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The idea for Thinking in Bets was inspired by Anne's previous career as a successful poker player (won over 4 million). Poker playing is a game that involves strategy, uncertainty (i.e., what cards other players have and what cards are left in the deck), and luck (good and bad). Investing can be viewed through the lens of "thinking in bets" because it involves similar elements of strategy, uncertainty and luck.
Thinking in Bets can involve other types of outcomes than winning money. The decision to move to a new city, for example, can be viewed as a bet that the future will be better in that city than in other possible cities.
When making a bet we envision various possible future outcomes, weight their likelihood of happening, and assign some value to them. In situations where there are unavoidable elements of uncertainty and luck, then we might want to frame the decision in terms of betting on a future outcome.
Event Planning Bets
Me and my wife held an outdoor concert event at our (agritourism) farm property the last 2 years and this will be our third annual outdoor concert. Last year's 2nd annual event was a bet that worked out because we were able to host it (250 limit), we created a memorable event and a stronger event brand, and we eked out some profit. You can't expect large profits when your attendance is capped.
This year is another bet that we will be able to achieve a certain gathering size at a particular time of year. We made the bet in march that we would be able to host at least 250 attendees again this year on the third weekend of August and budgeted accordingly so that we might again eke out a profit.
We were easily able to sell out the tickets for this event. We used facebook primarily to generate awareness of the event. We decided to add another event the night before and that sold out quickly as well.
These bets have a good potential upside at this point if we are able to host a larger gathering size. One of the reasons we added a second event was because we could reduce costs on sound and portable toilets and generate more profit per event as a result.
There is still hidden information about the future that could derail our plans (e.g., delta variant), and of course, the weather might not cooperate and create a less than stellar event experience. The unavoidable uncertainty and role of luck, gives the decision to host an event a betting aspect.
Covid has created difficulties in hosting profitable events largely due to crowd size restrictions. It has also opened up an opportunity to create an event brand that is reliably offering high quality entertainment, while most events that traditionally ran at higher cost are no longer happening and are still being cancelled.
The payoff for these bets is really next year if everything goes well this year. If things open up further by August and we can host, say, 500 people, and do that for two days, that would make this event more profitable and set us up for hosting 2000 per event next year. Hosting 2000 people on a farm is not something you would necessarily want to do in your first year. Alot of infrastructure has to be built and tested and venue building is ongoing to reach that stage. Next monday, for example we will be upgrading power to the barn (installing a new service) as the 100 amp subfeed from the farm house is barely sufficient for the power requirements for speakers and other draws on the day of a concert.
In this blog I introduced the concept of thinking in bets. As an example of thinking in bets, I discussed how it seems relevant to the decision making involved in hosting an outdoor concert event. Thinking in bets is a very rich subject and we only skimmed the surface here to create awareness of this approach. Thinking in best has applications to investing and starting a business that are interesting to think about.
As entrepreneurs investing in our own businesses, we generally need to be more practical in the types of things we invest in to start or expand our business.
Lately I've noticed a pattern in my own investing that involves buying many units of an item because I can potentially make more sales if I do.
For me, those units are Glass Carboys and Bicycles.
Where an investor buys shares in a company, the company itself may buy multiple units of an item that will help generate a greater sales volume. Generally a good use of an investor's capital is to help fund the purchase of units that increase potential sales.
One business that I have been working on over a long period is starting up a small scale winery at a farm property me and my wife purchased 10 years ago. Over the last 5 months of downtime from farming and wine making, I've collected 25 more glass carboys so that I can ferment and store a greater volume of wine than I currently do. I've mostly been buying them through online classified ads from people who have given up amateur wine making. I consider investing in glass carboys to be one of the best investments I can make for my wine making business because it is the most critical to enabling a greater sales volume.
Another business I am trying to start at our farm property is a bicycle rental business. The seed for this idea was planted around 3 years ago when I was at a bike shop in the fall of the year and they were selling bikes that they used for renting over the summer. I picked up 4 quality hybrid bikes and 1 commuter bike from them for a very good price. I then ended up purchasing 4 more of the best schwinn mountain bikes that a big box store was selling. It was the end of the season so they were selling bicycle inventory at a very reduced cost and I took all they had. These 9 bikes were my core bicycle rental fleet. I made feeble attempts at starting that business over the last 2 years but this year I decided to get more serious and built an e-commerce website with my son to rent my bicycle fleet and promote the area as a prime destination for those wanting to explore the area by bicycle.
Over the last 5 months I've accumulated 5 more used quality bikes through online classifieds: 1 mountain, 3 hybrid, and 1 fatbike. I also purchased 1 new fatbike so I would have a pair to rent.
The number of bikes I have determines the volume of sales I can make.
I'm excited to see how the bicycle rental business does now that things are opening up again and I have an online sales platform for renting bikes.
We also added an option to rent a campsite at our farm if they want to explore nearby areas over multiple days.
Carboys and Bicycles are the units that I have decided are the main units I need to invest in as they can potentially generate more wine and bike rental sales. For different startups there will be different units that are considered critical to determining sales volume. Some things that you might think are critical to determining your sales volume may only be making your life easier and not actually contribute that much to increasing sales. At some point, you also need to stop investing in new units until you gauge what the demand actually is.
Posted on May 25, 2021 @ 08:58:00 AM by Paul Meagher
Andrew J. Sherman in his book, Raising Capital (2012, 3rd Edition), provides a useful list of 10 questions that, in his experience, all venture investors ask (p. 18). I am repeating them below. Andrew claims that the answers to these questions determine if and how the deal gets done.
How much can I make?
How much can I lose?*
What is my exit strategy from this deal?
Who else says this deal is viable?
Does the founder (and others) already have resources at risk?
What other value (beyond money) can I bring to the table?
Can I trust this management team?
Is this company's target market large, growing (not stagnant or shrinking) and reachable?
Does the company have (or will it have) a sustainable competitive advantage, as a result of either operational effectiveness, its strategic positioning, or its intellectual capital or other barriers to entry?
Is the company's business, revenue, and profit model credible, verifiable, efficient, and sustainable?
* Andrew points out that investor loss is not just equal to the investment made but could be much more and include "potential liability costs, reputation costs, favors/chits used, time costs, commitments to follow-on capital, and other such factors".
These are good questions for entrepreneurs to consider so they can see things from an investor perspective and anticipate the type of due diligence questions they might be asked by potential investors.
Posted on May 10, 2021 @ 07:55:00 AM by Paul Meagher
In today's blog I want to discuss some similarities between pruning decisions and business decisions, specifically, the distinction between primary and secondary decisions.
The usefulness of the distinction between primary and secondary decisions recently came into view for me when I was pruning some grape
vines in a small vineyard I own. When you are pruning grape vines you need to first decide what primary cuts to make. When you are using a cane pruning approach, these are the cuts that reduce the complexity of last year's growth down to two new canes and often some central spurs for next year's canes. Once you make these primary cuts there are alot of secondary cuts that don't have to be made because they are no longer options (the canes were removed). The secondary cuts are those that reduce the overall length of the remaining canes and remove debris from these canes (i.e., tendrils, side branches, skeletons from grape clusters that were not harvested). Once your are done making your primary and secondary cuts, you can wrap your canes to the lowest trellis wire. Here is a video illustrating how I made the primary cuts on a couple of grape vines.
What you will often see in novice pruners is that they will focus on making secondary cuts (removing tendrils, shortening canes) and when they eventually make some primary cuts they may end up cutting out the canes they worked on. This is wasted time and effort. In my imagined instruction manual for novices I would emphasize that some cuts are more important than others and your first cuts are the most important ones. I would call these the primary cuts. Once you make these cuts, then you can focus on making any remaining secondary cuts that are required to finalize the form of the vine.
In business decision making, we may start up a company within a framework of primary decisions which constrain how we go about the day to day secondary decision making involved in running that business. We make primary decisions with some ideas about what we expect to happen and if we find that things are not turning out as planned, we may need to make some new primary decisions about which lines of business to pursue and which ones to drop.
It is easy to get complacent and run a business without questioning the primary decisions that framed how the business would conduct itself. We can easily lose site of the fact that our decisions are mostly secondary decisions within the path we have chosen. If we were to engage in primary decision making again, we might focus on pursuing other paths and the secondary decisions that we previously regarded as important may become irrelevant and time sucking.
When a novice initially tries to prune a vine they may be overwhelmed by the complexity of branching from last years growth. The distinction between primary and secondary cuts is useful in drawing their attention to the fact that certain cuts need to be made first (primary cuts) and once made, determine the other cuts that should be made (secondary cuts). When confronted with the complexity of starting or expanding a business, certain decisions will be primary decisions to reduce the options to a manageable number, and secondary decisions you make with respect to these remaining options. We may have expectations about how things will pan out, however, because we haven't engaged in alot of the secondary decision making as it confronts reality, we may end up learning that one or more of our primary decisions was unsound and that we should reexamine our primary decisions. This shift back to revising primary decisions is usually referred to as "pivoting" in the business literature.
One of the most difficult primary decisions I had to make was to remove 7 rows of vines that I mistakenly planted on my absentee neighbors property. After failing to secure an agreement with the owner for the upcoming season, I decided to remove them rather than dedicate all the time and effort required to maintain them for another season. I couldn't see myself spending all that time and effort working on something that I no longer had clear ownership off. I learned the hard way the value of precisely mapping your property boundaries. After I removed the grape vine rows, I made another primary decision to purchase land that had 14 acres of wild blueberries growing on them which are easier and less costly to manage and very productive. I would have never made this decision if I didn't make this mistake and was lucky to be able convert lemons into lemonade. The way I recovered from a bad primary decision was to make another primary decision to focus on growing a different type of berry that I could use for wine making.
Managing a vineyard takes a significant amount of time and money. When you are exerting all that effort and money year over year for very little benefit you have to wonder whether you are making a good primary decision. What motivates the primary decision to maintain a vineyard for me is not just the production of grapes, but the fact that people who will eventually be coming to the farm to sample our wine will have the visual of a vineyard and the option to sample some wine made from those grapes. Also, if a vineyard is not too big, it can be a good excuse to be active outside and engaged in a productive activity that you can get better at. In these times of covid, it takes my mind off the world and is good for my mental and physical health. Good business decisions are not just about making more money, they must also balance other factors that are important to your overall context.
So how do we make good business decisions? In this blog, I have argued that it is first necessary to distinguish between two types of decisions you need to make, primary and secondary decisions. Making good primary and secondary decisions are necessary to achieving success, but they involve different constraints. Primary decisions take into account your wholistic context where secondary decisions are more about making good decisions within the context of your primary decisions. Most business decisions involve making secondary decisions within the context of primary decisions already made. Sometimes we need to step back and realize that the decisions we are struggling with today could become irrelevent and timewasting if we revisited the primary decisions that justified this allocation of secondary decision making effort.
Posted on April 26, 2021 @ 07:34:00 AM by Paul Meagher
There are different names for Real Estate Limited Partnerships (RELP). It might also be called
Real Estate Joint Ventures or Land Development Partnerships. There are probably other terms.
I am using the term Real Estate Limited Partnership because it better highlights the legal structure of the company as a limited partnership.
In general, a limited partnership is formed based on two main types of partnership agreements:
An agreement where all partners are general partners and have similar rights, obligations and liabilities.
An agreement where there are two classes of partners:
One or more general partners
Limited partners who mostly help fund the venture, are not involved in day to day operations, and have limited liability in the event that the losses of the company exceeds their investment.
Most of the time, when investment articles discuss real estate limited partnerships they are referring to the second arrangement which is is used to fund larger real estate projects or a portfolio of real estate projects. An arrangement where all the partners are general partners is also an option for real estate investing and I would argue should also be mentioned when discussing options for how a real estate limited partnership might be structured, especially for smaller scale real estate projects.
One of the main reasons to create a real estate limited partnership as an investment vehicle, versus incorporating, is because it can be easier to flow income and losses directly to the partners. A corporate structure may reduce revenue distribution because income is taxed at the corporate level before it is distributed to the partners (i.e., double taxation). A corporate structure also makes it difficult to claim the losses associated with the real estate development in your personal income tax filings, where a limited partnership generally allows losses to "flow through" to the partners to offset personal income taxes.
