KP Unpacked

We Don’t Really Finish Projects. We Abandon Projects.

• KP Reddy

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The closeout process is where most projects quietly fail. In this episode of

KP Unpacked, the #1 podcast in AEC, KP Reddy and Nick pull back the curtain on why handovers break, why owners get stuck with the bill, and how to design for decades instead of deadlines. From BIM’s broken promise to the CapEx vs OpEx split, this is a hard reset on how AEC should finish work.

Highlights

1) Documentation and data

  • BIM vs reality: digital models did not eliminate banker boxes or fragmented handovers
  • Documentation as asset value: warranties, submittals, service records as the true owner’s manual
  • Modern handover standard: digitize everything, make it queryable, and keep data portable across owners

2) Incentives and ownership structure

  • CapEx vs OpEx: split mindset drives short-term choices that hurt operations
  • Incentives and warranties: tie first five years of maintenance to designers and contractors
  • Design–Build–Operate: operating accountability changes what gets built

3) Operations and economics

  • Maintenance economics: lifecycle costs can exceed build costs and should change design choices
  • Manufacturers and feedback loops: lost warranty visibility and how direct data ties prevent waste

4) Process and workflows

  • Decentralized workflows: hundreds of contributors, no single system, and why forcing one platform fails at closeout

5) Owner playbook

  • Set closeout requirements early, enforce data standards in contracts, and involve operations from day one.


This is exactly why we launched the Owner Training Series to help owners and owner reps fix what breaks between design, build, and handover. Learn how to manage risk, enforce better closeouts, and align your teams for long-term success.

2nd Webinar is on Nov 20th.

Enroll now and get the replay of first one → https://kpreddy.co/owner-training-series

AEC leaders, operators, and innovators, this one matters. Listen now and fix your closeout before it burns value.

Sounds like you? Join the waitlist at https://kpreddy.co/

Check out one of our Catalyst conversation starters, AEC Needs More High-Agency Thinkers

Hope to see you there!

SPEAKER_00:

Hey! We're back. Next a week.

SPEAKER_03:

I had some other guests. You think my you're my only co-host around?

SPEAKER_00:

What the hell? I thought I was uh I thought we had an exclusive guest.

SPEAKER_03:

I thought we're exclusive.

SPEAKER_00:

I'm being replaced. I'm being replaced. Getting flashbacks.

SPEAKER_03:

I thought we were exclusive.

SPEAKER_00:

I've heard that I've heard that one before in a past life. Let's um let's jump in. Let's like not let's do it. Let's not let's not waste any time. So, post of the week that caught my attention from KP Ready. I was flipping through one of my old decks. Oh no. That was actually my response was oh no, that deck already looks terrible. I have to go fix that. I was flipping through one of my old decks where I claimed that BIM was going to replace closeout docs. I was today years old when I found out that that's not the case. And then you posed a question: how do you handle closeout docs? Get an intern to do them. Do you outsource? Do you wait till the owner asks? Do you do it in-house? Or do you um do you just want to outsource everything to AI? Doesn't AI already handle everything? So I thought it was a good place to start because we've spent a lot of time recently talking about construction, um, construction tech, construction this, construction that. And I think this is like an often glossed over, like very underrated, um, massive component of a project is like the you know, is the closeout process. I know you have some strong opinions on this. Yeah. Take us through the what was in the old deck and what's happened since you wrote your textbook and and maybe why we haven't actually solved any problems yet. Yeah.

SPEAKER_03:

You know, the funniest thing about that deck, uh, I realized, I mean, it's several years old. It's 10 years old, 12 years old, maybe. And the person that put it together for me was Jackie Morick. Oh my gosh. I already offended, I already offended Jackie less than five minutes into the you know, I mean deck styles vary, you know, it's like, you know, yeah, yeah. At that time, it's yeah, it's retro chic now, right? Um, but I thought that was funny, like just how long, you know, people kind of are around the hoop, you know, people kind of come and go in the stuff that we're doing. Uh, you know, Jackie and I worked together back when I when I sold my company to a Reaper graphics company, right? God, like those words, and then you know, she went off and did some stuff on her own and came out. So it's kind of interesting, like you know, at some point it's the same folks. Actually, I think you both met at my book launch.

SPEAKER_00:

I met Jackie at your book launch, which was what, 2016, 2017? 2016, 17. Because you're still at Built Worlds, yeah. Yeah, I mean, you know, time is a weird thing when you get to a certain age. Yeah. And I think I'm like finally of that age where I like I don't under understand or um I don't quit. I I yeah, I don't have like it feels like yesterday when we uh look launched together. And like, yeah, you know, when re like reconnecting with Jackie when she when she joined um your operation was like, whoa, yeah, like time is a flat circle. Yeah, yeah.

