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 BLOG >> February 2018

Amazon Lessons [Growth
Posted on February 22, 2018 @ 05:15:00 AM by Paul Meagher

The Amazon is the largest river in the world. One of the reasons Jeff Bezos named his company after this river is because he intended his original online bookstore to be the biggest in the world.

Today I want to explore what it takes to be the biggest river in the world. I'm sure Jeff Bezos understands perfectly well why the Amazon is the biggest river. It is possible that he is using this knowledge to scale his own company.

One of the main reasons the Amazon river is the largest river in the world is because it has a Strahler number of 12. A Strahler number is a way of classifying streams based on the number and size of tributaries that feed into it. It is easiest to understand this numbering system by seeing an example:

The number assigned to a stream segment only increases when 1) two streams join, and 2) the number of both these rivers is 1 less then the stream they combine to form. When you get to the end of the Amazon river, adding a small tributary with Strahler number 1 does not increase the Strahler number of the river. It is only when two massive streams with Strahler numbers of 11 combine that the Strahler number of the ensuring stream becomes 12.

In the early days of Amazon the company, it grew by adding hard to find books to its inventory. Alot of small revenue streams from book sales fed into Amazon. Now that Amazon is a huge company, adding small revenue streams makes very little difference to its revenue flow. To grow significantly bigger, Amazon has to merge with some huge revenue streams such as grocery shopping and entertainment.

A stream is the visible manifestation of groundwater. The presence or absence of water stored in soil determines the flow characteristics of a river. Groundwater is like the customers that feed a business. The size of the Amazon river is a reflection of the groundwater that it has accumulated.

To compete against Amazon the company you would have to take the flow from one or more of its revenue streams. Amazon would be unlikely to notice flow lost as a result diverting small revenue streams, but it would likely notice if you tried to divert a revenue stream with a high Strahler number. The key is to not to get noticed by Amazon until you have a high enough Strahler number that you can fight back or maintain your ground. You may eventually decide to sell your flow back to Amazon.

Can a startup go from a small tributary to a huge river the size of Amazon without alot of merging? Very unlikely. The history of all the behemoths of industry is one of acquiring companies to become bigger companies. They merge like the Amazon river to become bigger companies.

In conclusion, the study of river networks may offer some insight into how companies grow over time.

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Bourbon and Bookkeeping [Farming
Posted on February 14, 2018 @ 12:56:00 PM by Paul Meagher

I just finished doing my year end accounting and tax return for an incorporated business I own and am getting ready to get started on the year end accounting and tax returns for a sole proprietorship business and a farm partnership business (with my wife). A downside to running multiple businesses is the amount of accounting and tax work involved. It can consume more and more of your time if bookkeeping is not properly managed. Every year I try to get a little better at it but I still have alot to learn. I am therefore on the lookout for palatable videos on bookkeeping and accounting and thought I would share a recent find with you.

I called this blog "bourbon and bookkeeping" because the 2 book authors in this discussion, Curtis Stone (The Urban Farmer, 2015) and Julia Shanks (The Farmers Office, 2016), agree that you may need liquid motivation to get exited about accounting work.

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Nothing Is Impossible [Design
Posted on February 8, 2018 @ 08:17:00 AM by Paul Meagher

Eliot Coleman, along with his wife Barbara Damrosch, own Four Season Farm in Harborside, Maine. They are both skilled growers with Eliot tending more to the vegetable side of the business and Barbara tending to the flower side of the business. They also write books for a living.

Eliot is well known as an innovator in season extension techniques and for designing new market gardening tools that have become standard market gardening tools (i.e., Tilther, Six-Row Seeder). I searched YouTube to see what Eliot was up to lately and enjoyed this recent keynote speech called Nothing Is Impossible.

Before Eliot, most growers would have thought it was fool hardy to try to grow vegetables commercially in Maine throughout the winter in unheated greenhouses. How was he able to accomplish this feat? Here are some of my answers based on this video.

1. Grit

You need a certain amount of grit, what Eliot calls stubbornness and persistence, to achieve an impossible goal or solve an impossible problem.

2. Competitiveness

One of the major motivations for Eliot to achieve the impossible was the desire to not lose his vegetable customers in the winter to California growers. You can be motivated to solve an impossible problem for many reasons, but keeping ahead of the competition is often a major source of motivation.

3. Problem is the solution

Permaculture founder Bill Mollison was fond of saying that the problem is the solution. Solving an impossible problem often requires looking at the problem as a solution to other problems. Growing veggies in winter solves the problems of market differentiation, better pricing, and pest control. Eliot is able to differentiate the produce he grows in winter from produce grown in California. His carrots, for example, benefit from being stored in the cold ground for awhile before they are harvested. They become sweeter and he is able to successfully market them as "candy carrots". Eliot is also able to price his produce higher if he is in the market with fresh veggies before other local growers. Over wintering crops or getting an early start makes this happen. Finally, growing crops in winter solves the problem of dealing with lots of insect pests that are only active in warmer temperatures. So part of solving an impossible problem is seeing aspects of the problem as the solution to other problems.

4. Practical inspiration

When we travel we often think of visiting art museums, beaches or other tourist sites. When Eliot travels he likes to visit hardware stores to see what they have that hardware stores in Maine don't. Eliot finds design inspiration in how other people solve practical problems although he probably has lots of theory to draw on as well. Eliot reminds us that another reason to visit distant places is not just to enjoy their tourist attractions but also to study the ways they solve practical problems. This might help you to see an impossible problem in a new light.

Another source of inspiration for solving impossible problems that Eliot does not mention is to study the lives of other animals and how they solve impossible problems. How is a caterpillar able to freeze rock solid but once it is warmed up it can go on about its business? How is a duck able to stay warm in a frigid pond? How is a queen bee able to maintain a sperm for several years from a one time mating episode with multiple drone bees? Humans need to freeze sperm to preserve it for that long.

One way to solve impossible problems is to see if nature has already solved a similar problem.

Partnering with inventors

Eliot has helped make Johnny Seeds (a 100% employee owned company) quite a bit of money from popular market gardening tools he helped to develop. Eliot developed early prototypes for new tools and then partnered with Johnny Seeds to manufacture and sell them. Eliot claims not to be making money of these inventions because he is primarily interested in seeing his ideas developed to the point of commercialization. I'm not sure if this type of partnering would work in other industries but it may be worth thinking about how you might partner with highly skilled people in your industry to help develop their ideas into commercial products. Rather then trying to invent things in-house, perhaps you can invest that time and money into identifying skilled practitioners and offer to support the development of their inventions to make life easier. It would be interesting to know more about how Johnny Seeds is able to benefit from Eliot Coleman's inventive mind.

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Neversink Startup Lessons [Agriculture
Posted on February 1, 2018 @ 10:52:00 AM by Paul Meagher

Neversink Farm has been releasing lots of new YouTube videos. Because of my interest in farming YouTube recommended I watch their videos. I took the bait and am glad I did.

The two main claims to fame of Neversink Farm are:

1. In 2017 they claimed to be grossing $350,000 on 1.5 acres of land. That puts them into the top 1% of farms in terms of farm productivity. See this popular video that goes into detail on their approach to farming.

2. A large part of their farming success is due to what they call a systems-based approach to farming. Part of what this means is that each vegetable is grown according to a particular system and they are always looking for ways to improve that particular system in the most impactful way. This leads to ever higher productivity on the same amount of land. A system-based approach also integrates growing with how you intend to retail your crops so it takes into account factors beyond the farm as well.

In some of Conor Crickmore's recent videos he reflects on his first year in farming and what he learned. I think they contain useful lessons for startups in industries besides farming.

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