A drawback to using a limited partnership versus incorporation for real estate development is that you may be exposed to more liability if something goes wrong. When setting up a Real Estate Limited
Partnership as an investment fund, they can be structured so that the general partner is a corporation that is involved in financing and managing a portfolio real estate projects while the limited
partners enjoy limited liability while investing in a diversified portfolio of real estate investments.
Real Estate Limited Partnerships may sound complicated, but in my own case, me and my wife both invested in and own a secondary farm property that could be viewed as a form of real estate limited partnership involving two general partners. We have invested over the years to getting the farm setup to make money and have been able to claim these development losses on our personal income taxes. This is because
the losses from our partnership "flow through" to the partners. The farm as an entity is not taxed like it would be if the farm was an incorporated entity. Where farms chose to use a limited partnership structure, it is common for the owners to be general partners. Some farms may chose to incorporate to limit liability and to limit taxation of income to corporate levels if the farm is making a good income.
There is much more that could be said on this topic, but the point of this blog was to raise awareness on three topics:
There are different ways to setup a real estate investment vehicle. A limited partnership structure may have certain advantages from the point of view of claiming losses during development and income distribution when you start earning income. Being able to claim losses associated with development lowers the break even point for your investment. To get back your money, you don't need to get back the initial amount you put into it if the losses you can claim offset income taxes you might otherwise have to pay in.
An important consideration in private investing is the extent to which income and losses "flow through" to the investor. A limited partnership often allows income and losses to "flow through" to investors where this is less direct or impossible for an incorporated company.
If you own some land that you want developed, a real estate limited partnership is one way you might want to structure the investment vehicle. For example, your stake might be the value of the land you currently own, to be matched by an equivalent amount from one or more investors who supply the amount of capital required to develop the project to the point of a liquidity event - the sale of the real estate or the initiation of income streams from the development.
I am not an expert on these topics so I would advise you to research these topics on your own and form your own opinions. I do think it is worth the effort to research further because it is easy to assume that incorporation is always the way to go when there are also some advantages to limited partnership structures depending on your situation.
Posted on April 23, 2021 @ 01:44:00 PM by Paul Meagher
I am quite interested in a free online event that started today and which will be taking place over the weekend.
The event is a virtual summit on the multi-faceted topic of Building Your Permaculture Property that is being held to promote the launch of a similarly named book by Rob Avis, Michelle Avis and Takota Coen.
Rob and Michelle Avis were trained as engineers. They operate a consulting company called Verge Permaculture. I'm a fan of the content they publish on their Youtube channel where this virtual summit is being hosted as a live Youtube event. It is bringing together alot of interesting speakers and leaders in Permaculture.
You can find more information about the speakers here:
Posted on April 16, 2021 @ 12:51:00 PM by Paul Meagher
Last night I upgraded webserver software that hosts these sites and encountered some upgrade issues that caused my email systems not to work for awhile. The websites were up but it took about 6 hrs to resolve the email issues. Quite frustrating but I did manage to learn a few things that I figured I would share.
1) If you upgrade webserver software and run into a problem getting it working again, there is a good chance that some new security feature of the software is the cause.
2) One piece of the email system software that was upgraded failed because the keys used for authentication were too short. A config file setting for the software allowed you to specify the number of bits to use for the cryptographic keys. The number of bits was too small so I had to increase the number of bits to use to a higher recommended number. I also had to generate new keys using new crypto algorithms that the upgraded software provided. Once I did this, the email system software would now startup because the new cryptographic security requirements were met.
3) Another piece of the email system software that was upgraded failed because you have to sanitize user emails in a new way in the "router" module before you can hand the email data to the "transport" module. The old way I was doing things involved sending "tainted" data to the transport module. So I had to rewrite the "routers" section of the config file so it "untainted" the email data before handing it off to the "transports". The transport configs had to be revised as well to use new untainted variable names.
My objective when I upgraded the webserver last night was to simply run newer versions of the software using existing configs. I believed that simply upgrading the software would lead to upgrading the security because I would be running newer versions of the software. Newer versions of the software often address security vulnerabilities in the older versions. In the case of upgrading webserver software, however, the old settings you currently have may not be compatible with the way developers and maintainers of the newer version of the software want it to run so you may have to dig back into your config files and change some settings and perhaps generate more secure keys to actually upgrade the security aspect of the software.
If you can endure frustration for a few hours and solve your problems, you will often come out the other end with some new and useful ideas you didn't know before. When you are banging away on a problem at 2:30 am in the morning, you are often not thinking about the value of frustration, although sometimes I do in fact remind myself of the learning value of frustration and it does help to calm your nerves and keep you working productively on the problem. What I took away from my frustration was that we all talk about the need for increased
cybersecurity but what does that mean? Well three things it means is using better cryptographic algorithms in your software, making sure to properly sanitize (or "untaint") all data coming into your programs before you use them, and anticipating that when I upgrade software in the future that some old configs might conflict with a more secure way that the
newest version of the software wants to run. My frustration has given me a new appreciation for cybersecurity and a desire to keep more up to date on certain aspects of it.
Posted on March 29, 2021 @ 04:37:00 PM by Paul Meagher
In today's blog I want to define some terms used in finance and investing that I think are worth knowing. I hope to make a habit of devoting future blogs to defining useful business terms. Some terms in finance and investing are "mind tools" that can help us think more clearly about certain business problems. Just like farmers have invented tools to make farming easier, academic and practicing business people have created business terms that make thinking about business problems easier. Here are some terms to start with.
Loan To Value (LTV):Loan to value is a ratio (L / V). It is the ratio of the amount of loan L used to acquire an asset to the assessed value of an asset V. Lenders may specify an LTV of say 70% meaning they will only loan up to 70 percent of the value of the asset. So, for a house assessed at $100,000, the maximum loan the lender will provide is $70,000. The portion the buyer is expected to pay is sometimes called "the haircut" (in this example 30% or $30,000) . The higher the LTV value on a loan, the riskier the loan is. Different lenders may offer different LTV rates and some may originate riskier loans. One of the factors that led to the economic crisis of 2008 was that mortgage originators were offering loans with high LTV's. In Investopedia's article The Fuel That Fed The Subprime Meltdown they describe what happened to LTV rates:
As a result of this activity, it became very profitable to originate mortgages—even risky ones. It wasn't long before even basic requirements like proof of income and a down payment were being overlooked by mortgage lenders; 125% loan-to-value mortgages were being underwritten and given to prospective homeowners. The logic being that with real estate prices rising so fast (median home prices were rising as much as 14% annually by 2005), a 125% LTV mortgage would be above water in less than two years.
Time Under Water: Measures how long it takes for some measure of business performance to return after it goes down in value. If you made, say, 50,000 in February of 2020 but your revenues took a hit as a result of COVID, then you could measure how long it takes to get back to making 50k a month again. The time under water would be the number of months it takes to get back to making 50k a month again. The time under water could be measured in days or years depending on the context. Many small businesses are continuing to spend time under water as a result of the pandemic. If you were making, say, 50k per month before the pandemic and then your revenue dropped to 10k per month, that drop of 40k would be the drawdown amount. If it was the largest drop in revenue you have ever experienced, then it would be the maximum drawdown, and your recovery back to making 50k a month again would be time spent deep underwater. When assessing the risk associated with different stock market investments, you might measure the average time under water and maximum drawdown of different stocks to create a risk profile for them.
It might be worth noting that if you are in the situation of having a mortgage loan where the value of the loan is greater then the value of the house, then your loan is said to be under water.
Arbitrage: An arbitrage opportunity arises when there is the possibility of buying something for a low price in one market and selling it for a higher price in another market. A stock that is priced lower in one stock exchange, for example, can be exploited by quickly buying up stock on the lower priced exchange and selling it on the higher priced exchange. Hedge funds will often use leverage to buy large quantities of shares to make it worth their while to make these arbitrage trades. The difference in price between the two markets is the gross profit. There are transaction costs in executing a trade which may wipe out the profits if you are not careful. Retail arbitrage involves buying items in one retail environment at a low price and selling it in another retail environment at a higher price. Some Amazon sellers, for example, use retail arbitrage to make money on the items they buy on clearance at Walmart and sell on Amazon. An example of arbitrage in rural areas might involve a store owner buying retail items in a larger big box store and selling them at a higher price in a rural general store.
Posted on March 11, 2021 @ 07:47:00 AM by Paul Meagher
I recently went to a local appliance store to inquire about their fridges. They mostly carry General Electric appliances. When I arrived I was quite surprised to see that they had hardly any inventory. I was informed that the limited inventory I could see was already spoken for. I asked about getting a fridge and was told I could be waiting 4 months for delivery.
It is likely that there will be supply chain issues for common types of lumber from 2 x 4's, plywood, and decking especially as we emerge from the pandemic and the season for building/renovation/diy projects starts to heat up.
From the point of view of the end consumer, these supply chain issues are major frustrations both in terms of not being able to get a product you want/need or having to pay higher amounts because of scarcity. From the point of view of an entrepreneur, these disruptions signal an unmet demand and an opportunity to provide some type of supply chain solution. Where the news media might use the term "disruption" an entrepreneur might substitute the word "opportunity".
We encountered supply chain issues in the early days of the pandemic when there was a lack of Personal Protective Equipment (PPE). There was a huge demand that was not being met and this was a signal for many different companies to step forward to help meet the demand. The shift to working and spending more time at home has spawned increased demand for many products and is causing ongoing supply chain issues. The shortage in GE Appliances, for example, is being attributed in part to increased home renovations and replacement of appliances.
As we exit the pandemic there are likely to be supply chain issues if the economy starts to heat up and there is not enough supply to meet demand. An entrepreneur or investor looking for opportunities might want to research these disruptions, their causes, and the possible solutions to identity potential opportunities. Maybe it involves manufacturing items that are typically manufactured elsewhere, or obtaining needed items from other sources, or solving a logistics issue, or creating software that sources/monitors supply chain items, or anticipating demand and obtaining items that will be in demand later. An example of the later is some automotive companies that anticipated potential supply chain issues with computer chips and stockpiled them. They are now sitting pretty compared to other automotive manufacturers who did not anticipate shortages and can't roll out new vehicles until they can obtain a supply of computer chips.
I'm also seeing supply chain issues in ordering fruit trees, berry plants, and vegetable seeds. The primary producers are running out of stock on the most desirable items. It will also be interesting to monitor the types of foods that might be in short supply. There was a run of on flour last year when everyone started baking at home. As we emerge from the pandemic what food supply chain issues might we see?
Where I live residential real estate has been hot with house prices going up, houses not staying on the market very long, and in some cases bidding wars leading to closing prices above the asking price. There doesn't seem to be enough real estate supply to meet demand.
This may be the biggest supply chain issue of them all especially considering the quickly rising cost of standard building materials that make purchasing an existing home even more attractive. Opportunities abound for entrepreneurs and investors in the residential real estate supply chain.
In conclusion, supply chain disruptions are frustrating for the companies trying to manufacturer products and for the end consumer. They also signal opportunities for those who seek to understand the causes and the possible solutions that might appeal to the manufacturers (B2B) and consumers (B2C). Many people are unaware of the supply chains and what it takes to keep them running smoothly. When they are disrupted we start to see under the hood that they involve numerous physical and computational steps that can potentially be disrupted. We have become more aware of supply chains as a result of pandemic shortages but there is still much to learn if you want to understand where entrepreneurial and investment opportunities might lie.
Posted on March 1, 2021 @ 08:44:00 AM by Paul Meagher
The pandemic has been going on for so long that it is getting hard to imagine that it might soon come to an end and that we should be starting to prepare for a post pandemic world. It might even come sooner than we think if the vaccines help to create herd immunity quicker than anticipated.
I am a fan of Dr John Campbell's Youtube channel where, since the pandemic began, he has been discussing empirical data and scientific studies on various aspects of the pandemic. Israel is ahead of most countries in administering vaccines to its population and there is now a good large scale Israeli study published (+1 million sample) demonstrating the effectiveness of the vaccine in stopping the spread of Covid-19, hospitalizations and death. The results of the Pfizer vaccine rollout in Israel is very impressive and a cause for hope.
