How To Solve The US Housing Crisis | Alexis Rivas, Cover

0:00The home should be 10 times cheaper than the car on a cost per square foot standpoint, but it's not. If you look at how those two things are made, it's night and day. A lot of the constraints around how homes are made and how long it takes is because it's an incredibly fragmented way of building. We saw very early on that big change was needed to make homes better, faster, higher quality at scale. The only way to do that is vertical integration. This is Alexis Rivas, and he is the co-founder and CEO of Cover, which is building a bunch of houses now. Do you want to just start off with the general situation with housing in America?

0:34I think that there's millions of unmet housing demand right now. It's a huge, huge market. Yeah, for sure. Well, we're in one of them right now, right? Yeah. There's something like, depending on measures, between 5 and 10 million home shortage in the United States, right? And that's just the US. And this is not a purely US problem, though it is pretty bad here. Housing is not fungible, right? There's hundreds of thousands or millions of abandoned homes in the US. That doesn't mean they're in places people want to live. Or they're in a shape that they can be lived in. And populations move. So places where there's housing booms and then people move out of there for whatever reason.

1:16So it's this dynamic thing. If you kind of zoom out and you look at a multi-decade lens, where people want to live and where there's a need for homes does evolve. right and so there's a need to respond to that and to build homes where people want to live and so there's there's a huge shortage in a lot of places i mean we're we're in los angeles right now a huge shortage of housing in in all of california um especially uh southern california you know near la and and around also the bay area like massive housing shortage um but it is not just a problem here it's a big problem yeah and did you actually make the decision because i've talked to a few other you know housing founders and they are trying to go where the like regulation and the city is much more willing to kind of want to build new housing um i think that nevada is there's a lot of places in nevada where they're trying to build new housing like austin's really happy to put up new houses uh san francisco and i think la are both very very difficult so why'd you choose to be here yeah uh so so so kind of looked at the there's a little bit of like you know how we got started and that leads into you know why we chose to start here we actually did nine months in the bay area before we decided to come to southern california part of the reason was the cost of housing and factories like a factory space would have been insanely expensive in the bay area and we're talking to you know tesla engineers and the tesla staff at the time who uh you know like people commute three three hours each way to get the tesla factory that's insane that that is not a sustained like i mean they made it work and kudos to them for doing so but that's a that's that's really tough yeah um tough on your staff right uh and so we and that was that was a while ago i think the problem has gotten worse since then uh and so started off nine months in the bay area and then moved down to uh la so we're in gardena right now uh just uh you know, in the South Bay, close to Manhattan Beach.

3:17And, and the reason for starting off, I mean, in California and in, in Southern California, is this is a problem that has been tried to solve many times before, right? Like building homes in a factory is not a new idea. This idea has been around for like 100 years. But most, it's been tried, many companies have failed trying to do this. Most people approach it like, let's just let's build lots of homes cheaply fast, right, which is all good. But then they develop a reputation for being low quality, something people don't want. And they associate them with mobile homes, right? Like a lot of people think manufactured homes, the image that comes to mind is a mobile home park.

4:00Yeah, it's something that's kind of like shitty that you live in only if you have to. Exactly. And that's unfortunately the perception, right? And so, and this perception has been around for a long time. And so, when we were starting the company, we said, we first, like one of the major things we had to overcome to become successful and flip the model of, you know, make most homes be built this way is prove to the world that this is a better way to build first. and for us that meant starting off in the high end of the market yeah and the best place probably in the world to build high-end homes is southern california when we were talking a few days ago you mentioned that you're just going and figuring out how to build houses that people didn't even realize they could build you know people are spending like sixty thousand dollars or whatever to figure out how to get some plot of land and make it work um whereas you're just like doing of like fully full stack you just come in build the house on someone's land and make it work um do you want to talk about like how you got the first few customers and how you're thinking about that so the the the way that homes are built conventionally right there's kind of like two main buckets there's you buy a home you're not building as a homeowner you're not building a home you're just buying a home from a real estate developer and that's actually how most people buy homes they just buy a home that someone just happens to already be built yeah yeah that's like the majority, right?

5:25When it comes to custom homes, it's an extremely fragmented process, right? You have a whole group of consultants before you even break ground, right? You've got your architect, you've got your engineer, you've got your surveyor. Oftentimes you have to loop in specialty permitting expediters and arborists sometimes and geotechnical reports, to you know geotech engineer um surveyors like all these civil for you know drainage especially to you know sometimes you know hopefully doesn't happen but you know environmental reports and all this other stuff so so it's it's a very fragmented process and you know i studied architecture i i i helped family and friends build a home like the when i was 14 i saw the process up close And I also interned at some architecture firms and saw the process from that side of things.

6:21And what I realized was a lot of the constraints around how homes are made and how long it takes is because it's an incredibly fragmented way of building. You have all these consultants. That's just before you break ground. I mean, once you break ground, you still have your general contractor. They usually don't have a big staff in-house. They usually have all their subcontractors. They're electrician, they're a framer, they're a painter. It's usually different companies, right? And so you have this extremely fragmented approach to building. And if you want to change something, you kind of have to either change it all, right?

