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 BLOG >> November 2015

Urban Circular Economies [Future
Posted on November 30, 2015 @ 07:44:00 AM by Paul Meagher

This week we will be hearing alot about the Paris climate talks and various solutions.

I'll add to the cacaphony by adding my own two suggestions for where the solution might lie.

One idea that I think should be considered is that the main locus for solutions is not at the country, state/province, or individual level but at the urban region level. Mayors will have more impact on climate change than other bureaucrats. Why? Cities, and more generally, urban regions (which includes agricultural areas on the fringes) are growing in importance and they have the local means to address climate change issues at a significant enough scale to make a difference. So maybe we should have sent the mayors of our major cities over to Paris rather than other bureaucrats or groups because I think it will be the urban region level that we can take our most significant steps to addressing the causes of climate change. Mayors will need to work to improve our urban ecologies. Individuals can also feel empowered to address climate change at the urban region level and can track their progress using emerging smart city technologies. The urban region level is not too big and not too small to make a difference. The main control knob for adjusting climate is to be found at the urban region level of operations.

The second idea that should be considered is to replace our current make-use-discrard linear economy with a circular economics model. The level of change we need to make as a society needs to be commensurate with the size of the problem we are trying to address. While setting targets for green house gases is an important component of the solution, the actual solution may involve a new model for economics. Circular economics might be that model. I'm impressed with the progress the Ellen MacArthur Foundation has made on defining the field of circular economics and in educating decision makes about it - mostly in Europe so far. Here is a talk by Ellen MacAthur that might whet your appetite to learn more about circular economics. In my opinion circular economics is still a work in progress with very promising idea integration work done so far.

We can combine these two ideas and the suggestion would be that the main way we might address climate change is if urban regions, acting under the direction of Mayors, should move towards managing their regions using a circular economics approach as much as possible. If we can optimize the efficiency of cities in consuming resources via circular economics ideas and techniques then we might have a chance at addressing our green house gas targets.

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Capability & Opportunism [Entrepreneurship
Posted on November 25, 2015 @ 08:09:00 AM by Paul Meagher

Floods and Diaper Waste. These are two examples of big problems.

Floods are a big problem because in many areas of the world as much as 80% of property insurance payouts are for flood damage of one sort or another (which can include sewage backup as an instance). If you can provide a solution that would reduce the amount of flood damage payouts, you might have a large and lucrative business. The problem of flooding is predicted to get worse with climate change, especially in coastal areas.

Another big problem is diapers. Most go straight to the landfill and can occupy up to 20% of the waste stream. Some see baby poop as a source of high quality nutrients and see big opportunities for handling diapers differently than just land filling them. Maybe we can use them to grow trees? The problem is the solution.

One way to approach starting a business would be to examine the big problems of society and structure your business around finding a solution or part of the solution to one of these problems. It wouldn't matter whether you have a background in theater, engineering, or business - you would begin the process of starting a business by looking at where the big opportunities lie and then you would proceed to build a business around the most promising opportunity.

Generally we don't start a business with pure opportunism as our objective. We often start from the capabilities we have and formulate the opportunity we want to address based on those capabilities. If we are a theater major, we don't think about starting a construction company even though that might be where the big opportunity lies. Maybe a theater major has some good skills for being the head of a construction company. Stranger things have happened.

Our capabilities are generally regarded as good things but sometimes they limit us in terms of seeing where the big opportunities lie. Things only become opportunities if they appear reachable from our current set of capabilities.

What if startups ignored their capabilities and focused initially on identifying where the big opportunities exist and then enlisted people with the capabilities required to address the best opportunity. Begin your startup in a state of pure opportunism looking for the best industries and niches to be in and then build a business to occupy a growing niche in that opportunity space.

Some theories of what makes a company successful talk about capabilities as being central. That might be true post-startup, but pre-startup perhaps you might do best to throw capabilities out the window and focus on where the best opportunities are. It could be that focusing too much on aligning your startup with your current capabilities means that you won't be addressing where the significant opportunities actually lie.

