Posted on January 11, 2019 @ 09:02:00 AM by Paul Meagher
My main resolution this year is to become more organized. With this goal in mind, I started to sort my farm receipts for the last 4 months (Sept to Dec 2018). So far, the setup below is what works for me:
Shown here are 4 open legal folders on the couch, one folder for each of the last 4 months of 2018.
I also cut strips of paper, folded them in half, and labelled one side with a
label for the type of receipt that goes there:
CCA purchases (purchase over $500)
License & Registration Fees
I don't have to create the same number of category strips for each folder, just the ones that are necessitated by the types of receipts I
encounter for that month.
I initially thought I would use the 3 slot trays to sort my receipts into the proper month. After sorting receipts by month I would then sort them into the proper category. You can see a three slot tray on the coffee table and on the sofa that I was using for this purpose. It turned out there are some inefficiencies with this approach. As I was placing receipts into the proper monthly slots, I found myself not wanting to mix them together. Instead, I wanted to put frequently occurring gas receipts together in a pile separate from other receipts so I wouldn't have to sort through them again. I also noticed that small tool purchases were popular and that it would be efficient to separate them out as well. I then started examining receipts in more detail and decided that I only want to do this sorting decision once. So I stopped presorting receipts into the monthly slots and am placing them directly into the appropriate monthly folder with receipts of the same type wrapped in a strip of paper with a category label on it. There are also a few miscellaneous folders for special transactions like a land purchase, vehicle and house insurance, and utility statements.
This example illustrates a fundamental principle of Lean Bookkeeping - that you should handle receipts as few times as possible.
Receipts are like a split piece of wood. If you have a wood stove you are probably aware of all the handling that you have to do on a piece of wood before you insert it into your wood stove. Lean Woodburning involves reducing the amount of wood handling as much as you can. For example, last summer I got split fire wood for the farm from a local supplier so my wood handling began with carrying it from the back of the suppliers half ton truck into my wood shed where I piled it into rows. This is an improvement over previous years when split wood was dumped outside the front door of the shed. I had to throw or wheelbarrow wood from the pile into the shed and from there handled it again to pile it. I also didn't have the lawn damage and mess that dumping wood causes.
In previous years, I took wood to the house by carrying arm loads of wood from the wood shed to the kitchen and placing them into a wood storage box beside the stove. This year I got lazy and loaded the wood onto a Costco dolly and leave the wood laden dolly in an inclined position beside the wood stove. I'm saving myself the work of unloading the wood, the weight of carrying it, and only need to make one trip to have a good wood supply in the house. The dolly beside the stove is not winning any awards for beauty but it works for me when I'm at the farm in colder weather.
Any receipts we generate are like a piece of split wood and alot of my disorganization around receipts comes from handling them too many
times. I still have to transcribe receipt amounts into a digital format so there is more handling to come and more ways to lean my bookkeeping process. It would be nice if I was sufficiently organized that I digitized my receipts right away, but it is what it is and you have to start somewhere.
Posted on December 19, 2018 @ 10:05:00 AM by Paul Meagher
In my last blog Business Asset Accumulation I discussed the importance of business asset accumulation to starting and growing a business. In today's blog I want to dive a little deeper into what a business asset is from an accounting point of view and an investment point of view.
Assets are sometimes defined as resources or things of value that are owned by a company. Some examples of assets which are obvious and will be reported on a company's balance sheet include: cash, accounts receivable, inventory, investments, land, buildings, and equipment.
One of the exercises that you typically engage in when creating a business plan is taking an inventory of all the business assets you currently own. If they are personal assets and will not be used in the business then they shouldn't be considered an asset for the purposes of your business plan. We can refine our thinking about assets by using the standard accounting categories to classify the type of asset the business owns. Does the identified asset fall into the cash, accounts receivable, inventory, investments, land, buildings, or equipment category of asset?
A business asset is a piece of property or equipment purchased exclusively or primarily for business use. There are many different categories of assets including current and non-current, short-term and long-term, operating and capitalized, and tangible and intangible. Business assets are itemized and valued on the balance sheet, which can be found in the company's annual report. Business assets are listed on the balance sheet at historical cost and not market value.
