Beyond The Walls: Diamond Age Rises To A Whole-Home Endgame
[Editor's Note] Just after Thanksgiving, we had an opportunity to visit with Diamond Age co-founders, ceo Jack Oslan and cto Russell Varone and their team, in person and on the ground in their Scottsdale, AZ, headquarters, and their pilot projects with Century Communities in the Phoenix environs.
We spent a couple of full days absorbing the requirements and early stage development of a venture bursting with purpose, promise, and one of the canniest business and operational plans we've yet to encounter in our long coverage of residential construction and real estate's would-be disruptive innovators. What we'd gleaned from earlier conversations in 2021 and 2022 with Jack and Russell about the Diamond Age platform had struck a chord – they're doing something different. Being there, on the ground, up close, and in real time crystallizes how and why "this time's different."
In three installments to come – as a continuation of our Trailblazers '23 focus on business transformers – we'll look closely at what's going on at Diamond Age that sets it apart. Part of that answer is in a blend of two driving mantras the company's founders Oslan and Varone bring to the table in their start-up: One is a well-known "Crawl, walk, run" approach to transformation, and another is a "test and refine" model that affords them a way to concurrently progress streams and systems that each need focus. This way, as progress occurs on multiple fronts of capability, the ultimate goal – more affordable access to homeownership – moves to within reach. In today's post-"easy money" era, a minimum value proposition must do more than validate a potential model. A venture like Diamond Age has to show partners and investors earlier on that it can operate as a money-making business even as it pursues scale. So, here is The Builder's Daily's story, told through three lenses – (1) 'Crawl' – what to build, who to build it for, and how to build it (2) 'Walk' – vertically integrating technology and data with dirt (3) 'Run' – scaling industrial capability, business profitability, and human capital. Expect Part 2 on Friday, Jan 27, and Part 3 on Tuesday, Jan 31.
Crawl – What To Build, For Whom, And How
Writer Rachel Monroe published a New Yorker piece this week, titled "Can 3-D Printing Solve The Housing Crisis?" The article takes a deep dive look at one of the nation's most acclaimed housing disruptive innovation narratives – Austin-based ICON. Early in a story that does what only the New Yorker does on delving into the origins, the timelines, the breadth and depths of its subject at hand, Monroe writes:
When I heard that you could 3-D-print a building, I imagined something akin to a “Star Trek” replicator—a machine that would whir briefly and then spit out a fully formed house. The actual process is messier and more laborious, and, at the moment, it is largely used to construct walls, while conventional methods are used for foundations, floors, roofs, and finishes. But walls are among the most costly and labor-intensive aspects of home-building, and, in the majority of newly built U.S. homes, they’re likely to be made out of drywall panels mounted on wooden frames. Though drywall is easy to produce and relatively inexpensive, it takes a while to install, is not particularly sturdy, and is susceptible to mold. 3-D-printing advocates argue that rethinking our walls is a step toward building cheaper, more resilient houses.
So, right off the bat, it's best to consider the stark differences among the several vaunted 3-D printing players in a residential construction start-up and innovation space that has witnessed well over $1 billion in early- and mid-stage investment in the past three or four years. Diamond Age, for example, is different from most in that it brings not just the printhead and gantry system to extrude cement wall systems. It brings the entire factory-in-the-field array of robotics tools to the land parcel, and – fully-tooled – performs the build cycle from slab to completion, with the exception of a handful of interior finishes.
Here's a glimpse at the Diamond Age difference – it goes beyond the walls...
On an early December Tuesday, Diamond Age co-founder Jack Oslan and I met for a quick counter-style breakfast – his heart-healthier than mine – and set out in his SUV, from Scottsdale, down across a 75-minute patch of Sonoran desert to Eloy, AZ. It's a terrain populated with iconic saguaro cactus and palo verde trees, rugged mountain ridges, bighorn sheep, mule deer, mountain lions, gray foxes and coyotes.
And yes, recently, the area is habitat to an algorithmically expanding system of rooftops that offer some of the more attainable new homeownership opportunities anywhere.
Over a soft-volume SoundCloud feed of country music, as we head southeast of Phoenix on the I-10 toward Tucson, Jack wonders aloud at the paradox that so troubles nearly every business enterprise principal or owner in the housing sector: How a Federal Reserve strategy bent on sending the housing business community into nuclear winter will accomplish what it says it's striving for, which is to crush inflation.
The logic makes no sense," Oslan says. "They're [the Fed] bringing the ones that produce more supply of homes to their knees when there's already a massive 1.5 million home a year need for new rental, and for-sale residences. And they're expecting that the result of shutting down the industry will be lower prices when the demand is increasing as we speak?"
Oslan's vibration over Fed funds rate and balance sheet strategies and their impact on housing supply and costs dovetails with why we're headed to Eloy. And, why he's in this business, and what he's doing about it all.
