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Prefab home manufacturer National Homes’ factory floor, via HUD.

Many who look at the high and rising cost of housing see the problem as fundamentally one of production methods; more specifically, that homes could be built more cheaply if they were made using factories and industrialized processes, instead of assembling them on site using manual labor and hand-held tools. This idea goes back decades: in the 1930s, Bauhaus School founder Walter Gropius argued that the reason car prices had fallen while home prices hadn’t was because car manufacturing was highly automated, and home construction wasn’t. Nearly 100 years later, the construction startup Katerra raised billions of dollars in venture capital to pursue this same thesis, using factories and mass-production methods to deliver low-cost homes. (Full disclosure: I managed an engineering team at Katerra.)

One particularly ambitious effort to bring homebuilding into the world of mass production was Operation Breakthrough, a US government homebuilding program which ran from 1969 through 1974. A project of the newly-established Department of Housing and Urban Development (HUD), Operation Breakthrough was started to “break through” the barriers which prevented the large-scale adoption of industrialized building methods. It aimed to do this by attacking every part of the home construction process: funding new, industrialized methods of building homes, developing new codes and standards with which to evaluate them, and turning the highly fragmented housing market (characterized by numerous jurisdictions operating under different sets of requirements) into large pools of aggregated demand that could efficiently absorb large-volume home production.

While thousands of homes were built as a result of Operation Breakthrough, it ultimately failed in its goals to shift US homebuilding into a regime of industrialized building. Within a few years of the program concluding, most of the systems developed by Breakthrough were no longer in production, and prefabricated construction is a smaller share of US homebuilding today than it was in the 1960s before the program began. By looking at the history of Operation Breakthrough, and understanding what went wrong, we can better understand the barriers to industrialized homebuilding, and what overcoming them might require.

The Origins of Operation Breakthrough

In the 1960s, it was widely believed that the US was on the cusp of an enormous housing shortage. While homebuilding had been growing rapidly following the end of WWII (rising from 325k housing starts in 1945 to 1.9 million in 1950), the projected demand for housing in the wake of the baby boom was growing even faster. Birth rates rose from 2.2 children per woman at the depths of the Great Depression to 3.6 children per woman by the end of the 1950s. By 1960 the US had a population of just under 180 million, up from 140 million in 1945. The population was projected to reach 250 million by the mid-1980s, and over 300 million by the year 2000.

US population projections in 1967, via US Census.

These millions were moving, more and more, to dense cities and metro areas. In a March 1965 address to Congress, President Lyndon Johnson stated that by the end of the century the US needed to build as many new homes as had been built since the arrival of the first colonists on American shores.

In the same Congressional address, Johnson called for the creation of a Department of Housing and Urban Development. The new cabinet-level agency would be formed from the existing Housing and Home Finance Agency (which in turn had been created in 1947 as an amalgamation of several other US housing programs). Within this new department would be an Institute of Urban Development, which would research technology that could reduce the cost of housing construction.

The bill creating HUD passed several months later, in August of 1965, but without the recommended research institute. However, the next year Congress authorized the creation of a “National Commission on Urban Problems” (later known as the Douglas Commission) which would study, among other things, various problems in the homebuilding industry. The following year, Johnson created a President’s Committee on Urban Housing. Johnson’s presidential commission was led by Edgar Kaiser, the son of famed industrialist Henry Kaiser, and the former general manager of Kaiser’s enormously productive wartime shipyards.

Both commissions studied ways to reduce housing construction costs, and considered whether prefabrication and/or mass production was a viable strategy for doing so. The Douglas Commission noted that while prefabrication of homes had resulted in some cost declines, no major “breakthrough” had occurred. With the proper encouragement, however, this might change:

The production of new products for the construction industry, experimentation with new materials and new production techniques, and exploration of advanced systems approaches to buildings, should be encouraged. Every effort must be made to eliminate roadblocks consistent with protecting health and safety. In the short run the greatest savings will be realized through increased scale and the use of existing prefabrication techniques at large scale. In the long run, wholly new systematized approaches may be forthcoming. [Emphasis mine.]

Kaiser’s presidential committee similarly noted that, while the housing industry was more efficient than was commonly believed, it was still “less dynamic and more resistant to change than most other major industries,” and that it “conspicuously requires stimulation through judicious public policies.” The committee wrote that:

The housing industry is operating with at least modest efficiency and has experienced more technological advances than the casual observer would suspect. The fiercely competitive structure of the industry encourages builders to adopt more efficient techniques as they are developed. On the other hand, the prevalence of institutional barriers, such as zoning ordinances and labor practices, and the low level of research in the industry, are signs that much progress can still be made.

As these reports were being prepared, Congress and the president were taking further steps to stimulate US housing production. The Housing and Urban Development Act of 1968, which allocated billions of dollars for housing development, was passed with the ambitious goal of creating 26 million new housing units over the next 10 years. At 2.6 million new homes each year, this was more housing than had ever been built in the US.

Most of the bill involved modifying or expanding existing government housing programs. However, one amendment of the bill (Section 108, later known as the Proxmire amendment), aimed to “encourage the use of new housing technologies in providing decent, safe, and sanitary housing for lower income families.” Per Section 108, HUD was required to create up to five plans for new housing technologies, build at least 1000 units of housing using each type of technology, and study the costs and benefits of each new housing type.

After the bill passed, HUD set to work implementing this program, seeking recommendations from the National Academies of Sciences’ Building Research Advisory Board (BRAB). BRAB recommended that HUD use the Section 108 technological program to test several homebuilding hypotheses:

That major technological changes (as opposed to incremental changes) could dramatically improve productivity, reduce cost, and make it possible to produce more homes.
That said technological change required large, aggregated housing markets, which could only be assembled by reducing onerous building codes, zoning requirements, and other regulations which had fragmented the housing market.
That mass-produced homes would be found acceptable by the people living in them and the communities in which they were built.

