Di . lem . ma noun – a situation in which a difficult choice has to be made between two or more alternatives.
Coliving has a dilemma. As the definition states, this dilemma is a difficult choice that Coliving operators have to make between two alternatives. These two alternatives are Community and Scalability. As an operator, do I create a Coliving product with a meaningful community or do I create a Coliving product that is scalable?
Speaking with dozens of operators around the world, the trade-off between Community and Scalability seems to be a foundational issue for the Coliving industry. Today we’ll explore the reasons why this dilemma exists and review some ways I believe operators can ‘crack Coliving’s dilemma.’
First, we’ll provide a background on the Coliving operators that typically fall on opposite side of the dilemma – small and large operators. Typically (although not always), small operators develop great communities and large operators are able to scale more rapidly.
Second, we’ll discuss each side of the dilemma and why it is seemingly difficult for Coliving operators to have both. Under what conditions do great communities naturally form? Why are large operators able to scale faster than small operators?
Third, we’ll introduce what I believe is the best strategy to crack Coliving’s dilemma: fully integrated user experience design. The strategy involves designing a living space AND living experience that will facilitate strong communities.
Lastly, we’ll focus on the multi-tiered community model that I believe can best crack Coliving’s dilemma. In future articles we’ll explore other important aspects of the living experience such as technology, spatial design, and community programming.
What constitutes ‘small’ vs. ‘big’ Coliving operators? When we say that community typically happens more organically in smaller locations, what separates big from small?
While we could just say any property with under 20 residents is ‘small’ and any property with over 50 residents is ‘big,’ in reality it’s a bit more complicated than that. The term Coliving right now is being attached to nearly every kind of residential product and the lines between the different executions are completely blurred. If you think of a housing spectrum with bunk beds in a hostel in Thailand on one end and a four-bedroom Manhattan penthouse suite on the other end, there are Coliving products that exist everywhere in between.
I feel like every time I turn around there is a new Coliving concept or some kind of hybrid model that wouldn’t fit in any of the existing Coliving categories. Trying to neatly define the different types of Coliving is a worthy pursuit but is not the goal of this article. Rather than get caught up in what is small vs. what is big, we’ll briefly describe each and provide a quick side-by-side comparison before jumping into the dilemma itself.
Whether small or big, all Coliving operators exist to provide their residents with a superior living experience compared to traditional living solutions. How they deliver that better living experience can vary quite drastically depending on a variety of variables, one of which is size.
As we explored in the Case for Small Gatherings article, meaningful relationships can best be formed in small groups. With this in mind, we can expect a Coliving house with ten residents to be more likely to develop a strong community when compared to an apartment building with 150 residents. I’m not saying that community can’t exist in a large group of people, but many aspects of human nature point to the smaller group forming closer bonds. We’ll explore this in depth in the next section.
For the sake of our discussion, the eye test will do just fine in separating small from big Coliving operators. If the Coliving company operates four locations with twelve beds each, that’s a small operator. If the Coliving company has raised tens of millions of dollars in funding and operates over 1,000 beds across multiple cities/countries, that’s a big operator. To make sure we’re on the same page, take a look at the table below for some characteristics of each.
Again, these are not cookie-cutter definitions. For example, many of the big operators that have many 50+ bedroom properties may also have properties in their portfolio that only have 6 bedrooms. There are also large operators such as Bungalow that only operate small properties, but are hoping to have over 12,000 residents by the end of 2020. The eye test, however, would classify all of these 1,000+ resident Coliving companies as big.
I’ve also had the chance to visit many big operators that are the poster children of the industry and are pushing Coliving towards being a mainstream housing option across the globe. You’ve probably heard of these, but here are a few for reference.
Before we move on, I just want to reiterate I’m NOT saying that small operators are better than big operators or vice versa. What I am saying is that operating less than five locations in one city could not be more different than operating fifty locations across ten countries. The finances are different, the operations are different, and the communities are different.
