I have to keep reminding myself that the Return-on-Investment in the orchards at the property that I am managing dwarfs the ROI on time invested improving other facets of the property's resources. In total, the orchards make up about 2% of the entire property's footprint but have been getting at least 95% of my attention.
Maintaining Options vs. Defending Sunk-costs
There are some commonalities between investing to maintain options and investing to defend sunk-costs. There are also some subtle differences.
I see what I am doing in the orchards as maintaining options. The disorder in the orchards was teetering on the brink of when it would be less expensive to bulldoze and start from the beginning. That is, the chaos and entropy were on the verge of avalanche. By administering a stitch-in-time I hope to keep the options that viable orchards offer "alive" for another two decades, albeit with a modest amount of annual maintenance.
A sunk-cost analysis differs from optionality analysis because sunk-cost is a backwards-looking analysis. "We invested a million dollars in fill in blank declining technology and we will get no revenue if we don't add more investment." Under many circumstances, the enterprise is doomed to lose money all previous investment (in the economic sense) regardless of what the firm does. And, in many cases, the firm would be better off quickly migrating to the ascending technology and scuttling the old, already-tooled technology; strip-mining the old of all the human and other capital that can be redeployed to the new technology.
There are many human factors that come into play with the sunk-cost based decision-making. One is that the most important players in the firm probably proved their worth in the arena defined by the old technology. They understand it. They identify with it. It is the "winning horse" they bet on in the past and it repaid them handsomely. They approved all of the investments that are now turning to ashes as they watch and see that as a mortal blow to their own, personal sense of worth.
Dot-products and Return-on-Investment
Suppose you have two young men: Abner and Aaron.
Abner is physically as strong as an ox while mentally he has the mind of a 5th grader (a functional vocabulary <10,000 words). Expressed as a vector, Abner might be (200, 50) with the first number representing percent (of mean) physical ability and the second number representing percent mental ability.
Aaron is mentally as sharp as a tack (a functional vocabulary >50,000 words) but is physically far from impressive. Expressed as a vector, Aaron might be represented by (50, 200).
Modern education would invest large amounts of resources into upgrading Abner's academic skills while letting Aaron fend for himself. Sadly, pushing resources at Abner is like trying to pour 32 ounces of water into an 8 ounce cup. It is wasted.
In Aaron's case, the system pours 8 ounces of water into a vessel capable of holding 32 ounces. If we are lucky, Aaron has a calm personality and doesn't get bored and start causing mayhem.
Expressed in pseudo-math, Abner is ((200,50) .dot. (50,200)) for a sum of 20k and Aaron is ((50,200) .dot. (200,50)) for a sum of 20k. Added together, the total benefit is 40k.
From a pure ROI standpoint, society would get more benefit at less cost if it stopped trying to "educate" Abner after 5th grade and concentrated on developing his physical gifts. Society would also get more benefit if the resources that WERE poured into turning Abner into an IT Wizard (or whatever the cool profession is today) were directed to developing Aaron's skills.
Expressed in pseudo-math, Abner is now ((200,50) .dot. (200,50)) for a sum of 40.2k and Aaron is ((50,200) .dot. (50,200)) for a sum of 40.2k. Added together, the total benefit is 80.4k, more than twice as much as the current model for allocating education resources.
Back to property management
Management is a limited resource. Beyond mitigating hazardous conditions, it is irresponsible to starve productive, internal enterprises to subsidize internal enterprises that offer dubious short-term and as-yet unproven long-term benefits.
Restated in the language of "Antifragility": Invest in the winners and place small side-bets on a universe of long-shots that spans the universe of potential.
Which is why my so many hour of my time are going into the orchards and the other parts of the property are treading water.
One must understand the environment's complexities and the true capabilities of what it contains before progress can be made; Abner and Aaron have different, but not insignificant, capabilities which would require very different methods of harnessing to maximize productivity, and - probably - very different methods of management to maintain it.
ReplyDeleteIn today's ideologically-driven education industrial complex that is impossible. Outside that complex, it could be possible; so far, however, that level of awareness and flexibility has yet to manifest itself outside of very small and homogeneous communities.
Governments are some of the worst offenders in relation to sunk costs. I think that politicians have too much ego tied up in failing project to be able to take an objective view and cancel them without wasting more taxpayer money. In the UK we see this with the fiasco that is the HS2 rail project - it was always a vanity project with a fictitious business case, but none of the politicians had the guts to put it out of its misery and stop the haemorrhaging of yet more taxpayer cash.
ReplyDeleteI just turned 66, went to a new Dr for a checkup.
ReplyDeleteHe asked about my daily activities.
I explained I start at 0800, water at least one orchard, weed, replant, do maintenance etc.
The next day another orchard, I have 300 fruit and nut trees planted and 800 in pots.
He told me hand watering was wasteful of my time.
I thought about the old saying, " the best fertilizer is the footprints of the orchardist."
I told him I had already spent my life trying to change people and the world and now I just wanted to grow food trees and in my book it certainly isn't a waste.
He stayed quiet after that.
Standing, here in Eaton Rapids, head bowed in quiet reverence.
DeleteStamping foot against the ground in somber cadence.
"I am Spartacus!..."
"I told him I had already spent my life trying to change people and the world and now I just wanted to grow food trees and in my book it certainly isn't a waste."
DeleteAnon, I tip my hat to you. Would that I could live up to your efforts; more and more I find your philosophy to be my own.
On property management. I'm on the home stretch for this year's round of beating back around 30 years of "Benign Neglect".
ReplyDeleteWife and I have been together for almost 10 years and I have been "Retired" for 3 so getting the property in shape is my "Job" now. I don't know what the ROI will be but the place sure looks a lot better than when I started.
Neck
A couple months old AP article shows that many older varieties have qualities still sought after.
ReplyDeletehttps://apnews.com/article/apples-climate-change-f724de5651fcb2e9021c5a6446496213
ERJ please keep up your great work knowing you're creating a wonderful legacy for your family's future.
Snowbird
Separating out the Abners and Aarons for separate educational and vocational training will last about as long as it takes to see the racial breakdown of the Abners and Aarons. Then the fecal material will hit the rotary oscillating device and the entire program will be scrapped.
ReplyDeleteI agree with the idea of testing and separating the Abners and Aarons to get the best educational value possible, but some people just won't accept what that looks like.