The Blog is Moving

I would like to announce that my blog is moving to the ForeRunner Corporation website. Please go to:

forerunnercorp.com

Just click on the Blog button to read the latest. I want to thank all of you reading this for your loyalty and your kind words. I hope that the new format and location allow for an even better experience.

Again, thank you.

Bill Groskopf

Dead Cat Bounce

There is a lot of cautiously good news for the energy business these days. The market is up, strongly so. While there remains plenty of bad economic news, like tulips in the spring, there are now occasional bits of good news on the economy. The price of oil, that bellweather of our industry, is over $ 60 a barrel. The tsunami like shock wave of bad news has swept over us the past 6 months, crushing everything before it. But like a shock wave, it is now past and we raise our heads out of our cellars and look around. Mirabile dictu - new projects are beginning. Today, it is easy to believe in spring.

But the question that haunts us all - Is this spring or is it Indian Summer? To use the language of the trading floor - Is this the beginning of a new bull market or is it a Dead Cat Bounce? The market uses the phrase "Dead Cat Bounce" to describe a market rally in a falling market. Metaphorically, it works off the fact that even though a cat is dead and has no life, it will still go up (bounce) somewhat if dropped far enough.

While I believe it a gruesome image, I do like the phrase. It has that combination of dissonance and vaguely scandalous thought that I strive for in my daily life. And it speaks so well to our current dilemma. Are we seeing the beginning of new and vigorous growth, or are we watching a dead cat that has fallen several hundred feet? No one knows the answer until well into the future, at which point it only allows us the pleasure of saying, "I told you so."

In the here and now however, decisions need to be made. Decisions that must be made in the fog. Decisions that can be ridiculed at some future date by those who know the outcome. The decisions that are made will affect peoples' lives. Across the country, people are struggling with this decision. Should I buy a new car, or should I keep the old one? Should we buy that bigger house our growing family needs, or do we make do for awhile yet. Do I commit our company's resources to a new capital project, or do I save my cash to buy my competitor's facilities out of bankruptcy? Our futures are being shaped by these decisions.

Notes from Dubai

I am sitting in a hotel room looking out at the tallest building in the world. It soars upward, a spare spear thrust into the sky. But it shares the window with many other skyscrapers equally picturesque. But it is the sheer number of cranes and the hazy sky that really dominate the scene. This is Dubai, crossroads of the United Arab Emirites.

Change is the key word in this part of the world. On the way from the airport to my hotel, my cab driver took the wrong turn, momentarily lost, because the road had changed since he last drove to this part of town. It seems that every road and every building is under construction.

I have come to participate in the vast surge of resources being drawn to this particular corner of the world. The strong gravitational force powered by capital spending pulls us all into its orbit. The concourse of the hotel and business meetings are a kaleidoscope of peoples and cultures. In a meeting yesterday, I met a young woman engineer from Russia. Her look was so definitively Russian, that I could imagine her as the model for one of those "Soviet Worker" posters so popular among the International Left in the 1930's. Working at the desk next to her was another young woman, veiled, in the garb of traditional muslims of the desert. I was driven back to my hotel by a young sales engineer from India. From the cynical tenor of his conversation, he must be an avid fan of the local equivalent of "Talk Radio". They all worked for an entrepreneur from Lebanon whose manic focus on business echoed the many hustling startups in our own country that have made our economy so vibrant.

The impact to the newcomer is strong. Walking into the air terminal, the sheer power of the extravaganza overpowers you. Grasping for a metaphor, it comes to me; Las Vegas on steriods. The architecture of the skyscrapers is not the sober economics driven square boxes that we have come to know in the West, but the arresting curves and cantilevers of imaginative architects given the freedom from economics to bring their fantasies to life.

And yet the next day allows one a more measured reflection. Standing in my window, I can count 31 construction cranes. If I could see in other directions, I would count equal numbers in those directions as well. Yet nearly all of them are strangely unmoving. While traffic is busy, there are no trucks to be seen. And while there are the blue coveralls of construction workers visible, their numbers are few. It appears that the real estate bubble may not be restricted to Phoenix and Las Vegas.

But the iron and steel of the energy business is outside the financial districts of Dubai. Though slower than before, the energy infrastructure of the Gulf continues to build. Even more than Houston, this is the energy center of our universe. Can we compete here? Can we play with the "big boys"? Conversations with numerous customers in the area give evidence of the opportunity. The same organizational strengths, coupled with a self effacing approach to client relations, that have allowed us to prosper in the domestic market will play well here.