SPEAKER_03:

So um, so yeah, so I think what was interesting, this is a uh presentation I used to go do to like hospital systems and airports, like and it was all about BIM. And and there was a fixation around BIM as a design tool, and you know, oh, we're using BIM to do design intent, and we're gonna virtually construct. And it was part of my book, um, my first book around BIM for owners and developers, and I had a whole section around like turnover and all that. And the idea was like, well, we're not gonna have these banker boxes full of documents, it'll all be digital, right? That was the vision circa 2011. And um, so I'd go around and give these talks, and the the image that um to best describe is a guy basically in a basement with banker boxes and rolls of drawings just shoved into a box saying, here's our closeout documents. And and I think for those of you that maybe don't know what a closeout, you know, it's basically when the contractor hands over the building to the owner, and the closeout docs are meant to be what I would best describe as the owner's manual for the building, right? It's all the here's the warranties and the products that are all the air conditioning systems and all the things that you just that we just built for you, and we're gonna hand it over. Now it's part of the contract requirements, but quite honestly, at the end of the project, you know, I always say we don't really finish projects, we abandon projects, is really the and so what happens is you know, the owner has all these requirements, the contractor is supposed to deliver them. Uh sometimes everybody's in a hurry and some of it gets missed, or some of it just kind of gets called in, right? Um, because the contractor wants to get paid and the owner wants the keys to the building to get going, right? So there's this weird dynamic at the end of the project. Um, but it's probably one of the most critical things for the asset, for the asset life. So imagine, you know, imagine buying a car with no owner's manual, with no maintenance schedules, like nothing. And you just drive along your way, and then one day, like one day you didn't get an oral change and it locks up on you, right?

SPEAKER_00:

So it's it's that kind of you know what's really what's really interesting about that example, that analogy to the to the car manual, is that if I bought a car today, I would not ask for the manual. Yeah, because I'm gonna because I'm gonna look it up. I'm gonna look it up on the internet. Like I'm gonna, I'm gonna, I'm gonna find I have a I have a a there's a much faster process where I just find the specific section or um the specific detail I'm looking for whenever you know part of my car is not functioning or not working. Or I'm not even I'm gonna skip, I'm gonna skip the owner's, I'm gonna I'm gonna I'm gonna actually skip the the owner document or detailing as much as possible and just go directly to um you know a Reddit or a chat GPT that's gonna actually just solve my problem because they already read the documents, yeah. Right.

SPEAKER_03:

Or the dealership already has if it's a newer car, the dealership has all the records, right? You have Carfax, you're tracking VIN numbers. But if you ever buy like a vintage car, much like buying a vintage watch, all the paperwork is part of the asset value, right? If you go buy a vintage Porsche tomorrow and it doesn't have any paperwork, that's worth a lot less than one that has meticulous, you know, um, service records. Yeah, and so there's a ton of value there, but you know, a couple of the reasons why it the process is broken is we always think about an owner as this one person, this one entity. And really owners are um there's it's basically like um there's a dichotomy of ownership, right? There's the capex owner, and then there's the opex owner. So the capex owner is the person that's tasked with go build this hospital, here's the budget, here's the schedule, here's the needs. And their entire focus is on getting the project delivered and handing over the keys, and then they move on with life. They're not asking questions like what's going to be the operating costs, what's the maintenance, and all that. It's not their problem. They move on. And then they hand the keys over to the opex person. And the opex person is like, hey, thanks for not getting me this smart building system. Why did you buy that unit that's always failed on us? And so there's this inherent um thing with owners where they're actually split in their thinking. I'll give you a good example. I used to do a lot of work for one of the largest grocery store chains, and we would basically do constructability analysis to help them understand what was going on when we're using BIM type of stuff. And they build a hundred stores a year. And the CapEx guys were super excited about working with us. We helped them deliver cheaper, better, faster, and then they hand it over to the store manager. So then we went to go spend time with the store manager, and the deli manager said, Hey, I don't know why you keep buying this cooler. We literally take the brand new one and we sell it on eBay and buy the one we like. And apparently they had told the CapEx side years ago, like, hey, why do you guys keep buying this cooler for us? And it just never got there because they don't care.

SPEAKER_00:

Yeah, they're not trying to opt, they're not trying to optimize the set of things that the OpEx owner is trying to optimize. Exactly.

SPEAKER_03:

So the closeout docs are that layer in between of handoff, right? That's why they're called handoff documents sometimes. That is the handoff. And it's like anything else, it's probably the most critical thing in that process. And then also, if you think about the costs of managing a building uh for the long term, far exceed build managing and maintaining a building for the long term far exceeds the construction costs. In fact, I think the last stat was your your maintenance and your maintenance costs for a building uh per year, if you are if you take um the building costs and deliver it by 20. That's that's that's crazy.

SPEAKER_00:

Something like that, right? So it's not cheap. Over over what time horizon? Over 20 years. Okay. So it's like a 20th per year. Okay.

