June 25, 2024 • 22 mins
What if investing in your community could transform not just neighborhoods, but lives? Join us as David shares his extraordinary journey from addiction to entrepreneurship, illustrating how community support can lead to personal and collective empowerment. Through candid conversations, David reveals how his real estate business became a beacon of hope, creating meaningful employment for those in recovery and fostering a culture of giving back. This episode captures the essence of how community investment can catalyze personal redemption and collective well-being.
Together, we explore the complexities of transitioning a property preservation business into a social enterprise aimed at revitalizing marginalized neighborhoods. Inspired by works like "The Color of Law," "Race for Profit," and "Evicted," we dissect the systemic inequities these communities face. We also address the detrimental effects of property flipping and private equity, contrasting these with the benefits of shared ownership models. Discover how our cooperative approach not only stabilizes communities but also enhances worker productivity and economic empowerment, proving that sustainable, regenerative investment is not just possible, but essential.
https://streetwell.co/
https://www.wmar2news.com/local/an-employee-owned-cooperative-is-taking-on-baltimores-vacant-housing-crisis
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Arc Integrated
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Joel (00:00):
What if investing in each other could change the world?
I'm Joel Skeen with bizradious,and this is the Mindful
Marketplace now or after this tohear David's story about how he
got started and how he used hisown personal transformation
(00:27):
journey, through addiction andthrough some other struggles, to
not only come out of that andbe successful himself, but to
take the business he was in andbe able to really help it serve
his community in the long run.
And we're going to get into howhe's been doing that.
But, david, welcome back intothe show here.
(00:47):
Really happy to have you today.
Thanks for being here.
David (00:50):
Yeah, thanks again for having me, joel.
Great to be back.
Joel (00:52):
Yeah, so, as I was saying , we talked about kind of your
journey of going from being anaddict and kind of going through
everything that's involved withthat and moving through that to
starting your own business.
That does a lot of differentthings all within kind of the
realm of you know, kind of realestate, but it sounds like the
(01:14):
main purpose of it at this pointis really to provide those jobs
to people who were in the samesituation you were in.
It sounds like that was reallythe heart of the beginning of it
.
Is that right?
David (01:24):
Yeah, that's how I started.
I found a low barrier to entryjob opportunity for myself.
That also let me create abusiness.
And then recovery teaches methat as the business grew, I
should open up that sameopportunity to others trying to
rise up out of the abyss.
Joel (01:43):
One thing I didn't get a chance to ask you in the first
half here was you mentioned thatto just as a human being going
through a difficult time,whatever it is, whether it's
addiction or it's any otherissue.
You mentioned just theimportance of a community in
that and how that informed theway you continue to approach
your business.
I'm curious if you could kindof expand on what you mean by
(02:06):
that and why the communityaspect you feel like is so vital
to that success and why youwant to invest back into it.
David (02:12):
Yeah, again, that just starts with sobriety.
One of the weirdest storiesabout my journey is I learned so
much about business and life inwhat we call the rooms, but
I'll just focus.
It all starts there.
You learn in rehab and then youlearn as soon as you get out
and start going to thosemeetings that the best way to
(02:35):
stay sober is to stay connectedto your sobriety community.
And then the best way to reallyreally make sure that you stay
sober within that community isto help others, and you know
there's a variety of ways thatwe do that in a recovery
community.
But then there's also thismessage that, hey, it doesn't
stop there, it's just you wantto serve your community, serve
(02:56):
your brothers and sisters inlife, just in life.
And then what you get out ofthat is A sobriety like so your
life, you get your life back.
But B a joyful life like thisis a good way to live.
Like you know, you feel likelife has meaning, you feel like
you have connection, sleep wellat night, unlike you, know some
of my past careers and certainlythe way that I lived life with
(03:19):
my drinking and so on.
Joel (03:21):
Yeah, no, absolutely.
And so what I wanted to reallydig in with you here, with the
time that we've got on this half, is to talk about this
transition that you made.
You started talking about itnear the end of the last episode
, where you talked about how youtook this business.
You had built where you knowyou started off just by working
it, by essentially cleaning outhouses that were getting
(03:42):
foreclosed on, and you know someother other, you know kind of
jobs like that, um, and then youbuilt the business and it was
important to you to, you know,pay your people well to have
that low barrier to entry, um.
But then there was a point atwhich, as the business grew, um,
you decided it wasn't justgoing to be your business, that
this wasn't going to just be anasset for you, it was going to
(04:04):
be an asset for the community.
Tell me a little bit about youknow kind of about that, that
process.
David (04:11):
Yeah, sure so.
So it starts with the fact thatthis sector that we work in it
has a couple, a couple ofeuphemistic names.
