built our own little micro funding mechanism in Milwaukee. It’s now been supplanted mostly by some of these platforms, but it still works because we’re all volunteers, so we don’t layer on any fees which any platform needs to survive.

Eve: [00:30:37] Yeah, absolutely. Yeah.

Juli: [00:30:39] You can’t do this for free forever, even though we do a lot of it for free. And then it’s because people give to people, right? And so, people like us, who don’t look like the power structure, who don’t have the right language, come to a safe environment and say, I have this idea. I don’t even know how to put it into a business plan. It’s a group that wraps around and helps and says, here’s why this might work or here’s why it wouldn’t. We’re not going to reject you because you didn’t have a good business plan. We’re going to help you. It’s a supportive environment. So, all of that is meaningful and has impact. And at the end of the day, yes, there’s a building, but what we’re left with is people whose lives have been changed and whose skill set has been expanded. And that can be adapted and replicated and expanded in their families and in their neighborhoods and in wherever they go next. And that’s intrinsic wealth.

Eve: [00:31:25] And that’s an amazing legacy to leave behind, which is only, because you’re pretty young, it’s only going to get better. It’s pretty fabulous.

Juli: [00:31:34] I’m pretty young. I’m trying to retire soon.

Eve: [00:31:38] That’s young. It’s just a state of mind.

Juli: [00:31:40] Fair enough, right. I need another lifetime to hike for a while away from everybody.

Eve: [00:31:46] Yes. So, I have one last question. And that’s what keeps you up at night?

Juli: [00:31:51] You know, it’s what we touched on earlier. It’s not anything specific to my projects. It’s specific to the world. And, you know, will we survive climate change? Will my kids survive climate change and wealth inequality? Those are the two main disparities that I see just getting worse. And I am very scared that we’re not substantively making progress in the right direction. I see, there’s very few women world leaders, and I think it matters when we have them and they’re stepping aside because they’re exhausted from the work. And I think we need more people with bold and just profoundly transformative disruptions at this point.

Eve: [00:32:31] Yes, the New Zealand prime minister stepped aside, which was really sad for exactly that reason. Yeah.

Juli: [00:32:37] So, I hope, I want to stay hopeful, but I have to say it’s hard to see how we get to the other side of wealth inequality and climate change. And those are the two things that I think really are spiraling us out of control these days.

Eve: [00:32:51] Yeah, well, I want to believe that there’s a lot of people like us out there squirreling away in their little corner, making things happen because, you know, there’s got to be, right. I wish I lived in your little corner of Milwaukee. It sounds fantastic. Thank you so much for joining me today. It’s a great conversation and I want to come visit.

Juli: [00:33:13] Well, thank you and thank you for Small Change. We are raising for my projects on your platform, and it’s been an incredible vehicle to do that and it’s transformative in the work that I do to have platforms that advocate the same values. So, thank you.

Eve: [00:33:46] I hope you enjoyed today’s guest and our deep dive. You can find out more about this episode or others you might have missed on the show notes page at RethinkRealEstateforGood.co. There’s lots to listen to there. You can support this podcast by sharing it with others, posting about it on social media or leaving a rating and review. To catch all the latest from me you can follow me on LinkedIn. Even better, if you’re ready to dabble in some impact investing yourself head on over to wefunder.com/smallchange where you can invest directly in Small Change and our mission to democratize capital formation to create impact in commercial real estate development. A special thanks to David Allardice for his excellent editing of this podcast and original music, and a big 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 Juli Kaufmann

Ready. Set. Homes.

March 22, 2023

Necessity is the mother of invention.

In 2019, Dafna Kaplan embarked upon an investigative journey to uncover the obstacles preventing true construction innovation from widespread adoption. Extensive research and development led to the launch of Cassette, an integrated product and service model with an innovative delivery approach.

In 2022, Cassette introduced a beautifully designed one-bedroom apartment pod that can stack up to six stories high into a multifamily development.  And their first order for 200 pods came in.

The company’s commitment is simple and straightforward: Deliver one manufactured product exceptionally well, improve that product’s performance and features over time, and with that discipline and repetition – reverse the cost escalation in housing construction.