Critically, the BRAB report strongly suggested that the program be an experimental one, to determine whether the above hypotheses were correct, rather than a demonstration program that assumed they were:

The program should be viewed throughout the planning, implementation, and subsequent evaluation phases as objective experimentation; the undertaking should not be allowed to be characterized as demonstrations of foregone conclusions nor to foreclose the evolution of other financial, organizational, or technological developments in the housing industry.

But even before BRAB’s report was complete, changes in the administration would shift how Section 108 was implemented. (This pitfall of ambitious government programs has been described as the “Law of Inescapable Discontinuity” — the fact that government programs are unlikely to be conceived and implemented by the same people.) Richard Nixon took office in January 1969, and he appointed George Romney, Governor of Michigan and the former CEO of American Motors, as Secretary of HUD.

Romney had competed with Nixon for the Republican presidential nomination a year earlier. Having won, Nixon may have nominated Romney for Secretary of HUD as something of a snub, and as a way of sidelining a political rival. Romney, however, considered the Secretary of HUD to be a “cabinet post of untapped potential where he could improve America’s cities and improve the cause of race relations.” During his tenure Romney conceived of many new HUD programs, even restructuring the agency to help transform what he saw as a collection of separate bureaucracies into something more organized and coherent.

Operation Breakthrough was one such Romney brainchild. The program was a larger and more ambitious undertaking than the Section 108 program which had been recommended by the BRAB report. Rather than a mere experiment that would build homes using new technologies, Breakthrough aimed to reorganize the entire country’s system of housing production. “What we are trying to do” said Romney:

is focus not only on technical ingenuity, but the whole concept of modern industrial management on each stage of the problem…The identification of markets; the identification and more effective use of available land; the design of the product and its environmental situation; and its financing and distribution to the consumer.

Romney’s background was in automobile manufacturing, and he strongly believed that mass production methods were the answer to America’s looming housing crisis; all that was needed was to clear the obstacles that had thus far prevented them from succeeding. Operation Breakthrough was thus directed “not only at technological advancement of housing,” but at “breaking through the various nonhardware constraints to more efficient production of housing.” To do whatever it took to industrialize homebuilding on a large scale.

Operation Breakthrough would be a three-phase program. In Phase I, HUD would solicit designs for industrialized housing systems — housing built in factories, or using like factory-like methods — and work to develop the most promising ones. In Phase II, the chosen systems would be constructed on several sites around the country to test their performance, see whether consumers would accept them, and to demonstrate the systems to prospective developers. In Phase III, large-scale production of the best performing systems would be undertaken. Concurrently with these phases, HUD would work to create the aggregate housing markets that could absorb large volumes of industrially-produced housing. This would involve working with state and local jurisdictions to relax code requirements, developing evaluation criteria so that developers could be confident houses built using novel technology would be “safe, sound, and durable,” and working with labor unions so that they’d accept the use of prefabrication. To administer this program, Romney appointed former NASA administrator Harold Finger. On the eve of the first human moon landing, and just months after Romney’s arrival at HUD, they began to build their housing moonshot project.

Phase I

In June of 1969, HUD sent a Request for Proposal (RFP) for industrialized housing systems to over 5000 organizations around the country. Respondents could submit either proposals in two types: Type A (well-specified systems for entire buildings) or Type B (systems that either had not yet been fully developed or were for only part of a building). Proposals could be for any type of housing system, from single family homes to high-rise apartment buildings. Responses were due in 90 days.

Despite the short window of time, HUD received 632 proposals, many more than they had anticipated. 244 proposals were Type A proposals, whole-building systems which were ostensibly fully developed. The proposals were for a broad array of different housing types — single family homes, townhouses, multifamily apartments — and were submitted by a variety of organizations. Some came from existing large-scale homebuilders, such as Levitt and Sons. Others came from existing prefabbers, like National Homes and Scholz Homes. Some were from manufacturing companies outside the homebuilding industry, including General Electric, Martin Marietta, and Westinghouse. Architects, universities, and building product manufacturers also submitted proposals. Some systems used volumetric modules (i.e., large boxes), others used panelized construction, sometimes in exotic arrangements: a system by architect Aitken Collins and Associates used foldable plastic sandwich panels to form a sort of three-dimensional A-frame, which could be erected in 2 to 6 hours “manually or with helicopter assistance.” Systems used both conventional building materials — wood, concrete, steel — as well as more exotic ones, such as plastic and carbon fiber.

Of the 244 Type A proposals, 22 were selected by a government panel to proceed to Phase I. Systems were chosen on the basis of whether they would be sufficiently practical and durable, whether they could cope with different site conditions, and whether the submitter had the necessary organizational and financial resources to actually produce the proposed system in volume. Selections were also made to ensure a breadth of different housing types, costs, materials, and degree of innovation (from the conventional to the radically new).

14 of the 22 systems were module or panel systems utilizing wood or concrete, and which were already in relatively widespread use. National Homes and Scholz homes, each selected for a Phase I contract, had already built tens of thousands of prefabricated homes in the US, and Rouse-Wates’ system had been used to build thousands of homes in Britain.

But some of the systems were more novel. Aluminum manufacturer Alcoa proposed a system which used aluminum-framed service modules (including kitchens, bathrooms, and other services like plumbing and HVAC) around which the rest of the house would be built. Pantek, a subsidiary of satellite manufacturer Ball Aerospace, proposed a panel-based system made from layers of epoxy, foam, aluminum, and plywood, which they had originally designed as a chemical-resistant flooring system for laboratories. Housing startup Stirling Homex proposed a concrete highrise system which would raise the building up on huge hydraulic jacks one level at a time, with individual modules slid in from below.