For the purposes of accounting we have a common way to breakdown assets (i.e., cash, accounts receivable, inventory, investments, land, buildings, and equipment). For the purposes of investing we have another common way we might want to breakdown assets (i.e., current and non-current, short-term and long-term, operating and capitalized, and tangible and intangible).
The Investopedia article claims:
The management of business assets is arguably one of the most important jobs of company management.
In summary, this blog delved a bit deeper into the topic of what an asset is. Accountants and investors have some common distinctions they use to further classify the asset into a particular class of assets. When you are creating a business plan and you are thinking about what types of assets the business has going forward, you might use these distinctions to help remind you of the different types of assets that businesses often report.
One last distinction I would make is between potential and proven assets. Startups may acquire business assets with the idea of eventually using those assets in the startup business. Until those assets are tested for the intended purpose they are only potential assets. An example would be a water dispenser I purchased many months ago thinking I might use it to transfer wine from carboys into bottles (or another carboy). Recently I needed to bottle some wild blueberry wine that was already filtered and decided I would try using it to bottle the wine. It worked good for the first few bottles and then my concern became whether it could actually transfer the full carboy on a single charge (it has a USB plug to recharge the battery). It did and it only took around 20 minutes to recharge. I was pleasantly surprised at how well this gadget worked. It now goes into the "proven asset" category and I would feel comfortable purchasing a few more of these proven assets (just ordered 2 more) for my mini-winery startup.
Posted on December 13, 2018 @ 12:13:00 PM by Paul Meagher
One way to start a business is to begin accumulating the assets you will need to start that business. Those looking to get into farming, for example, might accumulate a tractor, some old farming equipment and any good cheap acreage they can get their hands on.
When we use the term "startup" we might think there is a specific point in time when that startup was conceived or launched. Sometimes a
startup is what happens after an extended period of business asset accumulation.
If you wanted to someday start a hair salon, and you have the storage space, you might spend alot of your spare time searching for deals on
a building, chairs, mirrors, lights, and products that you might eventually need to "start" that business. You are arguably starting the business already if you are accumulating the assets you will need to start it, but it may not feel like that. We expect some official opening to happen to make the startup seem real.
If you accumulate alot of useful assets prior to starting a company, that can help you get the further funding you might need to ditch your
current job and start your new business. Business asset accumulation demonstrates seriousness, it reduces your launch cost, it can help secure the investment (reduce investor risk) and it means less of your operating income will need to be used to pay down debt that you might have incurred if you didn't accumulate these business assets.
There are many ways to start a business. Asset accumulation is an often used approach. Probably more important in situations where goods and services are physically produced and/or sold. Business assets, however, can include intangibles such as patents, copyrights, team composition, letters of intent, permits and useful know how.
Hobbies can often be turned into businesses because of asset accumulation. My photography hobby resulted in me purchasing more photography assets to get better at my hobby. There are many more assets I could be purchasing if I thought I might ever want to turn this into a paying gig. Some of these asset purchases might come over time without an explicit intention to make money from my hobby; nevertheless, these accumulated assets bring me closer to being able to offer a paying service to people and would involve fewer startup costs to fully launch.
Asset accumulation also signals to investors that you have "skin in the game". Investors like to see that an entrepreneur has sufficient confidence in their venture that they have invested some of their own capital into getting it started. Not just time, but actual money.
Posted on December 10, 2018 @ 11:04:00 AM by Paul Meagher
For a few years now I've used a Canon SX50 camera to take all my photographs and videos. It featured a powerful zoom lens and 12 megapixel resolution. I liked the fact that I could zoom in and take pictures and videos with one hand. It was like having binoculars built into your camera and sometimes I just used it as binoculars. I still like that camera. I nevertheless wanted see if I could improve my photographs and videos by buying a new Canon Rebel SL2 camera. It requires more skill and I need to use 2 hands to operate it so I'm still on a learning curve. I captured a couple of nice landscape photos with the SL2 that I thought I would share.