Genesis
A serial technology start-up maven, Jack Oslan's career arc ran in, around, and through Silicon Valley. Selling an array of print-technology solutions, three decades of peregrinations and network building afforded him front-row center access to become a student of applied brilliance and tech start-ups, inside and out – the people, the money, the solutions, the businesses. Oslan looks too young to have two adult children who live in the Bay Area, one of them married and welcoming their first child – his grandchild. But there you go. So, Oslan's brainstorm for Diamond Age started out deeply personal. Like any grandpa, he wants his son and daughter-in-law – both professional class earners in San Francisco – not to have to move far away from he and his wife so that they could afford to buy a home.
Oslan's epiphany – the blunt, family-level impact force of American housing's generational affordability crisis – kindled the creative embers of what would become Diamond Age. His grandchild's birth and the threat his family would have to scatter geographically for financial reasons both narrowed and sharpened focus on a swath of the affordability riddle he felt could be solved, initially with a mental model – first-principles thinking – his deep study of Silicon Valley successes had inspired:
First-principles thinking is one of the best ways to reverse-engineer complicated problems and unleash creative possibility. Sometimes called “reasoning from first principles,” the idea is to break down complicated problems into basic elements and then reassemble them from the ground up." – fs.blog
Real life in today's world shapes and invigorates the urgency running underneath Oslan's choice of a "complicated problem" to solve. It's roughly this: A new home, attainable for a two-income working household, near family and friend connections and work. This was the whole problem he'd try to reverse engineer into a doable business solution. That single challenge, he'd recognize, had to account for three separate, often clashing forces, that would either help or hinder getting to the goal -- building technology, land use policy, and capital.
Reverse engineering to a fully-baked solution would map specifically the job a business platform would accomplish, its customers' needs, and a viable pathway from birth to full-scale maturity.
The new home that gives working households access to homeownership was and is the endgame," Oslan tells me during our drive out to Eloy. "It's that outcome that we've been reverse engineering into a multi-stack, start-to-completion capability for our homebuilder customer."
If the sluice-gate barriers that today price out more than 75% of U.S. households from ground-up market-rate homeownership could be wrenched open even partially, people like Oslan's son and daughter-in-law might be capable of buying in a nearby market rather than having to flee the area.
At the instant this spark flared and percolated in 2014 and 2015, one career door slammed shut for Oslan, and two opened, giving that low burning flame both oxygen and fuel. The door that shut – a story all too typical in Silicon Valley start-up lore – was that Oslan, having birthed a tech-powered indoor agriculture platform and brought it to the brink of a big payday, was invited by the venture's board to exit and pursue his professional dreams elsewhere. It was hardly the best time to be out on his butt, especially as he and his wife were about to take on sending their daughter to grad school. After working through what was suddenly an austerity home budget, they decided to offer up an upstairs suite in their Bay Area home as a revenue unit, and they posted an ad on Craig's List. Financial straits, meet life-stage crossroads moment.
A friend of a friend – Russell Varone – wound up as Jack and his wife's house-mate and renter. Varone – a Bay Area transplant from Phoenix, where he'd finished out a 15 year-stretch overseeing maintenance improvement of a global multiplant network of manufacturing facilities -- was on the cusp of a three-plus year stint at Tesla, and needed a place to live close to work. By day, he was climbing meteorically at Tesla from senior equipment engineering manager in the powertrain division to director of Tesla's general assembly operation. By night, he was pounding the books to complete a Masters in reliability engineering and asset management from the University of Manchester.
Jack and his wife felt sorry for me, I guess, and they started to invite me downstairs for a late-ish dinner," Varone says. "Before long, Jack and I started bouncing ideas back and forth."
Nights at the kitchen table got later. Oslan and Varone bonded, became friends, and got to trusting one another. In time, Oslan broached his idea about a business that would step-change homebuilding as a solution capability. Varone riffed on the idea, drawing on his experience in Tesla's dizzyingly fast arc of industrial, consumer, and business success and his priors in the global nexus of manufacturing, engineering, automation, robotics, nanotechnology, and applied data.
A business, born on laptop versions of whiteboards and legal pads, came to life. During those long nights, Oslan and Varone evolved a value proposition that promised a full-stack of "end-of-arm" robotics tools that would offset 55% of skilled labor cost requirements and, further, reduce the start-to-completion build cycle from current construction cycle ranges of between 180 and 240 days down to averages of 30 days. The transfer of those costs and production capability could bend asking prices downward. At the same time, the ability to pull greater volumes of inventory turns through the balance sheet would yield a net gain in gross profits and per home margins. Oslan and Varone gave their venture a name, straight out of one of Varon's favorite all-time books: The Diamond Age: Or, a Young Lady’s Illustrated Primer by Neal Stephenson, who imagined:
Everyone has a 'matter compiler' so they can 3D print whatever they need from food, tools, and even shelter if your system is big enough. Sound familiar?" – Jack Oslan, quoted in Medium.com
We arrive in Eloy, the site of Century Communities' Century Complete Toltec Arizona Valley homes. Russell meets us as we hop out the truck and glance around at the six or so different elevation models of three- and four-bedroom single-story homes, running in the $250s. The point here? The ones for sale, the ones just sold ... they're all identical. And that's the point. No difference – on the outside – sets apart the four production homes Diamond Age produced, start to finish, right next to their stick-built counterparts.
