"Thank you very much for the extra input with my Restaurant/Nightclub proposal. I already have a couple investors who are requesting more info, and that's less than 24hrs after submitting the proposal to you. I am very pleased."
The imperative to "Obtain A Yield" is probably obvious to most people visiting this site, but there are many subtleties.
For example, you might create a beautiful garden and feel you have obtained a yield simply from the beauty of it. That is certainly one yield. From a practical perspective, however, you have not obtained much of a yield if you are not also going to eat some of the food produced by that garden. Many people do not obtain a proper food yield from their garden. They might not know how to cook or prepare the food in a way that makes them want to eat it on a regular basis, they might not know to preserve their food for storage, they might not be able to handle the abundance the garden produces in a certain window of time, they might be too busy to harvest, or they may simply be too lazy to harvest when the fun of planting and watching them grow is over. In order to obtain a yield you need to be able to manage the abundance that nature provides (i.e., catch and store energy) so that you can subsequently obtain a yield from that storage. Obtaining a yield requires managing the full cycle properly.
Yield is also more general than money but certainly includes it as one of the valued outputs of a production system. If you do not obtain a yield that is sufficient to maintain and improve your system then that system will not be in existence for very long. The need to obtain a yield is basic to that system's continued existence. The yield of the system can be money, social capital, natural capital, fitness, beauty, etc... So when designing a farm or garden we should be conscious of the need to obtain a yield from that landscape, the types of yields we might be looking for, the and the full cycle required to obtain these yields.
I was recently listening to lectures from Bill Mollison's 1983 Permaculture Design Course. Parts of it are hard to follow and a bit boring to me, however, there are parts that blow your mind with possibilities for obtaining yields. Raising Anacondas for meat, farming snails, Chinampa systems, and "City as Farm" are some non-standard examples he discussed that come to mind. Bill (the co-founder of Permaculture) talks about many different production systems and the various yields they can deliver.
The "City as Farm" system is quite interesting. He discusses the case of a fellow from Melbourne, Australia who made a business out of getting people in the city to grow chestnuts for him for a price of $ 3.00 per lb. This fellow noticed that there were many chestnut trees in the city that were not obtaining a food yield for their owners. Some chestnut trees
can be very productive, producing as much as 1500 lbs of nuts on one tree. So he contracted with these home owners to buy their chestnuts at a price of $3.00 a lb from them and enough home owners agreed to do so that he had a viable business. This chap went even further and also started to propagate chestnut trees and gave away the grafted chestnut trees to home owners who would agree to grow the trees in an organic way. He offered them a guaranteed commitment to taking their product (if he was still in business). So he had a plan for how he would grow his business further by giving away propagation material to his growers and creating harvest contracts. The "City as Farm" follows a pattern that Bill Mollison called the "Gleanings Model". You start by gleaning what is available in your city in some abundance that is not being utilized. You then form a company to organize people to supply you with that resource. You then figure out how to reproduce the resource and give the knowledge or propagative material away to the same or different people to produce more of the resource. In this way you can have a
"City as Farm" for many different types of products. The urban farmer Curtis Stone (blogged about him in Lean Urban Farming) is using a gleanings model to obtain underutilized yards from home owners to grow his food crops. I don't think he is educating or assisting those home owners to grow crops themselves, but that might be a future avenue of growth for him if he has sufficient market for the produce.
Another part of the "Gleanings Model" is that people can make a "living" by supplying you with the resource. If someone has a couple of chestnut trees and collects 2000 lbs of chestnuts, then that is $6000 in the families pocket. That money will pay family bills for a few weeks or a few months depending on your lifestyle, but the important point is that
you are making a "living" of that tree for a non-trival amount of time and that will make you want to participate. The "City As Farm" is capable of offering many "livings" to many people and you could measure the yield of the system by the number of "livings" it produces.
In conclusion, once we have applied the principle of catching and storing energy, we are ready to draw down the value on those storages in the form of various yields. We can model this situation with "Stock and Flow" type diagrams where various inputs contribute to the formation of storages and various yields come from those storages as the value is drawn down. In the vineyard example below the inputs contribute to building up vineyard storages from which various yields can be derived. The width of the pipe leading into the storage represents the amount of work invested while the width of the pipe leading from the storage represents the amount of that type of yield. Because my vineyard is still young, my grape berry yield is not expected to be largest yield this year, instead the greater yields will come from the vineyard as an attraction for guests to stay at my farm accommodations and also the health and fitness that vineyard work promotes. This is a starting point for an analysis of vineyard yield and I expect it to evolve over time.