SPEAKER_03:

That's a lot still. Yeah. Yeah. Yeah. So I I think that's one of these things that we really are kind of overlooked, right? We look at AI and this and that, and how we get design better, but but but when you look at that cost factor, and then the other thing that's interesting about all this is do the design and con do the designers and the contractors build things, design things, thinking about the 20 to 50 year life cycle of that building, or not. And the reality is they don't. Um, another good analogy, car analogy days are car analogy day. Um, when I took my first company public, you know, I was 20 something. So of course I went out and bought a house, bought a watch, bought a car. Um, and the car I bought was a BMW. Um, and at that point in time, BMW had just started including service and maintenance in it. Before that, BMWs were notorious for oh, the minute you drive it off the lot, you're gonna bring it back because there's always something going wrong with the BMW. And so BMW, in order to help bolster sales, they said, okay, for the first, I think it was like three years, 50,000 miles, all services included. And so that got people incentivized to buy it. Like, hey, if it breaks down, it's not my problem. Now, there's two things that did. One, it increased increased the demand for BMWs, but secondly, it quantified the quality issues in a very clear way because now BMW was paying for it. So they were line item, they understood like what it was costing them, what poor quality was costing them in the long run, so they could improve their product.

SPEAKER_00:

I wonder if that changed how they designed and engineered in the in the shorter term. Like, I wonder if they'd act like literally changed the design as after making that call.

SPEAKER_03:

100%. 100%. There were, I mean, I I saw it because as things broke down on my BMW, um, when they replaced it, the replacement part, the mechanic would always say, like, oh yeah, we're replacing it because actually the new version of this is better.

SPEAKER_02:

Yeah.

SPEAKER_03:

Um, and so they would they were very clear that there's clearly a process improvement thing. So imagine that. Imagine if once the building was handed over, if the architect, the engineer, and the contractor had to basically own the maintenance of it for five years. So, in other words, they got dinged, right? They I mean they have like a warranty period, right? That's very different. But it turns out like this broke and and they had to service it for the first five years of the building's life. How would they think about making different design choices and um in the submittal process substituting lesser quality products to save on price? Because maybe I'll spend a little bit more on that um on that revolving door, right? Instead of trying to get the customer to save money, I'll I'll actually buy a little bit better quality one because otherwise I'm gonna have to pay for it on the back end.

SPEAKER_00:

For what it's worth, one anecdote here. My so my dad my dad's a home builder. And when I was growing up watching him build houses, so he did mostly custom, custom high, high higher end homes. And so there was like, you know, a certain level of expectation with the the quality and the finish of these homes. And he got to a point where he actually started guaranteeing um, he basically gave people a warranty in the first year that if if there was a a serious issue with their with their home or they even needed him to fix something that should should not need to be fixed, if it wasn't just like basic, you know, homeowner, homeowner maintenance, he would pay for the he would he would basically pay for the warranty. So he would like go back, go back to be their handyman for a year if they needed him. Um I think I I don't actually I don't know if that's normal.

SPEAKER_03:

Um it's not it's not normal. Um, I will say my first home I bought from Pulti, my first starter home, and they actually had a one-year warranty. And what I loved about the experience is the warranty team was different, and they were just purely customer service. They they weren't caught up on cutting corners. I remember I had a problem, they're like, Oh, we'll just replace it.

SPEAKER_02:

Yeah, yeah, right.

SPEAKER_03:

They weren't like trying to cover up their bad work. In fact, there was almost like a weird, like, what else do you need done? Right, right. Then my third home was a custom home. And that guy was a total jerk. He was, I mean, he technically warrantied it for a year, but basically he would show up and like gaslight me, like, well, that's not broken. Yeah, right. Like, dude, that it's it's broken. I don't see any evidence of it. Why are you buying?

SPEAKER_00:

You know, it was like one of those type of things, right? If you're gonna basically, I mean, if you're gonna offer the warranty, you have to honor the warranty, right? Like, because you're just gonna create conflict if you don't like don't offer if he's if you're not willing to fix stuff, don't offer to right, right? I was like a nuisance to him.

SPEAKER_03:

I was like, great, I just spent X high-end home and like and Pulti at my little ninety thousand dollar starter home was giving better service than this guy. It's like uh it was super interesting, you know.

SPEAKER_00:

Yeah. So obviously that's not happening at any commercial scale. No, and um, you know, back to your point about about closeout docs, not only is that not happening, not only is the is the risk of short-term maintenance fails completely on you know the new owner of the building when when closeout happens. Um, but there's often not even the ability to diagnose properly how to fix things or you know what even went wrong because the closeout documents aren't digitized fully.

