Barron's Streetwise - Tesla, Bitcoin, and the Future of Homebuilding

Episode Date: November 28, 2024

Builders First Source CEO Peter Jackson joins the podcast. Jack talks stocks. Jackson considers abducting a squirrel. Learn more about your ad choices. Visit megaphone.fm/adchoices

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Yours, you've got waste, right? The stuff that you cut off. Well, that needs to go somewhere. So all that goes into the dumpster. So now you need a dumpster. You've got sharp objects, people climbing up onto a second story, trying to hold the board up

while their buddy is trying to do the same. It's a way for the builders to do things more quickly, safer, with less waste. Hello and welcome to the Barron Streetwise podcast. I'm Jack Howe, and the voice you just heard is Peter Jackson. He's the CEO of Builders First Source. Remember that company? We talked about it here a few weeks ago. It's a lumber company and, as Peter will explain, a distributor of value-added components for home builders. It came to our attention because the stock returned nearly 3,000% over the past decade.

In a moment, Peter will explain just what sets the company apart, and he'll talk about the future of home building. But first, I'll say a few words on Tesla and crypto and maybe Brillo pads. Listening in is our audio producer, Jackson. Hi, Jackson. Hey, Jack. It's a holiday week, a short work week. This is the kind of week where a lot of people phone it in. But what we're going to deliver for listeners here is, first of all, a CEO interview.

The CEO of a company with a hot stock, kapow, right? And some commentary on Tesla and other things that are moving a lot. Listen, do not call me a hero. It embarrasses me, right? And some commentary on Tesla and other things that are moving a lot. Listen, do not call me a hero. It embarrasses me, okay? How about a meatball hero? Not even that. Now, no time to waste. Let's start with Tesla.

Tesla stock is up 39% since just election day. We know that Elon Musk was a big backer of President-elect Trump, but that alone doesn't make your company 39% more valuable. So what are investors so excited about? Let me paraphrase from a report this past Monday from Wedbush Securities Analyst Dan Ives. He writes that in the coming Trump presidency, electric vehicle rebates and tax incentives are set to get pulled. And that's a negative for the industry, but it's a potential positive for Tesla. He says Tesla has scale and scope that's unmatched in the industry, and that will give them a competitive advantage starting in 2025.

Also, China is likely to get hit by higher tariffs, and that could push away cheaper Chinese EV players. It'll keep them from flooding the U.S. market. He writes, The golden goose for Tesla remains a fast-tracked, autonomous strategy which we fully expect under Trump and we estimate is worth a $1 trillion valuation alone to the Tesla story over the coming years. For context, Tesla recently had a stock market value of $1.2 trillion. So that is the bull case on Tesla right now. I want to sum up the bear case. Representing the bears is UBS analyst Joseph Speck.

He recently put out a Tesla report titled Tesla at $1.1 trillion. What do you have to believe? I like that approach in general. You start with the price, right? Wall Street usually starts with the predictions, the discounted cash flow analysis where you have to look out 10 years and you have to figure out what revenues are going to grow to by year eight and what margins will look like by then and debt and you have to come up with some kind of figure in order to adjust the company for its riskiness and so forth it's a lot of guesswork and you end up with a price but why do that when you already

have a vital piece of information which is today price, you can start with that and work backwards and say, what would this company have to do in the future to make it worth today's price? And then you just decide whether that future performance is feasible or not. Joseph rebuts the bull points on Tesla about the tax credits. He says, it might be a relative gain for Tesla, but it's not an absolute positive. If you take away the tax credits, it could hurt demand for everyone. As he writes, if credits go away, further pricing actions may be needed. This is at a time when Tesla is already pulling some levers on pricing to spur demand. On the subject of robo taxis, he acknowledges the view that an easier regulatory hurdle would be positive for Tesla.

