Well, and "depressed prices on farm goods such as corn, dairy and soybeans are also likely leading to a spike in Chapter 12 filings, according to the report."
The article and other sources report the majority of bankruptcies are in the dairy industry. It’s the result of US-Canadian trade disputes and overcapacity in the dairy industry which precedes the dispute. The CAD-USD exchange rate doesn't help either.
A gallon of 2% milk in Canada is about double the price in the US. I think its reasonable to assume that if Trudeau can't bring retail food prices down and resolve this dispute he's going to have to go back to surf boarding and substitute teaching in 2020.
Comparing the price of milk and Canada versus the US isn't a 1:1 comparison. Canadians pay much less in taxes to support their dairy industry than Americans due to supply management in Canada (i.e. not producing more milk than needed, paying for that production through subsidies, and then wasting it). So, in-store higher dairy costs in Canada are closer to true production cost than in the states.
There are a lot of other factors here too, one being that during the 70-80s American agricultural legislation focused much more on large scale farm operations than Canada and as a result it is much harder for small farmers to get by in the US.
Regardless, even with all other factors being equal dairy costs would still be slightly higher in Canada since due to generally higher taxes and higher farm wages.
The article says bankruptcies have "increased steadily" since 2014. It does mention China, and the trade war, but I think when they say "falling commodity prices" they are referring to a longer/broader issue. But it doesn't say why else commodity prices are falling, and I'm be happy if someone enlightened me.
The value of brand is rising which increases the prices paid by consumers for commodities. This makes people buy less of the underlying commodity and more of the overarching brand.
Think about coffee. It’s a commodity. But more people are spending $4-5 on a single cup instead of $4-$5 on a pound of grounds. Spending power does not match price change.
A good historical case study is Standard Oil. In an effort to stabilize prices and reduce peaks, Standard oil established last mile delivery for refined oil. People bought Standard Oil at the grocery store. Standard didn’t start buying oil wells until 20 years into the company after they had pressured prices down to the bottom.
Grains are sold as a bulk commodity. The sale typically takes place at a "grain elevator" where the grain is dumped into a shared storage pool by the truckload.
I'm not sure how anything about brands could apply. Any "brand" ends at the grate where you dump the grain.
Similar with other ag products. Remember how we just had that E. Coli outbreak in lettuce and nobody had any idea for several days where exactly it came from, so they had to broadcast the warning across the entire nation?
One issue that was talked about some years ago and has sort of fallen off the news cycle was overcapacity for maritime transport. That could have contributed to it, or maybe it's another symptom of the underlying cause.
An oversimplified explanation would be that each buisness has an incentive to undercut their competitors and by doing so decline the profit margins for everyone.
It benefits a lot of farmers actually.... it's just not "enough" for everyone. The whole system seems so propped up by various systems that I'm not sure what a relatively simple one would even look like.
Not to say I disagree with incentivizing food production at home altogether.... it's just such a mess.
Doesn't the US spend around $100B a year on farming subsidies from buying crops, to paying people not to farm etc? Not even counting indirect subsidies like requiring ethanol be added to gas.
While unemployment and asset prices have recovered in the past decade, business starts have remained at historic lows. When these small businesses die they aren't being replaced by upstarts. I wish we knew why.
I'm worried the future will be a small handful of oligopolist mega-corps. You see this consolidation in every industry: banks have consolidated (there are fewer banks now than at any point in modern US history), a few leading tech firms, agriculture, energy, etc.
Business startup by necessity has gone down. It's much easier to get hired by an international company in a niche field and work from home now, so people no longer are required to start a business to work in the field of their choice
It's more difficult to start something really innovative, related to the slowdown of Moore's Law
It's more difficult to start a business in an established field, as licensing laws have come to cover so much more of the landscape. You can no longer just decide to become a barber and hang out your shingle.
Moore's law originally stated that the number of transistors per IC would double every 18 months. For a long time this was a remarkably accurate empirical law, but it has slowed down dramatically in the last decade or so.
As an individual example: in 1998, Intel's top-of-the-line CPU was the Pentium II with about 8 million transistors. In 2008, they released the Core 2 Extreme QX9770, with about 820 million transistors; this is a 100-fold increase in 10 years, which is almost exactly what Moore's law predicts.
Fast-forward another decade to 2018, and Intel's highest-end Xeon chips have something like 7 billion transistors, which is less than a 10-fold improvement in the same timeframe.
EDIT: that said, I think it's a real stretch to go from "the slowdown of Moore's law" to a sweeping claim about innovation in general being more difficult. There are a ridiculous number of different fields in which someone could start a business; relatively few of them are dependent on enormous, ever-increasing amounts of computational power.
I'd go even further to say, that we're at a point where not EVERYTHING needs to be smaller... our mobile devices are so small and difficult to hold, we're putting things on the back to make them easier to hold. They're so thin and fragile, we're putting thick cases on to protect them...
I'd love to see a production cell phone that is already thick with a relatively huge battery, more rugged case, and a slightly better protected display. I'm willing to bet there's a market for this, just based on otterbox sales, and the sales of backpack battery covers.
Similarly a home media player like the roku, shield tv or fire stick are plenty small. That has nothing to do with being able to innovate and create newer or better experiences.
From 1987 until 2011, Intel created a new manufacturing process every 2 years like clockwork. In 2013, their 14nm process was delayed one year to 2014. The next process, 10nm, is delayed 3 years, assuming it is not delayed again before the currently planned late 2019 release.
> It's more difficult to start a business in an established field, as licensing laws have come to cover so much more of the landscape.
In my experience, it's been a problem with banks and small business loans being hard to obtain these days. Banks want a LOT of leverage, you have to already be doing pretty well.
Folks that are already pretty well-off aren't going to take the types of risks that create small businesses.
If either of the first two propositions was true, then we should be able to look at other first world countries around the world that should be experiencing the same pressure, and we would see a similar slump in small business creation, right?
The average American has so little buying power that they have become absurdly price conscious. If a big player muscles into my business, they can undercut me and ruin me with no recourse. Why would I get into that?
Essentially, up to the 1970s, wages followed closely with productivity. Quite suddenly, wages stopped growing while productivity has continued to grow with no sign of catching up.
What we can take from that is while prices for certain things have declined(e.g. technology, new cars, software, toys, clothes), the price of arguably more important things (child care, medical care, college tuition, textbooks, housing, food) has gone up. Sure, we've been bearing those costs, but the maximization of profits from those expenditures will inevitably cause an adjustment when Americans can't pay for those things anymore.
Americans might technically have a higher buying power than 1900, and especially 1930, but not necessarily in every area or even the areas that are important. If we were to say that Americans have more access to food, clothing, computers, education, etc., it doesn't mean that Americans are actually paying for those things; a lot of the wealth we think we have is coming from record amounts of debt that were unseen in the early 20th century. The things that make it seem like we have more spending power than we did a century ago are being made possible by what could be a ticking time bomb.
That is, once the dollar dropped the link to gold, and money could be printed, a lot if things went increasingly haywire, down to the circus of bailouts in 2008 and "quantitative easing" afterwards.
Oh come on. Not this argument again. Let me just say this: short of WW3 or a complete reset of the global economy, we will never, ever, ever go back to tying currency down to a commodity, ever again.
Why do you say that? Back in 2001 I couldn’t have imagined that the USA would still be in Afghanistan in 2018. But it happened. Is the US more or less likely to be in Afghanistan in 100 yrs? Idk.
What’s to say that currency won’t be tied back to commodities? What makes you so confident?
TV's, Software, and Toys are cheaper, and notably the only categories cheaper on that chart from BLS. Well, it looks like this is good at keeping rioting off the streets; everyone is too distracted consuming tech.
I would pay good money to test this hypothesis. I don't think its as simple as consuming tech though. I wonder how much effect cannabis legalization, opiod use etc. have on keeping a restive population dormant.
I think the consensus is that average American buying power peaked somewhere between 1970 and 1980, and it has been declining ever since.
That's plenty of time for an entire generation to be raised with an awareness that any entrepreneurial enterprise they may attempt can be crushed and consumed in short order by a competitor with the backing of the moneyed elites. If you try to manufacture a quality product in the US, and bootstrap your business, the instant you prove there is a market for it, someone will gather up some financing, knock off your product in China, and run you out of your own business. If you build a fun game app, Zynga or King or some other chop-shop with their model will instantly clone it and kill you with their marketing. If you open so much as a lemonade stand, the city will come round asking about inspections and permits.
Yet pundits on both the right and the left seem to be shouting "Ya-hoo! The economy is great!"
I don't really understand where that's coming from because it takes a minimal amount of research to figure out that the BLS unemployment statistic tells us virtually nothing(even Adam Ruins Everything covered that). Wages have been stagnant in comparison to productivity since around the 1970's(adjusted for inflation), the labor force participation rate is in decline, I don't know anyone who doesn't think housing and rent is absurd right now, Americans are buried in debt, medical care is expensive and often enters scam territory, etc.
And we're supposed to become entrepreneurs? lol
Things aren't adding up, and we're probably not going to even accept that we're in a decline until we're well into it.
Pundits go by statistical indicators of the economy's well being. You've provided only anecdotal evidence of grievances/complaints. EDIT: I see in another thread here you do provide factual evidence so I will retract my previous statement. My apologies.
Except the American economy is far from being in decline. Healthcare costs may be up, but outcomes are far better than they had been historically. Housing costs are up, but the size of an American home is 3x larger per person than it was a 60 years ago during what people refer to the peak of American success. The third and only other real big thing whose cost has risen faster than wages is education, where it's the only clear thing whose marginal utility has not really gone up over time in the way other industries have.
The problem with much of these things is that we're on a hedonic treadmill that we refuse to get off, even as further expansion of consumerism is destroying our planet. The big problem we have is policy that has promoted a society of which economic growth and even wage gains fails to provide a meaningful improvement in peoples lives.
Policy reforms could allow for the majority of people to live in cities in relatively new buildings serviced by public transit all at a lower cost than what we have now given our current system of inflated land values and high automotive transportation costs (i.e. cost of new construction is still relatively affordable when compared to the cost of land and public transit is far cheaper to build and service than automotive infrastructure). Reforms around healthcare that currently restrict the availability of doctors and enable overcharging of medical components would go a long way as well, and lastly, reducing the overhead around university administration while restricting lending would go a long way.
tl;dr: We aren't in decline, we just need reforms around housing, healthcare and education as their costs make poor economic sense and are only high due to protectionism and loose lending/insurance laws.