Dafna is a recognized futurist and design influencer, with a vast and varied career spanning two industries: consumer product tech and construction. Her past roles have included VP Marketing at MATT Construction where her leadership helped the company achieve over 300% revenue growth and senior roles in several rapid-growth organizations, from Inc. 500 startups to mid-size ($500M) companies. In 2017, she co-founded a live entertainment company, HATCH Escapes, before exiting the role with 30% return on investment in 12 months. Between 2009-11, she launched successful products for high-net-worth clients and influencers, including Marley Coffee and the Johnny Carson Digital Archives. And there is more!

Dafna has been a board member and advisor to several organizations, including American Institute of Architects Los Angeles, Western Museums Association, HATCH Escapes, Consumer Electronics Association, Urban Land Institute Los Angeles, the Consumer Electronics Association accessories division, and A+D Museum, among others. She  completed an MBA at UCLA Anderson School, where she graduated top of the class with honors, and completed her BA at the University of Oregon.

In 2020, Dafna received the Presidential Award from the Los Angeles Chapter of the American Institute of Architects (AIA) for her work at Cassette, addressing the housing crisis.

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. And speaking of building better, I’m very excited to share that my company, Small Change, is now raising capital through a community round that is open to the public. Small Change is a leading equity crowdfunding platform for impact investment in real estate. For as little as $250, anyone 18 and over can invest in Small Change, helping to fuel our growth as we disrupt the old boys club of capital that routinely ignores so many qualified people and projects. Please visit wefunder.com/smallchange to review the full details of our raise and to make an investment if you can. And remember, investing is risky. Don’t invest more than you can afford to lose.

Eve: [00:01:43] Necessity is the mother of invention. In 2019, Dafna Kaplan embarked upon a journey to uncover the obstacles preventing true construction innovation from widespread adoption. Extensive research and development led her to launch Cassette. In 2022, Cassette introduced a beautifully designed one-bedroom apartment pod that can stack up to six stories high into a multifamily development. Dafna’s commitment is simple and straightforward. Deliver one manufactured product exceptionally well, improve that product’s performance and features over time, and with that discipline and repetition, reverse the cost escalation in housing construction. In 2020, Dafna received the Presidential award from the Los Angeles chapter of the American Institute of Architects for her work at Cassette, addressing the housing crisis. Listen in to be inspired. 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: [00:03:12] Hi, Dafna. I’m really excited to talk with you today. Thanks so much for joining me.

Dafna Kaplan: [00:03:17] Thank you. I’m excited to be here, Eve.

Eve: [00:03:20] The tagline on your website says, Accelerating construction, 1000 homes at a time. Tell me about that.

Dafna: [00:03:30] Sure. Actually, I appreciate you reminding me what it says. It’s been a long time since I’ve been on my own website.

Eve: [00:03:37] That’s a great tagline.

Dafna: [00:03:39] It’s really connected to, in some ways, how we started the business which was this observation that there was a lot of interest in construction, especially in housing, toward utilizing what we know works in manufacturing. So, there’s a lot of adoption of prefabrication and manufacturing construction in the form of things like what we do, modular. But there’s also this, what seemed to be a lack of understanding in the real estate and construction world, that part of what really makes manufacturing efficient is this ability to run at scale. And so, while your project might be 15 units of housing or even 100 units of housing, when you’re thinking about efficiencies that come from manufacturing, it’s really in the thousands or it needs to be thought about in the thousands to really capture the efficiency and more important, the process improvement that you get from doing the same thing over and over and over again.

Eve: [00:04:42] That makes sense. Although, you know, it’s the same problem with the missing middle housing, right? That’s almost too small to build efficiently, which is why there’s so little of it. You know, tell me about the company. When did you found it? How young is it?

Dafna: [00:04:58] Yeah, sure. And as long as you get back to that missing middle, because that’s a big part of, I think, why we’re doing that.

Eve: [00:05:03] Oh, we can get back to it right now. Go ahead.

Dafna: [00:05:06] Okay. Yes, I agree. Most of those projects are too small to gain any kind of efficiency. But that is part of the purpose of how we’re looking at the business of creating the housing as a product and at least a componentized part of that project that we could repeat over, say, 100 different projects, so that your project of maybe ten units, at least half of the cost of your project might be able to be encapsulated in this manufactured item that is getting cheaper over time, like your television set, as opposed to getting more expensive every year. And so, if we can capture a big chunk of your project and then aggregate that savings for a bunch of developers like you, then we have the potential at scale to really reduce the cost of housing.