And so as I return to Denver, I am struck by the opportunity here. But I am also sobered by the reality of the world outside our borders.

Value

We are a service company that provides an ill defined service. Its hard for us to even tell people what we do. Are we an engineering company or a project management company? Are we responsible for the engineering within a project or the execution of that project? Are we the Owner's consultant or his sub contractor? Are we responsible for our part of the scope or are we responsible for the scope? The answers to those questions have a big impact on us, but the answers are slippery. The answer, of course, is that we are what our Client wants us to be at any particular point in the project. And if what our client wants us to be conflicts with what the contract and payment terms negotiated by the client's purchasing group require us to be, we can only hope that the project turns out well.

But back to the question, what is our value? As a service company, that is an important question. It is the most important question; driving as it does, everything that we do. Yet again the question, what is our value? If we can't define our service, we may face some difficulty in measuring its value. We are left with the realization that our value is in the eye of the purchaser, i.e. our clients that own and operate the projects that we work on. And what is it that our purchaser sees? How does the purchaser of our services decide with whom to do business? How does he value our service? How do we compete for his business?

Those who purchase our services are virtually all engineers. They are people who deal in numbers and facts. A case for value, solidly built on numbers and facts is what engineers want to see when faced with purchasing decisions. So when an engineer from an engineering services company sells engineering services to an engineer (how much wood could a woodchuck chuck . . . .)!! What is the sales conversation? What data does an engineer use to prove to another engineer that his particular engineering services company is superior his competitors?

The sales conversation with the purchaser must be meaningful to the purchaser. What is meaningful to the purchaser? The answer always boils down to the Four Horsemen, i.e. Time, Money, Performance and Quality. Any engineer worth his salt should be able to measure time, money and performance in his sleep. Quality may present a greater challenge, but there are many standards from the API, AGA, ASTM, etal. that control quality. It might take more work, but "quality" can be measured by a determined engineer.

Since Time, Money, Performance and Quality can be measured, the naive observer would expect engineering service providers to have reams of data on their performance relative to those criteria. The naive observer would be correct if that data was an important criteria in making purchasing decisions. Since the data does not exist, the more world wise observer would deduce that data is not an important criteria in making purchasing decisions.

But logic cries out that engineers always use data to make purchasing decisions. What is wrong with the engineers that buy our services? Have they been seduced by the Dark Side of the Force, i.e. business development? They say and we believe that they buy based on hard numbers. Yet our sales literature is full of pictures and abbreviated resumes called bios, with numbers few and far between. Either we are fools or pictures are in fact something that influences our client's purchasing decisions. Neither answer is comfortable to either party in the transaction.

In the darker marches of the night, my mind conjures images of a Beauty Contest. We have replaced the Talent Competition with our resumes. Instead of the Swimsuit Competition, we parade pictures of our projects. And yet, what are we to do? For in truth, there are no numbers.

Pity the poor client. He has no reliable way to estimate what a project will cost until the engineering is done. How can he measure Money or Time? Engineering Services must be purchased and used before either Time or Money can be defined, let along measured.

Where is he to get historical numbers to base his decisions on? He can only get them from his suppliers, i.e. us, or he can use internally generated numbers. Yet both sources resemble fun house mirrors at the county fair. Our numbers are suspect for a number of reasons. One of the most important is that like Garrison Keilor's community of Lake Woebegon, the projects that we do as engineering companies are all above average. We tend not to talk about our problem children.

Even more to the point, we, both ourselves and our clients, suffer from a lack of numbers. It seems that client organizations operate on a "need to know" basis. Obviously engineering contractors are not in the "need to know" category, with the result that we hardly ever know how much it cost to build one of the projects we design. Even when we construction manage, procure and do the cost tracking for a given project, deference to the sensitivities of the construction contractor, as well as internal client stakeholders, require that much cost data is unseen by us. The common tendency to add operational costs into the capital accounts; or conversely, supplement the project budget from other accounts further clouds any project cost accounting or tracking.

As a result, both our clients and ourselves are without the historical project cost information that would allow for any kind of performance tracking or ranking. Thus, we dress up in our pictures of past projects and flash our resumes.

Buffoons or High Priests?

Well it happened last Friday. Our EPA declared that CO2 is a "dangerous pollutant". While it came as no surprise, given the political and cultural tenor of the times, it still came as a shock when announced. Something like watching a train going off the tracks; at some point it becomes inevitable and you know that it will happen, but when the crash finally comes it still stuns you.

