Programming at last week’s American Banking Association’s Agricultural Bankers Conference focused on what’s next—with the nation’s economy, agriculture’s economy, Congress and the political environment, and the next generation of industry leaders. Some of the more interesting discussions centered on risk, both what might contribute to it and how it will be managed.
Risk is a familiar management issue for farmers and ranchers, who regularly deal with weather, markets, technology and finances. One of the unknowns today, noted Purdue University’s Jason Henderson and Brent Gloy, is the risk response of young farmers and ranchers whose management experiences may be limited only to the recent years of agriculture. A survey of young Indiana farmers indicated they had aggressive plans for the future, noted Gloy.
Given these experiences, how will these young managers handle the risks of a market reversal, lower income, low asset values or challenges yet to be defined?
Many young farmers and ranchers are likely millenials, aka Generation Y—those born between about 1980 and 2000. While difficult if not impossible to do, society has a propensity for assigning labels to groups—however inaccurate they may be. Millenials are no exception. Some researchers say millenials will be a civic-minded generation; others refer to their sense of entitlement and narcissism. Among the positives used to describe millenials: confidence, hunger for information, receptiveness to new ideas, tolerance, willing to employ technology, fast learners and willing to take risks.
The agriculture in which millenials are beginning their management careers has some unusual characteristics. One is that rather than managing with a sibling and/or a parent, the millennial may be on a management team with a sibling, a parent, an uncle, some cousins and a grandparent or two. Today’s operations also involve huge financial investments—in land, equipment, technology, inputs and risks.
The often-repeated investment disclaimer states that past performance is not an indicator of future results. Is the same true with the new generation of farm and ranch managers? When faced with management of risk will they stumble in the same way as past generations, or will they navigate a new, easier path through the turmoil? As one educator noted at the conference, you can tell a person about risk, they can hear how other people reacted to risk, but until risk is experienced, a manager cannot fully appreciate the challenges involved or know how they will react.
The youngest of today’s crop of managers have experienced only prosperous times in agriculture, so we have no measure of their steel in difficult times. The question is: How will the attitudes and skill sets that this generation brings to the management table influence their abilities to address risk? Will it be a management game changer? How will management teams of millenials and more mature business partners handle communication, decision-making processes and risk management? Will a hunger for information allow millenials to seek out and understand the lessons of the past—from family members or history in general—and use new technologies to mitigate or take on the risks of the future? How receptive will managers be to assess new or competing ideas and approaches?
In a recent article in the New York Times, consultant Tom Agan discusses millenials and innovation. Citing the book, “Why Nations Fail,” by Daron Acemoglu and James Robinson, Agan writes: “When a small, closed group of elites holds power, it tends to limit information and education and resist innovations that threaten its strength, the authors explain. By contrast, innovation thrives when information is unfettered, education is nurtured, people can readily form new groups and decision making is inclusive. These circumstances offset the strong tendency of those in power to resist change—in a country or at a company.”
Farmers and ranchers understand the importance of information—of events on and off the farm—to management of their operations. Adding to the mix the millenials’ focus on information, innovation and technology doesn’t eliminate risk, but it strengthens the potential for its management.