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Reasons to be excited
Over the past couple months, I’ve started to explore the possibility of web3 for the building industry. We are still very much in the early days (and I am in the very very early days of my own exploration), but I wanted to share what I’ve learned and thought about thus far.
(If you’re interested in these ideas, please reach out!)
First, I’m going to start with a conviction: I think new web3 models will revolutionize the building industry. This goes beyond the upside that a new cryptocurrency might bring, or the minting of NFTs for architectural design. Rather, I think there are massive opportunities for utility-generating inventions in buildings that will proliferate because of web3-based tools.
The term “web3” today describes the growth of decentralized applications that run on technology like blockchain, from smart contracts to cryptocurrencies, to non-fungible tokens (NFTs) and decentralized autonomous organizations (DAOs). What’s new about this type of connected software is transparency and traceability; by exposing and streamlining the mechanism by which information is transferred, new opportunities become possible.
When we think about the building industry today-- also known as AECO, or architecture, engineering, construction, operations-- its most striking characteristic is the fragmentation of the field. [You can read more about that here.] This fragmentation leads to poor outcomes in building-based experiences (like in learning and public health), it facilitates slowdowns in construction, and it encourages pustules of resistance towards needed innovation-- like new technology to reduce carbon emissions or improve public health.
Things to be excited about
I’m confident that new web3-based tools will allow us to finally overcome issues in today’s building industry. In many ways, the decentralized nature of web3 is a better match for the field’s fragmentation than what has been possible with web2. The reason? With fragmentation comes compounding need for trust. A technology so trust-ful that it’s trust-less would reap many rewards, eliminating much of the traditional overhead that bogs things down. In addition, new perspectives and tools to realign incentives would do wonders for the space. Web3 brings with it a dynamism that spurs swift action; the presently inert building industry would be smart to capture and utilize even some of that momentum.
Here are 4 examples of web3-based building innovations I’m especially excited for:
Example 1: Equity for builders
One of the biggest challenges I see in the building space today is the slurry of misaligned incentives across the industry. The specialization of architects, engineers, construction teams, operators, and the myriad of subcontractors in between (not to mention the differences between landlord, tenant, and occupant) results in what economist Tyler Cowen describes as the incentive today is to build a brick, not to build the building. (Note: Cowen here is talking about specialization in general, not buildings in particular.) Each specialized team is only responsible for their scope of work-- less so for the overall operations, health, and evolution of a building’s 100 years. But it is the overall life of a building that has the most impact to society. So how do we align the incentives of builders toward the overall value of the building, for profitably not just in terms of rents, but in terms of the productivity of its occupants? Right now, AECO teams do not get a share in the upside of a building when it sells or “launches” (opens for occupancy), let alone any upside over the course of the building’s life. Tech startups, on the other hand, use employee equity to incentivize their builders to create quality products and services, at least until the fantasized exit event. At that point, whether IPO, acquisition, or something in between, incentives are realigned with new participants, new targets, and new timeframes joining in on the fun. But what is the exit event for a building? A building going public via a REIT realigns incentives for investors, but what about the builders? I'd argue that today's equity-granting tools don't match the needs of the building space. How can we incentivize builders by giving them equity for the overall productivity, maintainability, and evolvability of the structures they build? I suspect web3 mechanisms can help.
Example 2: Overcoming NIMBYism
In his post “Crypto Cities,” Ethereum co-founder Vitalik Buterin writes of the opportunity for blockchain to overcome the “inevitable political tension between a home as a place to live and a home as an investment asset.” This tension is similar to the one of NIMBYism, or “Not in My Backyard”-ism, in which neighbors stall local construction projects because they think it will inconvenience them and hurt their investments. Buterin goes on to wonder, “But what if we could give people a way to save and create that economic alignment without flaws?” New web3 incentives like a neighborhood or city coin, structured to give wealth to residents for growth in their locality (rather than make them nervous their existing wealth will be hurt), could lead to massive gains for new and retrofit buildings and cities.