It is hard for startups and small businesses to plan when the outlook is bleak and uncertain. In this situation you may find yourself looking at the world through a scarcity lens rather than the abundance lens that is more typical of entrepreneurial thinking. What happens when the world starts getting back to normal where we can again gather in larger groups, socialize freely, travel without restrictions and do other things that we took for granted before? Will there be pent up demand?
It is still tricky to estimate when the economy will "reopen" but we should be starting to imagine it and what possibilities might open up when it does. Take, for example, a wedding venue business that I have been thinking about offering at our farm property. Last year was not a good year for holding weddings and many people put it off. In colder climates, that means putting it off until this summer. Will there be pent up demand for wedding venues this year? Will they generally be smaller due to international travel restrictions? Do I start advertising now and what should my marketing message be?
What about restaurants and bar venues? Increased demand here might be a result not only of people wanting to publicly socialize again, but also due to the pandemic forcing the closure of competing bars and restaurants leaving fewer venues to satisfy demand.
Is it a time to privately invest to get ready for demand? Valuations on many small businesses are lower than they were pre-pandemic and many small business owners are fed up and wanting to exit the business at lower valuation levels. How long will these valuations last if it appears that the economy might start to reopen and that demand might start to return or exceed pre-pandemic levels?
Just like many entrepreneurs and investors had to adapt to the pandemic world, forward looking entrepreneurs and investors are already looking to adapt and scout out opportunities in the post-pandemic world.
It may be important to monitor places like Israel and Scotland that will be leading the pack in terms of reopening their economies as a result their vaccines efforts to see what the trends and opportunities might be in a post-pandemic world.
The book could be interesting/useful reading for entrepreneurs and investors for the simple reason that growth is a central concern for both. A better and more detailed understanding of growth might allow us to 1) better understand how the world works, and 2) apply growth-related ideas to our own circumstance.
Chapter 1 of the book is called Trajectories: or common patterns of growth. The chapter is 69 pages long with relatively small typeface so there is alot of content in this first chapter to the extent you might consider it a book. My strategy for reading this 634 pg. book is to consider each chapter as equivalent to reading a small book. When I finish the first chapter, it should result in a sense of accomplishment and allow me to drop the book for awhile until I have time to focus on it again.
Chapter 1 sets a technical background for the book. Vaclav discusses some math and models that have been used to account for and explain the trajectories of growth. Growth is generally plotted as some labelled variable on the y axis that increases over time plotted on the x axis. Within this view of growth, many possible trajectories can be plotted and many different maths can be used to describe these trajectories. The math used to describe these trajectories can in turn be explained by different models and theories of how that trajectory came about. The varieties of growth refer to this diversity of maths, models, and theories that are used to describe and explain growth phenomenon.
If you study visual representations of growth in many different areas like Vaclav and others have, you will begin to notice common patterns. One common pattern is an S-shaped or a Sigmoid growth pattern involving slow growth at first, followed by exponential growth, and then trailing off to slow growth again. The model explanation of this pattern might involve a positive feedback loop accounting for the exponential aspect of growth with a countervailing negative feedback loop accounting for the slowing of growth at the end. Growth can also appear in a more modest linear form involving a constant amount of growth each year perhaps plateauing at points along the way. Growth can also be fast right from the start without any slow buildup - what startups and investors might wish was the case. The pandemic has caused many micro and macro economic growth curves to oscillate off trend.
In the remainder of this blog, I want to do a deep dive into one of ideas mentioned in this chapter that interested me.
Explaining Technological Change
In 1971, Fisher and Fry published a classic paper called "A Simple Substitution Model of Technological Change" (1971) which you may be able to download if you google it.
The objective of the paper was to provide the reader with a simple-to-understand model that might be used to explain how the technologies we use change over time.
Fisher and Fry summarize their model as follows:
The model is based on three assumptions:
Many technological advances can be considered as competitive substitutions of one method of satisfying a need for another.
If a substitution has progressed as far as a few percent, it will proceed to completion.
The fractional rate of fractional substitution of new for old is proportional to the remaining amount of the old left to be
.... Experience shows that substitutions tend to proceed exponentially (i.e., with a constant percentage annual growth increment) in the early years, and to follow an S-shaped curve. (p. 75-76).
This substitution model can be used to generate S-shaped curves using logistic type equations. The particular version of these equations Fisher and Fry used allows you to enter a point in time and return the market fraction (f) of a new method. Vaclav summarized the rest of Fisher and Fry's paper by saying they "used their substitution method to forecast the outcome of simple two-variable substitutions and applied it initially to competitions between synthetic and natural fibers, plastics and leather, open hearth furnaces and Bessemer converters, electric arc furnaces and open-hearth steelmaking, and water-based and oil-based paints" (p. 48).
The variety of technology changes they modelled in this paper is one reason the paper is considered a classic. Also the simplicity of the proposed model is a good starting point for thinking about technology change before formulating more complex models.
To better understand some of the concepts in Chapter 1, I felt the need to deep dive into some of the primary research Vaclav cited. If you decide to read this book, you might want to anticipate doing so as well out of interest and/or to more fully understand the concepts.
Posted on January 15, 2021 @ 12:10:00 AM by Paul Meagher
What is lean selling?
Lean selling is figuring out how to sell your product or service with the least amount of sales effort and the least cost while still being effective.
The idea of lean selling came to me when I was thinking about how I might sell the wine made on our farm property. I don't want to hang around all day selling our wine as I can't afford, at this startup stage, to devote too much time to selling while other things need to be done around the farm. So, I thought about selling all the wine at designated events that we will host at the farm. Easy as that sounds it involves commercial insurance, proper liquor licensing, building inspectors and jumping some other hoops but it seems like it could eventually be a lean way to sell wine.
The idea of lean selling is also tied into marketing as it is difficult to sell stuff, especially events, if you don't have good marketing. This year we sold out all the tickets to our second annual outdoor concert (socially distanced version). We only used facebook advertising and word of mouth and were able to sellout easily and quickly. I paid $0 for facebook marketing and it was more effective than the $1300 I paid for more traditional advertising last year. The point I want to make here is that lean selling also takes into account the cost and effort of the marketing aspect.
Many have heard of the term "lean startup" or "lean manufacturing" or "lean farming". In this blog I propose that lean can also be used to describe an approach to selling a product or service that minimizes the operational and financial costs associated with the sales aspect of your business.
Posted on December 31, 2020 @ 12:53:00 PM by Paul Meagher
Today I was testing a landscaping device I developed to see if it actually will perform a useful landscaping function. It performed better than I had anticipated because I didn't really appreciate how it worked until I tested it on a challenging landscaping task. Eventually I broke the prototype but way it broke provided useful information for designing the next iteration which will include stronger structural components. I did achieve a proof of concept that my invention is a useful landscaping tool and probably will work better with some additional tweaks.
There are stories of people who are very inventive in developing new devices to solve their own problems. There is quite a bit of intellectual enjoyment to be had creating new physical or digital tools to scratch your own itch. Engaging in invention does not need more justification than that it can be fun and intellectually challenging. This is the first year I developed two devices that I considered inventions (i.e., some aspect of it was new and significant compared to what came before) and in both cases I felt alot of satisfaction in making something that solved a particular problem I designed a prototype to solve. I think getting good at inventing requires practice like any other skill. Practice is probably not quite the right word as you are not doing something repetitive when you engage in invention, rather you are specifically allocating a certain amount of time to the task of inventing something new by sourcing materials and solving the problems that need to be solved to come up with an initial prototype. Then you test it, find out what the weaknesses and strengths of your design are, and refine it again, possibly at more cost if you decide you want to continue improving the design in significant ways.
There are a bunch of additional steps involved in getting a physical invention to market about which I am fairly ignorant, however, all these steps are another aspect of invention that you can practice on to become a better inventor. The design of your invention might have to change in certain ways to make it easier to manufacturer or to bring the overall cost of the materials down. Maybe you need to partner with another entrepreneur with some of the skills and know how you require to take it to the next level. Maybe you need to learn a Computer Assisted Design (CAD) program to communicate your design requirements precisely. Maybe you need to learn how to do a patent search, do an analysis of potential competitors, and a develop a plan for how to enter the marketplace in a small way to test the market along with a plan for how you might scale if things start to take off. These are all arguably skills that might be useful for inventors to have it they want to take their inventions beyond the garage and into the marketplace.
Sometimes the joy of inventing is in your belief that you have not just scratched your own itch with your invention, but the itch of a large and potentially lucrative market. That realization might motivate you to pursue the long game of invention where you start to invest more resources and time into making a significantly improved prototype and acquiring other skills necessary to bringing an invention into the market.
The accredited investor definition is important because "accredited investors may, under Commission rules, participate in investment opportunities that are generally not available to non-accredited investors, including certain investments in private companies and offerings by certain hedge funds, private equity funds, and venture capital funds. The
final rules are tailored to permit investors with reliable alternative indicators of financial sophistication to participate in such investment opportunities (p. 4)".
The amended definition now looks at more than an individuals net worth to determine if a person should be considered an accredited investor or not:
Prior to the adoption of these final rules, in the case of individuals, the accredited investor definition has used wealth—in the form of a certain level of income or net worth—as a proxy for financial sophistication.
However, as stated in the Proposing Release, we do not believe wealth should be the sole means of establishing financial sophistication of an individual for purposes of the accredited investor definition. Rather, the characteristics of an investor contemplated by the definition can be demonstrated in a variety of ways. These include the ability to
assess an investment opportunity—which includes the ability to analyze the risks and rewards, the capacity to allocate investments in such a way as to mitigate or avoid risks of unsustainable loss, or the ability to gain access to information about an issuer or about an investment opportunity—or the ability to bear the risk of a loss. Accordingly, the final rules create new categories of individuals and entities that qualify as accredited investors irrespective of their wealth, on the basis that such investors have demonstrated the requisite ability to assess an investment opportunity. ~ pp. 5-6.
In order to see what types of knowledge or expertise the commission believes provides the requisite level of sophistication, you should consult the 164 page final ruling document.
The new accredited investor definition also allows matrimonial partners to pool their funds to meet the net worth tests for being an accredited investor.
Also, an employee of an issuer who has excellent knowledge of the risks involved may also participate as an accredited investor of that issuer.
The definitional changes allows more individual investors to qualify as accredited investors. It also allows more institutional investors to quality as accredited investors. I won't go into all the changes here as the purpose of this blog is to draw attention to some of the changes so you can do your own deep dive into all the changes and their potential significance.
Posted on June 23, 2020 @ 07:19:00 AM by Paul Meagher
I find Project Farm videos informative and ingenious. The videos often involve testing to see
which product aimed at solving the same problem is the best. The latest video I watched tests which step drill bit is the best.
In this particular video, the tester does not just use one test to establish which step bit is the best, but conducts a few rounds of testing, with certain step bits not advancing to the next round
of testing because they performed poorly in less stressful rounds of testing. If they don't perform well under weaker tests, they are not worth testing in harder tests.
Many of us don't need the best product if it is quite expensive and we are only likely to use it infrequently. We might be looking for the best value for money and this video ends with two recommended step drill bits - the best one based on all the testing, and a good bit based on all the testing that is less expensive.
It is interesting that the consumer marketplace sells so many inferior products often at inflated prices, usually because they are associated with a brand name we trust. It seems like most tool manufacturers need to have their own brand of step bit and some require that the product meet a high level of quality while others apparently just want to have an offering in the market.
Project Farm videos are worth watching because they offer lessons in how we might test products to see which ones are the best. As an entrepreneur developing a new product, we might want to do
similar testing on a new product against its nearest competitors to see exactly how it stacks up against competing products.
On my farm, I've been creating blueberry wine and creating some variants by adding a bit honey or maple syrup to add to the finish. My testing has involved comparing plain blueberry wine with
the same blueberry wine with varying levels of honey or maple syrup added. While this is useful testing to do, I realize now that I need to be blind taste testing my wines against blueberry wines made by other wineries to see how it compares. Testing to improve you product needs to eventually give way to testing against other products in the same category.
Success might be gauged by the fact that your product is better than your competitors; however, that fact alone does not mean your product will sell more or be more profitable. The best step bit is also the most expensive - perhaps too expensive for most people and they may end up buying an inferior product that ultimately generates more revenue and is more profitable than the best product. This is where packaging, branding, distribution and pricing decisions come into play and also determine the success of your product. In the case of wine where the differences in taste are often barely noticeable, packaging, branding, distribution and pricing might matter even more.