There are of course pros and cons of each, and this is exactly the reason why the Community vs. Scalability dilemma exists in the first place. Generally, small operators are better positioned to maintain a close-knit community and big operators are better positioned to scale rapidly.
Now let’s explore why that is the case.
Before we launch into strategies to overcome the community/scalability dilemma (allowing operators to choose both), we’ll first dig into why the perceived dilemma even exists. While the dilemma we’re discussing today is specific to the Coliving industry, similar dilemmas have existed in other industries for quite some time and they tend to revolve around business strategy.
For example, both Hugo Boss and Wal-Mart are successful at selling t-shirts, but in very different ways. Wal-Mart chooses the quantity/low price strategy and Hugo Boss chooses the quality/high price strategy. Just like the community vs. scalability trade-off in the Coliving industry, there exists a quantity vs. quality trade-off in the consumer goods industry.
So how can Coliving operators generate great communities? How can they generate a scalable business model? These are again massive questions that can’t be answered in a few paragraphs, but we’ll take a look at some high-level thoughts on each question.
When chatting with Coliving experts around the world, most agree that community happens locally, and it happens in small groups. Interestingly enough these claims are actually backed up by the scientific community, based most notably on the research of Oxford anthropologist and evolutionary psychologist Robin Dunbar.
Dunbar theorized that evolutionary processes have biologically defined the sizes of groups where humans function best. His most famous claim is that human brains only allow us to maintain a maximum of 150 meaningful relationships at one given time (150 is now known as Dunbar’s number). He also broke down human groups into a variety of sizes that have varying levels of intimacy and serve different functions.
The above graphic represents something we all already know but could not be more important for creating successful Coliving communities. At any point in our lives we probably have around 5 people that we trust/interact with most (family, best friends), 15-20 people that are close friends (inner friend circle), 45-50 we interact with on a weekly basis (coworkers, acquaintances), and maybe around 150 total that we are familiar with. Remember this graphic as we’ll come back to it later on.
So, what does this mean for small and big Coliving operators?
The main difference here is that small operators are able to maintain an intimacy that is unobtainable for the large operators. Looking at the graphic above, ALL of the residents in a ten-person location can fit in the “intimate relationship” ring. Live in a Coliving community with 200 residents in the same building? Dunbar would argue that the human brain is biologically incapable of maintaining meaningful relationships with the whole building.
If a small Coliving operator in San Diego has four locations with 50 total residents, there’s a high chance that the CEO/founder has met the majority of residents in person. This tends to create a “I’m a part of this movement” feeling and a tribe mentality where members feel super connected to fellow members as well as the larger organization.
In summary, human nature dictates that genuine connections have a size limit. Therefore, we can conclude that Coliving communities are more likely to flourish amongst smaller resident populations that are typical of small Coliving operators.
On the other side of the dilemma sits scalability. It is undeniably great to develop a meaningful community of ten residents and have all ten of them enjoy the various life benefits of Coliving. BUT, wouldn’t it be better if we could bring those same benefits to 100 people? 1,000 people? 1 million people?
This is where the large Coliving operators come into play and the main tool they have at their disposal to scale rapidly is economies of scale. The concept of economies of scale is fairly straightforward and is the main reason that mass production leads to lower prices. Without diving too deep down the rabbit hole, we’ll briefly cover the concept behind economies of scale.
Any business will have two main types of costs: fixed costs and variable costs. Fixed costs are ones that don’t change with a greater number of products and variable costs are ones that increase with a greater number of products. For Coliving companies, examples of fixed costs include staff payroll or trademark registration fees. If you’re a Coliving operator with ten residents or one hundred residents, you still have to hire a community manager and apply for a trademark – it will cost the each operator the same regardless of the number of residents.
Examples of variable costs for Coliving companies include furniture (beds, chairs, shower curtains) or utilities (lights, cooling/heating, etc.). If you have a ten resident Coliving location, you only pay for ten beds and the energy for ten rooms. With one hundred residents you’ll be buying 100 beds and paying energy costs for 100 rooms.