I had to shutter my business due to nobody having any money. Regular people could not pay my reasonable fees. Even those with seemingly decent jobs. You have to sell to big corporations.
Health insurance costs and education savings. I'd like to hang out my shingle, but steady employment with health insurance is needed for my family of 4, along with savings for kids college and my retirement. It's all a risk mitigation.
>>* Entrepreneurship is dying in America and it should concern us all.*
One angle: A lot of stuff is moving online. Good luck with Google, Facebook, Amazon having their own interest$ etc being gateways to your site. Most people will not make it, so why even try? Risk vs reward.
Large businesses have long been more efficient than small ones on average but they often could not customize their products and services to cater to each locality or niche very well.
Advancing technology has enabled a greater economy of scale as well as mass customization beyond what was possible, thus increasing the competitiveness of large businesses.
Examples include customized shoes from big brands, e-commerce recommendation algorithms taking the roles of local shopkeepers, IT systems reducing the costs and increasing the effectiveness for managing far-flung enterprises.
completely anecdotal, but the reason from my perspective is that the system has been overwhelmingly rigged against being able to take economic risk.
I would have started my own business by now ... heck I'd probably have started and failed several by now if not for one thing. Well three:
1) you cannot afford prescription drugs in America unless you have good health insurance. At least in my state (Alabama), the federal health marketplace offers exactly one option from exactly one provider. It has a ridiculously high deductible and is (no shit) not accepted at nearly all doctor's offices in my town.
2) I cannot afford to lose my access to prescription medication and healthcare, because my wife has diabetes and I survived cancer a few years ago. We're in fine health now, but we DO have medical expenses ... things that should NOT be that expensive (yearly CT scans and insulin are hardly breaking technology), but have been SO inflated in price by a bogus, rigged third-party-payer system that we literally can't afford those things without "insurance".
3) I had kids early in life, and since my adult working career began, it has been an absolute baseline requirement that I be able to get them medical care and otherwise provide for them.
ok ... having kids early was my decision, and I'll accept that this decision limited my universe of personal options. Getting sick. Having a wife who got sick. These were not personal decisions. They are just things that happen to people.
Our system in America is designed to keep me at my desk, working for someone else, doing mostly meaningless work. Why? Because it'd be a complete nightmare for those at the top, if every last one of me out there in the workplace could afford to take a risk that might not work out.
There'd be a helluva lot more competition out there.
America is dying because of this. Not just our economy. But our society. The world would genuinely be a better place with the companies I would have started in it. And that is true for every other stymied inventor/would-be-entrepreneur in america.
There is always a downside to risk, and there is always a risk involved in starting a new Enterprise. But what we have right now is so far out of whack that taking even a minor risk, can straight up kill you or your kids for lack of access to proper medical care.
My wife could afford to start a few small businesses over the years only because I have health insurance from my employment, and can get her, and our kids, to the family plan.
If Obamacare did something good to people not on lowest-paid jobs, it is giving at least some options of health care to entrepreneurs who are not yet raking in millions (that is, most of them).
That explains why you, in particular, can't take a risk at starting a business. It does not explain why healthy/young/single/childless people do not try it.
Since we are talking about anecdotes - whenever I mention some success in my business, most friends get bored. Yet if they get to another create-a-crud-form job - this is being celebrated like some kind of achievement. I still hear talks about how small business is celebrated in the USA (i am immigrant), but I do not experience it in practice.
> That explains why you, in particular, can't take a risk at starting a business. It does not explain why healthy/young/single/childless people do not try it.
Historically, lots of small businesses are started not by healthy, young, single childless people, but by midcareer people that have savings to invest and professional networks and experience-based insights to build a business around.
So, when those type of people lose opportunity to start businesses, then total business starts drop.
Also, young people starting non-VC backed businesses have often relied on older midcareer relatives supplying financing, networks, and supporting experience, so many of the same things that hurt older people starting businesses (including healthcare costs, which—with common insurance schemes—not only tie you to wage labor but also still require you to maintain capital reserves for co-insurance, which reduces the attractiveness of using savings for speculative, long-payoff, high-risk business investment) also have a similar, if somewhat lesser, negative effect on younger people doing so.
Because our social safety nets are garbage. People don't feel comfortable taking the risks. It's why most entrepreneurs come from families with money. It's why countries with strong social safety nets are beating us in entrepreneurship rates. Give people easy access to free education, and universal health care and you'll see a rise in entrepreneurship in this country.
Same situation here in Nebraska really, there's a single healthcare provider that offers exactly 1 plan that would cost me, a young, healthy, 23 y/o hundreds of dollars per month with a ridiculously high deductible. If I were to start on my own I would be bankrupt in months from health insurance alone.
Healthcare seems to be so important to your financial future and yet your state consistently votes for politicians who are opposed to providing better healthcare (although, Doug Jones' win was certainly a bright spot).
It's possible that capital isn't as readily available as it was before the great recession, as banks have tightened lending guidelines. Are there any correlations between business formations and capital availability?
no, seriously. I have family that ran busineses. I have run businesses. Most successful small business don't pay much better than driving for uber, and driving for uber is a lot less risk, a lot less effort. (there's also a lot less upside, but let's be honest here... making a small business that pays better than working for google that isn't just contracting, even when you have the same skills, is extremely difficult.) - if you drive for uber, at least the capital you blew is on something that is still useful after you quit the business. I know a lot of people with a bunch of branded cups and other junk from their previous failed ventures.
I mean, I had some pretty marketable skills when I started my own business, so I did better than the uber driver, but I worked hard and made like 1/4th of what I get working for other people.
The other thing is that unless you are in the business of getting funding, it's way easier to start a business when the economy is shit. In '09, nobody tried to undercut me. Now? I would not want to be in that market anymore, just 'cause there is so much competition that is willing to lose money to buy marketshare.
In '09, I was able to pick up good people who were temporarily unemployed as employees; now? if you wanna hire someone good, you are competing with people willing to pay netflix level money.
(I mean, all this, I think, is actually pretty great. But it is not so good for facilitating a small self-funded company)
I'm in the process of shutting down my business, so anecdotally:
1) Globalization has made it almost completely impossible to make things in the US unless they are massively overpriced goods (ex. luxury items or niche specialty goods). Customers simply won't pay enough to cover your costs. And there's a good chance that if you are successful, someone will copy your stuff, make it in China, and sell it for half your price within 12 months.
2) In California at least, costs are pretty ridiculous for small businesses. Between state, county, and city taxes, high labor costs, ridiculous healthcare costs, rent, insurance costs, etc. etc. It is far more expensive to start a business today as a percentage of expected revenue than it was a few decades ago.
3) The US IP protection and regulatory systems are out of control. Fending off patent trolls, tiptoeing around trademarks, dealing with licensing systems specifically designed to be too burdensome for small companies to bear, spending time and money to deal with regulatory compliance, etc. puts small businesses at a massive disadvantage.
4) Unpopular opinion, but I think today's workers are less suited to small businesses than they used to be. Many younger workers say they want to work for startups, but what they really want is a venture-backed cushy office with catering and perks completely untied to actual business revenue. These types of businesses account for a tiny percentage of actual small business starts in the US, which are often not places today's workers want to work at, let alone stay loyal to.
> It's sad that you were able to make all of these very valid points without even needing to mention the "health insurance costs for self employed people and their employees"
That was mentioned along with a litany of other things in point 2.
Since you didn't refrain from airing an unpopular opinion, I will counter with another one: you failed in your business likely because you didn't adapt quickly enough to changing market situation (locally and globally) and were unable to recruit and motivate today's workers in the industry in which you operated in.
Generalizations offer very little insight though older folks seem to love to complain that the youth/next generation are just not suited/hardworking enough.
I think that we're at a point economically that it doesn't even make sense to point out mistakes that entrepreneurs may or may not have made... Even without any mistakes, the odds of failure for a small business are still ridiculously high. As a rule of thumb, all the capital goes straight to corporations. You can't build a business out of the current environment. You can hack, lie or cheat your way but you can't do it fair and square anymore.
These days you have to work like a maniac to get a 10% chance of success. It's not very motivating. It's better to save yourself the mental trauma, take a cushy job and get a 90% chance of being able to retire.
I think his first 3 points are valid, but the 4th should have been left out. All generations, young and old, have their fair share of entitled + lazy people. It's never been easy to find hard working, loyal people. Never. Blaming it on the current culture, or the "youth" is understandable, but ultimately misguided.
One of the undervalued skills in entrepreneurship is the ability to not only find, but successfully hire and retain, excellent employees. It's never been easy.
#1 and #3 seem to be in direct competition. You're worried about others copying your IP, but then also cite overbearing IP issues as a problem. If IP laws were weakened, would that not make the theft of ideas even worse?
#4 somewhat relates to #2, where costs as often put on the employees to keep small businesses afloat. Large companies have the sizes to keep costs down. I would love to work for a small business, but it would mean x5 increase in healthcare and insurance costs.
#1 and #3 are not contradictory. #1 is about being undercut by firms overseas that don't respect US IP law. #3 is about US IP law being overbearing where enforced. they're basically orthogonal points.
I can buy all sorts of US made shit, that is profitably sold, at reasonable prices, overalls, jeans, mattresses, washing machines, boots, cars - its that the margin is lower in the states as it costs 2-5% more to make something here.
The issue is, many things here cannot be made here with any ease, because the ecosystem for them no longer exists.
I'm willing to pay 10% more for american made things - I suspect most americans would be too, given the option.
Exactly this, for most generic goods, automation has reached the point where the cost of producing goods somewhere not too far from a major American rail route is only marginally more expensive to deliver to the end consumer than had you produced it in China or elsewhere. The problem is that the Chinese manufacturing environment has a much tighter supply chain, where all the precursor products needed are also manufactured nearby with heavily optimized supply chains for getting raw goods where they need to be. This is especially true with high weight added products such as appliances.
The real problem is that we absolutely suck at manufacturing anything other than items that only really make sense to manufacture locally (certain food items, detergents), where in terms of exports we only exceed at certain types of heavy machinery along with certain chemical and polymer products.
I think its possible to bring the ecosystems back - but you have to start at the top of the chain, and work backwards. Not at the bottom up - make a price competitive business with foreign made bits, and eventually thru protectionist trade policy, bring back lower and lower parts of the supply chain - we may find it makes sense to stop half way down, and not try to bring it all back - we may not.
Where can I buy US made jeans for 10% more than their typical internationally made counterparts? A pair of Levis or Wranglers runs somewhere between $30 and $50. I've never seen a pair of American made jeans for less than $200. Similar result with boots.