6:51And you own that full stack and you say, I'm just going to do things differently and make it work better, right? Or you have to change it in like very minor ways that integrates with the existing system. And, you know, we saw very early on that like big change was needed to fix this, fix and make homes better, faster, higher quality at scale. and the only way to do that is vertical integration and uh you just have to yeah it just doesn't work you have to yeah yeah how did you think about going from just starting a company to actually building the first home and then from there figuring out how to build this factory so that you can build much more at a higher scale yeah the the approach was always like uh start small and like optimize for learning right and this is this is a problem like as a problem you know there's a few things that we we know really well right people need homes that's not going to change right so there is there is a market right if you can build a better home i'd say even at the same speed at the same cost you're going to win right if you can build a better home faster and at lower cost you're really going to win right these are like these are known things right so um but doing that is actually very hard right so this isn't the kind of problem where you have to like chase revenue growth super early on you know yeah it's like figuring out the process is the main like the factory is the main hard hard yeah figuring out the product and the process and how they work together and like making something that people really want and it's high quality at that um at that better price point like creating that value um that's the hard part i'd like to talk about like you said you're targeting uh the roadster version of this you want something that's super high quality from day zero um how have you thought about like the design you went to design school how did you kind of come up with this design and go through that process what was that like so from from the very beginning the the goal was to deliver at a quality that you normally only see like multi-million dollar homes right and kind of um systematize that yeah and bring that to more people and uh yeah i went to architecture school uh thomas who leads design here uh went to school with me and uh and uh from the beginning it was like it's kind of simple right like simple design choices um but executed very well so lots of glass right big windows turns out when you when you have really big windows in order to be energy efficient and comfortable you need to have really high performance right so good installations good installation air tightness right like all all of these things actually become even more important because you're kind of making up for the energy lost or you know through the through the windows so um in many ways like the design also drove the engineering of the product too um yeah we have like way more glass than your average home right like every home like even a home even even a cover home that has like what we would consider less glass has like a lot more glass than your average home but you like optimizing for natural light it's yeah it's it's like natural light uh you know views views to like greenery outside um yeah for sure and it makes it makes a huge difference in just like how a space like you wake up in space and it's bright and like that's it's nice right i mean obviously blackout curtains are all good um yeah yeah and let's talk through the like you said that there was three separate um kind of iterations before you had something that was really really good that you know people actually wanted to live in uh do you want to walk through like what that first one what the second one and what the third one was like and what you learned yeah the so we we we went to building like very fast because the approach was let's just build and we'll learn by building right again optimized for for learning so we we we had an idea and we just started building it and like the first one just it didn't work well it was you know why was that i mean that was almost like we went to to building it too quickly it was it was it was just you know there were basic things that you would have caught if you had done a full you know model and full set of drawings and cutters and it's like we just really rushed to build right um we were kind of designing as we were building um you know nobody was living in that one uh and you like learned what a tolerance stack up was on that and and these very basic things uh so learn quickly um then the second iteration uh i'd say was was directionally in in you know like directionally correct yeah it was directionally correct but like the execution wasn't wasn't good right um and it ended up actually being like a beautiful home and it got published in like it was the end result was good because we we took a lot of pride in our work and we like made it good but it wasn't good in a way that scales well yeah right it was something that you can make once but it's not gonna yeah it was bespoke architecture right um that was trying to be efficient but it wasn't um and then you know the third one um the third one we actually built the home in like a a one bedroom home with with a kitchen and bathroom in eight days wow uh and uh that was like eight unsustainably long days a little bit of burning the 3mo oil yeah yeah like a lot of that actually like it was not sustainable in any like so you know it's not real real really eight days but um you know i think if we're looking at like hours it'd probably be like three weeks worth of hours in eight days at least uh but still like that's pretty efficient and and so that version we we ended up actually building a lot uh we built we and it you know continue to iterate and improve and always something you could actually build and ship but yeah we started shipping that one right and and And we and people are living in those.

12:36And and then last year, we rolled in another kind of major change after building a lot of those kind of like, you know, seeing the data points of where we could make things better. And a lot of these changes are are not necessarily the things the customer sees. Right. It's a lot of like how things come together. right um the tolerance stack up the precision required and like the the tool the process behind how to make the parts right it is like you know optimizing the factory um and then of course you to do that you have to change make product changes right so that that was like the the third one which is which is what we're in right now um and was that third one just initially kind of like a more smaller adu situation where you kind of want to just get the reps in for building it yeah well Well, the ADU thing was, we actually didn't know at the beginning when we started to cover that we wanted to build ADUs.

13:34Our mission to cover from the very beginning was, and it continues to be, to make thoughtfully designed and well-built homes for everyone. And the focus was like, how do you optimize for rate of learning? and you can learn a lot more by building you know five 500 square foot units or you know homes small homes than one 2500 square foot home yeah you're getting the process yeah right you get more reps in you get you get the process down you can iterate between them like fix mistakes you made on the one right on the next one um so it's like the the adu thing was it was a choice in order to optimize the rate of learning um the entire system from day one was designed with scaling to larger homes in mind and and even the adus we put like we built uh uh you know we one of the earliest structures we built was a single family home uh it was named the coolest airbnb in california by condenast and it was in the middle of the desert you know what happened when when that happened it was cool it was like oh wow that's like we didn't even like uh the the owner push for that PR.