But he writes, there really aren't any onerous federal autonomous vehicle regulations to relax. And there could be a battle between states that regulate drivers and the federal government that regulates tech. Further, he writes, a change in regulation doesn't immediately solve nor change the timeline to solve the technical challenge of unsupervised full self-driving. We continue to believe that full self-driving is improving, but the product is not ready for wide-scale robo-taxi deployment. His conclusion is that the rise in Tesla stock is mostly driven by, as he puts it, animal spirits slash momentum, which as he writes, has happened multiple times in Tesla's history.

And he does some math on what would have to change to justify the current price. If you wanted to sell more cars to justify the price, there'd have to be 15.5 million vehicle deliveries by 2030. That's versus a forecast of just over 4 million this year. That's close to four times his forecast. Or you could sell a lot more big batteries for electricity storage, but that would have to hit five times his 2030 forecast. Or there could be tremendous value added in robo-taxis,

but as he explains, there are hurdles there in the near term, and they're mostly technological, not regulatory. They're in the near term, and they're mostly technological, not regulatory. Joseph calculates that somewhere around just 12% of Tesla's current market value is attributable to the cars it's selling. Now, that figure changes over time as Tesla stock rises and falls. The average figure over the past four years, the average portion of the market value that's attributable to the car business has been 17%. When it falls below that figure, Joseph writes, the stock tends to fall afterwards.

So if we're at 12% now, he's predicting a lower stock price. His price target on the stock is $226. The stock's recently $338, so he predicts a fall of more than a hundred bucks a share. We'll see if he's right. But the stock could still stay high or rise, even if Tesla doesn't hit these metrics, right? As long as people are still optimistic about its future. That's right. And the flip side of that is Tesla could have tremendous growth from now to the end of the decade. But if something happens that makes people less enthusiastic for the stock, for example,

if people say, wow, that's great growth, but now the future trajectory of the business seems more predictable, there's no longer this open-ended future possibility. I kind of see what the path is now, and it makes them less excited about the stock. It's possible that the stock could do poorly, even though the business does very well. I think you kind of need both for the stock to go on a big run over the long term. But it is getting hard out there to tell the difference between what's running up for legitimate reasons and what's running up on nonsense. We talked recently about Bitcoin's huge run. That's up more than 35% since the election.

And maybe there are legitimate reasons they're having to do with the government's embrace of crypto. But I said that it would be more convincing if Dogecoin wasn't doing so well.

That's the parity crypto, and that one's up more than 150% since the election. Are you familiar, Jackson, with Peanut the Squirrel? I've heard of Peanut, but maybe fill me in. An eastern gray squirrel.

Its mother was tragically killed by a car in New York City. The squirrel was rescued, I guess you'd say. Maybe it depends on who you talk to. But a guy in 2017 brought Peanut to his house and set up an Instagram account, of course. And Peanut became a big celebrity. And then this past October, he was seized from that man's home by the New York State Department of Environmental Conservation. And he was euthanized soon after. And there was a big outcry.

But it also became a rallying cry against government overreach. I hear you, Freedom Fighter. Now, the reason we mentioned peanut here is the, of course, peanut the squirrel coin. It's a cryptocurrency. And if you're thinking it can't possibly have peaked at a value of $1.5 billion, you're right. Last I saw, it was up to $1.7 billion. No way. you're right last i saw it was up to 1.7 billion no way that factoid comes from the latest installment of grant's interest rate observer and it's titled view from the crazy train and it just

has a big long list of financial stuff that's going crazy now i don't see let me just make sure i don't see any mention of the banana you know about the banana right the i'm almost late to be talking about the banana but it's been around for a while right the modern art banana duct tape to a wall that's it sold for 6.2 million dollars which does sound bananas but i'm looking at a note here from robert teeter he's the chief investment strategist at Silvercrest Asset Management. He writes that the banana has been derided as an exemplar of market ebullience. Pronunciation check, Jackson. Ebullience? Nailed it.