If US made was only 10% more, I would go out of my way to purchase only domestically produced goods, but when it's 100+%, it's really hard to justify.
5) The housing crisis affects the business finances too: You need to pay your workers enough to live in the area of your business. In California, this is a major burden.
Going to disagree with you on point 2. Taxes for businesses are taxes on profit not income. If you're not making a profit, like most startups, you don't pay taxes. It's a very simple concept that most people simply don't understand, presumably because taxation of individuals is based on (gross) income. California is expensive--but factoring in the size of the available market, labor pool, logistics, and other resources, it's a far better choice than the Midwest or the South.
Sorry, but no. I thought the same thing until I actually started a business. Look up how taxes work in California and then look at how they work with respect to S Corps. Then look at how large companies hide their profits via schemes like the double Irish, which small businesses have no chance to do.
Just to give you an example - in Los Angeles, the county assess a tax on unsecured property that has absolutely no bearing on your revenue. That's a tax on your office equipment, furniture, machines, etc. The city also assess a tax on revenue, not profit, in excess of $100,000. And even if you don't make a dime in profit, Corps and LLCs still pay a minimum state tax. If you own a building for your business you're also going to pay property tax, and if you don't you're going to pay it in the form of higher rent as well.
To your last point, you need to add an "if" to make it accurate. California is a far better choice than the Midwest or South if you can start a small business with high enough margins to cover the much higher costs of basically everything.
Sorry, but no. I do this for a living, and you're deliberating misrepresenting how taxes work, including how business property taxes work. To note: a company with millions of dollars of business property might have a $10,000 business property tax bill. If you can't afford that, you have no right to call yourself a functional business.
The minimum LLC franchise fee is $800. A real business can afford that, a pretend business cannot.
Double-Irish structures don't work to shield US income. They never have, so US companies can't use them to reduce their US taxation either, regardless of size.
And finally, you chose a pass-through form of taxation, meaning you chose to be taxed as an individual instead of as a separate entity. That's on you--not on California. That same choice would screw you over pretty much everywhere there's a state income tax--meaning all the states where people actually want to live.
Not just entrepreneurship, but even competition itself, in a world that has seen nothing but consolidation and centralization of power and wealth over the last 20+ years as ever fewer organizations have been gobbling up and devouring and squashing any notion of competition and entrepreneurship in its infancy. It is arguably the sole model of the technology sector, the pump and dump, setting a "startup" up to appear as appealing to one of the monopolistic behemoths or titans. It's even somewhat of a model in the smaller tech company sector as free money paid for by tax dollars is sloshing around and companies are consolidating and creating ever larger conglomerates that take ever more air our of the entrepreneurial landscape.
It's not healthy, and no matter what the consequences will be, I cannot envision an outcome where any of this leads to positive things. But maybe it's just my own "bias" that I have positive associations with not being a subject to a hive mind of centralized power and control.
The reward simply isn't worth the risk. Why compete against mega corp when you can invest that same money in their stock and get 10% gains? Plus, you can work normal hours, have healthcare and lower stress instead.
I worked with a guy who freelanced for a while, and he had an interesting observation.
When the economy is shit, most large companies outsource a lot of work because they can't afford or don't have the workers for the amount of work they have. So if your a freelancer, business can be pretty good.
When the economy is great, those same businesses try to bring all those efforts in-house, so all those contracts dry up.
Not sure how it relates with entrepreneurship, but this guy had to quit freelancing and get a full-time gig (which is how I met him) because no one was handing out the contracts he wanted anymore.
Vaguely similar observation from a previous employer in engineering: job health is effectively a derivative of the general economy. That is, if your job entails design/construction of something new, you job would be stable in an economy under flux, where clients have desire to hire your services. Not strictly just a growing economy, because effects like transition to new technology can also ensure stable job prospects. A stagnating or impeded economy, while possibly still ensuring stable jobs for other fields, would mean job reduction in design and engineering.
I think what's endemic among business and societal trends is an erosion of middle ground. The smaller players stall small while the bigger players swallow the medium ones. It's not rocket science to figure out this will have various implications on society, as economics play a huge role in daily life.
The largest banks (JPMorgan, Citi, BoA, etc.) have decimated regional and mid-size banks while credit unions have essentially maintained the same role at the bottom. The big banks have more resources to invest in new technology and financial initiatives, thus having the ability to be market leaders and capture more money. In my opinion, digital also makes a huge difference. For example, JPMorgan is able to spend $10B on technology a year, which is more than the total assets of many small banks and credit unions. The banks that are midsize are in the hardest position because they don't have the capacity to outpace a big bank in R&D or IT, and are stuck in a position of being a lagging trend follower since they also can't spare a lot of risk tolerance. Further, it's hard to even leverage branch access and customer service as more individuals rely on digital banking to handle their finances, which actually pushes the big banks ahead in consumer satisfaction: https://assets.sourcemedia.com/dims4/default/0e422a4/2147483...
From a business side, it looks like we are headed down the path of oligopolist megacorps unless there's major changes. Money is the name of the game, and even in the startup world, the end-goal for investors is to pull off a lucrative exit (which usually means selling to a monopolistic megacorp) or IPO. Ask a megacorp CEO how much is "enough" for their business, and the goal will be to have as much as they possibly can.
I don't know if entrepreneurship is actually dying, but my speculation is it's getting tougher to build a reliable business to employ others and depend on for one's livelihood within the remaining territory left. So much has been taken over by huge companies, it's difficult to find a niche or market opportunity to feasibly "disrupt". It feels like the megacorps have already cleared the fields and claimed the land and the rest of us entrepreneurs have a choice of: i) work for the megacorp that owns everything, or, ii) try to find solace in the few options left.
My theory is returns to scale are much, much higher.
All this whiz-bang shit startups do like AI, machine learning, really even any kind of custom software or process innovation, just isn't possible when you're small. There's no scope for it.
The reason it's a bigger problem now is because we have bigger markets globally and better tools, both of which create winner-take-all effects.
20-30 years ago you might start an auto parts distribution or manufacturing business, or a niche software business, or something else. It's a lot different when you have to compete with the best of the best globally from day 1 without any of the advantages the incumbents (e.g. data, existing channels to market, established brand) can bring to bear.
Historically speaking farming has been a bit of a gamble as far as occupation / running a business. Booms and busts abound.
There's a bit of a myth about how farming should be, or was, but it really just had some booms here and there and then busts rather than any real golden age that lasted very long.
It seems like with all of the price/production data out there these days it would be easier to decide what to grow. Or perhaps that data is not accessible to the average farmer?
Ex-Farmer here who still rents out land to a current farmer.
The type and amount of data they have is startling. The issue is there are so many variables that are uncontrollable, or unpredictable in the time frame of a year or an entire growing season. These include weather and climate, and political climate across the world.
When a small-time farmer from my neck of the woods can sell directly to China, he has to worry about our politics and theirs, as well as the weather here, there, and at all stops between.
So, in other words, it's easier to predict what will be worth more, but no more easy to predict what will grow or what will sell well in 2 years or so. Add in soil conditions and requirements and costs, and you have a complicated picture.
Agriculture was the main driving force of the world economy for eons? It was a stable source of food and income for families and communities for generations. How is that not a golden-age?
As for boom and bust - agriculture is like investing. You may not make much in a year, and you may lose money in two or three, but over the course of your lifetime, you accumulate wealth (land) and prosper. The issue, at least in my area, is that property is just prohibitively expensive. I am by no means in a hot area of the country, but the price of an acre of land has almost tripled in the last 15 years.
Also - that so much of our food is produced by so few individuals is an incredibly recent development, like less than 40 years recent development.
I'm not really sure what all that adds up to, but I'm sure it's something.
> The issue, at least in my area, is that property is just prohibitively expensive.
There's a dangerous mentality which comes across farmers frequently. The neighbor is getting out of farming for whatever reason and putting their land up for sale. Land is typically held for decades, and having any of your neighbors selling their land may never happen again in your lifetime.
So farmers end up paying ridiculous amounts of money for land which will give them a very small positive, or often a negative, return on investment.
And good luck if you want to get into farming. The capital expenditure is ridiculous, even just for 40 acres of land. Medium quality farmland was running $6,800/acre in 2017. [1] $272,000 get you 40 acres without buildings, equipment, animals, seeds, a well, etc. It's so easy to hit $500k even if you went with used equipment. If you tried this, you'd probably want to build your own brand and get people willing to pay a significant premium for your product rather than trying to grow commodity products.
In my area, again anecdotal, no local guy has purchased property over 5 acres at any land auction in the last 5 years. Either mega-farm-corps have, or hunting/outfitting mega-corps.
The huge companies get involved and take the price for 40 acres from a relatively sensible $120,000 (what I purchased at 10 years ago) to $750,000+.
If you can't work at a scale that is so much larger than anything a family farm can, then you're priced out immediately. And if the farming mega-corps are not interested, it's because the ground isn't fit for row-cropping and the mega-corp nationwide hunting trek outfitting companies will double your bid without blinking.
It's a sad state of affairs, really. The only people who have enough money to play the game are either corporations or are in their 90's and bought the ground when it was $30/acre.
> It's a sad state of affairs, really. The only people who have enough money to play the game are either corporations or are in their 90's and bought the ground when it was $30/acre.
I don't think it's sad, more efficient users of resources are bidding them up which is exactly what they should be doing. The idea of a small farmer is great and has a lot of American nostalgia, but in general a giant company that produces much more food on the same land is way better for the country as a whole. It gets messy with subsidies, but the idea of more efficient players replacing small timers is how we keep upping productivity year after year and get richer as a country.
A handful of corporations are gaining massive influence over our political and legal systems. The "small farmer" is precisely what our country was founded on and was considered our strength. It allowed us to be something closer to a true democracy as opposed to the functional oligarchy we're running at this point. You're not an independent citizen if you have to depend on an employer to keep you fed, sheltered, and healthy.
It's only more efficient if you consider "generation of theoretical GDP" the ultimate badge of efficiency. If it's sitting in some banker's pocket, extra productivity doesn't really benefit anyone.
> Agriculture was the main driving force of the world economy for eons? It was a stable source of food and income for families and communities for generations. How is that not a golden-age?
For most people in most of history, agriculture was subsistence. A bad year means you go hungry and possibly die. Far from being a stable source of food, in countries such as China, there was pretty much always some region that was undergoing food scarcity (famine) at any given point in time.
