July 1, 2025 • 48 mins
Thomas Joseph, co-founder of Joseph Design Build, joins Reece to talk about moving from high-end custom infill homes to building at scale—with intention. He walks through how getting out of the “just wing it” mindset and leaning into systems, numbers, and rhythms changed how he runs his business—and why clarity is the difference between having a job and building an actual company.
Show Notes:
Introduction and Background of Thomas Joseph (0:00)
Challenges and Market Conditions (6:55)
Strategic Shifts and Organizational Changes (12:09)
Final Thoughts and Closing Remarks (46:39)
Find Our Hosts:
Reece Barnes
Matt Calvano
Podcast Produced By:
Motif Media
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Welcome to another episode ofbuilders, budgets and beers.
(00:03):
Today we have Thomas Joseph ofJoseph design build from Austin,
Texas on the show. This is goingto be an episode for the guys
that really have some bigdreams. Big dreams meaning like
competing with DR Horton andLennar. Thomas goes through
their 10 years of building inAustin, the product they were
(00:23):
building, they're all doinginfill, speculative building.
They typically were doing athree to call it 8 million
product. And now they're goingfor volume. They're going down
to the 750,000 to a million,million and a half price point,
and they're wanting to go to 150to 200 units. So in this
episode, that's where we talkabout knowing your numbers,
(00:44):
getting to a position to makingthat decision, and how to do it
the smart way. Learn fromThomas. Let's go ahead and jump
in.
I was on the HOA. What were youtalking about?
When your beard was shorter, youlooked like you were an active
(01:05):
member of the HOA, like the guythat complains about the trash
cans. It's like, should wereally allow trick or treating
this year? That's what you looklike. But the big beard, you
look like the wild man that Iknow and love. So this is my
That's right, that's right. Um,yeah, you know, I'm definitely,
I'm definitely going back forlength. You know, when I live
down in Texas, I really getnervous about people cutting my
(01:27):
hair, and I, like my guy inDenver, so I just, like,
completely went rogue when I wasin Dallas and came back. But I
didn't plan accordingly, so Iended up getting a different guy
at the barber shop cutting myhair anyways. So I'm kind of on,
like the third, fourth month ofgetting back to zero, getting a
little bit of a canvas for himto work with,
right? I mean, the turnover atSupercuts is crazy, man, I see
(01:50):
why you're struggling over I'ma Sports Clips guy. I'm a Sports
Clips guy. I'm going forendorsement stunt. I mean, super
cuts, that was, was it supercuts or super clips?
I don't know. I feel likethere's, that's a Walgreens CVS
thing, right?
I think it was, you get ahaircut for like, six bucks,
right? Crazy. It's just like agenius person, fresh out of
(02:10):
school, ready to mangle yourhead. That's
right, that's right, that'sright. They're just trying to
get some some cuts under theirbelt. But how are you dude?
I'm doing good man. I'm a littletired, but I was like, I'm not
gonna cancel on Reese, no matterwhat. So I'm here and I'm
excited to talk to you. Iappreciate
and you just look all dolled upas normal, just just absolutely
(02:33):
polished. What? What do you whatkind of shirt is that? It looks
like a doily turned into ashirt?
Yeah, that's a game set. Gameslike you look like you're
wearing a tablecloth. It's TedBaker. It's kind of like a old
Teddy Baker, huh? Yeah, it'slike, almost like a modern Sears
sucker. This is hot weatherfancy T shirts.
This is, this is Austin summergarb, right here.
(02:54):
Yeah, yeah. Like You I looklike, it looks like I could
light a match off of your over.
I didn't have to see the label.
No, that was Carhartt,yeah? No, I just, I threw it on.
You know, it's a littleovercasty, kind of chilly here
in Omaha or in Denver. I was inOmaha this week, yeah, because
you're so blue collar, it makessense that you wear tons of
work, dude.
(03:15):
If you knew me in my personallife, you'd know that I just
cannot stay away from hammers,you know, right? Just Give me.
Give me on a house on a framingkrill. That's my life.
You spent a weekend in thegarage. You know,
you're just tinkering around thehouse. I'm a tinkerer. I just
like to find things to do.
Hey, hey, honey, I got this basson the wall that talks to me
when I walk by. You're that guy,right?
(03:40):
I'm like, sharpening my chiselson the weekend. Like, I never
use them, but you gotta makesure they're sharp. Yeah, wall
where it's, like, there's theoutline of the thing
that's supposed to go there. Ihave a I get a neck and my
level, and I just go bananas,right? You snap it over your
knee. I'm going forthis is worthless. Now this is
(04:01):
worthless. It's completely outof touch. How am I supposed to
know if anything's plum? Yeah,right, yeah. Okay. Well, I mean,
we're recording, so this is,like, good role. We could start
here honestly. But so I alwayslike just to start it off for
the listeners to know who is onthe show. You give them a little
(04:23):
background, little backgroundyourself, and then we'll just
dive into the backstory of JDB.
What's going new in your world?
Just some some nice chatter.
Sure. So I'm Thomas Joseph, oneof the co founders of Joseph
design build. We are an infillluxury builder in Austin, Texas.
(04:45):
We're vertically integrated. Sowe do the whole stacks. We do
everything from the real estatepiece, the acquisitions,
architecture, interior design,structural civil engineering,
construction, and then themarketing, sales on the way out.
We historically. Been focused onarchitectural homes in the
downtown Austin area that wouldbe luxury, kind of three to $6
(05:07):
million price pointneighborhoods within 10 minutes
of downtown. And this is infill,so it's knocking down an old
house to build a house, so nosubdivisions. It's all scattered
lot. That's historically whatwe've done. And then this year,
we went out and we raised moneyand we created a new partnership
(05:28):
that led to a merger. And so nowwe are pushing down in price and
up in volume and scaling at apretty rapid pace. So now the
city changed the rules, whereinstead of doing one big house,
we can do three on a lot. So nowwe're doing more of like a
townhouse type product. So thesewill be like 750, to 1,000,005
trying to get our average downbelow a million. And we'll push
(05:50):
to do we're on pace that we willhave in the pipeline, probably
250 homes by the end of theyear. We're up to 130 right now.
So that's stuff that we'll doourselves, and then we also do
third party design and build forother developers. So we're doing
100 houses for developer inAustin and another 100 in
Dallas, with the same kind ofprogram where we'll, we'll do
(06:12):
the full stack, the design, thebuild, and it may or may not do
the marketing, sales at the end,dude, that's a really big deal,
like I've known you for threeyears, you know, basically. And
like you guys have always beendoing, like, homes that you see,
and you're like, if I could ownone one day, that would be
(06:33):
insane. And not to say that youguys are gonna be dropping on
quality, but the fact you'regonna be doing 150 to 200 units
now? Yeah, I'd be like, this isa huge pivot. It is, like, it's
a, give them a little backgroundon JDB. I mean, what 12 months
ago? Like, if you give like, a12 month look around, like, look
back. Is that like, I just, it'slike a flip switch, isn't
(06:55):
it? Yeah. I mean, I'll justbeing transparent. I mean, end
of 2022 they started raisinginterest rates, and depending on
where you were in the market andthe price points, but if you
were in Austin and you wereselling house above $3 million
you had about a 30, 40% drop invalues within six months. And
(07:17):
then it's been an absolutebloodbath, where probably half
the builders in that segment areout of business. Your bigger,
more scaled operators are out ofbusiness, and all kinds of crazy
Fallout investigations andstuff. So the mom and pops are
gone, the big guys are gone. Andthat market really went off
cliff. It was the biggest run upin the country, and then it was
(07:38):
probably the biggest drop in thecountry. And now that's, that's
luxury infill. So that's asubset the whole market. It
wasn't that bad. The wholemarket is probably down 12 and a
half percent from the peak, ifyou just went dead averages. But
it's lower volume transaction.
Things aren't moving. That's onthe sales side, on the, you
know, on the custom side, youknow, the consumer confidence is
low, so people really aren'tbuilding so, yeah, I mean, 12
(08:01):
months ago, we were staring downthe gun barrel of, hey, we've
got all these big, expensivespecs. They're not selling that
market's probably not turningaround anytime soon. You know,
we also, at that time, didcustoms and was like, hey,
people don't feel comfortablespending three, four or $5
million on a custom because, youknow, feel worried about
interest rates. Are worriedabout the election now they're
(08:22):
worried about trade war and realwar, and that that consumer
confidence at the high end iseverything right, even if,
logically, people can stillafford the homes, and even if
they still want to be in thecity, and even if they have a
job or a tax advantage or a realpurpose to be in the city, when
that confidence goes, peoplejust pull out of the market
completely. So sure that's whereit was. And in an effort to
(08:45):
pivot and try to get to a deeperbuyer pool and more affordable
price points, and in response tothe city changing the rules, we
went hard after that, developeda program with the kind of
thought that, hey, can we takewhat we do really, really well
on these big, more elaborate,more custom, kind of, more
(09:07):
architecturally focused homes,and can we do something more
approachable, where we take allthat cool design, but we do
something a little bit simplerfor the missing middle, you
know, kind of saying like, hey,What if you shouldn't have to
spend $3 million to get aninteresting home that's
architectural, that's got a lotof features, that's got a lot of
technology. You should be ableto get that at a lower price
(09:29):
point. And so that was kind ofthe thinking it's like, All
right, let's take advantage ofwhat the city's doing with
density, but let's bring what wewhat we know and what we do
well, and bring it down to lowerprice points. So make the
designs cool. These are, youknow, smart homes where we're
giving them a full Smart Homepackage with speakers and
automated lighting and, like, aWi Fi hub and automated blinds.
(09:52):
Like, like, this is a packagethat we would have put in a $5
million House, you know, we'reputting it in a $750,000
townhouse, right? Hey, let's,let's really deliver a lot those
price points and and the bet isthat the folks that would have
spent a million plus wheninterest rates were low now, if
(10:14):
you can offer something that'sreally great, that's more
affordable there, they'll comeback to the market, you know?
And they'll stop renting, andthey'll say, yeah, let me pull
the trigger on something that'sreally great, because there's
not a lot of good offerings inthat price point, right?
Especially in these cities. It'slike, you get real garbage if
you're not willing to spend alot of
money. Totally, two things andhelp me, help me remember the
(10:36):
first one in terms of like, thenumbers, because, like, I think
it's super interesting thatyou're taking or you made the
comment of, like, you don't needto spend three, 4 million bucks
to get the architectural designand like that high quality type
feel like, why can't we justscale that back and go into
like, 1,000,007 $50 millionproduct? So that's the first
one. But the second point that Iwanted to talk about, I think I
(11:01):
lost my train of thought. I'llthink of it hit that first
question, you could do theexterior completely out of
Carhartt? Wouldn't that be anattractive home?
I think so. And if we'rethinking like dungaree finishes
like that, would just bebeautiful.
AX handle for the front doorhardware, you know, you just got
(11:23):
lost in your in your, like,workman fantasy. There you just,
you went,No, it was good. It was
inside the Bass Pro Shops.
Dude. Now you're not helping,dude, I'm further away. I'm
further away talk to me aboutthe price. Like, dude, so what
(11:43):
do you have to know from yournumbers? Like, the confidence
standpoint, because you, again,you and Gabe were just like,
call it 10x our volume drop ourprices by a third. Like, where
do you get the conviction onthat? Because it sounds it's
simple, right? It makes all thesense in the world on paper. But
how do you have the confidencethat you can do that?
