00:01.72 bizzyweb We're back again. Dave how are you awesome. 1 of the things that I've been seeing a lot in in marketing and and in the business world right? now is is kind of one of the buzzords is. 00:04.80 Dave Meyer_ BizzyWeb I'm fantastic. Thanks trigby. 00:16.54 bizzyweb Ah, building communities and in in your workforce building communities in your your ecosystem. So I thought I wish we should find an expert and talk a little bit about that. So. Ah, we're blessed to have somebody who's super into and an expert in community building because he's built ah many and I actually had the privilege of helping him out when he was getting started. And he's grown his business to just an amazing extent till then so our guest today is Mike Keating from norhart norhart is a company based in Minnesota that is a $200000000 residential real estate company that designed builds and rents apartments. 00:59.94 Dave Meyer_ BizzyWeb Um, ah. 01:03.27 bizzyweb And is committed to solving America's housing affordability crisis by reducing the cost of and so construction. Thanks for joining us Mike. 01:08.85 Dave Meyer_ BizzyWeb Um, welcome Mike. 01:10.25 Mike Kaeding Yeah, thanks for having me I'm excited to be here. 01:13.93 bizzyweb Now before we started I said I said you weren't very funny but you're you're you're wonderful guy. So hopefully I'll be able to you'll be able to pull some jokes out of you and apologize. So. 01:21.44 Mike Kaeding Sounds good I'm game. 01:25.84 Dave Meyer_ BizzyWeb On this is great. Yeah, it's actually ah a topic that's pretty near and dear to my heart because my son just moved into his first apartment and he's 20 and got out and the affordability thing is a very big deal and yeah, we we've we hunted all over the place and found. 01:33.86 Mike Kaeding Um. 01:43.84 Dave Meyer_ BizzyWeb Found a place right in his in his school in Uptown and it's amazing. The different amenities and the things that you can do now inside of affordable um apartments and looking through your website. It's very clear that you guys have some pretty interesting and. 01:48.95 Mike Kaeding Yeah. 02:02.29 Dave Meyer_ BizzyWeb Exciting opportunities for people that are looking for affordable places to live in a cool community. So tell tell us a little bit about what you're doing at Norhardt. 02:11.39 Mike Kaeding Yeah, so at a high level. It was it talked about we build these apartments but really, we're focused on driving down the cost of housing. You know we're achieving about a 20 to 30% reduction typically but we believe we can get down to about a 50% reduction 02:27.76 Dave Meyer_ BizzyWeb Wow. 02:30.80 Mike Kaeding But imagine what that means means someday your rent we a mortgage payment could be half now I think there's an important distinction to make here. You talked about affordable housing. We're not actually affordable housing in the traditional sense. We're a company working to make housing affordable and why that's important. 02:41.52 Dave Meyer_ BizzyWeb Um, right right? Yeah I like that distinction. Yeah, you see. 02:49.31 Mike Kaeding Yeah, is that affordable, housing the traditional model is you get money from the government you put it into the project and then you cap the rents as a result of that well that works but it doesn't work at scale. You can't solve it for everyone. You can't take enough money from the rest of the economy. 03:01.99 Dave Meyer_ BizzyWeb Are. 03:07.10 Mike Kaeding And put it into those properties. It just doesn't mathematically work. The only way you solve housing affordability for everyone is by solving construction costs. 03:07.90 Dave Meyer_ BizzyWeb Hopeful. 03:17.55 Dave Meyer_ BizzyWeb Amazing. 03:21.44 bizzyweb So Mike how many different properties have ah does norhardt build and manage. 03:25.56 Mike Kaeding Yeah, we've got a couple dozen but it's about a thousand units overall right now and we're building at about 3 to 500 units per year. Yeah. 03:33.81 Dave Meyer_ BizzyWeb Mouth. 03:36.22 bizzyweb Redefine and and is that all in Minnesota or is that is that everywhere. 03:40.35 Mike Kaeding Yeah, right now we're all in Minnesota although we do have some manufacturing capabilities often Wisconsin and we're looking to expand into Texas and start growing a little bit more nationwide. 03:49.50 Dave Meyer_ BizzyWeb To all. 03:49.82 bizzyweb I Love I'd love to see somebody who's growing that extensively. So I think one of the things that it is is really impressive when you look at some of the marketing collateral that you've done for your communities is that they are very. They're all very independent. Unique. And they all have a ah particular sense of home to them. So Can you talk about the process of how do you design something that makes people feel comfortable. 04:07.11 Mike Kaeding Um. 04:11.71 Mike Kaeding Um. 04:18.52 Mike Kaeding It's such a great question. It's something that we've been evolving with time the way we kind of categories our categorize our properties right now are serious so we have a series one which is sort of a traditional style building less amenities still grantite countertop standless steel appliances. Then we evolved our thinking to a series two in series. 2 now you've got much higher in amenities we got sky lounges pools coffee shops. You know, even up all up to restaurants and now we've started to evolve and we said what would a series 3 property look like what would that community even look like and for us our first answer to that was norhart odale and we got really serious about hiring top end designers and people that think about this deeply to create the kind of community people want to live in so norhart Oakdale is. An oakdale. It feels like woodberry very nice area of the twin cities. 05:12.50 bizzyweb Yeah, for yeah for people who who don't live in the twin cities oakdale and woodbury is sort of a first ring suburb. 05:12.44 Dave Meyer_ BizzyWeb Um e. 05:17.98 Mike Kaeding Yeah, yeah, and a nice nice up and coming area of the city is there's a brand new transit line that they're building literally right now that will have a stop right at our front door The building itself is seven stories tall. The first floor is twenty two foot high ceilings. Ah, with a restaurant coffee shop co-working space the entire amenity space on that floor is like three hundred feet wide it's ah four hundred feet wide it's the entire width of the building up on third floor. We've got thousands of Square feet of amenities including game rooms movie rooms, art studios and much more. 05:42.59 Dave Meyer_ BizzyWeb How sweet. 