#it will create a mediocre and often inaccurate piece of writing and you will have gained nothing from the assignment

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AI often confidently hallucinates references that are inaccurate or completely made up.

(via the author, at the Ex Bird place)

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The Intelligent Investor, a publication by Benjamin Graham, is broadly regarded as the very best book on value investing ever written

The Intelligent Investor, a publication by Benjamin Graham, is broadly regarded as the very best book on value investing ever written. The book (and it's writer ) had a deep influence on how people consider investing. Graham was extremely influential to many titans in the realm of investing. . .chief among them Warren Buffett. Buffet said after that the publication is

If I hadn't read this book in 1949, I'd have had a different future. In the time of it's publishing, the book was revolutionary in how it brought a frequent sense approach to investing by highlighting that when a person buys a stock, they are essentially purchasing a bit of the underlying company and consequently the cost they pay for their piece of the underlying business must reflect their view of the value of said item. To many of us today, this is common sense but in the time such investing practices were not on the radar of your average citizen. He also brought a principled approach to investing; one that has been focused around blending awareness of business fundamentals with emotional behaviour.

I decided to write this post after realizing that Graham's work has had a profound impact on my life as well. . .not only in investing but company as a whole. Above all in my function as farm business owner.

Here are some lessons from The Intelligent Investor that have crossed over to how I think about farming.

Mr Market is just one of two owners of a business who comes into work daily with wild mood swings. On a specific day, he may either wildly overestimate or underestimate the worth of their business but no matter, he's willing to sell out for his spouse daily. The partner is obviously free to decline the offer, since he understands another day Mr Market will return to him with an entirely different offer.

