Circular Reasoning

There’s no law of state or town that requires innovation. Business leaders are free to choose to do it, or to refuse. Trying it out puts many of us into a discomfort zone, one that innovator Amory Lovins might describe as “rearranging the mental furniture.”

HIVE, our new business community and inaugural event, September 28 and 29 at Los Angeles’ LA Live, intends to be a place for housing’s leaders to “rearrange the mental furniture” on how they look at business challenges today and tomorrow, and as individual firms and as a dynamic ecosystem. Seats are going fast, so register here now. [Although, you are free, by law, to refuse or accept the opportunity].

Innovation may not be regulated or a government decree. But it may be necessary if we want to turn good performance today into viability and the ability to thrive in housing’s future. So, we turn now to one our five HIVE deans, renowned architect and Cradle to Cradle champion Bill McDonough, who’s leading our discovery process around the challenge of how manufactured housing products and material can be both profitable and safe and healthy for people and the planet.

I talked with Bill on Monday this week, and his responses to questions around the meaning, the pathway, and the gratification–personal and business–of innovation in our businesses, industry sectors, and housing community amount to a “rearrangement of our mental furniture” on many fronts. We talk expansively of issues that inform Bill’s approach to architecture, planning, business, product development, and communities. Topic areas include concepts like live-work everywhere all the time, re-use, disassembly, the “circular economy,” and what would make a 15-year-old excited about getting into the housing community today.

Here’s the interview:

JM: Bill, explain the meaning and definition—in your mind—of innovation in housing.

BM: What’s exciting about talking about housing is that it’s the most ancient of architectures but also the most urgent of architectures. … It’s something we all need. It’s something we all want. And hopefully it’s something we’d all love to have. So, when you combine need, want, love, you’ve got a very powerful framework for innovation.

If you look at the automobile, you need—I don’t know—an old Volkswagen. You want a BMW. And you’d love a Tesla or a Ferrari.

The idea that there’s basic needs being met. There are desires being accommodated. And then there’s this emotional connection to being home, and what that means to somebody in their life with their family. Means that housing is really a kind of technical word that can inspire people to be at home, which is a fundamental need, fundamental want, and a fundamental love. They’re not enough people who have that in their lives every day.

So, I am looking for how to make safe healthy places for people that will work either in specific materials or in uses and in their buildings across generations. And will be powered by renewable energy, have clean water, provide continuous social benefit.

I’m worrying about private clients who can afford anything to people who can’t afford anything at all, and treating it all with respect and dignity.

A safe home is a human right.

One of the more important elements is—it’s an odd contrast , but—it’s recognizing the power of cities, and their ability to have mixed use, and work-live, ideally, everywhere. And the suburbs, in this country, driven by driving, literally. We can reflect on how magical the cities can be, especially for innovative people coming into the workplace in their youth, and looking to be parts of communities, and find others who share their interests of all kinds. And then we see the idea of having children and being able to be in a city and enjoy that prospect, which is hard for some people. I remember being in New York City as an architect and being intimidated by the idea of having children in New York City; what I had to live on and what my salary was at the firm. Fortunately, for me, exactly at that moment, I was asked to be the dean at the University of Virginia, and ended up in a house designed by Thomas Jefferson. So, I got pretty lucky.

Imagine, 14 people came here with me from my firm, because they were having the same issues, starting to have families, and finding it difficult to afford to be in New York, and find schools and things like that.

There’s a time in life when you’re looking for common interests with young people, and then you find yourself with children in certain situations where you might want to go where there’s space, and outdoors, and rural escapes for them, and that kind of thing.

And then you come back to the city when you get older. You want to be back together with people and not have to worry about being lost in some file cabinet on some highway somewhere.

This idea of invigorating our communities with this range of interests, and then trying to figure out how many we can do at once. That’s where the real dynamic part comes, which is live-work everywhere, all the time.

That’s an important idea. It’s really going to move against this notion of single use zoning.

One of the nice things about having worked with Cradle to Cradle is the concept and now manifesting itself in industries, very large ones, too, is that the factories that make these products are safe, and you can live next door. We’ve designed textile mills where the water’s as clear as Swiss drinking water, which means they’d rather use that than new water.

You’re in places where you can live next door to a factory, a famously dirty, dangerous thing that is no longer so. This is design.

JM: What might be the most influential innovations that come to mind as examples in the past couple of years?

BM: Again, the ancient becomes modern, and what we’re seeing right now, the most advanced clients we have, we actually design office buildings as housing of the future. I’ve been doing this my whole career. It’s been very successful. We actually design an office building as loft apartments or apartments, and then, on the drawing board, convert it to an office building, and build it as an office building.

What happens is fascinating! You end up with really good proportions, because if you can live in it, you can work in it.

In Europe, where we have regulatory situations where you can’t be more than 7.5 meters from an operable window, like in the Netherlands, you inherently get these proportions and livability, by law. Here, you do it voluntarily. But it makes the places much more attractive.

