Mass Timber & Money #3: Innovation

R&D is missing critical aspects of Mass Timber’s ecosystem.??Why?

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When notions of user-focused mass timber research and development (R&D) initiatives arise, everyone’s a YES! Always a popular agenda item, innovation is usually greeted with great engagement.? But when asked how ideas offered might manifest, be measured or grow market share - enthusiasm fades. Such tensions are ubiquitous; however, this trait seems to manifest amid mass timber advocates more than most. It’s a curious aspect – one I’d suggest being worthy of deeper consideration.

Observations across my research point towards a nuanced bifurcation of thought surrounding innovation. This trait dovetails with my prior posts relating to awareness of mass timber’s tangible, product-oriented (“goods”) realm, as well as its intangible, investment (“services”) aspects.? Most agree interdependent ecosystems need integrated innovation to grow. This post attempts to put specific, attainable, action-oriented thoughts around a fuzzy but fun topic.

Innovation is often understood in two ways:

·????? The creation of something totally new.

·????? The recombination of known, existing elements in new and novel ways.

A 5-ply CLT panel, or a CAD-to-cutting 100% digital software service could be seen as examples of the former, or later. (Humans have been gluing wood and coordinating actions in creative ways forever.)??Either way, what they are not - are applicable examples of financial services related innovation. What they are - are examples which depend upon financial services innovation for their commercial success.? Translated to our conferences - when questions are asked about what breakthroughs are needed to unlock such capital flows - conversations tend to stall. This is because innovations needed to fuel such investments are hard to conceptualize, let alone realize.

History Helps:

As Voltaire observed - and as Howard Marks recently discussed with Morgan Housel - "History doesn't repeat itself. Man always does." It’s a helpful spirit from which we can consider prior evolutions across financial services.?The credit card, for instance, revolutionized commerce by better bridging consumers and merchants. ?This catalyzed an explosion in capital flows in new directions and scales. Today’s Silicon Valley giants offer additional examples. Google monetized search by pioneering new advertising services models.? Apple integrates hardware products and software services to create seamless commerce.? The take-away: trillion-dollar shifts – on the scale mass timber envisions - seem to involve a changing of how capital flows.

By contrast, mass timber R&D largely remains focused on cost reduction and product improvement - admirable pursuits, but insufficient for scaling an ecosystem. This is because financial mechanisms that enable investment are equally vital.? But that is not where our mass timber movement’s R&D mindset is moored.? Think about how the credit card example compares. Back in the 1950’s, the proposition amongst bankers and merchants was to envision a simple, small plastic object with a barely legible signature on its back becoming a trusted substitute for coins and cash. That was probably perceived to be of equal oddity and ambition as is our mass timber movement’s vision is today... to realize reformed city-building to create differentiated, profitable assets that also decarbonize, drive a manufacturing/rural renaissance, improve health and align with national security objectives. This too, is both odd, and audacious.?

Specific Applications:

To explore a bigger and broader mass timber innovation initiative, the list below is offered for consideration and critique. Note how it contrasts with ongoing, comparatively easier to understand, product-specific mass timber R&D.??This innovation fuels our conference sessions. And we have been lucky to have had their findings to help mass timber grow.??Examples of this traditional R&D include:

·????? The work coming out of labs at?Oregon State University’s Tallwood Institute.??

·????? The motivating?design explorations at University of Arkansas.??

·????? The full-scale earthquake testing led by?Colorado School of Mines’ Prof. Shiling Pei,

·????? The fire testing findings of Quebec’s?FP Innovations,

The point of these examples is to both note how its important - this work is relied upon by engineers and code officials - but also to note how it's not enough.??This is because financial services professionals also need to rely upon equally robust, user-based R&D financial findings to fuel their decision-making.??What might this look like? Examples of mass timber financial and/or services innovation that could help grow our ecosystem might include:??

1.???? Consumer Preferences Studies: what user’s value

Envision longitudinal surveys of mass timber building occupants to assess what is appreciated and paid for - and how such value generation may align with architect or developer perceptions.

2.?? Decarbonized Supply Chain Playbooks:?a contextual translation to hone actions

Collaborations with?world leading supply-chain & decarbonization experts, such as the Zero100?consortium, to research and translate “how it is done elsewhere” into mass timber ecosystem nodes - so that our private industry can benefit from such “IP” and technology transfer – avoiding the “reinvention of the wheel” hard lessons.

3.???Nudge Lab Toolkits;?behavioral finance means & methods to hasten impact

Applications of behavioral finance insights to investor and investee decision-making frictions that impede (or which may hasten) adoptions and ecosystem evolutions at scale. This could be akin to?U.Penn’s behavioral design team's R&D focused on our health care system.?

4.???Industrial Alignment and Facilitations:? resilience of existing supply-side firms??

Targeted conversations across global advanced manufacturing firms to leverage their product-development and expansion insights - because?changing industry and firms is hard – and industrial-scale change needs to be coordinated with capital investment.

