Increasing Yield: Part 2
Posted on May 30, 2017 @ 07:01:00 AM by Paul Meagher
In my last blog I discussed some ideas related to increasing yield. The topic is rich enough that I want to continue exploring the concept in today's blog.
The concept of yield is fundamentally a spatial concept - how much productivity can you get out of a given area. Farmers are very concerned
about the yield from their land as it correlates strongly with their level of profitability.
When yield is used in finance, this spatial aspect of the concept is often lost. Consider the Wikipedia definition of yield:
In finance, the yield on a security is the amount of cash (in percentage terms) that returns to the owners of the security, in the form of
interest or dividends received from it.
The financial use of the term yield refers to productivity in the form of interest and dividends, but disavows any connection to how much space is used to do it. I think we should have a concept of productivity that takes into account the amount of space used and yield usefully serves that purpose. In finance, the term yield can be equated to other terms such as ROI and IRR so does not serve as much of a purpose.
The yield of a system is often tied to how many functions we stack within a given physical area. Consider a bike stand I built yesterday for a couple of bikes that I own. One bike did not come with a kickstand and
my son broke the kickstand on the other one so I've been precariously leaning bikes against the garage as an alternative. The idea gestated in me that I could use a garbage bin I built a few months back as the base for my bicycle stands and this is what I came up with.
I made the stands from the last of some left over pieces of 2x6 lumber (sawed down the middle) from my cold frame project. I didn't have much for input costs other than my time. It was simple in design because I wanted it that way and because I didn't have much scrap lumber on hand. The space occupied by the garbage bin and around it now has an increased yield. It still offers garbage services but in addition it now offers bikestand services. Functional properties of the garbage bin were utilized, the fact that it was made of wood and heavy, to integrate the bike stand into the garbage bin. We are able to stack functions when the output or properties of one element can be the input to another element of the design.
All bricks and mortar businesses should be concerned with yield. How much revenue is the business making per square foot and how does that compare to similar businesses and other businesses in general. The storage business can be quite profitable when looked at through the lens of relative yield and the seemingly ever increasing need to deal with the amount of stuff people don't have the space for.
If a farmer grows alot of crop but it takes alot of inputs to produce that crop then that farmer's yield can be less than a farmer who produced less crop on comparable acreage but who had fewer input costs. The calculation of yield should take into account input costs. So if you want to increase the yield of a store by investing X amount, that should be justified by the increase in business activity relative to the investment. Yield isn't just about increasing business activity for the sake of business activity, but doing so in a way that increases yield, aka the profit, of the enterprise.
A book that has recently come onto my radar that may be relevant to the discussion of high yielding systems is a book called Compact Farms (2017) by Tyler Volk.
Posted on May 26, 2017 @ 10:00:00 AM by Paul Meagher
One of the things I love about gardening is the experimental nature of it. It is a great venue for applying experimental methods to the world. Every time you plant a seed you have the opportunity to plant a similar seed under a different condition and see if that matters. For example, I just
finished planting some tomato and pepper seeds that I will start under some grow lights. I have some left over seeds from the packets that I can also plant outside in my backyard greenhouse. I can then observe what benefit there is to starting seeds under grow lights versus direct seeding into greenhouse soil. I can potentially observe germination rates, the relative mortality of germinated plants, the effects of hardening off/transplanting for seedlings started under grow lights, days to harvest for the differently grown plants, etc...
Experimentation also means trying something out that may be kind of bizaare to see if it works or not. In this regards, I built a cold frame this year and started different varies of lettuce, carrots, kale, sweet basil and chives in it this spring. I also planted something else. In the late fall of last year I processed some plums into plum wine. I dumped the extracted plum seeds into the soil where I built my new cold frame. Instead of removing the plum seeds before I planted, I decided to spread them around and covered them with 3 to 4 inches of new soil. I planted my veggies into the top layers of this soil in the early spring. Yesterday I observed what I believe is the first plum seedling sprouting up amidst the lettuce.
This can perhaps be viewed as an example of vertical stacking; but instead of stacking one row of veggies above another row of veggies to maximize growing space; I am stacking seeds in the soil at different
layers to grow quite different types of plants in the same growing area - veggies and plum trees.
Bill Mollison, the father of Permaculture, famously said:
The yield of a system is theoretically unlimited, or, limited only by the information and imagination of the designer.
He often enjoyed showing how you could keep stacking functions within the same limited area to get more and more yield out of that area. An important goal for alot of (sub)urban gardeners is arguably to maximize the yield of their growing area. It requires experimentation in both the methodical and crazy senses to find new methods to reliably increase yield.