Well the issue isn't the boom and bust. It is the new leverage that has been made over seas that has forced the American farmer more pressure. Knowing this the Federal Government made a huge multi-billion dollar safety net for the farmers and I am guessing it wasn't enough.
The thing is this won't cause one acre of farmland to go unused it just means other farmers will have larger farms.
This is exactly what will happen. All these hobby farmers that thought they could make a living off of organic asparagus are getting a wake up call. I'd like to see the bankruptcy data about the 'age' of the farm. My guess is a significant portion were recent start ups.
That number will be very small. I am guessing it is the farmers that couldn't buy more land and got land locked by their neighbors huge farms. I had a friend who's dad was a wheat farmer and he actually went and rented land and did his own farming. They both owned about 5 square miles of farm space. Last time I checked he was at around 12 squares.
I think I'm going to start learning Mandarin next semester
Not because China is more structurally sound, because its not, but the opportunities - partly because of the inefficiencies - seem massive on mainland and greater China
I just want to know what people think about anything, out there, from their perspective.
I was in Australia and a young blond woman in college was on her social justice kick, talking about how horrible the US must be, and it was funny to me because her perspective was so limited to civil rights abuses and valid healthcare and education inequalities.
I told her "yeah but none of that would apply to you".
Because she doesn't know about the socioeconomic component, and the heavy correlations to the demographics of socioeconomic brackets, and the history of those demographics, along with the accessibility and strength of legal defense, if you can afford it.
and I bet China is the same way or similar, especially if you come to the environment with a bankroll already.
Small solace it'll be but Chapter 12 bankruptcies are a lot more more flexible and the debtors more likely to complete their plans than the Chapter 13 and 11 option afforded the rest of us.
Farming is harsh and without subsidies even more farms would go bankrupt. Prices for goods are low, manufacturing cost is high, margins are ridiculously low. Add the fact that maintaining a farm is hard work, both physically and mentally.
I worked on an alp in the mountains for a month, doing everything from cleaning the stables, milking cows, herding them on steep mountainous terrain, cooking, feeding the sick animals. I had a 16h work day; all while earning almost nothing (I did it to know what it means to work in tough situations). My boss and his family hardly had anything left when the month ended.
Also, Americans are used to paying subsidized, artificially low prices for agricultural products. I don't think many of us realize the actual cost of food production.
Why do we need to fix it? There's plenty of farms that do quite well. Just visit any organic farm that is near a city. There's a huge demand for locally sourced organic produce. We're just propping up the failing farms.
I'm interested in the question of: how would the global food supply/economy be affected if the US were to halt agri subsidies and let the farmers go bankrupt (it seems to be happening in a twisted way through this trade war anyways so ...).
We know the US produces way too much food than it needs. We know that US food is artificially kept cheap due to subsidies. Would higher food prices lead to more starvation in other countries? More hunger in the US? Or would farmers around the world step up and compensate for the deficit? Would it perhaps lead to farmers in lesser developed countries being better supported and lead to economic growth in those countries?
Those are indeed interesting questions. All the West keeps its food prices artificially low by subsidies, or at least the EU does heavily. If food prices were to go up, market would either adapt or compensate by import. That entirely hinges on consumer choice.
But if you cut subsidies, what will happen in the short- to mid term is more farmers going bankrupt and an increase of imports. Would it lead to economic growth in those countries? Hard to tell. Usually what happens in an industry that grows is competition which will lower prices in the mid- to long term. So maybe more farmers would be well off by finding jobs. I don't know. Good thought of yours, though.
my uneducated thought as a transplant to the midwest -
the need for farming hasn't dropped, it's the desire/ability/money to do it that is. Small farmers are going away and corporate farming is taking over.
Probably most frequently to other farmers. Your neighbors land might come up for sale once in your lifetime. For crop farmers, that's the only way you can expand your farm.
Honestly the writing has been on the walls for quite some time now. I’ve argued this with a few applications to YC. Farming in America is about to have a hard pivot. I definitely see it going from large-scale, monocultural enterprises to small-scale, mostly independent, polycultural, bio-intensive, sustainable farms. (Sorry for all the buzzwords, not sure of a better all-encompassing term)
If you’re looking for something to invest in it’d be AgTech with a focus on these new farmers as users.
Because what I'm seeing is a pivot in exactly the other direction. Near urban centers you're seeing more 'specialty' farms like you spell out. These farms cater, almost exclusively, to the wealthy.
But out in the breadbasket, there has been an absolute crush of consolidation. Fewer, larger farms are producing the goods.
I argue that we're going to see (or rather are already seeing) the wal-martization of farming. Few, HUGE scale producers who work at a scale that is just so much larger than what we have now they can still turn a profit.
I agree. At my local farmer's market, pretty much all the vendors sell their produce at a loss because they can't compete with big agri-business. (They continue to participate though, mostly for fun.)
Small scale production is going for specialty products, at higher prices, to specialty consumers. Think of a local vegetable farm that sells to farmer's markets, or a goat dairy that's making chevre to sell at specialty groceries in a 50 mile radius of their farm.
On the other hand, gigantic companies are increasingly controlling land used for industrial agriculture. Near me, a recently incorporated LLC (aka holding company for investors) just paid $171-million for 14,000 acres of irrigated farmland in Eastern Washington [1]. At that scale, there's simply no way that the traditional "small family farmer" can compete with industrial ag.
The few that have near me, are large families that essentially operate like a business. They've managed to hold on to their traditional farmland, and then expanded into what are essentially family-owned large-scale industrial ag operations. Good for them, but they're the strong minority.
It’s a common bias to think that everyone I know eats organic, therefore everyone eats organic. From that point of view, it makes sense to predict the demise of big farms.
I suppose that we will see two trends, both fueled by increasingly robotic farming.
* Old huge farms employing fewer and fewer people, replacing more low-skill work with machines, and possibly driving prices on some crops down.
* New smaller farms, employing a small number of people, made profitable by the extensive use of the (semi-autonomous) machines, catering to specialty / niche markets, perishables, etc.
Huge mono-culture fields may, or may not, be split to smaller, more diverse fields, as agriculture machines become more advanced and smart. A machine that allows for techniques that let you spend less on pest control could be attractive from a purely economic POV.
Since the cost of labor is high, neither will drive agricultural employment up. They will likely still bring more variety, and more sustainability due to technology allowing nicer practices.
Wow, bold statements. Show me the math. As in, show me the before and after P&L for a large-scale mono-culture grain farmer that transitions his enterprise to your vision.
This is exactly where I want my career to go. I want to own a small patch of land and I want to nurture that land to produce food. I am amassing capital now using my software engineering skills to purchase my land outright with cash.
For the Chapter 12s that fail, many of these farm owners will end up working the same lands in the same sorts of jobs. They just won't own the capital anymore, and the surplus value of their labor will accumulate in the factory farming companies. All but the largest organizations are currently struggling in America. This tendency towards monopolies needs to be curbed, it degrades food systems and reduces national resiliency. This is particularly dangerous giving the imminent threat of climate change.
Bankruptcy is an area of American law that is ripe for use for restructuring debtor-creditor relations to fight back against these trends. The entire Code, particularly Chapters 7 and 12, could and should do more to assist consumer and farmer debtors.
Sadly most interventions that western governments keep making in the name of the little guy keep benefiting the megacorps, whether by unintended side effects or from flaws in the policy-writing process (ie, countless small political-favours, lobbying, etc).
There have been countless policies since the 1950s intended to offset wealth disparity that have backfired and hurt the poor. For example, the rent control and other "tenant friendly" laws in Toronto and NYC in the 1970s resulted in decrepit urban ghettos littered with arsoned apartment buildings, because the only way a landlord could "renovate" was burn down their own building. Just look at pictures of Harlem in late 1970/1980s...
It also created a massive disincentive to invest in new low-income property, as the developers knew they'd make less money targeting the poor. So development went towards upper/middle class housing (resulting in an even worse lack of low-income housing in NYC and to a lesser extant Toronto by the 1990s).
Modern rent control laws have attempted to factor these "unintended side-effects" but there are a hundred similar examples in that book. It keeps happening and happening with every clever scheme concoted to help the poor.
The only winners of the massive growth in the US gov since the 1970s were consistently large firms, who had their competition wiped out or huge barriers of entry created in their markets in the name of 'progress'. And countless well-meaning socially conscious economic policies usually works for a small group while hurting a much larger group in the process, or works at the beginning then as the side-effects build up it becomes a net-negative...where it would have been better off to let the market function as is.
I’ve started, invested, and sold several startups and small buisnesses.
I was alurred into “stability” by staying with the corporation that aquired a startup I was working for. It was my decision, but now I regret it.
I’ve been working tirelessly to transition back into being independent, but now I too have a family to support and the current state of health care coverage in the US is one of the biggest risks I see.
Interestingly, I’ve seen more entrepreneurs lately from countries like Canada and Norway who have founders that aren’t as stressed when compared to here in the states. I don’t have any data points to prove my hypothesis, but I often wonder if we are doing a disservice to ourselves here in the US. I guess only time well tell.
We absolutely are. The only workaround has been a spouse who works who carries the insurance or you go without. The ACA actually helped increase entrepreneurship initially. I think it gets harder with a family though vs being single.
I live in Wisconsin. I feel confident saying that this is just an anomaly based on a strange summer weather pattern here in Wisconsin, not anything that indicates some kind of issue with international trade policy or structural issue with farming.
We have 68,500 farms in this state [1]. This summer was dry for a very long time, then it was very wet, and then it stayed very warm well into September. I suspect a lot of farmers had issues with moisture in their harvests. The thing about farming is you are taking a huge risk every year with what you invest, and farm equipment isn't cheap. If you make money, you make a decent amount of money. But if you can't make the payments on your machinery, you're basically done for.
I think this article was written with the intention of insinuating that this is somehow related to the Trump Trade war, and to be fair, I am sure that made or broke the profit margin for some farmers. But in general, I don't think that's what's going on here, and I think it's cheap journalism for them to play into that.
Somewhat related: Checkout "MN Millenial Farmer" on YouTube, it's some of the most relaxing content you'll find online. [2]
Same here in missouri. We had 2 dry summers in a row, then a wet harvest time this year.
Hay prices are up over double last year and last year was up from the previous year. Last year for example I would have been happy to buy $25 a 5x5 round bale. This year if you can find them, they're $90-$100. Small squares 2 years ago were $1.25, this year I happily paid $4.
