The Strenuous Life

In 1899 Theodore Roosevelt gave a speech titled A Strenuous Life before the Hamilton Club in Chicago. Among other things, he spoke galvanizingly when saying doing hard things is good, actually (albeit far more eloquently).

“I wish to preach, not the doctrine of ignoble ease, but the doctrine of the strenuous life, the life of toil and effort, of labor and strife; to preach that highest form of success which comes, not to the man who desires mere easy peace, but to the man who does not shrink from danger, from hardship, or from bitter toil, and who out of these wins the splendid ultimate triumph.” - Theodore Roosevelt

Much has happened since then, but today the mood has largely shifted to one preoccupied by instant gratification, shortcuts, and the word of the hour, slop. Meme coins, sports betting, and addictive social media algorithms have captured the zeitgeist, leaving the tech industry with a PR problem and society in maelstrom.

The Labor Corollary builds off Theodore Roosevelt’s 1899 speech A Strenuous Life and Will Manidis’ 2025 essay Craft is the Antidote of slop. A Strenuous Life contends toil is necessary and even good. Craft is the Antidote of Slop introduces the modern concept of “slop” and suggests it’s solution is craft. The Labor Corollary expands on these ideas.

The Contemporary Craftsman

“A mere life of ease is not in the end a very satisfactory life, and, above all, it is a life which ultimately unfits those who follow it for serious work in the world.” - Theodore Roosevelt

The contemporary craftsmen approaches serious work in accordance with Roosevelt’s world view. He acts as a steward of past approaches, builds bespoke and hard to replicate things, and often leaves traces of imperfection in his work—the marks of genuine human contribution. It is easy to say a craftsman may have luddite tendencies, but in line with Mr. Roosevelt’s advice, I’ll take the path of greater toil. I’d argue, a true craftsmen yearns for ways to improve his craft and in turn the quality of his output. Technology, when wielded properly, has the potential to do both of those things. In fact, the craftsman actually cares quite deeply about his technology stack. He utilizes the right set of tools thoughtfully in service of a mission to produce better.

If quality is the craftsman’s north star and craft is the antidote to slop, then the craftsman becomes the physician administering that cure. This begs the question: what, then, is the industrialist?

The Neo-Industrialist

The neo-industrialist is like the craftsman, in that they both produce. Both find meaning in participating in creation rather than mere consumption. Where they diverge is scale. The industrialist reveres scale of production and the craftsman revels in the intimacy that comes from limited production.

The neo-industrialist is singularly focused on production. He leverages technology not only at higher volumes than the craftsman, but also in different ways. The craftsman uses technology to improve his output, the industrialist uses technology to make processes more efficient and to increase production capacity. Higher volume and more efficient process leads to lower prices and greater availible output. If the contemporary craftsman builds for the individual, then the neo-industrialist builds for society.

Despite the ardent support of technology improvements to expand supply side production and process efficiency, the neo-industrialist still experiences toil. Industrial production, even when made hyper efficient with technology often takes an army, a team, to produce sufficient caliber output, at scale. The thing that unites both craftsmen and industrialists? Production by way of doing hard things. Even with technology, toil is the toll paid in pursuit of production.

Until now. Enter this new, other, third thing.

The Slop-Proprietor

“Slop emerges when we eliminate not just toil (the burdensome aspects of work) but labor itself (the meaningful human engagement with creation). Slop is production without history. Slop is detached from genuine human contribution. Slop born of effortless, replicable processes.” - Will Manidis

The slop-proprietor produces without labor. The strenuous life is non-existent — no toil, effort, labor or strife. Just production. Unlimited production.

Rather than using technology to make the output better in the case of the craftsman or process more efficient in the case of the industrialist, the slop-proprietor outsources process and output wholly. If the craftsman builds for the individual and the industrialist builds for society, this third thing builds for the sake of its proprietor, often at the expense of the individual and society.

Chopping Wood

If the human condition requires a life of toil and effort, of labor and strife to live a virtuous life then what happens in a world dominated by the slop-proprietor?

Perhaps the prevalence of the slop-proprietor decouples utility from labor. Like the commercial gym filled a void left by reduced physical work, meaningful labor becomes a chosen practice—something people seek not for survival, but for the sake of creation itself. Enter labor as leisure.

Alternatively, society may actively resist and constrain the slop-proprietor's reach, reasserting the primacy of labor in domains where it matters most.

“In this vision of redemptive labor, we can glimpse a more hopeful future where technology serves its highest purpose by eliminating true toil while preserving the sacred space for human hands and minds to engage in genuine craft. When automation frees us we gain capacity to redirect our energies toward the kinds of deeply human creative acts that build the Kingdom: tending gardens, raising cathedrals, composing hymns, and nurturing communities. It is a participation in the ongoing work of building the Kingdom.” - Will Manidis

To have a craftsman spirit is to love thy labor and care deeply about the inputs. But, society, at scale, cannot be powered by craftsmen alone. Industrialists are essential to reliably deliver the volume of output society requires. In their highest calling, the neo-industrialist labors to keep society alive; the contemporary craftsman labors to make life worth living.

Navigating this burgeoning third new thing will define the next decade for builders. In tech circles, “agency” was declared the only moat. Then came “taste.” What comes next remains unclear—but one thing is certain: In a world that acknowledges the slop proprietor, the most valuable capabilities accrue to those who spend time in toil, earning the tacit knowledge that uniquely can be found in labor.

After chopping wood for long enough, you know which cut will fit just right in the stove and which will burn through a long night. Oh to chop wood with loving grace, toil, and strife.

Inputs:

Recent readings that helped inspire this essay.

A Strenuous Life

Craft is the Antidote to Slop

Stripe Press Tacit

Agentic Frameworks

Breakneck

The Engineering State

Freedoms Forge

Machines of Loving Grace

Why Gen Z Hates Work

More CraftGild Research

State of the Union:

As of August 2025, AI-related investment has contributed more to economic growth than all the growth in consumer spending combined. As a % of GDP it has already surpassed the telecom boom of the 2010s.

From a construction standpoint, data centers drove > 70 % of the year-over-year rise in private U.S. non-residential construction spending as of March 2025. As a category, Data Center construction is nearing the total of US office construction spend; this would have been unthinkable even just 5 years ago.

When considering the global stage, the United States accounts for roughly 40% data center capacity of global infrastructure, hosting over 5,300 data centers in 2024.

Across the U.S. markets like Northern Virginia, Dallas, Phoenix, and Silicon Valley have all become hot beds for data center construction.

Data Center Origins

Wave One: The Computer

Mainframe computer rooms of the 1940s–1960s, such as the ENIAC required specialized environments for cooling and cabling.

Wave Two: IT

In the 1980s, as businesses deployed more IT equipment and consolidated servers into dedicated rooms.

Wave Three: The Internet

The late-1990s dotcom boom then fueled a surge in data center construction, with many firms building large internet data centers (IDCs) to host websites and online services, featuring redundancies for nonstop operation.

Wave Four: Cloud

In the 2010s, data center growth accelerated globally as companies moved from on prem-server hosting to cloud providers.

Wave Five: AI

Hyperscale campuses rise in the 2020’s. Mega-projects are underway to feed the insatiable compute demands of artificial intelligence.

Data Center Types:

1. Enterprise: Privately owned facilities dedicated to a single organization’s IT

   operations.

2. Colocation: Third-party operated facilities where multiple

   organizations rent space, power, and cooling for their servers.

3. Edge: Small, decentralized data centers located close to end-users or devices to

   provide low-latency computing at the “edge”.

4. Hyperscale: Extremely large-scale facilities (often 5,000+ servers and 10,000+ sq. ft.) designed for a single hyperscale operator.

Highlighted Projects:

Stargate is an unprecedented gigantic, cross-company, AI-focused joint venture. Launched in early 2025, backed by OpenAI, SoftBank, Oracle, and MGX, with support from technology partners like Microsoft, NVIDIA, Arm, and more.

• The initiative aims to invest up to $500 billion over four years in AI infrastructure, starting with an immediate $100 billion deployment.

• Initial construction is focused on a site in Abilene, Texas, with plans for up to 20 hyperscale data centers nationwide.

The MEP Backbone of Data Centers

Water and energy are the lifeblood of modern data centers. Both are managed through the Mechanical, Electrical, and Plumbing (MEP) systems that form the backbone of every facility.

Electrical:

Servers require a constant, stable flow of electricity to run 24/7. This is an especially heavy draw when hosting compute-intensive workloads like AI, cloud applications, and big data. Since the dawn of data center builds the core site-selection process constraints were 1) Proximity to fiber network 2) Available, low cost, flat land 3) Sufficient power. Today, in the AI hyperscale era, 24/7 non-stop access to POWER is the constraint.

To prevent downtime, facilities rely on Uninterruptible Power Supply (UPS) systems, typically battery-based, with backup generators ready for extended outages. Electricians build the power distribution chain from the utility feed down to rack-level Power Distribution Units (PDUs). The scale is immense: a large data center can consume as much electricity as a small town or even a medium-sized city.

Mechanical:

Temperature regulation for data centers is crucial as modern chips produce intense localized heat and overheating causes failures (and fires). Mechanical teams install the heating and cooling infrastructure that keeps server temperatures within safe limits. Many facilities use chilled water systems to absorb heat from servers and release it via cooling towers or other heat-exchange methods. These systems typically are made up of cooling towers, chillers, pumps, pipes, heat exchangers, condensers, and computer room air handler (CRAH) units.

The industry is increasingly switching from air-based cooling (fans, chilled air, typical HVAC systems) to liquid-based cooling (coolant flowing through pipes, cold plates, immersion baths) because air alone can no longer keep up with the heat output of today’s hardware.

Plumbing:

Data center plumbing is unique in that the plumbing infrastructure is built primarily for machines, not humans.

While most facilities still draw from municipal supplies, operators are increasingly turning to recycled, reclaimed, or non-potable water to ease pressure on local resources. Google was an early mover, using reclaimed water for its Douglas Country, GA facility back in 2012, a practice it has since expanded across multiple campuses. Amazon has committed to supplying more than 120 U.S. data centers with recycled water by 2030, part of a broader sustainability push to cut freshwater consumption. Microsoft and Meta are also pursuing similar programs, often in water-stressed regions. Microsoft’s closed loop system above won’t lose water to evaporation and has helped cut its water use down 39% since 2021.

Don’t be fooled: in hyperscale facilities, plumbing systems are more than just pipes feeding cooling towers. They’re integrated with the Building Management System (BMS) to monitor water flow, temperature, and pressure; tied to fire suppression systems engineered to protect sensitive electronics while minimizing water damage; and connected to drainage and waste lines for both routine discharge and emergencies.

The Contractors Leading the Charge

General Contractors

Holder Construction, HITT Contracting, Turner Construction, DPR Construction, Clayco, Whiting-Turner, and Hensel Phelps have dedicated mission-critical teams and a track record of delivering large-scale data centers for both hyperscale and colocation clients.

In 2023, Holder Construction ($3.80B), HITT Contracting ($3.61B), Turner Construction ($3.36B), DPR Construction ($2.72B), and Clayco ($2.31B) each generated more than $2 billion in data center construction revenue.

MEP Contractors

On the MEP side, Comfort Systems USA and EMCOR Group stand out for their broad infrastructure capabilities and strong presence in mission-critical data center work. Southland Industries and Murphy Company are also major contributors, especially in HVAC, plumbing, and fire-protection systems. While not purely MEP specialists, firms like IES Holdings and M.C. Dean deliver critical electrical and integrated systems expertise—and often handle data center systems that bridge both mechanical and electrical domains.

Wrapping Up

The U.S. has undoubtably entered a defining moment for data center development — a sector that has quietly become one of the most powerful engines of private construction spending. From the mainframe rooms of the 1940s to today’s hyperscale campuses built for AI, each wave of innovation has demanded greater scale, reliability, and resource intensity. The modern data center is as much a feat of industrial engineering as it is of computing, with electrical, mechanical, and plumbing systems forming a mission-critical backbone that rivals the complexity of any other built environment.

If history is any guide, the next decade won’t just be about building bigger data centers, it will be about making them smarter, more efficient, and seamlessly woven into the nation’s critical infrastructure. Hyperscale campuses will serve as the digital factories of the AI age, meeting the world’s insatiable demand for computation while shaping the architecture of the global economy for decades to come.

More CraftGild Research

More Craft Gild Research

Economies across the United States have changed dramatically over the last 35 years.

The business of health has grown be the dominate employer across the U.S. while the business of making things has shuttered.

Detroit as the Rule

Take Detroit. Once the fourth-largest city in the U.S., it served as the industrial backbone of the nation during World War II. Nicknamed “Arsenal of Democracy”, Detroit produced more than 25% of the materials used during the war time efforts. Powered by a booming auto industry, Detroit became a middle-class engine, offering some of the highest wages and homeownership rates in the country. By 1960, it had the highest per capita income of any major American city.

By the 1970’s the music stopped. American workers were rebranded as “cost centers” and offshore factories as “strategic advantages”. The culture, corporate strategy, and policy focus shifted. With a high price of the U.S. dollar and a single minded commitment to low inflation the decline of American manufacturing across the U.S. was accelerated. Detroit was no exception.

In 2013 Detroit filled for the largest municipal bankruptcy in U.S. history. As manufacturing jobs moved oversees, Detroit’s population shrank from 1.8 million in 1950 to less than 700,000 in 2013. It’s dwindling tax base, collapsing housing market paired with decades of poor municipal financial decisions left Detroit with public services collapsing, 70,000+ properties abandoned, pension funds and retiree healthcare benefits up in flames, not to mention a murder rate at a 40-year high.

Detroit as the Early Exception

A year after the 2013 bankruptcy a new mayor took office. In July 2025 he spoke at Reindustrialize about the options he was presented with when considering the future of the motor city post bankruptcy.