Often entrepreneurs are in a position where they are developing a new product and may not have direct competitors. To test novel ideas developing a Minimal Viable Product (MVP) is often advised so that you can begin gathering information about whether the assumptions you are making about how people will respond to your product are correct or not.
When seeking funding, it is important to derisk your idea by identifying as many of the assumptions you are making and subjecting as many of them to testing as you can. To do exhaustive testing of all your assumptions can be very costly in time and money so you will probably have to focus on testing the most critical assumptions first. Often it is this testing that is paid for by friends and family and income from your other job. Getting some of your assumptions tested through a minimal viable product, questionaires and surveys, early sales, letters of intent, a demo, comparative testing, etc... is often what makes your project ready for investment by people other than friends and family. Private investors often shoulder more risk than banks might, but they are still very attuned to the level of risk involved, what assumptions are being made and whether they have been tested sufficiently or not. In my case, if I were to do comparative testing of my wines against other wines in the same category, and the results came out positive, that would derisk investment into my blueberry wine business either from my own funds or from investor funds.
Today's blog is about the importance of product testing. It is important in coming up with a quality product that people will love to use, to create the branding, packaging, distribution and pricing that will make people want to buy it, and it can also help derisk your project for investors if you have done some testing of the most critical assumptions.
Posted on June 2, 2020 @ 09:47:00 PM by Paul Meagher
A server upgrade will be happening on Wednesday June 3rd, 2020. The sites will be taken offline at 6:00 pm CST. It will hopefully take around 1 to 2 hrs after that to have the sites up again. I will provide a status update on this blog once the sites are up again.
Posted on May 14, 2020 @ 08:09:00 PM by Paul Meagher
Gardening, like other aspects of modern living, is being reshaped by new technologies that are becoming cheaper and more function filled. I was, for example, looking for a way to automate plant irrigation in my greenhouse and my searches took me to this $100 piece of gardening tech.
This 4 zone irrigation controller works with a $40 moisture sensor that can be plugged into the irrigation controller.
So instead of scheduling watering to happen at different times of day for a certain duration each time, your system might measure moisture levels in the soil and turn on your irrigation hoses to achieve a certain level of soil moisture. That is the theory, I can't say whether this approach works best or whether this particular unit is the best/cheapest/simplest solution to that problem. One can imagine wireless networking, cloud based monitoring and control, and more sensor types might be involved in higher-end irrigation systems. These innovations will eventually become a part of the modern gardener's toolkit.
In the gardening sections of all the stores we increasingly have the option of purchasing battery powered mowers, saws, trimmers, blowers, pruners and more. It is becoming difficult to switch to a new brand of tool as your investment in batteries can lock you into a specific vendor. We are in the first phase of transforming energy intensive gardening tools to lithium batteries. The high amp hour batteries needed for these devices (4 Ah, 5 Ah and higher) offer electric storage potential for other devices around the home either as a DC source or inverted to become an AC source. They could, for example, supply some of the power you might need in a small green house to run led lights, to run a water pump, to run a motor that opens a window or door, etc...
The missing piece in this battery powered nirvana is how we charge the batteries. It would be nice to start seeing these tool vendors also offer solar charging solutions that are cost effective, easy to setup up, and more efficient and better thought out than the Do-It-Yourself systems we might put together. I am not expecting miracles, but if solar panels can start to be used to sustainably charge power tool batteries then that would be a step forward in my opinion. For those who don't use their gardening power tools that frequently, perhaps the length of charge in conjunction with a cheaper panel setup will be sufficient to fully charge the batteries for their next use.
Often we place a greenhouse in the most sun advantaged spot we can find on our properties. This naturally opens up the possibility of integrating solar panels and battery charging on or near the greenhouse.
One popular version of gardening depicts the gardener as regularly attending to their plants and using that as an opportunity to relax and get some exercise. I am a fan of that version and that approach will grow vegetables as well or better than many automated solutions. An automated solution, however, is necessary for my context because even a small home greenhouse requires alot of attention and I'm not always around to offer that attention. As a modern gardener, I do enjoy the challenge of figuring out how to automate gardening tasks in a way that might improve the growth of plants (moisture based watering) compared to manually performing those tasks (watering when I have the time or not at all). A large amount of a modern gardeners time can be spent thinking about, researching, purchasing and installing gardening technologies.
Last night it appears that temperatures went below freezing. Some of last years vines that I took out of the greenhouse to transplant have withered leaves today. We have had above freezing temps for awhile now and I ignored the possibility of frost. Tonight there are warnings of frost again so I am running a power cord to the greenhouse and will run a small 1500 watt heater over night to protect some seedlings I planted yesterday that were not affected. Unfortunately, I don't have my thermostat controller here otherwise I would permanently set the heater to come on when the temperature drops below a low temperature set point (2 C or 36 F) and shut off when it exceeds the high temperature set point (5 C or 41 F). I experimented over the winter with temperature control in my cold frame to try to grow veggies. That experiment failed to produce veggies but I did learn how to automate temperature and light control using a cheap setup.
The other main variable in addition to water and heat that you have to control in a greenhouse is ventilation. There are heat sensitive window openers that you can buy what can be used to open a vent when the temperature in the greenhouse rises above a certain level. I have one of these but haven't installed it.
It would also be nice to have a setup where a motor would come on that would lift a window covering as the temperature rises. This would allow me to keep a screen in the window frame to keep bugs out. This is not possible to do with the setup pictured above which is one of the reasons I haven't installed it yet.
Modern gardening often involves experimenting with different growing methods. You might, for example, explore growing plants under artificial lights or growing microgreens. Other options include hydroponic growing, aquaponic growing, vertical farming, and other forms of growing that involve more technical sophistication. We have more methods than ever for how we might grow a plant.
Modern gardening can be an expensive hobby if you want to go all in and grow all your veggies using some high tech method. For me, modern gardening is about patiently experimenting with and improving upon your technical approach to gardening over time. Each year you will have the option of integrating some new technology or technique into your gardening and making sure things work as expected before making grander plans around that technology or technique. Over time, you might become an effective modern gardener but probably not without alot of failure and learning along the way. I am hopeful that I have hit upon some good technologies and techniques this year that I might be able to scale up, but time will tell.
There are tried and true ways of gardening and for many it is a chance to get away from technology and relax in the outdoors. I still use alot of these traditional methods and tools in my outdoor growing. Modern gardening is not for everyone but I would argue it is becoming more of a trend as new gardening tech emerges to automate or effectively solve some gardening problem. Indications are that more people are going to be investing in back yard projects this summer, including gardening projects. I'm hopeful that gardening tool manufacturers and retailers will increasingly start to appeal to modern gardeners in the selection of gardening tools and gardening systems on offer.
I'll end this blog with a popular video showing what it is like to plant a field of corn in a modern setup.
Posted on April 21, 2020 @ 08:09:00 AM by Paul Meagher
As I spend my days pruning grape vines I have time to think about the skill of vine pruning and what expertise might look like in this particular domain of skills.
There a few different frameworks you can use to analyze what skill acquistion consists of. John Anderson's paper Acquisition of Cognitive Skill (1983; PDF) was and is still a landmark paper in the Cognitive Science tradition. The problem with these approaches is that it provides more of an observer's perspective of what skill acquisition consists of, rather than informing us on what the performer experiences while mastering the skill. If you want more of an experiential account you can opt for a skills framework by Hubert Dreyfus that is called the Dreyfus Model of Skill Acquistion. The Dreyfus model is inspired by a tradition in philosophy and psychology called Phenomenology which offers a vast literature to consult if you wish to go deeper.
For my purposes I was interested in what it might feel like as pruners advanced in levels of pruning expertise. Dreyfus offers the following language to describe 5 different levels of expertise:
I would say that I am somewhere in the Competent to Proficient range in pruning, but there are times when I drop to the Advanced Beginner. We had some hurricane damage to the vineyard last year that, I believe, blew in some salty moisture from the nearby ocean (4 kms) which helped desiccate alot of the leaves in addition to the high winds. One thing I was seeing were canes with branches at the end that were viable but the intermediate branches were often damaged or sickly looking. When pruning you like to keep the branches closest to the trunk (shortest distance networks) not the branches at the end of the canes. This was a repeating new situation for me, so I had to develop new routines to deal with it. Eventually those routines will become more automatic in the fullness of time.
What does the highest level of expertise consist of in the Dreyfus model. In this paper (PDF) Dreyfus describes the expert in these terms:
The proficient performer, immersed in the world of his skillful activity, sees what needs to be done, but must decide how to do it. The expert not only sees what needs to be achieved; thanks to a vast repertoire of situational discriminations he sees immediately what to do. Thus, the ability to make more subtle and refined discriminations is what distinguishes the expert from the proficient performer. Among many situations, all seen as similar with respect to a plan or perspective, the expert has learned to distinguish those situations requiring one action from those demanding another. That is, with enough experience in a variety of situations, all seen from the same perspective but requiring different tactical decisions, the brain of the expert performer gradually decomposes this class of situations into subclasses, each of which shares the same action. This allows the immediate intuitive situational response that is characteristic of expertise.
This seems like a good description of what might be going on in expert level pruning and is not really all that different from John Anderson's declarative to procedural theory.
I think it is helpful to visualize what expert level still looks like as exhibited in this match between a world chess grand master champion, Magnus Carlson, and Bill Gates. Magnus appears to be operating quickly and intuitively (Expert) while Bill needs to think more about each move (Competent? Proficient?).
A limitation of these skills frameworks is that they are mostly focused on the cognitive aspect of skill acquisition and don't talk much about how emotion, motivation and community might correlate with different levels of skill acquisition. These other contexts may explain why the skill is pursued to a high level or at all.
The question that I am mostly interested in now is how emotion might vary with different levels of skill. Specifically, can an activity that is unenjoyable become enjoyable as you acquire more expertise? It is
hard to compare how you might have felt at one level of expertise compared to a different level of expertise without being mindful through the process or having a good recollection. What I do remember is that
the early days of pruning produced alot of decision fatigue in me. It was tiring to follow rules that you weren't sure applied and you were always encountering new situations to figure out. I still do experience
some decision fatigue when I have to prune, for example, heavy criss-crossed vigorous growth. But even then I can listen to music and enjoy myself if it is a pleasant day and I am able to think about other things. My attention can wander more now as I do the complex activities involved in preparing a vine for this years, and next years, growth.
I don't think enjoyment is a necessary or frequent correlate of increased skill. Alot of the time it is just grit that gets you through a day of pruning. You set a goal and hell or high water you try to achieve that goal for the day. I'm not sure where Grit comes from (but Angela Duckworth is the guru on this). Part of it comes from all the mind games we play to convince ourselves that we need to keep moving forward - similar to what it takes to complete a marathon if you haven't trained as well as you should have.
In the case of a physical skill like pruning it also depends on remaining injury free. My upper back muscles are getting a workout similar to running a long distance and swinging your arms alot. So far, there is some soreness but it hasn't slowed me down. It is something that I need to be mindful off in the morning when muscles are stiff and you could activate an injury reaching for something the wrong way.
The company of others would probably have made this pruning job more enjoyable as well so the role of community potentially comes into play in explaining how skills are acquired and experienced.
To be mindful about the acquisition of a skill it is helpful to have a framework for thinking about how skills are acquired. You can be skillful in your thinking about skill acquisition by taking into consideration
not only the cognitive aspects, but also relating it to the physical, emotional, motivational, and community aspects as well.
For any business to succeed the employees need to be skilled at doing what needs to be done. A mindful startup would be a startup that is more aware of the types and levels of skills required and have a more wholistic appreciation of the context for skills development that includes the role of grit, emotions, and community in fostering increased skills development or new skills development. There is not much literature on what a mindful startup is and whether is more likely to succeed than a startup following a different path to success. Perhaps in these changed times the hegemony of the lean startup will be challenged by the ideas around mindful startups whatever they may turn out to be. There is no shortage of mindful literature out there to cross pollinate with the lean startup literature. The lean startup literature gives us one framework we can use to be mindful about how to create a successful startup. The lean startup concept has been accused of being more focused on explaining success in high tech unicorn-type businesses. There are other ways to achieve business success in a less exponential manner that we should be aware of so that we are not dogmatic in thinking about what it takes to succeed. Startups need to be mindful of their own context and situation. The level of awareness they achieve may be the main advantage they have other startups.
