How I Learned To Own My Failures – TAKE Ownership

“Evil isn’t done so often by evil people, but by good people who do not know themselves.”
-Reinhold Niebuhr

My first post in this series was about my start-up and business failures.

When I was done, I felt proud of myself. I was proud of my honesty and vulnerability, because  five years ago–maybe even one year ago–that post doesn’t get written. I would have hid my problems or argue them away, claiming the failures were other people’s faults, not mine, and I was proud that I wasn’t doing that anymore.

I should know this by now; as soon as I feel prideful, the fall is coming. The very first email response:

“That article was revealing, but missing something. How did you come to understand these flaws in yourself? You just tell us what your mistakes were, and not how you got to that insight, which is what I really want to know, so maybe I can do this for myself.”

Gut punch.

Publicly owning my failures wasn’t hard. That was easy, actually.

What was hard was getting to the point where I could actually own my failures to myself, and I didn’t really explain how I did that at all.

I wrote about the result of that work, which is, at its core, just me showing off.

That’s the dirty little secret of the fetishization of failure in Silicon Valley. It’s by and large a high-status excuse to show off. You tell everyone how many businesses you’ve started and how much money you raised, and how you are a better person through humility. You are competing to see who can be more humble. No one dives into how they actually learned from their failures, because they didn’t. It’s entrepreneur porn.

I hate when people do that…yet it’s exactly what I did.

That’s bullshit. If I want to write for me, it’s totally fine, I just need to keep that shit in my fucking diary. If I’m going to publish it, it has to be for other people, to help them.

That’s what this post is. A deep dive into how I actually learned to own my failures to myself. I’m writing and publishing this so that, by seeing my process, you can help yourself do something similar.

When My Perception Of Identity Was Fucked Up‍

I’ll dive into one example of a big failure, probably my biggest and most personal ever:

The movie about my life failed. And it failed mainly because of my bad decisions, and all of those decisions were ultimately driven by my deep identity and emotional issues.

I had an immense amount invested in this movie. Not money–I actually had zero money invested in it. But I had my entire identity and emotional state invested in its creative and commercial outcome.

If it succeeded, then I was a success. It was, at least in my subconscious, nothing less than a referendum on me as a person. Valid or not valid. Good or bad. Worthy or unworthy. Everything about who I was rode on the success of that movie, and every decision I made was deeply and unconsciously impacted by that.

The full story of that movie could be it’s own movie, but some quick, easy examples of how this emotional identity issue impacted my decision making:

1. We had the wrong director. You know who picked him? Me.
2. Very smart people told me I was wrong, and gave great reasons to not select this director. I ignored them. Why? My deep need to show everyone that I was right about MY decision. I made it about me.
3. We had the wrong production company. You know who picked them? Me.
4. Very smart people told me I was making a mistake. We even had a HUGE offer from the best studio in Hollywood. I turned them down. Why? Because, again deep down, I wanted to prove I could beat the Hollywood system by making an indie movie that I owned and I controlled. I made it about me.
5. We still could have made a good movie–even with a bad director and the wrong production company. But the shoot sucked. You know why? I made the whole thing about me.
6. Why? My need to show how smart and important I was became so manifestly important to my identity, that it sent my controlling side into overdrive. Nobody knew my life better than me. Nobody knew me better than me. So only I could make certain decisions. I screamed at a lot of people. Not because I hated them, but because their ideas about the character and the world of the movie so threatened my perception of myself that I couldn’t allow words or concepts that I disagreed with to even leave their lips. I emotionally and spiritually crushed everyone on that movie set, all because of my own emotional issues I would not face.

I could go on and on with examples like this. You get the point.

I can remember the night I knew the movie wasn’t going to do well. It was possibly the hardest night of my entire life. I cried more than I had ever cried in my life. I felt the worst I’d ever felt about myself. The emotional pain was so intense, so real, it became literal physical pain.

I wasn’t suicidal, but I honestly felt like I wanted to die. I’d spent the previous seven years scratching and clawing and fighting to get to this moment. I’d run through walls, over people, around obstacles, all for this? To feel this way?

I’d never felt so alone, so crushed, so utterly defeated. I had not failed at something. I felt like, in a very real emotional sense, that I was a failure as a human being.