Eve: [00:05:55] That makes a lot of sense. So, how long have you been in business?

Dafna: [00:06:01] So, in business, we actually formed and raised a little bit of friend and family capital to launch in early 2020, concurrent with the pandemic launching.

Eve: [00:06:10] Perfect timing.

Dafna: [00:06:13] And that set in motion a beautiful series of pivots that that I’d say every founder launches at the wrong time for some reason or another and at the right time for some reason or another. So, we formed the business. And as soon as the pandemic hit, we saw it as an opportunity to do two things. One, to start just consulting and taking everything, we had learned and understood about modular housing and modular construction and start doing feasibility studies for developers. While we were doubling down on our actual product design and engineering. So, we spent the last couple of years really focused on designing a best-in-class structural system that could go together very quickly on site and could be very easy to understand for the trades that have to interface with that object when it comes to the site to get the design finished. So, we launched that product, which is not only a structural system, it’s an entire finished one-bedroom apartment. This one designed by Hodgetts and Fung, an incredible design duo in California, and we launched that in late October last year.

Eve: [00:07:22] So, it took a while. Yeah, I saw the first Cassette Home you rolled out, the pod, and it’s absolutely gorgeous. I want to move right in.

Dafna: [00:07:32] Thank you. Same here.

Eve: [00:07:33] I’m wondering where you’re shipping it to at this point. Let’s start with how big it is and what it looks like finishes and windows and.

Dafna: [00:07:41] Yeah. So, as I mentioned, it was designed by a duo in California named Hodgetts and Fung, Craig Hodgetts and Ming Fung. They’re pretty well-known architects, but they have a lesser known history in industrial design. They actually had two modular patents, so unbeknownst to us before we met up and started chatting with them about a year ago, they’d been passionate about this idea of industrializing great design and we sort of landed on this idea and an alignment that just like, Target in the nineties, hired Michael Graves, a famous architect, to design your teapot for 20 bucks. Right? If you can really leverage manufacturing to do this at scale, there’s no reason you can’t have great design. And so, they took this roughly 600 square foot structure that we had, and they really made it sing from a livability standpoint. If you had 600 feet, that was about fourteen and a half feet wide and 43 feet long to live in, what would be the best version of that to live in?

Eve: [00:08:48] And so, what is the best version of that? Just how would you describe it?

Dafna: [00:08:52] Well, because of the structure, one of the real benefits of this unit is that we have a wall-to-wall window system on the front of the unit. So, about a 14 foot wide floor to ceiling window system. And on most applications that will be a window system with a couple of operable windows. A developer does have the option to get a sliding door system and to hang a balcony off of that unit.

Eve: [00:09:16] Right.

Dafna: [00:09:16] That’s sort of the… you see it the moment you walk in the door, you see that the end of the unit is just this giant, beautiful opening.

Eve: [00:09:24] It always makes space feel so much bigger when there’s light.

Dafna: [00:09:28] Yeah, and then a gorgeous sort of compact but luxurious cooking kitchen because both Ming and I love to cook, and I think a kitchen makes a great home. And then between the bathroom, which is immediately off the door and the living room is a bedroom that completely opens up with a three panel Hafele slider door. And the thinking behind that was that 80% of renters are one and two person households. We imagine that most of the time that bedroom would be open. And so, why make it a small door? Why not just open that entire wall so that your hallway doesn’t feel like a hallway?

Eve: [00:10:08] Nice. And again, anyone who’s listening, you should go check it out because it really is gorgeous. So, it’s a pod and how can it be used? You talked about, you know, someone who might use ten of them. I mean, how can it be put together?

Dafna: [00:10:24] Yeah, the design of the unit was really made for the business-to-business market. It was made for a real estate developer of any size who wants to deliver housing really quickly, to be able to stack it up to six stories high in multiple kinds of configurations. The constraints are really how it connects, which is at the corners. So, it is a bit rigorous in terms of a grid, but you could do a building with a single loaded corridor on the outside or you could do, if you have enough space, they’re long units, you could do a double loaded. And the unit comes with the structural support brackets to hold up that corridor or to hold up a balcony on the other side.