It is probably unrealistic to think that a startup will ignore their capabilities completely when they come up with a business idea. When it comes to raising investor money for your idea, however, we might see the advantages more clearly of being opportunistic in picking a business idea to pursue. Money wants to go where the big opportunities are, not just where your capabilities may lie.

Investors will not usually invest in a company that only has an idea. Eventually you have to add capabilities if you want to be taken seriously and raise funds. Also, the better the capabilities the lower the risk of the venture. I do not want to downplay the importance of capabilities. I do, however, want to highlight a couple of downsides of capabilities; that they can limit our vision as to where bigger opportunities might be, especially in the initial stages of identifying a market the startup should address. Second, you can be very capable at running a business but capability alone does not determine level of success; that is probably more determined by your share of the market, how much it is growing, and how lucrative it is. These are factors you should look for when starting a business, not just what you can do with your current capabilities. We should get outside of our capability comfort zone when figuring out what business idea is worth investing a good chunk of our life into pursuing.

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Permaculture Skills [Permaculture
Posted on November 24, 2015 @ 10:04:00 AM by Paul Meagher

I stayed up later than I should have last night watching Permaculture Skills videos at PermaSkills.net.

One of the people behind these videos is permaculturist Ben Falk whose work I follow because it is generally of high quality. I was not disappointed with the quality and the selection permaskills he has focused on teaching in these DVDs. They also offer streaming of these videos which I opted for. The videos are broken down into 4 groups corresponding to the 4 DVDs you would be ordering if you opted for that format.

This video series was successfully crowdfunded to finance their development and are now generating revenues on an ongoing basis through good reviews and recommendations such as my own. Nice example of how crowdfunding can be used effectively and profitably in the long run.

There are many high quality permaculture books you can read to learn more about Permaculture but often it is hard to convey some of the more practical skills you need to practice permaculture in a personal or professional capacity. Those into Permaculture often enroll in more than one Permaculture Design Certificate (PDC) under multiple teachers so they can be exposed to a range of people with practical know how of various sorts. Most of my permaculture studying to date has been online and on my own, so I jumped at the chance to learn by being exposed to some of the practical content they teach in their PDC training course.

So if you want to learn some practical design, living, landscaping, maintenance, and growing skills then I'd recommend you check out PermaSkills.net to get useful and professionally produced content all in one place by a variety of experts in the different skillsets.

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Definition of Money [Finance
Posted on November 23, 2015 @ 07:37:00 AM by Paul Meagher

I'm currently reading a book by Lars Tvede called The Creative Society (2015).

I'll probably have occasion to blog about the contents of this quirky and wide-ranging book in the future, but today I want to discuss Lars' definition of money which I found interesting:

Money is an information technology that informs us about the value of experiments and rewards those who performed them. ~p. 57

In an earlier section, he elaborates upon this definition as follows:

Money is often described as "a unit of accounting, a store of value, and a medium of exchange", but is also an essential information technology which describes to us the value of a voluntary win-win transaction. Win-win, yes. But win-win how much? The money provides the answer in a simple, common code. Two camels. 20 seashells. One million dollars. Any blabbermouth can fantasize about how much he did for others, but if he does it in a marketplace, we can make a decent estimate of its value by counting the money people gave him for his effort (of course, there are exceptions to that). ~ p. 54.

In perceptual psychology, we might call money a measurement scale where the amount of value in a product or service can be assessed according to the price we assign to it. So when we see that a product has a certain price, we assume it has a certain value. If we don't perceive the product or service as having that actual value then we don't buy it. We might view branding as a way to manage the measurement scale so that the price we assign a product or service has the perceived and experienced value associated with that price.

Ultimately what I like about Lars' definition is that is a definition entrepreneurs might find useful. Money informs us about the value of our experiments and rewards those who perform them.