Last night, I started watching Elon Musk's recent Ted Talk where he talks about ways to increase mining, traffic and energy yield (among other topics). Perhaps one of the secrets to Elon's thinking is his ability to see how yield can be increased beyond what others can imagine.
Continuum of Crowdfunding
Posted on May 24, 2017 @ 07:41:00 AM by Paul Meagher
Crowdfunding is regarded as a recent evolution in finance, however, there were precursors to crowdfunding and crowdfunding exists in
less conspicuous forms all around us today.
In 1983, the father of Permaculture, Bill Mollison discussed the topic of Self Finance in his Permaculture Design Course lectures.
Bill advised that the way to self-finance a business was to presell the item that your business was going sell. This would give you funds to actually create the item to sell. He cited the example of a startup restaurant that began by preselling a certain number of meals at the would-be
restaurant. Bill noted that when you presell in this way, not all of the presold inventory will actually be consumed, possibly only
half (another benefit of preselling). One marketing technique that Bill promoted was to send hand-written post cards (with postage paid for a response) to a carefully selected set of contacts advising them of your upcoming venture and what they might do to help. Bill advised that this would only work if you had a good product to presell and some convertable moral capital.
One way to look at crowdfunding is as an evolving market with self-finance being one of its precursor forms.
There has been recent legislation to open up the crowdfunding market and as a result we are seeing more participation in this form of
financing. Markets can evolve through regulation just as football, soccer, and rugby evolved from primitive football. Likewise, Crowdfunding can be viewed as an evolution of self finance; with the proviso that self-finance has been around longer and may survive longer in the end.
Regulations require that arbitrary quantities be used to circumscribe what is or is not considered to be crowdfunding. One arbitrary quantity is the minimum number of micro-investors or micro-funders that must participate in a fund raise in order for it to be considered crowdfunded. If you have only 2 to, say 10 funders, that is probably not going to be considered an example of crowdfunding.
You can look up what minimum number they suggest as the threshold but that the number is arbitrary and we may sacrifice a deeper understanding
of self-financing strategies by accepting regulated limits as real limits.
Perhaps all we can say is that the threshold of crowdfunding is crossed when there are alot of funders involved.
Amazon does crowdfunding on behalf of authors when it presells their work in progress. Amazon is not often identified as a crowdfunding platform perhaps because it is more strongly identified with being the premier e-commerce platform.
Online personalities that have lots of facebook, youtube, instagram, twitter followers may be able to use their moral capital to crowdfund upcoming projects. They can try to bring their following to a crowd funding platform to collect fees.
You can squander moral capital if the product you ultimately deliver is sub par. That has happened to me and it will likely not happen a second
time with the same person. It is important to ensure that you have a good product to presell by developing prototypes, minimum viable products,
meals, chapters, etc.. to get feedback so that you can verify that it is a good product before you spend moral capital promoting it.
In this blog I have suggested that crowdfunding might be better viewed as existing on a continuum rather than as a discrete type of financial
innovation. It has precursors in the ways that entrepreneurs have self-financed in the past and as such we can potentially learn about modern day crowdfunding by studying strategies used in the past. We obviously have a layer of social media on top of everything these days and I acknowledge that this has a big influence in how self-finance is done today; but the basic need to have a good product and moral capital to spend arguably apply today just as they did in the past.
Not only does crowdfunding extend back into pre-internet days, it also extends laterally into platforms such as Amazon that can pre-sell books
on behalf of authors. By seeing crowdfunding as existing outside of the official crowdfunding platforms, we open up the possibility of
integrating crowdfunding into popular e-commerce platforms or social media platforms. Because crowdfunding also does not need the internet it can also continue to evolve offline as well.
Update: After posting this proposal I read that Facebook is now allowing its users to create crowdfunding campaigns. I think this supports my thesis that crowdfunding cannot be neatly categorized any more and that it will soon spread into e-commerce and social media platforms, and not just dedicated crowdfunding platforms.
Markets & Traffic
Posted on May 16, 2017 @ 11:44:00 AM by Paul Meagher
What is a market? What is traffic? How are markets and traffic related? Some quick thoughts on these concepts.
What is a market?
For a definition, I consulted the excellent book Reinventing the Bazaar: A Natural History of Markets (2003) by the Standford historian of economics
He defines a market by first defining what a market transaction consists of:
...an exchange that is voluntary: each party can veto it, and (subject to the rules of the marketplace) each freely agrees to the terms.