Eve: [00:11:06] So if someone purchases like ten of these units and they’re going to make a five-story building with two units on each floor, do they build the common areas and then these pods slot in? Or do you provide, or are you hoping to provide staircase pods as well?

Dafna: [00:11:27] Someday we would provide the staircase pods. At this point, I think what our interest is, how can you make a product that is the same every time so that as we discussed, what is the minimum chunk of a building you could replicate and not have it changed between buildings. And so, often the common areas and the stairs and the, say the amenity spaces, are the things you really want to customize. But there’s only so many ways to design a 600 square foot apartment. And most architects will accept that because we hired a great architect to design the inside of that, they don’t need to revisit that. And so, we are only going to prescribe the apartment part and then give you multiple options for how you can configure that as an architect on the site.

Eve: [00:12:15] That makes a lot more sense.

Dafna: [00:12:17] Yes, you will have to add the corridors. Yes, you’ll have to add a staircase. There are many miscellaneous metals companies that will prefab a stair pod. That’s not something that you need a special thing to do.

Eve: [00:12:28] Right, fascinating.

Dafna: [00:12:31] To help visualize the way they connect together. They don’t slide in; they actually stack like Lego bricks. So, the beauty of our particular system and the way we designed it and the benefit of those two years in a pandemic, is that we got ourselves to a system where you don’t even need to weld it or bolt it together. It literally just stacks on top of each other until you’re at the top of the building. And then we tension a cable down the columns. It’s a vertically post tension connection.

Eve: [00:13:00] I’m going to ask questions I hadn’t planned now because I’m wondering what that’s like to get through building, permitting, and if that’s going to vary from state to state. Where are you targeting as your, for your rollout?

Dafna: [00:13:13] Yeah, we are based in California, and while it may have been easier to design a system for Texas or for any other place in the country, housing is not only deeply needed in California, it’s the entire West Coast. And what makes the West Coast difficult for modular structurally is the seismic, just the seismicity of the West Coast. And so, we felt like the greatest need was here and steel construction and specifically post tension construction, the way we’ve done it, it’s beneficial in a seismic zone if you can get it right. It’s tricky. But we have designed this particular product to be able to stack up to six stories with no external bracing, which is very unusual, especially for a modular project and one of that height. And so, it can go together very rapidly in a seismic zone. You could use the same product in a different state. We likely just wouldn’t need all of the columns, if that makes sense.

Eve: [00:14:16] Right, yeah, yeah, yeah.

Dafna: [00:14:17] Right now there’s eight columns per unit. You probably will only need to connect the corner columns in a state that doesn’t have the same seismicity.

Eve: [00:14:26] That makes a lot of sense. But are you focused on California is your market for now.

Dafna: [00:14:32] It’s our launch market. We’re focused anywhere on the West Coast. And you are right in that modular is permitted differently in every state, but most states permit modular at the state level rather than for a small municipality. And so, the benefit is the same product we’re using in Los Angeles we can use anywhere in California. And it’s permitted through private agencies in our case, which is also the case, and I think more than 40 states, where the state farms it out to private agencies to really specialize in this manufactured housing division.

Eve: [00:15:09] Interesting. I have to ask, why 600 square feet?

Dafna: [00:15:14] Oh, it’s a great question. It’s really driven by the dimensions that would make the cost and constructability and shipping logistics most efficient in our minds. That is something that changes from state to state and from highway to highway because different roads have different regulations, even within the same state. Different highways allow different widths on the trailer for different costs. So, ours was driven around this, for us, it’s like, how do we get the 80% or 90%? And what we decided was to keep it under 15 feet wide, even with all of the wrapping and the tarp on a truck, and to keep it at a length that was kind of just in that sweet spot where there’s the greatest number of trucks available. They certainly can drive a 75-foot module on a truck. And there are a lot of wood modular companies that are doing 75 feet long so that they can get two apartments in one with the corridor. That restricts the type of building you can design, but it also does make the logistics quite challenging.

Eve: [00:16:25] Oh yeah, I imagine, yeah. 75 is long.

Dafna: [00:16:27] And while there are trucks that can do that, there’s only so many and you run out of them. And so, you don’t want your project being a slave to what the shipping industry has available. We wanted it to be something that could ship on the most widely available fleets. And so, that’s how we landed. And we wanted a livable space. We didn’t want an eight-foot-wide container home. In our minds, that’s not a livable space for most people.