One of them is propertypreservation, another is REO
services loss mitigation butit's like the seedy underbelly
of the American housing financesystem, you know it's.
It's taking figuring out whatto do with foreclosures.
(04:32):
Once a foreclosure happens,which is an ugly, ugly, ugly
moment, so it's dangerous, it'sdirty and most aggravating when
you're trying to run a socialenterprise where you're, you
know there's like programmaticsupport.
If you make a commitment tohelp folks coming back from
rehab or from jail or fromprison or off the streets to
(04:53):
stand back up and to work and tobe part of community.
There's like cost to that,there's a programmatic
commitment to that, and so ifyou're working for clients,
first of all don't give a crapabout that mission, but also
just don't pay you well to beginwith.
It's really difficult tosupport that.
So we were looking for a way todo our employment, social
(05:16):
enterprise, better and at thesame time, we were like you're
in it every day, particularlyduring the recession.
You see what extractivefinancing really looks like on a
house-to-house,community-to-family basis and
how really reallydisproportionately bad it is in
neighborhoods that have alreadybeen oppressed for generations.
(05:37):
So we started to put it alltogether Can we pay ourselves
better?
Can we find a way to invest inthese neighborhoods that would
be mutually beneficial to ourteam and to the neighborhoods
that we're doing a lot of workin?
We started researching, likefiguring out what was going on,
and so started reading greatbooks which everybody should
read, like the Color of Law orthe Race for Profit or Evicted,
(06:00):
which are just stunningly starkbut insightful documentation of
how the American housing financesystem has worked in this land
since the New Deal Topic for adifferent day.
But we really start to becomeaware that these neighborhoods
that we are experiencing we arewitnessing yet another chapter
(06:21):
of oppression, extraction andexclusion.
This is like yet anotherchapter that goes extraction and
exclusion.
This is like yet anotherchapter that goes back
generations and decades.
So we come up with this thesishey, if we can raise the money,
can we do the work ourselves tolift up neighborhoods?
And can we find a way togentrify neighborhoods, meaning
revitalize them, bring them backto their greatness and bring
(06:42):
them back to a state of economicrobustness and wealth, but keep
that wealth and that equity inthe community.
So that was the idea that westarted pitching, and it's the
thing that we're doing today.
Joel (06:54):
Yeah, and it sounds like there's one of the fundamental
dichotomies that I'm hearing yousort of mention or ways to
think about this is you'vementioned kind of there being.
You know the companies thatyou've seen in your industry,
the way that they approach theirbusinesses.
You've mentioned the wordextractive a couple of times and
you have also talked about howyour business I don't know if
(07:14):
you've used this word, but itsounds to me like what you're
talking about is kind of using,instead of having an extractive
model of businesses, to have amore regenerative one where the
profits from the companiesthat's made don't get taken out
and sent off to, you know,cayman Islands or you know
anything like that, but they getput back into the community
that they're in.
(07:34):
Did the shift from youprivately owning your business
to actually transitioning it toa shared ownership model Did
that?
How did that affect that?
David (07:49):
where you were at on that extractive versus regenerative
scale, I guess From our ownbusiness perspective, it just we
were an employment socialenterprise all along, but what
that meant before the conversionwas just that I went into a ton
of personal debt to try to keepthis thing moving, and now
we've transferred ourselves froma place of that kind of awful
(08:11):
scarcity to a place ofregeneration that's a great word
, like a very regenerative.
I think the point I would focuson is I don't think we have
time for it, but I could rattleoff seven or eight different
ways that we think ofcorporations or capitalism, or
even the government extract froma neighborhood.
(08:31):
Maybe the shortest way to talkabout it is let's just go with
flipping.
Joel (08:36):
We'll leave predatory lending aside, we'll leave
redlining for another day, butjust flipping it Private equity
buying homes just to rent out,so that homeownership keeps
going down and down.
We can leave out that for nowtoo.
David (08:51):
And that's what's going on today, like we're competing
in neighborhoods now that nobodycared about and all of a sudden
there's people at the auctionblocks and it's private equity
funded homes investors, andthey're not even grabbing
properties for rentals in theseneighborhoods.
It's pure speculation.
They're just buying theseneighborhoods and letting them
sit vacant like the same kind ofshit.
(09:12):
Yeah, and so I'll lose at anauction to a private equity
funded investor on a propertythat's right next to one that
we're working on, and that'slike a continued drag blight on
us and they are purelyspeculating.
They are not going to doanything on it until the numbers
are right that they can selloff to somebody who will.
But anyway, yeah, I mean wecould leave it at that.
(09:33):
But even flipping flipping is anindustry that has these
characters in it that are calledbird dogs who put out bandit
signs.
You know, we pay cash for moneyand we pay cash for houses.
Yeah, yeah, yeah, hard moneylenders and then ultimately, the
flippers.
