In this 1992 paper, Amory Lovins explains that buildings are rarely built to use energy efficiently, despite the sizeable costs that inefficient designs impose on building owners, occupants, and the utility companies that serve them. The reasons for this massive market failure have to do with the institutional framework within which buildings are financed, designed, constructed, and operated: many of the roughly two dozen actors who play a role in this process have perverse incentives that reward inefficient practice. Fragmented and commoditized design, false price signals, and substitution of obsolete rules-of-thumb for true engineering optimization have yielded buildings that cost more to build, are less comfortable, and use more energy than they should. Investments in design education, leasing reform, elimination of perverse incentives for designers and engineers, and support of building commissioning and operation offer tightly focused, high-leverage opportunities to achieve important benefits relatively quickly. This paper describes the “second generation” of utility DSM programs that emerged, incorporating novel approaches such as direct incentives for building designers. This paper also describes the competitive advantages for building designers, owners, and operators by incorporating energy design features. This paper is reprinted with permission from E Source.