Believe me, I FULLY recognize the self-indulgent absurdity of this scene: here I was, a rich and famous white guy, who someone gave millions of dollars and creative control to make a movie about his life based on his #1 New York Times bestselling book, crying because it didn’t do 50 million dollars its first weekend? Boo fucking hoo.

But emotions and identity and self-perception are not about objective facts (talk to any Trump fan to see proof of that). This is about the emotional reality of my life, and it was this moment–where I felt like my entire personhood was a failure and invalid–that set me on the journey I am on today.

That was my emotional bottom. From that moment, I knew I had to get help. I knew the way I looked at the world, and at myself, was broken, and it would break me completely if I didn’t change it. I didn’t know why, and I wasn’t sure how, but I knew it was my reality.

A few months later I moved to Austin and started psychoanalysis. I also started angel investing at the same time. It was a coincidence, but those two things together taught me how to take responsibility for my actions and own my failures.

How Therapy Helped Me Shift My Identity Problems‍

It might be hard to understand how identity and the unconscious works. I can’t begin to give a full explanation of it, even in a long piece like this. One of my favorite blogs on the internet had a great explanation about how this works:

“The unconscious doesn’t care about happiness, or sadness, or gifts, or bullets. It has one single goal, protect the ego, protect status quo. Do not change and you will not die. It will allow you to go to college across the country to escape your parents, but turn up the volume of their pre-recorded soundbites when you get there. It will trick you into thinking you’re making a huge life change, moving to this new city or marrying that great guy, even as everyone else around you can see what you can’t, that Boulder is exactly like Oakland and he is just like the last guys. And all the missed opportunities–maybe I shouldn’t, and he probably already has a girlfriend, and I can’t change careers at 44, and do I really deserve this?– all of that is maintenance of the status quo, the ego.”

If you want to learn more quickly, Paul Graham has a great essay about separating your identity from the results of your actions, called “Keep Your Identity Small.” There are so many books and research papers about this idea, the problem is that they all have different names and different conclusions (quick start on background: a research paper showing people literally can’t do math when it goes against their identity, and a good book intro to this is Mindset).

The best tradition I’ve read to deeply understand this issue is actually the oldest: Buddhism (the actual Buddha called this problem in people “The Hungry Ghost”). In fact, you could say that this insight is the key insight of Buddhism: all the suffering of humanity is caused by the attachment to an identity or a result.

It’s even enshrined in their primary dicta, the Four Noble Truths:

[Don’t worry, I won’t lecture you about Buddhism, I promise]

How you define and see yourself and the results you strive for creates the suffering you endure. In essence, the less you are attached to things, and the more you just experience them, the better off your life is (I also included some basic reading lists for Buddhism at the end as well).

Simple to say, but hard and complicated to apply to your own life. I tried to learn this by just doing psychoanalysis and reading a lot about it. I have a large dent in my checking account and an even larger collection of flagged and annotated books as testaments to that effort. Eventually I got it “intellectually.”

But getting something in your conscious brain is VERY different than getting it deep in the unconscious. I only learned HOW to apply this concept (divorcing your identity from your results) to my unconscious—-to my own thinking and my own emotions–from the time I spent angel investing.

Lemme walk you through how that that process worked for me, maybe that will explain better.

How Angel Investing Taught Me To See Entrepreneurs’ Issues‍

When I was first starting my own companies, I was emotionally attached to each of my ideas,  and attached to their success. Not in the sense that because I worked hard on them, I really wanted them to happen. That’s normal. I was attached in the way that the ideas and the success became part of my identity.

When I say “became part of my identity” I mean this as literally as possible. I would, at least unconsciously, think that if my business idea succeeded, then I was a success. And if the business idea failed, then I was a failure.

I couldn’t look at my ideas or my companies objectively, with any kind of detachment, because they represented, in a very real way, a judgment of myself as a person. Their success was, in my mind, nothing less than a judgment of my validity as a human. Just like on the movie.

Being so attached to results was a problem. It prevented me from honestly and critically looking at my ideas and their results–even if they weren’t working. Especially then. It was too painful to see they weren’t working, because that made me feel bad about myself as a person. So I would lie to myself or convince myself that something stupid was smart (if you’re familiar with western psychology, this is basic rationalization and projection, and I did 100 times on the movie).

If you do this in a relationship, that’s not good. But it’s just about the very worst thing you can do as an entrepreneur (or a creative). Facts are facts, whether you like them or not, and if you are making emotionally-driven decisions about factual situations in start-ups, then you are going to make bad, bad business decisions.