Each one of those characters istaking a cut and it starts with
(09:54):
the bird dog finding somebodywho has a deed in a very poor
neighborhood and is under, youknow, financial distress, so
they part with that deed at aridiculously low price and then
the bird dog assigns thatcontract to a flipper.
So he might have bought thehouse for $10,000, and then he
assigns it to a flipper for$20,000 or 30.
(10:16):
So what just happened rightthere?
Like $10,000 or $20,000 ofequity got ripped right out of
that community and then theflipper will use these hard
money, high interest loans, tomake the renovation happen.
So again that high interest inthose fees, another form of
extraction that gets ripped outand incentivizes, pressures the
flipper to do shitty work, andthen finally the flipper is
(10:39):
going to flip it and try to gethis cut.
So I have a slide that shows.
You know that represents aboutafter the finish the house is
finished, 60% of the wealth thatwas created from that
renovation just gets rippedright out of the community.
Joel (10:53):
Man.
So, when you're thinking aboutthe way that you guys can do
your part at least to helpaddress that issue, why did that
shift to a co-op model?
You know how did model, how didthat serve that end goal?
David (11:07):
Yeah.
So there's two pivotal pieceshere.
One is our model is dependentupon us being able to raise
impact investment so rates thatlook much better than the hard
money lenders that are patientand long-term thinking and a
shared equity model.
So Seed Commons is a CDFI thatsupports co-op conversions.
(11:29):
They weren't really into likemortgages for residential
housing, but they took a chanceand they experimented with us
and iterated their financingwith us over the last three or
four years.
So we've gotten to this reallypretty amazing product now.
But the short of it is, you know, it's a 3% 30-year line of
credit that allows us torenovate up to somewhere between
(11:52):
90% and 110% LTV.
I know I'm getting a littletechnical here, but that's very
patient, very impactful, verypowerful money.
And then the other piece of itis if now the workers are the
investors, are the developers,we're not looking like to yank
that money out of the community.
We're just looking to payourselves better market wages,
(12:13):
middle-class wages, and to trainourselves better, and then,
once this portfolio stabilizesand turns into performance and
positive value, to distributethat, those dividends and that
equity, to the workers and tothe tenants that move in.
So you see a neighborhoodgetting lifted up.
But, unlike the previous modelswhere just it's just getting
(12:34):
ripped apart and waiting for,you know, the affluent to move
in and just push whoever's leftout, we're like keeping
everybody and everybody staysand everybody gets to enjoy the
wealth that they've built andthat they deserve.
Joel (12:46):
What's been the biggest surprise to you in all of this
recently?
David (12:50):
Well, one surprise we already talked about is when we
started all this, we were highly, highly distressed,
historically redlined.
Just like crumblingneighborhoods full of vacants.
Just like if you've driventhrough West Baltimore, you know
what this looks like.
And no like there's nocompetition, nobody cared about
these neighborhoods.
But now we are competingagainst a new form of, you know,
(13:12):
private equity.
That's that's kind of the badsurprising.
I think the good surprising is,you know we're still very early
stages, but just like how goodit feels and how well it's
proving out.
We have really greatmeasurement tools.
We have built really greatfinancial tools and impact tools
.
So we're carefully measuringwhat's going on and you can see
(13:36):
us increasing productivity.
So we're improving the way thatwe fully renovate properties
and, at the same time, bringingour budgets down just because
we're getting better at it andmore efficient and building
better tools for projectmanagement and that, in turn, is
converting into better wagesfor our workers.
So maybe I'll just leave it atthat one.
There's, like so many examplesI could give you of where I just
(13:57):
on a given day, I'll be likewow, that is beautiful balls man
, a thing that's happened.
But this one, which I think isa core tenant of cooperative
principles or arguments that youwould convert worker
productivity into better wagesfor workers is like totally,
absolutely and visibly provingout much faster than I expected.
Joel (14:19):
Yeah, I mean it just makes sense to me've been
companies or or I've worked bothon nonprofits and on the
business side and there've beencompanies and groups where you
could tell that they wanted togive you more ownership, more
stake in what they were doing.
And I've also had exampleswhere they didn't really want.
You know you were just kind ofa paid employee and you know you
(14:41):
that you were, you werereplaceable and they were
basically just renting you everyday.
And the places where I knowthat I've been given ownership
stake or I've been given, whereit's clear that the ownership is
interested in investing backinto its people at least is, I
know, for me personally, Ialways experience more
commitment to my work, morediligence in making sure I'm
(15:02):
doing good work and working hardand all those things that
typically we are good forproductivity, they're good for
profits, they're good for all ofthat.
I'm curious if you have seenthat play out in this.
You know a new experiment in away that you're doing.