Example 3: Better physical / digital interactions
While not specific to web3, it is undeniable that the concept of the Metaverse has played a major role in its popularity. Decentralized applications offer a clear way to incentivize both builders and participants within new virtual worlds. I’m excited for what this means not just for our virtual experiences, but for our in-person physical experiences as well. As we see more real estate developers invest in virtual parcels and commission web3-based architects to design their virtual spaces, there’s an opportunity to connect the fantasy of the Metaverse with the realism of existing structures. What can we experiment and play with in surreal meta-form that we can then bring back with us IRL? And how might our interactions in person influence what we experience in the virtual? I think this wave will promote better physical / digital 2D interactions as well, but I’m especially excited for the spatial component of the virtual.
Example 4: Better Life Cycle Assessments
Whole building Life Cycle Assessments (LCA) are an important component for sustainability in the building industry. Understanding the environmental and emissions impact of one of the most durable goods (i.e. a building) is critical to addressing our climate health. (Buildings contribute 40% of global carbon dioxide emissions after all.) However, reliable data collection is a challenge for LCAs, especially given the number of contributions and parts that comprise a building. Blockchains can help address this by bringing more integrity to supply chain monitoring, facilitating device-to-device transactions, and monitoring real time use through locally installed IoT. Of course, the existence of blockchains alone won’t motivate the myriad of players necessary to participate in LCAs, but the possibility of tokens and realigned incentives could further support its success.
Each of these examples demonstrate value in utility, and I’m certain there will be upside as well.
What’s Next: Infrastructure
In Tim O’Reilly’s piece, Why it’s too early to get excited about Web3, he astutely shares the four stages of innovation cycles according to economist Carlota Perez:
Perez identifies four stages in each of these 50 - 60-year innovation cycles. In the first stage, there’s foundational investment in new technology. This gives way to speculative frenzy in which financial capital seeks continued outsized returns in a rapidly evolving market that is beginning to consolidate. After the speculative bubble pops, there’s a period of more-sustained consolidation and market correction (including regulation of excess market power), followed by a mature “golden age” of integration of the new technology into society. Eventually, the technology is sufficiently mature that capital moves elsewhere, funding the next nascent technology revolution, and the cycle repeats.
According to Perez, each new innovation cycle must be supported by infrastructure, and it’s the early speculative bubble that funds it: “The bubble provides the necessary asset inflation for investors to expect capital gains, even if there are no profits or dividends yet.”
Whether we’re currently in the bubble stage of web3 or not, we will need useful infrastructure to support its growth. So what is the infrastructure for web3-based buildings I’d want to see built now?
Infrastructure 1. Extended Equity
ABOUT: New experiments in shifting value / equity to participatory stakeholders
In the early 1960s, the founders of Fairchild Semiconductor experimented with the idea of granting employees equity in their startup company. This move had lasting impact on the tech industry, contributing to the attraction and retention of employees as well as motivating the creation of successful products and services. For web3, I’d want to see new experiments in this kind of innovative social infrastructure, new experiments of shifting value and equity to participatory stakeholders. For a building this could mean granting equity to the architecture, engineering, construction, and operating teams responsible for its design and maintenance. We’d need to be thoughtful to identify the right “exit event” though, as initial occupancy or an offering to public markets would only mark a single stage of a building’s life. We should be driving towards generating and delivering value over the extended lifetime of a building instead. Given the absence of a single exit event that matches desired value, perhaps the so-trust-ful-it’s-trust-less nature of web3 will prove useful for generating and tracking multiple exit events instead.