You know, my mom was really niceto me when I was a kid, you
(12:05):
know, and I've rested like 17,so I just have all this
confidence, no, so the so acouple of things. One was
merging, so joining anorganization that was already
doing a few things really wellat scale. One of the things that
organization was doing is theywere using a combination of
local and offshore folks fortheir design team. So your
(12:28):
ability to build a lot ofoperational capacity without a
ton of money by utilizing somelower cost folks overseas was
massive, and that's somethingwe'd never done before, opening
up your material sourcing to bewilling to go factory direct,
whether that's domestic, nearshore or offshore, and deal with
the complexity of buying thingsin bulk and going directly to
(12:48):
factories and cutting outretailers to get pricing down.
So they brought that that wasextremely helpful to feel good
about, hey, we can get our buildcosts down low enough to
actually be competitive at thesedifferent price points, because
you can't just spend $500 afoot. You know, if you're not
selling for 1000 so there wasthat. The other side of it was
(13:09):
one of the, one of our mainpartners just brought a level of
financial sophistication thatwas very, I mean, it's it for
me, it's very inspirational.
Because I'm like, wow, this is,this is all the stuff that I
would like to know and get to,and that really helped us start
looking at things like, okay,how can you be process oriented?
How can be systematic? How canyou fight for every inch and
always be hammering your processto be like, how do you be a
(13:32):
little bit faster, go a littlebit smoother, pull out
extraneous cost, and reallythink about these things at with
a with a mindset towards scaleand and that, I think, was the
big the big shift. So it's thecombination of organizational
change, and then someindividuals with different
mindsets really hammering thisidea of process and organization
(13:54):
right. Because you can build abunch of houses and be
incredibly inefficient. You canhave terrible financials. You
can do all this stuff reallybad. But if you build cool
houses, ultimately, no matterhow you get there, they'll sell,
and you'll make some money, andyou'll think you did a good job.
But you can't do that 1000 timesunless you're really, really
dialed in and and that, thatvolume, I think, fleshes out all
(14:15):
the mistakes and the weaknesses.
So yeah, so seeing a differentway of doing it, and really
focusing on getting organizedand capacity building in ways
that we hadn't before, andhaving some good people involved
to help lead that charge, andkind of, you know, bring us
along and help us evolve andchange our mindset
(14:36):
totally. Do you how long haveyou guys been building, you and
Gabe,we've been building, well shit.
I mean, so here in Austin, itwould, we'd be like 11, going on
12 years, okay, but we grew upin construction. I mean, my dad
was a builder, my grandpa was abuilding we've always been
around job sites. I mean, Gabewas a framer. I was a laborer,
so I used to pick up trash,yeah, rates, which is, yeah.
(14:58):
Trash man, this was summertimein Albuquerque, so you just
covered in dust and, like, even,like, the lowest level guy in
the job sites, like, pick upthat trash. Like, oh, man, you
might as well. You're probablydoing community service labeling
is like a job by your Dougyou're probably
doing, yeah, at risk youth, youknow, they're like, Hey, go to a
(15:21):
job site. We've always beenaround construction our whole
lives, and been on job sites,and then a little bit of finance
and, yeah, just always been inthat, that world, nothing,
nothing like this, candidly, buttotally
Well, and that's kind of whatI'm getting to is like, we'll
dig. I want to hear some of thetactical stuff that helped with
(15:42):
this merger. But even more,like, Okay, call it 10 years in
Austin and like, let's justassume that you've been building
the product that you've beenselling for the last 10 years,
right? Like, a big high endproduct. Could you have done
this earlier? Like, do you thinkyou could have, like, done the
high end luxury thing, built abrand, built a name, gotten to
(16:04):
the like, the quality market,and then pivoted into volume
earlier. Or do you think thatthis was, like, all good
experience that was worthwhile,and it was the perfect storm,
and you saw an opportunity andtook it like, Tell me about
that? Yeah, that's a greatquestion. No, I don't think we
could have done it earlier. AndI'll tell you, and me and you
(16:25):
talked a lot about this, Ithink, when we first met, so we
tried to take a run at scalingearlier before interest rates
shot up. We I spent better partof a year really learning
capital markets, gettingfamiliar with private equity and
sort of how institutionalfinance works, and then going
out and engaging all thesedifferent private equity groups,
(16:46):
working with, like a capitalmarkets person, and getting the
point of, like, getting termsheets and getting taking the
credit committee with some biginstitutional private equity
investors, all with the businessmodel of, Hey, let's scale the
three to $6 million stuff. AndI'm so glad it didn't work out,
because basically all of thathappened right before interest
(17:08):
rates raised. Interest rates aregoing up. All of the private
equity across all asset classes,pulls back and does nothing for
the last three years. I thinkhad we done that, I think we
would have gotten started andthen just got caught in the bear
trap. Even worse, we would havestarted buying land. Rates would
have shot up, and then we wouldhave just sat there. We would
have had a bunch of half builtprojects or a bunch of dirt in,
(17:28):
you know, in the permittingprocess, and the light switch
would have got flipped off, andwe would have, we would have
ended up in a much, much worse,worse position because of timing
that so timing wise, no, I don'tthink could have done it
earlier. If you back thattimeline up even more. Had we
done it five years ago, we couldhave been doing 1000 houses by
(17:48):
the time rates shot up and thenreally exploded, and we would
have ended up like some of thebigger guys here in town. So
that would have been worse. Butthe other thing is just
temperament wise, I think thatseeing all these lessons the
last three years of the marketbeing so brutal, and having
spent enough time kind ofstudying what the more scale
(18:12):
operations do and stuff tounderstand that, like, hey,
there's a way to get there, butit's not the way I was thinking.
And then had some really hardlearning lessons along the way.
I think we were much moreprepared for the opportunity now
than we've ever been, and Ithink we were poised to not make
some mistakes that I think Iwould have made, like not
emphasizing process, and notbeing as tight on everything and
(18:34):
not taking the mindset at youknow, every single second and
Dollar and inch counts, and Ithink that's the only way that
you can really scaleeffectively. And so I think, had
I tried to do this any younger,if had we tried to do it any
sooner, I think we probablywould have done it in a fast and
loose way, and we probably wouldhave made a lot of money, and
(18:54):
then at some point, just blewup.
Already team. So today, we'reactually piloting our first ad,
if you want to call it that,it's really more just a
promotion. We just got back fromthe contractor coalition summit
in Omaha, Nebraska, and it was afantastic event. I suggest it
for anyone who's doing a milliondollars a year in construction
costs to $50 million a year inconstruction costs even bigger.
(19:17):
I mean, the entire gamut ofpeople that were there were
pretty incredible. And reallywhat this is, is just an
opportunity to learn from thebest, extremely collaborative.
When I'd asked builders, why arethey there and what the value of
this event is, they saidnetworking and learning from
others. So what we have with thecontractor coalition Summit is
actually a promo code if you goto my Instagram, adaptive Reese
(19:43):
with A, C, R, E, E, C, E, andyou go to my bio, you'll
actually see the adaptive code,and the code to get 20% off your
ticket for the contractorcoalition Summit is adaptive 25
again, you can use our code. Toget 20% off the contractor
coalition Summit, and that codeis adaptive 25 you just have to
(20:06):
put that in the promotion Linkfield when you're getting
registered for the event. Now,when's the next event? The next
event is going to be in Chicago,and it's on November 7 through
the 10th of 2025 if you have anyquestions, or if this promo
didn't land, jump into my DMsagain. My Instagram is adaptive,
Reese, R, E, E, C, E, and we canDM back and forth. You can give
(20:31):
me a call. You can leavecomments in the section, but
we'd love to get you there, andwe're incentivizing you as well.
What we're because I know, like,the last 18 months were like,
pretty tough. What were some ofthose just, like, beat up
moments for you, like, just thebrutal at the time, but awesome
learning experience situationsfor you?
(20:53):
Well, I mean, I think you talkedabout interest rates. So, yeah,
so interest rates go up. Housesaren't selling. You can imagine
the fallout with that. Nowyou've got, you've got investors
that are upset because they'regoing to lose real money. You're
watching future income erode,which starts to jeopardize your
ability to carry overheadprofessionally and personally,
right? And so the stress ofthat, because you've got, you've
(21:15):
got a lot of people that trustyou with their livelihoods, with
their money, with theirfamilies. So carrying that
weight is a big deal. And then Ithink just, I mean, seeing like,
hey, there's no end in sight,right? Just being like, All
right, well, you know, I thoughtwhen rates started going up, I
thought maybe this is 1218,months, you know, but it just
keeps going and going and going.
And even now I look at it, I'mlike, man, you know, I've
(21:37):
thought for sure this would havebeen a recovery year, you know,
and rates start coming down. Wegot past the election, and then
people are still freaked outbecause of the trade war stuff,
and now the Iran stuff andIsrael stuff. What's coming
around next month? Who knows.
And so I think that having thatweight of, okay, you're watching
(21:57):
everything go down, you'reyou're flying the plane, and the
ground is getting closer andcloser and closer, and the plane
is full of people, and you don'thave the ability to, you don't
have a way to pull up, right?
You can't just, you don't havemore power, sure, the stress of
that, the pressure that, Ithink, was tough because it was
just, it was so long lasting,right? It wasn't like, I had a
(22:18):
bad week. It's like, it's justlike, like, us, like, year
three. It's like, it's like,when these, I don't know, I was
a big fan of Band of Brothers,right? It's like, guys where
it's like, they follow him. It'slike, all right, they're in D
Day. And anybody would have beenD Day men. Like, ugh, glad I got
my arm blown off and going home.
That was crazy. And these guys,like, they made it all the way
(22:39):
through Europe, and then theyend up in the Pacific, and it's
like, yeah, we're still, we'restill here. We've been doing
this for three years. This isbrutal. You know what I mean?
It's like, you don't evenrecognize them. They like smoke
unfiltered cigarettes now. Andit's like, you know what I mean,
they're,it's crazy. So that's, that's
chugging white monsterenergy drinks. Yeah, I feel like
I've gone on campaign and, youknow, I mean me and my brother
(23:01):
now. He's like, when theyrelease a pig in the wild, and
it turns into, like, a wildboar, growth of tusks and like,
all kinds of, like, yeah, everyhair that's that's how I feel.
Yeah, you kind of, you lookbetter than that killing machine
now, because it's been sobrutal. But I kind of like it,
I'll tell you, it's brought outthe best of me. So, yeah. So I
think that's where it gets hard,is just managing all of that.
(23:21):
But I think what the positive inthat is that I think it's really
important, and there's probablya lot of builders going through
the same stuff right now, is yougot to look at it and say, like,
all right, what have I done?
Right? All right, you've built abunch of houses. You've done a
lot of really good work, and Ithink everybody's done good
things, right? You got tounderstand that you're the same
(23:43):
person that was capable of doingthose good things that you've
done, even though you're in abad market or bad climate or a
bad period of time, and that youdon't actually ever really lose
your capability, right? So youcan lose money, you can lose
staff, you can lose clients, youcan lose your house, you can
lose all these different things.
