tl;dr

• Construction industry faces massive growth but severe labor shortages
• Robotics and automation are key solutions, but challenges remain
• Best-of lists and market maps in construction tech often misleading
• Real insights come from customer conversations and financial data

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"The world is entering as we speak the most challenging and the most high activity era for construction ever. The Romans didn't build as much. We didn't build as much in the 1800s. We didn't build as much in the 1900s, or the last 25 years, as we will in the next 4 decades."

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Listen to this episode

00:00 - 14:00: Introduction and Bricks and Bytes podcast network updates

14:00 - 20:10: McKinsey's updated construction productivity report

20:10 - 29:00: Labor shortage in construction industry

29:00 - 38:00: Potential solutions to labor shortage

38:00 - 44:00: Attracting talent to construction industry

44:00 - 50:30: Patric Hellermann's analysis of "best-of" lists

50:30 - 54:00: Detailed breakdown of study results

54:00 - 57:30: Discussion on implications of the study

57:30: Closing remarks and end of episode

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Construction's Unprecedented Growth

We're standing on the brink of a construction boom that will dwarf anything we've seen before. McKinsey's latest report (NB: thanks to David Rockhill !) paints a picture so staggering, it's hard to wrap our heads around. The global construction market is set to explode from $13 trillion in 2023 to a mind-boggling $22 trillion by 2040. But that's just the tip of the iceberg. David and his team predict that there might be a an un-fulfilled construction demand overhang of $40 Trillion from 2024 to 2040 cumulatively.

Here's a fact that'll knock your socks off: 75% of the infrastructure the world will have in 2050 isn't even built yet. Let that sink in for a moment. We're not talking about minor upgrades or a few new buildings. We're talking about adding one New York City's worth of floor space every single month for the next 30 years. It's like we're building a new world on top of the one we already have.

And don't think this is just happening in developing countries. The US is looking at nearly doubling its floor space. Europe? They're not far behind with a projected 70% growth. This isn't some far-off future scenario. It's happening now, driven by a perfect storm of population growth, rising middle classes, and massive infrastructure needs.

The scale of what's coming is unprecedented. We're about to enter the most intense period of construction activity in human history. The Romans, with all their impressive engineering, didn't build this much. The Industrial Revolution? A drop in the bucket compared to what's coming. Even the massive building booms of the 20th century pale in comparison to the challenge ahead of us.

The Labor Crisis

Now, here's where things get tricky. While the demand for construction is shooting through the roof, we're facing a crisis on the supply side. The shortage of qualified workers isn't just a problem – it's a looming disaster.

In the US, the construction industry is staring down the barrel of a 40% loss in its qualified workforce by 2030. That's not in some distant future – that's just around the corner. Germany, known for its engineering prowess, is desperately seeking up to 300,000 electricians. Right now. Not in five years, not in ten. Now.

The UK isn't faring any better. They're on track to lose 20% of their construction workers in just a few years. This isn't a slow decline; it's a cliff edge.

But here's the kicker – this isn't just a Western problem. Take India, for example. They've got a massive workforce of 70 million construction workers. Sounds great, right? But here's the catch: they don't have enough qualified workers to handle the complex projects needed for their ambitious infrastructure plans. It's like having a huge army but not enough officers to lead them.

This labor crisis isn't just about numbers. It's about skills. It's about experience. It's about having people who can tackle the increasingly complex projects that our future cities and infrastructure will demand. And right now, those people are leaving the industry faster than we can replace them.

Robotics: A Part Of The Solution

Now, when we talk about solving this labor crisis, robotics and automation often come up as the silver bullet mentioned by generic pundits. But let's think for a second. It's not that simple.

We've been talking about off-site, modular construction for decades. The idea sounds great – build components in a controlled factory environment, then ship them to the site for assembly. It's efficient, it's consistent, and it can be heavily automated. So why hasn't it taken off at scale?

The answer lies in our (lacking) ability to shape the demand profile. Construction isn't like manufacturing cars or smartphones. The demand profile is for uniqueness, not for the same shape, due to the high AOV per order. Every site has its unique challenges. Unless we radically succeed in shaping the demand profile towards standard building types at massive scale (tens of millions per country) – which would make the world look like a scene from a 1960s Soviet movie – off-site robotics alone won't solve our problems at scale. It is that simple why it does not work.

Instead, we're more likely to see the rise of on-site robotics. These are machines designed to tackle specific tasks in the unpredictable environment of a construction site. Think of robots that can lay bricks, tie rebar, or even 3D print concrete structures. These aren't replacing human workers entirely; they're augmenting them, allowing skilled workers to focus on the tasks that require human judgment and creativity.

But even this isn't a complete solution. The construction industry is incredibly diverse, with projects ranging from simple home renovations to complex infrastructure builds. No single robotic solution can cover all these bases. We need a multi-pronged approach that combines automation with upskilling our workforce and attracting new talent.