I'm standing on a strip of land and a bridge that separates both sides of this body of water. The first photo is of the estuary where fresh water from the hills meets salt water from the ocean.
The second photo is where the navigable harbor starts and there is a wind sailing club that calls this section of the harbor home. I like taking photos near sunset and the camera seems to perform better than my old one under low light conditions. It was a calm evening so the glassy water threw off some nice reflections.
I recently looked at a book of nature photography from the late 70's or early 80's. The photographers were winning awards but the photography looked very coarse because the photos had such poor resolution. It was hard to appreciate the beauty of the scenery because the picture quality was so poor compared to today's standards. You had to be pretty dedicated to engage in the hobby of photography back then and the results often weren't that great (by today's standards). Perhaps I need to appreciate it as retro or vintage photography but that was a stretch for me at least.
In these days of needing to maintain a YouTube or Social Media presence it is easy to justify these camera upgrades as business expenses rather than hobby expenses.
Posted on December 1, 2018 @ 04:27:00 PM by Paul Meagher
Yesterday I picked up a couple of thin books on creating business plans. I am hoping this will motivate me and remind me of of the elements to include in my farm business plan. I intend to do most of the plan write up in December. I think December is a great month for business planning as January 1, 2019 is a natural choice to start implementing a business plan. December often marks the end of of fiscal year for tax reporting purposes and you can be starting to figure out what you earned and spent in the last year and use that to help in your planning.
The plan that I am developing with my wife will map out what we will do in the next 3 years to establish an estate winery operation on our farm (where wine is produced and sold on the farm). We have been gearing up for this by planting grape vines for the last few years, but to date we haven't created a formal business plan for how we expect this venture to unfold in the next 3 years.
Often you will need to create a business plan to obtain financing as the funder needs some idea of what you hope to accomplish, when, how much it will cost, how you will promote it, and what you expect to earn as profit. In our case, we need to formulate a business plan as part of a winery registration process. Funding and registrations are popular reasons for needing a business plan.
One element of a farm business plan that you might not see included in other types of plans is a section labelled "Holistic Context". Here the decision makers agree on a set of statements about values and constraints that they need or wish to operate under. Stating your holistic context explicitly can serve to setup valuable constraints on how the rest of your business plan will be formulated. Holistic context statements help to ensure that your plan is realistic with respect to values and the constraints of capital, time, machinery, etc... that the partners have to dedicate to the venture.
If traveling each year, for example, is really important to the partners, and this is included as one of your holistic context statements, then that constraint makes it harder to raise animals that might require 24 hour care 365 days a year. The farm owners state their holistic context so that they don't run into conflict in their business planning and how they run the operation. I wouldn't necessarily include an holistic context section in a business plan that I would be presenting for funding, but in the context of a registration process I think it makes more sense to do.
You can learn about how to formulate Holistic Context statements in
How To Write A Holistic Context: A Step By Step Guide. Ridgedale Permaculture provides an example of a well fleshed out set of Holistic Context statements (scroll down the page to view them). To be honest, I wasn't very by-the-book in coming up with my holistic context statements. I viewed the excise of coming up with some holistic context statements as a useful way of identifying constraints on how the business plan should be put together; otherwise, it is too open ended and only guided by what is good for the business. That can lead to an unrealistic plan for the owners if it doesn't match their holistic context.
The purpose of this blog is to remind entrepreneurs that December is often a good month to write business plans that go into effect
January 1, 2019. I also wanted to share with you the idea of starting the business planning process by formulating Holistic Context statements. These statements can serve to make writing the rest of your business plan easier because they provide useful constraints on your overall business planning and your write up. If your plan only makes sense relative to your Holistic Context statements, then it might be useful to include it as a section of your business plan.
Posted on November 30, 2018 @ 11:39:00 AM by Paul Meagher
A Turkish investor by the name of Abdul Latif Jameel is not a registered investor on our network. There have been 2 reports of him contacting entrepreneurs to discuss investing in their projects. We believe that he is googling public info in entrepreneur proposal summaries to eventually get into contact with them.
