DEVELOPING back into development
This page is in response to the question how could
500 million dollars be used in a real estate fund
from a foreign investor interested in profit and
requiring structural transformation
present mode of developing land for human use is destructive
and, in the end, economically self-defeating. It is
also a process that is wired into a bevy of special
interest groups from government to banking to energy.
Change the real-estate development process and you
have changed virtually everything about modern society.
Change will require a systematic METHOD.
it necessary? Yes.
it possible? Yes.
it be easy? No. Attempt it and do it poorly is an
invitation to bankruptcy. Do it correctly and there
is no way to fail.
it correctly means to approach the process as a system,
with a conservative economic strategy, and to systematically
build for the long run. There are aspects of this process
that will require steady work, for extended periods
of time, to establish the continuity necessary for significant
change. This implies a equity based, cash business that,
in a medium time frame, turns into a revenue generating
engine. By rolling this revenue back into the enterprise
an increasing returns phenomena can be created.
is a different strategy than the highly leveraged process
popular today. This process has two fatal flaws. First,
it plays to an army of locked-in organizations whose
standards drive costs up and value down. Second, this
strategy is highly vulnerable to economic swings - it
is a take no prisoners, crap shoot. It perpetuates a
everybody and everything is a commodity
attitude that demeans habitat. It is, essentially, a
time, real estate will always accrue value. Properly
developed real estate will accrue at a much greater
rate. It makes its own value. The rarest thing
in the world is a beautiful landscape that supports
human activities in an economically and ecologically
sustainable way. People will pay for it and it is
unlikely that any one fund could possibly overbuild
is said that the Earth is becoming over developed.
This is true and not true. It is over developed given
the Pattern Language and architectural design strategies
now in place. Humanities present approach to
infrastructure development will be catastrophic if
scaled much beyond present levels. Work and lifestyle
patterns are intrinsically integrated
to this infrastructure calamity as are building codes,
mortgage (death-gage) practices and so called
safety and work standards.
building industry (in name only) does
not employ ValueWeb structures but is composed of
many small, poorly financed businesses that work mostly
in a passive-aggressive set of contractual arrangements.
This imposes massive (up to 50% cost and 75% time)
penalties on the design/build process. There is no
comprehensive SYSTEMS INTEGRATOR in this mix
- merely different players seeking dominance and advantage.
a fund that will establish long term financial viability,
social, architectural and ecological integration,
and put into practice a new WAY of developing
earth assets will require going completely across
the grain of conventional wisdom. We have
come to the point, however, where there is little
choice but to do this. There are isolated, partial
examples of projects that have done so, over the last
50 years, with great success. Enough to point to a
direction that can be pursued with confidence.
is time for the new Cathedral
Builders. It is time to arrest destructive development
practices. Time to create a new model. This can be
done only if an integrated approach is taken. This
development process must be comprehensive and bring
together all of the components (research, design,
engineering, manufacturing, building, financing, property
management, real estate law and codes, craft unions
and so on) into one eloquent facilitated system of
one time or another, in the last 48 years, I have
worked in each of these now isolated domains. I have
found that they can be integrated and that
this brings powerful results. It is also to be
that the resistance and ignorance - and lack of vision
- in this arena is legend. There are entrenched
interest groups that will even employ violence -
and unethical practices that border on the illegal
as a common
practice that have been long banned in other,
more scrutinized areas of our economy - to maintain
their position. For change to be accomplished,
mass has to be brought to bear on a single point
and a systematic process employed over a multi-year
to PRACTICE a new way into being.
is worth doing. People need new environments based
on 21st Century patterns and opportunities. Environments
that are affordable and sustainable. Environments
that demonstrate how human economy and natural
ecology are one.
leveraged in the traditional way, a 500 million dollar
fund can be used to create an enormous amount of building.
If leveraged, the system-in-place will co-op
the process. Maybe, with great effort and extra cost,
something better will be accomplished but nothing
significant. If approached on a cash basis for long
term equity build, a much smaller project is possible.
However, one of enough scale to become self generating.
Enough scale to build a community. Enough scale to
create a new way. Something affordable and something
that will build great value for the investors.
are a number of elements essential to a systemic
approach to real estate development. Below is the short
ValueWeb Architecture created to align the interests
of investor, producer and user. See ValueWeb
Model. This web must be recursive through several
levels so that societal, animal and planet interest
are an intrinsic aspect of the design/decision process.
have to be designed to be built quickly. This
means accomplishing completion in days and weeks not
months and years. This is possible. Massive reduction
in the build time frees up the development process,
saves money and reduces risks. See the building process
description of the Bay
Area Studio Project.
have to be mixed-use. Zoning that separates
functional uses forces unnecessary commuting, wastes
energy and destroys community. See Organic
City zoning concept.
Master Planning PROCESS is necessary
that works on global, regional, community scales.
