A Good Reality Check

These guys are a successful organic farm... making $20k a year income for two people.

This makes me think more and more that the food raising operation should focus on feeding the people on the farm, and producing value-added beside that. It would mean the farm isn't a big market garden, it's enough to feed the people on the plot plus whatever product you choose to sell at the market. From looking at other organic operations... it appears vegetables are the worst thing to try to sell! While I admit I'm uninitiated, could it possibly be that raising only the food you need and then focusing on a few value-added crops would be the better way to make an income?

I guess there is only one real way to find out.

How Much Food per Year?

To make calculations of how much cultivation needs to take place on a plot of land, I was looking for a quick and easy way to survey the amount of food a family needs in one year. There are a few resources.

The Family Bulk Food Calculator is one, and comes up with a bunch of food that doesn't really fit my diet, but that's ok. There's this AAOOB place that seems to sell food in "FEMA" units. Knowing how well FEMA has done for itself in recent years, I might take these stats with a grain of salt (or 10 lbs of salt for one male over the course of one year). Each of these places seems to want to sell me stored food. Even Amazon.com is in on the action with the 1 Year Bulk Family Food Supply! Crazy stuff.

As a matter of fact, food storage can apparently be made easy, and very very pink. But I didn't want a year of food storage, I wanted a year of raw food to put in my belly.

I started wondering about how to convert from harvest volume to dry weight in order to figure out how much space would have to be cultivated to provide the food for one family for one year. First step is to find out how bushels convert to dry weight.

So I made a calculator based on the amount of average (mid to low) yield per product on the xls sheet on the pink page. I even included calculations I found for converting acres to gallons of canola oil:

Farmers traditionally set aside 10% of their land to feed the horses. Now days, if a farmer would set aside 10% of their land for an oil crop, they would produce enough oil and protein to supply most livestock operations. For example, an acre of canola yields 40 bushels. From 40 bushels you will make 2000 pounds of meal and 90 gallons of oil, not to mention 3 large round bales of straw and the ability to double crop, even in Wisconsin. The net gain is $560.00 per acre, which would equal corn at $4.00 a bushel without the ability to double crop.

From: HERE. That's some killer biomass left over. It's almost worth it just to grow canola for that!

A lot of my bushels per acre calculations came from here, and they are middling to low estimates. As for rice, where do we get it? Hmm apparently it will grow in Ontario. Sweet.

So far, grain intake is covered by about 0.64 acres of land. We'll see how far my math holds up later, but for now, the calculator is pretty fun.

An Idea for an Organic Farm

So I made an open call to a group of my friends to see who would be interested in buying in to a sustainable farm. This is something of a dream of mine, and one I’ve talked often about, but not been able to be totally serious about until now. If the housing market holds up, I will hopefully be able to put together a grubstake to build a rather good house in the country. The catch is that I think it would be better if other families (specifically those with some young kids like mine) came along too. Quite selfishly, I want the clean living lifestyle with food security for my family without giving up the close socialisation my kids get in a city environment. While it’s still my own dream, the family is what’s important.

It struck me, after talking to one of my friends, that people just saw an idea and a price tag and didn’t really picture what I had in mind when I made my offer. Well, here it is in black and white: a concept for a self-sustaining organic farm… with high-speed internet (that’s important). I’ve been researching the technology and everything that I am going to talk about here is mature tech – not pie in the sky tech that might come out in a few years. This is stuff on the ground, now. As many of you know, a lot of our great energy-saving concepts came out of the gas crunch of the 70’s, so these things – while not going mainstream – have nonetheless seen improvement since then. Such things as methane digesters and composting toilets have come a long way. Frankly, a lot of this tech could be implemented in a low-tech low-cost way, but I rather wanted to use stuff that kept the comfort of modern living with the added bonus of being sustainable. Cost reductions are therefore possible with simplification, but only if necessary.

Also, I have been attempting to build a realistic plan by putting together possible alternative income streams other than crops. Growing Power is an inspiration in this regard, as they conceive of the working urban farm in terms of dollars per square foot and attempt to extend profit-making activities beyond simple food production. The modern organic farm concept is something of a highly diverse business venture, with chances to tap income streams all over the map. Additionally, organic farms have the odd habit of attracting cheap labour (WWOOFers et. al.) because they are a shared passion amongst we greeners. Spinoff enterprises include everything from cob and cordwood building courses (which serve to populate the property with guesthouses and outbuildings) as well as aquaponics and organic farming courses that would be a source of income outside the traditional farming model. With a good sized stand of sugarbush, spring tourism would be a possible revenue stream during the sap run. With existing contacts, a yearly Japanese maple syrup tour would be more than possible, and would represent a source of labour that incurs a negative cost: a revenue stream that creates another revenue stream.

