Roll-ups, dot-coms, Enron. These fiascos have something in common.
As noted in this space last month, the roll-up consolidation craze that visited our industry was more about Wall Street gamesmanship than any serious attempt to build top-notch contracting organizations. The titans of the financial world can be as clever as Siegfried and Roy in creating illusions.
At other times, they can be pretty darned foolish. Witness the recent spasm of dot-com mania, in which companies that arose overnight and never sold a thing suddenly had more book value than the country's largest industrial giants. In this case there was no intent to deceive. Many people in the investment community truly believed e-commerce to be the wave of the future, and got carried away into a speculative bubble.
Enron's woes do stem from intentional deception. Yet, the cabal of executives, lawyers, accountants and auditors who erected that house of cards have a plausible defense. They were guided by legal counsel, which held that what they were doing was within the law, even if by a millimeter, and by "aggressive" accounting practices that were generally accepted, even if those in charge of the profession's standards had to hold their noses.
(While Congress is busy trying to figure out how to drain Enron's ethical swamp, am I the only one who notices an analogy with the impeachment hearings of a few years ago that ended with a slap on the wrist to our nation's CEO after he consorted in the Oval Office with a bimbo his daughter's age, along the way fudging the meaning of the word "is"? The swamp exists because business leaders and everyone else take a cue from politicians in elevating legalisms over the Ten Commandments.)
Shortcuts To ValueA common thread to these business blunders has to do with bastardizing our understanding of value, and doing away completely with the quaint notion of trust.
Value is not easy to provide. Operating a successful business requires a desirable product, expertise, hard work and organizational skills, and even all that may not be enough when the competition is formidable. In an era when morality is widely regarded as just another alternative lifestyle, the temptation is great to take shortcuts.
In the case of the roll-ups, you could persuade people that the whole would be greater than the sum of its parts, even if you didn't have the slightest idea how to achieve that. The dot-coms created dazzling visions of future value skewed by unproven assumptions. Enron's gamers used their considerable talent to create a business whose main asset was complexity itself. Neither Wall Street analysts nor the watchdogs in the media could figure out how Enron made money.
The day of reckoning has come for all the phonies. The roll-up entities are floundering or have been sold at fire-sale prices. Most dot-coms have evaporated. Enron's brand name is now the business world's equivalent of al Qaeda.
Coinciding with these collapses is a new mood in the country following 9/11. People are less frivolous, more serious of purpose. A recession that we may or may not have left behind put an end to our nation's longest growth period ever, and served to accentuate the vulnerability everyone suddenly realized on 9/11.
Real ValueAll signs point to a new appreciation for real value, as opposed to the aforementioned shell games. From now on it will not be enough for companies to issue glowing financial reports. They will be expected to prove the reliability of their numbers to a skeptical public and investment community.
If that's the case, plumbing and mechanical contractors should thank their lucky stars. Yours is a tough business made all the harsher by being perpetually undervalued. Opportunity is ripe to market yourselves on the real value so many of you provide.
One doesn't need to resort to accounting tricks to prove the value of systems that provide fresh water and eliminate waste in virtually every home and building in America. And you don't need an auditor to determine whether these systems are functioning well or not.
Health, safety, comfort and convenience are this industry's end products. Priceless in value, they routinely get delivered by plumbing and mechanical contractors at bargain prices. It's time to get that message out.
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