I work in the construction industry, you did not ask the LLM the right questions.
1) is already the way residential construction works. Conduit isn’t used in homes aside from Chicago and a handful of other jurisdictions but all conduit can be cut with a sub $500 tool called a portaband. Plumbing pipe can be cut with a portaband. There are multiple power tools that can be used to cut sheet metal. Fittings for the electrical, plumbing, and HVAC trades are commoditized and standardized.
2) Drywall and drywall finishing is the cheapest labor on a building site aside from the cleaners and maybe the insulators. The framers, finish carpenters, equipment operators, flooring workers, and MEP trades all make more than the drywallers, mudders/tapers, and painters.
3) Raised seam metal roofs are great and last longer than asphalt shingles, but it’s more expensive up front.
4) Solar roofs have far too many terminations/connections to be reliable, the upfront cost may possibly never be paid back. That could change, but it’s a tricky problem.
> That leaves the foundation + architecture / engineering work as the hard part. Most of the design work for that stuff could be automated. Let the homeowner and builder boss an LLM around, and then run the LLM output through code compliance + simulation gates. The latter is really important because most local code is hazard or climate dependent, and having good deterministic vetting of designs would let the construction process apply to multiple climates.
The architect and engineer design the construction documents to adhere to the codes in the jurisdiction the structure is being built in, no LLM needed. Most jurisdictions just adopt one of the standardized codes for general code like the IBC and then various trade codes like the NEC.
Things like roof load calculations for areas with snow make designing a house that works in both California and Minnesota not worth it unless you want to overengineer your roof for California.
There’s an entire massive industry focused on shaving costs to increase margins that have been working on these problems for a long time.
That’s what I’d expect for a country that imports all of its oil and a country that produces more oil than it uses, especially considering the oil importing nation is an island 1/25th the size of the oil rich country, making dense rail transportation easier.
I’d love if the US had better public transport and I could get rid of my car, it costs more per month than my housing (which is admittedly cheap)
I think the US is still a crazy outlier regardless of how much oil they produce.
They use double the oil of the entire EU despite having half the population.
Triple the usage of ASEAN despite having a little less than half the population.
Five times the usage of India despite India having four times the population.
I believe personal transportation is something like half of all oil use globally last I checked.
I don’t even think it’s about getting rid of your car entirely, it’s about a wild amount of dependence and a crazy economic incentive system where a 20mpg work truck has been the most popular vehicle in the country for decades. 100% of trips taken per week needing a car is a big consumption difference than 70% of trips taken per week needing a car.
The police are under no obligation to provide service to specific people or businesses, only the public in general. They don’t even have to say “This is a civil matter”, they could just say “Eh, this doesn’t interest us, good luck with that.”
I think you meant ESOP (Employee Stock Ownership Program), not ESPP. I work for a 100% ESOP company and it’s been very beneficial to me and also the former owners were able to cash out without selling to the devil.
An ESOP is where a portion of or an entire company is sold to the employees. Our company took out loans to acquire the shares from the former owners and shares are disbursed to employees yearly instead of purchased by employees. It took 5 years to fully buy out the former owners, so we’re a 100% ESOP now and we just finished paying off the loans taken out to buy out the former owners.
An ESPP just gives employees of a company the option to buy shares at a discount.
You are correct ESOP was what I was thinking of. Thank you for the correction. Worked great for Bob’s Red Mill I believe. Glad to hear it’s been a success for you and your company.
> The HVAC for example - the large firms around you do not run HVAC/plumbing/electrical, they run marketing companies that happen to schedule and bill H+P+E service appointments.
Maybe if you’re talking about the small residential market, that’s not where the money is.
The large HVAC/Electrical/Plumbing contractors in my area all perform their own work, including the one I work for. Large contractors do commercial and industrial work, not service calls for homeowners. Doing service calls homeowners sounds like a nightmare, personally.
Bain Capital just bought Service Logic which is a holding company for HVAC contractors. They own a couple of the local HVAC shops and they all have their own PMs, sales, estimating, and field staff.
It is analogous to a mortgage, you put down X% and the house itself secures the loan, along with PMI if your equity is below 20%. The assets of the business secure the loans in the same way a house secures a mortgage.
It is not analogous because if you sell your house and the sale money is not enough to cover your mortgage you are still on the hook for what's left of the principal.
A leveraged buyout is exclusively on the purchased company's books, so if the company goes to zero the PE parent company is not on the hook for a single penny.
That varies by state. Twelve states are fully non-recourse states (lenders can’t go after borrowers beyond the loan security); in other states they may be able to, but borrowers who default on their mortgage may not be particularly asset-rich targets in the first place.
If the company wasn’t able to borrow money for itself, a wrapper company could which would still have very closely the same effect as being an asset-poor borrower.
What I don't understand is how the cost of banks repossessing these companies in case of default don't make the math unviable. Unless the company have a lot of fairly stable semi-liquid assets (like real estate) banks should be charging fairly high interest on these loans which would make most of these business unprofitable.