But if you were capable ofproducing in our industry, great
work, you're still capable ofthat. And so there's still a
(24:06):
value in that and that you nowjust have to pivot and find
where, where can you apply thatskill set and that ability,
where it has value again, so younever really quite lose that. So
yeah, I would caution everybodyto remember that, because when
the markets shitty, you justtend to think it'll be like that
forever, or like, Why do I evenbuild these houses? Nobody wants
(24:29):
them, you know, but Right? It'sa it's a real capability. And so
the market does turn around.
Eventually, an opportunitypresents itself, and you're
still that's you still have thatsame skill set. So you just got
to being willing to kind oftough it out until there's an
opportunity to use it again.
Totally. No one. I think that'sso that actually reminded me of
(24:51):
what I was going to say is like,like you're never, like your
skills never going to diminish,right? Like your your ability
isn't going to diminish. Likeyou go through these things, you
go through these trials.
Tribulations. And like, as longas you're methodical and
rational about what's going on,like you're you'll still climb
and climb and climb, right, noteven considering the market
conditions or the externalfactors that you just cannot
control. It's like, that fluffylike, control what you can
(25:13):
control. Lot of validity inthat, right? But it gets
overused. And like, this is justkind of a great example of that.
So I don't forget, I was inOmaha this weekend, the
contractor coalition Summit.
Have you heard of it? No, so wecan talk about it later. But
basically what it is is it'slike, Nick Schiffer, he's NS
builders, Brad Levitt, aft andPhoenix, Mark Williams, Morgan,
(25:37):
molotar, Tyler, Grace, like allthese big builders have these
big Instagram followings. Theyput on this summit of, like,
knowledge transfer, awesome,okay? And they bring all these
builders in to, like, just openbook discussion, like, how do we
do things? You know, from amarketing standpoint, from an
ICP standpoint, to a salesfunnel, to a build practice to a
financial practice, everything,okay, well, adaptive, we
(25:59):
sponsored it, awesome. We wereone of the sponsors, and myself,
Daniel Martinez and Mattgummersbach. Have you met Daniel
or gum? I don't think so. Yeah,you'd love Daniel Gomez Bach.
You would love gomsbach too.
He's just again, one of thesmartest guys I know. We can
talk about gum later. Pointbeing is we were there, and
(26:21):
I do naming tons of dudes. Ilike that. You named like 40
people. This is a lot of buildup. Yeah, there. You know it is
every everybody. I'm a NameDropper. You are, man, I don't
know any of these names. Like,it's okay, we
can make introductions about,don't feel bad. What are you
(26:42):
feeling bad for? You just settledown. Are you getting nervous? I
think you're gettingnervous, people. I'm like, was
these characters on The Last ofUs? What is he saying?
Okay, let me get to the pointof, I did like, a 20 minute
presentation on not adaptive,like the features, but the
problem solution that we'resolving, right? And one of the
(27:03):
pieces that I really wanted todrive home, and we see this with
bowlers all the time, is you gotto know your numbers. Okay, I
pose it this way, like beforeyou start to scale, know what
the cost of your widget is. Moreimportantly, know what you're
gonna profit on the widgetright? Like, before you start,
(27:24):
like just running out andchasing a bunch of volume, know
that you're at least going tomake money doing it right. And I
wanted to bring that piece upbecause I want to know how much
of your and Gabes and the restof the team's decision making
and again, going from how manyunits were you doing 10
a year, we would do like, 10 to2510 to
25 and fills a year. And nowyou're gonna do 150 to 200 like,
(27:47):
quite literally, 10x yourvolume. Yeah, how much of that
was you knowing the cost and theprofit on the widget, or the
three to $5 million home, andthen your ability to track that
down into a product that you'relike, we can certainly make
money on this. Yeah, we'rebullish enough to go raise and
execute, yep,no, I think that's I think
that's everything. So I'll tellyou, like every single piece of
(28:10):
the business is designed tomaximize margin. So the fact
that we do infill instead ofsuburban production, it's
because our margins are threetimes what they are in the
suburbs. The reason we do thevertical integration, and we
perform so many of the pieces ofparts ourselves, is to capture
margin. We control the marketingand sales so we can get the
(28:30):
feedback, so that we canoptimize the houses to increase
mark. I mean, everything we dois, is margin driven. So I think
understanding how all thesepieces impact that. And then
also, like, saying, like, Whatbusiness do you want to go
after? Like, point you'remaking, it's like, hey, not all
business is good, right? Andwe've done, we own a concrete
company too, where, like, we dida school, and it was, like, a
(28:51):
huge job for us. It was, youknow, it was probably, you know,
we would do slabs and stuff forother builders. So maybe an
average slab was 50 to turn 50grand, and this school was, like
a three and a half milliondollar concrete job. And we
thought, like, bigger numberscan be awesome. It's gonna be
just like the other thing. Andwe weren't clear on our numbers
weren't clear on margin. And itwas, it was a new type of work
(29:13):
for us. We lost a ton of moneyon it, and we thought, you know,
more is better, or bigger,numbers are better. And on the
House side, it's like, yeah,like, you can specifically go
after client, go afterclientele, and sub markets where
the margins are better, and Iwould encourage people to, it's
like, yeah, you it's harder tobuild an infill. You're in town,
(29:35):
you got people on top of you,and you're the middle of a
neighborhood, but your marginsare way better than if you build
out in the country, and there'snobody there's nobody around,
right? Or if you're wanting todeal with the complexity of
building in a mountain town, youknow, like in a resort town,
your margins are insane becausethere's no competition. And
where's your where's yourconsumer elastic and what
they're willing to pay? So,yeah, I think that hardcore
(29:57):
focus on margins. And that'snot, not just to help you make
money in your business, but ifyou're out marketing to clients,
knowing your numbers to where,if you get a chance opportunity,
and you get a five minuteconversation with somebody, and
you know your numbers can builda ton of confidence and really
convert people. So yeah, I thinkit pays to be to be
(30:18):
quantitative. You do not want tobe somebody that just, well, I
think we can do it and, well, itseemed like a good job. And get
to the end be like, I don't knowwhy we didn't make any money,
damn it, you know, like, I knowa lot of people are like that,
regardless of the type ofbusiness. And I think that's you
can. You can be a lot morefocused and deliberate with your
(30:39):
time, and you'll make a ton moremoney, and it's a lot more
stress, it's a lot lessstressful. And the thing I've
learned too, is like, highmargin stuff will protect you.
If you've got big margins,things can drop and you can
still be okay, right? If you gota 30, 40% margin, it's like,
well, you can absorb a lot of alot of bad things, but if you
run on a 10, 12% margin, youbetter not make a mistake. So
(31:00):
yeah, I think knowing thosenumbers, knowing your margin,
being deliberate about findingniches in the market where you
can do better, there's lesscompetition, and you can stretch
your margin, stretch youradvantage, I think, is huge.
Using the same skill set, doingthe same amount of work to build
the same kind of thing, justdifferent target clients and
different target areas can makeall the difference. Make all the
(31:22):
difference,totally, margin, totally. What
would you say was, like, themost impactful and tactical
takeaway that you had you andyou brought about this up a
little bit earlier in theconversation with the merger,
right? You'd mentioned, like,there was some finance person
that you were talking to that,like, offered a lot of insight
(31:44):
and a lot of inspiration to you.
What were some of the moretactical takeaways that you took
from that experience on this?
Know your numbers, know yourmargin, know your cost. Yeah,
so, okay, am I asking the rightquestion?
Yeah, so this, so he's a, he'san active partner of ours, and
(32:07):
not a finance person per se, butjust a brilliant financial mind.
And part of what the way hethinks that was helpful in
shifting our thinking was thisidea that, like, kind of
realizing, hey, if somebody elseis doing it, you can do it. If a
national builder can get theirbuild costs down to 70 to 90
bucks foot. There's a path. Itmay be difficult. It may be
something that you have to getto a certain size before you
(32:29):
take advantage of it may involvefinancing structure that's
unavailable too. There may bereasons why it'll be harder, be
more time consuming, or take alonger time to get there, but
it's possible, like, so ifsomeone's doing it, you can do
it. And I think tacticallythinking about that, like, Okay,
how do we need to? We like touse tons of Windows, right? Very
modern designs. Like, well, howdo we get our windows down?
(32:51):
Well, can we buy them FactoryDirect? Okay, well, that cuts
out these, like, sales reps. Wesave a little bit of money. It's
like, okay, well, what factoriescan produce windows for less
money? And then where are they?
And, okay, how do we buy fromthem? And does that involve
shipping and logistics andordering in bulk? And, okay, is
all of that worth it? Do we pickup enough savings like that?
Idea of like, Yeah, this is alldoable. None of this is
(33:12):
impossible. So I thinktactically thinking like that
that like the big nationalsdon't have it's not, I mean, if
you talk with them, it's not,most of it is just scale. But
it's not like, it's notproprietary technology, right?
It's not like they're like,nobody knows how we do it. It's
like they're framing stick,framing houses in mass. And they
(33:33):
just have really great supplychains and really great
organizational processes so theycan do it faster and cheaper
than most people. But a lot ofthat you can lot of that you can
mimic and totally apply to yourbusiness. So I think just
tactically thinking like that,like lower costs or higher
margins or more profit or morevolume, aren't these
unobtainable mysteries. They'reall things you can do. They just
(33:55):
may take more effort, time andmoney than you're willing to
take on or, or, it may be a factof you, you can take those
things on. You need to bring insome other people, or raise some
money, or make some partnershipsor or find ways to cobble
together. But it's all. It's allmuch more doable than I would
have thought,totally well, and dude, I think
(34:15):
that's like, what do you thinkkeeps people from doing it. To
your point, like, it's not like,it's a secret, it's not out
there. What do you think keepspeople from
doing it? You know, it's funny.
So especially in our business,there's a lot of like, what I
would describe, and this isnothing wrong with this. If
these people are probablyhappier than I am, and probably
(34:36):
sleep more than I do, butthere's like, what I would
describe as like hobby farmers,where they're not Monsanto,
right? They're like, Hey, I justwant to build a handful of
houses a year and make a greatincome. And they like to be on
the job site all the time, andthat's how they want to do the
business. And they have no nointerest or desire in more than
that. And it's not because theycouldn't or because they're
(34:58):
afraid of it, like. Just, it'ssafe. They just, just wanted to
have, like, a lifestylebusiness. And I think building
homes, you can make a lot ofmoney off of a few houses, and
so it enables people to do that.
So I think that's one part ofit. I think the other part of it
is, you know, people, ingeneral, we are way more scared
(35:18):
of loss than we are excitedabout gain. We're just wired
that way, right? And it's asurvival thing. Like, you'd be
crazy if you were like, I canjump that cliff. And we, you
know, there wouldn't be peopleover wired just to be psycho
risk takers. But I think a lotof times, people just get in
their head about, oh, but if Itake that jump, then it's gonna,
it's all gonna fail, and then,you know, that will be so bad
(35:40):
and so unbearable. I don't careif I would have made more money
or had a little bit more, I'mjust not willing to take that
chance. So I think there's thathardwiring component, and then
there's a cultural thing thatI've seen broadly where and
it's, I think it's an Americanthing, where we're I say that,
like, I'm European or something.