I'll leave the last word on obtaining a yield to Bill Mollison who advises:
The yield of a system is theoretically unlimited (or only limited by the imagination and information of the designer).
There are a huge number of ways that we can "Catch and Store Energy". For example, we all need food energy to live and the food we eat is a way to store the solar energy in a form that we can use. So the imperative to "catch and store energy" can simply mean grow some food while the weather is favorable to growing it. We need to collect food during times when food is abundant so that we can store and use it when we need it. The seeds produced by our plants are another form of energy (i.e., reproductive energy) that we should store so that we can continue to grow food.
The advice to "make hay while the sun shines" captures the essence of this principle.
The basis for our real wealth lies in our ability to catch and store energy. The income we derive often comes from the release of value from
the energy storages we have built up.
We must all interpret the imperative to "Catch and Store Energy" in our own way because we must all decide what energies we want to catch and store. Physicists offer us one viewpoint on what energy is - the capacity to do work - that is useful in deciding on what constitutes "energy". Things like solar, wind, water, geothermal and biomass are primary and derived forms of energy. The theoretical biologist Howard Odum encouraged us expand our view on energy to include the concept of embodied energy, or the amount of energy that was used to create a particular thing. That
thing could be a fish, a 2x4 piece of lumber, a cell phone, or a wind turbine. Each of these things can be evaluated with respect to how much energy was used to create that thing. The amount of money we pay for goods is often correlated with the amount of energy that was used to produce that good. What about things like good will, popularity, positive affect towards a brand, music? Are these energies?
The challenge of living by the principle of "catching and storing energy" is to identify the energies that you want to capture and how you will go about storing it in a high value form. In farming it is relatively easy to identify some energies worth harvesting and storing. Food, water, soil carbon, seeds, wood, hay, animals are all storages of energy and wealth for the farmer. The farmer must manage these energies wisely and create proper storages so that she can eventually obtain various yields from these storages (e.g., food, heat, income).
Anyone who practices Permaculture is familiar with a sector map. A sector map is designed to map the energies that flow around a particular point on a landscape. Common energies to map are summer sun, winter sun, summer wind, winter wind, water drainage, wildlife, noise, fire, views, traffic, and pollution. Here is an example of what a sector map looks like (source):
A sector map can be conceptualized as base map of your property with an overlay for each major type of energy that impinges on it. That overlay typically includes a depiction of how energy flows towards a particular point of interest, often your home. A common way to depict an energy is by drawing a pie shape with the skinny end of the pie facing the house. The direction and width of the rim of the pie represents where an energy is coming from and over what parts of the landscape. A sector map can be used to help you design landscapes, buildings, wind breaks and growing systems in a way that intercepts good energies and deflects bad physical energies.
If we are to create sector maps for the energies that impinge upon us in our business lives it might look a bit different than the standard
sector map. It may be be difficult, for example, to establish a specific direction where the energies are coming from. The traffic to your
website might be coming from all over the world. A circle around your business probably doesn't provide much useful assistance to design you
web-based business. Perhaps a better way to go is to use the size of the pie to represent the importance of that energy to your business. The
energies can be good or bad types of energy (sectors filled with plus signs and negative signs respectively?). The exercise of creating a sector map of the energies critical to your business may be useful for designing your business to catch and store energies while deflecting other energies that might prevent you from doing so. These are just some early speculations on what an energetic analysis of a business might look like, one that is not exclusively concerned with physical energies (although they are important to map), but also might include embodied energies, and more abstract forms of energy such as web traffic, positive word of mouth, advertising, product quality, virality, etc....
To conclude, the imperative to "catch and store energy" is an abstract principle that directs us to pay particular attention to how energy
flows through the landscape and to take advantage of opportunities to store that energy in a valuable form. If we can store that energy in a valuable form then we can create paper wealth by drawing down on the real wealth contained in our energy storage. The imperative is easily understood in the context of physical energies like sun, wind, water, geothermal, nuclear, biomass, and food. The imperative is less easily understood when extended to "business energies" like popularity, positive reputation, negative reputation, usefulness, beauty, durability, quality, cheapnesss, etc... but may have some applicability to business design if you can create a way to map these energies for the purpose of business design.
