Broken in two directions

Start with the limit on this. I am describing companies I have personally been inside, and the pattern has held in those. I have not been inside every private equity rollup, and I would not pretend the ones I have seen speak for all of them.

Inside that limit, here is what keeps turning up.

One kind of company is owned at a distance. The people who decide sit in another state. They read annual numbers and quarterly numbers, and those numbers are accurate. The ones I have dealt with had never stood in a driveway at four in the afternoon while a homeowner worked out whether to replace a system. Underneath them the structure had grown large enough that nobody could say with confidence who belonged in which seat, so seats got filled on title match.

Decisions from that chair get made on a clean picture of a year. The year is real. The afternoon is missing.

The other kind of company is owned by the man who used to run the calls. He is excellent with his hands. He built the thing from one truck and he knows the work in his body. Hand him a profit and loss statement and he will find the bottom line, feel something about it, and put the paper down.

One of them is too far from the work to see it. The other is standing inside it with no instrument.

He has judgment that took twenty years to build and no way to turn a month into something he can point that judgment at. So he runs on memory and feel, which works while he can still hold the whole business in his head. At some point the business gets bigger than that. The drift starts a long way before he notices it, and the first sign is usually a good year that felt bad, or a bad year that felt fine.

Two companies, opposite roads, same destination. Whoever holds the authority to change something cannot see the thing that needs changing.

This is where the canyon shows up, and the canyon is underneath everything else I think about this trade. On one side are the people who do the work with their hands, genuinely good at it, uneasy with computers and numbers. On the other are the people who came out of school with the computer knowledge. The ones I have worked with had not held a wrench. When I meet somebody fluent on both sides, I notice it. That is how often it happens.

Technology was supposed to close the second gap. Give the owner a system, give him dashboards, and he will finally see his business. What I keep finding instead is one more thing he cannot use, built by people on the far side of the canyon and speaking their language.

The fix for the distant owner is simple to say and rare to see. Go stand in the driveway. Ride along for a week. Watch what the numbers were describing.

The fix for the close one is slower, and it is the work I actually do. Build the instrument in his language. Set the book up so the numbers mean what he already thinks they mean. Make the report answer a question he was asking anyway.

That is the whole of it. The argument starts here, and the things I have watched happen in real books are in the notebook.