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Physical Assets [Farming
Posted on November 19, 2015 @ 08:36:00 AM by Paul Meagher

One of my goals at the end of this farm season is to add my old truck to the list of farm assets. This will be a truck that stays at the farm to be used for hauling stuff around and transporting farm workers around.

I'll be driving it back from the farm to my main residence to have the a clicking sound near the torque converter looked at in a transmission shop. I debated whether it was worth keeping my 1996 Mazda B3000 on the road after I was confronted with $1800 worth of repair bills (not even counting the transmission) but have opted to keep it on the road by finding ways to reduce the repair costs substantially through the help of a retired mechanic and an informal network of repair expertise.

That same retired mechanic also got my 1974 135 Massey Ferguson tractor working again last night after it sat outside for three months awaiting promised repairs that never happened. Again the informal network of expertise kicks in to save the day. With a cleaned up carberator and a repaired and timed distributor, new plugs, and new lines to them the tractor is running with alot more power than it has all season.

Having a dedicated truck on the farm opens up the possibility of having workers at the farm and that can take care of themselves and haul stuff around in my absense.

In farming a common goal is not just to grow a certain amount of crops or animals each year but to add to your asset base each year - a new tractor, a new piece of equipment, more land, etc...

One of the first physical assets any business can add to their company is a company vehicle. It makes alot of sense accounting wise and all maintenance costs can be expensed to the company. It seems stupid for me to own two vehicles for myself but that is the wrong way to think about it. The farm owns the truck now and I use it when I am able to come down and work it.

Often when you are investing in hard physical assets like a truck or a tractor the investment can be partially justified by the value of the material assets themselves. If you can't meet your cost of ownership then the financiers can repossess those assets.

When you invest in an idea or non-material asset it is often hard to repossess anything.

I do not want to downplay the importance of ideas, creativity, teams, and management as the driving force behind startups and businesses. I do, however, want to recognize the importance of building up a base of physical assets as an important component of growing a business. You need the equivalent of tractors and trucks to add to your physical asset base each period. The physical asset base helps to embody the value of your company. I don't think they have to be top-of-the-line assets. Stuff that gets the job done is sufficient - old trucks and tractors that work well.

Farm soil is also an important physical asset. Improving soil each year is more important to some farmers than buying a tractor that might be detrimental to their soil improvement goals. I still think these farmers are investing into growing their physical asset base by taking care of the soil. There is real value in good soil when proper soil web accounting is done. The financiers might not see it but those wanting to buy or lease the land in the future might be convinced to pay for that value.

Sometimes figuring out what counts as a "physical asset" can be tricky. Also, just because something is physical does not mean it is an asset. A broken down tractor is physical but is it an asset?

Here is my revived tractor (asset) with bush hog (asset) attached. Hood removed because we are still tuning. Custom square gas tank because it used to be an ice rink tractor running on propane before it was converted back to gas again. Previous owner was a welder. Issue around the manifold making it louder than it should be.

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Positive Psychology [Motivation
Posted on November 13, 2015 @ 06:36:00 AM by Paul Meagher

I recently picked up a book called "Who Ordered This Truckload Of Dung" (2006) by a theoretical physicist who became a buddhist monk for the last 30+ years..

The book starts off with a story called 2 bad bricks that appears to be foundational for many of the stories that follow. I recommend reading the 2 bad bricks story if you want to change your perspective on measuring personal success and failure.

There are lots of "keys" to being a successful entrepreneur or investor. One of them is probably maintaining a positive outlook on life because if you become down on your project it is harder and more unpleasant to proceed. This story, and the rest of the book, provides some guidance on how to remain positive in light of life's difficulties.