David (15:19):
Yeah, so at first, like, everybody's like stunned and
doesn't know what to make of it.
When you make the announcementwe're a cooperative.
Now you know it's yours andyou've got to show up for
committees and become a memberand vote and debate and discuss.
Everybody's like a little likewhat.
But now it's really taking.
Our cooperative governance isreally strong.
We're adopting a new set of anew operating agreement, for
(15:42):
example, so a new constitutionset of a new operating agreement
, for example, so a newconstitution.
And we've had this greatwell-participated work group,
study group.
To, you know, read the newdocument the lawyers have
written for us and, you know,improve upon it and discuss it,
so that.
So this thing that was kind ofweird to everybody at first is
now turning into like realworker democracy, which is
(16:02):
amazing to watch.
But to your point about how doesit affect worker productivity,
I think that took a minute too,because people are often just
used to the boss workersituation.
So they, you know dynamic, sothey come to the work sites and
just expect to stand around andbe told what to do.
And we, one of our one piece ofour grand experiment is that we
(16:24):
are pushing decisions out to thefront line as far as possible.
So front line worker autonomyis a big part of our experiment
and we're building these projectsystems that do that, that send
out bite-sized chunks of therenovation project to small
groups, to individuals who areout there and they're
(16:46):
responsible for their budgetsand their deadlines and their
scope of work and the quality ofwork.
And that took a minute also forpeople to like jam on that, but
now they're getting it, becausethe other thing that we do is
we get, we, we, we agree upon abudget and if they hit it or
come in below, they get to keepthe difference right.
So it's like everything thatwe're talking about pushing the
(17:11):
autonomy out there.
And so the benefits of that,you know that win, that well run
, that interest in your own workis not just like.
You know morale and you knowfeel good stuff, it's real money
, which it should be, you know.
Joel (17:20):
Yeah, no, and I and I know for me when, when I know
that there's some kind of that,my work actually is going to
have an impact on you know, likeif I help, if I help my company
make more money, it's alsogoing to have a positive impact
on the same page.
Um, in in that way, which Ithink is is kind of is kind of
(17:48):
neat it does.
I do feel like there's, um,what I like about your work is
you're you're sort of, um, uh,questioning assumptions and sort
of busting myths, notnecessarily by talking about it,
but just by doing it.
Um, and some of those myths arethat, uh, if you're going to go
into business, it has to all beabout yourself and all about
your profit.
And it also, I think, isbusting the myth that you know
(18:10):
you mentioned before you guysare a for-profit co-op.
A lot of times, when peoplehear the word co-op, they think,
oh, they don't make money orthere's no profit to be had
there.
Have you run into thatmisconception?
David (18:23):
It's funny.
I testified for a co-op lawbill in front of the Maryland
General Assembly a couple ofweeks ago and this bill just
created a co-op structure in thestate of Maryland like there
are in 30 other states.
Sailed through the Senate,unanimous approval through the
Senate, but when we got to thisHouse Economics Matters
Committee, we testified and thenthe legislators started to ask
(18:45):
their questions and voice theirconcerns and support.
Of course, there was onelegislator not going to get into
the politics, of which party hemight be or from what part of
the state, but he started, like,expressing fears that this was
communism, you know right, likethis was state planning, and.
And he got roundly chastised bythe chairman for that.
(19:06):
But the point, yes, like peoplestill have this idea.
And you know what else isinteresting?
We have a lot of Latinos in ourgroup and it takes a minute for
some of the folks who've comefrom like Venezuela to
understand that this is not, youknow, centralized planning.
This is capitalism.
We've just changed who theshareholders are.
(19:26):
That is it.
That's it.
We are competing on the playingfield of capitalism and our
thesis is if you really want towin, that's what you got to do.
You just got to get out thereand you've just got to change
who the shareholders are, makethe workers the owner of their
own work, not in the socialistor communist, marxist kind of
way, but by making themshareholders of a corporation
(19:48):
that is out there competingagainst other corporations.
And then the thing that I thinkis an experiment I haven't heard
too much about before is thisprofit sharing model that we
have, which is like micro profitsharing, like small jobs that
get pushed all the way out tothe front.
The idea here is likedistributed profits, like
profits get in the pockets ofthe workers long before they
(20:11):
accumulate at the top of thecorporation, and then there's
got to be some kind of dividenddistributed.
Right, this is not communism.
They work for that.
They wrote the work order withus and they executed on it in a
way that will create a, a, abusiness that works.
But down at that level they getto to enjoy whatever you know
efficiencies or profit they,they considered, they, they
(20:34):
created within this capitalist,you know, playing field gridiron
.
Joel (20:38):
Well, yeah, I mean, you know we like democracy and so we
should like democracy inbusiness, is just kind of the
way I see it.