Which would increase the rate of defaults (if they are authorized in the first place) and in turn increase interest even further. I guess the PE is always maxxing out the leverage on every deal at _just_ the projected break-even point for loan repayment? But that leaves no room for error or changing market conditions which also increase the rate of defaults and so on.
Non-bank entities being in play is likely part of the problem. If you can sell the bad debt to some other entity say a fund that got investment from pension you win. For fund managers these things can look great on paper and that is everything that matters. Even if things do not workout they can on paper extend and pretend or take payment-in-kind. Meaning well you are short on interest payments so you just tack it on the principal.
And everyone gets their management fees until people start asking their money back...
Ah so it is related to that whole private debt markets, the loans these PE companies take are not with banks. It is related to that whole thing with Trump opening those kind of loan investments to ordinary americans and pension funds.
Most fun thing is that even if bank can't led to these sort of companies they can lend to companies that lend to them... So added fun. And well this has been going on for long time and cracks have started properly showing up more recently.
> Unless the company have a lot of fairly stable semi-liquid assets (like real estate)...
That's exactly what happened famously with Red Lobster. PE sold off all the underlying real-estate to get the initial sugar-high and replaced it with a leasebacks. Those leases had escalating costs and fixed terms, which made it difficult to adapt to changing trends, and was a big contributor in what ultimately sunk it all.
Check the other comment, apparently these loans don't come from banks, but rather from private debt markets. And most likely they don't know these loans aren't viable.
Yes, it's using bankruptcy and limited liability to extract value from companies that may well be completely solvent and functional with little/no downside or risk to PE.
Yes, this is the crucial distinction. (I wish that articles criticizing PE were framed in terms of LBOs + bankruptcy-law instead, because that's the root of the policy problem.) Corporations can go bankrupt without risk to the human beings who are owners/investors in the corporation.
Note that from the lender's perspective, the risk is the same and in a perfect-information universe could be mitigated by charging higher interest. The problem for society is the externality that the business's services get worse.
> so if the company goes to zero the PE parent company is not on the hook for a single penny.
Sounds like a problem for whoever is providing the financing. Not really my concern unless you're saying there's some systemic problem it causes like with mortgage securitization during 2007. The lender will charge a high interest rate if what you're saying is true.
It’s the shareholders of the purchased company that provide the financing, in the form of debt in the company’s books. Then they exit, and the company lays off people to service the debt, and you and I as taxpayers cover unemployment and other social harms.
It’s literally a way to extract revenue from our broader social institutions by spreading the pain across so many people that individuals don’t complain (or, in some cases, don’t even understand how it harms them).
It's the concern for the community who pays in higher prices, and the employees in their job stability.
Has everyone forgotten the social contract? We do not exist as communities to make a small number of people richer. If the trade doesn't work for all involved, we change the rules.
Some of those are for purchase and not refinance, but the reality is in almost all states (even those that are not single-action by statute, where single-action is "they can go after you, or the house, but not both") are practically single-action.
In fact, they'd much rather single-action foreclose as they'll likely get a house than force you into bankruptcy where they might not even get that.
One ton (HVAC unit) is 3.5kW of heat moved for each 1kW of input power under relatively ideal conditions, assuming a max COP of 4. The unit chosen to represent the amount of heat that can be transferred is irrelevant, you get the same information.
1) is already the way residential construction works. Conduit isn’t used in homes aside from Chicago and a handful of other jurisdictions but all conduit can be cut with a sub $500 tool called a portaband. Plumbing pipe can be cut with a portaband. There are multiple power tools that can be used to cut sheet metal. Fittings for the electrical, plumbing, and HVAC trades are commoditized and standardized.
2) Drywall and drywall finishing is the cheapest labor on a building site aside from the cleaners and maybe the insulators. The framers, finish carpenters, equipment operators, flooring workers, and MEP trades all make more than the drywallers, mudders/tapers, and painters.
3) Raised seam metal roofs are great and last longer than asphalt shingles, but it’s more expensive up front.
4) Solar roofs have far too many terminations/connections to be reliable, the upfront cost may possibly never be paid back. That could change, but it’s a tricky problem.
> That leaves the foundation + architecture / engineering work as the hard part. Most of the design work for that stuff could be automated. Let the homeowner and builder boss an LLM around, and then run the LLM output through code compliance + simulation gates. The latter is really important because most local code is hazard or climate dependent, and having good deterministic vetting of designs would let the construction process apply to multiple climates.
The architect and engineer design the construction documents to adhere to the codes in the jurisdiction the structure is being built in, no LLM needed. Most jurisdictions just adopt one of the standardized codes for general code like the IBC and then various trade codes like the NEC.
Things like roof load calculations for areas with snow make designing a house that works in both California and Minnesota not worth it unless you want to overengineer your roof for California.
There’s an entire massive industry focused on shaving costs to increase margins that have been working on these problems for a long time.
reply