”Detroit should be the next biotech hub”

“Detroit should be the next Silicon Valley”

“Detroit should be the next insert xyz hot thing”

Mayor Duggan thought about the various proposals on how to revive, rebrand, and revitalize this great American city and a crazy idea hit him…

What if Detroit did manufacturing again? Like really did manufacturing. What if Detroit became the very thing that made it the powerhouse city throughout the first 70+ years of the 20th century. It’s a simple idea, but one that if taken seriously, had the potential to fundamentally shift the trajectory of the motor city.

Since that time, Detroit has become a top three city in manufacturing employment growth, only behind Dallas–Fort Worth and The Phoenix metro area. Not dissimilar to how AI has revitalized the great city of San Francisco, electric vehicle manufacturing and autonomous vehicle production are in the early days of ushering in a new era of abundance for Detroit. Top auto-manufacturing companies like Ford, General Motors, and Stellantis have all made large investments into the city, focused on advanced manufacturing.

A Decade into The Experiment

Unemployment in Detroit has dropped significantly since 2013, population growth has returned for the first time in over 60 years, median household income is rising, home values have nearly doubled, and public safety has improved, with the lowest homicide rate since 1965.

Much of this progress is driven by a growing manufacturing base. From 2013 to 2023, over 35,000 people joined the manufacturing sector in the Detroit metro area.

Detroit has reclaimed its place as a manufacturing powerhouse, ranking #2in the U.S. for manufacturing talent density, #1 for EV and battery-related investments, #1 for tool and die maker talent density, and the top location for automotive production, producing over 1.7M million vehicles annually. With more than 290,000 advanced manufacturing jobs across 8,000 businesses, Detroit now boasts double the national average of manufacturing talent.

Manufacturing as an Employment Multiplier

Beyond the direct impact of manufacturing job growth in Detroit, there is a significant ripple effect of indirect and induced job creation. For every 100 durable manufacturing jobs added, 744 additional jobs are created in related sectors — one of the highest employment multipliers across any industry.

In Detroit, three industries are outpacing national growth rates: natural resources and mining, construction, and manufacturing. Of these, mining offers perhaps the clearest example of the economic ripple effects of industrial expansion.

Michigan holds a unique strategic advantage: it’s the only state in the U.S. that both produces and processes nickel, a critical material for electric vehicle batteries. As EV production accelerates, this has positioned Detroit as a natural hub. From 2018 to 2023, Michigan attracted over $28 billion in EV and battery-related investments, with the majority flowing directly into the Detroit region. Ford's $3B Plant in Marshall, Our Next Energy’s $1.6B battery manufacturing campus in Van Buren Township, and Stellantis's Sterling Heights Assembly Plant that it is retooling to produce its first battery-electric light-duty pickup truck are all good examples.

Manufacturing as a Key Ingredient to a Strong Middle Class

Historically, manufacturing has been a reliable source of middle-wage jobs that don’t require a college degree. That is even more true today. In Detroit, the average manufacturing worker earns 24% more than the regional average wage; 35% more than workers in health services and private education, 34% more than those in trade, transportation, and utilities, and 20% more than the average government employee.

While rising wealth inequality is a well-known national trend, what’s often forgotten is that it wasn’t always this way. From the post Great Depression era through the 1970s, income inequality in the U.S. steadily declined.

One of my favorite websites is wtfhappenedin1971.com. The short answer? A lot. But one key, and often overlooked, shift was the steady collapse of manufacturing as a share of total U.S. employment. In 1970, manufacturing made up nearly 26% of all nonfarm jobs. By 2000, that number had been cut in half. By 2025, it’s fallen to just 8%.

One of the biggest issues with this decline was the remaining alternatives for those who were in or otherwise would have gone in to manufacturing. The labor reallocation problem.

“The iconic workplace of the mid century was an automobile factory that lifted its workers into the middle class. The microcosm of the modern economy is a hospital staffed by a handful of highly paid physicians and an army of poorly paid support staff”. - Binyamin Applelbaum, The Economists Hour

Today, manufacturing accounts for roughly 12% of Detroit’s workforce, one-third higher than the national average, though still a shadow of its industrial heyday. While the city isn’t yet the “Middle-Class City” it aspires to be, it has made meaningful progress over the last decade.

Detroit’s poverty rate, long among the highest in the nation, fell from 42% in 2012 to 34% in 2022 and neighborhoods with a high concentration of poverty declined by 25%. Home values have grown nearly 100% since 2012 and mortgage lending has surged from just 220 loans in 2012 to 3,211 in 2022. With population decline halted, a balanced budget, and tens of thousands of blighted properties removed, Detroit has turned a corner. The question now is: how does the city grow its middle class?

No panacea exists, but strengthening Detroit’s growing manufacturing base could be the solution the moment demands. On this front, Detroit may be better positioned than any American city to lead. It not only has the potential to be a harbinger for neo-reindustrialization, but also a blueprint for middle-class growth, just as it was a century ago. Onwards.

CraftGild Research

This post is a special one. Excited to soft launch CraftGild Research with you all. The goal is to dig up the lore of labor the hands, hammers, and history that forged American Industry and formalize it with an in house publication at Gild.

Check It Out

CraftGild Research will chronicle the remarkable individuals who make up our industry and the tools and technologies poised to forge the industries future. Fittingly, our journey begins with a cornerstone tale from the past.

As America industrialized throughout the 19th century, millions of people left farms for factory jobs, driving the most prominent rural-to-urban migration in U.S. history. As cities grew portly with new arrivals, infrastructure lagged far behind.

Crude sewers, contaminated water, and overcrowded tenements created ideal conditions for waterborne diseases to spread, infect and kill large swaths of city populations. It’s estimated to have been upwards of a million civilian deaths from cholera, typhoid fever, and dysentery in the U.S during the 19th century alone.

In Massachusetts in 1850, deaths from tuberculosis were 300 per 100,000 population, and infant mortality was about 200 per 1,000 live births. Across the pond, In London’s poorest neighborhoods, more than half of all children died before their fifth birthday. Laborers in city slums had an average age at death of only 16, compared to 36 for the upper classes.

Pre-Modern Plumbing Era

In the early 19th century, most cities across the western world lacked any organized plumbing infrastructure. Water was typically obtained from local wells, rivers, ponds, or basic pumps. As city populations grew in numbers, these sources not built for scale, quickly became polluted with human and animal waste. New York’s streets in 1865 were piled waste 2–3 feet deep in places across the city.

Waste management in as a concept was primitive. Chamber pots (ie: portable toilets you’d put in a closet) were the hygiene standard and they were often emptied straight into the streets or in backyard pits.

Because of this an entire industry was built around “night soil men”, an occupation based around digging out and hauling away cesspit contents. They would do this on horse drawn carriage under the cloak of night. Hundreds of men were employed in cities doing this work and it was effectively essential for public health.

In the absence of proper sewers dedicated for waste, rain gutters and ditches served as open sewers, carrying yes rain, but also waste runoff. This meant raw sewage would be brough straight through town or into the nearest river. Wild.

Given the meager waste management infrastructure of the time, primary water sources like the Collect Pond in New York City, essentially become polluted sewers themselves — making access to clean drinking water sparce. City dwellers often were forced to rely on wells, rain barrels, or water sellers and regularly could did not have sufficient water for daily washing or drinking. Its no accident that American alcohol consumption peaked in 1830. The average man drank “4 to 5 shots per day, every day of the year” and yes they were probably alcoholics, but also water was dangerous and sparce, Milk was exclusively unpasteurized, and Apples trees were everywhere, but, like might as well make it hard cider. Right?

The Plumbing Revolution

By the mid 19th century the mounting public health crisis placed sanitation at the forefront of urban policy. The three core ideas that would capture the policy zeitgeist around urban sanitation in both the U.S. and in the U.K. :

1. Remove sewage

2. Provide clean drinking water

3. Improve drainage

Enter modern plumbing. The Industrial Revolution provided the picks and shovels that made large-scale plumbing projects possible. Cast-iron pipes and steam-powered pumping engines in century enabled cities to construct more expansive water distribution and sewer systems than ever before. (More on these specific innovations soon).

Major Innovations In Plumbing:

1. Underground Sewers.

Chicago implemented one of the first and most ambitious underground Sewer plans in U.S History. Originally the city was built on a low, swampy plain. In order to implement the newly designed sewer system the entire city was physically raised by several feet to allow for gravity sewer lines to be laid. They jacked up individual buildings block by block, until the city was raised and the new “underground system” was installed.

After a severe cholera wave in 1849, New York’s leaders pushed forward a plan for a comprehensive sewer network and by the 1860s, NYC had built over 70 miles of sewers. Other American cities like Boston, Philadelphia, and New Orleans built significant sewer infrastructure in the late 19th century, often in tandem with water supply projects. By the early 20th century, virtually all major cities had replaced their cesspools and open drains with underground sewers.

2. Piped Water Supply

The flip side of sewage removal was the provision of abundant clean water, piped directly into homes. In the 19th-century municipal waterwork projects boomed —powered by the production of cast-iron pipes and steam-powered pumping engines. The abundance of these components filled the 19th century with ambitious projects to bring fresh water from distant sources via aqueducts, canals, and iron pipes.

NYC’s Croton Aqueduct was an engineering marvel of its time. Completed in 1842 it channeled water from the Croton River, 40 miles north of the city, through masonry conduits and over high bridges into Manhattan, where a massive receiving reservoir and a distribution reservoir (what is now Bryant Park) stored millions of gallons.

Similarly, Philadelphia had earlier built the Fairmount Water Works (1812–1815) to pump water from the Schuylkill River into a reservoir, and Boston completed its Cochituate Aqueduct in 1848. By the 1860s, virtually every large American city was investing in modern water supply systems, often following the model of bringing water from distant clean rivers or lakes.

3.Indoor Plumbing: The combination of the underground sewer systems paired with newfound ability to procure clean water through pipes enabled another 19th century innovation…indoor plumbing systems. For the first time you could now connect to sewer pipes directly to alleviate waste automatically and also connect to clean water.

Indoor plumbing fixtures were introduced, cities had pressurized water mains, buildings could be equipped with taps (faucets), sinks, and bathtubs. The widespread adoption of flush toilets took off in the mid-19th century. Daily life was changed for ever. Running water was now possible to have in kitchens and bathrooms. By 1940 over 55% of homes has indoor piped water and by the post–World War II boom, indoor plumbing became a standard feature of essentially all new housing.

4.Water Treatment: Now that water was plentiful at scale, ensuring it was safe was the next part of the equation. Sand Based filtration became common for city water by the late 19th century and by the early 20th century chlorination made its way into the world of water treatment. Together filtration systems with chlorine based water treatment virtually eliminated waterborne diseases like typhoid fever. One analysis of U.S. cities from 1900–1936 found that introducing filtration and chlorination reduced total mortality by 13% and infant mortality by 46%.

The Night-Soil Men Fade and a New Craft Rises

The Night soil man’s job was regarded as one of the worst jobs in the 19th century. The role became particularly prominent during the rapid urbanization of the early to the mid 19th century. Despite the role being essential in removing large amounts of human waste from cities, it was one of the toughest and more dangerous jobs that could be done. Given the public health crises of the time, it turned out to not be all that effective in ensuring sanitary living conditions as populations scaled rapidly. Novel engineering feats, bold public health policy, and large capital investments of the time led a superior solution delivered more efficiently in every sense of the word. By the turn of the century the job was gone.

As underground sewers and the flush toilet took over the dirty work of digging and hauling waste, the night-soil men went extinct. What took this dangerous and onerous occupation’s place was a higher-skill craft focused on installing and maintaining the new tools and systems that powered the push button convince and safety of todays bathrooms. The plumber, a steward of hidden rivers, married math to cast-iron, and eventually emerged an entire trade of practitioners who kept entire cities (and farms too) flowing. Nearly 200 years later and the occupation of installing hidden pipes is still one of the most indispensable jobs of modern life.

Powering the Modern Metropolis

The modernization of plumbing infrastructure didn’t just save lives – it fundamentally altered how cities grew and how future cities would be planned. Prior to it, there were natural limits to city size: without enough water or with too much waste, cities would become so unhealthy that death rates rose or people fled. Today, those limits have significantly expanded.

Today, 99.6% of households in the U.S have piped safe water and modern sanitation. Indoor plumbing has become such a basic amenity that its absence is considered extreme deprivation. Access to hot showers, flush toilets, and clean kitchens fundamentally shapes daily comfort yet, a few generations ago these were luxuries unavailable even to kings and presidents.

Innovation in Plumbing systems represents one of the greatest improvements in human living conditions in history. Sewers and water mains are still to this day the invisible arteries that keep cities alive. Their invention, construction, and implementation have been the hidden hero’s of progress.

Much remains undone and grander triumphs lie ahead. Recounting the great feats of the past helps us in thinking more ambitiously about the future. Onward!

CraftGild Research

In 2025 there are labor shortages across the U.S. that threaten the future of critical American infrastructure. From schools, hospitals, roads, bridges, and the places we live—the most important things being built in America are missing something crucial…the people to build them.

My dad, a carpenter by trade, immigrated from Poland to the U.S. at thirty and has worked as a general contractor ever since. Growing up, that meant I got to spend nearly a decade living on an active construction site while he built our house from the ground up (see cover photo). Working alongside him on jobs—paired with this unique upbringing, instilled in me an unwavering appreciation and respect not only for the things that we build, but for the men and women who build them.

The State of Skilled Labor in the U.S.

The largest problem in one of the most important U.S. industries, is filling open roles.

• The Associated General Contractors of America say that nearly 80% of construction firms are having a hard time filling positions for craftsman.

• 7,000 new electricians are joining the industry each year, but 10,000 retire from it.

• It’s estimated that the skilled labor shortage could amount to a $2.5 trillion loss for the American economy by 2028, if unaddressed.

The Good News

1. The zeitgeist has shifted. There’s a vibe shift underway…Forbes, WSJ, Fast Company, NPR and more have recently dubbed Gen-Z the “tool belt generation”.

   1. Gen-Z is rethinking the economic value of traditional four-year degrees. Undergraduate enrollment fell from over 18 million in 2010 to under 15.5 million in 2021.