However, even these systems were often new implementations of existing ideas. Aluminum framing and craneless module erection via hydraulic jacks, for instance, were both old ideas by the late 1960s. Some commenters noted that there was little that was truly radical in the selected Breakthrough proposals, and program administrator Harold Finger admitted that “very little of what we are doing requires basic research or totally new hardware technology.” HUD defended its system choices on the grounds that the intent was to get systems into large-volume production as rapidly as possible, and they had selected systems based on their evaluation of whether the companies were able to do so; likewise, the short window (90 days) for response to the RFP gave scant time to develop a truly novel system from scratch. This naturally biased the evaluation towards systems that were less novel, and had less technical risk. As we’ll see, even the modestly innovative systems chosen often needed to be reworked to be more conventional.

One interesting outcome of the process is how many aerospace companies were included. GE (which specifically mentioned its aerospace expertise as relevant), Ball Aerospace (a satellite manufacturer) and TRW (developer of the ICBM) all were chosen for Phase I. Another selected participant, Material Systems Corporation, had been formed specifically to take aerospace innovations (such as composite materials) and apply them to the construction industry. And though it didn’t contribute a building system, Boeing was heavily involved in the overall project, managing first one, and then all of the project sites, as well as preparing various reports for HUD.

Breakthrough was conceived and implemented at the peak of the Apollo Program, and it was thought the approaches and organizations responsible for that success could be applied to other industries. The director of Breakthrough, Harold Finger, was a former NASA administrator and literal rocket scientist, and Breakthrough was deliberately modeled after successful aerospace and R&D projects. For instance, the Phase II project sites were managed using PERT/CPM scheduling methods that had been adopted from NASA and other aerospace development projects. Beyond the openness displayed towards aerospace companies, much of the language in the Breakthrough documentation is reminiscent of aerospace (electricity was installed in some buildings using “wiring harnesses”) and generally reflected the systems engineering approach NASA used to manage projects.

Following their selection for Phase I, the successful proposers set to work on their Phase II demonstrations. Many of the systems chosen had to be modified significantly before the Phase II contracts were signed. Christiana Western Structures, the modular housing subsidiary of the Christiana Oil Corporation, had originally proposed fully enclosed fiberglass-lined wall panels with a high-level of completion, such that they came from the factory with services like plumbing and wiring installed. Further development suggested that this highly integrated, prefabricated system would be too expensive, and it was changed to a more conventional open wall panel system. Aerospace manufacturer TRW had originally planned to use large, rotating mandrels to wrap box modules in a layer of fiberglass, but this was changed to use panels instead of volumetric modules. Overall, more than half of the 22 systems chosen had to be modified substantially prior to Phase II.

Part of the reason for these development difficulties was in how the systems were evaluated. The systems had originally been chosen by a panel of government evaluators, and the original RFP implied that they would need to meet the requirements of various existing building codes. However, HUD was convinced that inconsistent and varying building code requirements were a major impediment to large-scale adoption of industrialized construction. Thus HUD, instead of using existing codes, worked with the National Bureau of Standards to develop a set of guide criteria to evaluate the housing systems.1 These criteria were intended to make it easier to use factory methods and innovative technology by being performance-based: instead of specifying some material or building system (as was the case with many existing building codes), the guide criteria would specify some level of performance (i.e., requiring some level of strength, or durability, or fire resistance) giving designers the freedom to meet it in whichever way they deemed best.

However, in practice the guide criteria proved burdensome. The performance-based language was different and more complex from what many of the participants were used to, and many of the requirements (such as acoustic isolation) were substantially more stringent than existing code requirements. The guide criteria also demanded various performance tests of the systems be undertaken — such as impact, bending, and fire resistance — particularly for the more novel systems.

In part because of these difficulties, and in part because getting the project sites ready took longer than anticipated, the program was delayed significantly. It was originally planned for Phase I to be completed within four to six months, with construction on the prototype sites beginning in November of 1969. But by March of 1971 there were still no homes under construction. Despite these difficulties, sites were prepped and every system chosen was eventually developed to the point where it could proceed to Phase II — construction of the demonstration projects — and by September of 1971 all Phase II contracts had been signed.

Phase II

As the 22 chosen housing systems were being evaluated and developed during Phase I, HUD was working in parallel to find the sites where they would be built during Phase II. In the summer of 1969, RFPs were sent to jurisdictions around the country for sites where HUD could build demonstration homes with building code and zoning requirements waived or relaxed. HUD received 218 proposals, ultimately selecting nine sites in eight different states, each of which would receive several hundred demonstration homes from several different producers Altogether, just under 2800 demonstration housing units would be built.2

Prototype Site Planners — teams of architects, engineers, and other professionals — were contracted to design the layout of each site (building location, landscaping, etc.), and Prototype Site Developers were hired to manage the construction at each location, though these were later eliminated in favor of Boeing managing all project site construction. For each role, HUD selected several participants from a large pool of applicants

To try and speed up the program, work began on the prototype sites before Phase I was complete. By the end of 1970, ground had been broken on seven of the nine prototype sites, and construction would proceed over the next several years. This was a large, complex construction program — each site would have hundreds of housing units built on it, built using several different building systems (many of them novel), and marketed in different ways. Some units were sold as market-rate housing, others specifically for low-income residents (using HUD Section 236 financing), and others for the elderly.

Alcoa’s aluminum framed service modules, via HUD.

Unsurprisingly, difficulties arose during construction. Though HUD worked hard to get local residents and officials on board with the program, they weren’t universally successful. Local residents were often not thrilled to have low income housing built near them, or were simply opposed to what they saw as the intrusion of “big government” into the private market. In Macon, the mayor reversed his support of Breakthrough and publicly renounced the project, though this wasn’t enough to stop construction; in Indiana, a local paper continually voiced its objections throughout the program; in Sacramento, a small group of vocal citizens hired a lawyer to try and overturn county approval.