I agree with you. Here in central Michigan they've begun construction of a huge cheese plant will purchase 20-25% of the state's milk. Add to that the drastic slashing of the Canadian dairy tariff and people are cautiously optimistic.
Why would farmers extend themselves so much that one bad year breaks them? Why wouldn't they set aside some of that good money so in bad year they could still pay the bills?
If that's a hobby for them then they are just gardeners. If they are gardeners, then I sincerely hope that they get zero consideration from those who are supposed to help farmers.
Gardeners tend to gardens, so even for pro vs hobby that's not the distinction you want to make.
But even the intention behind the distinction is wrong, as not wanting to be a huge agricultural business doesn't mean you're not professional.
In fact, quality-wise the smaller shops can be much more professional. So, no, actually, those are farmers, of the kind with the smaller lots, that have always been there and fed humanity for millennia.
The other are just big business conglomerates who don't give a fuck about farming and just happened to be in the agriculture business -- and will do anything to drop their margins and sell crap.
I hope that they get zero consideration from those who are supposed to help farmers, and hopefully are driven out of farming.
What makes it a business vs. hobby is inability to plan for the not great years. Business is farming. Hobby is gardening. Even if it is on a large scale.
Equipment is an insane cost. That's why there are so few new farmers. The start up cost is astronomical. A combine, for example, can run to $400-500k — a piece of equipment that taking up barn space for 48 weeks out of the year. Add in your tractors, planters, spreaders, sprayers … add on top of that your land costs. Many farmers don't own all of their land outright, they hold medium/long term leases. Miss a single year lease costs and you lose the land, which forever drops your future earnings, lowering your margins, and bringing you closer to bankruptcy. There's a minimum amount of land you need to farm to even break even. You add more acres in good years to maybe save up enough for equipment replacement, or a new truck.
When you lose the land, lease, or go bankrupt, your land gets snapped up by huge corporate farms that can run at a higher margin, driving down food prices over the long term, making smaller farms less and less viable.
Why would a farmer own a combine? Aren't they owned by specialized harvest outfits? I don't have any experience in the business but when I was a kid and we needed the hay cut and baled we called the guy who brought in the hay baler on a low-boy. Nobody owned their own.
Rent vs. Own comes down to controlling your own harvest: renting means you may miss out, sometimes by weeks, of optimal harvest. You may have had to book a harvest weeks or months in advance. You may have to fork over cash months in advance. You may have to pay even if a field's yield is ruined due to summer floods.
If you own, you can select even segments of fields to harvest at more optimal times (a down grade, or wetter, portion of a field may harvest differently than an uphill, drier portion).
You should watch Food, Inc. on Netflix. They have a segment on Monsanto and how farmers have no choice but to buy seeds from them but the prices are so high most farmers are barely able to keep their businesses running even with subsidies from the Federal Government.
The farmers I know watch their finances closely. Because the yields are better they make more money buying from Mansanto despite the higher price of seed. You cannot be a successful farmer without paying close attention to the bottom line (unless you already own all your land).
Modern agriculture depends a lot on financing for machines, seeds, implements, even labor. Banks and suppliers will use this to get as much as they possibly can from farmers. And if you don't get financing you simply cannot produce anything. This guarantees that a bad year is enough to break most farms.
In 2008 and 2011 there was shortage (weather issues) and price spikes. Farmers around the world -- from Ukraine to Brazil to the US -- made a huge amount of money and invested in technology (new farm equipment, better seeds, etc).
In the meantime the weather globally has been perfect. Beyond specific local situations worldwide it has been perfect and the technology has only added to production.
There will be a problem in the future but the reason American farm bankruptcies are high is that the prices are beyond low and the production levels are lagged (they're based on past conditions and take time to correct). Currently it's beyond bad for large scale producers.
This is an actual issue. In the future the failure of producers now will lead to shortage ... and so begins a new cycle.
Curious: I have had a couple of conversations with people (not arm chair quarterbacks - knowledgeable, but not expert) about pro & con of supply management systems as enacted in US and Canada (triggered by recent trade talks). This sort of cycle was brought up as a "pro supply management" - if we leave it strictly up to somewhat free and somewhat global markets we inevitably get these boom/bust cycles, but they can be avoided by management boards and the like. Do you think it's accurate?
It is not only accurate, but agriculture is pretty much the worst case.
The problem is that demand for food is rather inelastic. You are going to eat when you are hungry, and if you're hungry enough you'll pay whatever you can for that next meal. But food production is highly variable. For example the 88-89 drought in the USA dropped food production by 29%. Therefore to have enough food in a bad year, we have to be willing to overproduce in a good year. Which means that we guarantee an excess supply, and therefore a very low free market price.
How we get there is arbitrary. We can subsidize exports, we can buy up food to throw it away, we can pay farmers to not grow food in good years. All of these are done somewhere. There is no first world country that doesn't do at least one of these because everyone understands that it is a national security issue - if your people go hungry you're likely to get civil unrest.
As a concrete demonstration, consider the Arab Spring. One of the contributing factors was that China had a severe drought. To ensure their political stability, they bought wheat on the international market. Thanks to the laws of supply and demand, the cost of wheat doubled. Poor people in Arab countries that couldn't subsidize their citizens suddenly went hungry. They revolted. See https://en.wikipedia.org/wiki/Impact_of_the_Arab_Spring#Chin... to verify this sequence of events.
Management boards have not worked historically. One example might be the Australian Wheat Board. A second example is the Canadian Wheat Board.
On the supply side production management has not proved successful that I'm aware of.
The demand side is a little different. Egypt is the world's largest importer of wheat and GASC (basically the same as the production boards but for buying) has generally been one of the best traders. They're good for the most part. They're generally clever.
Free markets work best in my personal opinion. But for production side I don't see broad-scale management working, while on the consumption side it actually can work.
I find it ironic that your example of "it actually can work" is a country that recently suffered a revolution after the price of wheat doubled due to a drought in another country.
Well, there's a lot behind Egyptian food problems beyond trade policy. That's a really deep issue and quite interesting on its own.
I merely mean that economically the supply side is harder to manage at a board/national level than the demand side. Has a lot to do with many many producers but only a few companies able to import.
The problems managing the supply side tend to be very predictable - they happen most years. So you constantly see problems but they are manageable.
The problems managing the demand side are unpredictable. For many years you'll be going along fine, but when you have a problem you tend to have a BIG problem.
Of the two, you're better having manageable problems most years and no big disasters than having things usually go smoothly but occasionally you get a disaster.
Are you actually serious to provide local weather conditions to your analysis? Weather in Wisconsin was X, here in Missouri the hay price is Y. (Hay I might add is not a food input nor a cash crop.)
Would be one example but aside from any trade war there's a massive glut of food supply and before you call this media anecdotal I'd suggest you study the topic.
The other thing I've noticed in Wisconsin, the kids don't want to take over the family farm. And quite frankly farmland is hard to sell unless it is for development. Sometimes a neighoring farmer would consolidate but it is low value land. The equipment is probably worth more in a lot of cases.
I grew up on a farm, I'm one of 4 kids. My brother is now a farmer, and my brother-in-law took over my dad's operation. But really, only two could stay on, the rest of us had to find our own way, as the pie is only so big. Same for small farm towns, there is a normal attrition, where most of your best-and-brightest kids leave town and don't return. The rest stick around. Some become farmers, most other become supporting staff (mechanics, truckers, feed sales, etc) for the various farming operations. So the towns don't grow much, if at all.
I don't think it's entirely surprising. Not to mention desertification without proper grazing and crop rotations. Competition from mega farms. And the practices of organizations like Tyson, where farmers are encouraged to take out huge growth loans "owning" everything that costs money, and not owning the product itself. Add to this what the likes of the farming equipment companies are doing to lock in maintenance costs and ever growing expenses.
I think the first thing(s) that should be done is eliminate farm aid to farms that own more than X acres, or are owned by parent companies owning more than X acres of land. Significantly roll back the DMCA. Third, would probably be to re-secure those loans on better terms. It's a national security issue at its' core.
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[ 2.9 ms ] story [ 228 ms ] threadedit: /u/WillPostForFood points out this report ends prior to the tarrifs. My bad. Their effect will be in subsequent reports.
A gallon of 2% milk in Canada is about double the price in the US. I think its reasonable to assume that if Trudeau can't bring retail food prices down and resolve this dispute he's going to have to go back to surf boarding and substitute teaching in 2020.
Lol, nothing like downplaying the achievements of the literal leader of a country ( one of the most successful possible positions for a person ).
There are a lot of other factors here too, one being that during the 70-80s American agricultural legislation focused much more on large scale farm operations than Canada and as a result it is much harder for small farmers to get by in the US.
Regardless, even with all other factors being equal dairy costs would still be slightly higher in Canada since due to generally higher taxes and higher farm wages.
The next report may be a doozy, then.
Think about coffee. It’s a commodity. But more people are spending $4-5 on a single cup instead of $4-$5 on a pound of grounds. Spending power does not match price change.
A good historical case study is Standard Oil. In an effort to stabilize prices and reduce peaks, Standard oil established last mile delivery for refined oil. People bought Standard Oil at the grocery store. Standard didn’t start buying oil wells until 20 years into the company after they had pressured prices down to the bottom.
I'm not sure how anything about brands could apply. Any "brand" ends at the grate where you dump the grain.
Similar with other ag products. Remember how we just had that E. Coli outbreak in lettuce and nobody had any idea for several days where exactly it came from, so they had to broadcast the warning across the entire nation?
https://unctad.org/en/pages/newsdetails.aspx?OriginalVersion...
An oversimplified explanation would be that each buisness has an incentive to undercut their competitors and by doing so decline the profit margins for everyone.
Not to say I disagree with incentivizing food production at home altogether.... it's just such a mess.
https://www.census.gov/newsroom/blogs/research-matters/2018/...
While unemployment and asset prices have recovered in the past decade, business starts have remained at historic lows. When these small businesses die they aren't being replaced by upstarts. I wish we knew why.
I'm worried the future will be a small handful of oligopolist mega-corps. You see this consolidation in every industry: banks have consolidated (there are fewer banks now than at any point in modern US history), a few leading tech firms, agriculture, energy, etc.
Business startup by necessity has gone down. It's much easier to get hired by an international company in a niche field and work from home now, so people no longer are required to start a business to work in the field of their choice
It's more difficult to start something really innovative, related to the slowdown of Moore's Law
It's more difficult to start a business in an established field, as licensing laws have come to cover so much more of the landscape. You can no longer just decide to become a barber and hang out your shingle.