SPEAKER_03:

Yeah. Right. And it's fairly common. Um, you know, and the building product manufacturers, which you know have a lot of relationships with those folks, they they wish there was better communication. Um, and because part of it too is like you buy a piece of equipment and it has a five-year warranty, it breaks down in two days, two years. Well, nobody knows that it was under warranty. So they call a repair person, right? And then, but the building product people, you know, the credible ones, which most of most of them are, right? They're all very credible, big companies, they want to comply with the warranty. They'd rather you call them and then replace it than build a reputation where their stuff breaks a lot. Like they but but they don't they don't even know. So it was interesting. I used to work with a large uh carpet manufacturer in Dalton, Georgia. And I said, like, guys, it's pretty simple. Your the life of your carpet is like three to five years. Aren't your salespeople calling the customer in three years to say, hey, would you like to look at our new styles of carpet?

unknown:

Right?

SPEAKER_03:

It should be automatic, right? Automatic. And you know what he says like that would be great if we actually knew where our product was. Wow, we have no idea. We sell to a distributor, a carpet installer buys it, they install it. We have no idea where it is. And um, not to get too far down this rabbit hole. Do you know about the warranty card business? The warranty card, yeah. Warranty cards. I don't think I do, no. I'm like pulling out the old stuff, right? So it used to be if you bought like a clock radio from Best Buy or Circuit City or somewhere, a Sony clock radio, in that clock radio box, there'd be a warranty card. Oh, yeah, yeah. Okay, I'm familiar with that. Yeah, and the whole purpose of the warranty card was for the manufacturer like Sony to actually know who their customer was because they had no idea. And the biggest thing as a manufacturer for RD or whatnot is getting a great feedback loop from the customer to it innovate, iterate, or whatever the product. But there was zero relationship between a Sony and the consumer. Now that's where Apple did a fantastic job, is Apple had a direct relationship. Remember, before Apple, you bought your Nokia phone from ATT, and your relationship was with ATT. Nokia didn't know anything about you. Right? Apple really did that connectivity. We're like, no, we actually have a relationship with the end customer, and we can get real-time data. We can get data from them, right? And so we still haven't solved that in the building product space and in the construction space. So, you know, we talk about oh, design build can really solve and optimize all these silos of information for design and construction, but what if it was design build operate? Then how does that change the dynamic? So back when I was younger, I used to work on power plants in Malaysia. And in those markets, EPC contractors, you actually do design, build, operate, transfer. Like that's the contract as an EPC, not all the time, but in the ones I was working on. And so you had to design it, build it, operate and transfer. Now the difference was our operate and transfer business wasn't really connected to the design build. So we would design and the design build team would design and build these power plants, and they would put in the instrumentation that they thought was required, which was usually the minimum. And the first thing the operations team did during commissioning was replace half of the instrumentation. They're like, this is like 10-year-old instrumentation. There's no way, like this, like it's it, it's the cheapest stuff. I now have to operate this bus this power plant. I want the best of the best because it'll make my life easy. Because I also get judged on throughput.

unknown:

Right?

SPEAKER_03:

I get to I'm a PPC. I get char I get judged on how much power I can produce, and better instrumentation implies I could. So they would literally like first thing they would do before they turn it on is replace all the instrumentation. Um, because not only do they have to operate, then they have to transfer it back to the power producer, right? So there was like strong, strong ownership around designing it right, building it right, operating it, optimizing it, and then basically driving profitability through the power plant and then transferring it back to the utility. Yeah. So it was truly full cycle.

SPEAKER_00:

So we're back to the hyper specialization, the hyper specialization of the built environment over the last century has destroyed a lot of the actual quality of you know the build the building product experience and basically you know degrades everything and creates misaligned incentives throughout, you know, throughout every stakeholder that's at fault.

SPEAKER_03:

100%. And I I I think there's another angle, right, besides the what we've talked about, there's also the institutionalization of asset management. Right. And and the reason I say that is if you were if if you were buying your if you were building your dream house and you planned on staying there and raising your family for the next 20 years, you would think about it. If you were buying a house to flip, how do you think about it?

SPEAKER_00:

Yeah, totally, totally different choices I would make. Yeah.

SPEAKER_03:

So with the institutionalization of real estate assets in this country specifically, there's not a lot of incentive to think about the long-term maintenance and management of the asset. When I'm just gonna flip it, right? I'm gonna go develop a Costco shopping center, get it to pencil out, keep it at a bare minimum, because I'm gonna flip it at a cap rate to AIG or some insurance company as a financial asset. Why do I care whether the air conditioning system breaks in five years? I really don't care. It's not my problem. And so I think it's two things. I think there's the what we've always talked about is this um the death of the master builder, so to speak, and the siloed and fragmentation aspects. But I do, I do think um the institution institutionalization of asset management. It was funny. I was talking to these guys out of Australia that own a bunch of hotel properties, and they were like, what is it with you in America? You guys flip assets every couple of years. Yeah. And they said, it's bizarre because we look at it and say there's only a fixed amount of properties to own in Australia. We never want to sell them. We never sell our assets, we develop them and we hold on to them for dear life, yeah. You know, for generations to come.