Here’s where angel investing helped me: I wasn’t evaluating my own decisions or identity. I was looking at other people and their decisions.

My job as an angel investor was very simple: I bet money (through buying equity) on my ability to correctly assess three things: 1. the entrepreneurs who pitched, 2. the product-market fit of their start-up, and 3. the market they were competing in.

If I did it right, I made millions. Wrong, I’d lose millions. Even though I’ve stopped, I made millions.

The reason I did so well is because when I evaluated other people’s start-up ideas, I didn’t have any attachment to them. It meant nothing to my identity if they were good or bad, so I could be completely objective. I could look at the facts with clear eyes. I could ask hard questions. I could see other alternatives. I wasn’t tied to any ideas I had about myself, because these weren’t my ideas.

You know the feeling where you can see all the relationship problems all of your friends have with total clarity, but you can’t figure your own stuff out at all. It’s the same concept (there’s an entire business built around this ironic tension–it’s called ‘life coaching’).

What I found out was that when I wasn’t unconsciously worried about defending my identity from failure in business, and I let my ability loose in evaluating OTHER entrepreneurs’ companies, it worked great. I was really, really good at evaluating founders, start-ups, business plans–all of it.

The funniest thing is that I started to become an true expert at calling out the entrepreneurs who were just like me!

The entrepreneurs who were so tied to their start-up idea or their success were super easy for me to spot. Just like former drug addicts are the best at seeing the tricks of other addicts, I could see them performing all the mental gymnastics I used to do to avoid admitting clear facts that might make them see themselves in a way that hurt their ego and identity.

Simply put, I paired up the insights I got in therapy (being able to see how much I tied my identity and self-esteem to my fame and success) with the insights I got from my angel investing (seeing how other founders delude themselves in the same way I used to and how it affected their business decisions), and it showed me where I was making emotionally-driven identity decisions in business–so I could stop doing that.

Except, to make it REALLY work, I had to do something really hard: I had to turn this new super power on myself.

How I Combined These Insights To Own My Failures

“We do not learn by experience, but our capacity for experience.”
-Buddha

I turned that super-power on myself in a very specific way. It may not work for you, but I’ll list out the process to make it easier to find your way:

1. For each business I’ve ever been involved in (and I included books and movies as businesses), I wrote down everything that happened. The objective facts. Things like revenue, time, result, etc. I got all the facts (that mattered) out of my head onto a piece of paper, as many as I could think of.

2. Then I did something really weird (I learned this from a doctor who treats OCD patients): I pretended that I was talking to a different entrepreneur about THEIR business, and then evaluated the facts of that person’s business. I didn’t just pretend. I actually changed the name at the top of the page to a different company and a different person for each company. Of course I knew it was me, but this little mental sleight of hand was enough to free me up to dissect this company and “this guy” objectively, because it was a “different” person. It took MY identity out of the equation.

3. Because it “wasn’t me” anymore, I was totally free to let go of any assumptions and just approach every problem with a fresh, beginner’s mind. I listed out, in detail, every mistake, every reason that every mistake was made, what other things the entrepreneur could have done better, anything I could think of. I went at each company like I would as an angel investor–razor sharp analysis and totally fucking brutal.

4. Once I had all the facts and decisions out on paper, then I started to analyze them. For EVERY decision, especially the bad ones, I asked myself this simple question:

Why would “he” make that decision?

Usually the first few answers were rationalizations or excuses. So I kept asking the question, with small variations, over and over and over…until I got to a reason that “he” would make that decision that was not driven by facts or reason or logic or business sense, but was driven by emotions or identity or status. Just like I did with other entrepreneurs, I was relentless in digging until I found the real reasons for decision.

Those were the decisions I was looking for–the ones that had deep underlying unconscious motives that I wasn’t admitting it to myself.

THAT is how I was able to write the post so brutally and precisely dissecting my own failures in business. Once I had that angel investor perspective working, I turned it on myself, and my decisions–and I kept dissecting them until was able to see them for what they really were.

You Gotta Own It‍

There is one more part to this, one more key to the HOW of really digging into your failures. I left it to last, because it’s the hardest part, and no one ever wants to hear this:

This only works if you’re willing to take complete and full responsibility for everything in your life.

When you ask these “why” questions, when you really dig into your decisions, you are trying to find the place where you can own the mistake or failure or decision. If you don’t, then you aren’t really owning your failure–you’re just re-assigning the blame to someone or something else.