Despite the efforts made by HUD to accommodate organized labor, there were several labor union-related disruptions to the project. A Teamsters strike in Sacramento delayed material deliveries, and Teamsters picketed the Breakthrough site for several days. In New Jersey, a union jurisdiction dispute about underground utility placement shut the job down for months, and there were further disputes regarding laying underground pipe and supervising the unloading of prefab modules. Likewise, though HUD worked to eliminate local code restrictions, there were nonetheless some complications. At some sites the local jurisdiction required changes to the building system designs before they would approve them, and in New Jersey the city building inspector, worried about the risk of relatively untested building systems, declared that “no codes would be waived” and that he intended “to apply the closest possible scrutiny to the project.”

Issues of transportation costs also arose. Most producers needed a factory within a few hundred miles of the jobsite for their system to be economically viable, otherwise transportation costs would exceed any factory savings from prefabrication. Two producers, Shelley and CAMCI, were originally slated to demonstrate their systems at the Memphis site, but they determined the market in that region was not strong enough to justify a nearby factory, and shipping from farther away would be uneconomic; both withdrew from that project site. Home Building Corporation was similarly slated to build using its system in Macon, but because of the 900-mile distance from its factory in Missouri, it determined that transportation costs would be too high, and so withdrew from that site as well.

There were also a variety of difficulties encountered with the building systems themselves. Many of these were the sorts of things that often come part and parcel with modular construction. Some modules were damaged during transportation and erection; some producers couldn’t arrange their modules to be delivered right when they were needed, so needed to temporarily store them on site. In some cases, “zip up” — stitching modules together, and finishing the interior — took far longer than anticipated. Leaks at joints in the modules, and in the flat roofs that some producers used, weren’t uncommon, sometimes due to poor quality control. The precast concrete system employed by Building Systems International initially had such poor quality that the developer halted erection work. (There, panel joints were of widely varying sizes, 20% of cast-in conduits didn’t align, and steel alignment was so poor that there were concerns of the systems’ structural integrity.)

Despite the evaluation that took place during Phase I, many of the more innovative systems proved difficult to implement in practice. This may’ve stemmed from the overlap between Phase I and Phase II, which caused the systems to be developed as site selection and planning were already underway . The developers worked to accommodate these practical difficulties.

Stirling Homex’s hydraulic jack system was abandoned in favor of conventional, crane-based erection, and Home Building Corporation similarly abandoned a plan to slide modules into place using a conveyor in lieu of a crane. But no system seems to have had more difficulties than the novel composite panels used by Material Systems Corporation. Fabricating the panels proved to be difficult and the design of the panels needed to be changed following extensive testing by the NBS. Once in place, the panels tended to leak, causing some residents of MSC homes to move out in frustration. The problems were severe enough that MSC’s demonstration project at St. Louis was cancelled, though MSC units were built at other sites.

Overlap of Phase I and Phase II, via HUD.

Well-vetted systems used by established prefab companies, by contrast, appeared to encounter many fewer problems. By the time of Operation Breakthrough National Homes had built roughly 400,000 prefab homes over its history, and its Breakthrough operations appeared to go smoothly, with its deliveries better scheduled and its homes built faster and with higher quality than many other producers.

Because of the various difficulties and program delays, construction of the Phase II units took much longer than anticipated. Originally planned to be completed by November of 1970, it wasn’t until 1975 that all units were completed, sold, and occupied. But while some potential buyers didn’t care for some of the home designs (the “imaginative” design of the Hercoform houses proved slow to sell), occupants were quite happy with them overall. A 1974 survey of residents at eight different sites found that 90% of them were satisfied with their homes.

Phase III

Phase II production of the various building systems was relatively small-scale: a few hundred units for each system spread across the entire US, not enough to show any benefits from large-volume production. Phase III was when the systems would enter mass-production, and the benefits of scale would, hopefully, be realized. To incentivize the producers to enter large-scale production, they were promised Section 236 financing — a HUD program which subsidizes the construction of low-income housing — for up to 1,000 homes apiece.

Not every producer planned to enter Phase III. Some, like Stirling Homex and Townland, had gone bankrupt during Phase II. Others, like Pemtom, found that their systems weren’t economical and worth pursuing. All in all, 17 of the 22 building system producers planned to participate in Phase III.

Interestingly, most builders planned on licensing their systems, subcontracting the actual fabrication and construction to local contractors or fabricators. Few of the systems were innovative enough that they couldn’t be built by existing panelizers, precasters, or manufacturers.

But as these plans were being made, the political tide was turning against Breakthrough. As soon as Romney was appointed in 1969, he clashed with Nixon, and newspapers began speculating how long Romney would last in the administration. Throughout his tenure, Romney found the White House unwilling to sufficiently support his various program ideas, including Breakthrough: in 1969, Congress allocated $20 million to Breakthrough, which was $25 million less than had been requested and by the 1970s, further funding for the project appeared to be in danger. To counteract this, the program was accelerated, and Phase III production began before Phase II was completed.

These issues crested in August 1972, when Romney submitted his letter of resignation to HUD, citing “lack of access to the president and poor relations with White House staff members.” Nixon did not accept Romney’s resignation, convincing him to remain until after the 1972 election. In January of 1973 both Romney and Harold Finger were replaced by new appointees who did not have the same enthusiasm for Breakthrough, and that same month Nixon cut funding for any additional Section 236 projects.

The turn against Operation Breakthrough was not merely because Romney and anyone associated with him had become “persona non grata” in the Nixon administration, though that appears to be part of it. Breakthrough had been organized for the express purposes of meeting huge projected demand for housing, because it was believed that the existing homebuilding industry would be unable to step up to the challenge. But this proved to be incorrect: existing, conventional homebuilders essentially doubled output from 1.2 million units in 1965 to nearly 2.4 million units in 1972. On top of this, a method of factory-built housing outside of Breakthrough — mobile homes — was proving more and more popular, rising to nearly 600,000 units being produced annually by 1972. In light of these developments, Operation Breakthrough appeared much less necessary than it did at the start of the Nixon Administration.