   2. Enrollment in vocational-focused community colleges, grew 16% in 2023 to its highest level since the National Student Clearinghouse began tracking such data.

   3. Expansion of registered apprenticeships, have led to a 64% growth in apprenticeship participation since 2012.

   4. 56% of people now believe that “blue-collar” jobs have more job security than “white-collar” desk jobs, given fear of AI/automation.

2. Increasing Demand: In the first half of 2023 alone there were more than 770,000 unique skilled trades job postings from nearly 95,000 employers. It is estimated that the construction sector alone will need to draw nearly 550,000 new workers to the field this year to meet the demand for labor.

3. The Technology Shift.

   AI has enabled labor matching problems to be solved, at scale. Progress in vision, voice, agents, and LLMs broadly have opened the flood gates to solve labor market inefficiencies at the application layer.

Introducing Gild

Part One: Optimize

Recruiting in the trades is broken. Labor inefficiencies across industries remain a fundamental matching problem—optimization is needed. Workforce dynamics unique to the skilled trades makes this specific matching dilemma require a solution built wholly for the trades. Enter Gild.

From superintendents and foremen to technicians and apprentices, Gild provides end-to-end support for every role skilled trade businesses need. We supercharge recruiting for mechanical, HVAC, electrical, and other specialty trade contractors—empowering them to build a resilient workforce. Our goal? To solve the matching optimization problem, with software.

Part Two: Expand the Pie

We plan to make it so that more individuals have the opportunity to break into the trades. More on this soon.

Interested?

Gild is currently hiring a founding engineer and will be looking for other SWE, GTM, and Ops craftsmen/women to help build the future of the skilled trades soon.

If you too are energized about the idea of revitalizing the workforce of critical American industries reach out to tyler@getgild.com to learn more about what we are building. We’re backed by the great folks over at Afore Capital.

In 2024 there are labor shortages across the U.S. that threaten the future of critical American infrastructure. From home services, commercial construction, manufacturing and more, America’s most important industries are missing something crucial…people.

• Taiwan Semi Conductor has pushed back one of the largest foreign investments in US history (its $40 billion Arizona chip plant) by multiple years, due to a lack of skilled labor to service its plant

• The Associated General Contractors of America say that nearly 80% of construction firms having a hard time filling positions for craftsman

• 7,000 new electricians are joining the industry each year, but 10,000 retire from it

• ¾ of manufacturing executives feel that attracting and retaining a quality workforce is their primary business challenge in 2024

The net of the net is companies have been unable to find employees to fill open positions. In a survey conducted by Angi, 77% of trade professionals believe there is a shortage of skilled trade labor, up from 71% in 2020.

It is estimated that this skilled labor shortage could amount to a $2.5 trillion loss for the American economy by 2028. This is not only a critical problem, but one also of epic proportions.

Please reach out to tylerlasicki@gmail.com if you too are captivated by this problem and are motivated to do something about it.

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Medieval Work Force Development

Dating back as far as 11th century Europe, a significant portion of the skilled labor force in medieval cities was structured around the organization of guilds. Merchant guilds were involved in trade and craft guilds were made up of craftsmen and artisans—all guilds were organized so that workers would learn skills from others connected with the guild. Members traditionally advanced through a well defined structure of apprentice, journeyman, and master.

1. An apprentice was a young person, who learned their métier by working for a master craftsman. At the time, it was typical for apprentices to live at their master’s house, were given room and board, but earned no money.

2. After finishing an apprenticeship, an apprentice would become a journeyman, a worker who was then paid wages by the day while working in the trade. Journeymen had the freedom to travel anywhere their services were needed, often moving city to city in search of bigger and better occupational prospects.

3. A master craftsman, was a full guild member who could start their own business. To become a master, journeymen had to produce a “masterpiece” to demonstrate their skill in their trade, and if the masterpiece was accepted by guild members, they could vote to accept the journeyman as a master.

Guilds aided in the progression and expansion of the economies of the era through the provision of education to apprentices and through enabling journeymen to enhance their skills. The specialization of expertise within a trade, as orchestrated by the guild framework, led to increased productivity, increased wages, higher quality products, and higher standards of living. Guilds became a major source of employment for workers with membership becoming widespread…until they weren’t.

By the end of the 18th century, the tides of public perception turned away from Guilds—resulting in the system being disbanded all across Europe. Although Gilds did not continue to dominate the economic zeitgeist much past the 16th century, their structures for skill development have endured for greater than half a millennium. In colonial America, some of the most influential early Americans got their start as apprentices.

George Washington started his career as a surveyor’s apprentice. When he wasn't leading troops into battle, George Washington was a land surveyor, exploring the Virginia lands of his youth.

Ben Franklin started as a printers apprentice at just 12 years old. By 22 he had started his own printing shop which would go on to create Poor Richard's Almanack, Cicero's Cato Major, and The Pennsylvania Gazette. He became the “Official Printer of Pennsylvania and New Jersey” and was responsible for printing the paper currency of the time. He is most well known for this role as a founding father of America, being the only person to have signed all four of the documents that helped to create the United States.

Paul Revere began his career as a silver smith apprentice to his father. After returning from service and with his fathers passing Paul Revere took over his family’s Silver Smith Shop.

Henry Ford began as an apprentice machinist in Detroit. After completing his apprenticeship, he was employed as an engineer at the Edison Illuminating Company of Detroit, later becoming chief engineer. Ford’s machinist background ultimately helped him invent what would go on to become the world’s first affordable, mass-produced car, the Ford Model T.

The Current State of Affairs

Despite the formation of Guilds being phased out in most of Western Europe by the 18th and 19th centuries, apprenticeships never left. In fact, they became a mainstay of economic independence in early American colonial times. In 2024, apprentices not only still exist, but are, once again, beginning to catch their stride.

In 2021 there were over 800,000 registered apprentices served across a variety of vocations. Since 2012, there has been a 64% growth in new apprenticeships.

So why the comeback?

1. Increasing Demand: In the first half of 2023 alone there were more than 770,000 unique skilled trades job postings from nearly 95,000 employers. It is estimated that the construction sector alone will need to draw nearly 550,000 new workers to the field this year to meet the demand for labor.

2. Government Initiatives: There has been a significant increase in federal government spending on workforce development after the passage of the IIJA, CHIPS Act, IRA and more. This is happening at the state level as well. In 2023 NY state in began implementing a $350 million Workforce Development Initiative. In 2022, Colorado Gov. Jared Polis signed an executive order expanding the number of registered apprenticeship programs within state government. As recently as November 2023 Maine Gov. Janet Mills designated $12.3 million to both private sector and public sector apprenticeships

3. Less Accessible Alternatives: The price to attend the average 4 year university program has increased 180% from 1980 to 2020, making the cost of college less accessible for many American families. As more families have to weigh the cost of attending college, many are beginning to explore alternatives. In 2023, the percentage of young adults who said that a college degree is very important fell to 41%, from 74% a decade earlier. In the fall of 2010 there were more than 18 million undergraduates enrolled in colleges across the country. In 2021 that number dipped below 15.5 million.

Although apprenticeship growth is happening, It needs to happen faster. Almost a quarter of US construction workers are over the age of 55, the average age of a master plumber is 58, in New Hampshire the average age of an electrician is over 55, in North Carolina it is 58. The list goes on. 27% of home service tradespeople, are within 10 years of the social security retirement age of 62. Ooof.

So, although demand for skill trade workers is incredibly high today, within the next 10 years, supply will fall off a cliff, exacerbating an already massive demand side problem.

So.. what is holding further apprenticeship growth back? In a nutshell this…

The Definite Optimists View

As technological change accelerates, the way we work will continue to be altered. Out of all the jobs that are most vulnerable to AI and automation, the skilled trades fall to the bottom of the list (they actually don’t make the cut for most lists, because they are so well insulated from automation). For a plurality of other jobs, the dynamics of labor are going to change significantly over the next decade due to efficiencies derived from AI. To be clear, this is a good thing. This is progress. But, none the less, Tens of millions of Americans will need new skills.

Apprenticeships have the potential to help businesses build new talent pipelines while also providing workers a new path to higher-skill and also higher wage careers. Like the journeyman of the 14th century Europe, someone who finishes an apprenticeship with a skill is able to provide value in any location they reside. Just as remote work during Covid enabled swaths of people to live and work anywhere, this next generation of skilled trades people can be empowered to do the same.

In a world where apprenticeships grow in popularity, we can expect to see a higher number of skilled trades people in the American workforce. At scale, the major societal implications are far-reaching:

1. A revival of critical industries

   1. Housing: It has been estimated that the US had a shortage of 6.5 million single-family homes as of March 2023. An increase in skilled labor would reinvigorate our ability to produce an ample supply of housing.

   2. Manufacturing: It is estimated that there will be a shortage of more than two million American manufacturing workers by 2030, representing an opportunity cost of $1 trillion dollars per year. Pairing an increase in skilled labor with automation in the sector, American manufacturing has the potential to regain a competitive advantage in making things.

2. A reversion to more localized economies

   1. In an increasingly globalized world, a higher concentration of skilled tradespeople will not only provide a greater number of local services, but also enable a greater availability of locally sourced goods. The skilled trades encompass tailoring, butchery, pharmacy, and various other professions, enabling the local production of goods. Picture this— you have a friend that makes your hoodies and jeans, another that you pick up your fresh steak from, and another whom you buy your furniture from. High quality, long lasting, meaningful goods. Now that’s what I’m talking about.

3. A higher density of business owners

   1. Pursing a career in the skilled trades is one of the clearest paths to owning and operating a business, in part due to the nature of the trades. For most, there are low capital requirements needed to get started and the businesses do not require a large economy of scale to be competitive. Unlike a lawyer, doctor, dentist, etc which require a large up front commitment of time and resources, starting a business in the skilled trades starts with an earn to learn apprenticeship.

   2. Outside of starting a business in the trades, starting an apprenticeship in the skilled trades and working for an owner of a trades business for an extended period of time can also position former apprentices to take over the business. Many trade business owners today are looking to retire with few to no succession plans. There is no one better to sell a trade business to than a long time employee who has the long standing relationships with clients, understands the day to day, and is able to ensure its future prosperity.

4. A greater satisfaction in one’s craft

   1. Nearly 9 out of 10 (83%) tradespeople list their job satisfaction as either very satisfied or somewhat satisfied. This can be compared to 51% of U.S. workers who say they are extremely or very satisfied with their job overall.

      

In Closing

In 2024, the United States faces a paradoxical labor market challenge of sorts. While skilled labor shortages leave business owners in dire need of staff, millions of workers remain in occupations that lack pathways to economic advancement. The estimated $2.5 trillion loss for the American economy by 2028 due to the skilled labor shortage underscores the urgent need for solutions. Apprenticeships are the panacea. From introduction in early careers to upskilling later in life, the apprenticeship model provides the most effective method for developing skills in fields that matter. By embracing apprenticeships, the United States can not only address its immediate labor shortages but also pave the way for a stronger, more resilient workforce and economy in the years to come.

If you are a builder and are interested in learning more about the opportunity within apprenticeships, please reach out to tylerlasicki@gmail.com.

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This post is dedicated to my good friend Gibson and his organization Time To Compete, A non-profit dedicated to bettering the lives of young adults battling cancer through the power of community. He and Time to Compete have been a big source of inspiration for me and provided me with much needed motivation during my NYC Marathon experience.

Check Out Time to Compete

Tradition and scientific innovation are two diametrically opposed ideas, yet in the constantly evolving world of sports, they can’t help but be inextricably linked. Over the years, various sports have implemented bans on certain substances and equipment to maintain fair competition. Steroids are the classic examples of performance enhancers that are prohibited across sports/leagues, simi In 1981, adhesives like Stickum were prohibited in the NFL to prevent making footballs too easy to catch, in 2010 full-body Polyurethane swim suits were banned in professional swimming due to a surge in swimmers setting world records, heck even today certain baseball bats are considered "illegal" in the MLB—the list goes on. At the same time sports and the athletes competing in them have changed drastically over the last century; from enhancements in equipment, facilities, and nutrition, to even entirely new rules. In sport when the raison d'etre is human achievement, how does one balance innovation with traditional human performance?

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The marathon is without a doubt one of sport’s most demanding feats. People die every year (about one in every 150,000 runners), it requires tremendous training (elite athletes run 100-190 miles a week), and as an achievement just 0.01% of the world's population completes one each year. Despite its difficulty, world records in the competition are being broken every year and it feels like more people are running them than ever before. Are humans just getting faster every year? Are more people getting good enough at running to complete a marathon? Or is there there more than meets the eye?

In the most recent Building Something Old I dove into another antiquated industry, printing/book publishing, as seen in Tyler Cowen’s Marginal Revolution. Today, I explore how innovation has impacted human achievement in the marathon.

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A Brief History of The Marathon

Marathon lore dates back to 490BC when the Athenian courier Pheidippides ran 22 miles from the site of the battle of Marathon to Athens with a message of Victory. After completing this journey it is said he shortly after collapsed and died. Despite this ancient fable, the first “modern” marathon didn’t take place until ~2500 years later. Initially, the race came in the form of a 40km (24.85 miles) run at the inaugural modern Olympic games in Athens in 1896. The fastest time for the 40km race was 2:58:50. A year later, the Boston Marathon was created and shortly after the 1904 St Louis Olympics would hold its own Marathon— a race so disastrous that it threatened the existence of the competition in future Games.

Despite the hesitation to continue it, the 1908 Olympics in London not only continued the competition, but actually extended it. Initially fixed at 26 miles, the Queen of England made a late request to move the start back to the East Lawn of Windsor Castle, so that “the race could be seen by the royal children in their nursery.” And just like that, the the 26 mile race became, 26.2 and the modern marathon was born. Queen Alexandra was FTK.

Old Word Running

"I do not think the marathon will be included in the program, and I personally am opposed to it," - James Sullivan, the director of the 1904 Games

The conditions at the 1904 St Louis Olympic Games consisted of the following:

• Some runners competing barefoot

• Dusty, unpaved roads that were so difficult to run on that the dust inhaled over the course of the race was responsible for ripping the stomach linings of runners

• Runners in dress shirt, slacks, leather street shoes, and even a beret

• The winning runner was high on a toxic cocktail that contained rat poison, egg white, and brandy. He was fully hallucinating by the end. He also reportedly lost eight pounds during the race.