So, I am not too concerned about the opportunities to derive profit from an organic farming operation. The issue then is to talk about what exactly the operation would work. My core theory is that of Jacobsian extension: the longer you keep stuff in your system, the more opportunities you have of making profit from it over and over again. The basis is then an attempt to create an almost closed loop system. A closed loop system is functionally impossible – sunlight is an external input that simply keeps on giving, therefore with that external energy source, there is no such thing as a closed-loop system. The key, then, is to make that sunlight input last as long as possible in your system and be a gift that keeps on giving.

LAND: Optimally, I see 100 acres of land with 30-40 acres clear and 60-70 acres in mainly maple. The clear would hopefully have only a small gradient, but the treed area could have a diverse landscape with bogs and hillocks. That’s my preference, but my ideas can be scaled to reality if need be. I would prefer it in a good growing region (6 or 7) but a high 5 will do fine. Access to local water sources preferred but not totally necessary.

HOUSE: The main expense of the operation, the house would be designed to qualify for a Passivhaus certification, meaning it would effectively pay for itself over the long run. Passivhaus design started decades ago (the inspiration came from a hyper-insulated house in Saskatchewan) and is the most strict energy-saving certification in existence. Most Passivhaus designs do not require central heating, even in the depths of a Canadian winter. They are heated primarily with human body heat and lightbulbs in the house. For additional warmth, there is radiant floor heating produced by a solar-powered geothermal heat pump. Since HVAC is almost totally eliminated, as are gas services and heaters, you actually save enough money to pay for the hyperinsulation. Passivhaus designs are being built for about $150 per square foot. Heating costs are near nil. The house would require hyperefficient appliances and solar panels, but again, these pay for themselves over the long run.

SYSTEMS:

This is where things get fun. The core of the farm is the people. The farm must supply food and utilities for the families, and take care of their waste products. Let’s start from the showers, shall we? Showers, sinks, and washing machines produce greywater. Greywater is dirty water that you can’t drink, but if you use the right soaps and detergents, plants can drink it. As a matter of fact, greywater treatment is a main feature of Earthships. It even occurs right inside the house, providing plants that clean the water as well as the air. The water is then used to flush toilets (because using drinking water for that is simply stupid). The treated greywater then gets flushed and becomes blackwater… that’s water, only with poo in it. The poo water goes to a methane digester, which produces both methane (natural gas) and natural fertiliser. Part of the input to the digester must be carbon-rich, and therefore sawdust and other biomass would occasionally be put in from foresting and farming activities. In order to back up the solar power units, the methane could be used to run not only the stove (with three families, there’s enough poo for a lot of methane for cooking), but a natural-gas powered fuel cell. One of these can make sure there is always enough current in the lines. Eventually the poo water becomes spent, and ends up as natural fertiliser on the Fukuoka-style grain fields. Eventually that grain becomes bread and beer, which continues the poo and pee cycle. Pee, by the way, should be separated from the poo by diverting toilets, because it is the perfect nutrient for an algaculture bioreactor – and also can be used directly on fields if diluted. Pee is really useful.

With people eating, there comes food scraps and other organic garbage. That stuff is great, and needs to be kept in the system as long as possible. Its first stop is to the black soldier fly buckets, where oodles of little creepy-crawlies reduce everything except cellulose. They can even eat meat and cheese and other milk products, stuff worms can’t eat. This system produces several products: heat, compost tea, compost, and black soldier fly larvae. There is a use for every one of those things. Heat is useful most of the time in Canada, so we’ll leave that be. Compost tea can be diluted and applied to the land as a very potent source of soil microbes to improve soil health. The compost is moved over to the next processing stage: vermiculture. Worms actually seem to prefer black soldier fly castings to raw foods, and they can process the cellulose that black soldier flies can’t. This process has been tested and it has been proven that not only are the two processes complimentary, the vermicomposting goes faster when the compost has been preprocessed by black soldier fly. This process produces vermicompost for the fields (a compost so rich that it should be mixed with other soil before applying to the ground), and compost tea. The black soldier fly and vermiculture units leave us with a surplus of creepy-crawlies with which to feed our tilapia in the aquaponics unit.