A market is a forum for carrying out such exchanges. ~ p.6
Perhaps you were expecting more from a definition of what a market is and there is definitely more that MacMillan has to say about how they evolve and what causes them to function effectively or not. I hope to return to discussing ideas from this book in the future, but for now I want to pair this book with another book like you might pair a particular wine and cheese for synergistic effect.
What is traffic?
For a definition, I consulted another excellent book Traffic: Why We Drive the Way We Do (and What It Says About Us) (2008) by Tom Vanderbilt.
To define what traffic is, Tom feels it is first necessary to be clear
about what a road is:
The road, more than simply a system of regulations and designs, is a place where many millions of us, with only loose parameters for how
to behave, are thrown together daily in a kind of massive petri dish in which all kinds of uncharted, little-understood dynamics are at
work. There is no other place where so many people from different walks of like - different ages, races, classes, religions, genders,
political preferences, lifestyle choices, levels of psychological stability - mingle so freely ... for most of its long life the word traffic has had positive connotations. It originally referred (and still does) to trade and the movement of goods... the movement of goods and people were intertwined in a single enterprise; after all, if one was going somewhere, it was most likely in pursuit of commerce. This is still true today as most traffic problems occur during the times we are all going to work, but we seem less likely to think of traffic in terms of motion and mobility, as a great river of opportunity, than as something that makes our lives miserable. ~ pp. 6 - 7.
How are markets and traffic related?
The study of physical traffic can be rich source of metaphors for how markets evolve and function. Traffic is interesting to study in its own right
because we are all subjected to it and perhaps for that reason it can offer a rich source for metaphorical comparisons to how markets work. Indeed, the definition of what a road is above seems to capture the idea of what a market is better than MacMillan's definition.
MacMillan's preferred way to think about markets is using the metaphor of primitive football and how it evolved from primitive football into the official sports of soccer, rugby, and football. Many of the same dynamics of how markets evolve over time are on exhibit in the evolution of primitive football into these three official sports. The rules and regulations loosely define these different sports much as the rules and regulation loosely define what a road is. By looking at the historical evolution of sports and roads, we can see how rules and regulations were crafted to evolve these sports and road into high traffic systems.
In addition to using traffic as a metaphor for thinking about markets, we might also view a market more literally as the situation where there is traffic to a product or service. While traffic may not be sufficient to define what a market is, it is probably a necessary condition for defining what is or is not a viable market.
These are just some preliminary thoughts to what markets are, what traffic is, and how they are related. I hope to revisit some of these themes in the future as I (slowly) make my way though these books. My aim is to have a richer understanding of these two fundamental concepts and their interrelations.
Posted on May 10, 2017 @ 11:40:00 PM by Paul Meagher
For the last 2 days I've been working on upgrading all the sites on the Dealflow Investment Network to serve pages using https (secure http) rather than http. You may have experienced some brief downtime in the evening/nightime while I was working on debugging the configurations.
I will continue to update links to use https rather than http and do more testing for the remainder of the week. Even though links may use http they will be rewritten to https by the webserver so I don't expect non-updated links to cause any linking problems.
If you do encounter any issues, please contact us and report the issue.
The Production Target
Posted on May 8, 2017 @ 09:56:00 AM by Paul Meagher
Last week I travelled to the farm and was busy adding collars to the grape vines. The exercise of adding the collars around the grape vines is teaching me some lessons in scaling up production. The main lesson is the importance of knowing your production target.
Last year, I developed a prototype for a collar that I want to install around my grape vines. It consists of 4 inch Big-O drainage pipe cut into 5 inch sections with a slit in the middle so you can install the collar around the vine. It also requires 2 pins that mount inside the collar and secure the sides of the collar to the ground. Finally, for good measure I add 2 pieces of geotextile fabric with a slit in the middle around each plant, one piece from either side. The collar is then mounted over the geotextile and
both are pinned to the ground. The idea is that I should have very little hand weeding to do and when I maintain the rows with my string trimmer I don't have to slow down as I can run the string into the collar without damaging the plant. This is how I hope to remain an organic vineyard without having to do alot of hand weeding. The jury is out on whether this will work or not.
As the spring arrives and the need for hand weeding started to emerge, I decided to pull the pin and to attempt to roll out the prototype for the whole vineyard (going too big too fast without adequate growing feedback is something I worry about). I had gathered pinning material, some rolls of geotextile, and a large roll of Big-O drainage pipe. I lined up two helpers and last week they started installing the collars. The two helpers installed an average of 250 collars a day.