Eve: [00:16:54] Right. So, you just launched. Do you have customers yet?

Dafna: [00:16:59] We do. We’re very fortunate. So, we launched the product, but we had already been working with a few developers and we’ve, both Nick and I, have been in the industry quite a while, so we’re fortunate to have a lot of goodwill. We have a signed letter of intent from a woman owned developer.

Eve: [00:17:18] Yay!

Dafna: [00:17:18] To do 200 plus units of workforce housing in the, not north of Los Angeles, but in LA County, in a city called Lancaster. And so, we’re just in the early stages of conceptualizing. It’s a ten-acre site, so we’re in the early stages of conceptualizing how that lays out.

Eve: [00:17:38] It’s a great first LOI to have. Congratulations.

Dafna: [00:17:42] Thank you.

Eve: [00:17:43] So, what’s your goal for 2023 and two years from now and five years from now? How do you get to the 1000 homes at a time? I suppose with five of those projects, right, and you’re done.

Dafna: [00:17:55] I would love to be serving projects of all size. I would love for more infill developers with ten units to understand that they can get the benefit of this, whereas they may not be able to get the benefit of most modular because you need a bigger scale or a bigger order. But by ordering a product that a company like Cassette has already prototyped has already put the R&D into, you don’t need to add that to your pro forma. And so, maybe now it pencils for you and maybe now we can scale that and make an impact across the industry with that as a product, as opposed to being a custom fab shop that kind of starts from zero every time.

Eve: [00:18:36] Interesting. So, I did talk to you once before and I was sort of really interested by the statement that you made that your hope is that eventually they will, costs will go down for each Cassette, not up.

Dafna: [00:18:50] Absolutely.

Eve: [00:18:50] So, let’s talk a little bit about that.

Dafna: [00:18:52] Yeah, I mean, why else would we do this, right?

Eve: [00:18:56] To make a lot of money. Not to bring costs down.

Dafna: [00:19:01] Yeah. I mean, making money is important, but there’s certainly easier ways to make money than starting a really complicated business. So, I could have stayed in an executive job. I could have done that. You know, life is precious. And I think a lot of us get to a certain point in life where we try to align the things that we know how to do and make money with the things that really matter. And that moment sort of came from me and my ability to think through that sort of came a few years ago, and that’s how that came about. All of a sudden, I forgot your question.

Eve: [00:19:34] You know, I suppose it’s how do you differentiate yourself in the marketplace? But also, I remember you saying that your ultimate goal was to drive the cost of each pod down.

Dafna: [00:19:44] Yeah.

Eve: [00:19:45] Purely because you’re not offering customized options.

Dafna: [00:19:49] Yeah, it gets down to a few years ago when I was leaning into industrialized construction. It wasn’t just because it was the hot new thing. It was because I had spent ten years in the manufacturing sector before I was in architecture and construction. And what I saw happening in prefab was not really manufacturing. And now there’s such an interest both from cities and the investment community in what prefabrication can do, because there’s this thought that, wow, manufacturing gets cheaper every year, right? We get better and better. We are so far advanced in manufacturing in terms of productivity improvement, that it is basically at the top of all other industries when it comes to productivity gains per year. And construction is pretty much dead last on that list. And in fact, we’ve probably lost productivity in the last 20 years for a lot of reasons, some of them good reasons for safety reasons, but some of them not so good reasons.

Dafna: [00:20:53] So, there’s this sort of understanding that there’s an inevitability around industrializing this construction industry yet, I think. You know, manufacturing is a really complex business, especially complex manufacturing, which would be more like automotive or aerospace. It’s not like manufacturing, say, a widget that has one plastic tooling form and then you amortize that form like we’re making plastic cups. It’s like, you have 50 different subassemblies inside of this product that are sub assembled by different. Call it mechanical, electrical, plumbing, subassemblies, etc…