05:52.38 Mike Kaeding Up on fourth floor. We got a spa sauna a pool and and kind of this courtyard area in the center and then up on the roof we have rooftop patio and grill with these penthouse suites that they are twenty two foot high as well with views of downtown Minneapolis and St Paul it's really reevaluating rethinking what we can do with apartments to elevate that experience which seems a little counter intuitive because at the other end is we're also working to reduce the cost. So we're trying to push both avenues at once think about the Iphone right. 06:18.39 Dave Meyer_ BizzyWeb Great. 06:25.81 Mike Kaeding Few decades ago. Computers were clunky. You know slow have you it could the dial up internet was was was it a good way to connect online. But today you have a super computer in your pocket. You get better quality and lower cost and the way you do that you solve that is innovation. 06:34.50 Dave Meyer_ BizzyWeb Who. 06:43.60 bizzyweb When I was a kid my dad worked for Ibm and he he once held the record for the biggest deal in the history of Ibm and it was he had sold. Um, 5 06:49.00 Mike Kaeding Um, wow. 07:00.72 bizzyweb Gigabytes of space to a company and I can remember going to the ribbon cutting and it was a data center and it it was in it was it was in this very particular glass building that you guys would probably know because you cause you because you live here and. 07:01.86 Dave Meyer_ BizzyWeb Who. 07:20.14 bizzyweb Minneapolis like I do but it took up 3 floors of the building and now I have 50 times that in my pocket at any given time that I paid $500 for it's ah. 07:23.28 Mike Kaeding Who how. 07:31.89 Dave Meyer_ BizzyWeb Um, absolutely. 07:35.86 bizzyweb It's amazing. How things get smaller and bigger. So okay, so you're you're you're building my or without that be considered all a luxury apartment or is that still in the realm of affordability affordability. 07:43.78 Mike Kaeding Yeah, yeah, so so it's a luxury in our prices are current market prices and I can talk more about that if you like but we're focused on driving down the cost of construction long term. 07:55.24 Dave Meyer_ BizzyWeb Um, yeah, please. 07:56.76 bizzyweb Yeah I mean I think it it'd be good because you know Dave and I are homeowners and so we don't really know a whole lot about the housing crisis in America right now. So what? What is an affordable how a rent these days and what does that really look like for somebody. 08:12.91 Mike Kaeding Yeah, so the traditional way I describe affordability is sort of the percent of your the area media income. Anyway, it's probably around $1000 ah per month for a unit. It's maybe an average estimate for affordability. It depends on your income level. It depends upon the area. 08:21.47 Dave Meyer_ BizzyWeb Are. 08:30.53 Mike Kaeding Um, but the way we think about it is that we could provide lower rents today because people look on our website and they say Mike you've been talking about housing affordability. But your rents are just in line with everyone else like what the. 08:34.63 Dave Meyer_ BizzyWeb Oh. 08:44.65 Dave Meyer_ BizzyWeb Um, yeah. 08:45.30 Mike Kaeding Hack. What are you doing? Ah why does why does that even make sense and my response is yes we could lower our rents today and if we did that we would solve housing affordability for a few thousand people that's great. That's admirable, but it's not the goal. Goals to reach to a point that we're achieving it for everyone nationwide. How do we solve that you solve it by building the system that builds apartments. You know Elon Musk talks how about how it's hard to produce a car but it is 10 to 100 to a thousand times harder. To produce the system that builds that car we're working on building that system thing factories thing infrastructure thing supply chain and that takes a lot of capital and so we're taking the profits putting it in that system scaling that system up over the next decade 09:24.55 Dave Meyer_ BizzyWeb Who. 09:39.25 Mike Kaeding We're hoping to reach about 192000 units with a 60000 unit per repaus. But here's the magic at now those sorts of levels were now starting to have a meaningful impact and housing supply in supply and demand factors kick in with more supply. Prices start coming down naturally and the magic is it's not just for our own residents. It's for everyone in the communities that we're building. 10:07.74 Dave Meyer_ BizzyWeb More supply across all of the residents across the community and then there's better more expectations at a better price. All of a sudden the iphone just came out so now Nokia needs to drop keys off of their phone I love that. 10:08.62 bizzyweb Wow! just. 10:24.43 Mike Kaeding Exactly. 10:28.10 Dave Meyer_ BizzyWeb Ah, Mike when when we started you you mentioned that you had worked with trigv at spdc a little bit to do some marketing things that that means that this is a startup and this is something that you formed. 10:36.90 bizzyweb Oh that was long time ago. 10:36.83 Mike Kaeding Um. 10:46.64 Dave Meyer_ BizzyWeb And so one of the things in a rapidly growing organization like norhart is that you have to hire great people. So how did how did you create the community to do this innovative costs forward kind of kind of a company. 10:54.82 Mike Kaeding Um. 11:05.50 Mike Kaeding Yeah, you know the this this taps on the biggest lesson that I've ever learned and it took me number of years to learn it. In fact, even after I met trig v for the first time. Um and what we had originally it was it was a good staff but I would say it's an average staff and. Was really hard to achieve anything extraordinary. It's virtually impossible to do that with an average team. What I found and what I've learned from people much smarter than me is that you want to hire the very best. And when when we say the very best we truly mean that we fly people in from other states to come work during the week and fly them home on the weekend. Ah who we are our engineer our ah property manager they're probably literally best in the country at what they do. We have an employee who in 2007. 