How did we come to this? The enormity of this decision confounds the senses. Not only was CO2 declared a dangerous pollutant, but so was methane (as well as nitrous oxide and various fluorocarbons). Taken to its logical conclusion, this gives the EPA the legal authority to regulate every aspect of our lives. It not only gives the legal authority; but, in fact, mandates that it be done. It is the law and is taken seriously. Carbon dioxide (CO2) is everywhere, in enormous quantities. It is essential to life and part of everything that we do. While the action is regarded as a means to chastise the energy industry, it will be a case study for future generations on the Law of Unintended Consequences.

But to ask the question again, how did we come to this? Is our whole culture on drugs? I suspect that most of our senior policy makers were at Woodstock, but this action gives evidence that they never left. There is an Alice in Wonderland quality to this whole thing that reeks of mind altering substances. Either that or we have turned over our future to the Three Stooges.

We voted for "Change". And we got change. But what is the change that we are getting? Who is making the decisions? What is the basis of the decisions that are being made? Make no mistake. Once made these decisions will be with us for the rest of our lives and our children's lives, for good or ill. The changes themselves are so bizarre that one is left with only two choices.

If people take actions that are counter to all common sense, facts and cultural norms, our first thought is that they are in fact buffoons. US energy and environmental policy is now being made by the Three Stooges. Imagine for a moment if you will, Carol Browner as Mae West and Ken Salazar as W.C. Fields. Perhaps our Governor, Bill Ritter, might be thought of as the Masked Bandit. Then watch their last movie together, "My Little Chickadee". At least it will provide a humorous counterpoint our current situation. As funny as it is, I do not think that those driving policy today to be buffoons. They are smart and dedicated people, with a record of accomplishment that gives the lie to that pleasant fantasy.

Instead, we are left with the other option. A much more dangerous and potent possibility. That is that they are people of faith. They are true believers. People of faith see the world differently than does the common man. Their faith gives them power. Whereas a simple policy maker might be persuaded to see reason if given a luxurious suite at the Super Bowl, a person of faith sees only utopia and takes delight in scourging the weak one who might be tempted by that suite. They are blind to the simple pleasures and failings of the rest of us. People of faith have been called to make this a better world, and if it takes suffering to make it a better world, so much the better. More importantly, they are indifferent to our suffering. It seems to be a truism that people of faith often love the masses, but have no sympathy for the individual.

We are now called to worship Mother Earth, sometimes known as Mother Nature. We tend to think of her as a kind and nurturing soul, in contrast to the harsh patriarchal God of Abraham. But a wise man (Tennyson) who came before us described her true nature "Nature, red in tooth and claw". But we will learn and our priests will see that we are made to suffer, in order that we are worthy of paradise.

An earlier generation, one more familiar with societies that tried to create paradise here on earth, had a saying about the environmental movement. They said that "the green tree had red roots". They were engaged in a great struggle lasting across generations with totalitarian movements. They recognized that the environmentalists shared a history and a world view with those who had created paradise in Russia, in China, in Cuba.

Cold Harbor

As I shared some time back, our conference rooms at ForeRunner are named after historical events. I chose the names to remind me of what I felt to be important lessons. Leadership of a company, or any other group of people, is a daunting task. Since there are so many opportunities to lose one's self in the fog, I felt it necessary to remind myself of certain basic themes I felt important if I was to become the manager I wanted to be. One of those ways was to name our conference rooms as reminders of what I needed to remember.

And so we have a conference room named Cold Harbor. I admit one of the reasons for the selection is simply the name. The dissonance of the name appeals to that melancholy which is such a large part of me. But it was really the events that transpired there some 145 years ago that drew me to name it so.

Early June of 1864. US Grant, the future president of the United States has assumed supreme command of the Union Army and has been hammering Robert E. Lee's Army of Northern Virginia for a long month. Beginning at the Wilderness, and following at Spotsylvania, Yellow Tavern, North Anna and many more, the two armies have slammed into each other with a sustained fury. The Rebels, under Lee, have always been heavily outnumbered, usually by 2 or 3 to 1, but have consistently defeated Grant and his army. Grant is seeking to break through Lee's army to capture Richmond, the Confederate capital.

Grant's army has sustained heavy casualties. He has already lost nearly as many men as Lee had at the beginning of this campaign, yet the industrial might of the North continues to supply him with inexhaustible supplies of fresh men and equipment. Yet Lee and his men continue to defeat him again and again. The roads between the front and Washington DC are jammed with both ambulances hauling the wounded back and columns of fresh faced reinforcements coming down to be thrown into the meat grinder that is the front. The Northern newspapers are screaming in large headlines at the horrific losses of men and treasure. Now the maneuvering armies confront one another once more near a small town called Cold Harbor, directly north of Richmond. The Rebels get the first and dig in, throwing up walls of tree branches and earth walls.