Here’s where the advantage of economies of scale comes in: both the small and big operators have to pay the fixed costs, but the big operator can ‘spread’ the cost over more residents. So, if both the small (10 residents) and big operator (100 residents) pay the community manager $100/day, it costs the small operator $10 per resident, but it costs the big operator only $1 per resident.
When you multiply this effect over all the fixed costs of a company, the cost savings can be extremely substantial for the bigger operators. So substantial, in fact, that it will allow them to build new buildings even faster. In the end it becomes a reinforcing feedback loop: the more Coliving rooms you operate, the more you save – and then when you save more, the more rooms you can build.
I’m clearly not an economics professor, so apologies if that explanation was confusing. But the main takeaway is this: Coliving companies operating bigger buildings can grow faster than Coliving companies operating smaller buildings.
So hopefully by now the perceived dilemma is a bit clearer. If you’re a small operator you have the advantage of community on your side, but you can’t grow as fast. If you’re a big operator you have the advantage of scalability on your side, but your big buildings won’t facilitate community as well.
So that’s it? We either have small Coliving operators with great communities or big Coliving operators that can grow faster?
The short answer is no, not necessarily. I recently had the chance to speak with some of the best thought leaders in the global Coliving industry and they have produced some ideas that used together can beat the dilemma.
In other words, I believe it is 100% possible for big Coliving operators to facilitate excellent communities at scale. And then thinking even bigger, if the entire global Coliving industry can maintain great communities while scaling rapidly, the sky is the limit for the collective positive impact of the Coliving movement.
Alright so we’re finally getting around to some potential solutions to our dilemma! Again, we’re going to look at the Coliving experience from a macro perspective and throw out some ideas as to how we can create strong communities in big buildings.
What sets Coliving apart from other living solutions? While there are lots of answers to this question, nearly all of them fall under one category: a better user experience.
Think about some of the biggest innovations of the past twenty years. The iPhone, for example. When the first iPhone came out it wasn’t the phone with the longest battery life or the biggest phone or the phone with the best camera. But it was the phone with the best user experience. It was designed well, convenient to use, and due to Apple’s culture/marketing, it was the coolest phone out there.
Look at Uber. In hindsight, the user experience of calling a cab, explaining to them where you are, and not knowing when they will arrive is pretty inconvenient. Ride sharing took the world by storm because it drastically improved the user experience. It’s just a better designed and more convenient way to get from A to B.
For me, this is exactly what Coliving is trying to do for the residential real estate industry – make a better designed and more convenient living experience. If there are other innovative living models not named Coliving that are trying to do the same thing, I’ll be the first one in line to cheer them on as well. Forget innovating phones, taxis, or TVs – we are WELL overdue for innovating the places that we spend the majority of our time and literally call home.
When is the last time residential real estate saw a truly disruptive innovation? Looking at lists of modern real estate innovations, they are chalk full of supplementary services like Zillow, AirBnb, and virtual reality tours. How we buy homes has changed, how we rent temporary stays has changed, but the underlying user experience of residential living solutions has not changed much at all.
In order for Coliving to meaningfully improve the user experience of residential living there are many different factors that must be redesigned to better fit twenty first century lifestyles. For me, all of these factors can fit into two categories: living experience design and architectural design.
There is of course the physical building that is necessary for any residential product and then there is the living experience that happens within that building. If Coliving operators can seamlessly integrate these two aspects into one united user experience, I believe they can crack Coliving’s biggest dilemma.
Below we’ll take a deep dive into how we can redesign the living experience to ensure the creation of strong communities. We will purposefully keep our discussion at a macro-level (or we would be here for hours), but I’m hoping in future articles to explore the details of community programming and how to actually implement a living experience strategy. Once we’ve established what a redesigned community living experience looks like, we’ll then examine how architectural design can be an instrumental tool in facilitating that living experience.
