Everything we hear on the street these days tells us this home building crash is the worst in U.S. history. Consider the absolute drop of units, the percentage fall in sales volume, or the velocity downward and nothing tops it. The losses from big public builders down to local independents are staggering. Bankruptcies are filed daily among builders, suppliers, manufacturers, and trades alike. You can bet more than 50 percent of the individuals who developed, financed, built, sold, and serviced homes just three years ago have now fled the industry. Meanwhile, foreclosures are tearing families apart.
We can and should spend time examining how we got into this mess. It’s essential that we face facts to avoid another such calamity. But we cannot stop there, because what ultimately matters is what we do with this experience—what we learn from it—and how we use that knowledge to guide us going forward. Experience is, after all, the best teacher, right? Well, maybe.
Pause for a moment and consider two salespeople you know well, or two superintendents, division presidents, or any two people in similar roles with 10 to 15 years in home building. They both have the same years of experience, yet it seems to you that one has learned a great deal while the other has learned comparatively little or perhaps even the wrong things. Who hasn’t witnessed one person with five years of experience who has learned far more than another person in the same role for 20 years? How does this happen?
Larry Wilson, founder of Edina, Minn.–based Wilson Learning Worldwide, one of the largest training companies in the world, explained that those who rise above life’s most difficult obstacles have a skill that many others do not: They have learned how to learn from their experiences. Each of us has experiences and the opportunity to learn from them, but do we? You’d assume anything as big as this housing crisis should be a no-brainer in the learning department, correct? Think again.
Recall the savings and loan scandal of the late 1980s that destroyed hundreds of S&Ls and brought down Charlie Keating and his friends. Skip forward 10 years to the late ’90s and you encounter the Enron debacle, closely followed by Tyco, WorldCom, etc. Today, we have the mortgage meltdown and daily news of troubled banks and financial markets. What’s infuriating from both the investor and consumer viewpoints is that, thematically, all of these scandals are identical. Whether they involved land contracts, pipelines, gas wells, consumer cable contracts, or mortgage paper, each was about monetizing assets into far more dollars than they were worth by tricking people into buying them as inflated investments.
Did we learn from those experiences? Clearly not. How many more companies, communities, and lives must be ruined before we engage in the kind of critical thinking that will prevent another round of carnage in the next decade, just wrapped in a new package? I suggest the first step is for us all to take some responsibility. There is ample blame to go around from Wall Street to builders to government regulators to mortgage companies to the borrowers themselves. The litany of gross mistakes and even outright fraud is appalling, yet often the complicity is more subtle, buried in our day-to-day activities.
The good news is that as a result of this crisis, many have become open to new ways of thinking. The principles of lean operations, for example, have been available to the industry for two decades yet are only now being grasped by a few builders motivated to address efficiencies and waste in a meaningful way. But when markets turn up again, will we forget what we learned and revert to the old ways? Sadly, that is the norm.
An old saying applies in tough times such as these: “What doesn’t kill you, makes you stronger.” But to that, I add: The experience you survive only makes you stronger if you have the willingness to learn from it.