SPEAKER_00:

Yeah. I mean, and for what it's worth, you do see. So actually, uh, yeah, there's a couple of threads I want to pull there. Um, in a city like New York, for instance, like to compare the all his comment about Australia, how many, how often are people flipping buildings in New York? No good investors doing that. Like these are these are buy and hold properties for you know that you pass through for generations. You'd be silly to you'd be silly to sell, you know, basically any Manhattan property if you if you don't need to. And if you try the flip model there, it just doesn't make any sense. Um but you're actually taught so you the institutionalization aspect, the argument that I hear you saying is everything's been financialized, everyone's chasing a yield, right? Like we've financialized every single every single asset class and have chopped it up in a way where smart, you know, enterprising individuals can come in and do a quick flip and make a quick buck. Um in in markets like Kansas or Indiana or Kentucky, where land is cheap and maybe, you know, maybe it's not as durable and you know and obvious as a return as you know in a New York City and a Manhattan building, but you know, in a time horizon where you time the the demand cycle well, you actually can do quite well. Yeah, but by the way, so this is a uh Bitcoin argument.

SPEAKER_02:

Yeah.

SPEAKER_00:

So the argument for for like in the Bitcoin community for for, and I'm outing myself as a as a hardcore Bitcoiner here, but the argument is that the money has been destroyed. So because of inflation, you can't have a savings account that generates any real yield and it's basically net, you know, it's it's real real rates are are are too low for you to for you to hold any any cash. So what do you do? You look for yield. You invest in the stock market, you invet, you know, you you you have an asset manager that that puts you know eight percent of your portfolio in an NVIDIA and the other 10 in you know in the SP, and maybe you maybe you allocate a little bit to venture tech, um, or maybe you allocate to real estate institutions, right, that are doing this flip model that can generate you 15 to 18 percent in you know uh IRR in a short period of time. Um, so the argument is that if you fix the money, the base collateral, and you're using an instrument like gold, which is taking off right now, or you know, store value in you know, in theory, that that's the Bitcoin argument is that it's gonna it's gonna be a similar store of value as as gold has been. Um, if you if you if that's the money, then you actually don't need that institutionalization because there's a yield and your money is preserved and protected. So this is like a common, yeah. I mean, like really I'm saying it's a Bitcoin argument, it's really a gold argument. It's been that's been our the argument for gold for a long time. Um, but the reason I bring it up is because it's actually like like most gold bugs would tell you that's a that's a societal problem that um that we have that it's a much deeper fix than just asking real estate owners or developers or contractors to like do business differently. The baseline incentive, which is money, is broken. And until we fix the money, we can't actually fix that core underlying incentive for developers to go build it in a very low quality, uh, you know, low fidelity way.

SPEAKER_03:

Well, which I think brings us to an interesting segue around venture capital, right? And how we think about how that how that world's changing. And you know, the idea of a 10-year fund life and providing liquidity to your LPs and then raising another fund. And I think the debate we've been talking about is why wouldn't we just do an evergreen fund and give cus give our LPs the option to get out every two years, right? They can get liquidity every two years. Now, the reality is most LPs won't, right? They won't because take the money out and do what?

SPEAKER_02:

Right.

SPEAKER_03:

That's always the redeployment. Because by the way, every time you deploy capital and redeploy capital, there is there are transaction fees, right? There are costs to doing that.

SPEAKER_00:

Taxes, yep.

SPEAKER_03:

Taxes, carried interests, all the things, right? That eat into that IRR of that capital. And and really, I think the only reason why a VC would take like an LP would take liquidity early is one if they needed the cash, they lacked liquidity, or if they're a larger institution and they need to rebalance their asset allocation. Like, oh my gosh, you got, you know, in many ways, when you're a VC and you if you overperform, you might actually put an institutional investor in imbalance and they have too much in VC because you've done well, uh, and they need to reallocate to real estate or something else to balance out their you know asset allocation kind of governance model, right?

SPEAKER_00:

Yeah. So why aren't, in your opinion, more VC funds pursuing the Evergreen fund? Like you've seen a few of the early, you know, that you a few of the more institutional types implement it. I think Sequoia has an Evergreen fund, for instance. Um what's you know, what why are they like an outlier here? And why isn't like why why like why why haven't we done that yet?

SPEAKER_03:

Just I think because you have to constantly be raising money, right? Because because in order to provide liquidity, because capital cycles in and out, yeah. Right. Yeah, in order to provide, let's say you had a two-year window, right? And we have to assume that uh you have to make you have to operate with the assumption that your LP is gonna take liquidity, right? Which means you're constantly raising money to be able to provide liquidity to your LP base every two years.

SPEAKER_00:

Yeah. So it's like the hedge fund model where, you know, you can you can withdraw basically at any time, you know, up in there's a up to a certain percentage of LPs that you basically you sign in the docs where it's like, hey, 50 over 50% of the investor base is withdrawing. We have to pause withdrawals because you know we're we're out.