11:41.41 Dave Meyer_ BizzyWeb And wow. 11:53.59 Mike Kaeding Steve Jobs announces the iphone then Steve Jobs walks off that stage and our employee follows that very presentation on that same stage. It's that kind of caliber of people and what most people most business leaders start thinking are they saying to me they say Mike. That's expensive I can't afford that and it's true. It is expensive but here's what miss most business leaders misunderstand the best people outperform the average by 2 to 5 to 10 times. 12:13.54 Dave Meyer_ BizzyWeb You right. 12:13.74 bizzyweb Yeah. 12:31.81 Mike Kaeding As much So if you look at it instead of a cost per person but instead you look at and a cost per unit produced. The best people are actually the least expensive. So the people who think they can't afford the best. My response is you can't afford. 12:43.67 Dave Meyer_ BizzyWeb Absolutely. 12:50.86 Mike Kaeding Not to and once you bring on a team like that it changes the game and there's so much more I could talk about but that that's a flavor of what we're trying to do. 12:56.85 Dave Meyer_ BizzyWeb I love that? Yeah and that that really flips the thinking because if you're if you're in constant cost cutting mode which a lot of companies are a lot of shareholder things end up like that where you're focusing on this quarter's performance at the expense of all else. It sounds like you're investing in the long-term future of your organization as well as the performance because if you were hiring a flash in the pan and trying to just get through the quarter. You wouldn't find that person that was at Apple you would find. Just some workaday Joe that could crush through some stuff for fifteen bucks an hour and throw them a happy meal and they're happy. So that's so interesting and I'm I'm assuming and I'm sure you're seeing fantastic dividends out of that on a longterm basis as well. Right. 13:44.59 Mike Kaeding Or Even short term. Ah you bring on on someone amazing and they change your they open doors. They make things possible for you that you didn't know were possible. You run into roadblockx and business all the time and when you have amazing people they burst through those roadblocks. Um. Yeah I think it's a it's a long term play and it's a short term play. 14:03.86 Dave Meyer_ BizzyWeb Cool. Love it. 14:05.54 bizzyweb I think you have this admirable goal of of making housing more affordable and it's admirable that you're hiring great people. But I think the third element of that is how do you keep them and how do you create the culture to make people want to buy into that. 14:20.41 Mike Kaeding Um. 14:25.70 bizzyweb Not just to get it. Not just for paycheck but to to to give you ah and to go above and beyond. 14:32.83 Mike Kaeding Yeah, we could have a a whole podcast just on this one topic. Ah the the simple like if there was 1 thing to do well to create a great culture is just hire. Great people right? because the people become the culture now. There's so much more do beyond that but that's step 1 14:34.83 bizzyweb Yeah, yeah. 14:50.23 Mike Kaeding How do you keep? those people is one one of your questions and 1 thing is we often say we have to pay top of market I never want pay or benefits to be the reason why somebody leaves and so we actually tell people when they get calls from recruiters because they do literally all the time at our company. We tell them to take the phone call. 15:03.66 Dave Meyer_ BizzyWeb Or. 15:07.98 Mike Kaeding And the reason is multiple fold 1 is we want? What's best for them. None of our pay or benefits or all of it vests immediately. They can leave tomorrow with no issue I want to earn the right for them to be here and then once they take that phone call. My next thing is if there's something better better pay better benefits better working conditions. Let us know and we make changes not to just your own pay. We make changes the whole pay scale for everyone that it makes sense for is a result of that new information. So that's that's 1 thing but that still doesn't keep people that's sort of just a bar or hurdle to hit. 15:43.62 Dave Meyer_ BizzyWeb Oh. 15:46.20 Mike Kaeding Most people join organizations because of the maybe reputation organization because the recruiter sold them on it maybe because that pay package was a lot better, but that's not why people leave people leave because their interaction with their coworkers and with their managers. Right? And even with me the the leaders of the organization and so we're really picking on that that the people element so we talked about hiring great people. We have an extraordinarily intense hiring process I think our acceptance rate is something less It's like point 2% give you some perspective harvard only accepts four percent and I know the question there is how do you do that in the world of construction There's so many people and ah hard to find people. Yeah exactly so we ended up hiring a 14 recruiters when we only had a hundred people employed. 16:31.10 bizzyweb Um, yeah, and such a dearth of available talent. Yeah. 16:40.25 Mike Kaeding And they look for people that aren't looking for jobs and they actually build out a pipeline well in advance so that we're filtering and bringing in the very best people. Um, so that's a key element of it The next key element is for many of our positions not all but many there's a trial period. So the first two weeks you're out here. Ah. 16:56.21 Dave Meyer_ BizzyWeb Are. 16:59.90 Mike Kaeding You're being evaluated and because we can think we hired the best person the interview went really well but they can I don't know kind of game the system and come out and be someone different. So at the end of the two weeks your coworkers will decide if you make it on the team. 17:08.53 Dave Meyer_ BizzyWeb Oh. 17:17.89 Mike Kaeding And those coworkers evaluate you compared to our values which are stated ah part of orientation all upfront, but they're evaluating that and then the last step that I'll last little nugget I'll throw out there is even if you make it past all of that we stole this notion of the keeper test. 17:25.36 Dave Meyer_ BizzyWeb Um, yeah. 17:37.43 Mike Kaeding Netflix and the basic idea is as a manager if your employee were to quit how hard would you fight to keep them if the answer is you would fight tooth and nail to keep them awesome. They're the right person. But if it's anything shy of that. 17:53.13 Dave Meyer_ BizzyWeb Um. 17:57.11 Mike Kaeding They're not the right person we need to be helping them out of the organization see most companies know they want the best most