Posted on April 24, 2015 @ 09:32:00 AM by Paul Meagher
Starting a business is not as glamorous as the Dragons Den and Shark Tank would suggest. There is alot of grunt work involved before you get to the stage of producing a new product or service.
I'm currently involved in some grunt work. I am pruning my grape vines before the buds emerge. There
is alot of hand pruning followed by taping the vine to the trellis. It is a cold, wet and windy day.
I have my rain suit on and am getting ready to do another session of pruning.
To call it grunt work is a bit of a misnomer. The pruning I'm doing now determines the fate of the vine for the rest of the summer. It involves alot of rapid fire spatial decision making using several heuristics such as cutting back as much of the bottom growth as I can, cut the tops off after 10-12 buds, create a spur prune instead of a cane prune when I have lots of branches coming off the cane, keep at least two main trunks and sometimes three, cut away canes pointing into the center of the row that might be hard to train, cut the plastic ties off the bottom so I don't constrict this years growth. These are some of my main rules of thumb.
Success in pruning is about getting the grunt work done as efficiently as you can while appreciating the importance of doing it. The same is true in most successful businesses.
Posted on April 22, 2015 @ 01:40:00 PM by Paul Meagher
I drove down to the farm yesterday to prune some grape vines and get some repair projects underway (new door and windows).
I also came down to observe and interact with the farm during the spring melt period. The water is flowing off the
landscape on this wet windy day. The lane is the main channel for moving rain and melted snow off the landscape. The
landscape is getting a deep watering which is nice. Some small trees that my wife and I planted in the fall of last
year have emerged from the snow intact. The ground is still frozen and there is still around a foot of ice in the
harbour. The winds are blowing the ice out to sea today which is good. It will be a late start for the lobster
fishermen as they must wait for the ice to clear.
These are some of my observations today. The first design principle of Permaculture is simply to "Observe & Interact"
with the system that you are designing. In the context of farming, it is often suggested that you spend a year
observing nature around your farm before you make any major design decisions for the farm. If you are planning a
business you should take some time to observe and interact with the people and technologies of that business. So the
first principle of permaculture design is to observe and interact because when you do so you create better designs.
This is true in farming and arguably also true of starting any business. Every day you could be asking What did I learn
from my observations? What did I learn from my interactions?
David Holmgren is the author of Permaculture: Principles and Pathways beyond Sustainability (2002). David is the
younger co-founder of Permaculture and some of his best work is his work on specifying 12 design principles for Permaculture.
These have become a standard part of the cirriculum. His book consists of a chapter on ethical principles and then a chapter for each principle. In the second chapter discussing the "Observe & Interact" principle, he has a section that is titled "The Landscape is the Textbook" where he elaborates his take on the principle:
The development of good observation skills requires time and a quiet-centered condition. This in itself requires a change from a lifetstyle that is indoor, semi-nocturnal and media dominated to one that is outdoor, mainly daytime, and nature-focused. At Melliodora we try to balance indoor deskwork with observation and physical work in the
garden that supplies most of our food. As well as feeding us, working with nature provides the inspiration for, and testing of, the more abstract ideas epressed here.
The interaction part is as important as the observation part. You can observe your garden all you want but until you start growing stuff you won't know some of the things you should be looking for. Ulric Neisser in his 1976 book "Cognition and reality : principles and implications of cognitive psychology" talked about the perception-action cycle and created this graphic to explain the idea.
I'll be reading more of David Holgrem's book at the farm and hope to eventually start doing a mashup of Permaculture principles and Lean Startup principles. I started discussing The Lean Startup in my last blog.
Posted on April 21, 2015 @ 11:00:00 PM by Paul Meagher
I'm about halfway through Eric Reis book The Lean Startup (2011). This book helped kick off the Learn Startup movement. It is definitely a book worth
reading. Well written and well organized with lots of useful case studies to explain and justify the lean startup ideas he advocates.