5.???Investee Capacity Building Interventions:?critical firm up-skilling & readiness

Envision “venture philanthropic” approaches – as modeled by others aiming to enact social change like?Social Venture Partners, the nation’s leading social investment consortium, that work to transcribe proven mechanisms for community-driven capacity building of firms. These efforts would recognize that today’s mass timber firms need to scale up their abilities across all business realms for economically sustainable operations.??And that this is really hard.? Scaling necessitates business acumen as much as technical expertise.?

6.???Financial Workforce Pathways:?new energies & expertise internships

Partner with aligned business schools like Stanford, or entrepreneurship centers like?Lewis & Clark College’s Sustainability program, to help energetic and imaginative graduates flow into mass timber ecosystem-critical firms.? Talent underpins sustained change and growth.

7.???Investor Feedback Loops: facilitate redirecting and?unlocking of capital flows

Partner with investment professionals to understanding what needs to be created to help the due diligence data requirements of equity and debt providers related to their fiduciary requirements.??And to provide feedback to ongoing mass timber R&D – from product development or new investment-related ideas – on its potential to reduce ecosystem risks or improve investment flows/returns.??Such coordination is common, one example being?iREOC.

8.???Tail-Risk Assessments:?underwriting the 5%

Translate engineering test results – from fire to earthquakes – into understandable, probabilistic tools that insurance underwriters could cite and utilize to ascribe risk or value.? And that asset holders could rely upon for “next generation” time horizon investment decisions.? This could mirror how health effects are understood by medical science, and then utilized by life insurance firms, the Society of Actuariesbeing an example.

9.???Business Cases:?more is more

Update and create more business case studies focused on investor/lender content akin to early examples developed and published three years ago. ??These are the tools which real estate appraisers or investment committees may appreciate, and which do not exist today in applicable-enough form.

Again, these are but a few ideas. Critique and additional ideas are welcomed!? But perhaps these illustrations are not advancing one's understanding of mass-timber applied financial innovation. As an alternative means, one can think about this investment innovation imperative via the academic ecosystem's representation of our world. Schools of Engineering, Forestry and Architecture are clearly engaged in mass timber R&D per their silos.? But that is mostly not true for Schools of Business, Centers for Entrepreneurship and Supply Chain Institutes. We probably also need Law Schools, Political Economy and Organizational Behavior departments to be welcomed in. From this lens, interdisciplinary work coupled with financial services industry partnerships is a way of thinking about holistically understood, user-centric investment R&D opportunity sets – tailored to scale-up mass timber investment rates.

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We’ve done this before:

The wood products industry has faced similar challenges before. Wood I-joists and plywood, now ubiquitous, were novel innovations just 50 and 100 years ago, respectively.? My best understanding of how Austria’s mass timber industry became the best is essentially – first, a couple of decades ago they “hit rock bottom.” Second, they started to collaborated across business, academic and government with a pragmatic mindset aimed at realizing massive ecosystem investments that can compete globally across price and quality. ?From i-joists to plywood to Austria - their commercial success examples are not merely functions of technical ability.? Rather, supporting financial services were created and adapted. ?A couple examples:

·????? Services relating to quality assurance and product standards arose, as illustrated today by our Engineered Wood Association (i.e.?the APA.) Why did this help grow the marketplace???Because the APA’s work allowed financial services professionals to cite and enforce investment expectations.??(Pension funds want to know they are creating a quality asset.)??

·????? Services relating to commoditization, trading and pricing arbitrage developed, as delivered today by groups like?Richmond International?(i.e. Forest city Trading Group.)??Why did this help grow the marketplace?? Because Richmond’s trading work helped investors have confidence across price consistency, price transparency and product availability considerations.??(Retirement funds want potential investments to be of predictable time and budget.)

Today’s mass timber products and production means lack many of these foundational supports—but there is no reason it cannot develop them. Our industry's expansion hinges not just on better panels or design tools but also on robust investment mechanisms. ?Learning from our own history offers confidence!? Mass timber’s future hinges on more than technical improvements—it requires a fundamental shift in how we approach investment, financial mechanisms, and market integration.

By learning from other financial evolutions, engaging new academic and investment partners, and developing robust investment norms, we can unlock capital flows that will accelerate adoption. This is not just about making better panels and beams — it’s about making mass timber an element within mainstream, investable assets. While past innovations have propelled the industry forward, true scalability demands a broader, interdisciplinary effort.

To distill this post:

·????? Our R&D focus is imbalanced towards tangible goods (products) - while financial and or services innovation is lacking.

·????? Analogous financial innovations give hope, and helpful frameworks to consider.

·????? Specific investment-focused R&D actions should be developed, debated and funded.

·????? Underlying principles of sound business and capital markets flows must be better applied to mass timber’s ecosystem – it is our burden to become “investable” or “value-creative.”

(as always... we hope this and prior articles help our collective conversations... thx for reading!)