SPEAKER_03:

And so as we know, the worst part of being in venture capital is raising money.

SPEAKER_00:

Right, right.

SPEAKER_03:

I mean, I don't know. We have some friends in the industry that are very good at it and they must enjoy it because they're very good at it. Um, I would say the vast majority of us are okay at it, and that's you know, we want to spend time with founders and working on working with the startups, and you know, that that's our bias. If all if all we did want, if all we wanted to do was raise money and get good at that, we'd be in investment banking and running hedge funds, probably.

SPEAKER_00:

Yeah, I also think the the challenge, I mean, I I think about like how I would explain this to N LP and what the model would look like for us. I mean, when you're investing seed stage, I think this changes as you invest later cycle, but there is a period of time where the capital is just locked up. I mean, the fund like the seed stage company is just not going to get to a liquidity event, and you can't really call capital on them. We can't, you know, withdraw capital from their you know their balance sheet. Maybe they likely don't even have the it's like the money is likely already spent and it, you know, at least in the first five years, they're running really lean, reinvesting everything that comes in. And so it's not practical until you get to a certain you know size and stage to even consider that model. You know, Sequoia is different, they have you know many different stage-oriented funds, and um, they can even withstand um that you know they they can they can structure things across multiple cycles and have LPs that would probably hold with them for 25 years, right?

SPEAKER_03:

So yeah, um by the way, I also think Sequoia, when they have companies go public, I think they distribute shares, they don't like liquidate their position. Yeah, it's like in it's in kind, yeah. You get the shares in kind, I think you get the shares, and then the LP decides where they want to hold on to it. And I think what Sequoia has like been known for is they held on to Google, right?

SPEAKER_00:

It they didn't liquidate that was the intent of their Evergreen Fund. They're like, why would I want to liquidate you know a generational company just to return capital to my LPs? Like, let's just create better alignment across the whole cycle, right?

SPEAKER_03:

Yeah, um I do think I do think you know, I've been having these conversations with founders where I think founders um uh you know, we can use whatever word, either lazy, disinterested, whatever the word is, and whatever the reasoning is, they really only understand finance as it relates to venture capital. They really don't understand broader finance, right? They don't understand debt, they don't understand all these, you know, private private debt, you know, they still don't understand all the different vehicles of which capital evolves. And I think a lot of VCs, especially at our size, have been kind of lazy about it's like, no, we do venture capital, right? But I think we're starting to realize like if we truly want to serve startups in a meaningful way, we need to have a diversification of capital and capital pools to support their growth.

SPEAKER_00:

Yeah, for sure. Right. I think we've said, like, hey, the you know, coming out with a venture fund that just does traditional seed stage investment or series A investment, it kind of doesn't work. And I think you could even make a case for the built world, it it definitely does not work. Like I think that's one of my my my takeaways when we you know when we design our next fund, it's gonna take some of that into account where your the capital formation is adjusted and we can flex up or down depending on the capital needs and and essentially um the the business model of the company we're investing in, um to meet their flexibility and to basically to meet to meet to meet them where they are, rather than just like hand them a standardized format that they have to follow or else, right? Um or they don't have any money. So that like you say, I think that the standardization and like I think I've referred I've heard it referred to the factory model of VC. Yeah. Um, I think that that model is just like it's just broken.

SPEAKER_03:

Yeah, I think we talked about on an earlier pod where it's like, hey, every day I'm itching to change my LinkedIn profile from venture capitalist to just investor.

SPEAKER_02:

Yeah.

SPEAKER_03:

And you're like, don't do it.

SPEAKER_00:

Crossover investor.

SPEAKER_03:

Yeah, I mean, uh, yeah, I like don't do it, it'll impede our deal, our uh uh our deal flow.

SPEAKER_00:

The the lay the label, I you know, I I guess it's a problem, it's a problem with uh like the label of of venture still works in my opinion, but it's the it's the offering that we show up, we that we show up at this to the startup and the founder with that is broken, where it's just like the the definition's okay. We're still you know risk seeking, risk capital. Yeah, hence hence the name venture, but it's the yeah, it's like the offer is like it's one it's one offer for every single company in the world, right? Like that's crazy, it just doesn't make any sense. So yeah, the argument is like capital formation actually has not kept up with um the type of companies and the in the technology waves that we've gone through.

SPEAKER_03:

Right. So what happens is a lot of founders they optimize for the factory model. Yeah, instead of optimizing what the customer wants or what the market needs, they optimize for access to capital, which creates a problem, right? That's its own problem, right? Yeah. Of how you optimize. But I think you know, I I think you know, I'm not gonna change my LinkedIn profile to investor because then I'll get like, I mean, I'll get movie scripts. I already get movie scripts and uh, you know, um nicotine-laced beverages, like I get all kinds of stuff in my inbox.