companies know they don't want the worst but we're we're different than most companies is we don't that most companies are okay with the average, nothing wrong with them. But. We just don't want the average we want just the very very best. So That's a little bit. 18:14.50 Dave Meyer_ BizzyWeb Um, or. 18:15.70 bizzyweb I want to jump why I totally want to jump on the keeper test because I've I've heard that before and I think a lot of what employers find in this day and age is that they are finding people who are working just hard enough to not get fired and so. 18:32.82 Mike Kaeding Um. 18:34.21 bizzyweb The the concern from the employer standpoint is even though this person isn't isn't ideal and even though this person isn't great. They're at least doing some something and so there's on the scale of things. There's nothing. There's something and then there's everything. And yeah I want everything. But if I get rid of this person who's doing something I go all the way to nothing So What would you recommend that person who has that fear and that and is saddled with that employee who is kind of may. 18:55.49 Mike Kaeding Yeah. 19:07.81 Mike Kaeding Yeah, that's the that is why most companies have an average culture, an average engagement rate of 34% or whatever that is ah it's because of the the leader's mindset. It's that fear that you just talked about and so. 19:16.18 Dave Meyer_ BizzyWeb Um, when you. 19:25.40 Mike Kaeding I Rerun in the exact same fear and for us like our average people are still pretty high caliber and so it's really tempting to be like oh they're Fine. It's Fine. It's Fine. We're good and just to stick with them. But I think what I've learned is you just. Have to be brave if they're just fine in you've got to have the conversation with them. This is what I want to see for improvements If You're not seeing improvements. Let them go I Know it's harder initially. But if you have the right infrastructure to hire on great people behind that. 19:43.72 Dave Meyer_ BizzyWeb Both. 19:52.40 Dave Meyer_ BizzyWeb Oh. 20:01.12 Mike Kaeding Take a few months or may be a few months ramp up period. But I have never come out of that decision and said I'm worse off I'm always like four months later I'm like dude I am so happy I made that call. Yes, it was hard. Yes, it was scary. Yes, it was frustrating. But we are in so much better of a spot today as a result and I think as a leader you just have to remind yourself of that point to have the bravery to do what you know you know needs to be done. 20:27.80 bizzyweb Well, that's always the trick right? as the brave you know what needs to be done. But do you can you can you have the bravery to to to do it and what I found is is that and the the older I get and the more people I talk to and the more conversations I have like this the more. 20:35.11 Mike Kaeding Nothing. 20:47.61 bizzyweb The less culture certainly matters money certainly matters. But the big underlying factor that and that is unique to everyone is their own risk tolerance and how much are you willing to roll the dice on people processes money. 20:57.60 Dave Meyer_ BizzyWeb Hope. 20:57.64 Mike Kaeding Yeah. 21:05.75 bizzyweb In order to really accomplish something great and a lot of times people fall short because it's it's hard and they talk a good game. Yeah yeah, oh yeah I know yeah I know you do the you you achieve greatness and you go for greatness. But. 21:06.86 Dave Meyer_ BizzyWeb Yeah. 21:21.86 bizzyweb Greatness also means sometime taking a step back to move 2 steps forward. 21:23.92 Dave Meyer_ BizzyWeb He. 21:26.94 Mike Kaeding Yeah I've seen many leaders that talk about that. But yeah, it comes down it really you're right? It comes down to your mindset. Where's your head. Ah if your head is truly in the realm of I want to achieve something that will change the world for the better. Then you're going to make subtle even unconscious kinds of decisions. You know I ran into a case a few weeks ago where I or maybe a few months ago but I didn't my head's mindset was not in the right spot and an employee came to me and said hey I've got some ah one of my my employees. They got an offer from another job. You know what should I do and I was like well you know what to do just just make it happen but in that kind of soft response that leader then took that as oh maybe I need to be more cost focus and not actually raise the wage to keep that person. 22:15.28 bizzyweb And. 22:15.97 Dave Meyer_ BizzyWeb Um, oh. 22:19.80 Mike Kaeding See from my perspective I wasn't I didn't do anything I just I just nodded and and let them run but what I failed because my mindset wasn't right in that moment I failed and really conveying the importance the passion, the energy around these principles to give that leader confidence to do what they knew they actually needed to do. 22:22.20 Dave Meyer_ BizzyWeb Who. 22:38.90 Mike Kaeding So this this mindset in here really does trickle down to the rest of the organization. You've got to get your mind right before you'll have a successful organization. 22:47.51 Dave Meyer_ BizzyWeb Love that. 22:47.84 bizzyweb And just just to to to level set here. You know you don't you're not managing a team of half a dozen people how many people work at norhart 250 people good gravy 22:58.50 Mike Kaeding Ah, close to 250 yeah 23:04.12 bizzyweb You you mentioned failure and you're pretty open about learning about failure Tell Tell what's your greatest screw up that you've made since starting hard. What's the what's the current and then then we can talk about your greatest hits. 23:11.15 Dave Meyer_ BizzyWeb Um, yeah. 23:12.87 Mike Kaeding Ah, oh my gosh every year I have a new greatest. Ah. 23:22.37 Mike Kaeding Yeah, ah well maybe I'll dive into one of the most interesting I think because early on in my career. Um, so kind of backing up my dad. My parents actually started this business. We lost everything growing up and my dad was even kidnapped in Peru. 23:39.39 Dave Meyer_ BizzyWeb Oh my God ah. 23:39.73 Mike Kaeding Um, and we my parents would'd be building the small buildings every year I'd be on site helping build these buildings and by the time when after college you know didn't want much to do with the family business because I didn't want people to think it was given to me you know I wrestled with my own ego but my dad and I um kind of hopped in together. Ah, for a few years because I