I like to think I have the ability to remain positive when confronted with difficulties although I also lapse on a regular basis. Permaculture has helped me to remain positive and optimistic. Also when I run into problems that are beyond my ability to solve I often view these as learning opportunities. This week I tried to diagnose a noise coming from the transmission of my farm truck and tried to get my old MF 135 tractor started again after removing the distributor to get it fixed. In both cases, I am still at somewhat of an impasse but I feel fortunate to have been able to apprentice under a retired mechanic for a couple of days trying to troubleshoot and fix these issues. Yesterday I helped him build a small cement pad in return for the help he provided me in trying to solve my mechanical problems. Learning is fun and you often learn the most when you don't know much about what you are trying to fix or do. I don't feel stupid or get too stressed about my temporary incompetence with certain tasks.

Everybody needs their own tricks and teachings that will help them maintain a positive outlook on life. Permaculture, viewing challenges as learning opportunties, and now this book are some of the tricks I use to maintain a positive outlook. In addition to all the other skills an entrepreneur must master, one more skill is how to maintain a positive psychology because without it you are probably looking at an uphill battle both from a motivational point of view and in terms of your personal interactions with others. There are some people that seem to be positive by disposition but for many of us we must do what we can to cultivate a positive psychology. Maybe a little bit of buddhist wisdom will be helpful to you as well.

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Full Commercial Intent [Entrepreneurship
Posted on November 4, 2015 @ 12:12:00 PM by Paul Meagher

This year I decided it was time to figure out if I could apply for a mini-winery license. To get that license I need at least 2 acres of grape vines in production. I felt that perhaps next year I might be at that point so I called a local agronomist who agreed to come out and measure acreage by walking the perimeter of the vineyard plots and using a GPS-based app that would calculate acreage. The acreage came to 1.85 acres. Bummer. That means I have to plant some more and probably wait for them to grow for 2 years before I can apply for the license.

I blame this result on the fact that I haven't pursued this wine making venture with full commercial intent. I was just happy that my vines were growing and guesstimated that I had around 2 acres in the ground. If I was operating with full commercial intent I wouldn't leave such critical matters to guesswork. I should have been measuring what I had planted and making sure that my last major planting 2 years ago was sufficient to get me over the 2 acres that is required.

The same lack of commercial intent applies to renting out vacation accommodations at the farm. I didn't create any signage or branding and put in a lackluster marketing effort with Trip Advisor and AirBnB. I still got some rentals but it was definitely not at the level it could have been if I operated with full commercial intent.

In my defense the farm property was purchased with the idea of eventually retiring there so I didn't feel like I had to operate it with full commercial intent. This is common in alot of farming where most farm owners earn their main income from their jobs and not their farm property. However, this does not excuse the measurement screw up or mediocre performance on renting accommodations. If you expect to get results you have to operate with full commercial intent.

Sam Altman, founder of Y-Combinator, observed that many of the companies that go through their incubator program do well while they are there. The companies grow and there seems to be momentum, however, once they leave many of them flatline or lose momentum. He called this the Post-YC Slump. I call it operating without full commercial intent.

The peer environment is certainly a big factor in driving Y-Combinator startups to do well while in the incubator and the lack of it when they leave is one reason cited for the slump. Another major factor that Sam cites is engaging in more "fake work" when they leave the program.

In general, startups get distracted by fake work. Fake work is both easier and more fun than real work for many founders. Two particularly bad cases are raising money and getting personal press; we’ve seen many promising founders fall in love with one or (usually) both of these, which nearly always ends badly. But the list of fake work is long.

I tell founders to consider how directly a task relates to growing. Obviously, building and selling are the best. Things like hiring are also very high on the list—you will need to hire to sustain your growth rate at some point. Interviewing lots of lawyers has got to be near the bottom...

So how can startups avoid this slump? Work on real work. Stay focused on building a product your users love and hitting your growth targets. Try to have a board and peers who will make you hold yourself accountable—don’t lose the urgency that you developed... Keep sending updates on your traction to your investors and anyone else who will read them...Make the mistake of focusing too much on what matters most, not too little, and relentlessly protect your time from everything else. Don’t ever let yourself feel like you’ve won before you have. I still don’t think the Airbnb founders feel like they’ve won. You have to keep up a high level of intensity for many, many years.