Probably. I don't know. He writes, but it's instructive to recall that Andy Warhol's once scoffed at 1969 Brillo box has already appreciated by 3000% suggesting that timing today's market top might be a slippery endeavor. Jackson, do you know about the Brillo box? You know, Andy Warhol, right? I know Andy Warhol.

I know about the Campbell soup. You know about the Campbell soup screen prints. And there were other products where he did sculptures of the packaging. Kellogg cornflakes Heinz ketchup and Brillo soap pads I'm looking at one of those sculptures now it's just a box it's like a shipping box it says 24 giant size packages it says new Brillo soap pads with rust resistor shines aluminum fast and that's pretty much it it's like something you would find at a supermarket. So he procrastinated and then bought a bunch of these soap boxes and put them in a pile? He sculpted the soap boxes based on the actual consumer product. And there was someone who, in 1969, bought one of these boxes for $1,000.

And it sold in 2010 at Christie's. And the estimated sale price was $800,000. But the actual sale price was $3,050,500. And if you calculate the compounded average annual return on that, it's over 21% per year. And that compares with less than 10% over that span for the S&P 500. So you really, really beat the market with that Brillo box. And I guess Robert at Silvercrest's point is, it's hard to pick a top on things like this. But I still don't get it. Isn't the banana going to get all old and rotten? That's the thing with the banana sculpture is of course it's not one banana you

have to replace the banana every so often because it gets rotten so you just like put a new banana and put the tape over it it's really i don't even know what you own when you bought this thing because i think it's kind of like a non-fungible token it's like an nft where you don't you know there's an argument over what exactly you own i I'm going to tape a banana to my wall right now. Yeah. And then you've got it. And you've saved $6.2 million. On it.

And I really don't know what that means for the future price of Bitcoin. JP Morgan writes in a recent report, The market has demonstrated its belief that a Donald Trump presidency and Republican-controlled Congress provides significant support for regulatory clarity in the U.S. and, in turn, greater crypto activity and adoption. This is my concern, I guess my theory when it comes to Bitcoin, and I don't really mean to poo-poo it so much. It is remarkable how much value it has held onto for so long. But my concern is that a thing that goes up 39% in value since

election day, I don't see that as having a lot of uses as a financial tool beyond being something that can go up a lot in value quickly. It's a speculative instrument. But that kind of gee whiz price volatility, I think, makes it less useful as a financial utility rather than more. I call this the Peter Pan theory. I think people buy Bitcoin because they want the price to rise. And I think for it to keep rising, it has to never grow up. And I think if you put in place a comprehensive regulatory framework that says exactly what it is and what it does and what it can be used for. And I think if we start using it as an everyday utility, I'm not sure how that is compatible with rapid price gains. Peter Pan said, all the world is made of faith and trust and pixie dust.

That's a bullish backdrop for crypto, but regulatory clarity, as JP Morgan puts it, that I'm not so sure about. What do you think, Jackson? Where's this thing headed? $200,000 or $200,000. Okay, somewhere in that range. I saw a report today that said that Ethereum looks like a good value here, because if you look at the Bitcoin to Ethereum ratio, it suggests Bitcoin's price

implies that Ethereum should be traded. Is that where we are now? We're calling other cryptos a value if they haven't kept up with Bitcoin? I don't know. I can't figure it out. Good luck to all the Bitcoin hodlers. We'll see where it takes us. And with that, let's get to a guy who's running a lumber company that's generating crypto-like returns. Builder's first source CEO, Peter Jackson. That's coming up next after this quick break. Welcome back, Jackson. How's your taped banana project going?