Dafna: [00:21:33] So, it’s complex manufacturing. Yet if you look since the thirties, complex manufacturing, it’s been measured that for every time you double the number of units you make, there is a constant savings and there is a curve of efficiency and savings associated. But that is when you’re doubling the same unit over and over. That is something that the way that most developers are buying modular construction, it’s still not happening. Even if you have 100 units in your building, that’s barely enough for a factory to start understanding how to build that product. And those savings, don’t, they do come a little bit from material aggregate, but Katara proved that just having big volume doesn’t get the cost down the way that process improvement actually gets the cost down. Which is the primary driver of cost savings, and manufacturing is this process improvement. So, we thought, okay, how do we create a process that really could be the same every time, all the way through installing the product? And so, that’s sort of the target. And the answer to your goal is I want to get this one product to 1000 and start to measure that curve. And what is that constant savings for every doubling? Because then we have a way of predicting how the cost will come down and then we have a reason to launch a second product and a third product.

Eve: [00:22:57] So, you also will have to probably, I’m assuming, scale your manufacturing operations. I don’t know where you’re manufacturing right now, but how do you expect that to change over the next few years as these numbers go up?

Dafna: [00:23:10] That’s exactly true. And so, the business was designed around scaling manufacturing from the start. And so, we actually have two agreements right now. We have two manufacturing hubs, and we’re bringing a third one online. And they’re in all in different places to have some diversification, to have scalability, but also have geographic diversification. Sort of, what’s best for this project? Where should these come from? And then building the back end, one of our goals in 2023 is starting to build what they call an ERP system in product where you start to really have control and data on every single material that goes into that product. And to be able to move that material and supply database across your different hubs of where you’re manufacturing it.

Eve: [00:24:03] Interesting. So where did the inspiration for this come from?

Dafna: [00:24:08] Oh, boy, I don’t think it was sort of a sudden inspiration. It was really more of a leaning in. It started with the hypothesis that manufacturing should work in construction, specifically around multifamily, because you have the ability to do the same thing over and over. It’s a lot harder in this country to do that with single family. That’s a whole other conversation, but I thought it should work. I’m going to lean into this, and for about a year I traveled around the world. I talked to different manufacturers, and not just of modular, but different forms of prefabrication, from CLT to panelized housing to volumetric. And in Asia, there’s a lot of volumetric that’s been going on for decades, actually. And I asked a lot of people in the US who’ve been doing these projects. And so, it was really a leaning in that led to just a lot of observations and questions. And one day I wrote a business plan. I thought, there’s something I see that I don’t think other people see. And as I started speaking about it, there were large companies and partners that were very interested right away in working with me.

Eve: [00:25:24] Another question I have is we know that buildings are responsible for probably about 40% of tainting our environment, our world. How does this process help, or does it help?

Dafna: [00:25:36] Yeah. I mean, that’s one of the most exciting parts about this, is that construction is also one of the most wasteful industries.

Eve: [00:25:44] Very wasteful.

Dafna: [00:25:45] When you think about things that are thrown in a landfill and a dumpster.

Eve: [00:25:48] That’s beyond the 40% emission number, right?

Dafna: [00:25:51] Yeah. No, no, absolutely. So, from a sustainability perspective, there’s been some measurement. Obviously, I’m not big enough and don’t have the track record yet to start measuring our specific business around it. But the early studies, at least in the UK and I think now in Canada have shown something like 70% less carbon emissions just from less trucks to the site.

Eve: [00:26:15] That’s what I was going to say. You’ve got one truck run instead of like probably hundreds, right?

Dafna: [00:26:20] I believe you have to be really honest and say, okay, well then you also have to measure trucks to your manufacturing hub. And so, people get very concerned about having a manufacturing site maybe where they think it should be. But what I would say from a sustainability perspective is the biggest thing you want to make sure is that all the suppliers are in close proximity to that manufacturing hub. So, and we have a manufacturing hub in Korea. We have a partner in Singapore. We’re working on a couple in North America right now. But the bigger important piece of that is designing the product and supply chain that goes into that manufacturing and making sure that that doesn’t have a big distance to travel and that that’s a sustainable material. If you’re doing it to really be sustainable rather than to just get points on a board, it makes you think about a lot of different things. And it’s one of the things I think we’re most excited to start measuring from day one is, how do we benchmark our carbon emissions and then over time, how do we improve that?

Eve: [00:27:24] Yes, fascinating. So, what’s standing in the way of producing housing like this? What’s making it harder for you? Or harder than it should be?