I doubt that I can run my vineyard and vacation accomodations businesses with this level of intensity because there is not enough time in the day for me to do so. What time I do have, however, should involve more commercial intent than I've mustered to date. The Post-YC slump illustrates that operating with full commercial intent is not easy and that we tend to revert to doing things that appear to be productive but are really different forms of fake work. You would think that businesses are always operating with full commercial intent but often they are not, they are coasting or busy with fake work. For me the first step is recognizing the ways in ways in which I am failing to operate these lines of business with full commercial intent and prioritizing the work of fixing these issues (e.g., monitor acreage, install signage, setup official home-based winery area, line up a vineyard/accomodations worker for next season, etc..). The level of commercial intent has to be jacked up more than it has been to date if I want to get better financial returns for my effort. It won't just happen and fake work won't get me there.

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Better Than Organic [Agriculture
Posted on November 3, 2015 @ 08:15:00 AM by Paul Meagher

One problem with organic certification is that it does not speak to the issue of carbon farming which is becoming a big issue in farming these days. It is possible on an organic farm to lose soil organic matter through tillage practices and still call yourself an organic farmer.

For farms to become better than organic, they would need to be doing all the organic stuff plus adding soil organic matter back into their soils. The good news is that this can be done in a very profitable way.

One outfit that is doing this is a 4 acre farm in Sebastapol California called Singing Frog Farms. They practice no till farming in which they add lots of compost and plant an understory of plants under their growing vegetables so they have a continuous cropping system going. The end result is that over 4 years they have gone from 1% organic matter to 8% organic matter.

I predict that carbon farming of this sort will be increasingly recognized and supported by local consumers and possibly by governments in the form of tax credits. Subsidized carbon farming has the potential to change farming in some major ways as the current subsidies on corn, for example, are encouraging some fairly bad carbon management practices in agriculture. Imagine what might happen if the subsidies shifted explicitly towards supporting carbon farming practices instead?

Putting carbon into the ground rather than the atmosphere is the major key to managing carbon greenhouse gas levels. To get there we need to be better than organic and start supporting and adopting carbon farming practices.

Keep in mind, however, that urban lawns are also a target for better carbon management practices. There is over 40 million acres in the US devoted to lawns. Can we speed up the sequestration of carbon in urban and suburban lawn areas? More trees, more plants, less mowing and keeping organic residues in the local landscape are some ways to do this. Don't throw that pile of leaves out to the curb, figure out some way to get it into the soil. We could turn city lawns into "better than organic" landscapes.

There is actually no accepted definition of what it means for a lawn to be organic. Because it typically doesn't produce edible goods for sale we don't really care enough to come up with an organic certification protocol for lawns. Perhaps if lawns could have organic certification we would have companies that would treat them with less chemicals than we currently do. Instead of pursuing organic lawn certification, an alternative route would be to certify lawns as being carbon neutral or carbon sequestering and manage them accordingly. You could be offsetting carbon in your own backyard.

There is some debate as to the effectiveness of compost in sequestering carbon because as piles of compost reduce in size they are also giving off carbon back to the atmosphere. Putting organic residues onto the soil or into the soil in a timely manner in the form of mulch or buried mulch might reduce the amount of composting work required and delay the release of carbon sufficiently that your carbon budget is on the positive side for your accounting period.

What shall we do with wastewaters and sewage in a carbon neutral landscape? They both have the potential to positively impact soil carbon and nutrient profiles rather than being treated as waste. Should a carbon farmed lawn deal with issues of waste water and sewage/manure handling as well? To dive deeper into backyard carbon sequestration read Why Not Start Today: Backyard Carbon Sequestration Is Something Nearly Everyone Can Do.

This blog was inspired by the beginning of a talk by Toby Hemmenway to promote his new book The Permaculture City. He used the phrase "better than organic" to refer to carbon farming. My last blog included a video by carbon farmer Gabe Brown and Toby's talk got me thinking about this topic again and connecting some more dots.

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