I was a bit surprised that the book appears to be primarily about how scientific methods can be used to create successful startups. For example, he advocates formulating hypothesis on an ongoing basis about which product features appeal to users and how growth will occur and testing these hypothesis using minimum viable products, split testing, cohort analysis, core metrics and other techniques. Eric encourages us to formalize our "big idea" in more detail so that we can test and measure the validity of our underlying product and growth assumptions. It is hard to argue against using scientific methods which makes it hard to argue against many of the techniques he advocates because they arguably lead to "validated learning" better than most other approaches we might use. According to Eric, "validated learning" is the main objective that startups should be seeking. The more validated learning you can do in a short amount of time the greater your chances of success. Adopting his suggestions will not guarantee startup success but it certainly can't hurt to be aware of scientific techniques you might apply to starting and growing a business.
Many of the techniques he proposes are not easily transportable to all industries. Startups in the IT industry are the best fit because it is relatively easy to run numerous online experiments to test ideas and analyze results with a large enough sample size to be statistically meaningful. Eric does not get into the nitty-gritty details of things like qualitative methods, power analysis, effect sizes, significance testing, or Bayesian analysis but issues like this potentially lurk in the background if you decide to run lots of experiments to figure out what works and what doesn't work for your startup. There are lots of books out there that discuss these technical details.
If the book is primarily about applying scientific methods to creating successful startups why did Eric call it the "lean" startup. This is partly historical because the inspiration comes from techniques used in lean manufacturing that Eric is, in part, adapting to managing startups. "Lean" also refers to the objective of making fewer and better mistakes on route to creating a successful startup. If you make fewer mistakes, and mistakes that are revealing about whether you should persevere or pivot, then presumably you don't need as much capital to become successful. Eric also offers up many ideas for how startups can
test product/service ideas cheaply without investing alot of money into development which is another way startups can be lean. I was hoping to discuss some of these cheap ways to test startup ideas but that will have to wait until my next blog.
Posted on April 15, 2015 @ 08:24:00 AM by Paul Meagher
Diego at Permaculture Voices is doing weekly podcasts with Curtis Stone, owner of Green City Acres urban farm. These podcasts will follow Curtis Stone through a season of growing, harvesting, and selling his crops on his successful urban farm. Curtis Stone has been urban farming for 5 years now and last year was averaging around $3000 a week in sales from small urban plots. Not a bad living and with enough margin to keep growing his business.
In these podcasts Curtis Stone and Diego offer many practical insights into what urban farming is and how to do it successfully. Urban farming has tremendous disruptive potential because of the proximity of the farmer to a potential
customer base. You can't grow all crops on an urban farm but you can grow enough to be very profitable provided you do it right and this podcast series is an excellent resource for learning how
to do it right. As in any farming endeavor, there are startup costs and they are not insignificant (cold storage, tiller, greenhouse, compost, soil amendments, seeds, irrigation, plastic, hand tools, etc...). I expect we will see more avid home gardeners making or seeking investment to take their passion to the next level to become urban farmers possibly at scales larger than Curtis Stone is operating at. It is important to know, however, whether your market is big enough to sustain whatever size you decide to grow to. At this time, urban farmers don't generally have alot of competition from other urban farmers so it is probably
a good time to consider market entry.
The week 3 podcast is not officially released yet on the site, but is available on SoundCloud and is called Going No-Till.
Even if you are not interested in becoming an urban farmer, these podcasts are interesting because Curtis Stone is a savvy and innovative businessman. He excels at marketing his business, listing to his customers and adjusting his operation accordingly, and is an innovator within his urban farming niche. He is a good case study for how a lean startup/business conducts itself.
Posted on April 10, 2015 @ 10:58:00 AM by Paul Meagher
Google hosts a wide variety of top notch speakers at their campus on a regular basis and post their talks to Google Talks YouTube Channel. I like to check it out every so often to see if there is anything worth watching.
One recent video that has received a larger number of views than normal is by investor Howard Marks, chairman of Oak Tree Capital, who published a well-received investment book called The Most Important Thing (2011, 2013).
In this video Howard Marks outlines the importance of controlling risk, taking randomness seriously, the futility of forcasting, contrarianism, defensive investing, the secret to investing - buying undervalued assets, making money of poor-quality companies, investing as a negative art (what you exclude is more important than what you buy) and more. He also discusses OakTree's investment philosophy and three adages that he lives by. This is followed by over 20 minutes of questions from the Google audience.