EVERY TIME I answered a “why” question and the blame fell on someone else, I asked a deeper why question, until I got to something I did or I thought that caused the problem. Only then would I let myself stop (and even then, I often had to go another level or two up to get deeper).

Here’s a great general example:

We all know that one person who says they keep dating crazy men/women, and they can’t figure out why. They go on and on about their multiple insane exes, and all of their problems…yet they never stop and make the obvious and simple observation that they’re the ONLY constant among all of those exes.

Obviously they’re making decisions that are either attracting those people, or allowing those crazy people into their life. Once is an accident, twice is a concern, and three times is a pattern. They will NEVER change until they admit that to themselves–that THEY are the cause of the pattern, at some core level–and then go about figuring out why and answering the fundamental question: what emotional need is being met by having crazy people as partners?

It’s not different in business. I did this for EVERY GODDAMN DECISION I MADE in this piece. It really fucking sucked.

I am not telling you that everything bad that happens to you is your fault. HELL NO. Even natural disasters aside, people have bad luck and shitty people do things to you that you did not deserve. God knows I’ve had those things happen–but did you notice I left pretty much all of that out of my failure list?

NOTE: Owning the decisions you made that led to your failures is not about beating yourself up, and it’s not about making yourself feel like shit. Don’t do that. Being honest with yourself does not mean you have to be mean to yourself.

Taking responsibility and owning failures is about clearly seeing where you are making bad decisions, and understanding why you are making them–so you can stop.

Taking Responsibility SUCKS‍

Make no mistake about it: that was really, really, fucking hard. It’s incredibly painful to honestly look at your mistakes and really fully own them, in all their glorious awfulness. To turn into that pain, instead of running from it, it about an unfun as life gets.

But it’s also incredibly liberating. Once I embraced the idea that I didn’t have to (and shouldn’t) judge myself by my successes, but that instead I could create a very small identity, and then see my businesses as things I did rather than things I was–then I was totally free to deeply critique them.

And once I did that, I could clearly see why I was making so many bad decisions–they were rationalizations for deep seated emotional issues. Not actual business decisions. And then, I could STOP MAKING THOSE STUPID ASS DECISIONS!

I honestly believe this identity shift in my mindset is responsible for why my current company is doing so well. Obviously, we are also hitting the three essential elements of start-up success out of the park, but Movie Tucker probably would have torn that all down, and all because he didn’t understand his issues, or even accept that they exist.

It’s not that I don’t have any more emotional issues. Please–just ask anyone on the Book In A Box team, they’ll tell you I have issues (we even talk about them in our meetings, like we do with everyone on the team). It’s that now I know where they are (at least most of the big ones), I can account for them, and I am open to talking about them and working to fix them. I understand that this is a process, not a result, and every day is about working the process.

The problems you know you have are almost never the problems that sink you. It’s the problems you don’t know you have (or won’t admit) that destroy you.

And that is why owning your failures is both so hard and so important–it’s the only way to improve and grow and change.

Buddhism Reading List:

There are so many places to start to learn about Buddhism. Maybe the easiest for many people is this book: 10% Happier by Dan Harris. It’s about how a person with SERIOUS identity issues found meditation.

But probably the best into Buddhism for Westerners, I think Zen In The Art Of Archery is also amazing. What both this book and 10% Happier have is an emotionally honest recounting of the way the mind works through these issues at the beginning.

That’s only a start though. From there, my favorite reading on Buddhism is pretty much all the books by Mark Epstein. I think his best is The Trauma Of Everyday Life, which is a psychoanalytic reading the Buddha’s life. Sounds really wonky, and to some extent it is, but it changed my life. Possibly a better place to start is Thoughts Without A Thinker or possibly Psychotherapy Without The Self. Or, if you want to go really deep, try After Buddhism by Stephen Bachelor.

I don’t feel qualified to give you any more of a list beyond that, because there is SO MUCH, and most of it is really contextual. What will deeply move one person is gibberish to another. And in fact, what was gibberish to me at one stage of my life, deeply moved me at a later one.

The only way to know you’re walking the right path is to walk that path yourself.