These levels of recursion have to cluster. See Master
and other community-shared resource design strategies
have to be employed to bring community and amenity
to families and small businesses at an affordable
price. See Domicile
have to be designed that they sit more gracefully
on the earth and so they can be moved
site to site. This way real estate can be developed
over time following a natural value cycle. Land is
too often underdeveloped in the beginning (due to
low value) then, when prices raise, causing disruptive
demolition for future development. See EcoSphere
greater density has to be accomplished at the same
time far less crowding must be the result. This is
possible by building three dimensional spaces in true
Mega Structure designs. See 1970s
landscaping has to
be part of every project no matter the type or scale.
Food, energy, landscape, economy are intrinsically
linked. See Permaculture.
Change one and you effect the others. This linkage
has been broken and covered up by slight-of-hand.
This is a massive system of transfer payments. A system
affordable because of subsidized oil prices. Add to
the real cost of oil a good portion of US military
spending and you will see what I mean. Individuals
think they are exercising choices - usually, they
are merely selecting between multiple competing options
of the same kind. Options (packaged goods)
that are made up mostly marketing and advertising
entire concept of land ownership and how it is practiced
has to be challenged. Stewardship of large chunks
of land managed for long term use through natural
development cycles has to become the norm. Chartered
Organizations can be established to do this. Land
speculation (and exploitation) is the enemy of affordable
living and work habitats, community and ecology.
(and there should be nothing else) must be Replacement
Economies (Jane Jacobs) otherwise there is not
long term intrinsic economic viability. Lack of a
true economy (common with overspecialized fragmented
developments) inevitably leads to the boom and bust
cycles of real estate which is unnecessary, leads
to exploitation and unnecessary ecological costs.
estate developments have to become Net Energy Producers
- not consumers. Small scale distributed energy systems
make the best strategy for taking the load off our
aging global grid. Buildings make up a huge portion
of US energy consumption - about 60%. They can be
much more energy efficient than they are now. This
does not require sacrifice nor the adaptation of minimum
living standards. It requiring engineering the projects
from the start to employ intelligent energy strategies.
Natural systems are complex and work for you.
Artificial systems require that you keep putting energy
in - forever. If true
costs were accounted, few of us would be living
in a typical suburban subdivision - nor would manufacturing,
transportation or cities be designed the way they
Ownership Options have to be found. There are
many that have been tested. No ONE will work
for every situation. We need a suite of options each
with a reliable specification of appropriate use.
Multidisciplinary Design Team has to be created
that has world-class design competency. This level
of integration requires eloquent solutions. These
multiple elements cannot be added on one
another. This kills the concept and accelerates costs.
must employ Alexanders Pattern Language
else the results will not be livable.
it seems that the approach indicated above is too
complex or risky, the following should be considered.
First, the course we are on is ultimately risky and
we are out of time. We are the first generation that
will inherent the mess we have created. Second, big
changes are easier to make than small ones. Big changes
attract great people. It is the compromises
between a new way and an the old way that leads to
a field of mines. Third, money talks. It is possible
to use the leverage of a significantly large fund
to put in place - and keep in place - new rules of
engagement. This requires investors with patience
and staying power.
this is the kind of project that we built the MG Taylor
System and Method for. If this process is employed
from the beginning, the risks can be greatly mitigated.
This was demonstrated by the 777 and F-15 projects.
The method is in place for facilitating systemic
changes that otherwise have no possibility of coming
about due to social lock-in.
personal note: I have spent 44 years training
this kind of project. Up to this date (May 2001)
neither my talents nor skills have ever been comprehensively
employed. It has all been good practice
for the real work yet to come [link].
requiring structural transformation
the system of real estate development, there
are several arenas that require serious restructuring:
- Land Ownership Codes Financing
present practices related to land ownership produce
massive negative consequences. Chopping land up into
millions of small parcels to be individually owned
is an automatic tragedy of the commons. It is impossible
to practice stewardship under these circumstances.
In practical terms, there is little real value in
land ownership other than those related to exploitative
economics. The system encourages speculation - not
use. It certainly does not encourage the use
and development of the land over centuries through
well understood cycles of use. This does not argue
totally against individual ownership of land. It argues
that ownership has to be defined and fit into an overall
schema of land use and stewardship. The is a SCALE
issue here - physical scale and time scale. Most ownership
strategies in place are totally out of scale.
and zoning codes designed to protect actually promote
mediocrity and constrain innovation and competition.
Developers and builders - and architects - can hide
behind these minimum standards which become
THE standards by default. The cost and risk
of innovation is made too high and the industry grinds
out the same thing over and over.
buildings cost far too much, long term financing becomes
necessary - which in turn - becomes one of the largest
costs of ownership. Few ever really own their
property. Few ever pay off a mortgage. Money is made
by high leveraged financing and selling based on an
increase in value (generally created by scarcity and
inflation). The need for this value increase,
in the short term, drives the entire real estate proposition.
these social constructs together and the result is
a FRAMEWORK in which innovation is risky and
difficult. The result is an entire industry that runs
at the lowest common denominator. Competition constrained
to a narrow bandwidth with few real degrees of freedom.
Almost every good idea is illegal or not financable.
This acts as a positive feedback loop artificially
keeping the status quo in place.
