The Wisdom Imperative
Leadership is everything—now, more than ever.
This is Sam Rashkin’s latest in a series of articles based on his second book, Housing 2.0: A Disruption Survival Guide. It is intended as a roadmap for high-performance builders to become the most successful in the industry. The next Housing 2.0 workshop starts February 9.
This article is personal. I’ve been consumed with maximizing efficiency and minimizing waste my entire life. Only when I became an adult did I fully appreciate the importance of this obsession and channel it toward a passion for sustainable buildings, communities, and the planet. We’re all a work in progress.
In September 2022, I wrote a related article suggesting that government is the opposite of all I strive to achieve with zero-carbon buildings. It is ultra inefficient and ultra wasteful. Yet, I pursued an extremely difficult career shift from architecture to government, managing national high-performance home programs. Not a good match for someone obsessed with efficiency and waste.
That said, I have had a dream career and the privilege to contribute to a huge impact on our built environment with these programs. We’re now in a new world. I don’t believe we can endlessly absorb the inefficiency and waste of government and sustain a stable society. We have to do better.
This article is an attempt to demonstrate the massive opportunity for greater governmental efficiency before us by looking at a case study on the tip of the iceberg. I had a unique opportunity, when no one was watching, to test governmental capacity for applying 10 times the innovation for effectiveness and cost savings to a program I loved. The results are compelling. But no one noticed. So, this article is an attempt to showcase what is possible. It’s time.
What Is Leadership, Really?
First and foremost, I’m not here to tear down government. Just the opposite. Our institutions, their embedded knowledge, and their missions are vital to the success, safety, and protection of democratic countries. However, history shows us over and over that when great civilizations reach a tipping point of excessive waste, inefficiency, and corruption (a.k.a., the lack of wise leadership), they fall. We can start with ancient Greece and Rome and work our way up from there.
It is very important to clarify what constitutes good leadership. One explanation is that leadership is about making informed decisions based on wisdom. As shown at the top of the next page, wisdom sits at the top of a pyramid built upon a foundation of data, raw measurements that may possibly be useful.
When trends can be identified, then data becomes information that provides insight. If principles for achieving desired outcomes are revealed, then information becomes knowledge that establishes the basis for subject-area expertise.
And finally, if experience is applied to knowledge, it becomes wisdom that informs effective leadership.
The Wisdom Pyramid for Leadership Success
More than ever, we need and should expect wisdom in government. Everywhere we turn, problems have exploded into crises: climate, biodiversity, fresh water, forever chemical contamination, ocean acidification, infrastructure atrophy, polarization, poverty—the list goes on. It takes massive resources to address each of these problems.
That brings up one more crisis: exponentially increasing the National Debt. The figure above shows the history of U.S. debt as a percentage of Gross Domestic Product (GDP). We first blew past 100 percent right after World War II due to the incredibly high cost of engaging in world conflict. The U.S. Office of Management and Budget, in its budget for 2013, projected this would happen again in 2024 and hyper-accelerate to 247 percent in 2042.
But the situation is even worse than forecasted back then. When I last checked the National Debt Clock while preparing this article, it had exceeded $31.2 trillion2 and the actual fiscal gap between committed spending and expected receipts has been quantified at $211 trillion.3 It’s impossible to comprehend a number that big.
Government has to become more efficient, less wasteful, and less corrupt. I’ll use a personal experience to demonstrate the possibilities that arise when we do optimize efficiency and minimize waste.
Somehow, I stumbled my way into the dream job of a lifetime when I was recruited out of California by the Environmental Protection Agency (EPA) to direct the ENERGY STAR certified home program.
At that time, the larger Energy Star program was in its infancy, only being used to label efficient computers with an automatic sleep mode. It was a dream job because I loved housing, and Energy Star was a huge anomaly in government as an incredibly lean and mean program that operated at the speed of business and with impressive market transformational impacts.
Yet, when the U.S. Department of Energy (DOE) offered me the position of chief architect for the Building Technologies Office (BTO), I left this dream job and a great collaborative team at the EPA.
Note that I had twice refused the DOE job earlier when asked to lead the Building America program in the BTO. I wasn’t interested in managing a big budget research program with the enormous bureaucracy attached to it. I took the job when I was able to negotiate a position to leverage existing BTO assets and link them to the housing industry.
The first priority was to take over a program called Challenge Home. This was DOE’s new homes label, at a higher-tier energy efficiency threshold than ESCH. I saw leading this program as an opportunity to apply everything we learned getting the Energy Star-certified home program past 1 million labeled homes, and to do it at a substantially lower cost and with better investment outcomes.
The immediate task was to fix Challenge Home by expediting the implementation of logo use guidelines and partnership agreements that were, amazingly, missing from the program. The second task was to meet with builders to get “voice of the customer” feedback, to optimize their program interest. This led to a quick name change—to the Zero Energy Ready Home (ZERH) program.
However, the biggest opportunity was to apply lessons-learned from leading Energy Star-certified homes to make the program ultra-efficient and ultra-lean, since I was able to start with a clean slate. The resulting cost savings achieved with ZERH compared to Energy Star are shown below and they exceeded all my expectations.