14:41We just saw it and it was great. That was a cool moment. But yeah, the system from day one was designed with full-size homes in mind. And we just intentionally constrained ourselves to learn faster and iterate faster. At what stage are you going to be trying to build multi-million dollar style houses that are much bigger, multi-family kind of situations versus just doing this? How much learning do you want to do in between now and then? we are doing homes now yeah um we're not doing multi-family so like we're not doing apartment buildings um but uh we are we are doing like full-size homes multi-billion dollar homes uh we're building uh one that's 2300 square feet like right now uh and so that's a 2300 2300 square foot home with a 800 square foot guest house so it's it's a you know it's a big project yeah and then we've got another one in the permitting process and that one's over 4 000 square feet.

15:36So there's like, there's big homes in the pipeline. And that's not the only one. Like there's a few that are over 3000 square feet. There's so we've shifted, we are doing ADUs and full size homes. Now, if you want to build the best product, you kind of have to be very close to it. And you have to be like either living in it or going and seeing, you know, the processes, like the factory is one thing. But then you also have to actually see like the production process. Like how does that work? You know, how are you deciding like where you focus your time when you could be here and trying to make more panels or you could be out in the field with engineers that are actually putting these things together you have to do both yeah um it kind of depends on like where the problem is right like where's the are you going to the biggest fire yeah you kind of you go to you what's the biggest problem what's the biggest thing gave the company from from you know achieving the mission right okay go go work on that or or yeah i mean help whoever's working on that like accelerate or you know yeah that's that's really what it is but but like the one that we built in eight days like i was i was helping build it physically right um and and i've done that since then as well right like multiple times uh build parts in the production line uh you know occasionally like jump into the design process and like test out our our design software and the systems and like you know go through the process of designing a cover home and giving feedback to the software team um talking to clients right getting their feedback like it's it's it's constantly changing it's it's constantly changing it's constantly changing depending on where we are where do you think like the biggest fire is right now we've got a lot to build and we're ramping hard and we're seeing where the processes start to break right we're growing we're growing the on-site assembly teams right the the teams that take the panels that we make in the factory and then turn them into a home um and uh with that comes a lot of new training right and uh so that's a big that's a big area right now um the factory actually could produce a lot more than we're building right now really it is producing at a faster rate than we're installing and so fixing that install problem going even going even faster on the on-site assembly is is uh that's where a lot of the focus is right now yeah and i know you mentioned when we're walking around you said that you're trying to get that down to basically like 28 days i believe it depends on the size of the home right like it'll depend if it's like 2 000 square feet or this place versus like 4 000 yeah yeah like this place we've we've built in in you know less than a month before right and and uh we're trying to get that basically at the limit of what is physically possible so you know we're talking about like you know you're basically moving materials to the right spot and then it just clicks together like legos some parts work like that today and then some parts are supposed to work like that today but they don't outside of like manufacturing what's the hardest thing that's uh that's like stopping you know you from moving faster it's so that's not i wouldn't even really consider that manufacturing problem because that's i mean it is if you consider the on-site assembly to be like a general assembly process right um then yeah that's it that's a manufacturing problem that's the hardest part right now is just figuring out the on-site assembly figuring that out and then and then scaling those teams right yeah finding the right people's scaling you know attracting the right talent um getting them onboarded uh you know yeah all of that and so when you were putting together the first like assembly team what were you like what were you trying to optimize for um versus today the first few homes was were uh you know built by a mixture of the technicians and the engineers like the you know it was it was we were one team and we would design and then we would build um so so a big part of what we've done is moved most of the complexity into the factory so that what happens on site is doesn't really look like conventional construction.

19:36Like you don't necessarily need, you know, an expert plumber, an electrician, you know, all of these, you know, very, you know, millwork carpenter, right? You don't necessarily need all of those trades. You do need people who, you know, are willing to work hard, can follow instructions well, can be aware of, like, you know, moving things around like not breaking stuff it sounds simple but has that been one of the biggest issues you know i mean you know it's there's a lot of stuff going on on an assembly site right moving stuff around um you've got to be like aware of what's going on right and paying attention right uh and and it's uh it's it is hard work it's hard work so it's it's uh but it's also incredibly rewarding because within a, you know, whereas like normally if you're working in construction, you show up at a job site, you do your part, you never even see the finished product unless you're the painter, right?

