Investing and Farming

I grew up on a farm. And I really enjoyed it.

As a kid, I could dig in the dirt, sculpt clay in the creek, tend to livestock, pick wild mulberries, and explore nature. It was a wonderful way to experience the world.

Granted, not everything was fun. Cutting cane in milo fields and heaving small, dusty square bales of clover weren’t exactly something I looked forward to each summer. Plus, living in the country meant I didn’t spend nearly as much time with my in-town friends during the summers.

But all things considered, it was a wonderful upbringing.

Despite that, not once in my childhood do I recall contemplating farming as a potential profession. Never. It’s almost like it never occurred to me that farming was a potential pathway in life. Maybe I figured my asthma and allergies were incompatible with a farming lifestyle. Maybe I was too soft.

Quick sidenote: As it turns out, I’ve sat in plenty of tractor and combine seats in recent years that were just as clean, dust-free, and comfy as my office chair. So, maybe I could have hacked farming after all!

In any case, farming was never my passion.

What I love about life, though, is it has a funny way of unfolding. Things you thought would never matter become incredibly important. People you never thought you’d see again become great friends – or even your colleagues or boss. There are a million ways a life can unfurl, and yet, for many, it often feels like things in the past were set in place to help us succeed today.

My profession has nothing to do with farming, but there are so many parallels between what I do and what farmers face each and every day. The lessons of the farm apply beautifully to investing.

Let’s count the ways.

For starters, in investing and farming, you can do everything right, but some things are out of your control.

As an investor, I can dissect a company’s financial reports, talk to its customers, employees, and suppliers, and read every news article about it before deciding to invest. But if a new government policy is put in place or a competitor comes up with a novel product or service, it could completely upend the investment.

Farmers can prepare the ground with fertilizer, plant at the exact right time, apply chemical precisely, and tune the combine to be ready to roll. But if the rain doesn’t fall, none of that matters. And there’s nothing you can do about it.

Here’s another one. In investing and farming, diversification is your friend.

The quickest way to blow up your investment dollars is to go all-in on one company or idea. Sure, if it works out you can make a ton of money, but if it doesn’t, you are back at square one, with less precious time.

Similarly, I’ve yet to find a farmer that planted just one crop. Even beyond crop diversification, many farmers have livestock or sell seed or have off-farm income. Farmers perfectly understand the power of diversification.

In investing and farming, no one knows exactly when to sell.

I’m not sure this one requires more explanation. Just keep in mind, in both worlds, there are plenty of pundits who sound knowledgeable and convincing, but they are just making guesses – some more educated than others. Selling doesn’t have to be perfect, but it’s best done at a profit.

And last but not least, in investing and farming, long-term holders tend to do well.

Even if you invested money in U.S. large company stocks at the tippy, tippy tops of past stock market bubbles – the absolute worst times imaginable – you still did just fine as long as you held the investment for the next several decades.

Farmers who bought land in the late 1970s and early 1980s, as long as they could hang on, experienced the same thing. For solid investments, time heals poorly timed purchases – though it still may leave a lasting scar.

I may have never wanted to be a farmer. But the lessons I learned on the farm apply incredibly well to what I do today. It’s funny how the world works.