Yeah, the tape peeled off, the bananas on the floor, and I'm kind of getting hungry. Oh no. I think I'm just going to capture a squirrel and turn it into a meme coin. I was afraid of that. I did a screen a short while ago, a few weeks back, and I think we figured that Builder's First Source was either the number three or number four top performing stock in the S&P 500. If you look back over the past decade, numbers one and two were NVIDIA and AMD. Those are the companies that make chips for artificial intelligence. I know that FICO, the credit score company was in there. We talked about that on a past episode and we talked about Builder's First Source, but I had a chance recently to speak with

the company's brand new CEO, and I wanted to get some more information on what sets the company apart and what's next for its growth and for home building. Peter Jackson took over as CEO only in early November. Let's hear that conversation now. Your company just has to be in the artificial intelligence chips business, because I'm looking at the stock chart. The stock has returned something crazy. It's like 2,800% over the past decade. So I'm thinking it's got to be AI, but then I look and I see lumber. How do you get those kinds of stock returns out of lumber let's start there what what accounts for for this um spectacular success of the stock over the past decade well i

mean thanks for the opportunity to talk about it it oddly enough i actually had a fund mention that we were triggered in the algos with nvidia because of the way we were moving in the algos with NVIDIA because of the way we were moving in the stock. Yeah, I think it really boils down to sort of the vision that was executed over 25 years from Paul Levy and from Brett Milgram. The folks have sort of said, wait a minute, this is an industry that's very, very fragmented, has the opportunity for efficiencies, and there actually are going to be some benefits of scale. And since then, it's been execution, right? We've been through a number of cycles, survived, thrived, found a way to continue to grow and capture those efficiencies that were sort of promised, hoped for as we were going along.

sort of promised, hoped for as we were going along. Let's take a step back and explain to folks exactly what your company does. It's a strange situation for a company of your size. I've spoken with many people who say, who? Because you've gotten so big so quickly. And now that I'm familiar with you, I see the trucks rolling through my town. But tell people what you do, who you serve. Yeah. So we're the largest provider of building materials to the pro. So when we say pro, we generally talk about new home builders, both single family and multifamily.

What's a little bit unique about what we do is we don't just provide your traditional lumber drop, right? Two by fours, two by sixes showing up at the job site when you need them. We do that, no question. But we also have about half of our business, which is what we call value add. So in our parlance, value add is whenever you take technology, process, fixed overhead, and replace skilled labor on the job site. So an example of that would be roof trusses, those triangles on the top of the house, right? The word trust keeps coming up when I read about your company. That's a framework, right? A framework that you would otherwise have carpenters putting together on site and you make it somewhere else. Correct. It's probably one of the trickier parts of the site and you make it somewhere else. Correct. It's probably one of the trickier parts of the home.

It holds it all together. It's very, it's an important load bearing component. It's an engineered part of the house. So historically it's where a lot of folks would candidly over-engineer. They'd throw in a few more boards. They'd be a little more careful to make sure it's right because they weren't quite sure. In the modern era, we use computer software, right? So we have engineered components. We use custom designed engineered plates to hold the connections together where the two pieces of board meet. And that is done, like you said, in a factory. So it's done on equipment that has a

fair amount of automation included in it, the precision, the quality can be better. And then importantly, on the job site, it's quicker. It's just a lot faster. And because we're able to save a bit on the amount of board that we use because of the engineering, but also the efficiency, how quickly we're able to do it without that kind of carpenter level of trade skill. It allows us to capture a nice margin while still providing a nice value for the builder. What can I expect as a big builder for that value? If I'm the CEO of Jack's Home Builders, and I guess part of it is some cost savings, some time savings, what's in it for me as a customer? Yeah, all that plus

safety, waste reduction. So if you think about the job site, what'll happen is the framers will get to the point where they need a roof truss delivered. And we have other value-added components. It's just a good example. But the roof truss needs to be delivered. Usually, not always, but a crane will show up and a tractor trailer truck full of trusses. So they'll crane them onto the top of the building. The framers will show up, align them into place according to the plan, brace them in, and boom, in a day, you'll get a roof, which may have taken you two weeks in a normal process. The other advantages that show up there is if you think about building it on the job site,

you're measuring boards, you're cutting. So there's sawdust. You've got waste, right? The stuff that you cut off. Well, that needs to go somewhere. So all that goes into the dumpster. So now you need a dumpster. The additional aspect is you've got sharp objects and people climbing up onto a second story, trying to hold the board up while their buddy is trying to do the same, safety. It's a way for the builders to do things more quickly, safer with less waste. And if you think about modern building, a lot of it is cycle time. They want to get on the job site and off the job site.