20:41With our crew, they get to show up on site from start to finish, right? They show up and there's just a foundation. And then by the time they leave, it's ready to move into. And they did that. So it's incredibly motivating, right? Like it's not an easy role, but it's like an incredibly rewarding, motivating feeling. And that's what we're trying to do. We're trying to bring people from outside of the construction industry also into building these homes with us. And a lot of people don't have prior construction experience. Some do, not all of them. Yeah. Tell me about like, so there's been a number of companies that have tried to do like mass manufactured homes and i think this is kind of the right model where you're going starting with the high end making something that's beautiful and amazing and that people actually want to live in and then you're trying to figure out how to scale that that process in production um what has kind of been the biggest like pitfall for other companies that have tried to tackle this problem because it's a massive problem like lots there are millions of you said 10 million unmet housing demand insane if you five and ten yeah yeah if you can just make houses great inefficiently, then you have a huge market.

21:48But for some reason, people just haven't been able to pull it off significantly. Yeah. Why is that? It takes doing a lot of things right. Right. And then I think there's, there's also, because it's such a big opportunity, there's a desire to go big quickly. And I mean, there's a lot of failure modes, right? I think some of the common ones are lack of focus and like going too big too quickly. I've seen, I've seen companies that, that like actually figured it out right and they were doing something and it was working and they were around for a while um and then they just like chased the wrong growth and then that did it for example you know another common failure mode i see is like spreading spreading yourself thin geographically right i'll see companies like they come up with like a cool product or they had a cool product but they were trying to roll it out nationwide um you know the southern california construction residential construction market is like a multi-billion dollar market right if if we've got something that's working well we can scale it quite a bit just in southern california yeah that's that's what we're doing right today we're serving southern california um so it's it's that discipline to say like we're going to focus and get really really good at this narrower subset of the market and yes we want to become huge and tackle all of these things right we want to build across the entire Sunbelt and across the entire country and, you know, do multifamily as well.

23:11And our system actually scales pretty well up to four to six stories. So like we'll get there. But, you know, starting off and basically doing like almost 10 years focused on ADUs and then saying, OK, yeah, like this is working well enough. Let's do single family homes too. And now we're doing that and we're going to do that for a while. And then we're going to do multifamily. It's like that discipline to say this is actually a hard problem and we need to get really really good at it before expanding the scope um because if you combine like if you i mean if you just if you combine like too big of a problem with without enough like focus you just run a bunch of different directions and nothing actually works nothing you don't make you don't actually make real progress right you're just trying to try and solve a bunch of hard problems and you don't solve them um yeah so that's a that's been a a common failure road i've seen yeah and so right now you're just basically laser focused on figuring out how to scale up this site in california or in southern even just la and make sure that you can build houses at a like meaningful pace with a number of hands yes there yeah and getting really really efficient and delivering an incredible experience to the customer right like they're like wow this is not only uh are they impressed by like the speed and the the the experience but like they walk in and they this is at the level of they're happy with the thing they're very they're very happy with it right um and and and delivering at a level that would not be possible conventionally do you want to just walk me through the process of like what what is the process from someone knocking on your door or saying you know i want to cover house to actually having something on the ground yeah so so uh you know first most people like reach out either phone email something like that talk to us get a sense that this is something that they're at least interested in yeah um then Then we do a design study, basically.

25:01So, you know, you're not entirely sure you want to build with us, but like you at least want to explore what that would look like. So we meet with you on your property. Our design team will give you a proposal based on what you want. So it's very, very bespoke. Like we go into detail about what you're looking for, your views, right? You want to keep this tree. OK, cool. Like we'll design around that. It's the nice thing is it's like Lego blocks, right? So this is actually another thing going back to the, you know, failure modes. A lot of prefab companies take this approach where it's like model based, right?

25:30They have like five models or maybe 10 models or 20 models, but it's models, right? And from the very beginning, we said that doesn't work. There's just too much variance in the number of, in the shapes and sizes of properties and zoning restrictions and all. There's all this complexity in the physical world that construction adapts to. And so we said we're going to develop a very versatile system that allows basically mass customization. right it's just it's it's really like legos for real homes right so it's wall panels floor panels roof panels um so going back you know we will design something specific to that customer and what they're looking for um show them what that looks like in their on their property and uh and and present you know price for that and you know usually there's a little bit of iteration and then they say okay yep let's move forward sign a contract and then we take care of the entire permitting process as well so how does that work because that must be a bitch yeah that was uh uh that was big learning curve uh and is this one of those things where you're really happy that you started small and started just with one to figure out that process yeah yeah absolutely um absolutely uh you know you know we've yeah we've we've permitted like you know it's like over 50 homes right uh and we still run into edge cases right um so yeah permitting is definitely complex but um the basics of it is like you put together you know your your engineering set for the building and your drawings right you submit that to the city and then they they put you through a bunch of you know forms and questions and maybe you know you got to clarify a few things uh and And eventually you get a permit, right?

27:14It's like way oversimplified. I think others have like mapped out this process with, you know, extensive flow charts and conditionals and it is annoyingly complex. And this is something that I think we really need to change as a society. We need to get better at building things and make it easier to build. Yeah, it's kind of funny, like even with startups in general, you know, I think when Amazon first started, it costs over a million dollars just to like put a website online or, you know, to have all that infrastructure ready to go. So the customers could actually like order something on a page.

