Sticking with my Warren Buffet theme lately. Charlie Munger was (and still is) Warren Buffet’s business partner and closest friend. Together they have built a $991B enterprise and well into their 90’s are still considered the most brilliant pair of investors in history. Munger is well known for his business savvy and rational decision making. Here are the top business lessons that I believe cross-over into agriculture, from the person Warren Buffet calls the smartest man he knows.
1. Knowing what you don’t know is more useful than being brilliant.
Primary producers may be the only industry where the CEO is also the janitor. This concept was the core focus behind Farmer Coach and the reason that I started attending Strategic Coach as part of my entrepreneurial journey. The ability to identify my own personal strengths and weaknesses has truly allowed me to grow our business (and the farm) at a faster pace than many others.
I found the first step was being okay with not knowing. You will always meet those people in life that believe they know enough about everything (in fact it is one of my biggest pet peeves talking to these people). The truth is, it’s the individuals that have identified the areas where they are not strong that are further ahead. These people know they need to find experts and advisors to fill the gap in their own knowledge. This weakness of most farms is not identifying what they are good at.
As a farmer I am comfortable enough to say, I was a poor farmer. I had limited knowledge in mechanics and operations, and even less knowledge in agronomy. But one thing I did know was business. This allowed me to hire advisors outside of the organization in many areas and allow business partners to take on the appropriate roles to fill in the weak points. Once many farms can identify this, it progresses them forward at an astounding rate.
2. A majority of life’s errors are caused by forgetting what one is really trying to do.
What is the whole reason behind farming? The definition of success will be different for every farm or business. In our organization our main priorities are our team and creating equity within that team. We identified very early in the growth process that for our farm to be considered successful in our eyes we needed to have the strongest team possible with the highest values, and in turn this would push profits and equity. Many will be surprised by this, but acres are not our main concern. Hence why we have multiple businesses in multiple areas of expertise in the industry.
I believe many farms have not actually defined what they are trying to do. The TEPAP (Texas A&M Executive Program for Agriculture Producers) stats show that 66% of operations don’t have a strategic plan, and even less have sat down and done long-term goal setting. So, in looking at it this way, do most farms know what they are trying to do? I see it everyday on land deals or equipment flips; what is the true reason behind the decision? Is it growth for the next generation? Is it growth to increase efficiencies of the current operation? Is it growth so you can wear a bigger belt buckle?
In the end I have seen this one in action. Operations forget the reason they began farming in the first place or don’t know why? The focus should be on identifying that before moving too far forward too fast.
3. Mimicking the herd invites regression to the mean.
“Quit looking over the fence”. I have used this line more times than I want to admit and yet it still holds true for most operations. In fact, the number one question I get asked lately is how the big farms got to where they are. My answer, “they did what they did”.
As an advisor I treat every farm individually. Yes, I know many of the best practices by many successful farms, but these don’t work for every operation. For us, 24 hour seeding shifts has been the best way to minimize equipment costs and build our team to an efficient size. It also allows our employees to avoid working more than 13-hour days anytime during the entire year. However, other farms don’t find the same efficiencies and have their own data to back up their processes. One is not right; one is not wrong.
Now please take one thing from this article. The term “must be nice” needs to be removed from agriculture. Whether it is in relation to land accumulation, or new equipment, or even the new house that your neighbour’s have, this is a highly negative comment. Unless you know the internal situation of every farm, you have no ability to analyze. In fact, most times the farm making the comment may be in a better financial situation than those they believe they are jealous of.
4. The fundamental algorithm of life is “repeat what works”.
As primary producers, we only get one chance per year to grow a crop. In comparison, Walmart turns over their inventory hundreds of times during the same period. In going back to Buffet, he avoided crypto-currency and stuck to key business fundamentals when it came to investing. This has led to the true accumulation of wealth over this period with minimal risk. As farmers, we need to learn this same lesson. I am not saying don’t trial new crops, machinery, or alternatives. I am just saying “trial” not full farm.
I also believe we need to be careful on the interpretation of this business lesson. Many farms would take this as “if it isn’t broken, don’t fix it”. I believe that the main takeaway should be focusing on the “core” fundamentals, adjusting, and adapting the processes for constant progression. As farmers we need to consistently change our methods when it comes to technology, human resources, and business, but we also need to remember that in the end we are still farmers. We do the same 52-week cycle every year, it just moves forward or backwards based on the weather.
5. Those who keep learning, will keep rising.
To be truly honest, I quit reading books right after I finished my CPA training. I wrote the three-hour exam and swore that I would never study or read a book again. This I believe cost me thousands of dollars over the next two decades and has put me behind my peers in business. Since I started attending Strategic Coach in 2019 my mindset has shifted. I now have realized that many of my clients that continue to read and learn, are drastically ahead of the rest of the industry.
This is also why we launched the coaching program in 2022. Across the agriculture industry there is currently limited education outside of farm shows and industry lectures. In fact, if we remove the TEPAP program, the ability for producers to learn about agriculture business and strategy is almost non-existent. All other industries are much further ahead when it comes to education, but as primary producers we were left in the dark for many years. Only lately has this been brought back to the forefront.
Lastly, we as an organization are also highly progressive when it comes to employee learning. With the amount of grant programs available to farms, there is no reason that your employees are not taking multiple classes and education per year to grow in their careers. And yes, I said careers. If you are only offering jobs on your farm, you better progress because that is the past, and careers are the future.
6. The best thing a human being can do is help another human being know more.
In agriculture we continue to employ the term “rugged individualism”. We win alone and we lose alone (hence the reason mental health continues to be at the forefront). Now in terms of helping humans, this has nothing to do with the local “coffee-row”. Don’t take this too harshly, but I believe you will come out less advanced from these discussions.
As a consolidated industry we need to learn to share. Too often competition on land has driven a wedge into this concept. I see the industry now trying to push farms through peer groups and other tools, but we are still drastically behind. In Saskatchewan alone we have over 4,000 farms above 3,000 acres in size. I know these types of numbers are not involved in peer groups or other methods of information sharing.
Lastly, I do want to commend those in the industry that continue to push this agenda. Groups such as Canadian Young Ag and other affiliations are trying to motivate the younger generation to continue growing. I just feel we need to do more, and it needs to be done more quickly. The new generations have not seen “tough times”, and we need to prepare them before it happens.
7. We insist on a lot of time being available almost every day to just sit and think.
I have to laugh when I read this final one; as a farmer, how many of you reading slow down enough to sit and think? Don’t answer that, I already know the truth. Even in my own business, until we started the EOS (Entrepreneurial Operating System), I never actually took the time to shut down my laptop and actually focus on the art of thinking (big picture). Some call it a “clarity break”, in my personal life I actually refer to it as a “sanity break”.
For those that can, I highly recommend setting some time each day to perform this. For many of you this will sound stupid or a waste, but for those that can actually unplug and focus on the strategy and big-picture thoughts of the business you will be surprised at the progression you can make. In fact, I do it most times in front of a whiteboard and write down every thought that comes to mind. 95% is garble, 5% has led to the progression we have in our business today.
So, in conclusion, most of us will never be Charlie Munger (or Warren Buffet). However, you need to realize that at the age of 30 both of them had net worths of less than $1M. For many farms today this is a benchmark that has already been surpassed. As Bill Gates quotes – “people overestimate what they can do in one year and underestimate what they can do in ten years”.