First, with a template fully established for implementing a national voluntary labeling program, staff person-years (PY) were able to be reduced from five PY for Energy Star to 0.5 PY for ZERH, adding up to a 10 times savings. The annual contract dollars for Energy Star certified homes were about $2 million, compared to about $0.5 million for ZERH or about 4 times savings.
The tracking system to measure program participation cost about $2 million to develop over several years, followed by constant ongoing modifications. ZERH did not invest in its own tracking system, aware of the database being already developed by the Residential Energy Services Network (RESNET) called the National Registry.
A small $200,000 contract with RESNET was used to modify the National Registry schema to allow real-time access by DOE to all ZERH certified homes. This was a 10 times savings.
Moreover, this system provided superior tracking capabilities with more data about the builders, homes, and ZIP Code locations. And this data was available in real-time, where Energy Star-certified homes data was only available every quarter. The system also eliminated a significant reporting burden upon every HERS rater to submit their data. Faster, better, cheaper is good.
The Zero Energy Ready Home Housing Innovation Awards showcases efforts made by builders to develop environmentally friendly homes.
Everyone’s a Winner
Energy Star as a program held a huge national gala awards event to recognize partners across all product categories. It was a very expensive undertaking, consuming significant staff resources, contractor support, an entire ballroom and catering at a high-cost Washington D.C. hotel, and substantial expenses for attendees to travel to the event.
Energy Star management mandated that Challenge Home builder partner awards be included in this event. As a rough guess, I estimated that the tax for Energy Star’s share of the event was at least $250,000, not including the substantial staff time involved to support logistics.
ZERH’s first improvement was to name its builder recognition scheme the Housing Innovation Awards (HIA) rather than the ZERH Awards. This was in recognition of the fact this name would be more valuable to our builder partners than an award named for the program—ZERH is limited in appeal when compared with the pure concept of being a leader in innovation.
Without the mandate to recognize builders at a DC political event, we found much better and cheaper recognition by piggybacking the HIA to the Energy and Environmental Building Alliance (EEBA) annual conference.
EEBA loved this partnership because the ZERH Awards would bring approximately 25 of the nation’s best high-performance builders to its event, more than doubling normal builder participation. This was directly aligned with EEBA’s goal of substantially increasing builder participation.
As a result, I estimated a small HIA expense of $10,000, mostly for the award plaques and glass crystals, which is 25 times the cost savings as compared to ESCH.
HIA was a better customer experience—ZERH builders received their recognition in front of a full EEBA plenary housing industry audience much more connected to their achievements than the unrelated product companies making up 90-plus percent of the Energy Star awards dinner audience. Moreover, this event gave ZERH an invaluable opportunity to educate the EEBA audience about the impressive achievements of the ZERH builders and program.
The other significant improvement with the HIA was to make ZERH homeowner testimonials about their superior use experience, and images documenting ZERHs as a requirement of the application. This content was leveraged to create the “Tour of Zero,” which showcases hundreds of beautiful and cost-effective certified homes across the country, along with compelling homeowner testimonials.
Additionally, ZERH has accumulated a library of hundreds of testimonials that are available to all partners to promote their certified homes. This type of unique showcase and testimonial database is not part of ESCH, and can be continuously assembled for free by integrating prompts into the HIA application.
ESCH held a partner meeting every year, primarily with utility programs providing incentives for certified homes. Although a host utility would often pick up significant costs, I would estimate about $100,000 of expenses for ESCH. While it is helpful for utility program staff to gather, a critical lesson learned was that they were too tied into their own bureaucracies and glacial pace of change to apply best practices shared at these events.
As a result, ZERH set up partner meetings with its most critical customers, builder,s and HERS rater partners, to gather feedback on how to continuously improve the program. This only cost the program about $1,000—to pay for lunches—it leveraged the HIA winners attending EEBA and HERS raters attending the RESNET annual conference.
Thus, there was no cost for the meeting rooms and for the attendees who were already attending these events. This resulted in a 100 times cost savings for much better partner meetings that have continuously informed and improved ZERH and earned significant partner buy-in.
I recall from discussions with ESCH staff that about $500,000 have been invested in developing HERS rater software for them to more effectively and efficiently run their businesses. ZERH would never make that investment because it is not core to its mission and objectives. That represents infinite cost savings.
The Department of Energy’s “Tour of Zero” highlights hundreds of beautiful and cost-effective certified homes across the entire country, along with compelling homeowner testimonials. Credit: Courtesy of United Way of Long Island
Implementing Two Label Programs
I know this is a lot of detail about the implementation of two national labeling programs. However, I think it is critically important to share. That’s because no one knows the story, and I was uniquely in a position to know the outcomes achieved in applying comprehensive strategies for eliminating waste across two similar government programs.
I went on to apply a similar process with several other DOE project, with similar results, but I don’t believe DOE management understood or valued what was achieved. The culture was predominantly focused on the larger spending initiatives.
What is important to understand about this application of lean and mean principles to extract waste is that it couldn’t have applied to ESCH once it was fully operational.
Wisdom is sorely missing and constrained by government rules, policies, and procedures. What was achieved by ZERH is just the very tip of the cost savings and waste minimization iceberg. I’m confident that the 10 times benefits seen with ZERH could be achieved at a vastly larger scale across all government programs. As the federal debt races to 250 percent of GDP, the question is whether we’re willing to choose the leadership that can make it happen.