27:47And today it's like$250. You might not even need to incorporate, but you can do$250 in Stripe Atlas. And then you, you know, set up a Stripe and like the banking for Mercury and Stripe as well, pretty much same day. And it's basically you're in business. And it's like, do you have a product that you want to sell and do people want to buy it? Whereas today, like with housing it's i mean how much of the time you know you say like 28 days spent on site putting a thing together how much time is spent in the background before you can even get on site to do that yeah i mean like the okay so the fastest home that we've ever built yeah um 104 days from permits middle to certificate of occupancy certificate of occupancy is like you're done and the city says you're done and you can move in um that's the fastest we've ever done more than half of that was uh regulatory right so either inspections at the end like 50 days of just that yeah yeah and and and uh and of course the permitting process in the beginning right like so it it took longer to do the paperwork to build the home than to build a home right that's that's nuts spacex i believe it was during uh i think it was like 2022 or 2023 something like that they ran into an issue where they were pouring potable drinking water on the ground under one of their launch pads when they were first launching that yeah i think the the starship and they got fined like 158 000 or something like that um for doing that and it wasn't even dangerous like the fa didn't think there was any issue but they were just like you're pouring water on the ground so we're gonna you know unless you pay this fine you just don't get to you know launch any more starships um is that kind of the situation that we're in right now where the people that are deciding how to regulate, how to permit are not really focused on trying to get more housing built.

29:32Okay, so we are able to get permits consistently. Yeah. How long it takes, there's definitely variance there. Like we can't, I wish we could say this type of permit will take exactly, I mean, I wish it would be like, you know, 48 hours or something. But, you know, I wish I could even say, you know, this will take two months. But sometimes it's three months and sometimes it's a year. right and and and there might be new things that the city requires or or you know some some department right sometimes you have like eight different departments involved um that needs to sign off on a project and so you know seven of those eight departments might be responding within a month and that last department has a big backlog and it's gonna take four months and this is this has happened before so and and and which department is slow honestly changes over time that's the other thing that we've seen.

30:19It's not the same. It's like, well, you know, two years ago, it's different from what it is now. So you can't even predict, you know, where it's going to go slow sometimes. Right. So we've gotten really good at this and we, and our approach to permitting is like, just try to get everything as fast as possible. Right. And just prepare documentation that's really comprehensive upfront so that there's, you know, very few excuses that they can give to, to deny or, you know, ask for clarification and then just, you know, repeated follow-up and we do escalate the situation with city council members or staff or people in the governor's office.

30:51And I think there's a general awareness this is a problem. And I think there's talk and some genuine desire to fix it from some places. But the problem is really bad. And it requires a shift in priorities and a real willpower to fix the act. Like there's a there's like an incremental mentality. And this needs a like we're going to start from a blank slate. Like an open heart surgery situation. Yeah, it needs open heart surgery, right? We need to go back to where we were with permits probably, you know, 50 to 80 years ago. um you know keep you know from a safety standpoint like keep all the advances that we've made it's not we should definitely be making taking advantage of everything we learned about earthquakes and everything we learned about safety and using those things um but from a process standpoint uh we just need to simplify things and some of it has to do with just capacity which you know the capacity for for these different departments to review everything um and i think there's like a question like do they need to review everything um and if the answer is yes now at least you know using technology to accelerate that process that's definitely an opportunity uh but but you don't need like ai review you know permit reviews to go faster you just need to you say like this department doesn't need to check this right and just say this is not necessary and it is more important that we build more homes than that like you know but that everyone is able to check all their boxes yeah yeah yeah like like at some point we've just got to make a decision like what is more important to us as a society what do you think the percentage of the boxes that have to be checked before you can start building like what percentage of those things probably don't even need to exist and just happen to be there because someone had to you know create something like they have a job and their job is to create you know basically issues yeah i mean hurdles i i don't i don't think like you can you look at certain things and it's like okay this is totally stupid right and but like if you really go into it there's a reason it's there and someone there was some problem that it was trying to solve or some some situation that it was trying to try to avoid yeah exactly um but but then but then the result is like it's there are some things that are just like stupid right but there's actually they're kind of rare right the the the bigger problem is just you have the system that like every little thing was well intentioned like had a good a good intention most mostly um but then the result is that you just have this this this broken machine right um if now if if you kind of like zoom on and say like how many of the things that that are part of the permitting process are like safety critical i mean it's like less than 10 of the the time is like safety critical stuff wow so if if that's the lens right um so for for your company like one of the major things is going to be basically figuring out you know if it takes 100 days let's say that you can hit that typical or the the fastest time which is like 104 days i think you said let's say that you're doing that for every single house how do you build like the systems and processes so that you can run through that those those permitting steps faster so you can actually like get houses built yeah so so there was a a point in time earlier this year where like permits was the bottleneck like the beginning i was i was like working on it every day right um uh and uh we've gotten out of that out of that point in time and i hope to stay out of that point in time how did you how did you like get out of that rate right just like submitting like accelerating the process for the permits that we had in review and and escalating it to elected officials like you know state level city level county level um having those conversations and they were helpful and uh and then also just like moving faster on getting more permits submitted faster so that you could wait basically accepting that it's going to take time and then we're just going to have a big enough buffer that it's going to be fine so you're trying to bake in like an extra 65 or 75 days yeah on every single build yeah you just you just submit early enough that it's not a problem anymore and you're constantly feeding the factory this is what's bonkers to me is that the people that have the most impact on many of these like hardware companies especially in housing or people that have no stake in you actually succeeding like and so if they move faster or like there's extra regulation they don't get any you know or there's like less regulation even faster they don't get any benefit from it um they're not the people actually like getting the houses and they don't get a bonus for you building a lot of houses and it's i i just think it's incredibly difficult to motivate people when the incentives are fucked i do think like the the like especially in california if i mean where you're seeing it's like people are leaving california because there are not enough homes and housing is too expensive yeah like and i think people um you know i think there's been a shift in uh at least the talk around these things in the last three years in a good way yeah um and we've seen we have seen a lot of uh state laws get passed that streamline certain aspects of uh zoning and building like For example, all zoning codes in California have to be objective.