 

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Some of My favorite Quotes

Testing New Futures

Holistic Ranch Management More Than Grass

5/20/2019 | 9:04 AM CDT

By  Dan Miller , Progressive Farmer Senior Editor

“No. You missed that,” Scott Johnson says, correcting a caller. He and his wife, Jean, were traversing a part of eastern Colorado on one end of a long-distance struggle with cell service. The caller had entirely missed the point Scott made about holistic management. It is much more than grass.

The template of holistic management laid over the Johnson family’s Flying Diamond Ranch, Scott explains, is a collaboration of moving parts. It considers the harsh seasons of Colorado’s semiarid eastern plains and the sustainability of the ranch’s composite Angus herd. It is management of predatory coyotes, of spring calving and scrutiny of meat markets. Most of all, it is family — this one taking its first steps into a sixth generation with five grandchildren, four born in 11 months.

“Do you follow my way of thinking?” Scott asks. “If our ROI [return on investment] is great, but someone is maimed, we wouldn’t be real proud [of our performance]. We will give up profit for safety or harmony,” he says. “The focus is on the whole. If we’re not getting along as a family, if we’re not safe, then the rest of this really doesn’t matter,” he explains. “It’s its entirety. Its wholeness. Its balance. Not perfection. But, bottom line, [we are] profit-oriented. Business is business.”

The Flying Diamond’s clean and highly viewable website uses six words to articulate holistic management: “Ranching with family. Working with nature.”

BORN ON A CATTLE DRIVE

Flying Diamond is 112 years in the making. Charlie Collins, Scott’s great-grandfather, fell in love with the land when, as a teen in the late 1800s, he trailed cattle near the banks of Big Sandy Creek on a drive from Mexico to Montana. By 1907, Collins had moved his family from Kansas to Kit Carson, where the ranch is still headquartered today.

The ranch is dominated by a shortgrass and sand sage landscape. Thick riparian areas border the Big Sandy and Horse creeks, tributaries of the Arkansas River. Culls are based on a female’s ability to wean a calf every year beginning at age 2 and succeed in 13 inches of precipitation and temperatures running the scale from below zero to above 100ËšF.

The cattle winter on corn circles in Kansas and Nebraska. “We like to rest our pastures during the winter. It’s healthier for our grass to have the cattle off and let it rest, and get a little more growth,” Jean says. Scott adds, “Having cattle on cornstalks, our day-to-day chores slow down a little bit in the winter. We can give family a little breather.”

Flying Diamond is an operation run by a family of type A personalities, Scott allows. “We’re not real chitchatters. We socialize. We have good times. We want to maintain excellent family relations. But, we’re not sitting around drinking a lot of coffee.”

GENERATIONS MANAGE TOGETHER

Scott and Jean anchor the Flying Diamond’s fourth generation. Their four adult children represent its fifth. Ownership is based on a meritocracy. The more a family member contributes, the more they own.

Jen Livsey, married to Jay, is the oldest. She is a Princeton University undergraduate and the first female graduate from the King Ranch Institute for Ranch Management. She recently opened Eastco Group, a livestock and drought insurance business. Jen oversees the rotational-grazing plan and analyzes purchase and lease opportunities.

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Will and Lauren Johnson live full-time on the ranch. A Marine Corps veteran, Will is CEO of Flying Diamond Ranches Inc.

Myles Johnson and his wife, Katie, live in Idalia, Colorado, where Myles is the K through 12 superintendent of schools. Myles is the ranch’s administrative officer, managing compliance, meetings and corporate records. Katie is a certified public accountant and manages the ranch books.

Charlie Johnson and his wife, Kaitlin, live in Kit Carson. He is chief operating officer (COO) of Flying Diamond Ranches Inc. He partners with Jen in livestock and drought insurance.

Business is organized around communications—face-to-face, weekly conference calls and a monthly executive committee meeting. Quarterly board meetings are a newer function Kirk Samuelson, Scott’s cousin, brought to the ranch. Samuelson served as COO of Fortune 500 Kiewit Corp., in Omaha, until he retired. He and Scott are cochairmen of the board for Flying Diamond. Quarterly board meetings are formal. “Ten years ago, I was the dictator,” Scott admits. “Now, no one is comfortable with that. When we talk about family harmony, that’s not to suggest there aren’t red faces and pounding on the table.”

The board meetings are to play a role in the ranch’s vitality. “You go to workshops, and you hear horror stories,” Jean says. “Families won’t talk to each other. Ranches divide. That is a threat. How do you keep a 100-year-old ranch together for the next generation?”