I'll end this blog with a popular video showing what it is like inside a tractor while planting.
Posted on April 3, 2020 @ 09:51:00 AM by Paul Meagher
Seems like we have alot of lemons on our hands in the form of self-isolating confinement and social distancing. While that stresses alot of people, to get over that stress you may have to start looking for positives aspects of this situation.
The main positives I see for entrepreneurs in this time of social-distancing is that it gives us time to focus on some valuable work like book keeping,
business plan writing, reading, coding, learning new skills, renovating buildings, ordering supplies to get ready for projects, creating and expanding online networks, designing a new product or service, and perhaps figuring out how you want to finance the next direction in your business. Seeking funding to finance a new business idea without having done any groundwork (i.e., plausible investment pitch, business/financial plan, minimal viable product, business registration, website) is less likely to result in a successful financing deal. Now may be a good time to work on laying some of that groundwork.
This is the time of year when I prune 1.5 acres grape vines I planted at our farm property. I will be making lemonade of this slow down to do some pruning next week. I will also be making some lemonade by learning horticultural skills for creating new woody plants. I have experience creating new grape vines using cuttings from my existing grape vines. Ideally, these cuttings are taken from grape vine prunings when the vine is still dormant so you don't harm the host plant more than you have to. I believe the same approach and techniques can be applied to additional woody plants like haskaps (Lonicera caerulea), highbush blueberries (Vaccinium corymbosum) and black currants (Ribes nigrum) that are growing in my suburban back yard. I could fail at creating new woody plants, but now appears to be the best time to do this propagation work to maximize the likelihood of success.
Yesterday I created cuttings from some older haskap bushes growing on our property. I filled a black tote with a soil mixture of bagged peat moss and bagged manure lying around my back yard from last year. I soaked the rooting end of the cuttings in a cup of water. I added a couple of drops of rooting hormone to that water and let the cuttings soak for a few hours. Then I planted all the soaked cuttings densely into the soil I placed in a plastic tote (see photo below). I dipped the rooting end of the cuttings in rooting hormone one more time before placing them in the soil. I then placed the tote on a heating mat I purchased online this year for around $60 that will maintain the soil at a particular temperature (20 C or 68 F). I placed a glass pane from a sliding window on the top of the tote to seal in the moisture, create a humid environment, and keep my 2 cats from jumping in. Some of the buds look like they are starting to leaf out today but I'm more concerned that the root system spring to life rapidly to support the development of these leaves.
Today I will be starting a couple more experiments using some cuttings from a highbush blueberry plant and a black currant plant in my back yard. The same planting and growing conditions will be used.
If some of these cuttings eventually become new plants they will be valuable to me in two main ways:
The new plants are valuable for my farm as something I could plant, give away, barter, or sell.
The acquired knowledge and skills on how to grow new plants from existing plants sets the stage for acquiring more horticultural expertise with other plants and different growing techniques.
Much of the relevant horticultural knowledge and techniques can be found on YouTube and other online resources. Self-isolating confinement offers me time to consult these resources while doing small-scale experiments to test ideas. These growing experiments don't take up much room. Growing salads and herbs in totes might be more practical for most people looking for a faster return on food growing efforts.
Like most people I was caught flat-footed by the sudden shutdown of business as usual. It seemed like alot of gloom and doom and for many it still is and it is possible it will become much worse before it gets better. If you are an entrepreneur and your business is slowing down now that sucks in many ways, but it may not be all bad. This is an opportunity to address intellectually challenging work that might help get you ready for the next chapter. You can get certifications, do business planning, create personal/business forecasts and budgets, work on your online presence, do renovations, get up to date on your business bookkeeping, and learn some new skills. My horticultural example is meant to show that we can use this time to acquire valuable new skills that can make and/or save money.
For some, this slowdown is a time for business emergency planning and there is a very real need to act soon. If that is the case, perhaps Steve Blank's five day plan will give you some ideas on what you might do to react more quickly to the current situation. In many ways this requires figuring out, on an accelerated timescale, how to make lemonade from the lemon situation we currently find ourselves in.
Posted on March 27, 2020 @ 10:15:00 AM by Paul Meagher
I started working on this blog before the corona virus pandemic took over the news cycle. The irony of discussing trail blazing when we are supposed to self-isolate in our homes prevented me from posting this blog. As time has gone on, however, it is becoming increasingly obvious that we are blazing new trails at an astounding rate to deal with covid.
I have retained elements of the original blog and made some updates to address the current situation.
When I go for a walk I like to walk beside a river. Since I've known this walking area there has been a lightly used ATV trail running the length of the forested part of the trail. I recently created a short detour off this ATV trail into a grove of 5 mature apple trees that I am calling the Apple River Loop. Today I created the Riverside Loop by clearing a few small trees to make it easier to access the river from the Apple River Loop.
Clearing away dead branches and alders to access the river.
My experiences with blazing physical trails has inspired me to examine the ways in which starting and growing a business is like "trail blazing" which it has often been compared to.
When building a trail you are not starting from scratch. At the very least, there is usually some trail that got you to the place and some destination you would like to hook up to, which might be another
trail. So building a trail involves first appreciating that the trail exists within a larger trail system, and an awareness of how the proposed trail fits into the system of trails. Blazing new trails consists of creating linkages between existing trails.
If a big industrial business shuts down, we see the ripple effects through the various small businesses that supported that industrial business. There are business trails running between the large industrial player and various smaller players that were part of a business ecosystem. Part of starting and building a business is developing business trails between your business and other businesses (b2b) and to consumers (b2c). The paths are not always as direct as we would like them to be and may involve alot of business to government (b2g) interactions before you can blaze b2c or b2b trails.
Community is another type of linkage. Because we are already using c for consumer, we will use the letter o to stand for community, or more generally, an organization. So b2o linkages are another type of linkage a business can blaze.
A business might be conceptualized as the sum of its b2b, b2c, b2g, and b2o linkages.
Starting and growing a business involves blazing b2b, b2c, b2g, b2o linkages. Revenue growth may be a proxy for the number and/or quality of linkages a business is able to create. In contrast, we see revenue decline when the number and/or quality of linkages decreases.
Up until a few weeks ago, I was immersed in walking the physical trail. That changed when I purchased a used Garmin GPS unit last weekend. Now I observe my progress along the virtual trail appearing on my GPS screen as I walk the physical trail. This virtual trail exists within a different space than my physical trail as it incorporates different information about my surroundings than my immediate senses alone can tell me (e.g., location of roads, train tracks, water, elevations, contours, etc..).
When our business goes online it is a new process of trail blazing to get your online business noticed as a point of interest. New online trails need to be blazed to get traffic to your online business. If you are an existing physical business, online trails to your offline b2b, b2c, b2g and b2o contacts are probably the first virtual trails to forge. If you want your online business to contribute to ongoing growth you will need to formulate a strategy to get beyond your current offline network. There are many techniques that marketers have proposed to do this but one technique relevant to this trail blazing discussion is the use of mapping technologies.
Ubiquitous GPS enabled smart phones and other devices are changing the face of what mapping is and what it can do. Mapping technologies are evolving at a rapid rate and it may be a good use of time to study what is out there, what might be happening next, and how you might take advantage of it for your business. One way of taking advantage of mapping is to ensure that your business is a point of interest on maps that are widely used to navigate your local area - google maps, openstreetmap, here.com, etc... Another way to take advantage of mapping technology is to use it to offer a new service. For example, one of the reasons I purchased the GPS unit was to create trail maps for walkers and cyclists around our farm property and beyond. In this case, mapping allows me to offer a potentially useful service to guests wanting to experience the local area by foot or bicycle. At the same time, maps can be used as a marketing tool online if it proves to be of value to local and online audiences. Ultimately, my hope is these maps create some economic activity on the farm (e.g., sell wine, rent bikes).
As your startup or existing business blazes new trails, you may want to utilize mapping technologies to develop new understandings, to offer new services, to connect in new ways, and to create instructional, marketing, and management assets for your business.
The idea of a basecamp is popular in the GPS world. Basecamp is the location from which you venture out to explore new trails. As we plan how we will re-emerge from the situation we currently find ourselves in, it might be useful to imagine that your startup or business as a basecamp from which you need to (re)blaze trails to the consumer (b2c), other businesses (b2b), other organizations (b2o), and the government (b2g). Some of those new trails will be in the offline world, but increasingly we are having to create new trails in the online world. For example, many musicians have taken to instagram live to stay connected to their audiences. Many businesses have turned to using zoom stay in touch with remote workers and to manage the business. Navigating the business landscape is going to be challenging for awhile as the current trail system is dominated by temporary b2g linkages (i.e., government supports). There needs to be a plan, however, to open up existing trails with new precautions and forge ahead in promising new directions. I wish you and your businesses well as you venture out again from basecamp along existing and newly blazed trails.
Posted on February 21, 2020 @ 02:44:00 PM by Paul Meagher
I completed a major milestone on some prototyping work. My berry cleaner prototype is now ready for field testing.
The basic idea is that you pour your harvested berries into the box above which will vibrate the berries down an inclined plane so they drop as a sheet of berries in front of the air blower and into the collection tray below. The air blower should remove leaves, grass, weeds, insects, smaller unripe berries and other chaff. The cleaned berries drop into one section of the bottom collection tray and chaff (for the most part) drops into the second section of the tray. The chaff can be cleaned again if there are too many good berries in the chaff section of the tray. Various aspects of the cleaner need to be "dialed in" for it to work properly (i.e., speed of blower, strength of the vibration, height of the berry drop, shape and height of the collection trays). I've gone about as far as I can go and must wait till berry season to test and evolve the prototype.
The design of the berry cleaner is based on the design of a small mobile gas powered blueberry cleaner that is no longer being manufactured in North America. I discussed my plans to redesign the cleaner in a previous blog called Design and Redesign. In today's blog I want to discuss my experiences and thoughts on prototyping an agricultural tool. In particular, I want to underline the importance of cost, chance and collaboration in the prototyping process.
The Role of Chance
Prototyping can end badly. My attempts to upgrade my cold frame with insulation and automated heat and lighting ultimately came to nothing as the plants didn't germinate for the most part and those that did grew very slowly. Trying to grow plants in the middle of winter is always challenging and I struck out again. I literally pulled the plug on that prototype.
When prototyping does go right it may not be simply a matter of everything going according to plan. The role of chance should not be underestimated. I use the term chance instead of luck because I don't want to imply that the good fortune is entirely random. You are looking for a solution and you encounter something by chance that seems to align with your prototyping goals and you take advantage of it. Often when you are prototyping you are trying to develop functional prototypes as cheaply as you can so the materials you have to work with may be whatever you can source cheaply and may determine how your prototype ultimately functions. You may have to put yourself in a position where you might find what you are looking for without knowing exactly what you are looking for. My visit to a local metal recycling scrap yard is where I found some of the critical components I was looking for. The thingy below turned out to be a critical part of the build and I don't even know what it's previous use was. It had the springs I was looking for and the width of the legs seemed like they might straddle the air blower so I purchased it for $7.50.
There is a temptation when prototyping to immediately try to implement what you think the final version might look. That temptation should probably be resisted if there is a cheaper functional alternative that might work and provide feedback. I tested out a cheaper setup but worried that mounting a vibration motor to the underside of a tire damped the vibration too much. I also didn't like the fact that the berries would have to drop at least the height of the tire before moving in front of the air blower.
I wouldn't definitively rule out using a tire as the platform for a vibration table, but mounting the vibration motor on a sheet of plywood attached by springs to a steel frame definitely produced a more vigorous vibration and I'm comfortable with the approach I am now pursuing which is truer to the original design.
My carpentry skills or ok. My metal working skills are almost non-existent. I was fortunate that a retired handyman with these skills had to stay at my place for a few days while his wife had surgery. I may have tinkered my way to the final design we arrived at but it would have taken alot longer and, in the case of the ductwork converted to a dumping box, I doubt it would have looked as professional as the final product now looks. There is a certain jazz fusion that goes on when you are jointly building something with a vague blueprint and you have some complimentary skills. Me coming up with some critical suggestions and my practical collaborator knowing how to implement these suggestions quickly and effectively and adding his own take on how it should work.