36:14Now, there cannot be subjective requirements in zoning. What does that mean? You can limit height, right? That's something you can measure. You can say all the homes have to be white. You can measure that. You can put a maximum size. You can't say they have to match the neighborhood character. you can't measure neighborhood character right um so that's good right that's a shift in in the right direction at least you know like what what hoops you have to jump through yeah i mean in the past you basically had to spend a bunch of money i mean it's crazy you have to spend a bunch of money to design a home and then like talk to the city and you know maybe try to convince them yeah like convince them that you know you're you're within the right vibe of what they want yeah right which is which you don't know the vibe that they want before you start i mean you might know the vibe but it's a vibe it's not a it's not a concrete thing right it's it's it's it's it's it's not a specific thing that you can design to um and so yeah you know that's a that's like a good a good shift um and we need like way we need way more of that right like frankly there should be like a page limit your zoning code should only be be x number of pages like font size 10 minimum right you should not be able to have a a uh 300 page zoning code is that what it is right i don't it's it's it's a lot and isn't each different zoning code like yeah each city has its own regulations which means like you can figure out one process really well but then you go to another you go from la to is there even uh different parts of la that have different zoning codes and stuff themselves yes oh god yeah so you have different districts right you'll have like r1 or r2 districts within within la city right and then la city has a different zoning code from santa monica city or culver city or beverly hills um so you know you look at like southern california i i ran i ran these i forget the exact number but it was something like there's 80 80 cities within LA County, something like that.

38:22And each of those cities probably has at least five zoning codes, right? So you're looking at hundreds of zoning codes. And like each of those districts is like 10 pages, right? So you're looking at to know how to build in LA County in every city, in every neighborhood, you're looking at like a thousand, minimum a thousand pages. How much of your time has spent doing things that you genuinely enjoy and feel like outside of the whole regulation stuff? Like how much of your time has spent doing stuff that you enjoy and you feel like you're genuinely pulling a lever to push the company forward versus just time suck because of stuff that you have to do so there's there's a lot of things that pull a company forward that i don't enjoy but i enjoy pulling the company forward yeah that makes sense right so it's still it's still actually rewarding to solve um but yeah like i wish i'd never had to read zoning code ever and it wasn't a problem that'd be nice there's like a number of startups that are really trying to do like manufactured housing where you're building everything in a single location and then you're shipping it out what's been the process for building this and making it work and actually like output panels that you can go ship to a site so we started off in a much smaller factory than this this is 80 000 square feet we started off in 10 000 square feet a big part of like rolling the design and you know going from like concept and a prototype to you know building it repeatedly is wrangling first like that information problem and making sure that the right parts are in the right place at the right time so that you can even build it right like that that is actually that alone is hard it's fucking difficult yeah right um and then it's like building it well right so training your training your technicians um helping them with better tooling right more ergonomic tooling better tooling faster tooling easier tooling um changing the design to make it easier to build right like it's it's this constant feedback loop right where you've got your engineering team on the line watching the process seeing you know the thing that you thought was going to be hard sometimes it's actually really easy and then there's this other thing you didn't even think of that's the hard part of the process um and what can you go into like what has what's that been like yeah i mean uh uh for our walls for example you know we we have we have foam like insulated foam walls and uh turns out like you know once you iron out like the timing and the material movement uh getting the foam in place was pretty easy and you know to the right specs like consistently right you've got you got to have temperature control and all these things we have but then once you once you get there it's easy you can do it repeatedly um uh creating the chases for your plumbing and electrical actually turned out to be like the most labor-intensive part of that process why um because we're cutting it out and it's just it's just like it's messy And so we actually ended up, our engineer, he built a new tool so that the chases were just built into every panel when you made the foam part to begin with.

41:14And you just delete the step. Yeah. Right. And that saved a ton of time. Because we didn't think that it was going to be as time consuming as it ended up being. Yeah. Right. And so we just made the extra investment in the tooling and made it work. So that's like a big improvement we've rolled in in the last couple months. What have been the what have been the biggest learnings so far going from just the first few houses built to now having built many, many houses? What have been the biggest things where you would not have expected them to be problems, but they just turned out to be problems? And then also, I guess, on the factory side, like actually building the panels isn't that hard, but putting them all together correctly in a relatively fast time frame on site is very difficult.