I'm like, oh, it's America,aren't you?
Armenian, I'm Lebanese,whatever. We're
(36:03):
from state New York. So that'slike, because Americans are
kids, it's like, Bruce, yeah,you know, basically like leather
jacket and a flag bandana. Butwe have a cultural thing of
winners and losers, right?
Everybody wants to be Brady.
Nobody wants this burger. Andit's just, we make people feel
so much pressure, like, one yougot to be a winner, but if you
(36:24):
ever lose, you're a fuckingloser forever. And that's but we
make people feel like you justeither win all the time, or once
you lose, you're just this,like, white t shirt with a big
old like, red stain on it, andyou're a loser forever. And so I
think that that paralyzes a lotof people, because they just
feel so worried of theembarrassment and shame of
failure and this idea that theywill then be blemished as a
(36:45):
loser forever because they tooka chance. And I don't blame
people, because look what we doto people like we, you know,
publicly, we like, tear peopledown if they stumble at all and
totally, you know, social mediamakes people feel like
everybody's doing better thanthem, and so there's a lot of
pressure on people to like,don't fuck up, don't ever fail.
But it's resulted in peopledon't take a chance. And I think
(37:05):
the sort of the secret, or thething that people that are
successful aren't telling peopleis like, everyone fails
constantly. Like, like, everyperson I know with a lot of
money has had multiple periodsof time where they almost lost
it all, or they were scared oflosing all, or they did losing
all, or they did lose all, andthey went and built it back,
like, right, take these bigrisks, and they got desensitized
(37:29):
to the risk taking. But we butfor some reason the mainstream
makes everybody feel like youjust it's so binary. So yeah, so
I think that fear of failurebecause of the cultural
implications of, of how itrelates to your identity, that
you now are a loser because youyou failed for some period of
time. But I just, I don't, Idon't think that. I don't
(37:51):
subscribe to that, and I've justseen it too many times that,
like, I know tons of peoplethat, and I've experienced it,
you know, gone within an inch ofbroke and then made a ton of
money, and with an inch ofbroke, made a ton of money. And
you so I but I think that holdsa lot of people back. They're
just, it's been beating theirhead that they should be afraid
of it kind of at the root, atthe root of who they are.
(38:13):
So are you, like, what's nextfor you? Are you gonna like,
like, give Grant Cardone a runfor his money? Or, like, Tony
Robbins and like, just pumppeople up or no. Dude, that was
great. It was great. It's atruth, dude. It's like, roll the
dice. Roll the dice. And theskills that you've developed and
like, you're gonna lose eitherway, yeah.
Oh, it's true. Well, what's nextis, I'm gonna go to Bass Pro
(38:35):
Shops and I'm gonna try to buyyou, you know, your Christmas
present, your birthday present.
I'm just gonna be like, I need,like, 200 yards of really
scratchy fabric to give thewreath,
and I'm gonna go and raid everygrandmother's limb closet, and
(38:57):
we'll have miles of gar garmentsfor the rest of our help produce
mea full doily outfit. You know,
the shirt I need, the doilypants and some doily shoes, you
know?
Yeah, you probably have them on.
There's probably a one piece.
There's probably something youscooped up on, like the beaches
of Mexico, or, like, an outfityou bought for Turks and Caicos,
(39:20):
and you're just like, rocking itright now. That's right. Last
serious question here, and I amcurious, just because I love you
and your brother, it's beenawesome working with you guys.
Do you guys actually want to dolike a DR Horton Lennar type
thing, or 100% so cool. The goalis to be a national, national
(39:40):
scale infill production builderfocusing on design technology.
So the idea is, give thatmissing middle in all these
urban areas really awesome,technologically advanced, well
designed homes in these pricepoints that people can. Board
and not just produce reallyboring stuff that feels like a
(40:02):
compromise to the consumer. Wewant to do that in multiple
markets. We're in Austin, Dallasnow. I think next stop is
probably Nashville and Raleigh.
And the goal is, in five years,to be a billion dollar company
and be in five plus markets. AndI think we have the right people
and backing and knowledge baseto do that, dude,
(40:24):
I love it. I think that's sweet.
And that's, I mean, I think interms of, like, the boring
product conversation we weretalking about this in Omaha, and
it's like, how many of theLennar and DR Horton, I'd love
to have one of their, like,execs on the pod one day? Maybe
that's a goal. But like, how,like, the product that they're
actually building. The peoplethat I know that have bought a
DR or Lennar house, it's like,in the first, like, year, two
(40:46):
years, five years, they havesome, like, really serious shit
go wrong with their house, andyou start looking at like
they're just crankingproduction, and they're trying
to fill an inventory shortage,and this is the opportunity for
them to hit their velocity. Butthen you're getting a 30 year
mortgage on a product that'sgoing to last 15 years, 20
(41:08):
years, like it might even lastthe life of the loan, right?
No. So this is going to be acontrarian opinion here. I'm
gonna give you my oh, let's hearit. Let's hear it. So I actually
think what I think national thenational builders actually do it
really, really well. And I'lltell you, when it comes to floor
plans, utilization of space sortof optimizing, I think it's hard
(41:32):
to beat what a national buildercan do with space. I think that
their process of production isby far the best their ability to
produce more things in a costeffective manner. Now, I think
that because the price pointsthat they tend to operate in,
and because the cost they haveto get to, they can't do all the
extra things always, that wouldprobably be more beneficial to
(41:55):
the consumer, but it's afunction of the price point that
consumer wants and the scalethey're playing at, right? So
it's a to me, it's like, hey,people want Zara. You're not
pissed at Zara. That's not LauraPiana. You're just like, hey, I
went to zarix. I wanted a $20leather jacket because I'm going
to a nightclub, because I wantedto write Thomas, because we're
in Vegas since my birthday,right? And it's white, sure,
(42:17):
totally. And that's, that's howI forever see you just an all
white suit with no shirt on inthe ARIA lobby, but smoking a
cigarette and then telling youHappy birthday, dude. If only
that happened. They do it reallywell, is my point. And they do
it really well, and I think theydo it as best you can in the
price points. They're in my onlyknock on them, and it's not
(42:38):
taking away up tomorrow anddecide to do this and decide to
do this and probably smoke it,but they're just selling to the
fattest part of the bell curve.
And so I don't think there'smuch emphasis on design to be
interesting, right? They'relike, we don't really need to
these don't need to be cool.
There's no there isn't atremendous value in them for
that. Because I think turning abig ship like that is slow and
(43:00):
difficult. And I think that forthem, they're like, hey, we need
to have 20 floor plans that wecan build 20,000 of a year.
We're not going to do a bunch ofcool, tricky things. And we
really don't need to reinventourselves and be technology
focused or be very like designoriented, because they're really
there. They've already cornered,sort of the beef of the market
(43:22):
that maybe doesn't care aboutthat, right? Like, not everybody
is buying a shirt that lookslike a doily. Some people just
bathe in Carhartt and, you know,and that's like, so, yeah, think
they're the villain that peoplethink they are. And I know, like
every builder listening this,knows we all get warranty calls.
We all despite best efforts,houses are, you know, wabi sabi,
(43:44):
the imperfection of creation.
They're hand built in the fieldby 20 year olds outside, right?
There's always stuff that messesup with them. And so, you know,
hollow core doors is, you know,a decision based on a price
point. But it's not becausethey're villainous, and you know
that they're bad at it, it'sthat they're so good at it, but
they're valuing differentthings. And so I think there's
(44:06):
room to come in and say, Let'svalue design and technology, and
then do the supply chain thingsto do that and be competitive on
price, and go where the marketcan afford that, right? So
totally focused on infill.
There's a little bit more moneyto spend and make the houses a
little bit cooler, whereas atthe absolute entry level, it's a
(44:27):
different it's a more difficultproposition. You got to have
real scale. But I think there'sstill room for it. But, yeah, I
think the national builders aregood at what they do. I think
there's just room to do it alittle bit
cooler. I like your perspectivea lot better than mine, and
truthfully, like that makes ahell of a lot of sense. I think
that's probably a message thatneeds, like, shared a little bit
(44:49):
more broadly.
Yeah, you were hoping I'd sayyeah, they're so
no, no. I think a year in sales,what happened is exactly what.
Should have happened, because,like, I'm like, I truly sit here
and I'm like, Dude, what ishappening with like, every
everything I hear about thesehouses is just like, falling
apart. Shit happens. Hear thatand the other and it's like,
(45:11):
yeah, okay, well, are you, like,is this like, a recency bias, or
is this, like, actually thecase, and it's probably more of
like a recency bias and like,but
go ahead, yeah, it can be, itcould be that. I mean, it's, you
know, especially if you're afirst time home buyer, you're
just living in apartments whereanything goes wrong. You just
call somebody right, and thenit's like you weren't living in
that nice of an apartment, rightwhen we were in our 20s, you
(45:34):
know? It's like we weren'tliving good. So we get into a
home, and here's what it is. Theexpectation is, everything is a
manufactured good. You buy a carfrom a factory, it's perfect. If
it's imperfect, you give it backthat you get another one. It's
perfect, right? Everything hasto be perfect. But houses are
hand built by a bunch of crazy,just slightly older than
(45:57):
teenagers. Right outside, right?
The craziest part outside, it's100 in the elements, smoking
cigarettes, drinking monsterenergy drinks, and no and, you
know, with a hangover, andthey're building these out. I
mean, that's just the reality.
It's like, it's like your dadbuilding you a fort. You know,
were you pissed that that forcedidn't pulled up? So good. So I
(46:17):
just think we're used to buyingperfect things, perfect
products, you know, we get aniPhone, it's fucking flawless.
And you get house, and you'relike, this fucking the you know,
the drywall cracks a little bitand that door sticks a little
bit, and, you know, they touchedup the paint. But I can see that
they touched it up. And isn'tthat just all of us, Reese,
aren't we all just imperfectcreations, you know, just doing
(46:39):
our best, you know, soif, if anything this podcast, I
hope this was helpful for thelisteners, but it made me
realize how much I do missspending time with you, wealth
of knowledge, just a salesman atheart with nothing but logic.
Just, you know, it's awesome.
It's awesome. I love it. I'mgonna go to Bass Pro Shop and
(47:00):
catch some lunch. Thomas, Iappreciate you for hopping on,
dude. This is agreat, yeah, well, you're back
in, you're you're in Boston now,right,
dude, so the wife and I wereselling our house in Denver. So
if there's anyone on here istrying to buy a house in Denver,
it's on the market, and we'regetting ready to move to Boston?
(47:21):
Yeah, to stand up a little go tomarket office for
adaptive. Well, I'm gonna haveto come see you in Boston and
just harass you. This is thething I always forget. I give
you so much shit, and then I seeyou in person and you're a big
dude, and I go, Oh, why did Isay all that? Theresa's like six
three in burly and clearlyaffiliate football.
Dude, I'm not six three. I'm notsaying, Sorry, I look like a
(47:41):
center. Maybeyou're a big dude in real life.
Yeah, you take any of my shitwhen I see you, it's
because you wear cashmeresweaters and chains. That's
right. Like, I'm scared of you.
It's like this guy knows someonethat could give me a pair of
concrete lashes.
At least I'm shiny enough thatyou, if you, if you attack me,
the light will reflect, andpeople will be like, something's
(48:03):
going on over that nice, shinyman, I love it.
