Investing Smarts From A Farmer’s Perspective

October 18, 2022

Investing, like farming, is a long-term game. And as the Oracle of Omaha has once said,

“Games are won by players who focus on the field, not the ones looking at the scoreboard.”

You would think that there are few similarities between farming and investing – but take a closer look and have a deeper think – you will soon find that there are many common threads as well as plenty of quality characteristics that one should adopt and apply in their investment strategy.

#1: Farmers understand the importance of managing and mitigating risks.

In their line of business, farmers have to contend with various sorts of risks; many of which are beyond their control such as unpredictable weather (floods, drought), pest infestation, commodity prices, market demand, etc.

From the farmer’s perspective, he recognises the fact that despite the most concerted efforts, nature may not always be on his side and optimal outcomes are never a given. But do you see farmers selling off their land just because of one bad crop? The answer is likely no.

#2: Farmers know that the long-term is far more important than the short-term.

Keeping your eye on the long game can be challenging, especially when you are right in the thick of short-term market turmoil which no doubt can be upsetting and panic-inducing.

Same goes for farming – anything can happen in the next day and bad harvests are simply part and parcel of a farmer’s life. In the 2015 Berkshire Hathaway Annual Meeting, Warren Buffett shared:

“Nobody buys a farm to make a lot of money next week or next month, or they buy, you know, an apartment house. They buy it based on what they think the long-term future is. And if they make a reasoned calculation of that and the purchase price looks attractive, they buy it and then they don’t get a quote on it every day or every week or every month or even every year, and that’s probably a better way to look at stocks.”¹