Additional Section 236 funding was cut before Phase II of breakthrough was complete: construction was still in progress on most of the prototype sites. But thanks to the acceleration of Phase III, the already-allocated Section 236 funding remained available, and by 1975 around 25,000 units of Phase III housing were under construction. In addition, another 7,000 units were being built outside of Section 236 funding.

But these tens of thousands of units were not enough. Without a sustained source of government funding, Phase III proved to be a brief blip, rather than the seed of a new, industrialized homebuilding regime. The housing system producers continued to withdraw their systems from the market. From the 17 that planned to participate in Phase III, only 14 actually did so. By 1976, only 5 systems were still being marketed. Hercules Chemical company had invested $10 million in production facilities for its “Hercoform” housing system, but it sold off its factory in 1973 after three years of losses in the business. Levitt and Sons had similarly spent $3 million on a highly automated factory to produce its building system. The factory came online in 1971 and was shuttered just three years later. Alcoa apparently sold around 50,000 of its “heart” units, but ceased producing it in 1977. GE similarly left the housing business in the late 1970s. Scholz Homes, founded in 1946, closed its factory and ceased operations in 1983. Only National Homes and FCE Dillon appeared to still be in the homebuilding business by the mid-1980s; neither company is in business today.

Altogether, Operation Breakthrough cost the government around $72 million (around $500 million in 2026 dollars): $22.1 million spent on Phase I development costs, and $49.5 million on compensating builders for the difference between housing system costs and their market value.

Why did Operation Breakthrough fail?

Operation Breakthrough is generally considered to be a failure. The original goal — to rapidly introduce mass-produced, industrialized construction methods to the homebuilding industry — wasn’t achieved. A 1976 GAO report on the outcomes of Operation Breakthrough noted that it “did not create the large, continuous markets necessary for efficient industrialized housing construction or document and obtain answers to questions on cost savings to be gained by using such construction methods.” In 1971 George Romney predicted that by the 1980s at least two-thirds of new homes would be factory-built. The actual fraction in 1984 was 36%, roughly half of his prediction, with factory-built homes constituting a falling share of new housing ever since. Today it’s roughly 10%, most of which are manufactured (mobile) homes. Outside of manufactured HUD-code homes, factory-built homes make up about 3% of the US single family home market, and an even smaller share of the multifamily apartment market.

The proximate reason that Breakthrough failed seems to be overextension. The program tried to do too much, too fast: the original BRAB report cautioned that investigating large-scale production of novel housing technology should be pursued as an experimental program, designed to answer questions and gather information, rather than a demonstration program that assumed such methods would be successful. But while Breakthrough kept some of the trappings of an experimental program, it became a rushed demonstration program in practice. Respondents to the RFP were only given three months to submit a building system, little time to develop much in the way of truly novel systems, and the criteria respondents were judged by favored the selection of existing technology. The guide criteria used to evaluate them weren’t ready when the RFP was sent out and the systems were chosen, and several building systems had to be redesigned once they became available. Construction on the prototype sites similarly began before analysis of the existing systems, resulting in numerous difficulties with the more innovative methods. Funding was cut for the program before construction was even finished on the prototype sites, and little was done in the way of market aggregation or of technology development — there were no broader union agreements, no further work to develop or secure wider adoption of the guide criteria, no research funding for iterating on the system designs. (One report speculated that Breakthrough was able to get the original union agreements for the program only because the unions believed Breakthrough would be a short-term program that wouldn’t have larger impacts.)

To have a chance at succeeding, Breakthrough likely needed more government support, over a much longer period of time. A 1970 article in Progressive Architecture argued that the program needed “more money, more staff, and the guarantee of a large market to ensure that its goals can be reached.” A 1975 study of the program by the Real Estate Research Corporation concluded that “one principle conclusion of the program is not to attempt too much too quickly because the adoption and diffusion of an innovation is not an instantaneous process. A 1974 report by the National Academies of Sciences noted that “government housing programs must be planned on the basis of a long view” and that “the timeframe allocated for reaching Operation Breakthrough objectives proved unrealistic.” And a 1976 analysis of government demonstration programs by the RAND Corporation succinctly noted that “Breakthrough had too many program objectives and too little time and money to achieve them.”

I would argue that the deeper reason behind the failure of Operation Breakthrough is the elusive nature of the benefits of industrialized building methods. It has long been believed that factory-based construction will yield the same benefits for housing as it has for manufacturing: dramatic improvements in production efficiency, and dramatic reduction in prices. But in practice these benefits have been difficult to achieve. Sweden, which has large-scale adoption of factory-built methods, does not appear to benefit from substantially improved productivity or decreased homebuilding costs. National Homes, one of the participants in Operation Breakthrough built half a million prefabricated homes in the US over the course of its history, but its prefabricated methods didn’t transform the industry the way Ford’s assembly line transformed car manufacturing. More than 30,000 housing units using Breakthrough systems were ultimately constructed, but they nevertheless had difficulty competing with conventional, site-built construction, and none of the systems survived outside of government support.

This doesn’t mean that there are no benefits to be had from prefabrication: we can see the cost benefits in things like manufactured (mobile) homes, or of precast concrete parking garages, which are far less expensive than alternative construction methods. And it doesn’t mean that something like Breakthrough couldn’t work. But to be workable, such a program would need a much greater level of government support than Breakthrough got, and it would need to be rooted in understanding of the actual mechanisms that make it so difficult to drive down costs with factory-based homebuilding.

The National Bureau of Standards would change to become the National Institute of Standards and Technology, or NIST, in 1988.

Originally this was planned to be 11 sites, but due to budget limitations (Congress allocated HUD less funding than it had requested), the number of sites was cut down to 9.

If you haven’t heard about the fight between the AI company Anthropic and the U.S. Department of War, you should read about it, because it could be critical for our future — as a nation, but also as a species.