That cost of capital during that build process can be shortened. That's a win. What should an investor be thinking about if they're trying to figure out the remaining growth opportunity here? I mean, that must be part of it. There are new markets you can go into still.

What do you think about when you try to figure out how big this company can become? Yeah, there's two layers in my mind. The first is we can run this same playbook for quite a while. So we're about 10% of materials in the house. If you narrow that down to just the products that we sell today So we're about 10% of materials in the house. If you narrow that down to just the products that we sell today that we're pretty good at, we're probably about 20% of the market. So quite large, more than twice as big as our next biggest competitor, but in a market this fragmented, still a lot of opportunity to do deals and to grow. The other thing that I think is

fascinating to think about, if you think about what we do on the value add side, we're not just capturing the TAM for materials, we're capturing it for labor too. So there's a tremendously large opportunity if you think about that to do more in this install area or to capture that skilled trade. So about 15% of our business today is installed where we're responsible for the hiring and input of everything from framing to windows to millwork to doors all over the country. That's probably the fastest growing part of our business right now. Frequently, it boils down to the fact that builders might not so catchy phrases, builders would rather sell a house than build a house because building a house is a pain.

So if they can get someone to help them with the part that's a pain, that's good for them. And it's good for us, right? If we can bring that technology process to it, we can do quite well. How are you doing on workers? Are you able to find all the people that you need? And how does your ability to hire and get the workers you need compare to that of the home builders? It's comparable. It's certainly challenging at times. Right now, it's not too bad. I think it's pretty manageable given the dynamics around labor and the employment situation. The interesting part about what we do, and I think it's perhaps underappreciated in terms of why we're successful and why we think we're going to be a lot more

successful, is we take out the friction in the process. What I mean by that, right? If you're Jack's home building, let's narrow it down. You're Jack's carpenter and you're doing amazing work. You do beautiful work in this home. Your doors are spectacular. They're all square. Your joints are perfect. You're really good at it, but you run your own business. So what do you need to do? Well, you need to call home builders. You need to be a salesperson. Then you need to manage the scheduling around the home builders, which trust me, their scheduling is tricky, right? They're tough to keep up with the way they change. Then after you do the work, well, let's say this, right? They're tough to keep up with the way they change.

Then after you do the work, well, let's say this. When you show up to do the work, you're really good, Jack. I know you are. But sometimes the guy you hired, he forgot to pick up the thing. So when you didn't have the thing on the job site, now you got to go and waste your valuable time to go get that thing that you forgot, piece of board, whatever it was. And at the end of it, you got to call the builder and say, hey, where's my money? I want money. What do you mean, what money?

My money. I did this job. What job? So cleaning up the collections process. What BFS does in that world, we have fantastic relationships with the builders. We deal with everybody, right? There's nobody that we don't really have a relationship with. So the ability to capture that business, be on the schedule already working with that builder is very valuable to the contract, a skilled trade, because it allows you to focus on being on the job, not on sales, not on, oops, I forgot the board.

So that's the type of thing that we're introducing into this market. It's just an efficiency. It's pretty simple at its core, but it's hard to execute at scale, right? These jobs are quite small. Tell me about the health of the housing market in the US. There's the long-term growth trajectory of your company, which has been really impressive. But then there's also short-term economic effects. My understanding, you can tell me if I'm wrong, is that one of those effects is that people are building smaller houses because affordability is constrained right now. And smaller houses, that's less materials, and that has an effect on your business. So is that still the case? How would you sum up the health of the

housing market in the US? Yeah, true. What you said is true. We've seen that. And it's not just the size of the house, it's the complexity, the componentry that goes in. People are addressing the affordability question, right? I don't think there's any surprise that affordability is front and center for every builder we deal with and most of the framers and contractors as well. So that world is governed by the monthly payment capability of the average consumer. And what we're seeing is pressure on that and a reaction that I think makes sense. It's pretty big. I would say this year we've got maybe a 10 plus percent headwind from that part of the business. The experience that we're having right now is kind of a choppy market, right?