But thank you so much for yourtime today, david, we do have to
run um.
Uh for all of you out there.
Check out um.
Where can they find you?
David (20:53):
uh, pretty much linkedin and instagram.
If you go to linkedin, there'sa page for each one of our
entities.
There's me, david lids, there'swater bottle co-op, rising
housing and appellation fieldservices.
On Instagram you can find allthose entities, great.
Joel (21:07):
And we'll put those links in the show notes.
Tune in next time and listen oniTunes, iheartradio, spotify,
stitcher all of the places youget your podcasts YouTube.
And until next time, rememberwe are each other.
What if investing in each other could change the world?
I'm Joel Skeen with bizradious,and this is the Mindful
Marketplace now or after this tohear David's story about how he
got started and how he used hisown personal transformation
(00:27):
journey, through addiction andthrough some other struggles, to
not only come out of that andbe successful himself, but to
take the business he was in andbe able to really help it serve
his community in the long run.
And we're going to get into howhe's been doing that.
But, david, welcome back intothe show here.
(00:47):
Really happy to have you today.
Thanks for being here.
David (00:50):
Yeah, thanks again for having me, joel.
Great to be back.
Joel (00:52):
Yeah, so, as I was saying , we talked about kind of your
journey of going from being anaddict and kind of going through
everything that's involved withthat and moving through that to
starting your own business.
That does a lot of differentthings all within kind of the
realm of you know, kind of realestate, but it sounds like the
(01:14):
main purpose of it at this pointis really to provide those jobs
to people who were in the samesituation you were in.
It sounds like that was reallythe heart of the beginning of it
.
Is that right?
David (01:24):
Yeah, that's how I started.
I found a low barrier to entryjob opportunity for myself.
That also let me create abusiness.
And then recovery teaches methat as the business grew, I
should open up that sameopportunity to others trying to
rise up out of the abyss.
Joel (01:43):
One thing I didn't get a chance to ask you in the first
half here was you mentioned thatto just as a human being going
through a difficult time,whatever it is, whether it's
addiction or it's any otherissue.
You mentioned just theimportance of a community in
that and how that informed theway you continue to approach
your business.
I'm curious if you could kindof expand on what you mean by
(02:06):
that and why the communityaspect you feel like is so vital
to that success and why youwant to invest back into it.
David (02:12):
Yeah, again, that just starts with sobriety.
One of the weirdest storiesabout my journey is I learned so
much about business and life inwhat we call the rooms, but
I'll just focus.
It all starts there.
You learn in rehab and then youlearn as soon as you get out
and start going to thosemeetings that the best way to
(02:35):
stay sober is to stay connectedto your sobriety community.
And then the best way to reallyreally make sure that you stay
sober within that community isto help others, and you know
there's a variety of ways thatwe do that in a recovery
community.
But then there's also thismessage that, hey, it doesn't
stop there, it's just you wantto serve your community, serve
(02:56):
your brothers and sisters inlife, just in life.
And then what you get out ofthat is A sobriety like so your
life, you get your life back.
But B a joyful life like thisis a good way to live.
Like you know, you feel likelife has meaning, you feel like
you have connection, sleep wellat night, unlike you, know some
of my past careers and certainlythe way that I lived life with
(03:19):
my drinking and so on.
Joel (03:21):
Yeah, no, absolutely.
And so what I wanted to reallydig in with you here, with the
time that we've got on this half, is to talk about this
transition that you made.
You started talking about itnear the end of the last episode
, where you talked about how youtook this business.
You had built where you knowyou started off just by working
it, by essentially cleaning outhouses that were getting
(03:42):
foreclosed on, and you know someother other, you know kind of
jobs like that, um, and then youbuilt the business and it was
important to you to, you know,pay your people well to have
that low barrier to entry, um.
But then there was a point atwhich, as the business grew, um,
you decided it wasn't justgoing to be your business, that
this wasn't going to just be anasset for you, it was going to
(04:04):
be an asset for the community.
Tell me a little bit about youknow kind of about that, that
process.
David (04:11):
Yeah, sure so.
So it starts with the fact thatthis sector that we work in it
has a couple, a couple ofeuphemistic names.
One of them is propertypreservation, another is REO
services loss mitigation butit's like the seedy underbelly
of the American housing financesystem, you know it's.
It's taking figuring out whatto do with foreclosures.
(04:32):
Once a foreclosure happens,which is an ugly, ugly, ugly
moment, so it's dangerous, it'sdirty and most aggravating when
you're trying to run a socialenterprise where you're, you
know there's like programmaticsupport.
If you make a commitment tohelp folks coming back from
rehab or from jail or fromprison or off the streets to
(04:53):
stand back up and to work and tobe part of community.