• Only 14 men out of 32 managed to cross the finish line that day.

Fastest finish: 3:28 for 25 miles, which would be a 3:38 minute finish (assuming the same average pace) in todays 26.2 mile distance.

The 1904 St Louis Olympics was by no means the standard of the Marathon running of yesteryear, however imagine this happening in the Olympics today. Impossible.

Modern World Running

In 2023, things are a little different. In the 2023 Chicago Marathon Kelvin Kiptum became the first man to run a sub-2:01 marathon in an officially sanctioned competition. A world-record time of 2:00:35.

During the 2022 INEOS 1:59 Challenge, an unofficial marathon, Eliud Kipchoge became the first human on record to break the two-hour barrier for the marathon, completing 26.2 miles in just 1:59:40:2. That comes out to an average mile time of 4 minutes and 33 seconds. For even the fastest of runners, that is effectively an all out sprint at 100% effort, for the entirety of the 26.2 mile race. Insane.

In addition to records of human achievement being beat left and right, more people are running marathons than ever before in history. Strava reported that the share of runners who raced in marathons on its platform nearly doubled in 2022. The NYC Marathon organization, NYRR, received more than 153,000 applications for the 2023 NYC marathon, the second-highest number of applications in marathon history (only behind 2020). Nearly a century ago the 26.2 mile race that we now know as the marathon did not even formally exist, now over 1.1 million people run a marathon a year, globally.

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Innovation In Running

First came rubber soles, then came synthetic tracks, now we have Garmin watches, Strava, and super shoes.

In the 1950’s Keds were making kids “run faster, jump higher, and win more often”. Today, innovation has led to the most elite runners being faster than anyone else in history (increasing performance) while also elevating a greater number of people to run marathons (increasing access).

In the lens of performance, during the 1904 Olympic games the fastest finish would have been a 3:38 finish in todays 26.2 mile distance. This Olympic gold medal wouldn’t even be considered a “good” men’s marathon finish today, which is commonly be defined as a 3:34:56 race. For context I ran a 3:34 marathon in my first ever race this past year and I sit at a desk all day. Even in 1908, the fastest marathon finish at the Olympics was a 2:55:18.4. Although an order of magnitude faster than the 1904 race, in today’s terms this runner likely would not have even qualified to run in the Boston Marathon, which has 22,000+ people make it every year. The TLDR is we are running the marathon faster today than ever before.

Running is already one of the most democratized sports and is accessible, in theory, for nearly everyone, absent of innovation. Where my interest in accessibility comes into play is it has become easier to run a marathon today than ever before in history. Innovations in marathon running have attracted greater numbers of runners and non-runners alike to partake in the Herculian, 26.2 mile challenge.

Below are some of the most notable recent innovations in marathon running.

Super Shoes

“Super shoes” were first introduced by Nike in 2016 with the release of the Vapor Fly. The defining features of the shoes that make them oh so super are 1) a thick yet incredibly light foam sole and 2) a curved carbon plate base. The carbon plate acts as an external recoil device which gives runners even greater propulsion when in stride and the thick foam sole reduces the muscular demand while also returning energy stored in the shoe. Broadly, the category of “Super Shoes” provide runners with more energetic efficiency, as less energy is lost with each step. This means runners are able to go faster for longer distances.

“Studies have found that runners can see a one to three percent increase in speed wearing the shoes — and the faster the pace, the bigger gains.” - via WaPo

A one to three percent increase increase in speed over the course of 26.2 miles results in faster finishes by way of minutes. When world records are determined on a scale of seconds, this matters. A lot.

In 2023, most major manufacturers have their own version of a Super Shoe, the Nike Vaporfly ($260) + The Nike Alphafly ($285), the Hoka Rocket X2 ($250), and Adidas Adizero Adios Pro Evo1 ($500). Nike’s early Super Shoe dominance has been apparent in the numbers. In 2019 Runners wearing the Nike Vaporfly shoes took 31 of 36 podium positions at all major marathons. In terms of world records, there have been five broken since 2018, all in super shoes and 4/5 being in Nikes. This stat excludes Kipchoge’s sub two hour finish in the INEOS 1:59 Challenge, as it was not an officially sanctioned marathon, but he also ran in Nikes.

Men’s Marathon World Records in Super Shoes:

• 2018 – Eliud Kipchoge – 2:01:39 – Nike Zoom VaporFly Next% prototype

• 2022 – Eliud Kipchoge – 2:01:09 – Nike Air Zoom Alphafly Next% 2

• 2023 – Kelvin Kiptum – 2:00:35 – Nike Air Zoom Alphafly Next% 3

Women’s Marathon World Records in Super Shoes:

• 2019 – Brigid Kosgei – 2:14:04 – Nike Zoom VaporFly Next

• 2023 – Tigst Assefa – 2:11:53 – Adidas AdiZero Adios Pro Evo 1

*To note prior to Kosgei breaking the record in 2019, the Women’s marathon world record had not been changed for 16 years.

In the lens of the two types of innovation (increasing access and/or performance) Super shoes have had an impact on the latter. They have played a role in making the most elite runners, even better. The jury is still out on their effect on average runners, but an abt quote from kinesiology researcher and pro-runner summarizes their impact:

"So for two athletes of equal ability on race day, the one with the shoes is going to beat the one without the shoes." - Geoff Burns

Wearables

Garmin has been the gold standard for long distance runners looking for precision, accuracy, running specific features, and long battery life. The devices have aided in the trainings of marathoners across the world—providing accurate pace keeping, interval training assistance, and even making race predictions.

Despite this, Apple watches continue to win the game of mass market distribution. Why? Ultimately, it is function of integration—an apple watch can be easily integrated into other parts of your life ie: can receive texts, take phone calls, go through your photos, even check your credit card statement. The power of connecting your watch with your iPhone and Mac does go a long way.

There is no strong argument that using wearables positively impacts running performance, so given the innovation question, wearables fall into the increasing access bucket. Broadly, they have shown an ability to increase physical activity levels amongst wearers. Garmin watches have aided avid runners with further training support and the Apple Watch, given its mass appeal, has done the same, but more importantly encouraged sedentary people to become more active. Running a marathon as an average person is something that happens gradually, then all of a sudden. In my view, an Apple Watch can act as a gateway device to running a marathon. Initially it is harmless— you are just closing your rings and getting your daily steps in...right? Wrong. Next thing you know you start running a couple miles a week. One thing leads to another and now you and a couple friends are signed up for a half marathon and before you know it you are standing at the starting line of the NYC Marathon about to embark on a 26.2 mile expedition. Ooof. BEWARE. this may happen to you. The Apple Watch is the gateway device (drug) to running a marathon. Take that as you may.

Running Apps

Running apps from Nike Run Club, to Map my Run, to Strava, all provide analytics for runners that allow them to track training, set goals, and better understand their capabilities. Outside of the individual analytics, the social networking functionality has been the real innovation amongst the platforms. Strava in particular has become the creme de la creme of running apps, by way of its intuitive UI, strong social network capabilities, and level of detail surrounding its tracking/analytics. With over a 150 hours booked and ~1100 miles logged this past year, I have seen first hand the value of 1) building a circle of running interested friends on the app and 2) tracking performance over time.

The value of making the app social:

1. Learning. As a novice, you automatically get visibility into more experienced runners (friends) routines, pace, distances, etc. Learning from those further ahead in their running careers is a low effort and low cost way to build a routine that works for you.

2. Motivation/Accountability. Seeing your friends grind, motivates you too as well.

3. Connection. Running is inherently an individual sport, but doing it with others has a plethora of benefits. Using Strava as a spring board to run with others is a low friction way to find friends with similar running habits, paces and link with them IRL.

The value in activity tracking:

1. Training Insights When training for a marathon knowing the amount of millage logged each week is crucial in understanding how much more work is left to be done. Strava lets you log weekly millage to stay on track with your training plan, lets you more effectively plan your tapper, and also allows you to gauge the difficulty of runs at different paces. Comparing heart rates across similar runs is the most clear way to see progress ie: Running a 8:30 mile for 10 miles at a heart rate of 160 bpm a 8:30 mile vs. 10 miles at a heart rate of 145 bpm is a significant indicator of progress. This also allows you to set better informed goals…

2. Goals Setting: Once you have an understanding of where you stand with pace and the level of effort to sustain that pace for long distances you are able to set goals for marathon day. Being able to see your best effort 5k, 10k, 20k, runs allows you to put your pace in perspective, ultimately setting better informed goals for race day.

Strava, like the wearables category, is a tool that innovates by increasing access. It equips the average runner with the tools, analytics, content, and at some level a support system necessary to train for a marathon.

Fuel

Long distance running is a war of attrition. For the typical runner, within 90-120 minutes into an activity your body depletes the stored carbs (glycogen) to the point where it can no longer adequately supply the necessary working muscles with the fuel needed to produce energy. This results in your body taking drastic measures to slow you down. When the stored carbs are nearly finito, fatty acids step up to the plate to be burned as an alternative energy source for your body. The catch? Burning fatty acids requires significantly more oxygen, so your body forces you to slow you down as it needs sufficient oxygen to burn the fat used to fuel your activity.

How do you avoid this?

1. The better shape you are in the more glycogen you can store which allows you to prolong the time it takes for you to “hit the wall”.

2. You can use fuel while running.

Fuel can come in many forms, typically any simple carbohydrate fits the bill—they can come in the form of a liquid, gel, chew, bar or even just actual food. Ingesting anywhere from 30g-90g of simple carbohydrates per hour of activity lets you sustain high energy outputs for hours on end while running. A variety of energy specific simple carb consumables have entered the marathon scene as a form of fuel. They are specially formulated to be easy to digest, carbohydrate dense, and conveniently packaged. The fuel comes in the form of gels, goos, and gummy chews—all delivering fast carbs in a convenient and efficient ways, with some also providing electrolytes and caffeine for an added push while running.

Energy gels and chewables have been an innovation that has positively impacted both performance and access in marathon running as more runners are now able to run longer distances without “hitting the wall”.

Wrapping Up

Exploring innovation's impact on marathon running reveals a dynamic interplay between tradition and progress. From the primitive conditions of the 1904 St Louis Olympic Games, where runners faced unpaved roads and drank toxic concoctions, to the present day where super shoes, wearables, running apps, and energy gels redefine the sport for the masses while also elevating the performance of elite runners. The marathon has undergone a transformative journey over the last century aided greatly by the alchemy that is innovation.

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Further Down the Rabbit Hole

Francisco Lázaro was a Portuguese Marathoner who died during the 1912 Olympics after greasing up his body for the race to avoid sweating (and perform better)

About the Ineos 1:59 Challenge

Hitting the Wall/Bonking during a marathon and how to avoid it

Technological Doping: The science of why Nike Alphaflys were banned from the Tokyo Olympics

A solid Thread on X about getting into long distance running

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In a world where endless content types and formats are constantly in competition for our attention — how do real, physical books still play a role?

Over the last 10 years, Americans’ average daily reading time has declined by 15.15%, while time spent in front of television has increased by 1.06%. Despite minor TV consumption growth over the past decade, short form video has taken over as the dominant content format for many. Platforms like TikTok and Instagram now beat out TV in terms of daily minutes consumed, specifically for young people. Sidebar—our collective attention spans may be toast.

Broadly speaking, reading is making up a smaller piece of societies daily content consumption habits and for those that are reading—fewer are reading real, physical books. 30% of remaining book readers are now reading online adaptations, not the printed versions. Ooof.

So given the macro trends that point to a shift away from long form, printed content, why would anyone in their right mind go into printing more of these things???Naturally, my first thought was good luck doing this with all of your Kindle Books (pictured below).

But as it turns out, there is a bit more to unpack than just me romanticizing baroque style libraries.

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I am interested to know why anyone would want to start a book publishing business today, but I am especially intrigued as to why Stripe, a company constantly innovating in an industry far removed from the world of book publishing, has gone on to launch their own publishing business, Stripe Press.

This new format of Building Something Old focuses on a single company (Stripe) that is building something in an old industry (publishing).

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A Brief History of Publishing

Although there is an important distinction today between printing (the production of written works) and publishing (the dissemination of said written works), much of the history of publishing is actually the history of printing.

Like many inventions popularized by the western world, the first iteration of the printing press originated outside of the west some 500 years before it was “invented” in Europe. Despite this, it wasn’t until the 1450’s that printing really took off. Johannes Gutenberg’s invention of the movable type with metal dramatically dropped the cost + increased the speed of book production—allowing the common citizen to finally afford books (LFG). The Gutenberg press would go on to permanently alter the structure of society as we knew it. For the first time in history it was possible to have ~relatively~ unrestricted circulation of information, allowing ideas to transcended borders. Printed works, not word of mouth, became the common form of idea dissemination.

Prior to the printing press, written works had been transcribed by hand for the majority of human history. So publishing, in some capacity, has existed for millennia, just with very restricted distribution capabilities due to its extremely limited means of production. The printing press solved the production problem and as a result increased distribution— ultimately being responsible for spreading the ideas that would lay the ground work for movements like the European Renaissance and Protestant Reformation.

Readily available books drove sharp increases in literacy rates which empowered a growing middle class through an increase in accessibility of education. This early technological innovation was the first glimpse of into the democratization of information, foreshadowing the impacts of internet that would be felt five centuries later.

The State of Modern Book Publishing

Today, there are five main legacy book publishers in the U.S, all founded in the 19th century and who collectively control >80% of the US book market. Penguin Random house, Hachette, HarperCollins, Macmillan and Simon & Schuster are the five houses, colloquially known as the Big Five.