As an individual example: in 1998, Intel's top-of-the-line CPU was the Pentium II with about 8 million transistors. In 2008, they released the Core 2 Extreme QX9770, with about 820 million transistors; this is a 100-fold increase in 10 years, which is almost exactly what Moore's law predicts.
Fast-forward another decade to 2018, and Intel's highest-end Xeon chips have something like 7 billion transistors, which is less than a 10-fold improvement in the same timeframe.
EDIT: that said, I think it's a real stretch to go from "the slowdown of Moore's law" to a sweeping claim about innovation in general being more difficult. There are a ridiculous number of different fields in which someone could start a business; relatively few of them are dependent on enormous, ever-increasing amounts of computational power.
I'd love to see a production cell phone that is already thick with a relatively huge battery, more rugged case, and a slightly better protected display. I'm willing to bet there's a market for this, just based on otterbox sales, and the sales of backpack battery covers.
Similarly a home media player like the roku, shield tv or fire stick are plenty small. That has nothing to do with being able to innovate and create newer or better experiences.
https://en.wikichip.org/wiki/intel/process
In my experience, it's been a problem with banks and small business loans being hard to obtain these days. Banks want a LOT of leverage, you have to already be doing pretty well.
Folks that are already pretty well-off aren't going to take the types of risks that create small businesses.
https://www.forbes.com/sites/timworstall/2016/10/03/us-wages...
Essentially, up to the 1970s, wages followed closely with productivity. Quite suddenly, wages stopped growing while productivity has continued to grow with no sign of catching up.
Take a look at this chart from the BLS:
https://pbs.twimg.com/media/DJ9l_q6VYAERRDt.jpg
What we can take from that is while prices for certain things have declined(e.g. technology, new cars, software, toys, clothes), the price of arguably more important things (child care, medical care, college tuition, textbooks, housing, food) has gone up. Sure, we've been bearing those costs, but the maximization of profits from those expenditures will inevitably cause an adjustment when Americans can't pay for those things anymore.
Americans might technically have a higher buying power than 1900, and especially 1930, but not necessarily in every area or even the areas that are important. If we were to say that Americans have more access to food, clothing, computers, education, etc., it doesn't mean that Americans are actually paying for those things; a lot of the wealth we think we have is coming from record amounts of debt that were unseen in the early 20th century. The things that make it seem like we have more spending power than we did a century ago are being made possible by what could be a ticking time bomb.
That is, once the dollar dropped the link to gold, and money could be printed, a lot if things went increasingly haywire, down to the circus of bailouts in 2008 and "quantitative easing" afterwards.
What’s to say that currency won’t be tied back to commodities? What makes you so confident?
I think our leaders just said “why not both?”.
It’s going to be an interesting few decades.
That's plenty of time for an entire generation to be raised with an awareness that any entrepreneurial enterprise they may attempt can be crushed and consumed in short order by a competitor with the backing of the moneyed elites. If you try to manufacture a quality product in the US, and bootstrap your business, the instant you prove there is a market for it, someone will gather up some financing, knock off your product in China, and run you out of your own business. If you build a fun game app, Zynga or King or some other chop-shop with their model will instantly clone it and kill you with their marketing. If you open so much as a lemonade stand, the city will come round asking about inspections and permits.
I don't really understand where that's coming from because it takes a minimal amount of research to figure out that the BLS unemployment statistic tells us virtually nothing(even Adam Ruins Everything covered that). Wages have been stagnant in comparison to productivity since around the 1970's(adjusted for inflation), the labor force participation rate is in decline, I don't know anyone who doesn't think housing and rent is absurd right now, Americans are buried in debt, medical care is expensive and often enters scam territory, etc.
And we're supposed to become entrepreneurs? lol
Things aren't adding up, and we're probably not going to even accept that we're in a decline until we're well into it.
The problem with much of these things is that we're on a hedonic treadmill that we refuse to get off, even as further expansion of consumerism is destroying our planet. The big problem we have is policy that has promoted a society of which economic growth and even wage gains fails to provide a meaningful improvement in peoples lives.
Policy reforms could allow for the majority of people to live in cities in relatively new buildings serviced by public transit all at a lower cost than what we have now given our current system of inflated land values and high automotive transportation costs (i.e. cost of new construction is still relatively affordable when compared to the cost of land and public transit is far cheaper to build and service than automotive infrastructure). Reforms around healthcare that currently restrict the availability of doctors and enable overcharging of medical components would go a long way as well, and lastly, reducing the overhead around university administration while restricting lending would go a long way.
tl;dr: We aren't in decline, we just need reforms around housing, healthcare and education as their costs make poor economic sense and are only high due to protectionism and loose lending/insurance laws.
That however stopped translating to things being good for the average American in like the 50s
I think we're already here, or closer than a lot of people realize.
One angle: A lot of stuff is moving online. Good luck with Google, Facebook, Amazon having their own interest$ etc being gateways to your site. Most people will not make it, so why even try? Risk vs reward.
Advancing technology has enabled a greater economy of scale as well as mass customization beyond what was possible, thus increasing the competitiveness of large businesses.
Examples include customized shoes from big brands, e-commerce recommendation algorithms taking the roles of local shopkeepers, IT systems reducing the costs and increasing the effectiveness for managing far-flung enterprises.
I would have started my own business by now ... heck I'd probably have started and failed several by now if not for one thing. Well three:
1) you cannot afford prescription drugs in America unless you have good health insurance. At least in my state (Alabama), the federal health marketplace offers exactly one option from exactly one provider. It has a ridiculously high deductible and is (no shit) not accepted at nearly all doctor's offices in my town.
2) I cannot afford to lose my access to prescription medication and healthcare, because my wife has diabetes and I survived cancer a few years ago. We're in fine health now, but we DO have medical expenses ... things that should NOT be that expensive (yearly CT scans and insulin are hardly breaking technology), but have been SO inflated in price by a bogus, rigged third-party-payer system that we literally can't afford those things without "insurance".
3) I had kids early in life, and since my adult working career began, it has been an absolute baseline requirement that I be able to get them medical care and otherwise provide for them.
ok ... having kids early was my decision, and I'll accept that this decision limited my universe of personal options. Getting sick. Having a wife who got sick. These were not personal decisions. They are just things that happen to people.
Our system in America is designed to keep me at my desk, working for someone else, doing mostly meaningless work. Why? Because it'd be a complete nightmare for those at the top, if every last one of me out there in the workplace could afford to take a risk that might not work out.
There'd be a helluva lot more competition out there.
America is dying because of this. Not just our economy. But our society. The world would genuinely be a better place with the companies I would have started in it. And that is true for every other stymied inventor/would-be-entrepreneur in america.
There is always a downside to risk, and there is always a risk involved in starting a new Enterprise. But what we have right now is so far out of whack that taking even a minor risk, can straight up kill you or your kids for lack of access to proper medical care.
My wife could afford to start a few small businesses over the years only because I have health insurance from my employment, and can get her, and our kids, to the family plan.
If Obamacare did something good to people not on lowest-paid jobs, it is giving at least some options of health care to entrepreneurs who are not yet raking in millions (that is, most of them).
Since we are talking about anecdotes - whenever I mention some success in my business, most friends get bored. Yet if they get to another create-a-crud-form job - this is being celebrated like some kind of achievement. I still hear talks about how small business is celebrated in the USA (i am immigrant), but I do not experience it in practice.
Historically, lots of small businesses are started not by healthy, young, single childless people, but by midcareer people that have savings to invest and professional networks and experience-based insights to build a business around.
So, when those type of people lose opportunity to start businesses, then total business starts drop.
Also, young people starting non-VC backed businesses have often relied on older midcareer relatives supplying financing, networks, and supporting experience, so many of the same things that hurt older people starting businesses (including healthcare costs, which—with common insurance schemes—not only tie you to wage labor but also still require you to maintain capital reserves for co-insurance, which reduces the attractiveness of using savings for speculative, long-payoff, high-risk business investment) also have a similar, if somewhat lesser, negative effect on younger people doing so.
"the sharing economy"
no, seriously. I have family that ran busineses. I have run businesses. Most successful small business don't pay much better than driving for uber, and driving for uber is a lot less risk, a lot less effort. (there's also a lot less upside, but let's be honest here... making a small business that pays better than working for google that isn't just contracting, even when you have the same skills, is extremely difficult.) - if you drive for uber, at least the capital you blew is on something that is still useful after you quit the business. I know a lot of people with a bunch of branded cups and other junk from their previous failed ventures.
I mean, I had some pretty marketable skills when I started my own business, so I did better than the uber driver, but I worked hard and made like 1/4th of what I get working for other people.
The other thing is that unless you are in the business of getting funding, it's way easier to start a business when the economy is shit. In '09, nobody tried to undercut me. Now? I would not want to be in that market anymore, just 'cause there is so much competition that is willing to lose money to buy marketshare.
In '09, I was able to pick up good people who were temporarily unemployed as employees; now? if you wanna hire someone good, you are competing with people willing to pay netflix level money.
(I mean, all this, I think, is actually pretty great. But it is not so good for facilitating a small self-funded company)
1) Globalization has made it almost completely impossible to make things in the US unless they are massively overpriced goods (ex. luxury items or niche specialty goods). Customers simply won't pay enough to cover your costs. And there's a good chance that if you are successful, someone will copy your stuff, make it in China, and sell it for half your price within 12 months.
2) In California at least, costs are pretty ridiculous for small businesses. Between state, county, and city taxes, high labor costs, ridiculous healthcare costs, rent, insurance costs, etc. etc. It is far more expensive to start a business today as a percentage of expected revenue than it was a few decades ago.
3) The US IP protection and regulatory systems are out of control. Fending off patent trolls, tiptoeing around trademarks, dealing with licensing systems specifically designed to be too burdensome for small companies to bear, spending time and money to deal with regulatory compliance, etc. puts small businesses at a massive disadvantage.
4) Unpopular opinion, but I think today's workers are less suited to small businesses than they used to be. Many younger workers say they want to work for startups, but what they really want is a venture-backed cushy office with catering and perks completely untied to actual business revenue. These types of businesses account for a tiny percentage of actual small business starts in the US, which are often not places today's workers want to work at, let alone stay loyal to.
That was mentioned along with a litany of other things in point 2.
Generalizations offer very little insight though older folks seem to love to complain that the youth/next generation are just not suited/hardworking enough.
I agree on the point that you can't just say "kids these days..." as every generation blames the one before and kids are always "lazy".