I noticed that my supplies were being used up quickly. I had to make a run for two more 250 foot rolls of Big-O pipe and this weekend I was sourcing more pinning material. I think I'm good for the geotextile material for now but I'll need more. I'll need more of everything.
How much more?
You can't answer such questions without doing alot of counting. In this case, I needed to actually count out the number of vines in the vineyard and the number of apple trees and pear trees I also wanted to collar. The tally comes to approx 3000 plants.
With that number I can now be more realistic about what materials I will need to complete the job, how much money I will have to pay out for installing them, how long the project might take. All these things were vague guesstimates in my head when this project started. The number 3000 focuses the mind and helps me to do more realistic planning. For example, if each collar is 5 inches long and I need 3000 collars, then that equals 15,000 inches. Divide that number by 12 inches and you get 1,250 feet of Big O drainage pipe. I will need 2 more rolls (250 ft per roll) to complete the job (purchased 750 ft to date). I'll have to budget for that cost.
Likewise, anyone manufacturing a widget should define a production target and then build a set of production and cost numbers around that target. It would have been nice to have known what my production target was before going into this project so I could have had necessary parts ordered and ready and some idea of what my total costs would be. The production target doesn't have to be fully accurate and exact, it just needs to get you in the ballpark so you can start estimating costs and requirements. When rolling out a prototype into larger quantities you also have to cut yourself some slack because there are lots of unknowns and the first time through the production cycle will be when you grasp more of the details of the production process.
Posted on May 1, 2017 @ 12:20:00 PM by Paul Meagher
Without trust between an entrepreneur and an investor, no deal is going to happen. It takes time to earn trust
so one limiting factor on the speed of a deal is how long it takes to earn trust.
Entrepreneurs have often asked me how long it takes to complete a deal. My typical response is that it varies based on a host of factors and I would proceed to list a few factors. I didn't include "trust" as one of those factors but that was a big mistake.
There are lots of tips on how to build trust. The tips vary and there are potentially lots of them. One tip you might encounter is that it takes time to earn trust. It is not clear how much time and presumably the other tips are designed to reduce the amount of time. But how far can you reduce the time required? Mistakes can be made when there is a desire to close a deal quickly and trust is allocated too fast. Due diligence involves slowing things down, doing your homework, talking with each other and hopefully building up a healthy sense of trust between each other. Once this is done, adding a lawyer can help to slow things down again and avoid additional mistakes.
The Slow Food movement encourages us to slow down the system for producing and consuming food as it can produce lots of individual and societal benefits. Likewise a Slow Deal might be the best deal. A slow deal might be defined in terms of the level of trust between the parties finalizing the deal. When both parties have a high level of trust, that might set the stage for other good outcomes in terms of an ongoing working relationship and eventual success of the venture. If
there are lots of lingering trust issues then the venture might be doomed from the start.
An entrepreneur can't wait forwever for a deal to close and needs to make decisions, often quickly, about whether to
pursue or close down a funding lead. One of the determining factors is again the level of trust and a forecast of whether
it is likely that you can build the requisite trust level in a reasonable amount of time.
Trust as a mathematical concept is interesting because it can be easily framed in Bayesian terms. Trust involves
the notion of prior trust and updating prior trust levels based upon new confirmatory or contrary evidence. Googling
the term "Bayesian Trust Model" returned this paper Bayesian Network-Based Trust Model (2003, PDF Link) with 433 citations.
Looks like an interesting attempt to formalize some important aspects of what trust consists of. Many years ago
I worked with one of the authors, Julita Vassileva, on Supporting Peer Help and Collaboration in Distributed
Workplace Environments (1998, PDF Link).
When seeking seed funding a common piece of advice is to ask friends and family for financial assistance. Funding at the seed level is quite risky so you generally need a backer who trusts you alot. To get similar funding from someone who is not "friends or family" will be more difficult because of the high trust level required and how difficult it might be to obtain. Once a project is seed funded and has something to show for it, then funding from outside sources is easier because they don't have to put as much trust in you that you will do what you say.
Trust can be used to analyze many of aspects of deal making.
Inspiration for this blog came from reading chapter 2 (title "Speed") of the book by noted designer John Thackara called In the Bubble: Designing in a Complex World (2005). I am currently awaiting delivery of John's most recent book How to Thrive in the Next Economy: Designing Tomorrow's World Today (2015).