The board meetings have a start-stop time and a structured agenda. They often include talks by outside experts. Assignments are given before the meeting—budgets, range management, cattle movements, fertility testing and branding, selling bulls, commodity markets and new market opportunities. “There is an element of accountability brought into the operation that we didn’t have before,” Jean says. “You are held accountable. What did you say you were going to accomplish? Did you do it?”

AGREEMENT IS KEY GOAL

Flying Diamond’s meetings are collaborative. The goal is consensus. “At the end of the day, we want to come up with a compromise we can all live with. This is a new concept for us,” Scott explains.

New is a continuing education standard. Time spent in continuing education is measurable and reported quarterly toward an annual goal of 300 hours. Safety is one component. Jean is the ranch’s safety officer. She has organized horse- and cattle-handling courses. “We specifically do safety training, communicate safety and track safety by hours per year.”

Calving runs from March through May. “We try to mimic nature,” Scott says. “We calve when the deer and the antelope and the elk calve.” Cows graze on spring grasses and not supplemental feed, and the calves generally miss late-season blizzards. Predation is better managed. Calves invite coyotes in the dark of winter. Coyotes have a wider menu in the spring, when the ranch’s wildlife also is giving birth.

“Deer and antelope spend zero dollars, and their offspring have a 50 percent survival rate,” Jen told ColoradoBIZ in a February article about Flying Diamond Ranch. The goal of the ranch, she explained, is to improve the odds of survival among the calf crop but mimic nature to lower production costs.

And here, an example of holistic management: “Our guys aren’t out in blizzards. The weather is better for the calf and better for us,” Scott says.

PATH TO PRODUCTIVITY

Cattle graze only 5% of the ranch’s ground at any one time. Nearly 200 miles of single-strand electric interior fence mark paddocks typically less than 300 acres in size. Cattle graze in some paddocks no more than three days in a growing season. Stocking rates once ran 40 acres per cow/calf unit. Today, it is 30 acres per unit. “We are able to run 30% more animals. Maybe we’ll be able to get to 20 acres per cow/calf unit with more intensive grazing,” he says.

Scott traces his land-management practice to several days spent 35 years ago with Allan Savory, the guru of grazing lands holistic management. Savory’s notion was to move cattle frequently—as bison moved themselves—by way of intensive, human-directed management.

Flying Diamond has laid out 20 miles of water pipeline with the assistance of Natural Resources Conservation Service’s Environmental Quality Incentives and Conservation Stewardship programs. Seven wells pump water to 23 stock tanks. The family has an eye to tightening its grazing practices—that cattle would graze no more than 1% of the ranch’s acreage at any one time.

Few ranches are as intense, Scott says. “Everything gets more intense the more intense we get. More monitoring, quicker moves. We are not know-it-alls. But, it can be a big benefit to the resource and a big benefit financially.”

ONE GENERATION TO THE NEXT

Holistic management is one of many parts. Flying Diamond Ranch has won its share of acclaim for this approach as the recipient of the Colorado Leopold Conservation Award and regional Environmental Stewardship Award, the latter partially sponsored by the National Cattlemen’s Foundation.

Awards recognize achievement. Flying Diamond Ranch tests new futures. Its organic cuts, for example, are finding customers in San Francisco. As a member of its advisory committee, Jean learns how the College of Agricultural Sciences at Colorado State University studies water conservation, sustainability, even urban farming. But also, meatless meat.

“It sounds like science fiction to us, but maybe it’s something that’s coming,” says Jean, not setting aside opportunity perhaps born of a petri dish. The future does not discourage Flying Diamond Ranch. “We’re bullish on agriculture,” Scott says.

The Flying Diamond Ranch evolves and grows and shifts for a time beyond Scott and Jean, and perhaps beyond Jen, Will, Myles and Charles—from today to a time for five grandchildren: Collins, Sofia, Clint, Stella and Henry, growing up among the hills of Colorado’s plain.

One generation builds on another. “We think,” Scott says, “that future is pretty bright.”

$1000 plus Cow Costs –

Where are Your Costs?

Here is a PDF of the

Estimated Cow Costs for the Nebraska area for 2019.

Where are you at.