Many writers find it difficult to make connections with the big five, given the size and staying power of these houses. Luckily, alternatives do exist. Both self-publishing and smaller, independent publishers are viable alternatives for authors. Although there have always been Authors who opt to self publish, more are empowered today to do so given the ease of self distribution through online channels and lower cost of production with eBooks. Outside of self-publishing, authors can also explore a growing number of independent publishers, many of whom have carved our specific niches for themselves like TokyoPop with Manga, Barefoot Books for children, etc

Enter Stripe Press

Stripe is one of the largest privately held tech companies in the U.S. It is (mainly) a developer-oriented online payments company that enables businesses of all sizes to accept online payments, including Amazon, Instacart, Slack, Shopify and millions of other businesses across the globe. Stripe has been most recently valued at $50 billion (it was $95 billion circa 2021). The company is estimated to reach ~$1 trillion in payment processing volume by the end of 2023.

The TLDR is that Stripe is a massive tech company in the online payments space. What in the world do they have to with book publishing? Well, in 2018 Stripe formed Stripe Press, a small-scale publishing house focused on books about economic and technological advancement.

Despite being a payments company, Stripe’s broader mission is to grow the GDP of the internet. Publishing content about technological and economic advancement is one way, albeit probably not the most capital efficient way, of helping entrepreneurs build and start businesses (which eventually may help grow the GDP of the internet). Stripe recognizes that it is unlikely that Stripe Press will be a major source of revenue—yet still, it doesn’t discount the impact it can have in shaping the future of entrepreneurship. Per Stripe Press:

“Stripe partners with millions of the world’s most innovative businesses. These businesses are the result of many different inputs. Perhaps the most important ingredient is “ideas.” Stripe Press highlights ideas that we think can be broadly useful.

Outside of this grandiose idea of powering the next generation of entrepreneurs through printed works, these two content distribution tactics from tech companies may provide a better explanation. 1) In recent years tech companies have allocated resources to creating and distributing their own content— Apple with Apple Studios, Amazon with Amazon Studios, etc. 2) Old school content marketing is making a comeback—Airbnb publishes a travel magazine, Casper and Dollar Shave Club have their own online magazines, and Slack has its State of Work Report, to name a few.

Through Stripe Press, Stripe has effectively built a hybrid of these two models. It is on one hand monetizing its unique set of content through a specific base of customers, not dissimilar to Amazon or Apple. On the other hand, Stripe press is also a content marketing engine that enhances Stripe’s brand, broadly. This growth strategy is one Stripe knows all too well—product first, audience second. Build something so beautiful that people will jump through hoops to use/buy it—all you need to do is tell them that it exists.

The focus on printed works is one that does remain an open question. In my view, it comes down to Stripe attempting to connect with the type of person who is willing to choose a medium of story telling that requires initiative to procure, detailed investigation to understand, and an interest in subject matter that is strategically aligned with Stipe’s mission. Perhaps it believes that this demographic has some greater likelihood to contribute to increasing the GDP of the internet? Who knows. It can also totally be as simple as Patrick Collison, co-founder & CEO, who notably enjoys physical books, wanted to publish some ideas he liked.

Content From Stripe Press

One of my favorite initiatives from Stripe Press is that it will re-publish old and nearly forgotten books. I’m in the middle of reading Pieces of the Action by Vannevar Bush, a book originally published in 1970. Stripe Press updated this edition to include 15 archival images and a foreword that puts into context Bush’s key lessons for contemporary readers. A) its a great read B) its something I never would have found if it hadn’t been for Stripe Press. In addition to it’s tendency to look back in history for content, many of Stripe Press’ books like Get Together, Scaling People, and Stubborn Attachments are all newly published works. Outside its publishing of hardcover books, Stripe Press has also been responsible for publishing podcasts and even a film, also related to economic and technological advancement.

Stripe Press has placed a significant emphasis on the design of each book. Each one is unique in its colors, fonts, imagery, finishes, and themes, but all follow some basic guidelines— ie: the book can only come in hardcover form, it won’t come with a book sleeve, the Stripe Press logo needs to be on the top right corner, etc. Despite the uniqueness of each book, these basic requirements make the books feel part of a collection, enough to make you want to collect them all to complete the set. Each one exceeds a level of quality greater than any modern printed book I have come across, which makes you take pride in its ownership. These are books you want show off in your baroque style library.

Cautionary Tales

Airbnb tried its hand in publishing, releasing a single 128 page issue of Pineapple, a guidebook of user-generated content to tell the stories of Airbnb’s host community. Although unclear of the success of the initial launch, Chief Marketing Officer Jonathan Mildenhall slashed Pineapple’s budget to focus on other marketing initiatives and there was never another issue launched.

Although not a tech company, VC firm Andreesen Horowitz (A16z) launched a media outlet, Future, in 2021 as an attempt to directly shape the narrative around tech, specifically with a techno-optimistic lens. Similar to Stripe and Stripe Press which both uniquely work towards Stripes goal of increasing the GDP of the internet, the purpose of A16z’s venture capital and media business was to accelerate the advancement of the future. In the case of Future, it reportedly shut down in late 2022 after a year an a half of operations.

These two examples depict the difficulties that come with creating + distributing content and “going direct", even as some of the biggest names in tech. Across the board, pursuing new ventures outside the core competency of a company are difficult. They require a diversion of resources from said core business—something that may fly during times of capital excess, but may be first on the chopping block in times of turmoil.

Why I Am Excited About Stripe Press

The printing press created low cost distribution, but with limited means of production. The internet gave us free distribution and now AI has created the opportunity for free and unlimited means of production. In a world of unlimited AI produced content how do we sort through quality? How do we find the content that we align with? That is accurate and true?

Projects like Stripe Press in my eyes are the answer. Respected individuals/organizations creating highly curated, thoughtfully designed, quality content. As we spend more time consuming online content—printed works will become more and more sacred. As books become more sacred, they become more appreciated, and as a result more thoughtfully read. Stripe Press is playing a role in contributing to the burgeoning generation of thoughtful readers—many of whom may play a role in increasing the GDP of the internet.

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Further Down The Rabbit Hole

The Promise of Stripe Press

Beneath The Surface (A Stripe Press Podcast)

Patrick Collison’s online bookshelf of physical books he owns

Pellegrini Press (not Stripe Press related, but cool to see a new, niche, and founder friendly printer/publisher)

Share Building Something Old

The construction of physical structures has been executed by a coterie of craftsmen for millennia. The scientific breakthroughs of the 17th century sparked an age of experimentation that enabled architects and engineers to build with a wide array of materials and forms. This era precipitated a wave of change in building large scale, permanent structures that would be felt for centuries to come.

Today, physical structures are inextricably woven into all aspects of our lives. Where we go to school, work, eat, sleep, and even where we retain most of our wealth. Real estate is the thread that makes up the fabric of the American economy. Home equity is the single largest financial asset for Americans, the construction industry supports nearly 10 million jobs in the U.S, housing makes up nearly 17% of GDP, and more people want to sell these physical structures than ever before.

Despite its size, stature, and tenure, the construction industry is often maligned as the industry that technology left behind. As the world has gotten more efficient, U.S. construction labor productivity has lagged overall labor productivity. As every major industry has changed around us, the places that we have spent greater than 2/3 of our lives in haven’t. The industry has seen cost, complexity, and variability go up while innovation has fallen behind. 

Proptech is technology built for the real estate industry. It has loosely been around since the 1980’s and in 2023 it touches a menagerie of functions pre, mid, and post construction. Construction tech, is a subsector which has begun to gain traction, in part due to the successful adoption of other proptech technologies over the last decade. Due to these adjacent successes, growing numbers of investors and operators are pioneering a new wave of opportunity for construction tech startups.

In a past industry overview I dove into a related and also very antiquated space, Urban Planning. Today, I explore the all infatuating sector of construction tech.

A Brief History of Construction Tech

Industrial Revolution

Prior to the late 18th century, construction relied heavily on manual labor and basic hand tools. The industrial revolution brought power-driven machines that revolutionized materials and processes and brought newfound capabilities to the building process.

In addition to all the major innovations listed above, there was a new, crazy idea that that captured the zeitgeist of the industrial revolution—what if you could manufacture a house like all the other products of the time?

In 1849 they did just that and created “kit houses” which contained all the pre-built components needed to make a house. These kit houses were then shipped by rail for those building settlements during the California Gold Rush to assemble. As the American population was quickly expanding West, where there were very few established settlements and the need for prefabricated and affordable housing was desperately needed. In 1908 Sears launched a mail-order “Modern Homes” program with the same concept. They went on to sell more than 70,000.

The PC Golden Era of Construction

Post World War II, demand for housing exploded in the U.S. and manufactured a decades long construction boom. This demand side surge paired with the introduction of the PC in 1984, acted as a forcing function for builders to adopt technology to keep up with growing consumer appetite. If materials and process were the theme of innovation of the industrial revolution, innovation in the 20th century would be summarized primarily by innovation in project design, architecture, and communications.

Design and Architecture: PCs impacted construction technology significantly because builders and their clients could now design, share, and scan projects using software. Computer Aided Design (CAD) emerged during this time, replacing the manual drafting of designs and enabling the development, modification, and optimization of the design process. Building Information Management (BIM) also got its start in the late 50’s allowing architects, engineers, contractors, and subcontractors to collaborate on the fine details of design and construction by using the same database and computer model.

Communication: Email and mobile phones made it possible for project teams to communicate easily, especially when working from different locations.

Lagging Innovation over the Last Two decades

What is the theme of innovation across the start of the 21st century? Thus far, it has been more about the expansion and revival of existing technologies, than net new creation.

1. Pre-fabricated (pre-fab) homes which have recently garnered media attention for being “The Future of Real Estate” have also quite literally been the past. Although an old concept, it has been forgotten in recent years because the stigma of pre-fab homes that originated in the 1960’s decimated the category. As the rush to build post WWII housing was winding down, everyone woke up one day, looked around, and realized that mobile homes made up 15% of the nations housing supply. Oof. The space became stigmatized and forgotten as the need for quick and cheap housing production had passed. In 2023, the modern resurgence of prefab homes have gotten a much needed facelift and are appealing to a growing number of home buyers/builders.

   

2. The cloud transition has enabled greater adoption of the CAD and BIM technologies of the 80’s and further enabled more effective and efficient communication mechanisms.

3. Advanced Materials like reinforced concrete, although novel have been an expansion of existing commonly used materials, concrete and steel. The innovation in this case is the combination of the two, which has unlocked new types of building, previously not possible.

Addressable Issues with Construction

It is becoming harder to build

Widespread labor and talent shortages, shrinking margins, cumbersome approval processes, broken supply chains, and higher interest rates for project loans all point to the same conclusion… it is becoming harder to build our physical structures.

Not enough homes exist today

As of July 2023, there exists a meaningful supply side housing shortage across the U.S, spurred, in part, by a housing construction slowdown over the past decade. To be fair, the surge in home buying due to the low interest rates of the Covid-19 Pandemic didn’t help much either. As of the start of 2023, the U.S had a shortage of 6.5 million single family homes.

Constructions Environmental Impact

Worldwide it is estimated that the construction industry generates about half of all carbon emissions. Some key characteristics contributing to negative environmental impact from construction include:

1. Cities can no longer sprawl endlessly into rural land.

   “The total area covered by the world’s cities is set to triple in the next 40 years – eating up farmland and threatening the planet’s sustainability.”

2. Construction creates ALOT of waste. Its estimated that 50% of landfills are made up by waste from the construction sector.

3. U.S. Homes are too big, and getting bigger.

   “The median square footage of an American house built in the nineteen-sixties was fifteen hundred square feet, compared with about twenty-two hundred today—and the earlier model was home to more people

4. High Energy Consumption of Buildings. The construction industry uses more energy than the industrial or transportation sectors. Buildings account for 40% of all energy consumption in the U.S.

5. Reinforced concrete contributes 78% of the total carbon emissions of building.

The Opportunity to Build Better

Construction is crucial to the survival of human kind. It will always exist, but the way and rate in which it improves is up to the technologists and industry expert operators. There is a sizeable opportunity for these pioneers to envision new ways of constructing our built environment to be more efficient, cost effective, and have less of an environmental impact.

Market Opportunity

As a $12 trillion global industry, architecture, engineering, and construction (AEC) is one of the largest global industries, yet it has been among the slowest to innovate.

“The construction industry is the largest in the world, in terms of dollars spent, yet we are the least productive in terms of technological adoption and productivity gains” - David Jason Gerber

Over the last few years there has been increased attention to the sector given the potential alpha of the opportunity. From a value perspective, it is expected that 45% of the industry’s value chain will shift from traditional processes in the next 15 years. Investors believe that this is shift is possible and it is seen in the numbers. It estimated $50 billion was invested in AEC tech between 2020 to 2022, 85% higher than the previous three years.

So where is this capital flowing to? Who are those that are seizing the opportunity in the burgeoning industry of Construction tech?

Startups Building Technology to Change our Built Environment

Homebuilders

There are a growing number of startups innovating on the standard home building process. They are offering cheaper prices, more transparency, less waste, quicker timelines, and are increasing accessibility to custom designed homes.

• Atmos is a home-building platform to built to assist in the creation and design of customized houses. The company is constructing a managed marketplace for homebuilding, connecting home buyers to homes. It has raised $18.7 million in total funding.

• Veev is a tech-led, vertically integrated home builder that leverages a digital architectural & structural design process, full panelized manufacturing, and on-site installation. It says it can build housing four times faster than traditional firms. Veev also has a home operating system offering create room-specific lighting, shade, and climate control and also offers protection against intrusion and cybercrime. It has raised $597 million in total funding.

• Welcome is a online home building platform that makes buying a new home simple by streamlining the entire new home construction journey from land selection to customization to construction. It has raised $35.4 million in total funding.

  author

  

  Welcome Homes on Instagram: “Putting the finishing touches on a gorgeous Oasis 3 Flex in Cold Spring, NY. During the finishes stage, the interior of your Welcome Home comes to life. Our Team installs your pre-selected flooring, cabinetry, tiling, and you guessed it, the finishing touches. The final step in transforming your design vision into reality.”