For two days the Union Army probes the Rebel defensive line, learning just how strong this line is. In late afternoon of the second day, Grant orders a massive assault for the next morning. The men in the Union lines are no fools, even though they know this is to be a fool's errand. An atmosphere of doom pervades the Union ranks. Over the past two days they have tramped through fields containing long unburied bodies, now skeletons, dead soldiers from a battle fought here two years before, Gaines Mill. They have seen the impregnable defence lines they face.

That night, many of the Union soldiers write their names on slips of paper that they pin to the back of their uniform. This is so that they can be identified when their bodies are carried from the battlefield the next day. In fact this is the origin of the dog tags our soldiers wear today. And so the next morning, they obey their orders and move forward in their long lines. Unbelieving rebels behind their walls watch the foolish advance. The guns fire and it is soon over. Union soldiers in their thousands lie dead and wounded before the walls of the Rebel line. In a final insult, for two days Grant refuses to request a truce so that he can pick up his dead and wounded, as he does not want to admit that he has again lost the battle. The wounded moan and cry for water, often dying on the ground between the two lines during the two day wait. The dead do what comes naturally in the summer heat, contributing to the horror of the scene.

Accepting the gift of leadership entails responsibility. The decisions that managers and leaders make have consequences. But the immediate consequences of those decisions are often escaped by those that make them. As the organization becomes larger and more impersonal, this becomes more and more the case. Whereas US Grant became President of the United States, with his portrait on the $ 50 bill. It was Private John Doe who felt the fear of the march into flashing guns and the pain when that metal tore his body apart.

While it may not seem fair, it is the way of the world. Some must lead and some must follow, if we are all to prosper. Yet it behooves those who lead to respect and care for those who follow. We who lead are ever in danger of belief in our press clippings. We are ever in danger of being captured by our emotions. Leadership has consequences. If we want to be good leaders; even more importantly, if we want to be decent people, we will remember that.

An Arrogant Crow

My wife and I spent her Spring Break in Southern California. I admit I am fond of California. I wouldn't want to live there, but it is a great place to visit. Its a bit like going to the Kingdom of Oz, even though it bears more resemblance to Girls Gone Wild than Judy Garland. But it is a land that lives in the midst of fantasy; but when we look behind the curtains we don't see the kindly old Wizard, but instead the Terminator.

My wife likes to take walks and I like to be with her, so I tag along. One morning we came upon a large well fed crow drinking from a puddle alongside the sidewalk. As we walked closer and then passed this bird, it showed absolutely no fear and gave us no more than an irritable stare. Much to my wife's annoyance, I passed into silence as I pondered what I had just seen.

How far we have come. Wild creatures, once known as vermin, that show no fear of man. Crows, prairie dogs, coyotes, et al. once feared us, and with good reason. We earned our reputation that Darwinist's of an earlier generation gave us, i.e. Killer Apes. But that was before Walt Disney taught us that rodents are just like us, only cuter. And then we discovered that we are hurting Mother Earth. All 6,000,000,000,000,000,000,000 tons of her are in danger and needs saving. As I said, we have come a long way baby.

But the fact is that earlier generation named us well. We are Killer Apes. We did not build our present civilization by being nice guys. It is no accident that wild animals no longer carry off our children for an easy meal or that rodents do not carry culture destroying plagues. Of course, we have changed and aren't like that anymore.

Ok, so what is the point? The point is that the environmental movement in the United States is probably coming to a reckoning in the next few years. The charming vision we now have of Mother Earth has joined apple pie, the flag, school teachers and emergency responders as icons we all love and respect in our culture. Yet since the beginnings of Western Civilization some 3,000 years ago, we have battled nature. We have seen nature as something to be battled or used, an opponent to test our mettle against.

So far, the environmental movement has not caused Joe the Plumber any pain. But now we are at the tipping point. Carbon control legislation offers enormous costs with no gain. Saving Mother Earth is now going to cost, its going to cost a lot. A fuzzy dreamy consciousness lies at the heart of modern environmental consciousness. We believe it because it makes us feel good about ourselves, and it doesn't cost anything. We get to have our cake and eat it too.

That is probably going to change. Western Civilization has always been about bigger, better, faster, cheaper. We will be pragmatic, we always have been. But we are also pretty ruthless when it comes to improving our standard of living. Maybe that crow will show a little respect next time we meet.