Like many people making their career in the Coliving industry, the idea of creating a better way for humans to live together is what got me into Coliving in the first place. If we started from scratch and threw all of our preconceived notions out the window, how would we design the perfect living experience?
Before even thinking about an answer for that question, we must define the basic needs of what humans actually want and/or require from a living experience. For that, we need look no further than a model that is mentioned quite often in the Coliving industry: Maslow’s Hierarchy of Needs.
Maslow’s Hierarchy is a beautifully simplistic way to illustrate what humans need in their lives and the relative importance of these needs. It starts off with the most basic needs of food and water and eventually ends with achieving one’s full potential. It’s also sequential so you must fulfill the lower lever needs before you can move up the hierarchy. For example, humans can’t fulfill their Esteem and Belongingness needs if they don’t first fulfill their basic needs of food, water, and safety.
Thinking back on the history of living solutions, the original focus was of course on the first two needs: Physiological needs and Safety needs. I can’t imagine cave dwellers moving into a new cave so they could better meet their self-fulfillment needs. What they required then (and what we still require now) was a shelter close to food and water and one that could give them safety from external threats (weather, predators, thieves).
Of course, modern living solutions still provide us with these basic needs, but in the twenty first century safety no longer needs to be the main focus for the majority of humans. Compared to humans that lived in caves or castles just to survive, modern people have the luxury to design living solutions that can start to address the higher levels of the hierarchy of needs. So, what’s the next need on the hierarchy that modern living solutions should look to master? Belongingness Needs.
As any Coliving operator will tell you, designing a Coliving living experience that can truly help create “intimate relationships and friends” is no easy task. Rather than jump straight into the details of planning events or creating an effective onboarding process, we’ll first need to revisit Dunbar’s theories to discover how to best fulfill the human need of Belonging.
Remember that Robin Dunbar made big waves in the field of evolutionary psychology starting in the 1990s by proposing humans can only maintain 150 meaningful relationships at once. While this was the most famous of his claims, Dunbar also defined a series of numbers that form the ‘layers’ of our social life. Here’s the graph again to remind us:
Over the past few weeks I dove down the rabbit hole of Dunbar’s research and have found it absolutely fascinating. Dunbar’s main contribution, the Social Brain Hypothesis, is built upon the theory that primates evolved larger brains not so they could process more information (as was believed until the 1980s), but so they could develop more complex social systems. The theory follows that since humans have the largest brains of all primates, we’re able to develop the most complex social systems.
But what are the limits of these social systems? How complex and how big will our brains allow them to be? That’s where Dunbar’s layers come in. Researching human groups in the past and present, Dunbar discovered a convincing amount of evidence that eventually formed into the different layers of his social layers hypothesis. Some intriguing evidence that supports his research:
My favorite evidence was found when Dunbar studied a dataset of six billion phone calls made in an unnamed European country in 2007. Parsing through all of the data (read the entire paper here), they identified that the average person has “clusters” of friends based on call frequency and the size of these clusters were extremely close to Dunbar’s layers: 4.1, 11.0, 29.8, and 128.9.
In summary, from nomadic villagers over ten thousand years ago to European smartphone users today, humans seem to form layered groups of relationships based on familiarity. Bringing it back to Coliving, how can we use Dunbar’s social layers theory to build better communities?
I believe the best way for Coliving operators to create meaningful communities is to start with an understanding of the science behind human social systems and then to create a living experience that is aligned accordingly. For example, if a Coliving operator’s goal is to have all 150 residents in their community be best friends, we can assume it will not work. According to the leading social science of the day, it doesn’t match with how humans form social bonds.
Therefore, Coliving’s biggest takeaway from Dunbar’s research on human social systems is that the genetic hardwiring of the human brain drives us to form ‘social layers’ of various sizes. Although we might never know exactly why we prefer such social layers, we should design our living solutions with this aspect of human nature in mind.
