There are several moving and critically important passages in Lennar executive chairman Stuart Miller’s Q1 2020 earnings overview from last week. If you want to read them–and you should–register for Seeking Alpha’s access to public company transcripts here . Or, better yet, listen yourself to Stuart Miller’s remarks by registering to hear the Lennar presentation on the firm’s own website here.
For purposes of this morning’s What’s Important Now message to home builder, developer, investor, manufacturer, distributor, and other partner stakeholders, I want to focus on two of Stuart Miller’s insights. One is this:
“Businesses across the country, like ours, are searching for playbooks and institutional memories to help guide the way forward. Those simply do not exist. There are no financial models to populate and no views around dark corners to illuminate. There is only management, hands-on management, working day-by-day and making adjustments, looking for signals and making decisions in an imperfect environment that will have to be considered and reconsidered as the landscape evolves. This time is different. Change has been sudden and unexpected and immediate, and the changing has not subsided, it continues…”
The second passage to have a look at this morning is this one.
“We have faced adversity before and although this time it is different, we have adapted and adjusted to meet the moment and to execute. I hope you have heard that the health and safety of our associates, customers and trade partners is and will continue to be our absolute number one priority. People matter. With every day that is passed, we’ve been focused on what is the right next step to keep everyone safe, while we remain open for business. With each passing week, we have learned and evolved our work environment to match the way we work within the expectations of our associates. This week, for example, with a focus on social distancing, we’ve developed a program to allow as many of our associates to work from home as possible. While this is new and we are just beginning, we feel confident that with daily focus, we can adjust, learn, evolve and manage all aspects of our business within the boundaries of this program.”
As in the past, housing’s market-rate ecosystem is undergoing a pummeling the likes of which few could have predicted, and none seem to be fully prepared for. Housing’s leaders–almost to a person–feel adrift. Uncharted territory is one way to describe it. Again.
The twisted feeling that, as Stuart says, “this time is different,” and, at the same time, deja vu all over again, is, we’d suggest, what separates, knowledge, information, and insight from character.
Think about this. Doctors right now–infectious disease specialists whose lives, experience, studies, hearts, and souls are all-in, all-hands, round-the-clock devoted–are scrambling mightily to solve the multivariate riddles of transmission, testing, treatment, public health, who to test, who to treat, where to send those with symptoms, where to send normally sick patients, how to stage, how to keep themselves safe in light of personal protective equipment scarcity, etc. etc. etc.,
One of their biggest challenges of the moment is this. They lack good data to support their management of the flood of cases, the heretofore un-explainable reasons a great number (80%) of people come through the infection relatively well, while still alarming numbers seem to crash.
You’ve got medical professionals looking at early studies and observations from China, Korea, Japan, Italy, Washington state, ferociously trying to unpack them for a shred of insight–based on genetic traits, immune-vulnerability, pre-existing or co-presenting conditions, age characteristics, etc.–as to how to manage algorithmically increasing numbers of people seeking medical care from a system that’s already bursting at the seams. Testing, treatment, access to expertise, etc., feel to many of us like cosmic roulette right now. That’s not so different than what many physicians, nurses, EMS workers, and other first responders feel.
“We just don’t have the data,” says one doctor at the front lines of treating patients, facing soul-crushing, moment-to-moment decisions as to whether to test a patient with symptoms, whether to treat a patient–and with which medical protocols–based on the present severity of symptoms, whether to use, resuse, try to clean, their own masks; whether to mask the patient, etc.
For the moment, at least today, and probably for the count of days or weeks, the medical and healthcare community are adrift in a pre-evidence, pre-data limbo. They’re operating, doing their jobs, fighting the fight, treating each person, each moment, each decision, on character. The same goes with the economy. An equally complex and complicated array of possibilities, priorities, urgencies, immediacies, contingencies, collateral effects, unintended consequences, moral hazards, Hobson’s choices, and potential momentary windows of opportunity, pathways to progress, fiscal and monetary acupuncture, etc. challenge policymakers, economists, and officials. Data is still not clear as to which measures to take, what the order should be, and whom to include in rescue initiatives, and whom to, at least temporarily, leave to their own devices.
This is, in essence, Stuart Miller’s, message above. The territory, the waters, the turf, whatever we may want to call our fields of engagement and commerce, are, all of them, uncharted. This time is different.
When times are really different, we humans, need to recognize that and behave, both personally and collectively, in the greater interest of people. By and large, it takes leaders to help us to these tough realizations, these new commitments, these changed behaviors a moment that is truly different requires of us. Leadership, which we all sorely need now, is about judgment, and about the ability to learn quickly how to respond to clear gaps between our current circumstances and those we, as humans want. It’s not necessarily about knowledge, data. It’s about wisdom, which is a character trait.
This is why we reached this morning for Miller’s words, verbatim.
We stakeholders in this essential service of making homes have three shapes floating around, more in our guts than our brains, as we experience the vertiginous, sickening shock of the moment.
One shape is neither what we would have chosen, nor even predicted as recently as a month ago, but is now the one we’d prefer. V. This shape–an index and middle finger spread apart and held up as a declarative wave–stands for victory. It also stands for a steep, sharp drop in housing activity, followed by an almost immediate steep share ascent back to where we were.
The second shape that comes immediately–with more than a pang of anxiety–is the U. A U-shaped pattern is a real Warren Buffett “swimming naked” moment. It will widen and deepen levels of distress, make personal guaranties hurt more, and shrink our universe of going concerns even as it may strengthen those who can withstand a sustained downturn.
A third possible shape to consider–and the least palatable of all–is that for which the common alphabet has no symbol. It’s, as Ara Hovnanian once described housing’s collapse during the latter half of the decade before last, the shape of a boat’s hull, with a long, flat-line, trough, to work through before the next upturn.
Each of the three–today, as a pathogen races on its destructive course, and as the economy wobbles in an effort to find a solid floor upon which to rebuild–is plausible. Character, the essential raw material of we humans that comes through even when all five senses–sight, hearing, smell, touch, and taste–fail to provide us evidence and data about our world and what needs to be done to improve it, is at our core.
In Stuart Miller’s words, now is about “the right next step to keep everyone safe.” That’s the only next step for the moment.
Thank you for the character we know you’re showing your people, your extended families and their loved ones, who as Miller says, are all equally working with “no views around dark corners to illuminate.” They need your character to come through now.
Above all, this defining moment, is about leaders … people whose characters shine when there’s no data to provide a clear pathway. You’ve proven you are what leaders are made of.