Early on in this project I tried a couple of times to hire a metal fabricator to help me re-implement a gas powered version of the berry cleaner. One fabricator didn't want to do the project because there were too many parts and he thought he would have to dedicate most of his time searching for and ordering parts. Another fabricator simply stopped responding after initial enthusiasm. Yes you can pay for a collaborator to help you, but if you are trying to keep things cheap you might opt for someone you know with skills who might be willing to work you free. Alot of older people have skills that they are only too ready to apply to novel problems over a few cans of beer.
Prototyping an agricultural implement is different that prototyping an app but the role of cost, chance and collaboration may also be at play in determining whether prototyping succeeds or fails.
Posted on January 17, 2020 @ 12:48:00 PM by Paul Meagher
In my last blog on Zone Analysis, I discussed what Zone analysis is and some reasons why we might use it. One short coming of my last blog is that
I didn't show an example of Zone Analysis applied to a real property. Instead, I only portrayed zone maps as a set of idealized concentric circles radiating from a central point - an annular zoning pattern which is generally considered unrealistic.
As a point of theory, the main reason why a set of widening circles in not considered a realistic way to zone parts of your property is because
we don't generally survey properties using circular edges around the property. Instead we prefer grid lines that tightly pack one property next
to another property. If we were to zone properties using a central point with a common distance around that central point, then an annular
zone map could be a realistic way to map the different zones on a property. What would we do about all those areas that don't fall within each person's property circle? Perhaps we might consider these areas the commons or public areas owned by no one and managed and enjoyed by all? How we survey the landscape has a hidden but profound effect how people care for the landscape.
Permaculture zone maps were originally proposed as a layout planning tool for farms, however, it has been extended as a layout planning tool for
suburban and urban landscapes as well. Whether it applies in the same way to sub/urban settings is another issue I want to examine in this blog.
Recently, Happen Films posted a new video on David Holmgren's 2.25 acre suburban property in Hepburn Springs, Australia that included a mapping of the different zones on his property. This zone map is for a property owned by one of the co-founders of Permaculture so it is an instructive example to study. Here are the zones that were mapped for his property. Each zone is simply a set of connected lines overlaying an aerial photo that contains the relevant zone.
So we see that zone 1 elements that are visited daily are placed close to the house (aka zone 0), zone 2 elements visited less frequently are located a bit farther away, and so on. Zone 4 actually doesn't belong to David or Sue, and may be a sort of commons, that they have taken it upon themselves to manage the vegetation on. This example shows how zone analysis can be realistically applied to a fairly large suburban property (2.25 acres). David and Sue's plan to eventually build a second house on the property, and to give that property its own small zone, were probably a major influence on where gardens and orchards were placed. Many factors go into deciding how to layout any given property including what was there before. The 5 zones that we might use in our mapping of a farm property are not all used for the smaller acreages alotted to suburban properties. There might only be zone 1 on a smaller lot if you are avidly maintaining the small yard area that you have. Even within zone 1 some areas may be more visited than others and Toby Hemmenway has suggested that you might have zone 1a, zone 1b, etc.. to map subzones within zone 1. The utility of using zone mapping is arguably less when applied to layout planning for smaller properties but this might be because we have no real good examples of how it might be applied at this scale (although see Toby Hemenway on this - pages. 51 to 59).
Zone 4 in the photo above is where Sue takes her goats to deal with vegetation in a ravine next to their property. As fire is a huge issue in Australia, removing fuel that might help fire spread is an important aspect of managing the landscape for everyone. In the process, Sue and David have been able to make the ravine more park-like for everyone to enjoy (rather than filled with impenetrable blackberry bushes).
In a sub/urban environment zoning might extend beyond the boundaries of the property we own and might be one way to care about what goes on beyond the boundaries of our own properties. Sue admits that she doesn't much care about who owns the property next to her, she feels the need to care for it by reducing the fire hazard and making access easier and more pleasant. One could argue that zone 5 for any sub/urban dweller could encompass the bioregion you occupy which is often synonymous with the whole watershed that influences the water you drink.
While zone mapping might have less utility as a planning tool on smaller sub/urban properties, it might nevertheless be used to plan other aspects of sub/urban living. In my last blog, I showed how it has been used to decide where to live and how to manage your transport needs (to minimize the use of fossil fuels and mazimize active transport options). I'll cite one more good example of how it might be used to manage you or your family's foodshed.
In his book, Permaculture City, Toby Hemenway proposed the following circular zone map for deciding where to source food so that you minimize the use of fossil fuels to transport it and support local food producers as much as possible.
The zones in this foodshed map are defined in terms of "frequency of use" just like they are for zone maps used for laying out physical properties so there is justification in calling this a zone map. Toby goes into alot of details about how to interpret this zone map and strategies for achieving it.
The last item of business I should mention before I leave the topic of zone analysis is that it is often combined with the techique of sector analysis which is a directional mapping of all the energies coming into landscape such as wind, sun, water, fire to name the most basic energies. These are aspects of the environment that we have very little control over. We have to design in a way that takes them into account by either accentuating them, blocking them or ignoring them. In an urban/suburban environment the list of sector forces can be expanded to include noise, pollution, smells, views, traffic, municipal zoning, neighbors, easements and utilities among others. The argument is that the design will be improved if we not only take into account the frequency of use/visits to different parts of our property, but also to the direction of the forces that impinge upon the property. In business, we might conceptualize our market as being influenced by named forces outside our control which we need to incorporate into our plans by either blocking them, accentuating them, or ignoring them.
So the purpose of this blog was to tie up some loose ends in my discussion of Zone Analysis by providing a realistic example of how it has been applied to a suburban property and how it might be used in sub/urban settings in general, not just farm scale properties. I also mentioned that it is typically paired with Sector Analysis to arrive at the best design of a particular landscape by taking into account how forces flow through the landscape. The fun comes in trying to apply these techniques to more abstract landscapes such as foodsheds, bioregions, transport, and markets.
Zone planning is a system where the location of an element in a design is determined by:
How often we need to use the element
How often we need to service the element
This is a basic logical principle, whereby the things you use most often, and the things you have to pay the most attention to, are placed closest to the house in the design.
Consequently, the things that are used the least often, or that require little or no attention, are placed furthest away in the design, and things that fall somewhere in between are placed accordingly.
By situating the most often used or serviced elements in a design closest to the home, it makes it easier to access them. This means less energy is expended to access them, making for a more energy efficient design.
So one important reason for doing zone analysis is that it helps you design energy efficient landscapes. It is also a tool for generating insight and solving problems.
5 Zone System
Co-founder of Permaculture, Bill Mollison, used 5 zones in his zone mapping. Zone maps often start with the house situated in Zone 0, landscape elements you visit frequently in Zone 1, less frequently in Zone 2, up to Zone 5 which you hardly ever visit. For introductory and visualization purposes, zone maps appear as concentric circles with Zone 1 depicted as an area around the house and Zone 5 as an outermost wilderness area. A good introduction to zone mapping in provided in this Oregon State University ECampus video.
In Toby Hemenway's last book, The Permaculture City (2015), he offers a very insightful discussion of what he calls "Zone Analysis" (pp. 35-41, or scan chapter 2 in the book preview for this section). Toby shows how zone analysis might be applied to other areas besides landscape design. Here is Toby's diagram depicting how different organizational structures might be conceptualized in terms of 5 zones.
Types of Organizational Structure
Suppliers & Competitors
One reason to engage in Zone Analysis is that it might yield insight. Toby's mapping of organizational structures allows us to see essential differences in how different organizations are structured while also seeing some similarities. Some might argue that having Executives in Zone 1 and Customers in Zone 4 does not seem to jive with the "Customer First" philosophy that many businesses espouse. Zone analysis in this case is being used to measure how close the different classes of people are from an abstract "center" of the firm. What is missing from Toby's analysis is where investors might fit into a business zone map. Are different classes of investors in different zones?
Zone analysis can be as simple as drawing concentric circles and putting labels onto the different rings. Bart Anderson used this approach to map places reachable by different modes of transportation.
In this map, Bart preferences walking as a mode of transport and wants the places he visits at least once a day to be reachable by walking (Zone 1). He wants the places that he visits frequently, but perhaps not daily, to be reachable by bicycle. He wants places that he might visit once a week to be reachable by public transport. And so on. Eventually Bart was able to setup his life in accordance with this zone map. This is an example of using a zone map to solve the problem of optimizing a portfolio of transport options.
According to Toby, this zone map was used by Bart Anderson to "arrange his life so that most of his movements were in the walking and biking zones 1 and 2 because that would shrink his energy and carbon footprints. The zone system not only made Anderson's goal easier to achieve but enabled him to envision and organize it in the first place by providing a framework to map his regular destinations by highlighting the concept of frequency of use". (p. 40)
There is a debate in Permaculture circles about whether Permaculture has to offer design advice for Zone 00. Zone 0 is often described as the "center of activity" with the house commonly being used as the center, or the center of a village in larger scale designs. Some view Zone 00 is being the users own mind and wonder if Permaculture needs to give as much attention to that zone as other zones when doing zonal mapping. Many of the top permaculture people see no useful way forward by getting more detailed about Zone 00. Toby Hemmenway has also voiced his disdain for Zone 00 analysis in his article Zone 00: Right Intentions, Wrong Term.
I take the heretical position that perhaps there is a useful way to think about zone 00 and how we might map it. Permaculture is very much about learning practical skills. In Bill's criticism of Zone 00, he says this:
Permaculture has always been about skills and systems that are practised, and verifiable by any individual; it does not, and will not, teach purely individualistic beliefs – such systems are already taught elsewhere, and there are numerous courses on spiritual, therapeutic, or theological subjects available.
So my proposal is that Zone 00 Analysis consists of mapping the skills you use frequently and skills you hardly use at all. There might be some correspondence or harmony between your externally focused Zone 1 to 5 map and your internally focused Zone 01 to 05 skills map (notice internal zones are prefixed by 0). For example, Zone 01 of your skills map might contain gardening skills because you frequently tend to your garden in your physical Zone 1. Personally, I have had to prioritize skills related to small engine repair, basic plumbing, and basic electrical wiring as being important skills for cost effectively managing a barn structure and equipment stored in the barn. Where those skills may have existed in Zone 04 or 05 of my skills zone map a few years ago, I see that they need to exist in Zone 02 or 03 of my skills zone map if I am to cost effectively manage the farm.
Whenever you are building a business, you are in a catchup game of learning the skills you need to adapt to the circumstances at hand. It was not obvious to me that I needed to learn about carbeurators and how to clean them until I noticed that 1) I have a significant number of small engines to maintain (string trimmers, powersaw, lawn mower, lawn tractor, garden tiller, chipper, generators), and 2) whenever I cannot start one of them, a plugged carbeurator is a common cause of it. If I am frequently being taxed to use a skill and I don't have that skill then that is an argument for prioritizing that skill into an inner zone of the Zone 00 skills map. Zone 01 are skills you use everyday, Zone 02 are skills that you don't use everyday which you do have to invoke on a regular basis. If you only do your accounting once a year and get someone else to do it, maybe you place that skill in Zone 04. If you do accounting more frequently then maybe that is a skill in Zone 02 or Zone 03. Zone 05 is the realm of skills you don't even know exist and the challenge may be in discovering which ones to add to Zone 05 that you think are worth acquiring. Like getting out in wild nature, you need to get outside your comfort zone and attempt to acquire some radically new skill.
It might be helpful to think about the skills required for different businesses as being different profiles having their own skill maps.
I hope you have learned something useful about Zone Analysis and Mapping from a few different examples to how it has been used and my own speculation on how it might be used to map the forbidden Zone 00. Toby's book, The Permaculture City, is my recommended resource for learning zone analysis and I'll leave the last word to Toby:
The zone system organizes the parts of the design in relation to the user or center of use.
Posted on November 27, 2019 @ 09:35:00 AM by Paul Meagher
When we use the term design, perhaps a more accurate term would be redesign. Arguably, there is nothing "new" under the sun, so all acts of design are in fact acts of redesign.
If we take this perspective on design, then the starting point of design is not pure imagination working within imagined design constraints, but rather a deep study of existing designs with the goal of improving upon those designs in some way.