One of the main reasons Howard Marks has a reputation among investors is because of his Memos from our Chairman that analyze various issues related to investing. Warren Buffet is listed as one of his biggest fans. I examined his most recent memo titled Liquidity and found it quite philosophical and sprinkled with lots of investment wisdom. His essay discusses many nuances of the liquidity concept and its relationship to making money and losing money as a buyer and seller. I'll be keeping an eye on Howard's future memos and dipping into some of his previous memos.
The project of trying to distill the most important things in your investment philosophy is not an easy task and one might wonder whether it is even necessary. Oaktree Capital has decided to define and rank the most important things in their investment philosophy and have done quite well. There is something to be said for disciplined investing and not just getting caught up in the irrational exuberance of the market. Perhaps Howard Marks can help tweak your investment philosophy through his discussion of the most important things in his book and especially from his memos (from which much of his book is derived).
The idea that Vaclav Smil was Bill Gates' tutor was mentioned in a Globe and Mail article in 2010 after Bill reviewed some of his earlier books
and mentioned how much he liked his work and read everyone of his 30 books. So Vaclav has been offering up ideas that Bill has been following for awhile now.
The reason I mention all this is because I don't think enough people appreciate the scope and style of Vaclav Smil's work. The recommendation that Bill Gates has given to his work is one indication of how powerful a thinker he is. He has written many books that are impressive in their quantitative reasoning about various big issues confronting society today.
You can find lectures by Vaclav Smil on the internet. He is an intense speaker who some might find controversial for his pragmatic views on the oil and gas technologies and green technologies. Below is one of his more recent YouTube videos called Energy Transitions in which he discusses a wide range of issues on the topic of energy transition and redefines what we should be talking about under this label. I don't endorse all of his views but I certainly think his views are worth listening
to. This video is over an hour long and there is a section around the 28:30 to 29:45 when the sound cuts out. Vaclav was born in the Czech Republic in case you are wondering about his accent.
Posted on April 7, 2015 @ 08:46:00 AM by Paul Meagher
The green movement has been successful in making us aware of the need to live more sustainably. Many large corporations now specifically address issues of sustainability in their accounting systems. Many business thinkers have argued that sustainability is not just nice, but can also create competitive advantages for those businesses. The favorable messaging they can put out is one aspect, but simply reducing and eliminating waste and pollution as part of a corporate mandate can introduce considerable cost savings and lead to more innovation.
We all have a basic sense of what sustainability means - that we don't harvest resources in such a way as to reduce the availability of those resources in the future. A sustainable system can run indefinitely and keep providing for humans and other beings.
Sustainability, however, isn't the only goal of the green movement these days. The concepts of resilience and regeneration are discussed more and more these days as positive attributes that our natural and cultural landscapes might benefit from.
Resilience is a system property that leads to those systems being more stable in the face of changing conditions. So resilience is more important these days as a result of things like climate change, water shortages, and economic recession. The goal of many people in the green movement is to design systems that are more resilient in the face of our modern hazards. This may involve planting a diversity of trees where some are more adapted to warmer/dryer conditions and some might be more adapted to cooler/wetter conditions. Whatever might come in the future you are covering off your bases better. Most corporations today don't specifically address the issue of how they are going to be more resilient but this may be just a matter of time.
The third term that I want to discuss is "regenerative" which is another term that is becoming more common in green movement discussions. Whereas those advocating for sustainable and resilient systems might be happy with maintaining the overall status quo, the objective of regenerative design is to create situations of abundance while also being respectful of the environment. Instead of just talking about conserving soil, a regenerative designer would want to talk about building soil so that you can create conditions of more food abundance. A regenerative designer might not be satisfied with a deal that only offers to maintain employment, they would rather see a deal that creates social structures that lead to greater abundance for the workers and community, where abundance is not just monetary but may include other benefits as well (e.g., social solidarity, better safety nets, better commons management, etc...).
It is useful to be able to distinguish between these three types of system properties (sustainable, resilient, regenerative) because green designs might focus on one more than another, or might focus on a couple or all three. It is also useful because it gives us an enlarged vocabulary for evaluating technologies and proposing new technologies.
The ecotopian ideal of many small farmers is to create farms that are sustainable, resilient, and regenerative at the same time. The same ecotopian ideals are often desired by those living in more urban settings. There is a market for ideas and technologies that can satisfy these three demands. Sustainability is not the only game in town. We also like our systems to be resilient and regenerative as well.
Posted on April 1, 2015 @ 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.