  August 20, 2023

• Homebound is a technology enabled, full stack home builder that is addressing the need to build more homes in more scalable and customer centric ways. Homebound leverages external labor markets to reduce the the time to build a home while also simplifying the customer journey through its online platform. It has raised $128.4 million as of 2023. I wrote a full deep dive into Homebound for Contrary here.

• Homma is a tech-enabled home builder that specializes in designing modern homes focused on modern, healthy living. Homma builds custom hardware, software, and sources quality materials allowing them to simplify construction timelines. Homma has raised $31.9 million as of 2023.

Additions and Renovations:

Startups are also changing the way additions and renovations occur. They are providing streamlined customer experiences, tools for contractors to scale, allowing for more collaborative design processes, and more.

• Block Renovations is a renovation platform that combines architect-grade design, construction labor, and materials into a streamlined online renovation experience. It has raised $104.5 million as of 2023.

  

• Made is a architecture and planning company that specializes in home renovation. It provides managed services that combine design, materials, and construction into a single, stress-free home renovation experience. Made has raised a $9 million seed in 2020.

• Cottage is a SaaS-enabled marketplace that allows homeowners to design online, get upfront pricing and access vetted contractors who run their business on its platform. It is starting with Accessory Dwelling Units (ADUs). It has raised $18.5 million as of 2023.

• Eano, delivers custom design and build solutions, including architectural designs, ADUs, bathrooms, kitchens, floorings and custom projects for homeowners. For architects and contractors, it provide tools to help them scale more efficiently and reach more customers. It has raised $17.2 million as of 2023.

Prefab/Modular Homes

Traditionally, pre-fabricated homes have felt like building houses on a film set—resulting in Truman Show-esque look and feel. Pre-fab startups today are solving home customization at scale, while also maintaining the efficiency, cost, and limited waste benefits that come with traditional modular building.

• Cover is a tech company that designs, manufactures, and installs custom Backyard Studios. Its software creates a digital 3D model of each custom studio then it manufacture the home in its Los Angeles factory using a high-precision quality-controlled manufacturing processes. It has raised $73.3 million as of 2023.

  

• Abdou is a prefab home builder that builds backyard homes, constructed offsite, and installed in homeowner backyards. It has raised $23.5 million as of 2023.

Multi-family/mixed use

Cities can no longer sprawl endlessly into rural land. Startups focused on providing dense housing enables the creation of walkable and energy efficient communities.

• Blokable is a modular home builder for multi-family properties. It provides a vertically integrated solution to create housing at scale through the use of modular units, aka “bloks”. Blockable has raised $35.9 million in funding.

• Juno develops residential apartment buildings intended to offer environmentally friendly and fast housing alternatives. It has developed a proprietary prefab building system that uses repeatable components that can be easily configured or adapted to suit a specific site or local codes. It has raised $31.3 million in total funding.

• Prescient is a technology and manufacturing company that offers a cost-effective alternative to conventional building structures. Prescient's develops multi-unit buildings and residential construction, including apartments, condos, senior and assisted living communities, hotels, and college and military dormitories. It has raised $295 million across six rounds of funding.

Other early companies include Woho, Fullstack Modular

3D Printing

3D printing addresses some of the major issues with construction today; cost, customizability, and time to build. Homes fully built using industrial-sized 3D printers can be made in less than 24 hours.

• Branch Technologies: Is a tech company that develops 3D printed and cellular fabrication technologies and products. It combines additive manufacturing, prefabrication and digital technology at construction scale. It has raised $19.8 million as of 2023.

  

• Mighty Buildings is using 3D printing, robotics, and automation to a less wasteful, faster, and more automated approach to build homes. It has raised $101.8 million as of 2023.

• ICON 3D prints homes using robotics, software, and advanced materials. ICON utilizes its construction technologies on both earth and lunar surfaces. It has raised $451.5 million. Icon claims that it can produce a 600 to 800-square-foot, economy-sized building for as low as $4,000 in 24 hours.

  

Risks

Regionality Constraints

Most construction tech startups have started on the west coast and are regionally focused on warm regions with limited precipitation and weather variability. Proof of concepts that were successful in LA will have difficulty translating to the variability of climate on the east coast. Additionally zoning, licensing, and regulations differ locally so market expansion is much more complex. Most construction tech startups have been hyper selective about market expansion. The above constraints make national expansion complex and less scalable, especially when comparing to pureplay software businesses.

Business Models and Pricing

The construction industry broadly is characterized by high pricing and a lack of transparency. Although many of the startups have aimed to fix the inherent intricacies of construction pricing, which is impacted by geography, topography, supply of labor, materials, etc, most have not. Those that have generalized pricing in optimizing for transparency, have come at the cost of appearing priced extremely out of market ie:

The average size home in the U.S. in 2021 was 2,480 square feet and the average price per square foot ranges ~$120 to ~$744, depending on the state. All of the pricing examples above would rank in the 98-100 percentile in average price per square foot in the U.S. Hawaii ranked higher, for only a few specific models, as seen in the graphic below.

Although not an apples to apples comparison, ADUs or Tiny home kits are sold for can be found for a fraction of the price. To note, the majority are DIY, some only include the framing, etc.

From a business model perspective, the capital intensity has been a point of contention for many investors. VCs want things that scale at zero marginal cost, which describes software, not building physical structures.

Broad Approaches = Lack of Focus

Many construction tech startups are doing a lot across the full stack of customer needs. From buying land, designing, building, financing, and even insuring the home some startups are taking touching every point of the customer journey in an attempt to provide as much value as possible. Katerra tried to do some variation of this by attempting to become the Salesforce of construction. Its goal was to be a one-stop-shop, vertically integrated, construction project management company. In hindsight, its early lack of focus introduced a lot of complexity while at the same time created very little actual value. $2 billion was invested into Katerra over its lifetime, more investment than any other private company in the construction industry over the past five years. Kattera would go on to file for bankruptcy six years after its founding date.

Stylistic Uniformity

This risk is one that only occurs if startups win and construction tech eats the world. The risk of stylistic uniformity is seen in the globalization of building styles all across the world. This is occurring already, but as more buildings are built by startups there is risk of further uniformity across styles, materials, and aesthetics, resulting in everywhere just looking the same. Glass-and-steel monoliths have already replaced local architecture, but any future hopes to preserve local techniques and styles goes against fundamentally what startups need to be successful at scale. This wonderful twitter thread explains this concept better than I ever could.

Final Thoughts

As construction tech continues to evolve, it holds the potential to reshape the way we create physical spaces, fostering efficiency, sustainability, and innovative design. While the journey ahead is marked with challenges, the construction tech industry is poised to shape the future of construction, merging technology and physical spaces in novel, non-consensus, and impactful ways.

Further Down the Rabbit Hole

aka Links to other cool stuff

All of Block Renovations Completed Projects

Proptech Traction

Veev’s Product Page

Homebound’s Overview of Custom Homes

Proptech Investors 2023 POV per Techcrunch

NPR on the Housing Shortage

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Cities have historically been constructed around the dominant technologies of the era. Irrigation systems during ancient times facilitated the rise of agriculture and led to the rise of urban centers. Innovation in naval trade during the classical era led to the creation of ports and urban centers powered by their ability to import and export of goods/ideas. Over the last century, cars have been the dominant technology enabling the movement of people and therefore have demanded structural ownership in the form of space allocation in our cities. The internet, as the dominant technology of today, is positioned to be the technology that cities are built around for centuries to come.

Just as cities are designed differently, they are also organized differently over time and geography. In the U.S, cities have traditionally centered around labor markets. People live where there are jobs and people move to be closer to those jobs. Thanks to the ease of travel, ability to obtain quality employment remotely, and the ability to learn new skills via the internet, the onus of choosing where to live has fallen more on the individual than ever before. The technological capabilities of today has decoupled the need to be physically located where you work. The opportunity that presents itself is the newfound ability to organize cities around characteristics other than work— shared values, interests, and even solutions to the commonly held issues with the cities of today.

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What is Wrong With U.S. Cities Today

Car Centered Urban Design

Modern U.S. Cities have been built around the popularization of the car. This has come the expense of other forms of transportation.

It is estimated that as much as one half of a modern American city’s land area is dedicated to streets and roads, parking lots, service stations, driveways, signals and traffic signs, automobile-oriented businesses, car dealerships, and more.

Why is this bad?

Traffic. It is estimated that on a national level, roadway congestion costs the economy more than $165 billion each year in lost productivity and wasted fuel. The average commuter in Boston and Chicago loses nearly 150 hours per year and greater than $2,100 thanks to traffic congestion. In the most American fashion, our solution has been to increase roadway capacity and expand the number of lanes. Typically, increasing roadway capacity has actually increased congestion as a result of induced demand (increased roadway capacity encourages more people to drive).

There’s less space for cool things. With 50% of the average city being taken up by the spaces dedicated to the storage of and movement of cars, there is less room for quality housing, public parks, museums, storefronts, etc. This development of car specific infrastructure can result in the vicious cycle seen below.

Environmental impact. Cars emit the highest amount of CO2 out of any form of transportation. Trains, e-bikes, e-scooters, even buses are all more environmentally friendly forms of transportation when considering emissions on a per passenger basis.

Death and Injury. Vehicle accidents are a leading cause of death globally (8th). 1.35 million people are killed in car accidents every year globally and another 20-50 million are injured. Cars have been unable to successfully share space with other forms of transportation—half of these deaths and many of the injuries involve pedestrians, cyclists and motorcyclists.

Cost of Living

The cost of living in the major U.S. cities has risen, mainly due to housing demand far outweighing the ability to produce more supply.

• Housing in San Francisco costs 5x the national average

• In NYC it’s the norm to pay a 15% of annual rent brokers fee due at signing when renting an apartment

• In LA the median home price is nearly $1,000,000

What is going on?!

Less Building. While U.S. apartment construction is at a 50-year high, San Francisco could see a 58% drop in new apartments in 2022.

Less building of the right kind of homes. Despite NYC having built nearly 200,000 new apartments over the past decade, likely more than any other city in the nation, NYC average home prices nearly doubled. With new buildings being developed, a recent trend is that many of them contain fewer apartments than they are zoned for or in some instances fewer apartments than the building they replaced. Many developers feel that the cost of land and construction is too high for anything other than luxury condos.

Poor Waste Management Systems

One of the most common reasons I hear when describing why someone prefers one city to another is that city x is cleaner than city y.

Point blank, cities generate ALOT of trash and most of it is not managed effectively. Worldwide cities generate over 720 billion tons of wastes every year. In part, due to the heavy reliance on industrialized and packaged food which significantly increases the quantity of household waste generated every day.

Heavy reliance on Landfills. In NYC, residents produce nearly 13,000 tons of waste every single day. Like many other U.S. cities, the vast majority of this waste ends up in landfills and incinerators in other communities outside the city itself. The diesel trucks that lug Manhattan's garbage to these communities drive 7.8 million miles every year and cost nearly $290M in taxpayer dollars. Once at the landfills, the garbage decomposes and releases methane, a greenhouse gas 30x more potent than CO2. For a better idea of the minimal usage of alternative removal tactics, nearly one third of the waste New Yorkers produce is organic material yet only 1.4% is composted.

Poor Waste Collection Systems. Trash in NYC can sit for days on sidewalks completely obstructing the already limited walking space of sidewalks. The lack of in-ground containers, street-level sorting bins, and technological solutions make the pickup process inefficient, messy and frankly hazardous.

Neglected & Outdated Public Transportation Systems

Public transit systems in the U.S. have been neglected for years— underfunded and improperly managed all while accruing massive amounts of debt. With ridership down and the cost to manage these ancient systems rising, the American transportation system that at one point was the envy of the world, is now hanging on for dear life.

Between 2012 and 2018, bus ridership in the U.S. declined 15% and rail ridership declined 3%, in part due the following reasons.

Frequency & Reliability. Most urban U.S. public transportation systems are not reliable. This is in part due to their age which require frequent maintenance and therefore increased closures/delays. A general lack of resources for these systems leads to understaffing and further limits service. The MBTA, better known as Boston’s T is a prime example of this with riders excessively padding their commutes due to such schedule uncertainty.

Below is a set of maps for five U.S. cities that show the network rail and bus lines that operate at the bare-minimum service level required for people to be able to live adequately car free. This means, at least every 30 minutes, all day to midnight, seven days a week. The Toronto map is for comparative purposes.

Infrastructure. A great quote that encapsulates the current state of American transit infrastructure is from transit blogger Alon Levy:

"In 1912, Boston had this great public transit system, with four subway lines and streetcars that fed it. Then they spent the next 60 or 70 years destroying it."

Many public transit and passenger rail system infrastructure assets have come to the end of their useful life and need to be repaired or replaced. With a backlog of $105.1 billion in deferred maintenance and replacement expenses, struggling intracity transit systems fall further and further behind in the absence of adequate maintenance. Additionally, intercity transit on a regional basis is also living in the metaphorical dark ages. In the U.S. today, we have zero miles of high speed rail. Amtrak's Acela is the fastest passenger rail we have traveling at 150 mph over a total of 49 miles. In comparison, China has a high speed railway network as long as 24,855 miles and capable of accommodating high speed trains running at 186 - 217 mph.

Painful Permitting Processes at the Municipal Level

It costs too much money and takes too much time to get things done at the municipal level. From breaking ground on construction projects, to starting a new business, to just hanging up a sign, approval to do things takes a long time and cost a lot in most U.S. cities.

High Cost. Nothing more astutely encapsulates this idea than the recently accepted (and since paused due to massive public backlash) plan in SF’s Noe Valley to create a singular 150 sq foot public toilet that would cost $1.7M and would not be ready until 2025. One toilet. $1.7 Million dollars. Nearly 3 years building process. HOW?

The craziest part, this is not an outlier. SF’s McLaren Park restroom was completed a couple years ago for a no-less-astonishing cost of $1.6 million.