Dafna: [00:27:36] Yeah, harder for us versus harder for the industry may be two different things. I mean, we are, like a lot of women owned businesses.

Eve: [00:27:44] Oh, well, that’s hard right there.

Dafna: [00:27:46] Yeah. That started in a pandemic. I’m not complaining, but we’ve bootstrapped and that’s just a slow process. You know, maybe it’s my optimism. I don’t think things are standing in our way. I think there’s a lot of capital markets that don’t understand how to calculate a risk of something that’s very new. And so that’s not just me, that’s the modular industry facing industries like banking and insurance that are not incentivized to take risks, right. So, changing things in that industry usually takes a crazy amount of capital to be able to guarantee loans and those things. So, that’s one of the obstacles to the industry. But it’s softening. And then what I would say is the bigger obstacle, and this is the less talked about obstacle, is this culture of custom start from scratch. And even a lot of architects are looking at prefabrication and saying, Oh, I want mass customization. And what I would say is, well, you haven’t even figured out how to make the industrialization work. Great, let’s get to mass customization. I love that.

Dafna: [00:28:49] I was, the contractor I worked for, built the Broad Museum and the Academy Museum of Motion Pictures, and every kind of iconic, like one off unique thing and using 3D technology, and it’s all great. But that’s not where construction started and that’s not where prefab or modular needs to start. We need to start by understanding that when I build a project as a developer and a general contractor, my typical process involves 80 different stakeholders down the chain, from the lender to the plumber on site to the neighborhood to the permitting agency. There’s a lot of people involved in this process. And the crazy part about what we do, is that every time you develop a new project, you change all 80 of those entities, or maybe like 75 of them are different every time. And so, if you’re going to say like I do, that cost savings over time comes from process improvement, how in the heck is that going to happen when you have a different 80 companies doing that process every time?

Eve: [00:29:54] Right.

Dafna: [00:29:55] And so, I’m trying to sort of cordon off this 50 to 70% of what you’re doing to make sure we can have a repeatable process for you. But what that means for everybody else is that I need to make sure that my product is actually created in a way that’s simple enough that I can teach it to a very fragmented industry, and they can quickly get it every time. So, I think one of the obstacles is this sort of desire to customize everything and not really respect and understand the investment that goes into creating a product in a manufacturing environment. But I do believe that just by showing the industry that a beautiful product can be created and it has a fixed price, and you could actually know exactly what you’re getting for the price you’re getting it, which is unheard of in construction, that developers will buy that. If you build it, they will come. And that’s what we’re starting to experience and it’s, hopefully that will be transformative in the industry when that starts to happen.

Eve: [00:31:00] Well, I feel like I’ve missed some question somewhere. Is there anything else you want to tell us? It’s a fascinating business.

Dafna: [00:31:07] I feel like I’ve been talking too much, and I’d like to know more about you, actually.

Eve: [00:31:12] Well, that’s not what this is about, but we can talk about that later. It’s really fascinating. What’s next for you? I mean, what do you have to do over the next three months to keep this going and keep building it?

Dafna: [00:31:25] Yeah, well, we’re set on executing perfectly, right? I mean, there’s a lot of people that want to get a lot of projects. I want to get our first project in the ground and have the project work the way we’ve promised and to keep our word and to measure it. And we’re fortunate enough to have at least one customer that wants to move forward and work with this system. And I think our job is to just execute well. So, that’s my goal. I believe everything else falls into place from that.

Eve: [00:31:54] Well, I can’t wait to see it. Thank you very much for joining me. It sounds fantastic.

Dafna: [00:31:59] Thank you, Eve.

Eve: [00:32:18] I hope you enjoyed today’s guest and our deep dive. You can find out more about this episode or others you might have missed on the show notes page at RethinkRealEstateforGood.co. There’s lots to listen to there. You can support this podcast by sharing it with others, posting about it on social media or leaving a rating and review. To catch all the latest from me you can follow me on LinkedIn. Even better, if you’re ready to dabble in some impact investing yourself head on over to wefunder.com/smallchange where you can invest directly in Small Change and our mission to democratize capital formation to create impact in commercial real estate development. A special thanks to David Allardice for his excellent editing of this podcast and original music, and a big 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 Dafna Kaplan

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