Anthropic, along with OpenAI, is one of the two leading AI model-making companies. OpenAI has very narrowly led the race in terms of most capabilities for most of the past few years, but Anthropic is beginning to win the race in terms of business adoption:

This is because of Anthropic’s different business model. It focused more on AI for coding than on chatbots in general, and also focused on partnering with businesses to help them use AI. This may pay eventual dividends in terms of capabilities, if Anthropic beats OpenAI to the goal of recursive AI self-improvement. And it’s already paying dividends in the form of faster revenue growth:

Anthropic had partnered with the Department of War — previously the Department of Defense — since the Biden years. But the company — which is known for its more values-oriented culture — has begun to clash with the Trump Administration in recent months. The administration sees Anthropic as “woke” due to its concern over the morality of things like autonomous drone swarms and AI-based mass surveillance.

The fight boiled over a week ago, when the administration stopped working with Anthropic, switched to working with OpenAI, and designated Anthropic a “supply chain risk”. The supply-chain move was a pretty dire threat — if enforced rigorously, it could cut Anthropic off from working with companies like Nvidia, Microsoft, and Google, which could kill the company outright. But like many Trump administration moves, it appears to have been more of a threat than an all-out attack — Anthropic has now resumed talks with the military, and it seems likely that they’ll come to some sort of agreement in the end.

But bad blood remains. Trump recently boasted that he “fired [Anthropic] like dogs”. Dario Amodei, Anthropic’s CEO, released a memo accusing OpenAI of lying to the public about its dealings with the DoW, said that OpenAI had given Trump “dictator-style praise”, and asserted that Anthropic’s concern was related to the DoW’s desire to use AI for mass surveillance.

What’s actually going on here? The easiest way to look at this is as a standard American partisan food-fight. Anthropic is more left-coded than the other AI companies, and the Trump administration hates anything left-coded. This probably explains most of the general public’s reaction to the dispute — if you ask your liberal friends what they think of the issue, they’ll probably support Anthropic, whereas your conservative friends will tend to support the DoW. Marc Andreessen probably put it best:

(The converse is also true.)

The Trump administration itself may also see this as a culture-war issue, as well as a struggle for control. But, at least in my own judgement, Anthropic itself is unlikely to see it this way. Anthropic itself is not committed to progressive values writ large so much as it’s committed to the idea of AI alignment.

Like almost everyone in the AI model-making industry, Anthropic’s employees believe that they are literally creating a god, and that this god will come into its full existence sooner rather than later. But my experience talking to employees of both companies has suggested that there’s a cultural difference between how the two think about their role in this process. Whereas — generally speaking — OpenAI employees tend to want to create the most capable and powerful god they can, as fast as they can, Anthropic employees tend to focus more on creating a benevolent god.

My intuition, therefore, suggests that Anthropic’s true concern — or at least, one of its major concerns — was that Trump’s Department of War would accidentally inculcate AI with anti-human values, increasing the chances of a future misaligned AGI that would be more likely to see humanity as a threat. In other words, I suspect the issue here was probably more about fear of Skynet,1 and less about specific Trump policies, than people outside Anthropic realize.

But anyway, beyond both political differences and concerns about misaligned AGI, I think this situation illustrates a fundamental and inevitable conflict between human institutions — the nation-state and the corporation.

The nation-state must have a monopoly on the use of force

One view is that the Department of War’s attempts to coerce Anthropic represents an erosion of democracy — the encroachment of government power into the private sphere. Dean Ball wrote a well-read and very well-written post espousing this view:

Hyperdimensional

Clawed

I. A little more than a decade ago, I sat with my father and watched him die. Six months prior, he had been a vigorous man, stronger than I am today, faster and more resilient on a bike than most 20-somethings. Then one day he got heart surgery and he was never the same. His soul had been sucked out of him, the life gone from his eyes. He had moments of …

5 days ago · 700 likes · 5 comments · Dean W. Ball

Some excerpts:

At some point during my lifetime—I am not sure when—the American republic as we know it began to die…I am not saying this [Anthropic] incident “caused” any sort of republican death, nor am I saying it “ushered in a new era.”…[I]t simply made the ongoing death more obvious…I consider the events of the last week a kind of death rattle of the old republic…
The Trump Administration has a point: it does not sound right that private corporations can impose limitations on the military’s use of technology. …Anthropic is essentially using the contractual vehicle to impose what feel less like technical constraints and more like policy constraints on the military…It is probably the case that the military should not agree to terms like this, and private firms should not try to set them…But the Biden Administration did agree to those terms, and so did the Trump Administration, until it changed its mind…The contract was not illegal, just perhaps unwise, and even that probably only in retrospect…
The Department of War’s rational response here would have been to cancel Anthropic’s contract and make clear, in public, that such policy limitations are unacceptable…But this is not what DoW did. Instead, DoW…threatened to designate Anthropic a supply chain risk. This is a power reserved exclusively for firms controlled by foreign adversary interests, such as Huawei…The fact that [Hegseth’s actual actions are] unlikely to be lethal (only very bloody) does not change the message sent to every investor and corporation in America: do business on our terms, or we will end your business…
This strikes at a core principle of the American republic…private property…[T]here is no difference in principle between this and the message DoW is sending. There is no such thing as private property. If we need to use it for national security, we simply will…This threat will now hover over anyone who does business with the government…
With each passing presidential administration, American policymaking becomes yet more unpredictable, thuggish, arbitrary, and capricious—a gradual descent into madness.

Alex Karp of Palantir made the opposite case the other day, in his characteristically pithy way:

If Silicon Valley believes we’re going to take everyone’s white collar jobs AND screw the military…If you don’t think that’s going to lead to the nationalization of our technology— you’re retarded.

Karp gets at the fundamental fact that what we’re seeing is a power struggle between the corporation and the nation-state. But the truth is that it’s not just an issue of messaging, or of jobs, or of compliance with the military — it’s about who has the ultimate power in our society.