Aquaponics has been talked about before, but for the uninitiated, it’s a system that takes the best of aquaculture and hydroponics and puts them together. There is no cycling of water out of the system: fish poo fertilises planting trays, the nitrates are transformed into nitrites by the resident bacteria, the nitrites fertilise the plants, the plants thereby purify the water. The water can be cycled indefinitely as opposed to flowing through wastefully. The only input required is food, and worms and black soldier flies provide part of that. With an algae bioreactor, tilapia can also eat algae (for which they are adapted because of filters in their gills). Tilapia are omnivores that can truly eat anything. After all, they naturally occur with hippos because they can eat hippo poo. With constantly cycling and recycling nutrients, the only thing a person has to do for an aquaponics system is plant, maintain, and harvest. The amount of food produced by a small system is staggering… and it is tried and tested tech. The aquaponics system would require a greenhouse to be able to produce all year round. Yes, even in Canada, in minus 20 degree weather. How, you ask? Well, I have a mind to incorporate rocket stoves with thermal mass as well as a potential solaroof design. All possible, all tried and tested. With the aquaponics unit would come a flock of Muscovy ducks for pest control, meat, and eggs. Duck poo is perfectly welcome in an aquaponics system, and ‘scovies are at home on the range, capable of foraging and generally taking care of themselves. If necessary, chickens could be added to the system to add heat and carbon dioxide. An odd thing, you may think, to add to a greenhouse… but if it’s near airtight and plants consume CO2 to make sugars, you need a source of CO2 in the greenhouse. The added heat of the coop (as well as the eggs and pest control services) wouldn’t hurt.

A key to the functioning of the farm, then, would be water storage. A pond would be highly useful for not only water storage but production of biomass. Duckweed, a nigh indestructible water weed, is an exceptional converter of sunlight to protein, and can multiply on still water faster than you can say photosynthesis. Opening up a nice pond with duckweed on top would allow for green forage for the tilapia that can be frozen for storage over the winter. Another aquaponics enthusiast does this for his fish, and the nutrient composition of duckweed is superb for fish feed when supplemented with other stuff like black soldier fly (which, itself, is actually superior to most commercial fish feed). Additional water tanks for runoff collection would also be useful for dry periods.

What you see above is a reasonably brief discussion of some pretty nifty thoughts for just the central systems of the organic farm. A woodlot makes a great deal more activities possible, especially if it is maple. With a big enough woodlot, the income from sustainable forestry would also supplement the bottom line, and the use of a pyrolizer for heating in the greenhouse would produce not only heat but biochar – useful in making terra preta. On top of those things, an open expanse of clover would allow for beekeeping, a couple possible dairy cows, goats, you name it. That’s just gravy, as all the necessary calories are already being produced in the systems I’ve just talked about. Excess produce can be sold through the middle of winter. A little bit of cottage industry, and secondary products are also possible. Add in WWOOFers and farm vacationers, as well as weekend courses, the place can become quite an earning proposition.

So, that’s the basic idea. Any questions?

Dao De Jing, verse 31.

夫佳兵者，不祥之器，物或惡之，故有道者不處。君子居則貴左，用兵則貴右。兵者不祥之器，非君子之器，不得已而用之，恬淡為上。勝而不美，而美之者，是樂殺人。夫樂殺人者，則不可以得志於天下矣。吉事尚左，凶事尚右。偏將軍居左，上將軍居右，言以喪禮處之。殺人之衆，以哀悲泣之，戰勝以喪禮處之。

And that's about all there is to say about that.

Elizabeth May on Food Security

The Problem Is the Incentive Structure

As you probably know from reading this blog, I like to think about all kinds of stuff most other people find interminably boring. After writing a couple rants about the stupid incentive structures in most corporations, I found myself pondering incentive structures in general over my morning coffee. It started by me asking myself:

Why aren't corporations aren't targeting the "Base of the Pyramid" (BoP), that 4-billion-strong cadre of low-income consumers?

I reckoned it could have been any number of things, but let me walk you though my first ideas.

1) Perhaps they just had an information gap. It's possible that with over 60,000 multinational corporations (MNCs) in the world, every single one of them has been utterly and completely kept in the dark regarding four of the six billion people on the planet. OK, maybe that's not very possible. Next idea.

2) Perhaps they had information about the BoP, but were subject to prejudice regarding their ability to be a market. I'm certain that a lot of this exists. People in business who think you can't sell something to someone who works for a dollar a day are more than likely the majority. Still, for there to be virtually zero interest in business to serve 4 billion willing customers, that prejudice had to be not only deep-rooted and persistent but pervasive. It means that even when a visionary leader has come along who thinks that serving the BoP could be good business, that prejudice has, until very recently, always won out in the end. I have a hard time believing that this is the case, not only because it requires "perfect prejudice" (and not everyone over the past 60 years has been thus) but also because that prejudice has been overcome by a select few companies. It's clear that there are people who want to sell to the BoP, it's just corporations don't allow them to do it. Next!