I love it. Okay, well, we'llcatch up more here later, I've
got some updates for you on theon the old adaptive But dude, I
appreciate the hell out of you.
Thanks for jumping on. Yeah,for having me, man, of course.
Well, we'll talk to I mean,thanks later. Yeah.
Welcome to another episode ofbuilders, budgets and beers.
(00:03):
Today we have Thomas Joseph ofJoseph design build from Austin,
Texas on the show. This is goingto be an episode for the guys
that really have some bigdreams. Big dreams meaning like
competing with DR Horton andLennar. Thomas goes through
their 10 years of building inAustin, the product they were
(00:23):
building, they're all doinginfill, speculative building.
They typically were doing athree to call it 8 million
product. And now they're goingfor volume. They're going down
to the 750,000 to a million,million and a half price point,
and they're wanting to go to 150to 200 units. So in this
episode, that's where we talkabout knowing your numbers,
(00:44):
getting to a position to makingthat decision, and how to do it
the smart way. Learn fromThomas. Let's go ahead and jump
in.
I was on the HOA. What were youtalking about?
When your beard was shorter, youlooked like you were an active
(01:05):
member of the HOA, like the guythat complains about the trash
cans. It's like, should wereally allow trick or treating
this year? That's what you looklike. But the big beard, you
look like the wild man that Iknow and love. So this is my
That's right, that's right. Um,yeah, you know, I'm definitely,
I'm definitely going back forlength. You know, when I live
down in Texas, I really getnervous about people cutting my
(01:27):
hair, and I, like my guy inDenver, so I just, like,
completely went rogue when I wasin Dallas and came back. But I
didn't plan accordingly, so Iended up getting a different guy
at the barber shop cutting myhair anyways. So I'm kind of on,
like the third, fourth month ofgetting back to zero, getting a
little bit of a canvas for himto work with,
right? I mean, the turnover atSupercuts is crazy, man, I see
(01:50):
why you're struggling over I'ma Sports Clips guy. I'm a Sports
Clips guy. I'm going forendorsement stunt. I mean, super
cuts, that was, was it supercuts or super clips?
I don't know. I feel likethere's, that's a Walgreens CVS
thing, right?
I think it was, you get ahaircut for like, six bucks,
right? Crazy. It's just like agenius person, fresh out of
(02:10):
school, ready to mangle yourhead. That's
right, that's right, that'sright. They're just trying to
get some some cuts under theirbelt. But how are you dude?
I'm doing good man. I'm a littletired, but I was like, I'm not
gonna cancel on Reese, no matterwhat. So I'm here and I'm
excited to talk to you. Iappreciate
and you just look all dolled upas normal, just just absolutely
(02:33):
polished. What? What do you whatkind of shirt is that? It looks
like a doily turned into ashirt?
Yeah, that's a game set. Gameslike you look like you're
wearing a tablecloth. It's TedBaker. It's kind of like a old
Teddy Baker, huh? Yeah, it'slike, almost like a modern Sears
sucker. This is hot weatherfancy T shirts.
This is, this is Austin summergarb, right here.
(02:54):
Yeah, yeah. Like You I looklike, it looks like I could
light a match off of your over.
I didn't have to see the label.
No, that was Carhartt,yeah? No, I just, I threw it on.
You know, it's a littleovercasty, kind of chilly here
in Omaha or in Denver. I was inOmaha this week, yeah, because
you're so blue collar, it makessense that you wear tons of
work, dude.
(03:15):
If you knew me in my personallife, you'd know that I just
cannot stay away from hammers,you know, right? Just Give me.
Give me on a house on a framingkrill. That's my life.
You spent a weekend in thegarage. You know,
you're just tinkering around thehouse. I'm a tinkerer. I just
like to find things to do.
Hey, hey, honey, I got this basson the wall that talks to me
when I walk by. You're that guy,right?
(03:40):
I'm like, sharpening my chiselson the weekend. Like, I never
use them, but you gotta makesure they're sharp. Yeah, wall
where it's, like, there's theoutline of the thing
that's supposed to go there. Ihave a I get a neck and my
level, and I just go bananas,right? You snap it over your
knee. I'm going forthis is worthless. Now this is
(04:01):
worthless. It's completely outof touch. How am I supposed to
know if anything's plum? Yeah,right, yeah. Okay. Well, I mean,
we're recording, so this is,like, good role. We could start
here honestly. But so I alwayslike just to start it off for
the listeners to know who is onthe show. You give them a little
(04:23):
background, little backgroundyourself, and then we'll just
dive into the backstory of JDB.
What's going new in your world?
Just some some nice chatter.
Sure. So I'm Thomas Joseph, oneof the co founders of Joseph
design build. We are an infillluxury builder in Austin, Texas.
(04:45):
We're vertically integrated. Sowe do the whole stacks. We do
everything from the real estatepiece, the acquisitions,
architecture, interior design,structural civil engineering,
construction, and then themarketing, sales on the way out.
We historically. Been focused onarchitectural homes in the
downtown Austin area that wouldbe luxury, kind of three to $6
(05:07):
million price pointneighborhoods within 10 minutes
of downtown. And this is infill,so it's knocking down an old
house to build a house, so nosubdivisions. It's all scattered
lot. That's historically whatwe've done. And then this year,
we went out and we raised moneyand we created a new partnership
(05:28):
that led to a merger. And so nowwe are pushing down in price and
up in volume and scaling at apretty rapid pace. So now the
city changed the rules, whereinstead of doing one big house,
we can do three on a lot. So nowwe're doing more of like a
townhouse type product. So thesewill be like 750, to 1,000,005
trying to get our average downbelow a million. And we'll push
(05:50):
to do we're on pace that we willhave in the pipeline, probably
250 homes by the end of theyear. We're up to 130 right now.
So that's stuff that we'll doourselves, and then we also do
third party design and build forother developers. So we're doing
100 houses for developer inAustin and another 100 in
Dallas, with the same kind ofprogram where we'll, we'll do
(06:12):
the full stack, the design, thebuild, and it may or may not do
the marketing, sales at the end,dude, that's a really big deal,
like I've known you for threeyears, you know, basically. And
like you guys have always beendoing, like, homes that you see,
and you're like, if I could ownone one day, that would be
(06:33):
insane. And not to say that youguys are gonna be dropping on
quality, but the fact you'regonna be doing 150 to 200 units
now? Yeah, I'd be like, this isa huge pivot. It is, like, it's
a, give them a little backgroundon JDB. I mean, what 12 months
ago? Like, if you give like, a12 month look around, like, look
back. Is that like, I just, it'slike a flip switch, isn't
(06:55):
it? Yeah. I mean, I'll justbeing transparent. I mean, end
of 2022 they started raisinginterest rates, and depending on
where you were in the market andthe price points, but if you
were in Austin and you wereselling house above $3 million
you had about a 30, 40% drop invalues within six months. And
(07:17):
then it's been an absolutebloodbath, where probably half
the builders in that segment areout of business. Your bigger,
more scaled operators are out ofbusiness, and all kinds of crazy
Fallout investigations andstuff. So the mom and pops are
gone, the big guys are gone. Andthat market really went off
cliff. It was the biggest run upin the country, and then it was
(07:38):
probably the biggest drop in thecountry. And now that's, that's
luxury infill. So that's asubset the whole market. It
wasn't that bad. The wholemarket is probably down 12 and a
half percent from the peak, ifyou just went dead averages. But
it's lower volume transaction.
Things aren't moving. That's onthe sales side, on the, you
know, on the custom side, youknow, the consumer confidence is
low, so people really aren'tbuilding so, yeah, I mean, 12
(08:01):
months ago, we were staring downthe gun barrel of, hey, we've
got all these big, expensivespecs. They're not selling that
market's probably not turningaround anytime soon. You know,
we also, at that time, didcustoms and was like, hey,
people don't feel comfortablespending three, four or $5
million on a custom because, youknow, feel worried about
interest rates. Are worriedabout the election now they're
(08:22):
worried about trade war and realwar, and that that consumer
confidence at the high end iseverything right, even if,
logically, people can stillafford the homes, and even if
they still want to be in thecity, and even if they have a
job or a tax advantage or a realpurpose to be in the city, when
that confidence goes, peoplejust pull out of the market
completely. So sure that's whereit was. And in an effort to
(08:45):
pivot and try to get to a deeperbuyer pool and more affordable
price points, and in response tothe city changing the rules, we
went hard after that, developeda program with the kind of
thought that, hey, can we takewhat we do really, really well
on these big, more elaborate,more custom, kind of, more
(09:07):
architecturally focused homes,and can we do something more
approachable, where we take allthat cool design, but we do
something a little bit simplerfor the missing middle, you
know, kind of saying like, hey,What if you shouldn't have to
spend $3 million to get aninteresting home that's
architectural, that's got a lotof features, that's got a lot of
technology. You should be ableto get that at a lower price
(09:29):
point. And so that was kind ofthe thinking it's like, All
right, let's take advantage ofwhat the city's doing with
density, but let's bring what wewhat we know and what we do
well, and bring it down to lowerprice points. So make the
designs cool. These are, youknow, smart homes where we're
giving them a full Smart Homepackage with speakers and
automated lighting and, like, aWi Fi hub and automated blinds.
(09:52):
Like, like, this is a packagethat we would have put in a $5
million House, you know, we'reputting it in a $750,000
townhouse, right? Hey, let's,let's really deliver a lot those
price points and and the bet isthat the folks that would have
spent a million plus wheninterest rates were low now, if
(10:14):
you can offer something that'sreally great, that's more
affordable there, they'll comeback to the market, you know?
And they'll stop renting, andthey'll say, yeah, let me pull
the trigger on something that'sreally great, because there's
not a lot of good offerings inthat price point, right?
Especially in these cities. It'slike, you get real garbage if
you're not willing to spend alot of
money. Totally, two things andhelp me, help me remember the
(10:36):
first one in terms of like, thenumbers, because, like, I think
it's super interesting thatyou're taking or you made the
comment of, like, you don't needto spend three, 4 million bucks
to get the architectural designand like that high quality type
feel like, why can't we justscale that back and go into
like, 1,000,007 $50 millionproduct? So that's the first
one. But the second point that Iwanted to talk about, I think I
(11:01):
lost my train of thought. I'llthink of it hit that first
question, you could do theexterior completely out of
Carhartt? Wouldn't that be anattractive home?
I think so. And if we'rethinking like dungaree finishes
like that, would just bebeautiful.
AX handle for the front doorhardware, you know, you just got
(11:23):
lost in your in your, like,workman fantasy. There you just,
you went,No, it was good. It was
inside the Bass Pro Shops.
Dude. Now you're not helping,dude, I'm further away. I'm
further away talk to me aboutthe price. Like, dude, so what
(11:43):
do you have to know from yournumbers? Like, the confidence
standpoint, because you, again,you and Gabe were just like,
call it 10x our volume drop ourprices by a third. Like, where
do you get the conviction onthat? Because it sounds it's
simple, right? It makes all thesense in the world on paper. But
how do you have the confidencethat you can do that?