This idea of design as redesign occurred to me as I was trying to figure out how to re-implement an existing design for a field blueberry winnower. Here is how it currently works.
This clever design is a prime example of an appropriate technology that once existed
and which isn't manufactured anymore. Because I am borrowing the cleaner, I am trying to figure out how to re-implement it. Discussion and schematics for building one of these can be found here.
As I performed my deep study of this blueberry cleaner I began to appreciate the minimalistic, compact, and interlocking elegance of the design. I began to notice, however, that the main functions of the field blueberry winnower could be performed in a different way and that the design could be improved upon. All unproven at this point.
Performing Functions In A Different Way
The blueberry field winnower performs two basic functions:
It provides a vibration function that keeps the blueberries rolling down an inclined plane that you pour your blueberries into.
It provides a blower function that operates upon the blueberries and the debris as they fall off the end of the vibration table. The blower ideally blows away all the debris while allowing the heavier blueberries to fall more vertically into your collecting container.
In the original design, both the vibration function and the blower function are powered by a small 3 hp motor with a pully that drives two pullies, one for each function.
A single belt from the drive pully wraps around the other two pullies to drive them.
Times have changed since this design was in manufacture. They probably didn't have cheap and easily accessible power generators like we have today. So, an alternative way we could power the blower and
vibration functions would be via a generator with two plugins, one for the blower motor and one for the vibration motor. So instead of taking one machine to the field to clean blueberries, you would take your cleaner machine and a power generator. The cleaner does want to vibrate so you might have to weight down the table with an equivalent or greater weight to keep it from jumping all over the field on you. It works best if the cleaner is mounted directly on vibration absorbing earth rather than a wooden platform.
Improving On The Design
Once I imagined powering the two functions in a different way, the idea for an improvement began to form.
Instead of driving the vibration function and the blower function from the same pully, you could independently control the vibration speed and the blower speed. This would give you a greater ability to fine tune the two functions of the cleaner to maximize the efficiency and effectiveness
of the cleaner.
This little case study of my journey to develop a field blueberry cleaner is meant to illustrate that redesign is often a better description of the design process. If you enjoy design, it is probably because you enjoy redesigning how things currently work rather than coming up with
completely original ideas.
Posted on November 12, 2019 @ 09:13:00 AM by Paul Meagher
Lately I have been thinking about the concept of "pivoting" because this year I have had to pivot from my original farm plan of starting a "farm mini winery" (license your production acreage up to a minimum of 2 acres then make wine) to starting a "commercial winery" (few restrictions on where your production acreage comes from). I had a terrible year crop-wise (hurricane damage to grapes, bad year for my wild blueberries) so I had to pivot to getting wild blueberry fruit from a large blueberry grower who I am partnering with for the 2019 wine production. My investments now are going into upgrading the barn to be a commercial winery and, eventually, a retail space as per the regulations if I want to sell wine from my farm (must adjoin the winery). Sometimes a pivot is between two well-defined government options and all the consequences they entail.
Being able to continue making pivots on an unprofitable farm for 7 years is quite a luxury. The "runway" for this farm enterprise is very long compared to the typical "runway" for a startup that might only have enough capital to last a few months before they have to start showing traction. Because me and my wife both have other income and could afford the long startup costs for the farm, there has been no investor pressure on us to show profit quickly.
My brother-in-law has been involved in an oyster farming venture for around 7 years and is only now getting to the point where it might start to make a significant income. A big pivot his business went through last year was to partner with a childhood friend who is enthusiastic about the industry. They are buying equipment together and managing their leases together. This is a secondary line of business for my brother-in-law (who primarily fishes crab and lobster) where there is no investor pressure to become profitable quickly; however, they are gearing up to be profitable (e.g., populating leases with oysters, investing in oyster farming equipment, investing in off-shore oyster handling equipment, upgrading their boat).
Anyone who has a day job can be investing in a secondary venture for a long time without requiring immediate payback. These may one day hatch as a "startup" after many years of ongoing investment and pivoting.
Pivoting in a long running startup can look different than pivoting in a new startup.
If you want to see how pivoting works in high-performance startups with limited runway then you might want to watch Dalton's talk "All About Pivoting".
Posted on October 29, 2019 @ 07:29:00 AM by Paul Meagher
I was listening to a news item on the radio about an outdoor skills workshop. The organizers wanted participants to takeaway three key points: the importance of Positivity, Ingenuity, and Resilience. The organizers said that keeping these concepts front of mind would be helpful not only in outdoor survival situations but for life in general. I agree.
The idea that we as individuals, businesses, communities and regions need to be Resilient is a popular idea these days. Merriam-Webster defines
resilience as "an ability to recover from or adjust easily to misfortune or change". As climate continues to change, the need for resilience is
obvious, however, there is also alot of discussion about raising resilient kids and business resilience.
The definition of resilience does not tell you how to "recover from or adjust easily to misfortune or change". That is why the concepts of positivity and ingenuity are also important because they are often critical in achieving resilience. You are less likely to be resilient if you maintain a negative attitude to misfortune or change or if you lack the ability to come up with new and innovative solutions to the problems that arise.
Positivity + Ingenuity does not equal Resilience, however, because the ability to adapt to misfortune or change also consists of anticipating what might go wrong and developing safeguards to help protect you against those scenarios. So communities recognizing that power outages might become longer or more frequent, are creating warming centers and places to pickup drinking water. Individuals are buying generators. Resilience is more about developing the strategies, assets and organizations required to deal with misfortune or change. Resilience often requires positivity and ingenuity to actually come into effect.
Resilience is an important idea whose time has come, however, we might keep in mind that positivity and ingenuity are also important when dealing with misfortune or change.
Posted on October 18, 2019 @ 07:41:00 AM by Paul Meagher
Four entrepreneurs whose proposal expired several months ago contacted me to tell me that an investor using the name "Abdul Latif Jameel" is claiming that I have provided him with their contact info. This is not true. Adbul has never been a registered investor and appears to have obtained the email addresses of the entrepreneurs he contacted through an investor who was deactivated under suspicion that she was contacting entrepreneurs and selling entrepreneur contact info to a questionable investor/funder. It has been verified that all reports so far are coming from entrepreneurs that were contacted by the deactivated investor.
Around November 2018, a person claiming to be "Abdul Latif Jameel" contacted entrepreneurs with these credentials:
Abdul Latif Jameel
ALJ Yatirim Holdings
The aljyatirim.com website was created in November 2018 and there is no site there any longer.
An identity thief going by the name Abdul Latif Jameel claimed to be president of a company registered on the Turkish stock exchange. The real company has verified that a company called "ALJ Investment Holdings" has been maliciously assuming their identity.
In his latest attempt at identity theft, this person is contacting entrepreneurs using email@example.com and claiming to be:
Abdul Latif Jameel
This website was created in February 1996 and was not created by the scammer this time. He is pretending to be president of this company.
You are advised not to deal with the individual claiming to be Abdul Latif Jameel if you are contacted by him with the above gmail address. It appears that there is a real and legitimate Abdul Latif Jameel who is unfortunately the favorite persona of this identity thief.
Entrepreneurs can use our Investor Verification tool to verify whether an investor who contacts them is registered with our network or not. If not, don't deal with them and please report them.
Posted on September 19, 2019 @ 11:20:00 AM by Paul Meagher
I have been reading a book on farming called "Ten Acres Enough: The Classic 1864 Guide to Independent Farming" by Edmond Morris. You
can read it online for free here.
The book reports on his first three years of farming after leaving the city and purchasing a farm. He had a family of 10 and appears to have acquired many firm ideas about farming before he ventured into owning and running a 10 acre farm.
The book is interesting and well written but the main reason I wanted to mention it was because Edmond spends alot of time in the
book discussing how much he made by selling certain crops and what he paid out in expenses. He summarized his receipts and expenses
over three years with this report:
Edmond Morris wouldn't have written the book if he didn't think he performed quite well so I was curious to convert his profits in the last year ($1327.02) into what it might be in todays terms using measures of inflation to make the adjustment. When you do this using the CPI Inflation Calculator you get this result:
$1,327.02 in 1857 is equal to $39,133.06 in 2019
This result surprised me as I expected his profit (in todays terms) to be more. This surprise has caused me to reflect on the history of entrepreneurship and the nature and causes of inflation to try to figure out what is going on here.
Entrepreneurs have existed throughout history and "10 Acres Enough" is a book by an agricultural entrepreneur on what he did to make his farm successful. What "success" meant to an Entrepreneur in 1857 in terms of wages may be different from what it means to be an Entrepreneur today. Today we expect a successful entrepreneur to be making a high wage but back then a successful entrepreneur was perhaps happy to make enough money to live without alot of financial stress. Being able to produce all your own food (in addition to selling it) certainly helped to reduce/eliminate a major financial stress that a family of 10 would have to deal with and gave the author a hopeful and optimistic outlook on life.
Another way to think about these numbers is that the inflation calculator is not fully capturing the reality of inflation - its nature and its causes. This has lead me to reflect on some categories of expense that are not included in this financial report that we would expect to be listed in the financial report of an agri-business today: sales taxes, insurance, fuel, loan interest, new equipment, repairs, registrations/licensing/permits, etc... For entrepreneurs, new categories of expense are causes of inflation that increase our cost of living and simultaneously decrease the amount of time that can be allocated to earning income. Inflation is reflected in how time and money is allocated.
You can read about Inflation on Wikipedia for how economists talk about inflation or you can examine a financial report from long ago and reflect on that it might be telling us about the nature and causes of inflation.
Posted on July 16, 2019 @ 06:47:00 AM by Paul Meagher
In the spring of this year, I had to submit a business plan to an agency the regulates mini-winery licensing. I started to get bogged down in the process until I decided to focus my plan more and take some advice from an agriculture representative I talked to about the core of a business plan.
Focusing The Plan
We have a couple of enterprises on the farm now. One is selling hay and another is renting a trailer on the farm to tourists. These ventures make some money but they are not going to pay the bills for the farm. When I started working on my plan I thought I would discuss all the ventures on the farm and that the plan would be for the farm as a whole. That way of thinking slowed me down. Eventually I decided that the plan only had to be about the mini-winery aspect of the farm and didn't have to address other farm ventures, existing or planned. So one secret to developing a quick business plan is to make sure your plan is focused on the particular venture that requires planning and does not discuss ventures that do not require planning. Originally I thought the plan should be for the farm as a whole, but realized that the plan only needed to discuss the mini-winery aspect of farm. The same is probably true of most businesses where your plan might try to touch on all aspects of your business, or it could focus on the particular line of business that you want to plan for. The latter approach makes for a quicker business plan.
Core of the Plan
The agriculture representative talked to me about submitting a business plan to them. He said the main thing to include
was to set some goals for year 1, 2 and 3. He also suggested that the goals include getting better by some modest amount, say
10 or 20 percent each year. The core of my plan and planning focused on clarifying what goals the mini-winery would
need to achieve in the next 3 years to become established and grow over time. Production of wine would increase modestly over each of the three years so that was where the percent improvement over time came in. I also had to build and purchase alot of stuff over 3 years to get to where I wanted to be.
So the core of my business plan was a laundry list of goals. One laundry list for each year of the plan. Many plans would probably also include the cost of achieving the goals so that you would know what type of budget would be required. I wasn't seeking funding for this plan so I never bothered doing costing. It was probably a good
thing that I didn't engage in too much costing work because even over the span of 3 months some of my goals have changed and other goals have emerged. Alot of the costing would have been wrong by now.
Types of Goals
Not all goals are created equal. Some goals may involve simply paying money to someone to acquire a piece of necessary machinery. Other goals, like building a wine cellar, involve a achieving a long list of subgoals. It is important when you are coming up with goals to spend some time thinking about how many subgoals might be involved in meeting the overall goal. You might also distinguish between goals for which you have some experience and expertise and goals that are new and which require alot of learning. One goal I had that seemed innocent enough at the time was to hold an outdoor concert to raise awareness of the farm and to gain some experience in holding events as this is an increasingly important aspect of selling wine.