realized I wanted to make a meaningful impact I could do it with this business and so we doubled the size of the company to gather and then my dad overnight passed away. Yeah, and. 24:11.50 Dave Meyer_ BizzyWeb Oh my gosh. 24:17.22 Mike Kaeding I was young I was inexperienced I didn't know what I was doing I I was getting feedback and insight from people like Trigg V helping me along and um, yeah, ah overnight I was Ceo you know was a very small business but I was still ceo of this small business. And I didn't know what I didn't know I I really I was inexperienced and so then the next big project the the project I was doing right? My dad passed away was a project called emberwood and the city knew they could just tell that I was anpeenced. And they weren't going to let anything fly and they just shut us down twice and the second time they shut us down. They looked at me and said Mike dude you you're inexperience you don't know what you're doing. We need you to hire real management. So. I had to go and find somebody quickly which is the worst way to do it in like three days so that my crew could actually continue working otherwise the city wouldn't let us continue going forward and so um, found someone but it was it was kind of a nightmare anyway, a few weeks before we're supposed to open there was this. 25:20.30 Dave Meyer_ BizzyWeb Um, with ah. 25:28.33 Mike Kaeding Water main thousands of feet long is buried fifteen feet in the ground in my contractors. We had a leak. There was a pinhole leak somewhere in this water main we could tell by the pressure test but we had no idea where it was and so um I was out there in my relatively nice clothes. Out there with the excavator in the mudge looking for this league digging around for weeks for long long days. We eventually found the leak and I know just a few days before we're supposed to open the city comes out says Mike there is no way. No way, you're now opening this building I know you got people lined up. They're not moving in. You got to find something else to do with them. We worked like crazy through the nights and the last day the city officials came out for a full or half day inspection half the staff were there half the inspectors were there and um. Look to every nook and cranny at the end of the inspection. The head building official came down in the basement with me and said Mike I know we are hard on you in this project. But honestly right now this is the best project that we've opened up in this city was like I like. 26:36.23 Dave Meyer_ BizzyWeb Wow Tool ah has ah. 26:40.80 Mike Kaeding But it was years years of feeling like I was not good enough before getting past that hurdle. But the truth is every stage of a company. We're doing something new that I'm still not good enough. I'm still struggling right? So I'm always in this feeling of not being good enough but that's exactly where you want to be. In order to grow and to push things. Forward. 26:59.20 bizzyweb Are you open about that with your employees. Are you open about that with your employees or do you try and give them a sense of confidence you know, might. 27:01.59 Dave Meyer_ BizzyWeb Um, yeah. 27:04.41 Mike Kaeding Um, what was that? Oh absolutely, No no, no. Ah. 27:11.72 bizzyweb My dad my dad was a college professor and you know oftentimes he'd teach classes that he didn't know anything about night and I I'd ask him? Well, how'd you do that and he said oh it's easy. You just have to say 1 chapter ahead of the the class. So. In business though if you're taking on a new endeavor in you yeah, it's gonna be great. We're gonna we're gonna do it are you or you is like man I don't know let's figure it out. 27:34.51 Mike Kaeding So I totally sympathize with the staying 1 chapter ahead. That's that's my entire life. But what I will say is for me at least I want to be fully transparent I find that being authentic real. 27:39.26 bizzyweb Yeah, yeah. 27:54.60 Mike Kaeding Honest with who I am honest with where I'm at is actually way more powerful. Um because the right employee is the best kind of people that we work with they get behind that and you know a lot of times leaders often say it's lonely at the top and I think part of that comes from. 28:07.39 Dave Meyer_ BizzyWeb Help. 28:11.99 Mike Kaeding Wanting to project a certain level of confidence but they don't necessarily feel that internally and so there's a little bit of a divide between you and your staff as a result for me I'm not pessimistic I'm still positive about the future. But I'm honest about our weaknesses our mistakes our failures. Um, if we have a big mistake I mean literally within days. There's a full team meeting where everyone gets to hear about exactly what happened. In fact, we do play engagement surveys and we got our feedback on those surveys and we share that with the teams quite openly and my results which are typically a hidden thing in this survey. They get to see my results openly and honestyly and last year we took it a step further and now we show all of our results on our website. You can read all of the comments. The good the bad and the ugly and trust me, there's plenty of ugly but the reason I do that is I don't want to be fake. Good. 28:50.23 Dave Meyer_ BizzyWeb Um. 28:59.14 Dave Meyer_ BizzyWeb For now. 29:06.48 Dave Meyer_ BizzyWeb Who. 29:08.44 Mike Kaeding I want to actually be good and the first step to be actually becoming good is to say hey I'm Mike and I have problems but I'm working on them and the magic is when you're honest, like that. Not only does that help you improve even more but the people around you give you grace and support. And help to gain and build that in yourself and then they become more humble and willing to take feedback as well. I think that's the only way to really get to a high level of performance. 