You know, my mom was really niceto me when I was a kid, you
(12:05):
know, and I've rested like 17,so I just have all this
confidence, no, so the so acouple of things. One was
merging, so joining anorganization that was already
doing a few things really wellat scale. One of the things that
organization was doing is theywere using a combination of
local and offshore folks fortheir design team. So your
(12:28):
ability to build a lot ofoperational capacity without a
ton of money by utilizing somelower cost folks overseas was
massive, and that's somethingwe'd never done before, opening
up your material sourcing to bewilling to go factory direct,
whether that's domestic, nearshore or offshore, and deal with
the complexity of buying thingsin bulk and going directly to
(12:48):
factories and cutting outretailers to get pricing down.
So they brought that that wasextremely helpful to feel good
about, hey, we can get our buildcosts down low enough to
actually be competitive at thesedifferent price points, because
you can't just spend $500 afoot. You know, if you're not
selling for 1000 so there wasthat. The other side of it was
(13:09):
one of the, one of our mainpartners just brought a level of
financial sophistication thatwas very, I mean, it's it for
me, it's very inspirational.
Because I'm like, wow, this is,this is all the stuff that I
would like to know and get to,and that really helped us start
looking at things like, okay,how can you be process oriented?
How can be systematic? How canyou fight for every inch and
always be hammering your processto be like, how do you be a
(13:32):
little bit faster, go a littlebit smoother, pull out
extraneous cost, and reallythink about these things at with
a with a mindset towards scaleand and that, I think, was the
big the big shift. So it's thecombination of organizational
change, and then someindividuals with different
mindsets really hammering thisidea of process and organization
(13:54):
right. Because you can build abunch of houses and be
incredibly inefficient. You canhave terrible financials. You
can do all this stuff reallybad. But if you build cool
houses, ultimately, no matterhow you get there, they'll sell,
and you'll make some money, andyou'll think you did a good job.
But you can't do that 1000 timesunless you're really, really
dialed in and and that, thatvolume, I think, fleshes out all
(14:15):
the mistakes and the weaknesses.
So yeah, so seeing a differentway of doing it, and really
focusing on getting organizedand capacity building in ways
that we hadn't before, andhaving some good people involved
to help lead that charge, andkind of, you know, bring us
along and help us evolve andchange our mindset
(14:36):
totally. Do you how long haveyou guys been building, you and
Gabe,we've been building, well shit.
I mean, so here in Austin, itwould, we'd be like 11, going on
12 years, okay, but we grew upin construction. I mean, my dad
was a builder, my grandpa was abuilding we've always been
around job sites. I mean, Gabewas a framer. I was a laborer,
so I used to pick up trash,yeah, rates, which is, yeah.
(14:58):
Trash man, this was summertimein Albuquerque, so you just
covered in dust and, like, even,like, the lowest level guy in
the job sites, like, pick upthat trash. Like, oh, man, you
might as well. You're probablydoing community service labeling
is like a job by your Dougyou're probably
doing, yeah, at risk youth, youknow, they're like, Hey, go to a
(15:21):
job site. We've always beenaround construction our whole
lives, and been on job sites,and then a little bit of finance
and, yeah, just always been inthat, that world, nothing,
nothing like this, candidly, buttotally
Well, and that's kind of whatI'm getting to is like, we'll
dig. I want to hear some of thetactical stuff that helped with
(15:42):
this merger. But even more,like, Okay, call it 10 years in
Austin and like, let's justassume that you've been building
the product that you've beenselling for the last 10 years,
right? Like, a big high endproduct. Could you have done
this earlier? Like, do you thinkyou could have, like, done the
high end luxury thing, built abrand, built a name, gotten to
(16:04):
the like, the quality market,and then pivoted into volume
earlier. Or do you think thatthis was, like, all good
experience that was worthwhile,and it was the perfect storm,
and you saw an opportunity andtook it like, Tell me about
that? Yeah, that's a greatquestion. No, I don't think we
could have done it earlier. AndI'll tell you, and me and you
(16:25):
talked a lot about this, Ithink, when we first met, so we
tried to take a run at scalingearlier before interest rates
shot up. We I spent better partof a year really learning
capital markets, gettingfamiliar with private equity and
sort of how institutionalfinance works, and then going
out and engaging all thesedifferent private equity groups,
(16:46):
working with, like a capitalmarkets person, and getting the
point of, like, getting termsheets and getting taking the
credit committee with some biginstitutional private equity
investors, all with the businessmodel of, Hey, let's scale the
three to $6 million stuff. AndI'm so glad it didn't work out,
because basically all of thathappened right before interest
(17:08):
rates raised. Interest rates aregoing up. All of the private
equity across all asset classes,pulls back and does nothing for
the last three years. I thinkhad we done that, I think we
would have gotten started andthen just got caught in the bear
trap. Even worse, we would havestarted buying land. Rates would
have shot up, and then we wouldhave just sat there. We would
have had a bunch of half builtprojects or a bunch of dirt in,
(17:28):
you know, in the permittingprocess, and the light switch
would have got flipped off, andwe would have, we would have
ended up in a much, much worse,worse position because of timing
that so timing wise, no, I don'tthink could have done it
earlier. If you back thattimeline up even more. Had we
done it five years ago, we couldhave been doing 1000 houses by
(17:48):
the time rates shot up and thenreally exploded, and we would
have ended up like some of thebigger guys here in town. So
that would have been worse. Butthe other thing is just
temperament wise, I think thatseeing all these lessons the
last three years of the marketbeing so brutal, and having
spent enough time kind ofstudying what the more scale
(18:12):
operations do and stuff tounderstand that, like, hey,
there's a way to get there, butit's not the way I was thinking.
And then had some really hardlearning lessons along the way.
I think we were much moreprepared for the opportunity now
than we've ever been, and Ithink we were poised to not make
some mistakes that I think Iwould have made, like not
emphasizing process, and notbeing as tight on everything and
(18:34):
not taking the mindset at youknow, every single second and
Dollar and inch counts, and Ithink that's the only way that
you can really scaleeffectively. And so I think, had
I tried to do this any younger,if had we tried to do it any
sooner, I think we probablywould have done it in a fast and
loose way, and we probably wouldhave made a lot of money, and
(18:54):
then at some point, just blewup.
Already team. So today, we'reactually piloting our first ad,
if you want to call it that,it's really more just a
promotion. We just got back fromthe contractor coalition summit
in Omaha, Nebraska, and it was afantastic event. I suggest it
for anyone who's doing a milliondollars a year in construction
costs to $50 million a year inconstruction costs even bigger.
(19:17):
I mean, the entire gamut ofpeople that were there were
pretty incredible. And reallywhat this is, is just an
opportunity to learn from thebest, extremely collaborative.
When I'd asked builders, why arethey there and what the value of
this event is, they saidnetworking and learning from
others. So what we have with thecontractor coalition Summit is
actually a promo code if you goto my Instagram, adaptive Reese
(19:43):
with A, C, R, E, E, C, E, andyou go to my bio, you'll
actually see the adaptive code,and the code to get 20% off your
ticket for the contractorcoalition Summit is adaptive 25
again, you can use our code. Toget 20% off the contractor
coalition Summit, and that codeis adaptive 25 you just have to
(20:06):
put that in the promotion Linkfield when you're getting
registered for the event. Now,when's the next event? The next
event is going to be in Chicago,and it's on November 7 through
the 10th of 2025 if you have anyquestions, or if this promo
didn't land, jump into my DMsagain. My Instagram is adaptive,
Reese, R, E, E, C, E, and we canDM back and forth. You can give
(20:31):
me a call. You can leavecomments in the section, but
we'd love to get you there, andwe're incentivizing you as well.
What we're because I know, like,the last 18 months were like,
pretty tough. What were some ofthose just, like, beat up
moments for you, like, just thebrutal at the time, but awesome
learning experience situationsfor you?
(20:53):
Well, I mean, I think you talkedabout interest rates. So, yeah,
so interest rates go up. Housesaren't selling. You can imagine
the fallout with that. Nowyou've got, you've got investors
that are upset because they'regoing to lose real money. You're
watching future income erode,which starts to jeopardize your
ability to carry overheadprofessionally and personally,
right? And so the stress ofthat, because you've got, you've
(21:15):
got a lot of people that trustyou with their livelihoods, with
their money, with theirfamilies. So carrying that
weight is a big deal. And then Ithink just, I mean, seeing like,
hey, there's no end in sight,right? Just being like, All
right, well, you know, I thoughtwhen rates started going up, I
thought maybe this is 1218,months, you know, but it just
keeps going and going and going.
And even now I look at it, I'mlike, man, you know, I've
(21:37):
thought for sure this would havebeen a recovery year, you know,
and rates start coming down. Wegot past the election, and then
people are still freaked outbecause of the trade war stuff,
and now the Iran stuff andIsrael stuff. What's coming
around next month? Who knows.
And so I think that having thatweight of, okay, you're watching
(21:57):
everything go down, you'reyou're flying the plane, and the
ground is getting closer andcloser and closer, and the plane
is full of people, and you don'thave the ability to, you don't
have a way to pull up, right?
You can't just, you don't havemore power, sure, the stress of
that, the pressure that, Ithink, was tough because it was
just, it was so long lasting,right? It wasn't like, I had a
(22:18):
bad week. It's like, it's justlike, like, us, like, year
three. It's like, it's like,when these, I don't know, I was
a big fan of Band of Brothers,right? It's like, guys where
it's like, they follow him. It'slike, all right, they're in D
Day. And anybody would have beenD Day men. Like, ugh, glad I got
my arm blown off and going home.
That was crazy. And these guys,like, they made it all the way
(22:39):
through Europe, and then theyend up in the Pacific, and it's
like, yeah, we're still, we'restill here. We've been doing
this for three years. This isbrutal. You know what I mean?
It's like, you don't evenrecognize them. They like smoke
unfiltered cigarettes now. Andit's like, you know what I mean,
they're,it's crazy. So that's, that's
chugging white monsterenergy drinks. Yeah, I feel like
I've gone on campaign and, youknow, I mean me and my brother
(23:01):
now. He's like, when theyrelease a pig in the wild, and
it turns into, like, a wildboar, growth of tusks and like,
all kinds of, like, yeah, everyhair that's that's how I feel.
Yeah, you kind of, you lookbetter than that killing machine
now, because it's been sobrutal. But I kind of like it,
I'll tell you, it's brought outthe best of me. So, yeah. So I
think that's where it gets hard,is just managing all of that.
(23:21):
But I think what the positive inthat is that I think it's really
important, and there's probablya lot of builders going through
the same stuff right now, is yougot to look at it and say, like,
all right, what have I done?
Right? All right, you've built abunch of houses. You've done a
lot of really good work, and Ithink everybody's done good
things, right? You got tounderstand that you're the same
(23:43):
person that was capable of doingthose good things that you've
done, even though you're in abad market or bad climate or a
bad period of time, and that youdon't actually ever really lose
your capability, right? So youcan lose money, you can lose
staff, you can lose clients, youcan lose your house, you can
lose all these different things.
But if you were capable ofproducing in our industry, great
work, you're still capable ofthat. And so there's still a
(24:06):
value in that and that you nowjust have to pivot and find
where, where can you apply thatskill set and that ability,
where it has value again, so younever really quite lose that. So
yeah, I would caution everybodyto remember that, because when
the markets shitty, you justtend to think it'll be like that
forever, or like, Why do I evenbuild these houses? Nobody wants
(24:29):
them, you know, but Right? It'sa it's a real capability. And so
the market does turn around.