There's like cost to that,there's a programmatic
commitment to that, and so ifyou're working for clients,
first of all don't give a crapabout that mission, but also
just don't pay you well to beginwith.
It's really difficult tosupport that.
So we were looking for a way todo our employment, social
(05:16):
enterprise, better and at thesame time, we were like you're
in it every day, particularlyduring the recession.
You see what extractivefinancing really looks like on a
house-to-house,community-to-family basis and
how really reallydisproportionately bad it is in
neighborhoods that have alreadybeen oppressed for generations.
(05:37):
So we started to put it alltogether Can we pay ourselves
better?
Can we find a way to invest inthese neighborhoods that would
be mutually beneficial to ourteam and to the neighborhoods
that we're doing a lot of workin?
We started researching, likefiguring out what was going on,
and so started reading greatbooks which everybody should
read, like the Color of Law orthe Race for Profit or Evicted,
(06:00):
which are just stunningly starkbut insightful documentation of
how the American housing financesystem has worked in this land
since the New Deal Topic for adifferent day.
But we really start to becomeaware that these neighborhoods
that we are experiencing we arewitnessing yet another chapter
(06:21):
of oppression, extraction andexclusion.
This is like yet anotherchapter that goes extraction and
exclusion.
This is like yet anotherchapter that goes back
generations and decades.
So we come up with this thesishey, if we can raise the money,
can we do the work ourselves tolift up neighborhoods?
And can we find a way togentrify neighborhoods, meaning
revitalize them, bring them backto their greatness and bring
(06:42):
them back to a state of economicrobustness and wealth, but keep
that wealth and that equity inthe community.
So that was the idea that westarted pitching, and it's the
thing that we're doing today.
Joel (06:54):
Yeah, and it sounds like there's one of the fundamental
dichotomies that I'm hearing yousort of mention or ways to
think about this is you'vementioned kind of there being.
You know the companies thatyou've seen in your industry,
the way that they approach theirbusinesses.
You've mentioned the wordextractive a couple of times and
you have also talked about howyour business I don't know if
(07:14):
you've used this word, but itsounds to me like what you're
talking about is kind of using,instead of having an extractive
model of businesses, to have amore regenerative one where the
profits from the companiesthat's made don't get taken out
and sent off to, you know,cayman Islands or you know
anything like that, but they getput back into the community
that they're in.
(07:34):
Did the shift from youprivately owning your business
to actually transitioning it toa shared ownership model Did
that?
How did that affect that?
David (07:49):
where you were at on that extractive versus regenerative
scale, I guess From our ownbusiness perspective, it just we
were an employment socialenterprise all along, but what
that meant before the conversionwas just that I went into a ton
of personal debt to try to keepthis thing moving, and now
we've transferred ourselves froma place of that kind of awful
(08:11):
scarcity to a place ofregeneration that's a great word
, like a very regenerative.
I think the point I would focuson is I don't think we have
time for it, but I could rattleoff seven or eight different
ways that we think ofcorporations or capitalism, or
even the government extract froma neighborhood.
(08:31):
Maybe the shortest way to talkabout it is let's just go with
flipping.
Joel (08:36):
We'll leave predatory lending aside, we'll leave
redlining for another day, butjust flipping it Private equity
buying homes just to rent out,so that homeownership keeps
going down and down.
We can leave out that for nowtoo.
David (08:51):
And that's what's going on today, like we're competing
in neighborhoods now that nobodycared about and all of a sudden
there's people at the auctionblocks and it's private equity
funded homes investors, andthey're not even grabbing
properties for rentals in theseneighborhoods.
It's pure speculation.
They're just buying theseneighborhoods and letting them
sit vacant like the same kind ofshit.
(09:12):
Yeah, and so I'll lose at anauction to a private equity
funded investor on a propertythat's right next to one that
we're working on, and that'slike a continued drag blight on
us and they are purelyspeculating.
They are not going to doanything on it until the numbers
are right that they can selloff to somebody who will.
But anyway, yeah, I mean wecould leave it at that.
(09:33):
But even flipping flipping is anindustry that has these
characters in it that are calledbird dogs who put out bandit
signs.
You know, we pay cash for moneyand we pay cash for houses.
Yeah, yeah, yeah, hard moneylenders and then ultimately, the
flippers.
Each one of those characters istaking a cut and it starts with
(09:54):
the bird dog finding somebodywho has a deed in a very poor
neighborhood and is under, youknow, financial distress, so
they part with that deed at aridiculously low price and then
the bird dog assigns thatcontract to a flipper.
So he might have bought thehouse for $10,000, and then he
assigns it to a flipper for$20,000 or 30.
(10:16):
So what just happened rightthere?
Like $10,000 or $20,000 ofequity got ripped right out of
that community and then theflipper will use these hard
money, high interest loans, tomake the renovation happen.