Infrastructure 2. Railroad across the Metaverse
ABOUT: Building out connections across siloed virtual worlds
The expansion and improvement in new accessible virtual worlds will be a magnificent playground for new types of world-building, structures-oriented, and land-based explorations. First and foremost, virtual reality will (and already does) attract attention and talent for new ways to think about our 3D environments. Simply watch your parents use an Oculus Quest for the first time and you can easily imagine what new experiences might be unlocked with greater accessibility to such worlds. Building out the railways of the Metaverse will be an important infrastructural step because it implies accessibility and “globalization” across today’s proprietary and siloed virtual kingdoms. Just as the railroad brought new life to far-off depots across the continental United States, the railways of the Metaverse would connect different virtual lands, each with its own resources and culture. With rail lines laid, stations and supporting amenities like the saloon, the post office, and the pharmacy could also take root… a mixing pot for new amalgamated products and services. I’m excited to watch as this infrastructure unfolds.
Infrastructure 3. Ubiquitous Commissioning
ABOUT: Further advances in commissioning real world building sensors that map to the virtual
EXAMPLES: Imagine if Matterport began to simplify sensor commissioning for their digital twin 3D models
As our virtual models improve and become more accessible, and as sensors and IoT devices become cheaper, we’ll hopefully see a surge in demand for installed sensors that deliver value in both the operating and virtual economies. For this to be possible however, sensors will need to be massively easy to install, commission, and integrate into the various pipelines desired. Multiple sensor companies have tried methods to improve their own setup processes, but for truly expansive sensory experiences, we’ll need this commissioning process to be decentralized and ubiquitous, both at the enterprise and consumer level.
Infrastructure 4. Builtware (multidirectional sensory systems)
ABOUT: New experiments in sensory feedback
The vision of omnipresent physical and virtual interactions has been around for ages. I call this “builtware” because we should envision these technologies as part of our built environment, the walls and surfaces that surround us rather than simply hardware devices to exist as fleeting furniture. This is similar to the vision that Bret Victor puts forward with Dynamicland, where “the entire building becomes the computer,” a medium for more collaborative learning. The required infrastructure for this vision includes multidirectional sensory systems: colors and shapes that help you intuit the value of an algorithm, haptic feedback that allows a virtual partner to get your attention, or sensory ware that lets you smell the chocolate chip cookies you see listed on a virtual menu. For these ideas to scale, builtware infrastructure will be a requirement.
Infrastructure 5. Blockchain-based Building Catalogs
ABOUT: Advances in blockchain-based building catalogs to influence ease of maintenance as well as embodied, operating, and end-of-life emissions
While tools like Building Information Modeling (BIM) exist, they are computationally intensive, difficult to verify, and challenging to integrate into other workflows. New platforms like blockchain-based building catalogs (similar but not directly the same as BIM) would be a new successful infrastructure that could launch many new applications. For example, more robust catalogs could facilitate the transition away from carbon-intensive building materials, offer necessary data to prove ROI on new operational investments, and help to manage the end of life of building components. As researcher Theo Dounas and fellow authors write, a “cryptographically secured mechanism allows the generation of a representation of a building component, and the management of its lifecycle from birth to end of life, including all phases of the lifecycle of a building, from concept to decommission.” I’m excited for the new businesses that could leverage this type of plumbing.
As you can see, there’s a lot to be excited about for the future of web3 and buildings, and we are still in the very early days. Now is the time to embed our plans into new infrastructure as it gets built.
Speaking of embedded plans, I often think of Gregory Bateson and his profound words in Steps to an Ecology of Mind:
Should the original planners put into the very fabric of their plan collateral incentives which will seduce those who come later into carrying out the plan for reasons quite different from those which inspired the plan?
Bateson here is wondering about intention-- does the success of a final outcome depend on the motivation of the actor? The fragmentation of our building industry necessarily means that each party will have different motivations and incentives. We should use these permutations to our advantage, but for shared benefit: physical and virtual structures that offer better experiences, allow us to be healthier and more productive, and are capable of evolving to match future needs. I believe new web3 tools will help facilitate this organized complexity, encouraging decentralized actions that still culminate into a complex whole-- the very fabric of our plans. I can’t wait to see what that will bring.