The other nice things for the banks is that we’ve been designing these buildings for what we call end-of-use, where we design for next use, intentionally. So, we’ll say, if the financing’s 15 years, and the leasing is 15 years, even on our office buildings, we’ll realize that we can design the building as commodities of the future. So, we can design them for disassembly and re-sale. So, if the bank, say, got stuck with the building, and had to take it down, under conventional construction they would have to pay to have it removed. In Europe, the office buildings are around 80-Euros a square meter for demolition and removal.

We’ve seen pre-pricing on some of our projects at 120 euros as an asset, because we’ve pre-priced the steel, following commodity trends, so that at the next use, if the bank wants to take the building down or sell it, then the first choice they have is to release it as an office building, which, of course is very practical. The next option is to convert it to housing, immediately, because it’s totally ready. So, that’s very cost-effective because there’s always a market for housing. The 3rd option is to have someone tear it down for a skyscraper or a park or something. They can get paid for it, instead of having it as a cost. Turn liabilities into assets.

So, this idea of having intergenerational assets instead of intergenerational liabilities is a really critical design concept that we’re playing out, very successfully with the developers.

It’s actually based on fundamental economics, both currency and capital, short term and long term designed into one design program. So, it’s very straightforward, and it allows you take your human values—which is, you like to do good work—and translate it through principle behaviors, to goals, strategies, tactics, measurements, and value creation. It’s very intergenerational, instead of here-today-gone-tomorrow.

JM: How do you talk about this kind of change in terms of how it impacts people’s sense of and need for communities, continuity, cohesiveness?

BM: The only constant in modern life is high-speed change. So, it’s actually a very ironic moment, that in order to be constant you have to be ready for change.

So, I think if you look, Rome wasn’t built in a day and it didn’t have zoning. Rome is still occupied. If you look at SoHo in New York, some of the most attractive apartments, offices are by design. Buildings were designed with great proportions, to live in New York because you had to have high ceilings to get good ventilation; you didn’t have mechanical ventilation. You had to have tall windows to get light, space. You had gas lamps, furthering the air quality problem. The buildings were made of massive materials, so they could hold night-time temperatures when they were cool through the day, as thermal banks, so they could moderate temperature. And, of course, acoustics. Those are the fundamental desirable conditions of a great anything in New York City. The fact that these neighborhoods continue to thrive across uses…

When I moved to New York in the 1970s, SoHo was just art studios. Now, it’s very luxurious places to live, galleries. It can be anything it wants to be. It thrives under all uses. That’s very interesting.

It has good bones.

JM: What are the opportunity areas, product segments, most ripe for the most meaningful new Cradle to Cradle reinvention?

BM: Some of the things are not ready for prime time, but are very powerful. By the time we are in LA, I think I will be able to make some big announcements.

Exciting to see the biggest companies in the world be exposed and excited by this idea.

The Circular Economy grows out of Cradle to Cradle. It’s the second condition. The first is, safe and healthy materials and biological and technical cycles… in other words, design for next use. Then it goes back to soil or back to industry use.

The second is Circular Economy means reusing things, but also there’s a quantification, and if we reuse poisonous things, have we done a good thing? It begs the question of what is the quantity. That’s why Cradle to Cradle is so important. Quality first, then quantity.

Interesting for the housing market for the United States, for example, that when you look at things like Airbnb or Uber, a lot of people think that’s the circular economy because you’re seeing these things as services, rather than as just physical assets. So, the apartment or the house as a service, the car as a service…. That’s an important thing. That’s also called the sharing economy. So, it’s not just circular, it’s really more of an efficiency moment. More extended use of things as well.

So, the Circular part would actually be the physical object that’s being designed to be reused in various ways.

This does affect housing dramatically.

Then on the renewable energy side, what we’re seeing is unbelievable. We just saw the other day, a solar plant, a big one, went out at 3 cents a kilowatt hour. 3 cents! Imagine that? That’s half the price for any gas. That’s half the price of wind power. 3 cents! So we’re here!

We’ve arrived. So anybody that’s not on that bandwagon can’t do math. Doesn’t belong in the real estate business.

Clean water is a universal right.

Social benefit is really why we’re all here in the first place. Watching Cradle to Cradle get taken up and scaled is very exciting.

JM: What role might home builders and residential developers play in applying circular economy thinking to their business models?

BM: The answer’s kind of odd. It’s think short term. Think long term. For a lot of people in the housing business, there’s short term because they need a return on investment that matches their expectations in the short term. That’s to be expected, that’s driven by the market. What’s interesting about that is that you can have your short term and you can also think long term.

