Flywheel Development Log
aka essential business logic for SH4 and its rollout for replicability.
Fri Jul 28, 2023
Separate track: 4 year program. Think of it as the Children of OSE. You have to demonstrate high learning capacity for both learning concepts and learning to use tools. Sample penel shipped to us as proof, or other sample modules. Cost - $10k for 6 months. From there, you start getting work-study pay. First 6 months is 50/50 school/work. Work is building. School is learning collaborative culture, principles and practice of open source ecology, peak performance development, towards Movement Entrepreneurship by a Survey of Everything in the first year, followed by design. At 6 months, you will quality for between $15-25 hourly pay depending on the skill level you attain during the first 6 months - $15 if you remain close to beginner, $25 if you can build at 70% of optimal scale. This figure can grow to optimal scale ($35.7) ( At the 6 month mark, you have the choice to continue on the 50/50 schedule, or move on to 75% class - 25% work schedule. Tuition is $12k per semester for the first year, and we may be able to offer scholarships if we can manage to secure nonprofit sector funding. At the 1 year mark, we review. If you are making satisfactory progress in learning and practical skills, you may continue, in which case we select a project that you will steward for your collaborative senior thesis. The current options are: DMS Studies of Construction, exploring the CEB press, Tractor, or Human Collaborative Vehicles. The first 4 year publication is a group project, intended for widescale replication. It requires tech development of 1.5 years, and 1.5 year of enterprise model development and proving. $12k for tuition, we have financing available, with the financing
It took 2 years for me to understand this, and for us to prove this 75% so far:
- Subcontractor margin is 54% typical , so 100% markup . This is industry standard.
- Contractor margin is 35%, or about 54% markup . This is industry standard.
- Note that there is a lot of confusion regarding 'margin' and 'markup', and there are many numbers that float around the internet, but the above 100% and 54% markup are consistent with OSE's observations and online query
- This means that if you compound these, the cost over materials (for labor of contractor and subcontractor) is 3.1x the cost of materials!!! To see this, imagine $60k in materials, the subs charge the general contractor $120k total, the contractor pimping the subs takes in 0.54*120k + $120k = $184k. This is just the production cost of a house, no land/legal/anything else.
- By comparison, our cost is $60k+$25k (1000 hours *$25/hr doable with semi-trained workers, 75% data-backed build time assumption), plus our construction manager (construction manager industry standard pay is 5-15%), and in our case on the low end of 5% because of the reduced build time. So our apples-to apples comparison is $90k vs $184k house. This means, that without even considering 'profit' - we are at $94k net advantage per house over the competition. This $94k is the advantage we have for a small house 2 bath/3 bed of 1300 sf, and it will be greater than this for larger homes. Our cost/sf goes down for larger homes, while our cost advantage to the customer increases over the competition.
- This looks like a formidable enterprise flywheel that will spin up all other OSE operations and thus begin to deliver on its promises.
- Bottom line: out model allows for robust operation while still selling at a lower cost (as our quality is much above builder grade - who provides 5kW PV in their base offering?). Bottom line is that from first principles, our model is designed to succeed under many scenarios where others would not be able to build or venture.
Do you see any defects in my logic so far?
Thu Jul 27, 2023
We agree that we have to prove the model now, there was some controversy regarding timing the builder (paid) - apprentice (paying) tracks. For the paying track, we can clarify the 'paying for what'. Are they paying for education? I claim our education is better (more applied, immersive, diverse) than tech school.
Let's keep clear on focus: next Seed Eco-Home build in Savannah in 6 weeks, with runway of another 6 weeks (3 month runway based on $50k net from sale from $200k revenue and repayment of $150k loans, and payroll for 4 of $16k/month). If we make it through this 3 months, then we have $200k in the bank AFTER repaying the last $50k of loan after the second house sells. At that point, I would consider this 'home free' as $200k in the bank allows us to operate comfortably) if we have only 4 employees ($4k/month/person) - so about a 10 month runway until the next house sale.