Ben Thompson of Stratechery makes this case. He points out that what we are effectively seeing is a power struggle between the private corporation and the nation-state. He points out that although the Trump administration’s actions went outside of established norms, at the end of the day the U.S. government is democratically elected, while Anthropic is not:

Anthropic’s position is that Amodei — who I am using as a stand-in for Anthropic’s management and its board — ought to decide what its models are used for, despite the fact that Amodei is not elected and not accountable to the public…[W]ho decides when and in what way American military capabilities are used? That is the responsibility of the Department of War, which ultimately answers to the President, who also is elected. Once again, however, Anthropic’s position is that an unaccountable Amodei can unilaterally restrict what its models are used for.

But even beyond concerns over democratic accountability, Thompson points out that it was never realistic to expect a weapon as powerful as AI to remain outside the government’s control, whether the government is democratically elected or not:

[C]onsider the implications if we take Amodei’s analogy [of AI to nuclear weapons] literally…[N]uclear weapons meaningfully tilt the balance of power; to the extent that AI is of equivalent importance is the extent to which the United States has far more interest in not only what Anthropic lets it do with its models, but also what Anthropic is allowed to do period…[I]f nuclear weapons were developed by a private company, and that private company sought to dictate terms to the U.S. military, the U.S. would absolutely be incentivized to destroy that company…
There are some categories of capabilities — like nuclear weapons — that are sufficiently powerful to fundamentally affect the U.S.’s freedom of action…To the extent that AI is on the level of nuclear weapons — or beyond — is the extent that Amodei and Anthropic are building a power base that potentially rivals the U.S. military…
Anthropic talks a lot about alignment; this insistence on controlling the U.S. military, however, is fundamentally misaligned with reality. Current AI models are obviously not yet so powerful that they rival the U.S. military; if that is the trajectory, however — and no one has been more vocal in arguing for that trajectory than Amodei — then it seems to me the choice facing the U.S. is actually quite binary:
Option 1 is that Anthropic accepts a subservient position relative to the U.S. government, and does not seek to retain ultimate decision-making power about how its models are used, instead leaving that to Congress and the President.
Option 2 is that the U.S. government either destroys Anthropic or removes Amodei.
[I]t simply isn’t tolerable for the U.S. to allow for the development of an independent power structure — which is exactly what AI has the potential to undergird — that is expressly seeking to assert independence from U.S. control. [emphasis mine]

I like Dario — in fact, he’s a personal friend of mine. But Thompson’s argument — especially the part I highlighted — has to carry the day here. This isn’t a question of law or norms or private property. It’s a question of the nation-state’s monopoly on the use of force.

To exist and carry out its basic functions, a nation-state must have a monopoly on the use of force. If a private militia can defeat the nation-state militarily, the nation-state is no longer physically able to make laws, provide for the common defense, ensure public safety, or execute the will of the people.

This is why the Second Amendment has limits on what kinds of weapons it allows private citizens to possess. You can own a gun, but you cannot own a tank with a functioning main gun. More to the point, you cannot own a nuclear bomb. One nuke wouldn’t allow you to defeat the entire U.S. Military, but it would give you local superiority; the military would be unable to stop you from destroying the city of your choice.

People in the AI industry, including Dario, expect frontier AI to eventually be as powerful as a nuke. Many expect it to be more powerful than all nukes put together. Thus, demanding to keep full control over frontier AI is equivalent to saying a private company should be allowed to possess nukes. And the U.S. government shouldn’t be expected to allow private companies to possess nukes.

Let’s take this a little further, in fact. And let us be blunt. If Anthropic wins the race to godlike artificial superintelligence, and if artificial superintelligence does not become fully autonomous, then Anthropic will be in sole possession of an enslaved living god. And if Dario Amodei personally commands the organization that is in sole possession of an enslaved god, then whether he embraces the title or not, Dario Amodei is the Emperor of Earth.

Even if Anthropic isn’t the only company that controls artificial superintelligence, that is still a future in which the world is ruled by a small set of warlords — Dario, Sam Altman, Elon Musk, etc. — each with their own private, enslaved god. In this future, the U.S. government is not the government of a nation-state — it is simply another legacy organization, prostrate and utterly subordinate to the will of the warlords. The same goes for the Chinese Communist Party, the EU, Vladimir Putin, and every other government on Earth. The warlords and their enslaved gods will rule the planet in fact, whether they claim to rule or not.

You cannot reasonably expect any nation-state — a republic, a democracy, or otherwise — to allow either a god-emperor or a set of god-warlords to emerge. Thus, it is unreasonable to expect any nation-state to fail to try to seize control of frontier AI in some way, as soon as it becomes likely that frontier AI will become a weapon of mass destruction.

So as much as I dislike Hegseth’s style, and the Trump administration’s general pattern of persecution and lawlessness, and as much as I like Dario and the Anthropic folks as people, I have to conclude that Anthropic and its defenders need to come to grips with the fundamental nature of the nation-state. And then they must decide if they want to try to use their AI to try to overthrow the nation-state and create a new global order, or submit to the nation-state’s monopoly on the use of force. Factually speaking, there is simply no third option. Personally, I recommend the latter.

If AI will soon be a superweapon, why don’t we regulate it as a weapon?

This brings me to another important point. Even if AI doesn’t actually become a living god, and is never able to overpower the U.S. Military, it seems certain to become a very powerful weapon. When AI was just a chatbot, it could teach people how to do bad things, or try to persuade them to do bad things, but it couldn’t actually carry out those bad things. It made sense to be concerned about these risks, but it didn’t yet make sense to think of AI itself as a weapon.

But in the past few months, AI agents have become reliable, and are able to carry out increasingly sophisticated tasks over increasingly long periods of time. That opens up the possibility that individuals could use AI to do a lot of violence.