Here’s an example. I do a lot of work in the carpet industry. We brought the concept of carpet as a service to the industry. We were the ones who originally put that in play. And we’re doing it with Berkshire Hathaway—the largest carpet company in the world now. It’s not recirculating substances of concern, like soft Pvc or something. It’s actually designed to be safe and healthy, across generations and reuse. So for the long-term, you’re storing your raw materials on the customers’ floors. That’s really interesting if you’re going to keep an economy going. But that’s a long-term thing. It also is a short-term thing.
Here’s what I mean. If I have the numbers close to right, carpet was nylon 20 years ago. Nylon 66 and Nylon 6 are very durable materials. You’re talking decades.

Today, we’re seeing in the housing market, especially for rentals, that everybody wants a new carpet. Nobody wants to go into an apartment with some old dusty carpet.

So all of a sudden we have this [situation]: You can do the right thing for the long term while you do something short term. What do I mean? The carpet right now we’re seeing flipping from being ordinary nylon, and now it’s pvc [poly vinyl chloride]. So, given the recycled content desires of the bottling industry, to meet regulations for recycled content in bottles, for polyester … They’re having a tough time getting it! And the price is much higher than virgin.

The reason is, the carpet industry wants it, to give it to the housing industry! People want to by an $800 carpet, not a $3,000 carpet for a little apartment. Because it’s only going to have to last and be of service for a couple of years, and then they’re going to tear it out. So, what we can do, is we can say, ‘fine, we’re going to use polyesters that are safe and healthy.’ We use safe and healthy dyes and fixatives and so on … backings, … Why not? Because we can. Now you’re giving your customer something that essentially makes their life better. Better acoustics, better appearance, better comfort. And then in two years, when you rip it out, we want it back!

It actually becomes a short term thing providing a long-term benefit. So, you can get your short-term results, just think long-term at the same time. Otherwise, you’re not taking advantage of another moment. So, we’re structuring the businesses that way so that essentially the suppliers of these materials are providing you with the benefit of their product for a couple of years as a service. And they’re keeping their raw materials on your floor.

When I watch home builders who are doing multiple units, it is interesting to watch that if you give customers way too much choice, they can get lost in it. They say, ‘wait a minute, this isn’t the pink I thought I was ordering. It doesn’t look like it did on the swatch.’ All of the sudden, they’re lost in there. Sometimes, it’s easier just to say that, ‘here’s three choices—this, this, and this.’ What happens is people are relatively happy with that.

We see a lot of studies on happiness. Sometimes too much choice causes the opposite of what you’d think in terms of happiness.

So, people go, ‘oh, I like the grey one,’ or ‘I like the blue one,’ or ‘I like the beige one,’ and then what happens is interesting, because then as you do the housing, if you have left over carpet or paint, for example…, if you don’t have too many colors, … you send the painter on to the next paint job with whatever is left over from the previous paint job. It’s all one color. And it’s nice.

And if people want to tune it up, go ahead. Paint. Feel free. That way, the builders save a lot of money and they’re not running around buying extra cans of paint or extra carpet. And they can take advantage of the scale.

JM: What would you say to a 15 year old to excite him or her about opportunity in housing and residential product design and engineering today?

BM: If you think about it, and as an architect I can’t help it, because it’s what I chose as my avocation. It’s very exciting to wrap up life with a bow, and make it better, and it’s a gift. For you young person, if they look at various things where they see that the world is being controlled for them in ways that they may not want to be constrained by … Or, the opportunity to be very productive economically, which is famously connected to real estate for people who are acting wisely.

Also, the creative work that lets you express yourself as an individual. It’s a very great opportunity in almost every step: From how you think about community down to how you make choices on fixtures. It’s all a fun thing.

The world gets better because you’re here. That’s the message.

Get to it. You get to do something physical. Your not a pundit. It’s not theoretical. You get to do something. That’s very exciting. Most people in environment and real estate take about how the goal is to be “zero” something. Zero bad. I don’t know how many 15-year-olds want to be “zero” bad. If their parents tell them they have to be less bad and have zero impact, but children make it difficult because they have to feed and clothe them.

A world of nothing. That’s not that interesting. A lot of times, they look at the adults and say, ‘I’m going to be like that; I’m going to reduce my carbon footprint by 20% by 2020 or something.’ Now, they’re telling us what they’re not going to do. How exciting is that to a 15-year-old who’s trying to figure out what they’re going to do with their lives.

Everybody’s telling them what they’re not going to do. They’re going to reduce their carbon. Well, how? What does that mean? That’s like jumping in a taxi and saying, ‘quick, I’m not going to the airport.’ What does a 15 year get from being told what the adults are not going to do. They’re goal is nothing. That’s not exciting at all!

What if you’re going to house thousands of people in a delightful place, using your creativity and doing it in a business-like way? In an area wher e you don’t have to have a PhD to be a wizard! I think that’s really cool. And, it’s everywhere! It’s in your home town! And you can make it better; how cool is that? You don’t even have to travel. I love it.