So again that high interest inthose fees, another form of
extraction that gets ripped outand incentivizes, pressures the
flipper to do shitty work, andthen finally the flipper is
(10:39):
going to flip it and try to gethis cut.
So I have a slide that shows.
You know that represents aboutafter the finish the house is
finished, 60% of the wealth thatwas created from that
renovation just gets rippedright out of the community.
Joel (10:53):
Man.
So, when you're thinking aboutthe way that you guys can do
your part at least to helpaddress that issue, why did that
shift to a co-op model?
You know how did model, how didthat serve that end goal?
David (11:07):
Yeah.
So there's two pivotal pieceshere.
One is our model is dependentupon us being able to raise
impact investment so rates thatlook much better than the hard
money lenders that are patientand long-term thinking and a
shared equity model.
So Seed Commons is a CDFI thatsupports co-op conversions.
(11:29):
They weren't really into likemortgages for residential
housing, but they took a chanceand they experimented with us
and iterated their financingwith us over the last three or
four years.
So we've gotten to this reallypretty amazing product now.
But the short of it is, you know, it's a 3% 30-year line of
credit that allows us torenovate up to somewhere between
(11:52):
90% and 110% LTV.
I know I'm getting a littletechnical here, but that's very
patient, very impactful, verypowerful money.
And then the other piece of itis if now the workers are the
investors, are the developers,we're not looking like to yank
that money out of the community.
We're just looking to payourselves better market wages,
(12:13):
middle-class wages, and to trainourselves better, and then,
once this portfolio stabilizesand turns into performance and
positive value, to distributethat, those dividends and that
equity, to the workers and tothe tenants that move in.
So you see a neighborhoodgetting lifted up.
But, unlike the previous modelswhere just it's just getting
(12:34):
ripped apart and waiting for,you know, the affluent to move
in and just push whoever's leftout, we're like keeping
everybody and everybody staysand everybody gets to enjoy the
wealth that they've built andthat they deserve.
Joel (12:46):
What's been the biggest surprise to you in all of this
recently?
David (12:50):
Well, one surprise we already talked about is when we
started all this, we were highly, highly distressed,
historically redlined.
Just like crumblingneighborhoods full of vacants.
Just like if you've driventhrough West Baltimore, you know
what this looks like.
And no like there's nocompetition, nobody cared about
these neighborhoods.
But now we are competingagainst a new form of, you know,
(13:12):
private equity.
That's that's kind of the badsurprising.
I think the good surprising is,you know we're still very early
stages, but just like how goodit feels and how well it's
proving out.
We have really greatmeasurement tools.
We have built really greatfinancial tools and impact tools
.
So we're carefully measuringwhat's going on and you can see
(13:36):
us increasing productivity.
So we're improving the way thatwe fully renovate properties
and, at the same time, bringingour budgets down just because
we're getting better at it andmore efficient and building
better tools for projectmanagement and that, in turn, is
converting into better wagesfor our workers.
So maybe I'll just leave it atthat one.
There's, like so many examplesI could give you of where I just
(13:57):
on a given day, I'll be likewow, that is beautiful balls man
, a thing that's happened.
But this one, which I think isa core tenant of cooperative
principles or arguments that youwould convert worker
productivity into better wagesfor workers is like totally,
absolutely and visibly provingout much faster than I expected.
Joel (14:19):
Yeah, I mean it just makes sense to me've been
companies or or I've worked bothon nonprofits and on the
business side and there've beencompanies and groups where you
could tell that they wanted togive you more ownership, more
stake in what they were doing.
And I've also had exampleswhere they didn't really want.
You know you were just kind ofa paid employee and you know you
(14:41):
that you were, you werereplaceable and they were
basically just renting you everyday.
And the places where I knowthat I've been given ownership
stake or I've been given, whereit's clear that the ownership is
interested in investing backinto its people at least is, I
know, for me personally, Ialways experience more
commitment to my work, morediligence in making sure I'm
(15:02):
doing good work and working hardand all those things that
typically we are good forproductivity, they're good for
profits, they're good for all ofthat.
I'm curious if you have seenthat play out in this.
You know a new experiment in away that you're doing.
David (15:19):
Yeah, so at first, like, everybody's like stunned and
doesn't know what to make of it.
When you make the announcementwe're a cooperative.
Now you know it's yours andyou've got to show up for
committees and become a memberand vote and debate and discuss.
Everybody's like a little likewhat.
But now it's really taking.
Our cooperative governance isreally strong.
We're adopting a new set of anew operating agreement, for
(15:42):
example, so a new constitutionset of a new operating agreement
, for example, so a newconstitution.
And we've had this greatwell-participated work group,
study group.
To, you know, read the newdocument the lawyers have
written for us and, you know,improve upon it and discuss it,
so that.