- Design Build Use Method (including augmentation
method that spends 75% of the time and half of the
financial resources on itself gives up
too much from the beginning. There remains no marginal
utility to build well, design with care and perform
systematic research on alternative methods. Those
that do good work in such a system finance
it by their willingness to take extraordinary risks
and to work for far less income than those who play
the game as it is.
design-build methods have to employed to get the cost
down to where it is possible to invest in new designs
and technologies. However, if these financial gains
are merely sucked out of the project as short term
profits nothing systemically is gained. Systematic
investment in both method and product is required
if the future is to be different.
- Technology (water, energy, materials, etc.)
estate development does not pay for its own
costs. It transfers most of them to other systems
and to the future. It is a massive generator of unintended
costing methods are necessary to understand the true
design tradeoffs required for sustainable development.
a development has to include in its Business
Model the costs to the larger system: water cycles,
energy generation, transportation, animal habitat
and so on. These systems costs have to be made part
of the project costs and long term amortization schedules.
- Paradigm of Use Concept of Architecture
now popular crammed together 10,000 square foot house
on a single lot - a million or two (or more) of pretentious
design is the perfect icon of an idea gone crazy.
Add to that the ego-monuments of business and the
massive infrastructure necessary to make the present
model of peanut butter spread development
work and you have a prescription for failure. A system
that progressively gets too expensive to maintain
furthering the ongoing rise and decline cycles of
real estate value and use.
and ecology are now one subject. Architecture and
economics are now one subject. Architecture and health
are now one subject. In designing a building, a design
team is, in fact, designing a way of living.
They are creating a MODEL of how to see the
world and approach life. A city is a room in the house
we call our planet. These must be better integration
between these multiple levels of recursion.
notion of what is necessary, what is adequate and
what is abundant has to be challenged. Our society
is fragmented and detracted - the new form of Roman
Circus. Life is a headlong rush to the next task.
Everything a commodity to be bought and sold and reported
on like a sports event. Our architecture, naturally,
reflects this and encourages it. Architecture is the
PLACE in which this frantic living
is going on. Change one, you change the other.
Innovation thorough low-scale sustained
real estate industry has no systematic and comprehensive
R&D method. It is, therefore, impossible to change
the system that is in place as a system. Change
is ad-hoc, incremental, risky and rarely at a scale
where all of the major pieces of the design,
build, use method can be understood,
challenged and altered as a system. There is rarely
continuity of effort making it nearly impossible to
build mutual trust and common METHOD.
does not require great scale to do this. It requires
an environment of steady production over an extended
period of time. It requires a wide scope: all
of the building types; all of the social/economic
conditions. It requires equal and creative participation
of the entire ValueWeb that makes up what today
we call a city. As a deliberate experiment in the
entire process of living, new rules-of-engagement
have to be put in place - a covenant - that reduces
catastrophic risk (downside) and yet rewards performance
(upside) only, however, to a reasonable scale.
are several ways that such a venture can be funded.
In the first place, even highly experimental development
can be accomplished so that its market value
over the medium term (10 to 15 years) can equal the
cost and return capital. Secondly, IP that has market
value can be created, protected, package and Licensed
as a business. Third, certain venues can be employed;
today what R&D is done is often done in entertainment
and recreational building, or by personal patronage
expressed in individual homes or institutional buildings.
By building a careful portfolio, the project can draw
on many sources of capital and pay back though a variety
of methods. In fact, it can be highly profitable.
The only caveat is that the demand for short term
return has to to attenuated and that a steady capital
flow over an extended period is essential. Also, that
real experiment has to be financed.
R&D effort such as this would require a sponsor
that can represent the industry and who is willing
not to interfere in the day-to-day operations of the
project. A large track of land will be required in
a region where the building authorities are willing
to suspend conventional codes. Likewise, cooperation
from unions, insurance companies and the many other
producer/protector entities. And, the end users
will have to be carefully selected. The metaphor is
like sending a colony to Mars to start serious development.
This can only be approached as a serious experiment
in building a serious 21st Century habitat for Earth.
ALL aspects of this have to start with a blank
slate. A small number but critical rules-of-engagement
have to be put into place and a governance process
that can evolve with the reality that is being created.
Growth will have to be paced. Too fast or too slow
can be a problem. The scale of the project has to
be such that every buding type can be explored. The
scope such that maximum self sufficiency can be achieved
in food production, energy and economy. Green space
and accommodation for a wide variety of non-human
life forms has to be integral to the effort.
this said, however, it can be seen that this R&D
effort is well within the scope of modern development.
We are probably talking about an effort that will grow
to a population of a 100 thousand over a 5 to 10 year
period. There is plenty of good social science in place
that will allow for the proper setting of these parameters.
On the scale of US and global development, an effort
of this scale is decimal dust in terms of capital requirements.
some effort of this kind is not launched, it is impossible
for me to see how we humans will be able to design,
develop and test alternatives to our present course.
there anyone who can claim, with credibility, that
our present course will work over the next 25 years?
Palo Alto, California
May 6, 2001
voice of this document:
INSIGHT POLICY PROGRAM
May 6, 2001
October 13, 2003
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20011206.238751.mt 20031013.998271.mt •
this document is about 75% finished)
Taylor 650 814 1192
Matt Taylor 2001, 2003