Bit of ebbs and flows. You have builders that have leaned in to try and put a bunch of homes in the ground, adjusting for the size. Maybe it's got a slab on grade instead of a basement. Even up in the north, which is kind of surprising to me. I grew up in the North. Nobody didn't have a basement. Well, apparently that's changing. So whether it be that garages going from a three to a two to a one, in some cases, it's just bonus or extra space that gets cut away. So that shows up in our numbers. So that's really the explanation. You mentioned deal-making earlier, and you also mentioned that the industry is maybe

remains a fragmented industry. So there have to be some suppliers out there that are, I don't know, either mom and pop operations or have been family-owned for a while. And some of those people just eventually look to sell because no one in the family is going to pick up the business. So what makes you a good buyer? Do you actively look for opportunities like that? And what makes you the kind of company that someone like that would want to sell to? Yeah, you hit the nail on the head.

That is a very common profile of the businesses that we acquire. We acquired six this quarter. So yeah, it's what we do. The reason why most folks choose us is because they see us as a really good home for this creation, for this child, if you will, that these folks have invested their lives in. We've done over the years a lot of really good work at integrating the teams that we acquire. If you look at my senior leadership team, it's a blend of the BMC acquisition, the ProBuild acquisition, other deals that we've done over the years. We continue to look for that best quality talent.

And we have so many opportunities for folks, right? If you are interested in moving up, we've got locations all over the country. If you want to reload, you know, some of them are fun and exciting locations, Florida, Alaska, the mountains in Colorado, but also opportunities to learn, right? We've got leadership development programs. We've got investment that we make in our, all the way down to the line level staff to be able to sort of advance careers. So that's been probably the most compelling aspect, knowing that they get to be part of something big that knows how to take care of people. Now there's a counterpoint where we're

builders first source. There are some folks who want to keep the name of their company in place forever, that pride and that legacy. They don't want let go of, not generally what we do. So we're not the perfect home for everybody, right? We're going to make you part of us because that's part of how we capture the scale and the benefits of what we do. You mentioned career advancement. Speaking of that, you are yourself fairly new on the job here, but not new to the operation, certainly. fairly new on the job here, but not new to the operation, certainly. So, you know, give us an introduction. How did you get into this business?

And now that you're in charge of it, what have your first days been like? And what are your priorities going forward? Gosh, about a week, week and a half in the job here in terms of taking the CEO chair. But I've been with Builders First Source for eight years as the CFO. But when the call came to come over to BFS, what I saw was a company about a year out from one of the biggest merger, well, at the time, it was the biggest merger in industry history, where the $1.5 billion BFS bought the $4.5 billion ProBuild. So when the dog caught the bus, they had some work to do. And it was an opportunity for me to come in and work on a lot of the process and the structure that I have so enjoyed over the years. And as time passed, I was really able to partner with each of the CEOs that had gone before me to sort of build out the strategy.

So you asked about, you know, what are my priorities? What do I want to lean into? The good news is that because Dave Rush and I had worked so closely together over the last two years, my fingerprints are all over the existing strategy, right? He and I partnered really well on that, gave me an opportunity to sort of pass the test, if you will. But the areas that we are focused on, growth, continuous improvement, and continuing to do smart, disciplined capital allocation. And the ways that we're focused on getting there, not going to be a surprise, people development, talent improvement, and leveraging technology and digital. So specifically, we bought a company by the name

