Compound Interest

You have savings.  I need capital to get things rolling.  I interest you in allowing me to use your savings by offering to pay you a little more than I borrow when I repay you.  This also rewards you for taking a chance on me.  The difference between what I borrow and what I repay with time factored in is the interest rate.  If I loan out my money at 1% over 70 years it will double.  If I loan out money at 70% for one year it will double.  If I continue loaning out the principal and any interest earned I earn more.  And more.  And more.  It’s compound interest.

Bill Bonner covers this in Family Fortunes: How to Build Family Wealth and Hold on to it for 100 Years.  He says old money sits.  Old family money moves slowly.  It doesn’t get consumed.  It is guarded and at the right times is nurtured into growth.

Is this interesting?  Well, yes but no.  But it happens all the time on the farm.

If I were to foolishly breed rabbits, then breed their bunnies and the rabbits, then breed three generations without harvesting from the stock you would see your interest compound.  But you would lose money…

My wife’s aunt and uncle are tireless supporters of our efforts on the farm.  They are also an example to us of what could be.  Each year they host events at their house selling splits and starts from their garden.

This year they surprised us with coneflowers, red bud trees an, most recently, daylillies.

I think daylillies are a good example of compound interest.  Unlike rabbits, they don’t taste very good [Turns out I’m wrong.  See comments].  Their value is in their continued existence.  But their continued existence and health multiplies them.  So you split the cluster and plant them again.  And again.  And again.  Before long you have so many daylillies you are looking for a niece to give them to.  Like old family money, old family daylillies are guarded, nurtured and grown over time.  Time.  How do we make daylillies?  The old-fashioned way.  We grow them.

So here is our daylilly savings account.  They gave us 10 different varieties.  Someday it may look more interesting.  I had to plant my flag on some new garden territory here so…

I know this is a farm blog but what’s the fun of gardening if you don’t have something pretty to look at too?  My kids like flowers.  I like flowers.  My wife likes flowers.  And our interest is compounding.  Who knows?  Maybe we’ll start propagating plants too.  Gotta do something interesting with all our free time.

Misleading Averages

Averages are just average.  No real magic here.  Averages are descriptive, not predictive, and macro, not micro.  Take enough years worth of weather information and you’ll see a picture of “normal” with the understanding that in any given year there is no normal.  Graph the data, zoom out and it all looks normal.  The bumps along the way smooth out.  The trend appears.  The lie appears.  Those bumps along the way when you’re in your pasture trying to keep livestock alive when it’s 114 and hasn’t rained in weeks?  Those are part of the normal.  But the average rounds them down.

Averages lie.  I enjoyed reading Walt Davis’ book How to Not Go Broke Ranching.  In that he jokes that his part of the world gets an average of 30″ of rainfall but in reality he gets 90″ one year and nothing for another two.

On average we get 3 inches of rain in August.  We got closer to 9 last month (4.5 in 2 hours on Aug. 2nd) with more coming today.  The ponds are full, the creeks are swollen, my gutters runneth over.  Where was this rain in July?

But it will add to the new average.  On average we get 32″ of rain each year.  Sometimes we get more than we can swallow, sometimes we’re in drought.  Heck, last year we went 5 months without rain.  That’s normal.  But the average dictates we SHOULD get about 3″ each month.

I need to find ways to store more water…to sponge it up, to hold it back and to deliver it where it is needed the most.  That way I can survive the normal drought and hold back the normal flood.

There are all kinds of ways to do this.  Keep up with us as we explore our options over the next few decades.

If you don’t find this an interesting problem to solve I would invite you not to become a farmer.  Maybe you should get a nice place on the edge of town.  Maybe get a big lawn mower and a couple of fruit trees and deck/patio surrounding a pool and invite your farmer to come for a swim on a hot day.

I’m in a hurry to get started this morning before the rain returns.  I need to move chickens, pigs and goats then lay out a few more paddocks for the cows so I’ll try to update this with some interesting pictures later when it starts raining.  No promises though.