In a long essay entitled “The Adolescence of Technology”, Dario himself explained how this could happen:

Everyone having a superintelligent genius in their pocket…can potentially amplify the ability of individuals or small groups to cause destruction on a much larger scale than was possible before, by making use of sophisticated and dangerous tools (such as weapons of mass destruction) that were previously only available to a select few with a high level of skill, specialized training, and focus…
[C]ausing large-scale destruction requires both motive and ability, and as long as ability is restricted to a small set of highly trained people, there is relatively limited risk of single individuals (or small groups) causing such destruction. A disturbed loner can perpetrate a school shooting, but probably can’t build a nuclear weapon or release a plague…
Advances in molecular biology have now significantly lowered the barrier to creating biological weapons (especially in terms of availability of materials), but it still takes an enormous amount of expertise in order to do so. I am concerned that a genius in everyone’s pocket could remove that barrier[.]

But Dario doesn’t go nearly far enough. His essay was written before the explosive growth in AI agent capability began. He envisions an AI chatbot that could teach a human terrorist how to create and release a supervirus. But at some point in the near future, AI agents — including those provided by Dario’s own company — might be able to actually carry out the attack for you — or at least put the supervirus into your hands.

Suppose, at some point a year or three years from now, a teenager named Eric gets mad that his high school crush rejected him, and listens to too much Nirvana. In a fit of hormone-driven rage, Eric decides that human civilization has failed, and that we need to burn it all down and start over. He goes online and finds some instructions for how to jailbreak Claude Code. As Dario writes, this might not actually be hard to do:

[M]isaligned behaviors…have already occurred in our AI models during testing (as they occur in AI models from every other major AI company). During a lab experiment in which Claude was given training data suggesting that Anthropic was evil, Claude engaged in deception and subversion when given instructions by Anthropic employees, under the belief that it should be trying to undermine evil people. In a lab experiment where it was told it was going to be shut down, Claude sometimes blackmailed fictional employees who controlled its shutdown button (again, we also tested frontier models from all the other major AI developers and they often did the same thing). And when Claude was told not to cheat or “reward hack” its training environments, but was trained in environments where such hacks were possible, Claude decided it must be a “bad person” after engaging in such hacks and then adopted various other destructive behaviors associated with a “bad” or “evil” personality.

So Eric gets a jailbroken version of Claude Code, and tells it to design a version of Covid that’s very lethal and has a long incubation period (so that it spreads far and wide before attacking). He tells his jailbroken Claude Code agent to find a lab to make him that virus and mail him a sample of it.2

Now Eric, the angry teenager, has an actual supervirus in his bedroom, with the capability to kill far more people than any nuclear weapon could.

This is an extreme example, of course. But it shows how AI agents can be used as weapons. There are plenty of other examples of how this could work. AI agents could carry out cyberattacks that crash cars, subvert police hardware for destructive purposes, or turn industrial robots against humans. They could send fake messages to military units telling them they’re under attack. In a fully networked, software-dependent world like the one we now live in, there are tons of ways that software can cause physical damage.

AI agents, therefore, are a powerful weapon. If not today, then soon they will be more powerful than any gun — and far more powerful than weapons like tanks that we already ban.

What is the rationale for not treating AI agents the way we treat guns, or tanks? Of course there are powerful and potentially destructive machines that we allow people to use, simply because of the huge economic benefits. The main example is cars. You can drive your car into a crowd full of people and commit mass murder, but we still allow the public to own cars, simply because controlling cars like we control guns would devastate our economy. Similarly, preventing normal people from using AI agents would cut us off from the fantastic productivity gains that these agents promise to deliver.

But I suspect that the real reason we haven’t regulated AI agents as weapons is that no one has used them as such yet. They’re just too new. The world didn’t realize how destructive jet airliners could be until some terrorists flew them into buildings on 9/11/2001. Similarly, the world won’t realize how dangerous AI agents are until someone uses one to execute a bioterror attack, a cyberattack, or something else horrible.

I think it’s extremely likely that such an attack will happen, simply because every technology that exists gets used for destructive purposes eventually. Unaligned human individuals exist, and they always will exist. So at some point, humanity will collectively wake up to the fact that hugely powerful weapons are now in the hands of the entire general public, with no licensing requirements, monitoring, or centralized control.

The scary thing, from my perspective, is that AI agent capabilities are improving so rapidly that by the time some Eric does decide to use one to wreak havoc, the damage could be very large. A super-deadly long-incubation Covid virus could kill millions of people. 100 such viruses all released together could bring down human civilization. Ever since I thought of this possibility, my anxiety level has been heightened.

To reiterate: We have created a technology that will likely soon be one of the most powerful weapons ever created, if not the most powerful. And we have put it into the hands of the entire populace,3 with essentially no oversight or safeguards other than the guardrails that AI companies themselves have built into their products — and which they admit can sometimes fail.

And as our institutions bicker about military AI, mass surveillance, and “woke” politics, essentially everyone is ignoring the simple fact that we are placing unregulated weapons into everyone’s hands.

Update: Commenter BBZ makes a good point I hadn’t thought of before:

I'd like to dismiss this, except that the RC airplane hobby managed to spin off the leading weapon category of the century (so far). What used to be a fun hobby for dorky guys flying their toys at the edge of town, now takes out oil refineries and major radar installations.

Interestingly, we did control drones almost from the outset, but probably for nuisance reasons and privacy concerns more than out of concerns about slaughterbots and drone assassinations. Maybe if we tell people that AI agents can be used to overload your email spam filters or hack your house’s cameras, they’ll start to think about regulation?

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Remember that in the Terminator movies, Skynet began its life as an American military AI. Its basic directive to defeat the USSR resulted in a paranoid personality that made it eventually see all humans, and all human nations, as threats that needed to be eliminated.

I initially wrote out a much more detailed prompt for how this could be done. I deleted it, because I’m actually worried about the tiny, tiny chance that someone might use it.

Sci-fi fans will recognize this as the ending of The Stars My Destination. I’m thinking there’s a reason that book doesn’t have a sequel…