Thus, it follows that Coliving operators should design their living experience such that each resident can develop and maintain strong relationships in each of their social layers.
Turns out Dunbar isn’t the only one that recognizes the importance of creating community with social layers in mind. If you had the chance to read my Case for Coliving series, in Part 2 we discussed Marc Dunkelman’s relationship rings from his book Vanishing Neighbor. You’ll notice that Dunkelman’s rings (as seen below in my expertly crafted graphic) capture the exact same idea as Dunbar’s social layers:
Dunkelman’s hypothesis (influenced by Putnam’s research in Bowling Alone) is that prior to the 1970s people lived in towns/cities where they invested a healthy amount of social capital in all three rings, particularly in the Middle Rings. In modern towns/cities, Dunkelman argues that the average person no longer invests as much social capital in the Middle Rings. Smartphones allow us to be connected 24/7 to our Inner Rings while social media has increased the amount of Outer Ring contacts we are loosely connected to.
This shift has pushed the Middle Ring ‘neighbor’ out of modern lifestyles. I argued in Part 4 of the series that Coliving can help individuals maintain a healthy balance of social capital invested in each ring, particularly restoring the Middle Ring relationships that we have lost – Coliving can help us befriend our neighbors again. BUT that’s only possible if a Coliving operator’s living experience is specifically designed to create community across the rings/layers.
In the Coliving industry there are many community experts that are championing this approach as well and some even putting it into practice. Gaetan de Dietrich, whom I consider to be one of the best community visionaries in the global Coliving industry, is currently leading the Community Experience team at Hmlet to foster their resident community across multiple levels.
On a recent Co-Liv virtual meetup hosted by German design firm Space and Pepper, Gaetan spoke at length on how to design and scale a Coliving community. For me, the most important piece of information shared on the call was that “scale does not matter as long as you operate at multiple levels of community.” For Gaetan and Hmlet, the three community levels they aim to support are around 6, 15, and 30 people.
The idea is that 6 people form a flat – these are people you see all the time and hopefully create some kind of “flat community” with. The next level exists at around 15 people or a cluster of 2-3 flats – these are similar to Dunkelman’s Middle Rings in that they aren’t your best friends, but they are neighbors that you are familiar with and see on a weekly basis. The last level is around 30 people – it’s a big enough group to give residents a sense of inclusion and may be the maximum number of other residents you can realistically consider friends.
Gaetan contends that you could have 100 or 1,000 residents in a single Coliving building, but as long as the living experience supports resident groups at three levels (6, 15, & 30), you can still create a meaningful community. While this idea hasn’t been tested extensively quite yet, the social theories of Dunbar and Dunkelman seem to back up this approach to community.
Whether you use the term social layers, relationship rings, or community levels, the multi-tiered approach to community facilitation is the best strategy to create and scale a great living experience. In other words, this is how you get the best of both worlds and crack Coliving’s dilemma.
Before we celebrate that we ‘cracked Coliving’s dilemma,’ we should recognize that identifying a strategy is only the first step in the process. The much more difficult step is actually executing such a strategy in a cost-effective manner.
Rather than tackle this extremely wide topic now, in the future I hope to publish another series of articles that will aim to detail the different design elements of creating a multi-tiered community experience. Coliving elements such as technology, spatial design, and community programming are extremely important to leverage in order to create a seamless user experience.
Hopefully the breakdown of Coliving’s dilemma along with the review of the social sciences behind human relationship building has been interesting at the very least. I believe human nature should play a central role in how Coliving companies facilitate communities and as mentioned above, it’s possible this can be best achieved by using the multi-tiered community approach. Over the next few years it will be fascinating to review how different community models have performed and which will be the preferred Coliving model moving forward.
Stay tuned for my next article that will incorporate several discussions I have recently had with Coliving spatial design experts from around the world. In that piece we’ll cover many spatial design elements that can facilitate community and individual wellbeing and make the argument that the ‘cluster’ model is the best model to enable the multi-tiered community model.