Turns out that holding an outdoor concert is a very complex goal with a huge number of subgoals. I also did not have alot of experience
or expertise in holding events which made it even more difficult. Just because it is difficult, however, is not sufficient reason not to do it, but it is good to know what you might be getting yourself into by assessing the number of subgoals and your level of expertise in carrying out subgoals.
Alot of work this summer has gone into landscaping around the back of the barn and making a stage where the musicians will be performing. Today we will be putting the rafters on the event stage which will also be the area where grapes and blueberries will be cleaned, crushed and pressed for making wine.
The headline act for the concert will be Rankin MacInnis / Party Boots who have put out great a new album. Eclectic mix of tunes with great big band feel on alot of the songs. Usually has the crowd on their feet during live shows. Press the play button below to listen to my favorite song on the album so far.
Posted on June 24, 2019 @ 06:53:00 AM by Paul Meagher
Last year I invested in some remote vacant land and posted 3 blogs on the topic of remote land investing
(Part 1, Part 2, Part 3).
Today I want to discuss one other benefit of investing in remote land, namely, that payments to this network were used to purchase 130 acres of remote land that is helping to offset my own CO2 usage and the CO2 usage of those who paid any fees.
I certainly use fossil fuels in my farming activities, but I'm not running larger tractors that often. String trimmers, lawn tractors, lawn mowers and wood chippers are the main consumers of fossil fuels.
I use a small truck that burns fossil fuels to gather supplies, run errands and travel back to my remote land.
I haven't taken a flight in years because me and my wife are too busy and there is no place I would rather be in spring, summer, fall.
Even though I am not an angel when it comes to burning fossil fuels, I believe that the 130 acres of land purchased with funds raised from this network, are offsetting my own usage and the usage of entrepreneurs who pay fees to this network. The land is sequestering carbon in new forest growth, in fields that are not plowed or mowed, and through a type of farming (managing wild blueberries) that does not require heavy use of fossil fuels.
To get to my remote property, you need to travel along a road called Melrose Hill Road. This takes you to a turn off onto my property alongside Beverly Hills Road. Here is what it looks like as you travel through Beverly Hills.
The ground is white with lichen, an indicator of high air quality. A close up of the trees reveals the growing tips that are taking carbon out of the atmosphere to create new growth.
If one were to take samples of the soil in some of the abandoned fields, I would expect to see the amount of soil organic matter increasing over time as the grass and weeds grow and die back each year contributing to the amount of carbon sequestered into the soil.
When I purchased this land, it was not done with the intention of storing carbon but that is a very real benefit that often comes with remote land investing. The funds used to purchase that land came from entrepreneurs who paid my fees last year and from entrepreneurs in the future who are helping me to pay down the remaining loan that was used to purchase the land. Your funds are making a difference in the amount of carbon in the atmosphere.
Is this a green network? I think so and while I don't use all the funds from the network to pay for carbon offsetting land, a significant amount was and that land is converting atmospheric carbon into new tree growth and soil organic matter. I can't tell you how much carbon is being sequestered as I haven't tried to do the math. A book that might have some answers is The Carbon Farming Solution (2016) by Eric Toensmeier.
This weekend I started construction on a modest 8ft x 8ft outpost in a wild blueberry field (Vaccinium Angustifolium) where I hope to better observe the land and perhaps do some calculations on how much carbon is being offset.
The main reason I picked up the book was because it looked like it had some useful applications of systems thinking to an important topic: modelling conflicts to help resolve conflicts. I like the fact that it is not an edited volume and provides a consistent perspective and level of quality on a variety of interesting topics in conflict modelling and conflict resolution. There is some math in the book, which I also like, because it is used to clarify and add precision to important ideas, not to prove theorems and other niceties. There are some practical agent-based modelling applications discussed in Part III of the book which is where a good chunk of value of this book lies in my opinion.
Table of Contents
Part I: Conflict and the Promise of Conflict Modeling
1. Environmental Conflicts in a Complex World
2. Why Model? How Can Modeling Help Resolve Conflict?
3. The History and Types of Conflict Modeling
4. Participatory Modeling and Conflict Resolution
Part II: Modeling Environmental Conflict
5. System Dynamics and Conflict Modeling
6. Agent-Based Modeling and Environmental Conflict
7. Modeling Conflict and Cooperation as Agent Action and Interaction
Part III: Applications of the VIABLE Model Framework
8. A Viability Approach to Understanding Fishery Conflict and Cooperation
9. An Adaptive Dynamic Model of Emissions Trading
10. Modeling Bioenergy and Land Use Conflict
11. The Future of Modeling Environmental Conflict and Cooperation
You don't have to read the book cover to cover to get something out of it. To maximize your time, you can scan through and find an application or section that interests you and read about that. For example, I came across a section called The Farmer Agent Model on pp. 292 to 295 and decided that it might be worth investing some time into that concept. One component of the The Farmer Agent Model is the harvest function which I have simplified to:
h = r * A * B * f
The harvest for a particular crop h by a particular farmer is found by multiplying:
r: The fraction of land planted in that crop, also called the priority of the crop.
A: The arable land area in hectares used for the crop.
B: The biomass yield per hectacre.
f: The fraction of biomass produced that is harvested (e.g., 90%)
If you add up the harvest amount for each farmer h harvesting that crop sum(h), then you get the total harvest for that crop H. You can use this sum as the crop supply in agricultural equations of supply and demand to figure out the price you might get for that crop. If prices are low for a particular crop then The Farmer Agent Model might respond by adjusting the value of the crop priority r downward so less land area is devoted to that crop. Using harvest functions, pricing functions, and investments functions in an integrated model allows you to tweak parameters to see how they influence other parts of the overall model. Government investment in ethanol production using subsidies, for example, will increase the value of r for bioenergy crops.
Another interesting topic in Chapter 10: Modelling Bioenergy and Land Use Conflict involves using spatial models of farmers across the
landscape so that you take into account spatial interactions among farmers. We don't just treat farmers as disembodied harvest functions,
but make an effort to locate those harvest functions (aka farmers) on a grid so you can simulate and explore local interactions that might be
important to account for.
Conflicts can arise in communities establishing a bioenergy plant because citizens may have differing views on fuel, water, land use changes that the plants bring with them or signify. Some may object to the increased water use or the nitrogen runoff that might accompany increased corn production next to streams. The other side may object that farmers need to be profitable and the plant jobs are needed. Many of these issues and interactions may be left unmanaged if they are not explicitly modelled as part of an overall model of the bioenergy plant and how it interacts with the ecosystem, the main stakeholders, and the government incentives that might be driving increased production of bioenergy crops.
In Illinois they have some of the best soil and growing conditions for bioenergy crops and other types of crops so bioenergy conflicts are likely more common there. Where I live, there is a conflict around burning wood for energy in a local paper mill. The pro side argues that it helps the mill keep their costs of operations lower because power is a huge cost for them, that we don't have to make expensive upgrades to our power grid to supply the Mill with power, that burning wood for energy is better than burning coal because the wood is renewable, and that it is helping sustain the economy with forestry employment in rural areas and good paying mill jobs. The opposing side argues that the large number of truckloads of wood a day needed to feed the bioenergy plant is not green, that it is decimating forests and habitat, that we can find better uses, that we can be adding more value to our products and keep the same level of jobs and economic prosperity, etc..
Fisheries is a big industry here and there are lots of conflicts between fishermen and the government over quotas, between fishermen and environmental groups over the cause of whale deaths and what needs to be done, between fishermen and another local pulp and paper mill over the mills desire to pipe effluent into fishing grounds. The powerful pulp and paper industry has met its match when their practices affect the equally powerful fishing industry.
Because I have an interest in fisheries (my father-in-law and his sons are fishermen) I was interested in picking up this book to see how they approach modelling conflict in the fisheries (see Chapter 8. A Viability Approach to Understanding Fishery Conflict and Cooperation). The starting point for all the models we might want to create is generally is a simple stock and flow diagram for a single fish population. From here we start drawing other boxes and linkages to capture more of the complexity of the situation.
Agent based modelling often starts with creating visual depictions of the system. Stock and flow diagrams are a commonly used technique but you generally need to master a few more visualization techniques to depict a full systems model. The best intro to these techniques is Thinking in Systems (2008) by Donnella H. Meadows.
The German philosopher Gottfried Leibniz (died 1716) was famous for his slogan "Let Us Calculate". The slogan conveyed his belief that conflicts could be resolved by representing problems in a logical calculus that would help reasonable people find solutions. The belief that we can resolve conflicts through modelling therefore is not a new idea. What is new is that the agent based models (aka "logical calculus") are getting better at incorporating more of the complexity of the situation and providing a better decision aid for resolving conflicts. Leibniz's envisioned logical calculus can be implemented in the multi-agent programmable modeling environment called NetLogo which was used as the agent-based modelling platform for the conflict models discussed in this book. I've toyed with the idea of learning NetLogo, but this book gives me more reasons to do so as the book would be of even greater value if I downloaded and ran their conflict models.
It should be noted, however, that resolving conflicts is often not as simple as coming up with a good conflict model and the value of modelling can be overrated when it is done poorly. It tends towards armchair theorizing if not communicated to and validated by stakeholders in the conflict. That being said, doing armchair theorizing based on NetLogo is better than doing armchair theorizing based on NetFlix.
This is a very limited review of the book to give you a flavor of the content you might find. Not exactly a coffee table book or one that would appeal to a wide audience, or one that is accessible price wise; nevertheless I think it is worth seeking out for those with an interest in exploring the use of agent based models to represent and resolve conflict situations. Also, anyone wanting to add a new book to their systems thinking collection.
Posted on May 21, 2019 @ 08:36:00 AM by Paul Meagher
I spent some time over the weekend building a trail through a wooded area on our farm. Building a trail for me is not a high impact event, it consists of cutting away a few branches blocking your path and putting bright orange ribbons on some trees so you remember your path. Often animals have found paths before you and following them is not a bad bet.
Can you see the next reach?
One recommendation from Permaculture Design is to spend a year observing your property before you make any radical changes to it. You should try to understand the trajectories of the sun through the year, the prevailing wind directions, the microclimates, the flow of water, the flora and fauna, and the lay of the land.
To observe a large piece of real estate with wooded areas requires being able to access those areas of your land. Putting a full road into your property could violate the principle that you don't make radical changes until you understand the landscape better.
A good compromise is to make some low impact trails to give yourself the chance to make the observations you need. Putting in a trail is guided by strategies that you think will optimize the likelihood of establishing a good path with a minimum of effort.
One strategy I use in areas that allow for it is to follow beside a stream. If you know where a stream starts and where it ends you know that following it will take you from point A to point B where you want to end up. That strategy works at to a global level, but as you
navigate reaches of the path you may encounter dense growth, fallen trees, and swampy land that make you scratch your head as to the best path forward. In these areas of the path I am reluctant to mark a trail because I would have to traverse the area a few times to find a decent path.
The metaphor of trail blazing is often used to describe entrepreneurship. There are certain people with a high tolerance for risk who will blaze trails were others are too meek to lead the way. That is an heroic description of the entrepreneur, especially when so many also fail. But even failing or treading water does not diminish the fact that the entrepreneur has tried to blaze a new trail. There are many entrepreneurs in the non-profit sector who blaze new
trails without monetary markers of success but who make significant changes in other ways (e.g., build community, create commons infrastructure, help people, etc...).
The machinery in our minds evolved from a hunter/gatherer stage that involved path finding and path building as essential skills. That same machinery may be what is most taxed in entrepreneurs building new businesses.
One concept that I find central to path finding in the physical sense is the concept of a "reach". When you are walking through a wooded area and you have to decide where to go next, that decision for me is often determined by where the next "reach" is. A reach is the clearest path ahead in the direction I want to go. If I can see one reach 20 feet away that is fairly clear of limbs, swamps, and fallen trees but there is another similar path 40 feet long then I will select the one that is 40 feet long as it minimizes the path to where I want to go. A reach decision often weights more than one factor at a time. If the 40 foot reach took me away from the stream too far then I might choose the 20 foot reach and hope that I'll find another good reach near the stream once I get there. I'm also looking a bit ahead of the next reach as I decide on the next reach.
If you want to explore natural pathfinding in more detail then one of the best authors on this topic is Tristan Gooley. His site Natural Navigator and his books offer alot of insight into path finding in nature which might enrich the metaphors we use to find and blaze new trails in business.
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