Drawn out Timelines. Obtaining residential and commercial building permits can take greater than a year in some cities. The Honolulu Dept. of planning and permitting has been under fire as of recent for this exact reason. People created this detailed game just to show how crazy this process is. Play it, it’s wild. Other examples include:

• San Francisco is currently being investigated by the state for taking longer than anywhere else in CA to approve much needed homes

• Getting a permit to install a sign for a storefront in Washington D.C. to me greater than a month and a half

• The clean energy permitting projects can require local, state, and federal permits, with the local permits always being required

  • Land-use permits based on the zoning and planning ordinances of the city or county are almost always required

  • There is a database of local ordinances for wind energy, which can face significant local opposition due to appearance, noise, and other localized impacts

  • Even getting rooftop solar can require a local permit

The Opportunity to Rethink Cities

Despite all the flaws of cities today ~83% of the U.S. still lives in them. The innate human need for proximity to others has resulted in a massive demand for density. The hundreds of millions of people living in these cities indicate that the positive agglomeration effects appear to outweigh the negatives. To our luck, we live in a time where we have the ability to consider the negatives and rethink the way urban environments have been fundamentally designed. What makes this opportunity possible today is the vast amount of uninhabited land in the U.S. paired with the benefits of the internet.

Space is plentiful. In the U.S. there is 1.78M square miles of uninhabited land—nearly half of the entire country is absent of any human habitation.

Digitally Native Communities. Technology has created the opportunity for individuals to create larger and more specialized communities, digitally. Today, there are greater than 6.7 million Discord servers, a growing percentage of which are not gaming related. It has also enabled considerable numbers of people from around the world to relocate without interrupting their ability to work or communicate.

What makes this opportunity worth pursuing? Other than philosophically wanting to make the world a better place of course…

The Market Opportunity

The potential economic value that results from creating great cities is massive. NYC has a gross metropolitan product (GDP but for cities instead of countries) of $1.85 trillion. NYC’s economy produces more value than entire economies of countries like Canada and Russia. If it was its own country its economy would be the tenth-largest in the world.

On the neighborhood scale, an example of economic success is Peter Cooper Village and Stuyvesant Town which thousands of New Yorkers call the 80 acres home. It was developed by the Metropolitan Life Insurance in the early 1940s, initially as a post WW2 housing project for returning veterans. Its goal was to be the neighborhood for New Yorkers who wanted “to live in a park - to live in the country in the heart of New York."

Peter Cooper Village and Stuyvesant Town was sold by its creator, Met Life for $5.4 billion, a net of taxes gain of ~$3 billion, STILL the largest residential real estate transaction in history.

From my perspective, the early success of startup cities will come from models that mirror more of the original idea behind Peter Cooper Village and Stuyvesant Town compared to those trying to create the next New York Citiy from scratch. On the spectrum of startups building cities, Peter Cooper Village and Stuyvesant Town falls closer to the target than building the next NYC.

How Does One Start a City?

Based on the early success of the few projects working on this today, the order of operation can vary, but what is needed to start a city is the following:

The order of operation can vary, depending on strategy, but what is needed to start a city is the following:

1. Create a community, to cast the widest net it should be digitally native

2. Design the city layout, governance/legal/ownership structures, values, etc

3. Raise funding

   1. Equity (for corporate operations)

      1. From the community

      2. From institutional investors based on pre-generated demand (VCs, corporate venture arms, real estate funds)

      3. Extremely wealthy individuals who are connected to the project

   2. Debt (for the capital intensive assets, namely the land and construction)

      1. Banks

      2. REITs

      3. Real estate funds

4. Acquire an uninhabited piece of land, best to do in partnership with a land bank or municipality

5. Develop infrastructure

6. Move in!

Although still early, there are companies attempting to do this today.

Who is Doing This Today

Notable startup cities that have gained traction over the past couple of years are few and far between. The short list of those pushing the boundaries of what is means to live in urban areas are nothing short of bold and original. Each comes in their own flavor and variety, but all related in their mission to improve urban living in some capacity. Here are some of them:

Coldesac is building the first car free neighborhood in Tempe, AZ. They Raised a $30M series A financing round from Khosla Ventures and Founders Fund and have designed the most walkable neighborhood in the U.S.

Praxis Society is changing urban organization by building a city around a shared way of life rather than around labor markets. They have organized a community around optimism, good health, clear purpose, and commitment to an idea greater than themselves, which they refer to as “Vitality”. Praxis raised a $15M series A financing round led by Paradigm Capital.

Although related to Startup cities, another classification of innovative city structures are called Charter Cities. The north star of these structures are legal, political, and institutional reform. Definitionally, they are not required to be built by startups. Charter cities build off the idea of special economic zones which transformed the cities of Shenzhen in China and Dubai in the United Arab Emirates and are responsible for the *politically confusing* Hong Kong and Singapore.

Prospera is the West’s first charter city that is being built by a startup. Located on a 60 acre tract of unoccupied land on the island of Roatan, Honduras, Prospera aims to be the tech hub of Latin America. They are working to provide a place where entrepreneurs and businesses can work freely while intentionally improving Honduran employment and economic options. Prospera has raised greater than $80 billion in aggregate from several investors including Pronomos Capital. The Apolo Group is also assisting in the development of their first property in Roatán.

Astral Codex Ten

Prospectus On Próspera

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5 years ago · 205 likes · 555 comments · Scott Alexander

The Line is one of the most futuristic projects being worked on today is the Line, a 656 foot wide, 105 mile long mega city in the middle of a Saudi Arabian dessert. The goal of this project is to consolidate a traditional city's footprint in order to provide healthier and more sustainable living. This project is funded by the Saudi government public investment fund and sovereign wealth funds in the region. Although not being built by a startup, it is part of special economic zone called “NEOM” which has a strong technological dimension, given its lofty futuristic vision.

Network cities are unique from Startup cities, but again live within the same family of innovative city structures. A Network city is a collection of dispersed properties tied together by a shared culture, community, economy, and governance. Cabin is a great example of an organization doing just this.

Cabin is creating a global network city for online creators and location flexible knowledge workers. Cabin residents can freely move between a network of neighborhoods sharing a similar culture and values. Cabin has ‘neighborhoods’ across the country which collectively creates their network city. They even enable interested parties to co-buy property.

Seasteading is the final and perhaps most far out idea that I’ll highlight related to new and innovative urban structures. Seasteading is the concept of building startup communities at sea, specifically in international waters outside the territory claimed by any government. The thesis being that nearly half the world’s surface is unclaimed by any nation-state, and building communities with political autonomy that float on the ocean can solve some of the world most pressing issues.

Because many of these projects are so early, very futuristic, and only marginally corelated to urban planning and design, I’ll link a couple notable projects below without going into too much detail.

Arktide, Atlantis Sea Colony , Ethos Island, Flexbase International, Blueseed (failed/on hold)

Risks

Community Building. Many of these startups have taken the following staged approach of city building:

1. Build a community

2. Raise $

3. Purchase land

4. Build

5. Inhabit

Engineering “communities”, both digitally and IRL is hard. A discord server of people that are interested in similar things does not automatically constitute a community. There is a fine line between being transactional and authentic and companies across the board are building group chats of people before they sell a product to generate hype and adoption. How many of these are artificial and temporary and how many will drive long term value for its members and the organizations they represent? That is yet to be seen, as this community centric approach to product building is a relatively recent phenomenon.

Community could be the most important piece of startup city building. Long term, people are what make cities great. Attracting and maintaining the best people will be one of the great challenges for all startup cities. The early adopters that make up the initial community of a place are incredibly important. Given that raising capital is predicated on the proven demand that comes with a community building, there is incentive to grow communities quickly and optimize for size + speed. Although discord growth of from 10 to 1,000 members in months is a great metric to put in an investor deck, it doesn’t necessarily reflect the quality of the community, which as an important metric to track in of itself.

Homogeneity. A big part of what makes NYC so great is the differences in people that live here. The varying backgrounds, occupations, cultures, nationalities, ages, etc all add to the charm, the dynamism, and fundamentally the success of the city. Constructing micro societies of individuals with shared basic values, could, unintentionally, result in very homogenous populations. At scale, this could exacerbate the modern segregation of race, class, gender, etc. This would negatively impact the upper bound number of people to that could be involved in a given city—effectively making a city less successful because of exclusion. Additionally, just as many tech companies of today have been riddled with problems of hateful communities congregating on their platforms, this risk is exacerbated IRL when digital communities turn into physical ones.

Re-building existing neighborhoods. Despite nearly half of the U.S being uninhabited by humans today (1.78 M sq miles of land), startup cities still may choose to re-build or build upon existing neighborhoods. This possibility, especially at scale, would obviously have an impact on those that live there.

Further Down the Rabbit Hole

About Startup Cities, Zach.dev

https://www.wsj.com/articles/3-d-printed-houses-are-sprouting-near-austin-as-demand-for-homes-grows-11635240601 ** to include or not?

https://thenetworkstate.com/miami

https://www.wired.com/2013/11/software-is-reorganizing-the-world-and-cloud-formations-could-lead-to-physical-nations/

https://twitter.com/FrancisSuarez?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1335037068108554241%7Ctwgr%5Eb3c0674c3564a0e670490d9afbe644d963331090%7Ctwcon%5Es1_&ref_url=https%3A%2F%2Fthenetworkstate.com%2Fmiami

https://www.forbes.com/sites/johnfrazer1/2019/08/06/the-reshaping-of-city-cores-that-were-designed-for-cars/?sh=15d944ab1e46

The majority of my time with Hillside Ventures was spent focused on the Insurtech Vertical — conducting market research, meeting with founders, professionals at incumbent insurers, etc. Within the industry, I was surprised to see how a seemingly small amount of tech could have such an outsized impact on accuracy, efficiency, and scale of insurance products/services.

Disrupting the ‘old guard’ has been a staple of the tech industry since inception. In 2022 it feels like there are tech companies taking over every major category and no stone has been left unturned. What will be the next wave of technological changes? What markets will they come in? What are the next major opportunities?

In my view, there is a massive opportunity in the near to medium term to focus on innovation in markets neglected in the current tech landscape. I suspect that many of the big companies over the next few years will come out of industries that have fallen to the back burner during the most recent technological revolution. As we look forward to the internet revolution and the companies of tomorrow, there are still entire sectors stuck in an age not yet consistent with what we think of as the “companies of today”. The Insurance market, despite the last couple of years of growth and progress, sits as one of the few remaining laggards of the ‘old guard’.

Share Building Something Old

In industries with little disruption, large incumbent players, and antiquated systems, gatekeepers of the status quo are able to make technological implementation difficult. High barriers to entry (regulation, capital intensity, scale of incumbents, general complexity) have historically limited the volume of startups attempting to solve key problems within the insurance space.

Although difficult, I take the glass half full perspective here in that the lack of technological progress and high barriers to entry are the exact reasons why these industries could make for such considerable opportunities.

In a past industry overview I dove into debatably the largest, most antiquated sector of them all…government. Today, I will look into one with a similar status — insurance.

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What is Insurtech:

At a high level, insurance is really just a means of protection from financial loss. An individual, organization, or business pays “x” amount of money on a consistent basis to ensure protection against the risk of an uncertain loss, “y”. If sum(x) for time period t >sum(y), then an insurance company generates a “float” of sum(x)- Sum(y).

In instances of successful claims, the insurer will pay the policy holder using the pool of scheduled payments that has been collected over time. The difference between the scheduled payments (aka premiums)and the claims paid out (sum(x) — sum(y)) is the “float”. This spread is ultimately invested in interest bearing securities and voilà, insurance companies make money on the money they have just made.

I tend to think of Insurtech companies as tech companies first, insurance companies second. Insurtechs develop the technology to improve insurance processes and outcomes. The traditional insurance functions that insurtech businesses commonly serve can be broken down into the following domains:

Insurtech startups have found ways to disrupt specific functions within each of the 3 major segments P&C, Health and Life, and Commercial. Many have thus far have focused on pricing/underwriting, claims processing, billing & other 3rd party admin functions. It is not uncommon for insurtechs that have proven they can contribute within one tier of the value chain to vertically expand their offerings and increase their usefulness across the full stack of insurance products/services.

Opportunity

A McKinsey report highlighted that in 2011 just $140M was invested into insurtech companies. By 2015, $140M of insurtech funding had risen to $2.7B, in part due to seed and early stage startups maturing to advanced financing rounds. By 2019, greater than $6B had been invested and in 2021 that number jumped to a staggering $15.8B. Undoubtedly a massive jump in funding values, but in comparison to the broader insurance market which in 2019 alone wrote $1.32 trillion in insurance premiums, the funding has been just a drop in the bucket.

As an increasing portion of the VC and tech community is learning, a specific sector’s abilities to attract private market funding is not always an accurate indicator of the true potential of a given market. These funding values most correctly show how general investor interest in insurtechs has increased over time and how initial funding has led to larger rounds, helped create more mature companies, and has encouraged new talent to build in the space.

Over the last 18 months the first wave of insurtechs who have primarily focused on distributing insurance products, rather than building enabling technologies have gone public. The list includes Doma, Hippo, Lemonade, Metromile, Oscar, and Root. Collectively, they have not performed well in the public markets, some trading as low as 85% below last years price. Granted, this is in the midst of a broader public market tech correction* of which the Tech heavy Nasdaq is down ~30% from the November 2021 peak. This has made it difficult to gauge exactly how much of this poor stock performance is due to investor sentiment on overall public equities vs. the tech equities broadly vs. insurtech specific equities.

Based on public market performance and current investor sentiment as of June 2022, it is fair to assume that funding to insurtechs won’t be nearly as aggressive as it has been over the past three years. This will force insurtechs to focus on profitability and move to more sustainable business models.

Pictured below, is the loss ratio (gross and net) for Lemonade. Despite improving this metric from 166% in Q4 of 2017, it is still far higher than the industry average. A typically acceptable loss ratio sits within the 40%-60% range. Fundamentally, what this means is Lemonade is not charging customers for the risk they represent, a “growth at all costs” mindset. Loss ratios this high make it hard to be around for the long term; investors are cognizant of that today, much more than in recent history.