So this thing that was kind ofweird to everybody at first is
now turning into like realworker democracy, which is
(16:02):
amazing to watch.
But to your point about how doesit affect worker productivity,
I think that took a minute too,because people are often just
used to the boss workersituation.
So they, you know dynamic, sothey come to the work sites and
just expect to stand around andbe told what to do.
And we, one of our one piece ofour grand experiment is that we
(16:24):
are pushing decisions out to thefront line as far as possible.
So front line worker autonomyis a big part of our experiment
and we're building these projectsystems that do that, that send
out bite-sized chunks of therenovation project to small
groups, to individuals who areout there and they're
(16:46):
responsible for their budgetsand their deadlines and their
scope of work and the quality ofwork.
And that took a minute also forpeople to like jam on that, but
now they're getting it, becausethe other thing that we do is
we get, we, we, we agree upon abudget and if they hit it or
come in below, they get to keepthe difference right.
So it's like everything thatwe're talking about pushing the
(17:11):
autonomy out there.
And so the benefits of that,you know that win, that well run
, that interest in your own workis not just like.
You know morale and you knowfeel good stuff, it's real money
, which it should be, you know.
Joel (17:20):
Yeah, no, and I and I know for me when, when I know
that there's some kind of that,my work actually is going to
have an impact on you know, likeif I help, if I help my company
make more money, it's alsogoing to have a positive impact
on the same page.
Um, in in that way, which Ithink is is kind of is kind of
(17:48):
neat it does.
I do feel like there's, um,what I like about your work is
you're you're sort of, um, uh,questioning assumptions and sort
of busting myths, notnecessarily by talking about it,
but just by doing it.
Um, and some of those myths arethat, uh, if you're going to go
into business, it has to all beabout yourself and all about
your profit.
And it also, I think, isbusting the myth that you know
(18:10):
you mentioned before you guysare a for-profit co-op.
A lot of times, when peoplehear the word co-op, they think,
oh, they don't make money orthere's no profit to be had
there.
Have you run into thatmisconception?
David (18:23):
It's funny.
I testified for a co-op lawbill in front of the Maryland
General Assembly a couple ofweeks ago and this bill just
created a co-op structure in thestate of Maryland like there
are in 30 other states.
Sailed through the Senate,unanimous approval through the
Senate, but when we got to thisHouse Economics Matters
Committee, we testified and thenthe legislators started to ask
(18:45):
their questions and voice theirconcerns and support.
Of course, there was onelegislator not going to get into
the politics, of which party hemight be or from what part of
the state, but he started, like,expressing fears that this was
communism, you know right, likethis was state planning, and.
And he got roundly chastised bythe chairman for that.
(19:06):
But the point, yes, like peoplestill have this idea.
And you know what else isinteresting?
We have a lot of Latinos in ourgroup and it takes a minute for
some of the folks who've comefrom like Venezuela to
understand that this is not, youknow, centralized planning.
This is capitalism.
We've just changed who theshareholders are.
(19:26):
That is it.
That's it.
We are competing on the playingfield of capitalism and our
thesis is if you really want towin, that's what you got to do.
You just got to get out thereand you've just got to change
who the shareholders are, makethe workers the owner of their
own work, not in the socialistor communist, marxist kind of
way, but by making themshareholders of a corporation
(19:48):
that is out there competingagainst other corporations.
And then the thing that I thinkis an experiment I haven't heard
too much about before is thisprofit sharing model that we
have, which is like micro profitsharing, like small jobs that
get pushed all the way out tothe front.
The idea here is likedistributed profits, like
profits get in the pockets ofthe workers long before they
(20:11):
accumulate at the top of thecorporation, and then there's
got to be some kind of dividenddistributed.
Right, this is not communism.
They work for that.
They wrote the work order withus and they executed on it in a
way that will create a, a, abusiness that works.
But down at that level they getto to enjoy whatever you know
efficiencies or profit they,they considered, they, they
(20:34):
created within this capitalist,you know, playing field gridiron
.
Joel (20:38):
Well, yeah, I mean, you know we like democracy and so we
should like democracy inbusiness, is just kind of the
way I see it.
But thank you so much for yourtime today, david, we do have to
run um.
Uh for all of you out there.
Check out um.
Where can they find you?
David (20:53):
uh, pretty much linkedin and instagram.
If you go to linkedin, there'sa page for each one of our
entities.
There's me, david lids, there'swater bottle co-op, rising
housing and appellation fieldservices.
On Instagram you can find allthose entities, great.
Joel (21:07):
And we'll put those links in the show notes.
Tune in next time and listen oniTunes, iheartradio, spotify,
stitcher all of the places youget your podcasts YouTube.
And until next time, rememberwe are each other.
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