29:38.65 bizzyweb Wow. 29:42.36 Dave Meyer_ BizzyWeb That's that's really powerful Mike and I think as you're as you're talking about building culture and how to be transparent and honest and kind of share that fosters the ability for people to speak up. 29:56.80 Mike Kaeding The. 29:58.74 Dave Meyer_ BizzyWeb And especially if you're hiring the right people you want their input and their feedback and it sounds like you have ah a community or you've built a culture where mistakes aren't just tolerated. But. The risk taking that goes into making a mistake is embraced and yeah. 30:20.30 Mike Kaeding Is this celebrated? Yeah, we had ah someone who made a ah like a million dollar mistake and they came to me a little terrified and basically expecting that this is the end of their job and told them I'm like dude I would be crazy to let you go. 30:27.11 Dave Meyer_ BizzyWeb A a. 30:36.11 Mike Kaeding Because now you've just learned what causes that million dollar mistake you are more valuable to me today than you were before that mistake and we talk about that at orientation to I do all the orientations and we talk about the the keep tasks. We're very open about it and said this is the scariest thing about our company. 30:48.62 Dave Meyer_ BizzyWeb He. 30:55.67 Mike Kaeding And say some people are a little afraid of that they think well I'm just walking on egg shells because if you make a mistake, you're just going to fire me and I say no, how do we decide who to hire and fire. What's our values is there anywhere and her values that talk about making mistakes mean a bad thing. No. 30:56.48 Dave Meyer_ BizzyWeb When. 31:07.25 Dave Meyer_ BizzyWeb Who. 31:14.65 Mike Kaeding It's actually polar the opposite we want to achieve great things. We want to change this world and that requires us to try new things this will result in mistakes. In fact, if you're not making any mistakes I am concerned because that means you're not really trying. 31:21.29 Dave Meyer_ BizzyWeb Only. 31:30.81 bizzyweb The. 31:33.42 Dave Meyer_ BizzyWeb For sure. Ah, how do you? How do you set up and kind of kind of looping back a little bit to I know in big projects like this you probably are are working with funding sources and partners and people that um might want to have feedback or input. 31:46.65 Mike Kaeding Um. 31:50.74 Dave Meyer_ BizzyWeb So How how do you handle like bankers that want to be much more conservative than what you're looking to push forward right? because you know decreasing the cost of rents in your buildings is probably not chief on that investors. Outlook where they're saying you know I I Actually want you to double your rents because then that means more money for me. So How do you handle that balance between more conservative or you know cash flow based versus values based conversations. 32:25.91 Mike Kaeding Yeah, that's a great question. It's something I don't know if we have a perfect answer for I think one well 1 thing we have done because our costs are so low. Um I don't have any equity investors I mean that that might change in the future but it's just my wife. My. 32:28.10 Dave Meyer_ BizzyWeb Yes. 32:35.50 Dave Meyer_ BizzyWeb Awesome. 32:37.53 bizzyweb Even in your building projects Whoa That's not a small thing. 32:41.12 Mike Kaeding Yeah, yeah, we're a hundred percent owner of all of it. Um, yeah, um, no, not at all I mean if you think about it. Our traditional costs are 25% less than what the value is well. Banks are typically willing to lend at 75% of cost. 32:41.63 Dave Meyer_ BizzyWeb Wow, That's amazing. 32:57.18 Dave Meyer_ BizzyWeb Yeah. 32:59.49 Mike Kaeding And so or at least a value and there's some. There's some things we have to work out with the banks on that but generally they're funding most if not all of each project and so we don't need equity investors typically as a result of that now the world's changed a little bit in the last couple of years because a rising interest rates but generally that's been the case for us. 33:01.85 Dave Meyer_ BizzyWeb With. 33:13.69 Dave Meyer_ BizzyWeb Or. 33:18.10 Mike Kaeding From a Banker's standpoint as long as the all of their key metrics kind of pencil out and the deal makes sense. They're on Board. Um from an investor standpoint we have something like our norhard invest platform where we've actually taken a little bit of a different approach. It's more like a preferred equity structure where we define the interest or the rates that you get because I am afraid of investors that are just truly on the they're wanting this two X Return kind of thing because that's kind of not in line with our dream of solving housing affordability. So we're. 33:39.33 Dave Meyer_ BizzyWeb Well. 33:44.94 Dave Meyer_ BizzyWeb Right? name me. Yeah. 33:54.85 Mike Kaeding What we do then is we just we just outline what your returns will be come in agreement with that as long as we're hitting those metrics and providing the returns people want to see they're happy. 34:02.33 Dave Meyer_ BizzyWeb 12 34:03.48 bizzyweb I Want to get back to the the people element because you at Norhard do something that is well. It's not in wholly unique, but it's certainly unusual. What's your pto structure like. 34:21.24 Mike Kaeding Ah, yeah, it's unlimited and so I know that's ah like in Software. That's not uncommon but in the world of construction I don't know anyone who's ever done Unlimited paid time off for like hourly employees like low level employees. And yeah, it's. It was a bit terrifying but it's awesome and when you have great people. They don't abuse it right? That's the magic and what we've learned is we would give as much power freedom or flexiibility as we can to our staff even down to giving everyone credit like not quite everyone but almost anyone who needs it anyone who asks for it will get a credit card. 34:42.27 Dave Meyer_ BizzyWeb Are both. 34:57.42 Mike Kaeding But unlimited spending power right? Like we don't put any kind of restrictions in that kind of stuff because we find that the best people we just need to get out of their way rather than putting a bunch of rules and boxes around them. 35:10.74 bizzyweb Have you had any money have you used those things I mean an unlimited credit card with excellent spending power I'd be I'd be scoring launches every day. Probably why dad probably why I don't have 1 but um, yeah I mean did you have what did did that create did. 35:18.24 Mike Kaeding Ah, you know. 35:26.97 bizzyweb Did some people who but surprised you bubble up to the surface and take three week vacations or something. 35:33.66 Mike Kaeding Um, so if if someone's take an excessive vacation. It's it's never really been a problem but we'll just have a conversation say you know it seems like it's been a little higher than sort of what we see typically. 