Graham is known for saying that in the short term markets are similar to voting machines, tallying the emotional thoughts of the market participants but in the long run they act like weighing machines, reflecting the accumulated value of the underlying company. Mr Market demonstrates psychological behaviour but the informed investor may know the inherent value of the business get the most out of purchasing or selling opportunities when the time is right for him. In agriculture, we're selling products rather than buying bits of a company but the idea stays the same. We will need to remember that emotion can fuel short term movements in the markets but that it's up to us to make the call on when we wish to market. And the only way to know whether a cost makes sense for you to market at is to be aware of the worth of everything you've created, aka your cost of manufacturing. Your number will be different than your neighbor's. Know this amount. It's possibly the most important calculation you'll do annually around the farm and unfortunately not enough individuals really spend the opportunity to do it. Actually, one of my regional Farm Credit executives estimates that less than 5% of his customers understand this amount for their operation. Finally, Graham said,"Market quotes are for your convenience, possibly to be taken advantage of or discounted." He predicted this gap the Margin of Security also it can be thought of as how safe (and potentially rewarding ) an investment can be. This line of thinking applies across all boundaries of assets from bonds and stocks to real estate to even commodities as a seller. If you would like to think concerning Margin of Safety when creating farm investment decisions, then one of the key elements you want to be aware of is the inherent value of your advantage. How can you determine that value? Could it be centered on marketable asset value? The very best way of valuation will be dependent on what you're trying to appreciate and how long you plan on holding it. By way of example, a 100 acre field which you intend on farming for the next 50 years should be valued differently than you plan on selling to some neighbor in 5. Equipment decisions may also be assessed by comparing intrinsic value vs market value. Equipment's intrinsic value is essentially it has utility value. Unless the piece of equipment is very old (essentially a collectible) we all know it is going to depreciate in value each year. Thus, to justify ownership of that equipment it's utility value better transcend the market value. Once equipment has zero usefulness values, it's time to move on from it and don't wait. How many of you have discovered old equipment nestled in the bloodline of a farm which you work which isn't even worth salvaging for scrap iron? At one stage, the utility value of the equipment fell to zero while still having some marketable value but yet the owner still couldn't part with this. This is called the"Sunk cost fallacy" and has affected farmers using old gear because the first plow was hitched to a mule. A higher Margin of Safety provides protection in case some of your intervention methods prove inaccurate. Just take the case of 3 farmers: Farmer A bought land in 2012 and guessed a 5% margin of security (using $7 corn to project income for the foreseeable future), Farmer B also purchased property but negotiated with the sellers before he had a 20% Margin of Safety. And Farmer C, couldn't find any attractive options with higher than 20%, so that he sat on the sidelines. I'd assume that Farmer A's purchase has caused him a substantial setback in his small business. I would presume that Farmer B is faring better than Farmer A but he is also probably a little light on working capital and is having to pass attractive opportunities. This is really where Farmer C gets redemption. At first he was somewhat mad to see his neighbors so busy purchasing land but now he's got more chances than previously and at more attractive valuations than 5 decades back. Margin of Safety can also apply to sellers. When the market value of this asset you own approaches or surpasses your inherent worth, it is time to consider selling. Now many farmers won't sell farmland and I'm right there with you. But we can and do sell products all year long. So when the market worth, aka future costs, exceed your inherent worth, aka your cost of production, it is time to consider selling. Again, the market is your servant and not your master in the event that you clearly know what your aim is and possess the discipline to follow your plan. To complete, as Graham wrote,"The use of the Margin of Safety is, in nature, that of rendering unnecessary an accurate quote of their future." Having a long-term outlook :Graham believed that among the best pieces of mental armor an investor might have was having a long-term perspective. By thinking in terms of decades instead of months or a year or two, the intelligent investor could more readily have the discipline to pass up cool or mediocre investments in the short term to be able to take advantage of fantastic investment opportunities in the long run. Among the most interesting paradoxes of business is that the best chances typically present themselves in poor times, but in bad times there are fewer people who will actually take advantage of those opportunities. Instead (and perhaps a future blog post), most of the major titans of company that you know of from Buffett to Rockefeller to Carnegie to Walton (and many more) made their most impactful business investments of their careers when times were tough. Easy to say, hard to do. Easier to do with a long-term perspective of the usage of Margin of Safety when assessing business investments. Keep this is mind when you think about the current state of ag. The long-term mindset also allows the smart farmer to make the most of the magic of compounding. Years before, in the Millionaire Next Door, the writers raised some eyebrows when they generated statistics stating that your average farmer was wealthier than your normal physician or attorney despite most farmers earning much less than those more affluent professions. That is possible because farmers often save more of their earnings to be reinvested into their business or investments. Over time, this may have a dramatic impact on the bottom line of one's private wealth. Buffett has explained compounding with a vibrant image of rolling a wet snowball down a really long snowy hill. It will grow exponentially. He's living evidence of the intense power of the long term consequences of compounding. Actually 99% of his wealth was got after his 50th birthday. Understanding the difference between linear and logarithmic profits is something every farmer needs to have a grasp of. Every tiny incremental change you make on your operation to lower costs or raise yields or increase your market cost combines in a multiplicative capacity. Small changes can have a tremendous effect over the long term. Long-term thinking also comes into play when thinking about infrastructure investments and soil health. Are you improving your infrastructure for this particular year in mind or the next ten? Have you ever designed your new store in order that a potentially bigger combine will fit into it in ten decades? It can have a loooong time for soil health to improve via cover crops and increased biological activity. Can you have the mindset and patience to reap the benefits of cropping system enhancements which may cost a little more on the front but pay massive dividends over the long term? The second best time is now." Lastly, purchasing land is the ultimate long-term investment if you're a farmer and plan never to sell it. This may mean a great deal of things like being individual on property purchase decisions, but it can also mean not structuring a property purchase loan so sharply that you become money poor and battle when other opportunities present themselves. There are all types of platitudes out there in regards to purchasing land but likely the best advice I've heard is to consider it as long term capital allocation. Bearing that in mind, constantly ask yourself A) Could I purchase at a cost that provides a Margin of Safety, B) Does my surgery produce enough revenue to make the obligations (again Margin of Safety) and C) is this the best location to allocate my capital as it now stands. Be skeptical of"specialists" and"forecasting": Graham was a skeptic of anybody who tried to forecast market prices in the future and you should be too. It's far easier to create valuations in the current than later on. Any idea of projecting future conditions should be baselined since most likely reverting to the mean. To put it differently, great times or bad times will last forever. Think about it. . .if specialists were so much brighter than us they'd be able to crush the markets regularly and, let us be fair, they wouldn't be crowing about their latest insights to you but rather earning millions while sipping Mai Tai's on a Carribean beach somewhere. Actually, experts are woefully inaccurate in regards to outperforming markets. Would you feel that in the last 15 years, just 35 percent of mutual funds have outperformed the S and P 500 index? In our current culture, it is unfortunate that too frequently the loudest voice is confused with being authoritative. Bear in mind that you can not predict the long run you can just manage your current circumstances. My own business has largely been predicated on the principle that if you're able to make your outcome independent of any views as to the long run you're that much better off." You should also be impartial when it comes to making decisions on entered choices with your crop. If you are actively engaged in farming, then you probably do not have the luxury of being a passive investor in your own operation. Consequently, you understand what Graham might predict an"enterprising" investor. In these tough times, you need to be searching for that additional edge. This may indicate negotiating input prices or paying down your working loan the moment you see a deposit has cleared. Little things accumulate in a huge way when compounding is involved. And farming is the greatest business case study .

I find people such as Ben Graham and his acquaintances such as Warren Buffett, fascinating case studies for farmers since so much of what they have learned and educated over the course of their lifetimes in company can be directly related to how we think about farming as a business enterprise. What valuable business lessons have you heard from those which aren't directly engaged in farming but nevertheless crossover that will help you on your day to day farming operation?

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