As a business model, selling technology to incumbent insurance companies is has gained recent traction. Globally, the IT spend of incumbent insurance companies has grown nearly 45% over the past 6 years. Although D2C insurtechs like Lemonade have found themselves reaching IPO status earlier than many B2B Insurtech providers — a massive opportunity also exists within B2B Insurtechs.

Trends to Watch

Partnerships Vs. Replacement

A large portion of insurtechs have shifted away from directly competing with incumbent insurance providers and instead have begun to partner with them. In fact, an argument can be made that much of the the insurtech growth and development has been because of incumbent insurers, rather than in spite of them. In an analysis of approximately 2,000 global insurtechs it was found that from 2010 to 2020, about one-third of them secured funding, and a handful established strategic partnerships with at least one incumbent.

91% of Insurtechs say they are not seeking to replace insurance giants like MetLife or State Farm, but rather fill in gaps to improve policyholder experience and/or make data more valuable. In fact, 61 percent of all insurtechs today offer their services to insurers.

There seems to be a symbiotic relationship budding between startups and legacy carriers as insurance companies are learning that they must embrace modernity and innovation to keep up with contemporary consumer demand. Insurtechs have similarly realized the value of leveraging existing customer bases, risk/pricing data, regulatory expertise, and scale of established players.

Embedded Insurance

Embedded insurance is the real-time bundling and sale of insurance coverage or protection when the risk is most top of mind for the buyer, at point of purchase. The 3 types of embedded insurance are the following:

1. “Soft” embedded services where customers can opt in to purchase insurance

2. “Hard” embedded services that come with an included warranty

3. Invisible embedded services, where the insurance is embedded into the unit price of a product or service

It has been found that including insurance as an add on at checkout has a conversion rate within the 20–50% range vs. a 2%–3% conversion when someone makes a purchase and seeks out insurance separately.

The ability to seamlessly integrate insurance products and solutions into customers’ digital journeys makes the buying process effortless for customers and extremely valuable for insurance providers.

Embedded Insurance Startups to follow: Route, Extend, Cover Genius, Element, Qover, and Boost.

Insuring “New” Risks

B2C Insurtechs like Hippo and Lemonade have figured out how to sell relatively the same coverage as the incumbent insurers, but in new/ innovative ways. Their competitive advantages have been:

1. Bypassing agents and acquiring customers and distributing insurance directly

2. Using data to personalize plans and offer more accurate/better pricing for customers

3. Automating much of the claim processes

Alternatively, there is an increasing cohort of insurtechs focused on insuring “new” risks ie: risks that are not covered by incumbent insurers. I like to to think of these “new” risks in two buckets:

1. New markets that incumbents have not modeled out products/services for (NFTs, e-scooter, drones/new mobility, cloud storage, etc)

2. Old/traditional markets that incumbents have pulled out from or disassociated with (Wildfire risk in CA)

Companies like Kettle, Delos, Coincover, Zego, Voom, and Paramterix all are tackling “new” risk areas.

At the core of all these companies is data. Each new risk insurer has innovative top of funnel data ingestion strategies that ultimately allow them to consider a larger array of factors per policy holder. This paired with innovative underwriting models allows these insurtechs to consider more criteria and run more efficient/accurate algorithms to process claims and ultimately assess and price risk.

As an example, in CA traditional insurers will asses homeowners wildfire risk using 2–3 data points. This ultimately results in mass denials of coverage for millions of homeowners. Insurtechs like Kettle and Delos are focused on creating more accurate wildfire risk models and have been able to create a competitive advantage by collecting greater than 200 data points per homeowner. Synthesizing climate data, satellite imagery, eco-regional factors, historical fires and losses, ignition insights, etc results in more accurate decision making and pricing.

Risks within Insurtech

Consumer Trust

Part of why insurance companies have persisted for so long is because they are stable, reliable, and rarely change — adjectives that juxtapose fundamentally what it means to be a startup. Creating authentic consumer trust is typically something that happens over long periods of time — a fact that investors don’t love to hear. Building consumer trust in young insurtechs is most definitely a barrier to entry.

For insurtechs with deep pockets, there is always the option of sponsoring every major sports team/event enough times until consumers believe you are a big and established company, cough* what every major Crypto exchange is currently doing.

Risk Accumulation in New Risk Markets

In all insurance markets, but specifically within “new risk markets” there is statistically speaking, a likelihood that all active policies will incur losses.

In unchartered territory like all “new risk markets” there are few, if any historical data sets to predict catastrophes and high tail-risk events. As new pricing and underwriting models are created, real data collected over time through experience becomes of increasing important in predicting these low likelihood, large impact events. Young companies may not yet have had time to accumulate large enough data sets to truly assess these kinds of risks — especially when the market is just getting on its feet.

Conclusion

Technological capabilities like comprehensive data collection, process automation, and ideas as simple as cutting out middle men are seen as table-stakes in most tech centric markets today. Within the insurance sector, these very characteristics have acted as points of differentiation and have created tens of billions of dollars in value.

In a market as slow moving and antiquated as insurance, seemingly small amounts of technological improvements have had an outsized impact on accuracy, efficiency, and scale of insurance products/services.

Even with the amount of technological progress, capital and growth in the insurtech space today, it could be said that the sector has almost found “product” market fit. Ie: The first wave of insurtechs that have hit the public market have proved that insurtechs provide a valuable service and that there is a market need for them. The next phase in the insurtech sectors lifecycle will be about finding the outliers who can sustainably grow with business models that can persist...

Technology products have transformed every major industry , but the public sector still remains a major exception. Although this is changing — and changing more quickly than many anticipated, the government still represents one of the final frontiers for major technological innovation.

So What Exactly is GovTech?

GovTech is the classification of technology that supports or enables the provision of public services. As a sector, it encompasses companies using technology to modernize the operations of government. The term is generally associated with startups building products for government customers, but can also refer to companies who rely on government referrals or work with government suppliers. In addition to the GovTech startup environment, there has been an increasing amount of GovTech related activity concentrated among larger players such as Deloitte and Accenture.

The “GovTech” classification is extremely broad. There are subsectors unique to specific government services which can be seen in the graphic to the left. But just as there are unique subsectors, there are also functions of government that are shared by every other enterprise customer. HR, Communications, Finance, Customer Service, Productivity, Employment, and IT are all essential functions of government that make up sizeable additional markets.

The Opportunity

Governments are massive. The global GovTech market size was estimated to have been roughly $400 Billion in 2018. Out of context this number makes it sound like governments spend a lot on technology, but at the moment it still only makes up a small fraction of their total budgets. In that same year U.S. state and local spending alone was $3.81 Trillion. When thinking about the economy as a whole, U.S. government spending (federal, state, and local) makes up 17% of total U.S GDP. In fact, if states were treated like companies, 26 would be ranked in the Fortune 100.

There is a huge opportunity for startups to begin treating states, localities, and federal agencies more like businesses — to finally capture this massive amount of untapped value.

Unique Characteristics of GovTech

As there are barriers unique to GovTech as a sector, there are also characteristics of the industry that make it an extremely exciting space.

1. When other parts of the economy are adversely hit due to macro level shifts, governments are known to be steady and stable. In times of turmoil, government is almost always the most stable customer.

2. As it may be hard to sell into government, once you are in, it is very hard to get out. Although, on average, one’s customer acquisition cost will likely be higher than your average B2B or B2C businesses, customer retention rates are higher and churn rates extremely low.

3. Many people perceive government to be classified as “one customer”. It’s not. Just as one would sell to different businesses, one also has to sell to different government agencies at different government levels. Each of these agencies is a large potential customer that comes with interagency network effects.

4. Selling into government develops credibility. This credibility validates quality and and often makes a company’s path to the private sector much easier.

5. GovTech has a massive opportunity to positively impact society aka make the world a better place. Private sector and public sector collaboration is generally a more powerful means to make change.

GovTech and COVID-19

COVID-19 has changed a lot. That much is clear. In the context of government, the pandemic has accelerated government’s willingness to accept new technology products and has very much highlighted the flaws with their current technology stack.

Over the past 12 months, legacy product after legacy product has collapsed as seen with SBA Example, Unemployment Example, Cobol Mainframe Example, Supply Chain Example. As things being to normalize, governments will be moving their focus from trying to keep these systems running to updating these systems to prepare for the next pandemic and beyond. When the next crisis hits there should be no excuse to be this unprepared.

The UN breaks up this shift to digital government in three ways. The first two (React and Resolve) are in direct response to the COVID-19 pandemic, and the third (Reinvent) follows a more long term outlook. “Reinvent” highlights the full opportunity moving forward for GovTech as a sector.

Barriers and GovTech Risks

Although there may be a correlation between big customers being more attractive customers, there is not exactly causation to say that bigger is therefore better. In fact, there are a number of unique barriers and risks associated with GovTech that make the sector particularly challenging.

The first being the act of selling to governments. Historically, selling to governments has been an off-putting idea to many VCs and investors. One of the main concerns has been the long sales cycle associated with government procurement. On top of generally long sales cycles, every state, municipality, and federal government has a different formal procurement process — making it challenging to understand the landscape without previous government experience.

Most procurement processes require open and fair competition, so even if you are the only one creating a specific product, a government entity may open the bidding process to other potential competitors — often going out of their way to convince others to apply. These selling processes have been thought to take anywhere between three–nine months on average.

Often times, it is incredibly difficult to even know who to reach out to when attempting to sell to a government entity. Generally speaking, most government workers don’t advertise themselves on Linkedin, Twitter, or anywhere on the internet for that matter. Finding an initial point of contact proves to be more challenging for GovTech businesses than for B2C or B2B-facing companies

Governments have traditionally been slow to adapt to new technology. At some level, the risk averse nature of government and slow formal processes that come with them is what good government is supposed to be. Most people just want their basic services to be delivered and their tax dollars to be allocated well. If governments were constantly innovating, pivoting, and disrupting — people’s daily lives would be disturbed, flaws would be made, and inconveniences would be had. This is part of the reason that 70% of the U.S. government’s IT budget is spent on maintaining legacy systems — perpetuating a system where a small number of incumbents dominate.

Myth. Busted.

Although the three–nine month rule of thumb has been commonly perceived by investors and company's alike, The Govtech Fund, a GovTech focused VC firm founded in 2014 says otherwise:

“The average sales cycle of our govtech startups is 86 days.” -Ron Bouganim, Founder and Managing Partner of the GovTech Fund.

For context, the GovTech fund has invested in nearly 30 startups that work with over 30,000 government agencies around the world.

When thinking about B2B sales cycles, smaller deals can often take around three months where larger and more substantial sales are likely to fall between six to nine months. Hmmmmm — makes you think.

Being exclusionary with capital because “selling to governments takes too long” and then investing in enterprise software businesses exposes a certain level of cognitive dissonance. The reality is B2B and GovTech sales cycles aren’t all that different…

Traction

Funding: In 2019, 100 of the top U.S. GovTech companies had raised total funding of $2.9B, a number that shot up to $4.8B in 2020.

Some individual GovTech companies that made recent headlines with their raises:

• Payit raises $100M from Insight Partners

• Passport Raise $65M from Rho Capital Partners + more

• ArchiveSocial Raises $53M from Level Equity + more

Additionally, a handful of specialized GovTech-focused VCs have surfaced over the past couple of years: The Govtech Fund, Urban Us, 1776 Ventures, and the Urban Innovation Fund to name a few.

Here is a list of VCs (generalists and specialists) who invested in the GovTech 100 in 2020.

Notable Exits:

Palantir is very much a GovTech business. One of their core goals is to “Become the default operating system for data across the U.S. government.” Palantir IPOed in September of 2020 at a valuation of $22 Billion and is currently trading at a market cap of nearly double that ($43.90 Billion as of 1/9/2020).

Darktrace is one of the world’s fastest-growing cyber defense companies and a leader in Enterprise Immune System technology. It is targeting a 2021 IPO which would likely place a value of $5 Billion on the business.

GTY Technology Holdings completed a six GovTech Company merger in 2019 and currently has a $305 Million market cap while trading on the NASDAQ.

Motorola acquired WatchGuard, one of the most prominent body camera makers in the country in 2019 for an undisclosed amount.

2021 and Beyond:

States and local governments face a multi-year revenue challenge as they continue to experience high unemployment rates and lower consumption levels.

Although budgets are tight and funds are low, states and local governments are relying on technology like never before.

Subsectors I am excited about

Space! Space! Space! From space manufacturing, satellite transportation, space tourism, and space station development, there are so many areas within space to be excited about. Private companies are partnering with NASA and selling to the government (and other businesses) while solving complex problems in space.

• Varda is working to build the “Foxconn of space” and manufacture commercially viable products at scale in space.

• Axiom Space is a human spaceflight services company that provides access to the International Space Station and is also working to build their own low orbit commercial space station.

• And companies like Space X, Blue Origin, and Virgin Galactic are all fundamentally changing access to space travel.

Public Health: Pre-pandemic, the idea of telehealth seemed farfetched. Fast forward to April of 2020, nearly half (43.5%) of Medicare primary care visits were provided through telehealth compared to less than one percent (0.1%) in February. This period has cemented the fact that technology collaboration with public health is a partnership that is just getting started.

• MD Ally is a telehealth emergency care platform that allows EMS to triage the patients to virtual care instead of dispatching costly, emergency services.

• Cardinality.ai has created cloud-agnostic solutions for frontline workers in HHS to better provide critical services to vulnerable citizens.

Other Cool GovTech Things

• Danish Agency for Digitisation: Created a mobile ID and drivers license for Danish citizens

• BioBot analyzes sewage to map out population health in cities, counties, and states

• Element: Slack for government with extra cyber security

• Loop and HyperLoop projects from The Boring Company

• Any and all things PUBLIC

In summary,

2020 has highlighted the importance of technology in government. All it took was a global pandemic and damn near government failure to put technology and innovation at top of mind for government officials. Looking forward, there are a number of areas ripe for change within government and I am betting a lot of those needs will be met by startups and other innovative technology providers. Now is the time to reimagine the delivery of public services — it’s time for government to level up.

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GovTech — Government Leveling Up was originally published in The Startup on Medium, where people are continuing the conversation by highlighting and responding to this story.