35:44.70 Dave Meyer_ BizzyWeb Are. 35:46.27 Mike Kaeding Oh okay, you had your family death. You know there's some really legitimate reasons. Not a problem. it's it's fine um so we haven't seen too much issue there I think the the credit card is interesting and we haven't had any problem with that. But 1 of the things I frame it with at orientation as I say guys imagine for a moment. It's a hot awful week and I know I hired you as an electrician or a plumber or a designer. But today I need to go out and shovel rocks if you ever shovelled rocks before it's terrible. You get like 1 rock on each shovel. It's like ah it's it's awful and you're out there in the hot and 9000 degree weather. 36:17.44 bizzyweb Depth. 36:17.84 Dave Meyer_ BizzyWeb Um, and me. 36:24.67 Mike Kaeding And a few days in your shovel breaks and you're like swearing my name underneath your bra. You're really just upset. But at least you got this company credit card right? So you can go to the home improvement store. You go to the shut the checkout line and you you see it. You know that that shovel six thousand the one that can shovel rocks. You're super excited about it hang. You didn't get to the checkout line. 36:41.27 Dave Meyer_ BizzyWeb Um. 36:44.62 Mike Kaeding That's when you release yeah the ice cold bottle of Coca-cola you think to yourself? Dude Mike is an idiot. This place is crazy I've earned this I deserve it. You take the coldcacola and you put it on the company credit card. Okay, that's s scenariore 1 snare number 2 36:45.78 bizzyweb Cold lemonade. Yeah. 36:51.22 Dave Meyer_ BizzyWeb Um. 37:03.59 Mike Kaeding Same hot awful week your shovel breaks to go to the store get a new shovel get to the checkout line and you see it. But now you think to yourself dude my team has been struggling. My team could use it pick me up. My team could benefit from some ice cold Coca Cola and so you take the. 37:18.17 Dave Meyer_ BizzyWeb A with. 37:23.70 Mike Kaeding Coca-cola and you buy it with the company credit card and I tell everyone I say dude if you're the first person I don't want you here. But if you're the second person I love and adore you and I want more of you see I can't create enough rules to define those 2 but what manners to me is where your heart is at is your heart in the right place when making these kinds of decisions and if it is you're in a good spot. 37:43.15 Dave Meyer_ BizzyWeb So who. 37:51.65 bizzyweb I think I would fall into category number 3 which is um I would think oh crap I broke my shovel I ruined a company acid I need to go get a new one. 37:52.75 Dave Meyer_ BizzyWeb What reals. 38:05.33 bizzyweb And put it on my own credit card and then pretend it was the same shovel. You gave me. 38:10.26 Mike Kaeding Ah I hope nobody in our company is afraid to ah to be open when they need something. But yeah, that could happen. 38:14.36 bizzyweb Wow. Okay, so getting back getting back to the housing crisis. what's what's the next five years looks like I know you're opening the lux building which is cool and I bet it's you know, giving a lot of people to to the opportunity to flex a little bit more. But. I think before I yeah answer that question where where are we as a country going in terms of housing. 38:38.20 Mike Kaeding Yeah, it's really interesting right now because home mortgage rates I think I saw recently were the highest they've ever been home. Prices are still increasing and so home ownership affordability is like the worst. It's been I think in 20 or 30 years. 38:49.68 Dave Meyer_ BizzyWeb Um. 38:55.16 Mike Kaeding So that's moving more people into rentals right now and we haven't seen the increases as much in the rental market that we've seen prior years. That's good news that the scary news looking out the next couple of years is the new apartment starts. Has fallen off a cliff in Minnesota in the twin cities right now. It's fallen by 90% nationwide. It's fallen by like what was that oh people starting new apartment projects. So there's projects that are under construction that will be finished up. 39:15.55 Dave Meyer_ BizzyWeb Um, oh. 39:17.13 bizzyweb What do you mean by it. What's not what's in a what's an apartment start. 39:24.24 Dave Meyer_ BizzyWeb Oh. 39:29.70 Mike Kaeding Those are deliveries but starts as someone breaking ground doing a new building and so that's fallen by 90% in the twin cities by 70 to eighty percent in the rest of the country and so you pair this home ownership affordability getting worse. So more people moving to durant pair that with. 39:31.86 Dave Meyer_ BizzyWeb Who. 39:38.40 Dave Meyer_ BizzyWeb Oh. 39:47.82 Mike Kaeding No new supply or much less supply of apartments I'd see a perfect storm over the next couple of years where apartment prices might climb substantially and so we're trying to get out ahead of that and to produce more of those units which is what we're working on. 39:51.78 Dave Meyer_ BizzyWeb Oh. 40:02.70 Dave Meyer_ BizzyWeb So and especially when we're talking about trends right? So one of the things that I was reading recently is that the Airbnb Trends and and all that stuff like on on homes and vacation properties and things that. 40:08.76 Mike Kaeding Um, yeah. 40:19.88 Dave Meyer_ BizzyWeb We're we're nearing a time of reckoning where the interest rates are probably pushing people where they're not going to really really be able to make their money back that probably doesn't impact you terribly hugely in the apartment space on on where you are like um I don't know if. 40:29.35 Mike Kaeding Um. 40:36.55 Dave Meyer_ BizzyWeb People can airbn be out or you know how that how that works but you know how do do you see any other big changes coming. You know it's like the senior affordability problem and the fact that the boomers are all moving out of their homes and. They're they're looking for more affordable or downsized space. What? What are those big trends that are coming that we should all be cognizant of. 41:02.52 Mike Kaeding I think the big trend that we're seeing right now is rising interest rates are causing these deals to just not make sense and so like we said earlier, it's dropped by 90% here in the twin cities and the reason that is is simply because the interest rate is so high. 41:12.54 Dave Meyer_ BizzyWeb Um, a. 41:16.17 Dave Meyer_ BizzyWeb Okay. 41:21.85 Mike Kaeding There's no money left over for the equity investors and so the equity investors aren't interested in those projects anymore and everyone's pulled out I mean literally it's a bit of a frenzy right now in the market as a result of that where we have been positioned pretty Well again is our costs are lower. So even though now our costs have risen because of the interest rate expense. 