Differences Between High-, Medium-, and Low-Profit Cow-Calf Producers: An Analysis of 2014-2018 Kansas Farm Management Association Cow-Calf Enterprise – A Review

This study by Whitney Bowman, Dustin L. Pendell Ph.D. and Kevin L. Herbel can be found at the Kansas State University AgManager.info website. Review and summary by Aaron Berger, Nebraska Extension Educator.

Whitney Bowman together with Dr. Dustin Pendell and Kevin Herbel recently published a paper that highlighted the differences between 71 different producers with cow-calf enterprises that are part of the Kansas Farm Management Association. The paper examined both returns over variable costs and returns over total costs in 2014-2018. The authors broke out participants in the study into three groups of high-, medium- and low-profit producers. Here are differences that stood out between producers from the data when looking at returns over total costs.

• Differences in costs between operations significantly outweighed revenue differences. High-profit operations spent $259.93 less per cow than low-profit operations in this study.
• High-profit operations generated more revenue per cow, $152.32, than low profit operations.
• Major differences in costs between high profit and low profit herds were found in feed expense. High-profit herds spent a total of $418.66 per cow on grazed and harvested feed, while low-profit herds spent $543.92. This is a difference of $125.26 per cow!
• Labor, depreciation, machinery and interest expenses were all lower on a per cow basis for the high-profit operations than the low-profit operations. High-profit producers spent on average $100.95 less on these items than low-profit producers.
• High-profit operations generated on average an annual positive net return to management of $60.53 per cow, while low-profit operations had a negative return of -$351.72 to management over the five year period.

The Kansas Farm Management Association cow-calf enterprise data provides insights into the differences between high-, medium- and low profit producers. Participants in the data set have the necessary production and financial records to know what their production costs are and then can use that information to make management decisions to improve profitability. In this data set, producers who aggressively controlled costs while producing more pounds of calf to sell per cow than their competitors were the most profitable.  Good production with cost control differentiated the most profitable producers from those that were the least profitable.

A one page sample budget titled Estimated Annual Cow Costs for Nebraska 2019 is a tool that can be used to help producers to begin to estimate what their own cow costs are.  Good accounting and record keeping can help producers track their costs and know their cost of production.

For producers interested in learning more about this topic, a Unit Cost of Production Workshop is scheduled for February 5 & 6 at the Cedar Creek Church which is in the Burwell area.  For more information contact Aaron Berger at 308-235-3122.

Interviews with the authors of BeefWatch newsletter articles become available throughout the month of publication and are accessible at https://go.unl.edu/podcast.

10 Best Management Practices for Running a Profitable Ranch

Some folks purchase rural land for pleasure as much as for profit. Motivated by a dream of running a hunting operation, raising cattle or having their own place to roam, they may forget that the land can help to pay for itself.

Do first things first. Most people never accomplish their goals because they focus on what they know how to do, what they like to do, what’s easiest and what’s urgent. – Danny Klinefelter (Texas A&M University agricultural economist)

“Most people ranch or farm because they love growing things, they love animals, they love being outside, or they love being independent,” says Danny Klinefelter, an AgTexas Farm Credit board member and Texas A&M University agricultural economist. “Not as many enjoy the financial, marketing and people management sides of the business. But these days, that’s where you need to focus.”

Klinefelter offers ten best management practices that can be especially helpful for new ag operators and rural landowners.

“These are things that any producer can do, but that 95 percent of producers don’t,” says Klinefelter, who is also a farm management expert with Texas AgriLife Extension. “If you’re looking for ways to get better, this list would be a good place to start.”

 

1. Match costs with revenues. (Book)

Too many producers treat costs and earnings separately. Focus on managing the margin between costs and revenue by looking a few months ahead. Cattle producers, for instance, can lock in the price of future inputs such as feed, and then use the cattle futures market to protect their selling risk.

“Too often, farmers and ranchers wait to get a better deal,” Klinefelter says. “If you lock in a profit, it’s hard to go broke.”

2. Play “What if?” . (Website)

Don’t limit yourself to considering most-likely outcomes. Plan for the worst. Start with the four Ds—what if someone dies or becomes disabled, what if there’s a divorce, or what if a key player departs?

Klinefelter uses insurance to illustrate the need for contingency planning. If you take off a hay crop every year for extra income, you might be able to ride out a drought. But if you produce hay and cattle in a drought-prone region, you may want to consider weighing the cost of Pasture, Rangeland and Forage Insurance against the cost of  purchasing hay for feed.

“You might hate to pay the premium, but look at what could go wrong and ask yourself if you can afford it,” Klinefelter says.