Attracting New Talent

Speaking of new talent, we've got a major image problem to solve. Construction jobs aren't seen as sexy. They're often viewed as a fallback option, not a career of choice. We need to change this perception, and fast.

There's a cultural shift needed here. One poster in Germany captured this perfectly: "What's preventing me from taking a craftsman job? My academic parents." This sums up the challenge we're facing. We've spent decades pushing the idea that a white-collar job is the path to success. But in doing so, we've neglected the crucial roles that quite literally build our world.

We might need to rebrand these jobs. Take a page from the automotive industry's book. They transformed the role of "car mechanic" into "automotive mechatronics specialist." It's not just a fancy title – it reflects the increasing complexity and technological nature of the job. We need to do the same for construction roles.

Here's a prediction that might raise some eyebrows: the next generation of $200,000 jobs might well be plumbers and electricians. Think about it. As our buildings become smarter, as our infrastructure becomes more complex, the skills needed to maintain and improve them will be in high demand. We're not talking about your grandfather's plumbing job. We're talking about skilled technicians who understand complex systems, who can work with advanced materials, who can integrate smart home technologies.

But to get there, we need to start early. We need to show young people that a career in construction can be high-tech, well-paid, and crucial for society. We need to create clear career paths, invest in training programs, and yes, maybe even make it look a little cooler on social media.

Investment Realities in Construction Tech

Now, let's switch gears and talk about how we evaluate construction tech companies. If you've been in this space for any length of time, you've probably seen those flashy "best-of" lists and market maps. They're everywhere, promising to show you the hottest startups and the next big things in construction tech. But here's a hard truth: often, they're more hype than substance.

We decided to put these lists to the test. We conducted an extensive analysis of over 20 such lists, covering more than 530 construction tech companies. The results? Well, they were eye-opening, to say the least.

First off, we found that two-thirds of the capital raised by these "top" companies came before they were even mentioned on these lists. Think about that. These companies aren't being highlighted because they're doing something revolutionary. They're being highlighted because they've already raised a bunch of money. It's circular logic at its finest.

But it gets more interesting. We looked at companies that were rarely mentioned on these lists but had still raised significant capital. Guess what? They often outperformed the darlings of these lists. It's like these list-makers are looking in all the wrong places.

The most damning evidence came when we looked at what happened after the hype cycle of 2021. The least-mentioned companies – the ones these lists mostly ignored – raised almost three times as much as the most-mentioned ones. If these lists were any good at predicting success, we'd expect to see the opposite.

The Truth Behind the Hype

These findings expose a harsh reality: many of these lists are driven by PR and funding amounts, not actual performance or potential. They're often poor predictors of future success. It's like they're playing a game of follow-the-leader, where the leader is whoever shouts the loudest or has the biggest bank account.

So how do we find the real gems in construction tech? It comes down to three things:

Talk to customers. Nothing beats hearing directly from the people using these technologies. What problems are they solving? What new challenges are they creating?

Talk to suppliers. They often have insights into what's really happening on the ground.

Look at the P&L and cash flow statements. At the end of the day, a company needs to make money to survive. All the hype in the world can't cover up bad financials forever.

Now, we know not everyone has access to this kind of insider information. For those on the outside looking in, it's tougher. But that doesn't mean you should fall for the hype. Be skeptical of "best-of" lists. Dig deeper. Look for companies solving real problems, not just the ones with the flashiest PR.

The Future of Construction Tech

Despite all these challenges, we're incredibly optimistic about the future of construction tech. In fact, we'd argue it's potentially more exciting than healthcare for the next 20 years. Why? Because the problems are so big, and the potential impact is so massive.

We're seeing innovative startups tackling everything from training and cross-border labor sourcing to advanced software tools for workers. There are companies developing AI-powered project management systems, others creating new materials that are stronger and more sustainable, and still others working on autonomous construction vehicles.

The scale of the problem – matching massive demand with a shrinking skilled workforce – demands big technological leaps. It's an industry ripe for disruption and innovation. And unlike some tech sectors where the problems being solved can seem trivial, advances in construction tech have the potential to improve lives on a global scale. Better housing, more efficient infrastructure, more sustainable building practices – these aren't just nice-to-haves, they're essential for our future.

As we navigate this new era of construction, we need to be critical thinkers. Question the hype. Look for real results. Remember that the most promising companies might not be the ones grabbing headlines or topping lists.

The future of construction is being built right now. It's up to us – investors, entrepreneurs, workers, and yes, even consumers – to ensure we're building on a solid foundation of facts, not just flashy PR. The challenges are enormous, but so are the opportunities. Let's get building.

Companies mentioned

McKinsey, Gecko Robotics, Monumental, Nexii, HammerTech, Forge, Starbucks, KFC, BMW, Porsche, Google, InfraMarket, EquipmentShare, Built Technologies

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Keywords

construction technology, robotics, labor shortage, infrastructure growth, investment trends, market maps, best-of lists, construction automation