41:55How important the information side of this is? I underestimated that. um you know because you you see videos of your tour factories right and you just you see you see the automation you're like wow that's cool or yeah it pulls the shit out of people you see you see even you see you see the production line you're like okay that looks hard to set up right setting up a production line with like a good throughput is hard um uh the the information part of the problem you don't really see it right um you see the results of it right a stop line um but you don't it's less tangible um but it's it's incredibly important to a factory running well and and the whole operation well running well when you're building a car you're buying a car you're pretty much buying the same car as the next guy and maybe you do like um a wrap or something afterwards and it's a different color yeah for this sort of thing i think most people generally want a very customized house um and i think for every single house that you built so far it's like customized to the to the what the person actually wants yeah it's like 85 percent 85 percent of the homes are like custom floor plans yeah and then within that there's variations right so different different floor options different appliance options different storage materials um uh you know do you want your awnings or not like if you're facing south you probably want awnings for you know to improve energy efficiency um bug screens you know there's like configuration options but then like that's just within the same layout where you talk about you know customizing layout and it's it's practically infinite yeah right then the number of configurations that of a home that you can build with the cover you know lego blocks is is for all practical purposes infinite so when you're thinking about like scaling up something where every single house is going to be custom how how do you do that efficiently it's it has to be a true system where you do have a finite set of lego blocks right like parts and those parts are made in a standardized way and then combine to create the unique thing right so but like being really clear around okay the end result is unique that doesn't mean every single part has to be unique that's and that's what we're doing right that's super key to making it scale right so we have up but you don't notice it right like if if someone comes to us and you know they describe their home that they want like we can get really really close to what they want and those you know some people might say that there are limitations.

44:36But it also breeds a level of efficiency and focus on quality. By not doing anything, the things that we do do, we get really good at. That's the other thing, when you compare with conventional construction, it's a shame, right? Because you have these multi-million dollar homes where people spend years of their lives designing and engineering them, right? And coming up with really clever ways to build something that look and function great. And then that never gets done again. Yeah. Right. And so you have this, and there's a beauty to that. And there's a role, there's like, there is a role for that in society, right?

45:20Like, you know, we should be building cathedrals, right? And incredible works of architecture. Every home doesn't need to be that. And so by standardizing kind of the kit of parts, right? the lego blocks you can make those lego blocks much better because you can you can build it once learn from it and like iterate right and you and so you're you're getting compounding in a space that historically didn't have it from a quality and product standpoint and is is the reason why the assembly like the on-site assembly is such a bitch is it because every single one even though it may be the same kit of parts it's a different house every single time and so figuring out the process for you know creating that specific structure is a unique thing every single time i mean it's it's not uh like we still build homes you know it's like it's like much easier than putting together a conventional home like we've made it we've made it a lot easier it's just it's not as easy as it needs to be like we are our standard for that is is just real like our Where we're trying to get to is very high, right?

46:24So we're, you know, we want to be building a home like the one that we're in, in less than a week. Wow. Right? Like normal hours, not, you know. Pulling all miters. 22 hour days for seven days straight. Yeah, exactly. Like, you know, so, so because, because we think that that's key to scaling because there is a labor shortage of skilled construction traits, right? So there's a labor shortage, right? And that's, that's kind of a big driver here. So we need to make it really easy and really scalable so that you've got production lines running with robots that are building homes extremely efficiently, right?

47:06Building the panels for homes extremely efficiently. And then those panels get shipped on a regular flatbed truck, can get assembled without all this heavy machinery on site by people who didn't necessarily spend 20 years apprenticing on how to be the best craftsperson in this area, which we need those people, right? But there's just not enough of them.

47:29And then it comes together, you know, it just assembles super easily, right? Like that's where we're going to. And so and that assembly process for us today, we've made a we've made a ton of progress. And we went we took down from 120 days down to down to a month and then three weeks. And, you know, we're making like we're making progress on that. But it's. We've got a high bar for ourselves for how efficiently we want to get that process. So when you when you think of like the massive housing companies right now that are building like a few hundred thousand houses a year, why are they not doing something like this?

48:04So a lot of them are interested, very interested in this because they are seeing a shortage of trades and those. They have the same problems as you have. They have the same problems. In some places, the problems are so extreme that even though there's a demand for homes, they just can't build there. Right. Because there aren't enough people to build the homes. So it's definitely a real, like this is why there's a, this is why there's a housing shortage. Right. So they are looking at, they're very interested in this. Some of them have even made investments in companies doing this, right? Because it's a very real problem.

