The U.S., other developed countries and, to some extent, North American agriculture could experience a tremendous loss of institutional knowledge as the baby boomer generation fades into the golden years of their lives. In the agricultural industry, many organizations are strategically examining life without the baby boomers as the “worker bees” of their boards, management teams and in everyday operations.
To put it into perspective, I have developed the 40-30 rule of institutional knowledge. Look around at individuals in their 40s. They were 10 years of age during the last farm crisis in the 1980s. This includes young producers, suppliers, ag lenders, government leaders, teachers, etc. Taking it a step further, those who are 30 years of age or less have never experienced a general downturn in agriculture, with the exception of a few sectors.
While many young producers and lenders are rolling their eyes thinking I am in a time warp, it is very easy to forget the last major crisis and the major implications it has had on economics and personal lives. I remember my professors, parents, and neighbors discussing the Great Depression, only to see some of the perspectives played out during the 1980s.
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Here are some points to ponder in anticipation of the next crisis, which I hope does not occur.
- Economic change occurred very rapidly, i.e. negative profits and lower land values. Behavior quickly changed from wanting to acquire assets, to no bidders and difficulty ascertaining value on the downside.
- Moods and behaviors change quickly with neighbors, suppliers and lenders. Media and leaders will dwell on the negative, actually making it worse.
- Those with cash will wait it out to allow the market to drop, and then come back into the market very slowly.
- The downturn will actually change paradigms. For example, many people sold discounted land, rented back at discounted values and actually made positive cash flow during the 1980s.
- Farm financial standards became much more uniform because of the need for consistent, objective, financial information to make loans and management decisions. This was one of the benefits of the farm financial crisis of the 1980s and it would have never happened so quickly if we had not had a crisis.
- Profits and cash flow became en vogue with a sound, executed marketing plan.
- American agriculture went into the crisis very fast, only to come out very slowly and tentatively. This is a very common theme in any crisis and rebound from the crisis.
Yes, institutional knowledge is still valuable, and it needs to be enumerated and cherished to avoid repeating the mistakes of the past.