For 4 workers for now: risk is that some major fuckup on a limited runway of $50k for 3 months.
Assume we have $50k for 3 months runway after selling the Maysville house, what can we do?
- Hire 4 workers. 40 hour week ($25/hr, whereas starting carpenter pay is $11-20 nationwide, $13 average for apprentices)
- Recruit 8 paying apprentices - 4 in design, 4 in Movement Entrepreneurship
The brutal facts are:
- I am working 40 hour construction weeks with the 4 workers, on a 4 day 10 hour week schedule for construction
- I am spending 6 hours in the classroom. This includes 3 hours Friday teaching open source performance culture: collaborative design, heavy focus on design thinking, mental models, performance mindset, solving problems. Survey of Everything to get people onto the mindset of solving pressing world issues. I am also spending 3 hours on Friday teaching Machine Design (which starts with the House in Year 1)
- I am spending about 16 hours with any due diligence on teaching prep, or getting permits for the next build.
Summary of tracks:
- Builder - 40 hour building
- Designer - 20 hr building, 20 hr study minimum (3 of this is class time)
- Open Source Ecologist - 20 hr building, 20 hr study minimum (3 hr class time)
- 40 hours of participative construction management, easiing out of this after 6 months
- 6 hrs teaching
- 12 hrs teaching prep (this constributes to ongoing curriculum refinement)
And in this process, we go balls out (that's an engineering term) on building the Savannah house. We have 8 builder equivalent from 4 full time and 8 part time builders. If we get really good people, then I am inspired, not drained, by teaching. I have previously seen joy of pure inspiration upon me teaching workshops, but only when it came to edutainment. Here, it's more about getting shit done, so I really have to up the quality of the commitment/grit in the people i teach. That will be the challenge, my experience has been poor so far on people doing what it takes for the 1000 mile march. To summarize:
- 12 recruited for 9 full time builder equivalent including me (360 hours per week), 4 week build time of the 2000 sf model)
No deadspots of effort as we now have full detail + CAD up to finish trim, and the lot we're building has no inspections required
- I am inspired because with the build detail available, i can leave the role of designer/documenter which I am doing currently for the build detail.
- The effort is based on 'everyone starts on the factory floor'. Reason is that Design-builders-entrepreneurs need to know how to build, otherwise they produce shit design like most of the world does.
- The effort is
The above seems to address the intensity learnings from the last Apprenticeship, where information overload was complete for the participants. In the above scenario, we divide the issue into separate builder-designer-ecologist tracks.
I could envision that builders will want to join the designer/ecologist tracks, but I think the answer there is simply to charge them for the apprenticeship time, so that it's fair to the people who pay.
Do you think the above would work? Does this address the sequencing, regarding supreme focus on house build+sale cycles? Regarding risk of frustrating the build and money proof. You mentioned spending time teaching rather than getting performance from the people. It seems we have a workable solution:
- Program makes no compromise on finishing the house, but only adds effort to it via the apprenticeship tracks (apprentices still have to have an interest and ability to build, that is part of admission)
- Is my time taken away for teaching? I think if we do the 4x10 schedule for the build track, we are all good. Can I do it? I think so, I work all day already. The real question is if I lose house-building focus because I'm teaching? I don't think so - I can teach in my sleep. For teaching build skill - we have skilled people that our students learn from. For class time, we have tons of materials already available - the question is more the quality of the students who would have to have higher bandwidth to actually learn. And i plan on selecting only people who I think would be capable of rapid learning for those tracks. If they aren't capable, they are just builders, and can take longer to learn. I really think the success will be at the point of recruting, and if I don't think there are good candidates for the apprenticeship, we simply don't take them. I think we need to select for the quality of people for potential succession. Ideally the candidates are so good that it's a joy to teach, as people are not overloaded but asking for more tasty morsels.
Thanks for listening here - let me know what clarity I still need here.