Eventually, an opportunitypresents itself, and you're
still that's you still have thatsame skill set. So you just got
to being willing to kind oftough it out until there's an
opportunity to use it again.
Totally. No one. I think that'sso that actually reminded me of
(24:51):
what I was going to say is like,like you're never, like your
skills never going to diminish,right? Like your your ability
isn't going to diminish. Likeyou go through these things, you
go through these trials.
Tribulations. And like, as longas you're methodical and
rational about what's going on,like you're you'll still climb
and climb and climb, right, noteven considering the market
conditions or the externalfactors that you just cannot
control. It's like, that fluffylike, control what you can
(25:13):
control. Lot of validity inthat, right? But it gets
overused. And like, this is justkind of a great example of that.
So I don't forget, I was inOmaha this weekend, the
contractor coalition Summit.
Have you heard of it? No, so wecan talk about it later. But
basically what it is is it'slike, Nick Schiffer, he's NS
builders, Brad Levitt, aft andPhoenix, Mark Williams, Morgan,
(25:37):
molotar, Tyler, Grace, like allthese big builders have these
big Instagram followings. Theyput on this summit of, like,
knowledge transfer, awesome,okay? And they bring all these
builders in to, like, just openbook discussion, like, how do we
do things? You know, from amarketing standpoint, from an
ICP standpoint, to a salesfunnel, to a build practice to a
financial practice, everything,okay, well, adaptive, we
(25:59):
sponsored it, awesome. We wereone of the sponsors, and myself,
Daniel Martinez and Mattgummersbach. Have you met Daniel
or gum? I don't think so. Yeah,you'd love Daniel Gomez Bach.
You would love gomsbach too.
He's just again, one of thesmartest guys I know. We can
talk about gum later. Pointbeing is we were there, and
(26:21):
I do naming tons of dudes. Ilike that. You named like 40
people. This is a lot of buildup. Yeah, there. You know it is
every everybody. I'm a NameDropper. You are, man, I don't
know any of these names. Like,it's okay, we
can make introductions about,don't feel bad. What are you
(26:42):
feeling bad for? You just settledown. Are you getting nervous? I
think you're gettingnervous, people. I'm like, was
these characters on The Last ofUs? What is he saying?
Okay, let me get to the pointof, I did like, a 20 minute
presentation on not adaptive,like the features, but the
problem solution that we'resolving, right? And one of the
(27:03):
pieces that I really wanted todrive home, and we see this with
bowlers all the time, is you gotto know your numbers. Okay, I
pose it this way, like beforeyou start to scale, know what
the cost of your widget is. Moreimportantly, know what you're
gonna profit on the widgetright? Like, before you start,
(27:24):
like just running out andchasing a bunch of volume, know
that you're at least going tomake money doing it right. And I
wanted to bring that piece upbecause I want to know how much
of your and Gabes and the restof the team's decision making
and again, going from how manyunits were you doing 10
a year, we would do like, 10 to2510 to
25 and fills a year. And nowyou're gonna do 150 to 200 like,
(27:47):
quite literally, 10x yourvolume. Yeah, how much of that
was you knowing the cost and theprofit on the widget, or the
three to $5 million home, andthen your ability to track that
down into a product that you'relike, we can certainly make
money on this. Yeah, we'rebullish enough to go raise and
execute, yep,no, I think that's I think
that's everything. So I'll tellyou, like every single piece of
(28:10):
the business is designed tomaximize margin. So the fact
that we do infill instead ofsuburban production, it's
because our margins are threetimes what they are in the
suburbs. The reason we do thevertical integration, and we
perform so many of the pieces ofparts ourselves, is to capture
margin. We control the marketingand sales so we can get the
(28:30):
feedback, so that we canoptimize the houses to increase
mark. I mean, everything we dois, is margin driven. So I think
understanding how all thesepieces impact that. And then
also, like, saying, like, Whatbusiness do you want to go
after? Like, point you'remaking, it's like, hey, not all
business is good, right? Andwe've done, we own a concrete
company too, where, like, we dida school, and it was, like, a
(28:51):
huge job for us. It was, youknow, it was probably, you know,
we would do slabs and stuff forother builders. So maybe an
average slab was 50 to turn 50grand, and this school was, like
a three and a half milliondollar concrete job. And we
thought, like, bigger numberscan be awesome. It's gonna be
just like the other thing. Andwe weren't clear on our numbers
weren't clear on margin. And itwas, it was a new type of work
(29:13):
for us. We lost a ton of moneyon it, and we thought, you know,
more is better, or bigger,numbers are better. And on the
House side, it's like, yeah,like, you can specifically go
after client, go afterclientele, and sub markets where
the margins are better, and Iwould encourage people to, it's
like, yeah, you it's harder tobuild an infill. You're in town,
(29:35):
you got people on top of you,and you're the middle of a
neighborhood, but your marginsare way better than if you build
out in the country, and there'snobody there's nobody around,
right? Or if you're wanting todeal with the complexity of
building in a mountain town, youknow, like in a resort town,
your margins are insane becausethere's no competition. And
where's your where's yourconsumer elastic and what
they're willing to pay? So,yeah, I think that hardcore
(29:57):
focus on margins. And that'snot, not just to help you make
money in your business, but ifyou're out marketing to clients,
knowing your numbers to where,if you get a chance opportunity,
and you get a five minuteconversation with somebody, and
you know your numbers can builda ton of confidence and really
convert people. So yeah, I thinkit pays to be to be
(30:18):
quantitative. You do not want tobe somebody that just, well, I
think we can do it and, well, itseemed like a good job. And get
to the end be like, I don't knowwhy we didn't make any money,
damn it, you know, like, I knowa lot of people are like that,
regardless of the type ofbusiness. And I think that's you
can. You can be a lot morefocused and deliberate with your
(30:39):
time, and you'll make a ton moremoney, and it's a lot more
stress, it's a lot lessstressful. And the thing I've
learned too, is like, highmargin stuff will protect you.
If you've got big margins,things can drop and you can
still be okay, right? If you gota 30, 40% margin, it's like,
well, you can absorb a lot of alot of bad things, but if you
run on a 10, 12% margin, youbetter not make a mistake. So
(31:00):
yeah, I think knowing thosenumbers, knowing your margin,
being deliberate about findingniches in the market where you
can do better, there's lesscompetition, and you can stretch
your margin, stretch youradvantage, I think, is huge.
Using the same skill set, doingthe same amount of work to build
the same kind of thing, justdifferent target clients and
different target areas can makeall the difference. Make all the
(31:22):
difference,totally, margin, totally. What
would you say was, like, themost impactful and tactical
takeaway that you had you andyou brought about this up a
little bit earlier in theconversation with the merger,
right? You'd mentioned, like,there was some finance person
that you were talking to that,like, offered a lot of insight
(31:44):
and a lot of inspiration to you.
What were some of the moretactical takeaways that you took
from that experience on this?
Know your numbers, know yourmargin, know your cost. Yeah,
so, okay, am I asking the rightquestion?
Yeah, so this, so he's a, he'san active partner of ours, and
(32:07):
not a finance person per se, butjust a brilliant financial mind.
And part of what the way hethinks that was helpful in
shifting our thinking was thisidea that, like, kind of
realizing, hey, if somebody elseis doing it, you can do it. If a
national builder can get theirbuild costs down to 70 to 90
bucks foot. There's a path. Itmay be difficult. It may be
something that you have to getto a certain size before you
(32:29):
take advantage of it may involvefinancing structure that's
unavailable too. There may bereasons why it'll be harder, be
more time consuming, or take alonger time to get there, but
it's possible, like, so ifsomeone's doing it, you can do
it. And I think tacticallythinking about that, like, Okay,
how do we need to? We like touse tons of Windows, right? Very
modern designs. Like, well, howdo we get our windows down?
(32:51):
Well, can we buy them FactoryDirect? Okay, well, that cuts
out these, like, sales reps. Wesave a little bit of money. It's
like, okay, well, what factoriescan produce windows for less
money? And then where are they?
And, okay, how do we buy fromthem? And does that involve
shipping and logistics andordering in bulk? And, okay, is
all of that worth it? Do we pickup enough savings like that?
Idea of like, Yeah, this is alldoable. None of this is
(33:12):
impossible. So I thinktactically thinking like that
that like the big nationalsdon't have it's not, I mean, if
you talk with them, it's not,most of it is just scale. But
it's not like, it's notproprietary technology, right?
It's not like they're like,nobody knows how we do it. It's
like they're framing stick,framing houses in mass. And they
(33:33):
just have really great supplychains and really great
organizational processes so theycan do it faster and cheaper
than most people. But a lot ofthat you can lot of that you can
mimic and totally apply to yourbusiness. So I think just
tactically thinking like that,like lower costs or higher
margins or more profit or morevolume, aren't these
unobtainable mysteries. They'reall things you can do. They just
(33:55):
may take more effort, time andmoney than you're willing to
take on or, or, it may be a factof you, you can take those
things on. You need to bring insome other people, or raise some
money, or make some partnershipsor or find ways to cobble
together. But it's all. It's allmuch more doable than I would
have thought,totally well, and dude, I think
(34:15):
that's like, what do you thinkkeeps people from doing it. To
your point, like, it's not like,it's a secret, it's not out
there. What do you think keepspeople from
doing it? You know, it's funny.
So especially in our business,there's a lot of like, what I
would describe, and this isnothing wrong with this. If
these people are probablyhappier than I am, and probably
(34:36):
sleep more than I do, butthere's like, what I would
describe as like hobby farmers,where they're not Monsanto,
right? They're like, Hey, I justwant to build a handful of
houses a year and make a greatincome. And they like to be on
the job site all the time, andthat's how they want to do the
business. And they have no nointerest or desire in more than
that. And it's not because theycouldn't or because they're
(34:58):
afraid of it, like. Just, it'ssafe. They just, just wanted to
have, like, a lifestylebusiness. And I think building
homes, you can make a lot ofmoney off of a few houses, and
so it enables people to do that.
So I think that's one part ofit. I think the other part of it
is, you know, people, ingeneral, we are way more scared
(35:18):
of loss than we are excitedabout gain. We're just wired
that way, right? And it's asurvival thing. Like, you'd be
crazy if you were like, I canjump that cliff. And we, you
know, there wouldn't be peopleover wired just to be psycho
risk takers. But I think a lotof times, people just get in
their head about, oh, but if Itake that jump, then it's gonna,
it's all gonna fail, and then,you know, that will be so bad
(35:40):
and so unbearable. I don't careif I would have made more money
or had a little bit more, I'mjust not willing to take that
chance. So I think there's thathardwiring component, and then
there's a cultural thing thatI've seen broadly where and
it's, I think it's an Americanthing, where we're I say that,
like, I'm European or something.
I'm like, oh, it's America,aren't you?
Armenian, I'm Lebanese,whatever. We're
(36:03):
from state New York. So that'slike, because Americans are
kids, it's like, Bruce, yeah,you know, basically like leather
jacket and a flag bandana. Butwe have a cultural thing of
winners and losers, right?
Everybody wants to be Brady.
