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Hiring Money [Finance
Posted on September 5, 2017 @ 05:29:00 AM by Paul Meagher

One often cited classic of aglit (agriculture literature) is Maurice Grenville Kains' book Five Acres And Independence first published in 1935 and revised in 1940. The fact that it is still in print and easily purchased is a testament to its ongoing usefulness.

The book consists of 51 short chapters on a variety of critical areas of farm management from growing crops to managing finances. If you can't read the book, reading the table of contents alone (use Amazon's "Look inside" feature) is worthwhile because it is a masterful summary of the books contents.

The book contains lots of diagrams and figures because it is meant to provide practical instruction on a variety of farm matters. Again, if you don't have time to read the book cover to cover, simply browsing some of the diagrams would be a good way to quickly assimilate some useful content. For example, in the days before electric pumps, an hydraulic ram system was a way to use water to pump water. Here he shows how to setup an hydraulic ram system for use in the field:

Or in the home:

If you do have time to read the book, then you can consult the sections that are most relevant to you. The information does not seem too dated and it is useful to hear the perspective of a successful farmer from 80 years ago to see how they solved many of the same problems that farmers face today.

Some of the chapters that I read about first are his chapters on finance, capital, and accounting. In his chapter on Farm Finance I came across the idea of "hiring money". In the quote below, the masculinity of the pronouns dates the writing and the culture of farming that existed then but the points are still valid:

To determine ways to make money in farming the annual budget and the annual inventory are of prime importance. When the farmer starts business and at the beginning of each of his business years (which may be calendar or his own fiscal year, say March 1) he makes his inventory, then estimates his probable gross expenses and income for each month and for each crop or department so as to determine in advance at what time he is likely to be pinched for money, when he will have surplus, when he must borrow and when he can repay. Knowledge of business methods teaches him that hiring money is the same as hiring labor. [Emphasis mine] So he shows both his budget and his inventory to the cashier of his local bank and arranges for loans perhaps months before he will actually need to borrow. ~ p. 57

I think the notion of "hiring" money is an interesting one that potentially allows us to think more clearly about the role of capital than the notion of "borrowing" money. When a business needs money to startup, expand or as working capital that money is not borrowed but rather hired for a specific job that will ideally return an amount greater than the borrowed amount. We hire labor because their labor generates more revenue than it costs. Likewise, we hire money when we see an opportunity to generate more revenue than it costs.

The metaphor of hiring money encourages us to think about treating any money we might require to finance operations in the same way we would treat money used to hire labor. It needs to generate similar returns to be worth hiring. The metaphor of borrowing money is unhelpful in this regards - you are just putting it back into the original storage without any suggestion that it needs to generate a good ROI for the employer of the capital.

One other aspect of the book that intrigues me is the value assigned to "independence" in the title of the book. In these days of social media, I'm not sure you would be successful promoting the virtues of independence, but there was obviously a time when independence was highly valued, perhaps in the same way that resilience is valued today.




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