48:42One of the challenges is that the construction supply chain is actually relatively efficient, because everyone does things a certain way. and so for some things we use conventional you know suppliers and materials other things we we do things differently and for those things we do things differently our approach has to be so much more efficient it overcomes the scale that the entire construction industry has right it's a little bit it's a little bit like the uh the energy industry where you just have like trillions of dollars worth of uh infrastructure already there pipelines built that sort of thing that the that the alternative is like yeah yeah you have to overcome matt and also like subsidies right how do you actually like get this company to a point where it's building a hundred plus thousand homes a year like what are what is the road map to get there yeah i mean you know first scale up scale up uh you know i love this like pilot production right where you're testing out the system and scaling it right so scale it up um get the product and process working uh and then like go to some real scale with with with automation right a big factory and at that point you're doing at least thousands of homes probably tens of thousands of homes a year right and you're you're close to the uh the median uh price point that homes are being built at at that point and then from there like further investing in manufacturing and in in product development to cut down on the material cost but also you know the labor that it takes to put all this together and bring it down to like below what it takes to build a house so there's there's a couple of steps to get there but uh yeah the first step is like prove to the world that this is a better way to build, right?

50:37And show that it works. And then, you know, track the key, like technical KPIs behind it that prove to that scalability. How are you thinking about like designing your team in order to get, you know, rally a group of people around this idea? Like, how are you finding amazing talent? We've got an incredible team. And a big part of that is getting people that have like a very wide range of experience so like we have some people from within the construction industry right um uh you know our our head of product engineering uh was the the structural engineer behind the apple campus in cupertino for example really yeah like he was the lead structural engineer on that project um and so he's seen like you know the cutting edge of structural engineering but he built the hospital on on the fault line in uh in uh in riverside uh you build a stadium right it's like it really knows how to push the bounds on structural engineering and what's what's possible there right and make uh so so it's like getting like the best from within the industry but then also pairing those people from with with uh people from outside of the the construction world right so we've got people from from manufacturing from that have worked out you know tesla spacex uh that that have built uh you know uh uh, automated warehouses and, and, and production, you know, like automated, you know, production lines, like all sorts of things, uh, Ferrari, right.

52:13Um, and it's putting those people together to solve the problem because, because the, the solution doesn't come from doing like construction really well, if that makes sense. Yeah. Right. Like we're not just, we're not just trying to, I mean, we are trying to build homes really well, but, but it's taking things that other industries are much better at, you know, manufacturing, rapid assembly, design for manufacturability, and bringing those things into an industry that hasn't seen much of that. When I went and interviewed Jim Belosick, he said that he doesn't actually like to tour manufacturing like a normal sheet metal or something factory.

52:48What he wants to tour is, you know, the people that are making cosmetics or the people that are making apparel or other things. So you can kind of understand how other people have done things and then bring that into to his own company. Are you thinking about it the same way? Yeah, for sure. Like, I love touring, like, all factories. If there's, you know, another factory building homes, I also like to tour those too. But I think, yeah, the most fascinating factories I've seen are, like, automotive factories, for example. I think that's kind of, I mean, probably the pinnacle of engineering and manufacturing today, right?

53:22You know, it's incredible, right? The scale and efficiency and repeatability and quality of automotive is like insane it's like one of the only mass manufactured huge products in the united states i think yeah yeah yeah and and and it's like if you if you think about a car in some ways it is actually very similar to a home right people go inside of them they have air conditioning they have to be structurally sound i mean in in this case for like impacts but you know it's not that i mean it's it's different but you have earthquakes you have wind you you know you have dynamic loads or cars but there's a structural component to it um there's there's a design component like the look and feel and and fit and finish of the car and home um you've got moving parts a lot more moving parts than a home um there's there's fire safety there's there's actually there's a lot of similarities between automotive and construction and like homes um and so i think that's like you know obviously they're very different industries but you know the fact that you can buy a toyota camry for like i think it's like 280 a square foot something like that um you you you'd find it very difficult to build a home in la today like you know as a solo person you know building a home in la for that that price very hard yep um and that's kind of crazy that a car which is so complex like you know is 10 000 parts yeah it's insanely complex right like all these motorized you know motorized windows like all these things you take for granted uh is cheaper than a home which is like all flat surfaces 90 degree angles like hypothetically and or at least in theory it should be incredibly simple to build yeah like like the home should be 10 times cheaper than the car from up on a cost per square foot yeah standpoint but it's not right and like i you know But if you look at how those two things are made, it's night and day.

55:43They're opposites. And that was actually one of the big inspirations for cover was looking at cars and just seeing the level of efficiency that they're built at and the quality. Final question. What's the hardest thing you've overcome? Oh, that's... I don't know. I tend to... like block out a lot of the pain. Many people do. I tend to, I don't, like I, you know, try to remember the lessons, but like not remember the pain.

56:23I don't know if it's not, it's like subconscious. It's just, I don't, I don't remember as much the pain. No, there's, there's been like a lot of, a lot of hard stuff. technical problems non-technical problems getting people to work together well sometimes that doesn't work uh it's it's hard it's really hard to just like pinpoint one thing it's it's hard it's just generally getting up in the morning and doing the thing and then doing it again and again and again that part's not hard that part's not hard like this is a a very important problem to solve that I want to solve. And so I'm not going to stop until I solve it.