3) Perhaps they tried and failed to tap the market. Possible. Hart routinely stated in Capitalism at the Crossroads that companies that try to transport their business models for the 1st world to the 3rd world often find the models have no traction. Why would they try to transport extant business models to new markets? You know, like trying to sell a McDonald's hamburger in New Delhi? McDonald's had to transition to non-beef and even non-pork products and add vegetarian dishes to its menu to serve the bustling metropolis. Perhaps other companies have failed for their inability to be flexible? This is another possibility, but large companies have shown that they can adapt their services and products to local clientèle. Hart argues that the BoP are not just different by local custom and preference, but they operate on a completely different model than the one billion satisfied customers of the first world. While companies can adapt to sell to people who have money in other countries, they can't necessarily adapt to sell to people who don't have much money - especially in other countries.

4) Perhaps the corporate culture played a role. I'm going to be an armchair anthropologist and theorise that there are three things cultures do: stuff that they know is pragmatic and useful in their day-to-day lives, stuff that they know is sacred and useful to their spiritual lives, and stuff they know is taboo. Corporations are no different. Some examples: sales incentives are pragmatic (because they encourage a beneficial activity); staff retreats are spiritual (because nobody can prove they do anything useful, but people still believe in them); and presenting market data about the company in anything but the most glowingly positive terms in the quarterly report is simply taboo. Corporations try to minimise risk and maximise gain. It makes sense that the activities a company considers pragmatic, those activities that make up its culture, are things they've tried before that worked. Humans are innately conservative in this way, we tend not to like to step outside the bounds of stuff we've done before. It makes us uncomfortable. While there are people who really enjoy that kind of discomfort (me, for example), in a working environment where the culture is propagated by all your coworkers, it is hard to be innovative or step outside of your corporation's comfort zone. So far as I can determine, anything not pragmatic or spiritual is taboo when it comes to corporations. I'd go so far as to say that if the idea of serving the BoP somehow got past the first three ideas above, it would be stopped dead in its tracks at this one. Hart called this the corporate immune system, and it's a great analogy. Except in this case, the immune system is malfunctioning, like in Hashimoto's Thyroiditis or Crohn's Disease. The immune system attacks the good parts of you as opposed to keeping the baddies out.

All of these ideas get back to a central point: the incentive structure. Why? Well, perhaps there was an information gap, but why would such a thing happen? Business planning models rely to a degree on demography to pinpoint potential customers. Lamborghini doesn't think about me, because I will never have enough cash to purchase a Lamborghini. Equally so, most companies in the developed world have products that simply aren't a demographic fit for the BoP, more or less by design. This is because corporations attempt to create as big a market as possible with the highest margin possible by measuring potential demand versus total production (supply). Any and all traditional models that serve the BoP are likely considered high-volume low-cost because culturally we are accustomed to modelling the consumer as an individual rational actor who attempts to maximise value. We don't model individual phone service providers with access to microcredit, such as Grameenphone did. This cultural prejudice biases us against low-income purchasers because we misconstrue their actual purchasing power. If we modelled them any differently, we would run up against a corporate taboo: we would step outside the bounds of that which is corporately pragmatic or spiritual. There are always going to be actors in a corporation whose interests coincide with stamping out that which is neither corporately pragmatic or corporately spiritual, because the corporate system privileges the minimization of risk. The unknown is a risk. When you associate a risk with an ongoing expenditure, you will have executives - stumbling over themselves to look good to their shareholding puppeteers - to cut it.

So, all this to say that corporate culture incentivises the information gap because to use untested and unknown models to gauge projected profit margins is risky. Why gather information about a demographic it isn't profitable to sell to? Corporate culture incentivises prejudice because of this same reason - but it could equally be that a corporation has tried and failed to sell to the BoP and this engenders further prejudice. Corporations will try and fail to serve new demographics because of their inability to approach the demographic in a culturally sensitive way, instead considering the extant first world model to be sufficient, then wondering why it doesn't work. This is because, again, stepping outside standard operating procedure is considered an unnecessary risk even if it shoots the venture in the foot from the beginning. Finally, in corporate culture, the incentive is to minimise risk and maximise gain, and executives will a) always be coming in and out of the organisation, and b) always be on the lookout for ways to make their mark. One of the main ways to do so is to "trim the fat" and one day, eventually, your beloved BoP project is going to be that "fat". Your growth horizon is farther away than that executive's likely date of leaving the company. If you don't show spectacular growth in under 6 years (3 preferably), be very afraid.