These days you have to work like a maniac to get a 10% chance of success. It's not very motivating. It's better to save yourself the mental trauma, take a cushy job and get a 90% chance of being able to retire.
One of the undervalued skills in entrepreneurship is the ability to not only find, but successfully hire and retain, excellent employees. It's never been easy.
#4 somewhat relates to #2, where costs as often put on the employees to keep small businesses afloat. Large companies have the sizes to keep costs down. I would love to work for a small business, but it would mean x5 increase in healthcare and insurance costs.
I can buy all sorts of US made shit, that is profitably sold, at reasonable prices, overalls, jeans, mattresses, washing machines, boots, cars - its that the margin is lower in the states as it costs 2-5% more to make something here.
The issue is, many things here cannot be made here with any ease, because the ecosystem for them no longer exists.
I'm willing to pay 10% more for american made things - I suspect most americans would be too, given the option.
Like what?
The real problem is that we absolutely suck at manufacturing anything other than items that only really make sense to manufacture locally (certain food items, detergents), where in terms of exports we only exceed at certain types of heavy machinery along with certain chemical and polymer products.
If US made was only 10% more, I would go out of my way to purchase only domestically produced goods, but when it's 100+%, it's really hard to justify.
https://lcking.com/collections/jeans-pants
All US made stuff, decent quality and long lasting too - first link is made in Oklahoma, second on in Tennessee.
Start there - good boots are expensive no matter where you buy them - I have 100 dollar cowboy boots though, that are US made.
Boots of various styles, mostly western though - all US Made: https://www.justinboots.com/footwear/men_collections_shop-ma...
Just to give you an example - in Los Angeles, the county assess a tax on unsecured property that has absolutely no bearing on your revenue. That's a tax on your office equipment, furniture, machines, etc. The city also assess a tax on revenue, not profit, in excess of $100,000. And even if you don't make a dime in profit, Corps and LLCs still pay a minimum state tax. If you own a building for your business you're also going to pay property tax, and if you don't you're going to pay it in the form of higher rent as well.
To your last point, you need to add an "if" to make it accurate. California is a far better choice than the Midwest or South if you can start a small business with high enough margins to cover the much higher costs of basically everything.
The minimum LLC franchise fee is $800. A real business can afford that, a pretend business cannot.
Double-Irish structures don't work to shield US income. They never have, so US companies can't use them to reduce their US taxation either, regardless of size.
And finally, you chose a pass-through form of taxation, meaning you chose to be taxed as an individual instead of as a separate entity. That's on you--not on California. That same choice would screw you over pretty much everywhere there's a state income tax--meaning all the states where people actually want to live.
It's not healthy, and no matter what the consequences will be, I cannot envision an outcome where any of this leads to positive things. But maybe it's just my own "bias" that I have positive associations with not being a subject to a hive mind of centralized power and control.
When the economy is shit, most large companies outsource a lot of work because they can't afford or don't have the workers for the amount of work they have. So if your a freelancer, business can be pretty good.
When the economy is great, those same businesses try to bring all those efforts in-house, so all those contracts dry up.
Not sure how it relates with entrepreneurship, but this guy had to quit freelancing and get a full-time gig (which is how I met him) because no one was handing out the contracts he wanted anymore.
Using banks as an example, look at the market share of total assets over the last 20 years: https://www.peakprosperity.com/sites/default/files/users/u31...
The largest banks (JPMorgan, Citi, BoA, etc.) have decimated regional and mid-size banks while credit unions have essentially maintained the same role at the bottom. The big banks have more resources to invest in new technology and financial initiatives, thus having the ability to be market leaders and capture more money. In my opinion, digital also makes a huge difference. For example, JPMorgan is able to spend $10B on technology a year, which is more than the total assets of many small banks and credit unions. The banks that are midsize are in the hardest position because they don't have the capacity to outpace a big bank in R&D or IT, and are stuck in a position of being a lagging trend follower since they also can't spare a lot of risk tolerance. Further, it's hard to even leverage branch access and customer service as more individuals rely on digital banking to handle their finances, which actually pushes the big banks ahead in consumer satisfaction: https://assets.sourcemedia.com/dims4/default/0e422a4/2147483...
From a business side, it looks like we are headed down the path of oligopolist megacorps unless there's major changes. Money is the name of the game, and even in the startup world, the end-goal for investors is to pull off a lucrative exit (which usually means selling to a monopolistic megacorp) or IPO. Ask a megacorp CEO how much is "enough" for their business, and the goal will be to have as much as they possibly can.
I don't know if entrepreneurship is actually dying, but my speculation is it's getting tougher to build a reliable business to employ others and depend on for one's livelihood within the remaining territory left. So much has been taken over by huge companies, it's difficult to find a niche or market opportunity to feasibly "disrupt". It feels like the megacorps have already cleared the fields and claimed the land and the rest of us entrepreneurs have a choice of: i) work for the megacorp that owns everything, or, ii) try to find solace in the few options left.
All this whiz-bang shit startups do like AI, machine learning, really even any kind of custom software or process innovation, just isn't possible when you're small. There's no scope for it.
The reason it's a bigger problem now is because we have bigger markets globally and better tools, both of which create winner-take-all effects.
20-30 years ago you might start an auto parts distribution or manufacturing business, or a niche software business, or something else. It's a lot different when you have to compete with the best of the best globally from day 1 without any of the advantages the incumbents (e.g. data, existing channels to market, established brand) can bring to bear.
There's a bit of a myth about how farming should be, or was, but it really just had some booms here and there and then busts rather than any real golden age that lasted very long.
The type and amount of data they have is startling. The issue is there are so many variables that are uncontrollable, or unpredictable in the time frame of a year or an entire growing season. These include weather and climate, and political climate across the world.
When a small-time farmer from my neck of the woods can sell directly to China, he has to worry about our politics and theirs, as well as the weather here, there, and at all stops between.
So, in other words, it's easier to predict what will be worth more, but no more easy to predict what will grow or what will sell well in 2 years or so. Add in soil conditions and requirements and costs, and you have a complicated picture.
As for boom and bust - agriculture is like investing. You may not make much in a year, and you may lose money in two or three, but over the course of your lifetime, you accumulate wealth (land) and prosper. The issue, at least in my area, is that property is just prohibitively expensive. I am by no means in a hot area of the country, but the price of an acre of land has almost tripled in the last 15 years.
Also - that so much of our food is produced by so few individuals is an incredibly recent development, like less than 40 years recent development.
I'm not really sure what all that adds up to, but I'm sure it's something.
There's a dangerous mentality which comes across farmers frequently. The neighbor is getting out of farming for whatever reason and putting their land up for sale. Land is typically held for decades, and having any of your neighbors selling their land may never happen again in your lifetime.
So farmers end up paying ridiculous amounts of money for land which will give them a very small positive, or often a negative, return on investment.
And good luck if you want to get into farming. The capital expenditure is ridiculous, even just for 40 acres of land. Medium quality farmland was running $6,800/acre in 2017. [1] $272,000 get you 40 acres without buildings, equipment, animals, seeds, a well, etc. It's so easy to hit $500k even if you went with used equipment. If you tried this, you'd probably want to build your own brand and get people willing to pay a significant premium for your product rather than trying to grow commodity products.
[1] http://dreamdirt.com/blog/iowa-farm-land-land-values-up-2-in...
The huge companies get involved and take the price for 40 acres from a relatively sensible $120,000 (what I purchased at 10 years ago) to $750,000+.
If you can't work at a scale that is so much larger than anything a family farm can, then you're priced out immediately. And if the farming mega-corps are not interested, it's because the ground isn't fit for row-cropping and the mega-corp nationwide hunting trek outfitting companies will double your bid without blinking.
It's a sad state of affairs, really. The only people who have enough money to play the game are either corporations or are in their 90's and bought the ground when it was $30/acre.
I don't think it's sad, more efficient users of resources are bidding them up which is exactly what they should be doing. The idea of a small farmer is great and has a lot of American nostalgia, but in general a giant company that produces much more food on the same land is way better for the country as a whole. It gets messy with subsidies, but the idea of more efficient players replacing small timers is how we keep upping productivity year after year and get richer as a country.
A handful of corporations are gaining massive influence over our political and legal systems. The "small farmer" is precisely what our country was founded on and was considered our strength. It allowed us to be something closer to a true democracy as opposed to the functional oligarchy we're running at this point. You're not an independent citizen if you have to depend on an employer to keep you fed, sheltered, and healthy.
It's only more efficient if you consider "generation of theoretical GDP" the ultimate badge of efficiency. If it's sitting in some banker's pocket, extra productivity doesn't really benefit anyone.
It is more than nostalgia. It's a strength. What we're seeing in SO many areas is just a race to the bottom.
For most people in most of history, agriculture was subsistence. A bad year means you go hungry and possibly die. Far from being a stable source of food, in countries such as China, there was pretty much always some region that was undergoing food scarcity (famine) at any given point in time.
The thing is this won't cause one acre of farmland to go unused it just means other farmers will have larger farms.
Not because China is more structurally sound, because its not, but the opportunities - partly because of the inefficiencies - seem massive on mainland and greater China
I just want to know what people think about anything, out there, from their perspective.
I was in Australia and a young blond woman in college was on her social justice kick, talking about how horrible the US must be, and it was funny to me because her perspective was so limited to civil rights abuses and valid healthcare and education inequalities.
I told her "yeah but none of that would apply to you".
Because she doesn't know about the socioeconomic component, and the heavy correlations to the demographics of socioeconomic brackets, and the history of those demographics, along with the accessibility and strength of legal defense, if you can afford it.
and I bet China is the same way or similar, especially if you come to the environment with a bankroll already.
< End Tangent
See http://www.uscourts.gov/services-forms/bankruptcy/bankruptcy... for ex
I worked on an alp in the mountains for a month, doing everything from cleaning the stables, milking cows, herding them on steep mountainous terrain, cooking, feeding the sick animals. I had a 16h work day; all while earning almost nothing (I did it to know what it means to work in tough situations). My boss and his family hardly had anything left when the month ended.
I don't know how to fix this, but it's important.
We know the US produces way too much food than it needs. We know that US food is artificially kept cheap due to subsidies. Would higher food prices lead to more starvation in other countries? More hunger in the US? Or would farmers around the world step up and compensate for the deficit? Would it perhaps lead to farmers in lesser developed countries being better supported and lead to economic growth in those countries?
