New Jersey Project
About: how do we develop a win-win-win situation for developer, OSE, and customer? In 10 year horizon, there will be options for creating the world's first Network State.
Fairlawn, New Jersey
- Intent - inject life-work and land use integration into any development, considering Jen Gerson's critique of affordable housing. Efficiency and profit position OSE exceptionally well in this role
- All improvements are shared 50% between the 2 parties involved based on a fair algorithm.
- Ex - Negotiation of project pay for a whole development with a Collaborator - basic 50/50 means: We create a baseline upon what the next competitor would cost. That is our starting pay potential. We divide the benefit of cost reduction 50/50. For example: OSE can do it for $100k. Another guy can do it for $200k (developer still charges their usual profit). Working with OSE 50/50 upside agreement - we charge less than the $200k developer (so that we can get the business). Our starting premise is a lower cost home with ecological features (and potential reinvestment into agrihood enterprise, local waste water, etc), and 36x speed improvement per house. Irresistible offer. End point looks like $150k for OSE. This looks like a suboptimal deal principles-wise. OSE is making $50k, and Collaborator made an extra $50k. But the Collaborator is making a profit upon this - say a standard 25% or $50k. OSE should get half that profit in a true 50/50 scenario - for a total of $75k for the developer, $75k for OSE. This sounds fair in principle: we shared 50% of our upside, which is our lower build cost. They shared 50% of their upside. They made 50% more, we made 50% more. Regarding costs - such as if they got the land and did grading - this would have to be shared.
- Above is mostly 50/50, but does not address land cost or grading.
- Is there a better way?
- Too complicated, how about simpler: we look at overall project cost and be transparent. Revenue is whatever the Collaborator sells for assuming units are sold, but this would require a formula if units are rented. OSE gets half the net, Collaborator gets the other. Therefore, we are working everywhere to maximize value, as upside is always shared. Simple as that. So we don't set any price - we risk share throughout. Their value add is putting up money, our value add is building homes. Can it be as simple as that? We don't have to worry about fairness, we agree to share half up front. The only question is fair representation of cost - ie, integrity in the partners. That is the only question - and it's something that we get a feel for in the personal negotiation. Keeping it simple. This is consistent with Never Split the Difference.