15 May Smart Finance and Farming
In 1738, the second edition of the first modern encyclopaedia for arts and sciences announced that Agriculture is “the art of tilling, or cultivating the earth, in order to render it fertile, and make it bear plants, trees and fruits”.
It goes onto to say (the pronunciation is verbatim) that “it has been cultivated by many of the greateft men among the antients: as emporers, dictators and confuls…”
Agriculture has been held within the highest echelons throughout time as the grand necessity to power the development of great civilizations. Entitled manorial lords in limestone castles and aspiring family houses bestowed small mercies to summon vast labour forces in the form of man and beast to “assart” land and fuel these growing empires and their armies. It almost conjures fantasy if it were not our actual history.
Fast forward today and the terminology has changed but perhaps the structures have not. Corporates and high net worths have replaced absentee landlords and generational family operations have replaced neifs and villeins. Meanwhile the tenancy of aspiring farmers continues to pay “tallage” for the privilege of tilling the soil.
What is notable is how the evolution of privatisation of agriculture has transferred injurious variabilities of seasonal and financial risk onto the owners. And given the size of the balance sheets required for viable operations, the management of risk is leveraged ultimately into financial outcomes benevolent for kings or synonymous to peasants.
So here lies the question, with immediate accessibility to all strata of relevant and reliable information in today’s modern world, what prevents various farming management systems to act on unfolding events that could swing the financial bias in favour of more desirable outcomes? Surely any decisions that result in measurable and tangible financial rewards would drive and motivate action?
The answer simply lies within our genome or inherent wiring since we first drew breath on this earth.
As humans, we are an emotional species with the more recent capability of rational thinking, not rational thinkers with the capability of emotional undertakings. And by emotion we mean behavioural responsiveness to decision making. This is not an adverse trait; it is in fact a survival mechanism that drives us towards making decisions resulting in instant and ultimately sustained gratification.
The unintended consequence of this evolutionary trait is that it often conflicts with rational thought.
Rationality can define a pathway entailing decisions with methodological procedures that do not initially create a positive “emotional” and desirable outcome and are hence delayed or ignored. The necessity to fire a nonperforming employee, the requirement to switch a loyal agent or professional advisor to a more professionally equipped expert to advance your business, and obviously negotiating your position with a long-standing lender to improve the economics of your debt funding structure are all difficult scenarios to action.
Recognising these personal barriers that are preventing your business from accessing improved productivity, economics and risk management is the first step. The next step is taking action with a proven process to minimise (or even remove) these emotive barriers so as to enable the procurement of enhanced utility and welfare of the business. It is refreshing to witness many agricultural and commercial businesses that overlay this blueprint into their decision-making framework and harvest the rewards accordingly.
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