Nobody wants this burger. Andit's just, we make people feel
so much pressure, like, one yougot to be a winner, but if you
(36:24):
ever lose, you're a fuckingloser forever. And that's but we
make people feel like you justeither win all the time, or once
you lose, you're just this,like, white t shirt with a big
old like, red stain on it, andyou're a loser forever. And so I
think that that paralyzes a lotof people, because they just
feel so worried of theembarrassment and shame of
failure and this idea that theywill then be blemished as a
(36:45):
loser forever because they tooka chance. And I don't blame
people, because look what we doto people like we, you know,
publicly, we like, tear peopledown if they stumble at all and
totally, you know, social mediamakes people feel like
everybody's doing better thanthem, and so there's a lot of
pressure on people to like,don't fuck up, don't ever fail.
But it's resulted in peopledon't take a chance. And I think
(37:05):
the sort of the secret, or thething that people that are
successful aren't telling peopleis like, everyone fails
constantly. Like, like, everyperson I know with a lot of
money has had multiple periodsof time where they almost lost
it all, or they were scared oflosing all, or they did losing
all, or they did lose all, andthey went and built it back,
like, right, take these bigrisks, and they got desensitized
(37:29):
to the risk taking. But we butfor some reason the mainstream
makes everybody feel like youjust it's so binary. So yeah, so
I think that fear of failurebecause of the cultural
implications of, of how itrelates to your identity, that
you now are a loser because youyou failed for some period of
time. But I just, I don't, Idon't think that. I don't
(37:51):
subscribe to that, and I've justseen it too many times that,
like, I know tons of peoplethat, and I've experienced it,
you know, gone within an inch ofbroke and then made a ton of
money, and with an inch ofbroke, made a ton of money. And
you so I but I think that holdsa lot of people back. They're
just, it's been beating theirhead that they should be afraid
of it kind of at the root, atthe root of who they are.
(38:13):
So are you, like, what's nextfor you? Are you gonna like,
like, give Grant Cardone a runfor his money? Or, like, Tony
Robbins and like, just pumppeople up or no. Dude, that was
great. It was great. It's atruth, dude. It's like, roll the
dice. Roll the dice. And theskills that you've developed and
like, you're gonna lose eitherway, yeah.
Oh, it's true. Well, what's nextis, I'm gonna go to Bass Pro
(38:35):
Shops and I'm gonna try to buyyou, you know, your Christmas
present, your birthday present.
I'm just gonna be like, I need,like, 200 yards of really
scratchy fabric to give thewreath,
and I'm gonna go and raid everygrandmother's limb closet, and
(38:57):
we'll have miles of gar garmentsfor the rest of our help produce
mea full doily outfit. You know,
the shirt I need, the doilypants and some doily shoes, you
know?
Yeah, you probably have them on.
There's probably a one piece.
There's probably something youscooped up on, like the beaches
of Mexico, or, like, an outfityou bought for Turks and Caicos,
(39:20):
and you're just like, rocking itright now. That's right. Last
serious question here, and I amcurious, just because I love you
and your brother, it's beenawesome working with you guys.
Do you guys actually want to dolike a DR Horton Lennar type
thing, or 100% so cool. The goalis to be a national, national
(39:40):
scale infill production builderfocusing on design technology.
So the idea is, give thatmissing middle in all these
urban areas really awesome,technologically advanced, well
designed homes in these pricepoints that people can. Board
and not just produce reallyboring stuff that feels like a
(40:02):
compromise to the consumer. Wewant to do that in multiple
markets. We're in Austin, Dallasnow. I think next stop is
probably Nashville and Raleigh.
And the goal is, in five years,to be a billion dollar company
and be in five plus markets. AndI think we have the right people
and backing and knowledge baseto do that, dude,
(40:24):
I love it. I think that's sweet.
And that's, I mean, I think interms of, like, the boring
product conversation we weretalking about this in Omaha, and
it's like, how many of theLennar and DR Horton, I'd love
to have one of their, like,execs on the pod one day? Maybe
that's a goal. But like, how,like, the product that they're
actually building. The peoplethat I know that have bought a
DR or Lennar house, it's like,in the first, like, year, two
(40:46):
years, five years, they havesome, like, really serious shit
go wrong with their house, andyou start looking at like
they're just crankingproduction, and they're trying
to fill an inventory shortage,and this is the opportunity for
them to hit their velocity. Butthen you're getting a 30 year
mortgage on a product that'sgoing to last 15 years, 20
(41:08):
years, like it might even lastthe life of the loan, right?
No. So this is going to be acontrarian opinion here. I'm
gonna give you my oh, let's hearit. Let's hear it. So I actually
think what I think national thenational builders actually do it
really, really well. And I'lltell you, when it comes to floor
plans, utilization of space sortof optimizing, I think it's hard
(41:32):
to beat what a national buildercan do with space. I think that
their process of production isby far the best their ability to
produce more things in a costeffective manner. Now, I think
that because the price pointsthat they tend to operate in,
and because the cost they haveto get to, they can't do all the
extra things always, that wouldprobably be more beneficial to
(41:55):
the consumer, but it's afunction of the price point that
consumer wants and the scalethey're playing at, right? So
it's a to me, it's like, hey,people want Zara. You're not
pissed at Zara. That's not LauraPiana. You're just like, hey, I
went to zarix. I wanted a $20leather jacket because I'm going
to a nightclub, because I wantedto write Thomas, because we're
in Vegas since my birthday,right? And it's white, sure,
(42:17):
totally. And that's, that's howI forever see you just an all
white suit with no shirt on inthe ARIA lobby, but smoking a
cigarette and then telling youHappy birthday, dude. If only
that happened. They do it reallywell, is my point. And they do
it really well, and I think theydo it as best you can in the
price points. They're in my onlyknock on them, and it's not
(42:38):
taking away up tomorrow anddecide to do this and decide to
do this and probably smoke it,but they're just selling to the
fattest part of the bell curve.
And so I don't think there'smuch emphasis on design to be
interesting, right? They'relike, we don't really need to
these don't need to be cool.
There's no there isn't atremendous value in them for
that. Because I think turning abig ship like that is slow and
(43:00):
difficult. And I think that forthem, they're like, hey, we need
to have 20 floor plans that wecan build 20,000 of a year.
We're not going to do a bunch ofcool, tricky things. And we
really don't need to reinventourselves and be technology
focused or be very like designoriented, because they're really
there. They've already cornered,sort of the beef of the market
(43:22):
that maybe doesn't care aboutthat, right? Like, not everybody
is buying a shirt that lookslike a doily. Some people just
bathe in Carhartt and, you know,and that's like, so, yeah, think
they're the villain that peoplethink they are. And I know, like
every builder listening this,knows we all get warranty calls.
We all despite best efforts,houses are, you know, wabi sabi,
(43:44):
the imperfection of creation.
They're hand built in the fieldby 20 year olds outside, right?
There's always stuff that messesup with them. And so, you know,
hollow core doors is, you know,a decision based on a price
point. But it's not becausethey're villainous, and you know
that they're bad at it, it'sthat they're so good at it, but
they're valuing differentthings. And so I think there's
(44:06):
room to come in and say, Let'svalue design and technology, and
then do the supply chain thingsto do that and be competitive on
price, and go where the marketcan afford that, right? So
totally focused on infill.
There's a little bit more moneyto spend and make the houses a
little bit cooler, whereas atthe absolute entry level, it's a
(44:27):
different it's a more difficultproposition. You got to have
real scale. But I think there'sstill room for it. But, yeah, I
think the national builders aregood at what they do. I think
there's just room to do it alittle bit
cooler. I like your perspectivea lot better than mine, and
truthfully, like that makes ahell of a lot of sense. I think
that's probably a message thatneeds, like, shared a little bit
(44:49):
more broadly.
Yeah, you were hoping I'd sayyeah, they're so
no, no. I think a year in sales,what happened is exactly what.
Should have happened, because,like, I'm like, I truly sit here
and I'm like, Dude, what ishappening with like, every
everything I hear about thesehouses is just like, falling
apart. Shit happens. Hear thatand the other and it's like,
(45:11):
yeah, okay, well, are you, like,is this like, a recency bias, or
is this, like, actually thecase, and it's probably more of
like a recency bias and like,but
go ahead, yeah, it can be, itcould be that. I mean, it's, you
know, especially if you're afirst time home buyer, you're
just living in apartments whereanything goes wrong. You just
call somebody right, and thenit's like you weren't living in
that nice of an apartment, rightwhen we were in our 20s, you
(45:34):
know? It's like we weren'tliving good. So we get into a
home, and here's what it is. Theexpectation is, everything is a
manufactured good. You buy a carfrom a factory, it's perfect. If
it's imperfect, you give it backthat you get another one. It's
perfect, right? Everything hasto be perfect. But houses are
hand built by a bunch of crazy,just slightly older than
(45:57):
teenagers. Right outside, right?
The craziest part outside, it's100 in the elements, smoking
cigarettes, drinking monsterenergy drinks, and no and, you
know, with a hangover, andthey're building these out. I
mean, that's just the reality.
It's like, it's like your dadbuilding you a fort. You know,
were you pissed that that forcedidn't pulled up? So good. So I
(46:17):
just think we're used to buyingperfect things, perfect
products, you know, we get aniPhone, it's fucking flawless.
And you get house, and you'relike, this fucking the you know,
the drywall cracks a little bitand that door sticks a little
bit, and, you know, they touchedup the paint. But I can see that
they touched it up. And isn'tthat just all of us, Reese,
aren't we all just imperfectcreations, you know, just doing
(46:39):
our best, you know, soif, if anything this podcast, I
hope this was helpful for thelisteners, but it made me
realize how much I do missspending time with you, wealth
of knowledge, just a salesman atheart with nothing but logic.
Just, you know, it's awesome.
It's awesome. I love it. I'mgonna go to Bass Pro Shop and
(47:00):
catch some lunch. Thomas, Iappreciate you for hopping on,
dude. This is agreat, yeah, well, you're back
in, you're you're in Boston now,right,
dude, so the wife and I wereselling our house in Denver. So
if there's anyone on here istrying to buy a house in Denver,
it's on the market, and we'regetting ready to move to Boston?
(47:21):
Yeah, to stand up a little go tomarket office for
adaptive. Well, I'm gonna haveto come see you in Boston and
just harass you. This is thething I always forget. I give
you so much shit, and then I seeyou in person and you're a big
dude, and I go, Oh, why did Isay all that? Theresa's like six
three in burly and clearlyaffiliate football.
Dude, I'm not six three. I'm notsaying, Sorry, I look like a
(47:41):
center. Maybeyou're a big dude in real life.
Yeah, you take any of my shitwhen I see you, it's
because you wear cashmeresweaters and chains. That's
right. Like, I'm scared of you.
It's like this guy knows someonethat could give me a pair of
concrete lashes.
At least I'm shiny enough thatyou, if you, if you attack me,
the light will reflect, andpeople will be like, something's
(48:03):
going on over that nice, shinyman, I love it.
I love it. Okay, well, we'llcatch up more here later, I've
got some updates for you on theon the old adaptive But dude, I
appreciate the hell out of you.
Thanks for jumping on. Yeah,for having me, man, of course.
Well, we'll talk to I mean,thanks later. Yeah.
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