Inside one of the Diamond Age model units, Russell says:
Listen, feel it in here."
The quiet inside is palpable, as a thicker exterior wall subtracts noise, leaving what sanctuary must feel like. Too, there's a thermal barrier R-value in the 40s for energy efficiency and a concrete shell enclosure whose strength and durability set the Diamond Age units apart from their identical twins stick-built in the Toltec community.
The important thing here in real-life is proof that our customer here is Century Communities," says Oslan. "It's their house, their floor plan, their marketing and selling platform, and we're just serving as their multi-stack, vertically-integrated general contractor with our factory-in-the-field. When Century wins by being able to keep its asking price low – or even lower the price – and still achieve or improve their margins on a per unit basis, then we win. That's our business."
If there's a housing future that can ever extend the net of attainable access to homeownership, getting that future to happen is hard, and by the looks of things, getting harder. It won't happen on the backs of pitch-decks, panaceas, and performative claims. Back in the truck after the stop in Eloy, Oslan goes back to emphasizing Diamond Age's first-principle reverse engineered solution is building the business of entry-level housing, just like production models the nation's largest builders are producing – but removing the friction and cost of frontline skilled labor and amping up the volume that can be pulled through the enterprises' balance sheets.
Our mission is not to save the world," says Oslan. "It is to make entry-level homes more affordable to more people because that's a really basic wealth-creation bedrock of our society."
Getting that future to happen means the crazy applied genius of the cement mix adjustments, sensor technology, mechanical processes, data telemetry capture and instrument improvement, the open- and closed-loop software controls that have advanced so far in Tesla's facilities, and in aeronautics manufacturing plants, all has to work on the ground, in the pale, brown sandy loam and soils that formed in old mixed alluvium of Casa Grande – ironically, enough, named "Big House." The factory-in-the-field's proof case needs to prove out on the ground, where monsoon squalls can kick up out of nowhere some months, and where temperatures can vary between the mid-30s to the mid-120s.
Our job now is to get more housing stock into the market, optimize our technology, and start to capture where we're seeing a reduction in the square foot price to produce a home," says Oslan. "We're at an early operational inflection point now where we're experiencing our first growth spurt."
A company like Airbus invests on average $2 billion annually in R&D, and Tesla's committing over $1.5 billion a year on its research & development to keep advancing its product performance, design, engineering, technologies and safety. Recently, Tesla announced plans it would invest $770 million to enlarge and improve an Austin-based facility.
All in, investments, research and development into residential construction product development, new building technologies, and engineering are miniscule by comparison.
This raises the stakes of players like Diamond Age, which takes us to our next stop, where we can experience real-time, the magic happening.
The Arizona desert's slightly gnawing wind makes it a jacket-and-sweatshirt morning at the job site in Casa Grande. Here, Century Communities' Mountain View Estates has just gone live online, promoting 43 new one-story Century Complete 3- and 4-bedroom, 1,500 to 2,000 square-foot homes its buyers can pay in the mid-$200s – $2,000 or less a month -- and call their own.
From a distance, minutes before we arrive at this scruffily preternatural Pinal County pinpoint – marking an approximate half-way I-10 diagonal between Phoenix to the northwest and Tucson to the southeast – a mirage made of two rectangular 2,100-square foot steel gantry systems stencils the horizon line in sharp relief of the flat desert.
We pull up to the site. Gantries gird the perimeter of two rectangular cement home site slabs, while movable crossing bridges steer – building technology's version of autonomous driving – a cylindrical tank that axially extrudes a fresh liquid aggregate concrete through a "printhead" die or nozzle with laser-positioned precision, curing into a robotized dry-stack brick masonry wall.
Like a bricklayer, minus the Advil, arthritis, the imperfections, and a lot of the time.
A handful of technicians in headsets follow a constant-motion choreography of positioning, instrument telemetry, communications, and iteration, so rigorous and so physically minimal it's hypnotic.
The autonomous positioning system gives us an intermediary system to instruct the tools to adjust to and correct precisely for the environment," says Varone. "There's going to be wind and temperature changes on a job site; the gantries themselves will move, but the software corrects for those conditions."
The magic of such a moment and its day-and-night contrast with stick-built, site built home construction on so many job sites for so many years can set the imagination running riot.
As easy as X, Y, Z – the three axises that Diamond Age's autonomous positioning system allows its gantries to be fitted with automated, robotic tools that can perform faster, better, cheaper the work that 26 or so construction trade contractors and subs do to start-rough-out-and-finish new homes – new homes can go up now in less than 60 days, two at a time.
The real magic though goes far beyond Diamond Age's technologically-driven "super-sub" system in the field. It's the company's capability at building not just homes, but homebuildng systems at scale.
We'll take an inside look at how that's coming to be in our next installment: "Walk."