SPEAKER_00:

So nicotine laced beverages is the new weed weed stock you're getting pitched.

SPEAKER_03:

I think I mean I'm seeing a lot of nicotine-laced beverages.

SPEAKER_00:

I haven't seen any nicotine beverages.

SPEAKER_03:

Oh, yeah, I've seen a lot of them. Wow. I I think they're I think they're trying to capitalize on people drinking less alcohol. Yeah, and it gives you a little bit of a buzz.

SPEAKER_00:

I prefer nicotine over alcohol. Yeah, yeah. I'd probably prefer to prefer a cigarette over alcohol. I do miss smoking cigarettes.

SPEAKER_01:

I mean, let's be real.

SPEAKER_00:

It's a good, it's a lost start.

SPEAKER_03:

I'm I'm also convinced that my first startup um I was like smoking all the time and eating a lot of cheeseburgers.

SPEAKER_00:

Yet you still miss it. Yet I still miss it. I was I was in New York this week and uh, you know, New York, some European cities, you get the you get the itch.

SPEAKER_03:

Man, I know it's like on one hand, like when people are smoking around me, I'm like, oh, that's disgusting. I want to do it so bad. But like when I was, I mean, when I'm my first startup, you know, staying up all night and you know, we're running internet traffic, so we'd have outage issues. I mean, I'd have to go fix routers and stuff, and it's two in the morning, like, geez, like how else am I supposed to function?

SPEAKER_00:

Yeah, yeah.

SPEAKER_03:

Yeah.

SPEAKER_00:

It was either that or dipping, and dipping is disgusting. Did you just speak of speaking of nicotine, smoking? Did you see um Palmer's interview on T T V PN this week? Yeah, yeah, yeah. So he was talking about some of this stuff. Yeah, but I I thought one of the one of the interesting points he made was that um, you know, he's basically like a a healthy society that's on an uptick ruled by caffeine and nicotine, right? Yeah, that was like the post the post-war um you know recipe that that allowed the US to become Oppenheimer's power.

SPEAKER_03:

If you watch Oppenheimer, they're smoking the whole damn time. Oh, of course. Madman.

SPEAKER_00:

Um, but anyway, the the point he made was that uh so it's like one, we you know, maybe there's maybe there's something to that. I don't want to make the argument that cigarettes are net positive in society, but uh maybe there's something to look into that's interesting there. And then um they the TBPN guys, they said, um, yeah, like you know, that even if you like, you know, you look at the the literal front lines and in war, and like every you know, everyone was fueled, it's maybe it was in rations, right? Like cigarettes were in rations and nicotine were in rations for people to be alert and stay for soldiers to be at work and uh you know alert and stay awake. Um, and then you know Palmer was like, if you come to my factory, the literal, the literal front lines of of you know our engineering teams, like they're all smoking cigarettes, guys. Yeah, like this hasn't changed.

SPEAKER_03:

Yeah.

SPEAKER_00:

Like there's a re and there's a reason they're doing it. Like it's stressful, you know. Um, it's stressful, it keeps them, it keeps them alert, keeps them sharp.

SPEAKER_03:

Anyway, we've digressed, but I thought now it's all about like the pet, like Lucy and all the other pet stuff.

SPEAKER_00:

Yeah, because you're you're you know, where it gets dangerous, like where people where you don't or like it's actually proven to be carcinogenic, is um with when it's when it's coupled with tobacco. Yeah, it's smoke, smoke, or even you know, dip.

SPEAKER_03:

Um if you so don't we think less so do we if you have it independently, it's all healthy.

SPEAKER_00:

Then I think that's like a very obvious thing. I mean, just look around. I think it's definitely definitely made us less productive.

SPEAKER_03:

Why I mean it's literally like if you've ever smoked weed, I mean nobody gets more productive.

SPEAKER_00:

No, I mean not only can you like look at certain cities that have had you know have had legalization come through and and you know look at their general productivity trends, but I think you can just deduce it from your like any personal experience.

unknown:

Yeah.

SPEAKER_00:

Man, we're gonna hard hitting topics to that. Where did we digress? All right, so let's bring this back to closeout docs. Um, so your okay, so your question was how do you handle closeout docs? Do you get an intern? Do you outsource them? Do you wait till the owner asks? What and so today, given the tools that we have, what is in your opinion the optimal way to handle them?