If something doesn't work, and it doesn't work repeatedly, and it fails in the same way each time, there is a really good chance that the problem is systemic, and not just the victim of the whims of fate. Successes in reaching the BoP are certainly successes against the odds. As I mentioned in my previous blog post, a startup is more capable of navigating the rough waters of a BoP strategy because it comes without as much baggage.

The solution here is not to plead with corporations to do the right thing. The solution is to build a smarter corporate model from the ground up.

More on Capitalism and Profit

I've just gotten to the end of Capitalism at the Crossroads and I wanted to share a couple quotes:

"...it is precisely the incumbents that most often stand in the way of fundamental change."
(paraphrased from Saving Capitalism from the Capitalists) I've heard this somewhere before.

"It's been said that capitalism is like a knife: It [sic] can be used to cut off your brother's arm, or it can be used to butter bread and feed the hungry - the same knife."
While I think that the simple line "capitalism is a double-edged sword" would have been fine here... we get the idea anyhow. We're back to my contention that capitalism is a force, not an idea or a method or a practice... it's just a fact. Funny how people just don't come out and say that. Capitalism just is. Any business practice that does not incorporate capitalism in its raw form is just an incorrect assumption regarding a potent force of nature, and is therefore dangerous. You should not look at a tornado and call it cupcakes. That's both wrong and potentially harmful to you and any easily manipulated cupcake lovers nearby.

Hart continues: "The problem with capitalism is thus not the profit motive; the problem is how the profit motive is conceptualized. ...there is a persistent myth that the ultimate purpose of business is to maximise profit for the investors. However, the maximization of profit is not a purpose; instead, it is an outcome. The best way to maximize profits over the long term is not to make them the primary goal."
In this statement it is like he is tantalisingly close to a breakthrough in understanding that profit and share value are two separate and distinct animals that don't often have much to do with one another. If Hart could see that the system has incorrect feedbacks at the level of the organisation of the corporation, he might be closer to understanding why certain BoP pilots he used to formulate his BoP Protocol failed. Briefly, the reason why they failed is simple: the quarterly report.

Why? From a systems standpoint consider the following:

1) Sustainability requires the ability to see long-term advantages.
2) The quarterly report comes out every three months.
3) A day trader clears his portfolio every night. How many investors buy big in one company and go long?

Stock price movement and the long-term success of a BoP approach are, simply through their incongruous rhythm, thoroughly disconnected. Every quarter for a long period, the only thing an investor is going to see of the BoP initiative is an unnecessary expenditure. Certainly, there are astute investors who think five years into the future, but they aren't thinking about your company five years into the future - they are thinking of their own future. They may not even hold stock in your company by then. They are thinking about the trades they are going to make in order to put an addition on their house. Your company's long-term viability does not matter to an investor unless it's somehow personal. Individuals will have traded in and out of your company twenty times before a sustainable initiative makes real money. Mutual funds hold huge baskets of shares - they don't care about your company's long-term viability, they care that you outperform S&P for a few years before they shift to a different company. Share price is not profit, and the CEO is beholden to shareholders, not to their company's profit motive. As I have and will keep on saying - profit motive is capitalism; share price is a bastardization of capitalism.

So, why did the initiatives fail? Because the minimum number of times a CEO will have to go to bat to defend that expenditure for a five-year project is twenty: the number of quarterly reports. The average lifecycle of CEOs is about 6-7 years. Chances are high that in the middle of a BoP project, your champion moves to another job. The kind of short-term thinking that ruins companies also makes BoP initiatives hard to protect.

How to solve this? Finance it differently! Shares are stupid for this purpose, and Hart contends that the corporate arms that do BoP work must not, on any account, be spun off from the company. I contend he may be wrong. His worry is that the initiative will be consigned to the charitable arm of the company when it doesn't perform fast enough. My worry is that share price motive will invariably sewer distant time-horizon initiatives anyway. The way to deal with this is to make a wholly independent startup with seed capital from the mother corporation. The seed capital can be in the form of a loan instead of shares. That way, the subsidiary has to make a profit to cover costs and repay the loan, but isn't saddled with constant interference from meddling board-members. It has the latitude it needs and the mobility it craves to do things right. That is perhaps why the example of TWI (a startup) did far better than the other corporate case studies. They were on their own from the start - so when an established corporation wants to do the same, they need a way to be like Cortez and burn their ships.

Just a few thoughts.