of Paradigm in 2021, who had an expertise in configuration software. At the time, they were very focused on window configuration, door configuration. So if you walk into your favorite home improvement retailer, and you want to buy a window, you're going to sit down at a screen that'll help you walk through the process. It's a little trickier than you might imagine because of all the variables, all the things you can select. It's important that you need to be able to actually build the thing that you have designed on the paper. So since then, we bought that company and have built out what we're now calling mydldr.com. And it is a series of tools and functionalities and technologies

that creates an end-to-end platform for builders. Right now, focused on sort of the 50 to 250 homes a year kind of a builder to be more efficient, more effective, basically to leverage modern technology, a three-dimensional digital twin to build residential homes. Jackson, go ahead. You mentioned these digital technologies. Is there anything else in the pipeline that you're excited about that will allow building homes quicker, more efficiently? I don't know. When I look at a home under construction, it doesn't look all that different than what I imagine studs and boards looked like 50 years ago. Is there anything that's going to drastically change that? You know, McKinsey's got the study they put out and it has productivity improvement over the last hundred years.

And home building is down there next to hunters and gatherers at the bottom of the chart, right? You're right. Nothing's changed. There have been waves of improvement over the years. Modularization, right? Offsite fabrication. You could go all the way back to Levittown in the New York area, what they thought the world was going to be like, but in most cases, the cycle killed those guys, right? The density required, the distance to travel. When you get into big bulk, you end up shipping a lot of air, which limits your distance

that you can actually serve. It kills folks after a while. What I think we have a unique capability on, and it is really evidenced by this whole trust manufacturing thing we were talking about earlier, we've got 125 trust plants around the country. And because we serve all the home builders, not one, we're able to leverage our capacity, right? I'm a manufacturing guy at heart. The game is fill your capacity. If you have a full plant, you have a successful plant. If you have an empty plant, you're probably not very happy. When builders try and do it themselves, inevitably, they'll put their factory in a great location for their existing communities. When they build out their communities and they move somewhere new, all of a sudden their plant becomes a trailing anchor for them. We don't have that,

right? Because we sell all the builders and we're able to provide this type of offsite fab, we have the ability to leverage these facilities and fill them up with not just one product, but a variety of products. I think that opens the door to more modularization, something that a lot of people have tried to take swings at over the years, candidly have failed. You guys have probably heard of Katerra and the SoftBank guys, right? That was a particularly flaming mess by the end. But I think a bunch of the ideas they had were good. They were on the right track, leveraging technology, robotics, process improvement to be able to do more off the job side. I think if you combine that with what I was talking about earlier, that three-dimensional

digital twin that we're talking about in our digital platform, you start to introduce this idea of third-party firms working in a precise and reliable environment, right? Because the digitization really allows you to ensure that the build is what you think it is. I don't know if you've done much in the way of renovation and home building on your own. I've done a bit. It's chaotic. It's far less precise than they may want you to believe. But they're craftsmen, right? They know how to correct for it. If the foundation is off by two inches, they won't repour the foundation. They'll just build the house a little bit angular so that it all fits by the time you get to the main floor. That's the type of thing I think over time, improve technology, improve

discipline through utilizing tools, and then having off-site fab provide stuff to the job site. When it's precise, the walls, the roof trusses, the cabinets, the floors can all be selected, designed, built, and delivered. Over time, I think that's how you get to a modern, I don't know if I would ever say factory, because I don't think mobile homes or modular homes are really where we'll go to at the end of the day. But you can do meaningfully bigger components of the house, the job site. That feels like the future and something we're leaning into. Thank you, Peter.

And thank all of you for listening. If you have a question and you want to hear us answer it in the podcast, just tape it on your phone. You can use the voice memo app and send it to jack.how. That's H-O-U-G-H at barons.com. Jackson Cantrell is our producer. He's taping fruit and he's trapping squirrels. Subscribe to the podcast on Apple Podcasts, Spotify, wherever you listen. If you listen on Apple and your feelings about this podcast are welling up inside you and you feel like you're going to burst, you just have to let the whole world know. Don't burst, please.

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