Red herring: Are trades employees or freelancers?

What's incredibly admirable about digital and data-driven empire building today--think of Google, Amazon, Facebook, Apple, etc.--is a healthy disdain for all that takes place outside a wildly successful business model.

90% of which are mere distractions; and a fair number of those are out-and-out red herrings. The difference being that a red herring is a distraction that sucks time, energy, talent, and money into a vortex that is directly proportionate to the gain that could be achieved by pouring that same amount of time, energy, talent, and money into initiatives they should be invested in to make the model work better.

Legacy industries and companies can learn something from the fact that for many Silicon Valley rock stars, more that is material to their success is endogenous--meaning that variables occur within the business and operational model--than exogenous. Regulatory hurdles tend to be treated as hiccups. Momentum and ultimate sway stem more from the "wisdom of the crowds," a faith that people will rule the day, even if the long arm of the law and government try to get in the way.

Take an issue currently riling lobbyists, one that brings our legacy industry and the digital, sharing-economy business model world together: the question of who's an employee.

Simply, in two fell swoops, the Department of Labor on one hand and the National Labor Relations Board on the other, have weighed in as government agencies on turf that is already a tender area for home builders: the labor front.

So, it seems to the Feds that the longstanding way that home building companies contract with trades in the various stages of a construction cycle may be in need of new rules, new grounds for enforcement, new means to penalize firms for non-compliance, and new areas for lawyers to enter into the debate, dissecting the semantics of the transactions, the percentages of work for hire, the share of work done for multiple companies, etc.

The Economist steps back from the numbing fray of minutia and argument and raises the basic question: Who is an employee?

What this and other stories in the past several weeks show is that a funny thing is happening on the way to our future on-demand, freelance-oriented economy. Government likes the idea of getting in while the getting is good, and, it seems, messing with the mechanics, perhaps in hopes of developing new revenue opportunities around the relationships between who's doing the hiring and who they're hiring on-demand.

The National Association of Home Builders is justifiably concerned with both the Department of Labor and the NRLB initiatives to reclassify and perhaps extract more money from the ties that bind builders as general contractors to subs, because that's their job description after all.

But, at the end of the day, the NRLB is an agency made up currently of more Democrats than Republicans--its initiatives and rulings can be overturned with the a new election or a change in personnel. What's more the gray areas of the debate make it highly unlikely that government agencies will gain purchase on a way to get into the local trenches, and mess with how trades and builders contract with one another to any significant degree.

It's actually a red herring issue.

The more important issue, we know, is how individual home building organizations need to work more felicitously with trades on the bigger issues at hand: capacity; inefficiency; and asymmetry in information flow.

If the resources--time, energy, talent, and money--that are taken up with battling the NRLB and other government agencies, were poured instead into the business and operational models of each of the companies doing business, to smooth their schedules, execute start to completion with less waste, better data, and more effectiveness at each stage, then the who's-a-freelancer vs. who's-an-employee questions would go away.

In the DNA of many of the Silicon Valley companies, they almost assume that exogenous events and impacts--like regulatory overreach--are ephemeral and, ultimately, unimportant, if they can make a case for their model in the court of public opinion.

That's the lesson I think we can learn in the home building and development industry. Don't get sucked into the regulatory red herrings.