3. Stay on top of your business. (Book)

“Successful managers monitor and analyze their performance,” Klinefelter says. “They’re more likely to spot problems and opportunities before it’s too late. Business problems are like cancer—they eat away at profits. But if you spot them early, they’re often treatable.”

For example, many ag operators take last year’s cash-flow budget and adjust it for next year.

“Usually, lenders won’t settle for this,” Klinefelter says. “They know that ranchers and farmers consistently overestimate projected earnings.”

Each month, check projections against current cash flow. If this month proves worse than projected, you may need to adjust your expenditures.

4. Establish priorities—the 80:20 rule. (Book)

The 80:20 rule says that 80 percent of what we accomplish is produced by 20 percent of what we do.

“Do first things first,” Klinefelter says. “Most people never accomplish their goals because they focus on what they know how to do, what they like to do, what’s easiest and what’s urgent.”

For example, if you operate a hunting ranch and prefer the hands-on work of building feeders and maintaining deer blinds over marketing, it might pay to hire a marketing professional to promote the business.

5. Conduct autopsies.

Evaluate key decisions to avoid repeating mistakes. What went well and what went poorly? What did you overlook, and which assumptions led you wrong? What did you learn?

Consider the rancher who raises purebred cattle for potential embryo and breeding stock sales. If that business model is too labor- or input-intensive, it may be time to switch to a more traditional cow-calf business model.

6. Do little things better—the 5 percent rule.

“Studies show that the most sustained success comes from doing 20 things 5 percent better, rather than doing one thing 100 percent better,” Klinefelter says. “Also, the most profitable producers tend to be only about 5 percent better than average farmers in terms of costs, production or marketing.”

He uses wheat to illustrate how little things add up. Assume the seasonal average wheat price was $7 a bushel. Others waited for prices to hit $8, but that never happened. You locked in a sure thing by forward-contracting for $7.35, just 5 percent higher than the average price.

7. Benchmark your performance.

“Most producers have no clue how they stack up against their competition,” Klinefelter says. “They think they’re average or a little above—but it’s not possible for everyone to be average or above. How do you stack up against the top 25 percent?”

Consider, for instance, that you raise cattle, and your calves have a lower average birthrate than those on similar operations. Find out how others have improved survival rates in their herds.

8. Analyze what to stop doing.

“Successful managers spend as much time analyzing what they need to stop doing as they do evaluating new opportunities,” Klinefelter says. Such analysis can lead to shedding assets, enterprises, people, land leases or unnecessary practices.

He cites the case of a family that produced milo and cotton crops that were only marginally profitable. They generated more profits buying calves and putting them on winter wheat in November, and selling them each spring.

“These brothers decided to lease their cropland to other farmers and focus on what they did best—raising cattle. It made a huge difference,” he says.

9. Use accrual-adjusted income to evaluate profitability.

“Cash-basis accounting is great for simplicity and tax management, but it’s a poor way to measure true profitability,” Klinefelter says. “Cash-basis often lags accrual-adjusted accounting by two to three years in recognizing profit downturns and upturns. By then, it’s too late to respond.”

You don’t need an accrual accounting system, however; simply prepare balance sheets that reflect the beginning and end of the period for which you’re measuring income. Include inventories, accounts receivable, prepaid expenses, accounts payable and accrued expenses.

10. Learn from the E-myth principle. (Book)

The E-Myth” a book by Michael Gerber, talks about how many people believe they can succeed as entrepreneurs, when in reality most small businesses fail. Gerber maintains that most business owners begin with a fatal assumption—that if you understand the technical side of your business, you understand how to run the entire business.

Klinefelter suggests you apply this lesson to ranching, by learning about other players that affect your operation—employees, buyers, suppliers and funding sources.

“Find the top three things that most frustrate each of these groups in dealing with a business like yours. If you can reduce those frustrations, you can become the supplier, customer, employer, borrower or tenant of choice,” he says. For example, ag lenders such as Farm Credit like to hear from customers when changes occur—don’t wait until the end of the year to contact them.

Do you manage a ranch or farm? Share your tips for running a successful business in the comments section.

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This article appears in the fall 2016 issue of Texas LAND magazine and was provided by Farm Credit Bank of Texas. Visit www.landmagazines.com to read more and subscribe to future issues of both LAND magazine and Texas LAND magazine.