SPEAKER_03:

One, I think um, if you read some of my other stuff I've been talking about, is we keep talking about the workflow, right? And we reference workflow, workflow, workflow. And I I think we need to stop saying workflow, right? Because there is no workflow, there's lots of workflows, right? A construction project, a building project is a temporary team with highly decentralized workflows. And I think one of the things that we have to kind of continuously think about is that you know, you can't get part of the issue, you know, if every if everybody just put all their stuff into the system at closeout, there'd be no problem. But if you're the you know, the the door and window hardware person, are you really low, you know, uh logging into Procore or whatever and uploading the like you're not doing any of that stuff, right? So I think there's so much friction that I think that you know, this industry being so decentralized and having hundreds of workflows that we continue to build technology and software to say, you know, buy this and it'll fix everything. And then we all have to adapt to it. And I think you can force that, right? In a company, you can force that function, right? You can say everybody's gonna be on Salesforce, that's how it is, everybody's gonna be on SAP, that's how it is. But when you have a hundred entities contributing to these closeout documents that's highly decentralized using different systems, I think that's kind of one of my big takeaways. As you know, I literally was on a call with someone, had to go pull up that. I was like, where's that deck at? I had to go pull it up. I was like, we're still talking about this. Like, come on, we're still talking about this.

SPEAKER_00:

It does feel like a problem that is solvable in this era, though. Yeah, yeah. Right? I think so. It feels like everything is. I mean, you know, back to your car analogy of uh of having the warranty documents and the owner's manual and older models, like critical. But in any new construction that happens today, I don't understand why anything would not be fully digitized when it's when it's handed over and basically queryable by an LLM today. Like that seems fully possible. I think that the only constraint um for closeout documents being fully managed and workable from an LLM is outdated information that does not exist in digital form that you just don't have in your building because it's old and just lost it over the years.

SPEAKER_03:

Yeah, I mean I think that I mean for existing facilities, it's always a challenge. You know, I have a friend that does as builting, and I get shocked when he tells me he comes out to a building that's two years old and literally get charges like a hundred thousand dollars to walk the entire building and document everything. Um, and partly, you know, because back to the financialism of how things are, a lot of this stuff, it doesn't make it over from owner to owner. Oh, we don't know what they did with that. Oh, the last owners had that somewhere. Um but what you know what's interesting about that is we're seeing it solved better in the consumer side, like residential. It seems like people are starting to figure that out, like keep good records of your equipment, even if it at the at the smallest level, put it in a file at the and moderate, like set up a Google Drive. And you know, actually, I have a Google Drive that I call important documents because I lose stuff and I take pictures of stuff and upload it into that Google Drive from my phone, you know.

SPEAKER_00:

All right, I know what the file name is when I hack in your computer later. Which computer and the cloud exists in the cloud, we just gotta hack in your Google account. Which Google account.

SPEAKER_03:

On a side note, did you do this for your kids? We've done this for Ronan. We set up an email address for him when he was born. I think you've told me this before.

SPEAKER_00:

I I actually have not done that now.

SPEAKER_03:

You gotta do it, man. It's great. I mean, to all those listening, we set it up for him, and when I have like these random thoughts, you know, I email him. That's amazing. I like that. I email him.

SPEAKER_00:

Like give me give me an example of what what you would send him.

SPEAKER_03:

Um, you know, you and I are a little bit age difference, right? So a little bit some of my stuff is like I feel like, you know, he's three, I'm 54, right? So in a way, I'm like, okay, when he's 18, like I may or may, you know, I don't know, right? But um I think like words of wisdom stuff, right? Like whenever I feel like I'll say like days when I feel like uh I, you know, I generally wake up every day. I tell people like uh I'm critical and kind and I'm working on kind, so don't judge me too much, right? Um, I think there's days where I don't think I've been my most kind person. And I'll like write up a little email and send it to them.

SPEAKER_00:

Where you have not been kind and to like to him specifically or just in general, and you're you know you're seeing okay, I see, I see.

SPEAKER_03:

Yeah, because I think you know, you raise kids, you you raise kids optimizing them, like be kind, be loving, be you tell them all these things, right? But guess what? One day they're gonna be a little asshole, right? But you also want them to move off of that, right? And say, like, hey, even my dad screwed up, even my dad was mean to someone one day, one you know, once upon a time. So yeah, I think I'm I'm more in the nuggets thing. Um, funny enough, um, my wife will actually any kind of calendar events, she'll add his email to it. So now he has like a um a chronology of all the birthday parties and things that he's gone to that he went to as a kid. So it's a lot of fun, anyway.

SPEAKER_00:

Another would you email your older boys the same thing, or is it do you really want to make it personal to Ronan?

SPEAKER_03:

I just think like I mean, they're they're older, so I just call them up and yell at them. Wasn't kind today. Yeah, I think for me, some of the age stuff is what really like when he's 30 and going through something, cops may not be around, you know. Yeah, yeah, yeah. You know, so I think it's more I think that's I I fall into that old man dynamic. I'm not gonna be around for that, so I better tell him now. Yeah, good stuff, cool. All right, man. It was good catching up.

SPEAKER_00:

That's all we got for today.

SPEAKER_03:

That's all we have for today. God, we did a lot, ran through a lot of stuff.

SPEAKER_00:

That was meandering. But good, thanks. All right, man. We'll see you. See ya.