41:28.50 Dave Meyer_ BizzyWeb Um, a. 41:34.64 Dave Meyer_ BizzyWeb Oh. 41:40.88 Mike Kaeding We can pivot into doing maybe an equity play or some other kind of investment play where other people are going from the equity play into nothing because the numbers just don't work anymore. Um, so that's where it's been beneficial to us I think long term trends have been kind of interesting after 2008 41:49.29 Dave Meyer_ BizzyWeb Um, right. 41:58.40 Mike Kaeding Saw the shift from home ownership into rentals and I think last time I looked that shift was going back to home ownership. But now things are so chaotic. It's we had the the covered which impacted supply chain which now supply chain is better but it impacting interest rates where it's just impacting construction. 42:07.39 Dave Meyer_ BizzyWeb Who. 42:17.80 Mike Kaeding Like this wave that's going through the economy and it'll be interesting to see how it all pans out over time. 42:18.64 Dave Meyer_ BizzyWeb Who. 42:25.90 bizzyweb There's 1 other thing that I wanted to talk about that I think really makes norhart unique and just really fascinating and that's actually how Mike and I reconnected so what is norhart invest. 42:36.55 Mike Kaeding In no hard invest is a investment opportunity that people can put their money into it offers them high rates of return. We're much higher than a bank account and you can lock it between so 6 and twenty four months and then you get your money back after that time period um, yeah, it's a if it is an online account. Super easy to use and it feels a little bit like a banking count. It's not. It's not Fdic insured let me very clear about that. It's an investment. Ah, but we offer higher rates a return to compensate for that. 43:12.81 bizzyweb Is that is that something you're using to build buildings or is that a separate and project unto itself. 43:20.38 Mike Kaeding I yeah, so we talked about the fact that construction or the interest rates are rising. So if we have a $100000000 building our costs might be 75000000 typically the banks offer 75 now. The banks may be only offering 55 there's still a pretty healthy profit margin on that entire building but we need to bridge that gap to get us back up to 75000000 to cover our construction costs. So that's where no hard invest comes in is that's a vehicle that we use to invest in these new projects ah to fill that bit of a gap. We do have additional protections I know how to invest itself. Where that's a separate entity investors put their money into it but we put our own money our own capital into it as well. And so if one of our deals heaven forbid loses money. The investor does not get hit first. We get hit first and we have to lose the assets that we put into it first before the investor will lose any of their assets. So our our goal with nore invest is really to protect the yeah the investor our dream is to bat a thousand so that no one ever even has to think about losing their money now it is an investment. 44:31.41 Dave Meyer_ BizzyWeb You hope you. 44:33.32 Mike Kaeding Can lose your money. This is not insurd very clear in all of that and make sure to read the disclaimers we have on our website. 44:38.56 bizzyweb So drawing drawing. Um ah a line from point a to point f or I shouldn't say f because that that means something given for G point a to point G is you're actually offering. 44:48.86 Dave Meyer_ BizzyWeb Um, and. 44:56.48 bizzyweb The general public the opportunity to help invest in and get returns on building for building affordable, housing and building a much larger community in order to help solve the the problem that you're that you're focused on. 45:08.57 Mike Kaeding Exactly and we went the more expensive route with the scc when it's called a reggae but allows us to allow anyone nationwide to invest but took us a year it took us hundreds of thousands of dollars thousands you know I think like a thousand pages of legal documents. We've got to get to audited. We've got to background trucks is a whole bunch of stuff in order to protect investors I think it's actually really good but we went that route first people thought it was crazy for doing it rather than going the easier route of going to institutional investors but I did that because we. And much rather give the public an opportunity to have access to investments like this that they normally can't and plus it's a really powerful way because you can now be invested in helping long term self housing affordability and earn a great interest rate on top of that. It's to me. It's a really a win win and I mix. And we get the kind of investors that way that are excited about what we're doing and so it's been a lot of fun. 46:08.11 bizzyweb Well Mike this has been great and thank you so much for joining us and as one of my former counselies from the small business. The sbdc I wish I could take credit for any of this but it it was. Ah, need to see you on the ground floor and see where you've gotten to today. So thank you so much for joining us if people are more interested in in norhart and obviously the investment opportunity I think is is really neat where can people find out more information about that. 46:25.35 Mike Kaeding Um. 46:35.92 Mike Kaeding Yeah, you can go to our website. It's norhart dot com that's norh a r t dot com and click on invest and 1 other fun thing is we have a show or we have a couple of shows but 1 of our podcasts is called 0 to unicorn. We look at people who have built businesses or built enterprises that have made a billion dollar kind of impact and are um season 2 is just about to launch and actually the first guests to season 2 is Michael Oslin who's original the executive producer of batman. 47:07.25 Dave Meyer_ BizzyWeb Um, cool. 47:10.65 Mike Kaeding And the lego movie national treasure some really incredible franchises. But what's interesting is it took him 10 years of pleading of of pitching of challenging of encouraging of finding the people. In order to get batman off the grounds. It's just really an incredible story. He was involved with Lego Batman too yeah 47:28.33 bizzyweb What the Lego Batman though yeah yeah I like I love lego Batman I'm a huge batman guy. So awesome Mike thank you so much for joining us. 47:28.58 Dave Meyer_ BizzyWeb Good death. That's so cool. 47:39.23 Mike Kaeding Yeah, thanks for having me.