But if you cut subsidies, what will happen in the short- to mid term is more farmers going bankrupt and an increase of imports. Would it lead to economic growth in those countries? Hard to tell. Usually what happens in an industry that grows is competition which will lower prices in the mid- to long term. So maybe more farmers would be well off by finding jobs. I don't know. Good thought of yours, though.
http://dreamdirt.com/blog/iowa-farm-land-land-values-up-2-in...
the need for farming hasn't dropped, it's the desire/ability/money to do it that is. Small farmers are going away and corporate farming is taking over.
Who buys them? Maybe big agro? Or maybe convert it into building-approved land? Report doesn't exactly say as far as I can tell.
If you’re looking for something to invest in it’d be AgTech with a focus on these new farmers as users.
Because what I'm seeing is a pivot in exactly the other direction. Near urban centers you're seeing more 'specialty' farms like you spell out. These farms cater, almost exclusively, to the wealthy.
But out in the breadbasket, there has been an absolute crush of consolidation. Fewer, larger farms are producing the goods.
I argue that we're going to see (or rather are already seeing) the wal-martization of farming. Few, HUGE scale producers who work at a scale that is just so much larger than what we have now they can still turn a profit.
The one-off farms are great for those that can spend extra but they are not the ones feeding America right now.
Small scale production is going for specialty products, at higher prices, to specialty consumers. Think of a local vegetable farm that sells to farmer's markets, or a goat dairy that's making chevre to sell at specialty groceries in a 50 mile radius of their farm.
On the other hand, gigantic companies are increasingly controlling land used for industrial agriculture. Near me, a recently incorporated LLC (aka holding company for investors) just paid $171-million for 14,000 acres of irrigated farmland in Eastern Washington [1]. At that scale, there's simply no way that the traditional "small family farmer" can compete with industrial ag.
The few that have near me, are large families that essentially operate like a business. They've managed to hold on to their traditional farmland, and then expanded into what are essentially family-owned large-scale industrial ag operations. Good for them, but they're the strong minority.
[1] https://www.heraldnet.com/business/big-farm-deal-171m-for-14...
* Old huge farms employing fewer and fewer people, replacing more low-skill work with machines, and possibly driving prices on some crops down.
* New smaller farms, employing a small number of people, made profitable by the extensive use of the (semi-autonomous) machines, catering to specialty / niche markets, perishables, etc.
Huge mono-culture fields may, or may not, be split to smaller, more diverse fields, as agriculture machines become more advanced and smart. A machine that allows for techniques that let you spend less on pest control could be attractive from a purely economic POV.
Since the cost of labor is high, neither will drive agricultural employment up. They will likely still bring more variety, and more sustainability due to technology allowing nicer practices.
Permaculture, maybe? I hope you’re right.
Bankruptcy is an area of American law that is ripe for use for restructuring debtor-creditor relations to fight back against these trends. The entire Code, particularly Chapters 7 and 12, could and should do more to assist consumer and farmer debtors.
Thomas Sowell wrote a great book about this:
https://www.amazon.com/Wealth-Poverty-Politics-Thomas-Sowell...
There have been countless policies since the 1950s intended to offset wealth disparity that have backfired and hurt the poor. For example, the rent control and other "tenant friendly" laws in Toronto and NYC in the 1970s resulted in decrepit urban ghettos littered with arsoned apartment buildings, because the only way a landlord could "renovate" was burn down their own building. Just look at pictures of Harlem in late 1970/1980s...
It also created a massive disincentive to invest in new low-income property, as the developers knew they'd make less money targeting the poor. So development went towards upper/middle class housing (resulting in an even worse lack of low-income housing in NYC and to a lesser extant Toronto by the 1990s).
Modern rent control laws have attempted to factor these "unintended side-effects" but there are a hundred similar examples in that book. It keeps happening and happening with every clever scheme concoted to help the poor.
The only winners of the massive growth in the US gov since the 1970s were consistently large firms, who had their competition wiped out or huge barriers of entry created in their markets in the name of 'progress'. And countless well-meaning socially conscious economic policies usually works for a small group while hurting a much larger group in the process, or works at the beginning then as the side-effects build up it becomes a net-negative...where it would have been better off to let the market function as is.
I was alurred into “stability” by staying with the corporation that aquired a startup I was working for. It was my decision, but now I regret it.
I’ve been working tirelessly to transition back into being independent, but now I too have a family to support and the current state of health care coverage in the US is one of the biggest risks I see.
Interestingly, I’ve seen more entrepreneurs lately from countries like Canada and Norway who have founders that aren’t as stressed when compared to here in the states. I don’t have any data points to prove my hypothesis, but I often wonder if we are doing a disservice to ourselves here in the US. I guess only time well tell.
We have 68,500 farms in this state [1]. This summer was dry for a very long time, then it was very wet, and then it stayed very warm well into September. I suspect a lot of farmers had issues with moisture in their harvests. The thing about farming is you are taking a huge risk every year with what you invest, and farm equipment isn't cheap. If you make money, you make a decent amount of money. But if you can't make the payments on your machinery, you're basically done for.
I think this article was written with the intention of insinuating that this is somehow related to the Trump Trade war, and to be fair, I am sure that made or broke the profit margin for some farmers. But in general, I don't think that's what's going on here, and I think it's cheap journalism for them to play into that.
Somewhat related: Checkout "MN Millenial Farmer" on YouTube, it's some of the most relaxing content you'll find online. [2]
[1]: https://datcp.wi.gov/Pages/Publications/WIAgStatistics.aspx
[2]: https://www.youtube.com/channel/UCp0rRUsMDlJ1meYAQ6_37Dw
Hay prices are up over double last year and last year was up from the previous year. Last year for example I would have been happy to buy $25 a 5x5 round bale. This year if you can find them, they're $90-$100. Small squares 2 years ago were $1.25, this year I happily paid $4.
https://www.freep.com/story/money/business/john-gallagher/20...
But even the intention behind the distinction is wrong, as not wanting to be a huge agricultural business doesn't mean you're not professional.
In fact, quality-wise the smaller shops can be much more professional. So, no, actually, those are farmers, of the kind with the smaller lots, that have always been there and fed humanity for millennia.
The other are just big business conglomerates who don't give a fuck about farming and just happened to be in the agriculture business -- and will do anything to drop their margins and sell crap.
I hope that they get zero consideration from those who are supposed to help farmers, and hopefully are driven out of farming.
Big businesses have failed to do so, and small family shops have survived for centuries...
So, taking a bit hit, or even dying, on some "not great years", is not a criterion for business vs hobby at all.
When you lose the land, lease, or go bankrupt, your land gets snapped up by huge corporate farms that can run at a higher margin, driving down food prices over the long term, making smaller farms less and less viable.
If you own, you can select even segments of fields to harvest at more optimal times (a down grade, or wetter, portion of a field may harvest differently than an uphill, drier portion).
It sucks either way.
https://www.huffingtonpost.com/2013/02/20/supreme-court-mons...
Trust me when I say this is real.
There's been a massive over supply of agriculture products around the world for the past 3/4 years.
In 2008 and 2011 there was shortage (weather issues) and price spikes. Farmers around the world -- from Ukraine to Brazil to the US -- made a huge amount of money and invested in technology (new farm equipment, better seeds, etc).
In the meantime the weather globally has been perfect. Beyond specific local situations worldwide it has been perfect and the technology has only added to production.
There will be a problem in the future but the reason American farm bankruptcies are high is that the prices are beyond low and the production levels are lagged (they're based on past conditions and take time to correct). Currently it's beyond bad for large scale producers.
This is an actual issue. In the future the failure of producers now will lead to shortage ... and so begins a new cycle.
The problem is that demand for food is rather inelastic. You are going to eat when you are hungry, and if you're hungry enough you'll pay whatever you can for that next meal. But food production is highly variable. For example the 88-89 drought in the USA dropped food production by 29%. Therefore to have enough food in a bad year, we have to be willing to overproduce in a good year. Which means that we guarantee an excess supply, and therefore a very low free market price.
How we get there is arbitrary. We can subsidize exports, we can buy up food to throw it away, we can pay farmers to not grow food in good years. All of these are done somewhere. There is no first world country that doesn't do at least one of these because everyone understands that it is a national security issue - if your people go hungry you're likely to get civil unrest.
As a concrete demonstration, consider the Arab Spring. One of the contributing factors was that China had a severe drought. To ensure their political stability, they bought wheat on the international market. Thanks to the laws of supply and demand, the cost of wheat doubled. Poor people in Arab countries that couldn't subsidize their citizens suddenly went hungry. They revolted. See https://en.wikipedia.org/wiki/Impact_of_the_Arab_Spring#Chin... to verify this sequence of events.
On the supply side production management has not proved successful that I'm aware of.
The demand side is a little different. Egypt is the world's largest importer of wheat and GASC (basically the same as the production boards but for buying) has generally been one of the best traders. They're good for the most part. They're generally clever.
Free markets work best in my personal opinion. But for production side I don't see broad-scale management working, while on the consumption side it actually can work.
What would you consider a failure?
I merely mean that economically the supply side is harder to manage at a board/national level than the demand side. Has a lot to do with many many producers but only a few companies able to import.
The problems managing the supply side tend to be very predictable - they happen most years. So you constantly see problems but they are manageable.
The problems managing the demand side are unpredictable. For many years you'll be going along fine, but when you have a problem you tend to have a BIG problem.
Of the two, you're better having manageable problems most years and no big disasters than having things usually go smoothly but occasionally you get a disaster.
Really?
https://www.nytimes.com/2018/11/05/business/soybeans-farmers...
Would be one example but aside from any trade war there's a massive glut of food supply and before you call this media anecdotal I'd suggest you study the topic.
https://www.nass.usda.gov/Statistics_by_State/Wisconsin/Publ...
https://www.ft.com/content/0b02085d-d5b2-351d-81a2-1135025d0...
But google 'Bunge agriculture industry consolidation' (to be clear, I have no association with Bunge)
The entire global food system is getting squeezed and restructured. It's not just US farmers. But this is a real issue. This news is not fake.
That's all I mean to say.
> I'd suggest you study the topic
Please omit personal swipes from your comments here. They only degrade discourse, and the site guidelines are all about not doing this: https://news.ycombinator.com/newsguidelines.html.
I think the first thing(s) that should be done is eliminate farm aid to farms that own more than X acres, or are owned by parent companies owning more than X acres of land. Significantly roll back the DMCA. Third, would probably be to re-secure those loans on better terms. It's a national security issue at its' core.
What percentage of farms are going bankrupt? 70 farms seems like a very small percentage.
How many new farms started?