Here is his company and contact info:
Abdul Latif Jameel
President: ALJ Yatirim Holdings
The content of the website at aljyatirim.com is taken from another website. The owners of the real website have stated:
Our official website is this https://www.globalyatirim.com.tr/en/, as also stated on the kap.org.tr (Public Disclosure Platform), which is run by MKK (Central Securities Depository for Capital Market Instruments in Turkey). Information as to our board members is also available at: https://www.kap.org.tr/en/sirket-bilgileri/genel/967-global-yatirim-holding-a-s
We have been informed by other third parties as well that they have been contacted by an “ALJ Investment Holdings”, whereby “ALJ Investment Holdings” referred those third parties to aljyatirim.com, the whole content of which seems to have been copied directly from our official website.
Once the information on aljyatirim.com is reviewed, it can be seen that:
Our management and subsidiary information has been altered and copied
Our company name “Global” is on the picture on the main page
There is no phone details and half an address in order not to be searched online.
Our legal team is currently working on the matter, and we would recommend against continuing the communication that you have been receiving.
Anytime you as an entrepreneur are contacted by an investor claiming to be registered on our website, you can use their registered email address to do a status lookup using the Investor Verification tool in the entrepreneur login area. If that lookup fails to verify them as a registered investor, then please report them to us and discontinue communication until we have had a chance to look into the situation. We have had 2 reports so far of Abdul Latif Jameel contacting entrepreneurs for the supposed purpose of investing so we are publicly issuing a warning not to deal with him because he is 1) not a registered investor, and 2) is assuming the identity of another company.
One idea I had recently for how more plastic could be recycled is if there was a way to cheaply convert, say, plastic grocery bags into feedstock for a 3D Printer. If the 3D printed object can be taken back and used to create new 3D objects, then we would have some circular economics happening for plastic products and plastic packaging.
Posted on September 22, 2018 @ 08:30:00 AM by Paul Meagher
The image of the lean startup is often associated with spending as little as possible to verify your business model. The entrepreneur is living on ramen noodles, making a series of low cost minimal viable products and getting it out in front of potential customers to find out if they are on the right track. Eventually the entrepreneur reaches a moment when they can take on investment because they have reached a proof of concept and now need to scale. This type of business evolution is more likely to happen in the tech world because of the relatively low cost of entry.
Problems arise when we take this startup approach into a nonlean industry. A nonlean industry is one that is heavily regulated and which may require a high level of expenditure before you can even get started. You may need expensive licensing, meet standards that are costly to achieve, buy real estate, build structures, do extensive renovations, etc...
You can't do all these things on a shoestring budget.
Take for example the production of wine. To make a good bottle of wine you can make it with inexpensive plastic pails and glass carboys. To be able to get into the marketplace with your wine is not so easy. There are many regulations and standards that you have to meet before you may do so, even though you may be in possession of a product that a customer would like. In a nonlean industry startups need to raise significant startup capital to deal with regulatory compliance and other costs of doing business before they can even begin to do business. The legal cannabis industry, for example, is a nonlean industry as there are high regulatory compliance costs to doing business in that industry. This is offset by the potentially high reward factor, as it is in any nonlean industry.
Vegetable farming is an example of an industry where you can startup in a relatively lean manner and become even leaner over time. You can start simple but in time your lean operation can become heavily invested in efficiency improving tools and systems like this one:
In conclusion, the lean startup movement has a tremendous amount going for it but the image of starting a business on a shoe string budget is not applicable to some industries where other factors (fund raising success, compliance, networking) may have more importance in determining whether you can create a startup in that market.
Posted on September 5, 2018 @ 01:27:00 PM by Paul Meagher
When companies say they want to "scale up" their existing business, we might ask them to be more precise. If they want to double their business, then that would be a 2x scaling factor. If they they wanted to increase revenues from 1 million to 10 million then that would be a 10x scaling factor for revenues
On Youtube, one of the channels I like to watch is Stefan Sobkowiak's channel. He has a unique take on Permaculture orcharding and life in general. In the video below Stephan talks about a 10x scaling pattern for planting an orchard that involves planting 1/2 an acre, then scaling up to 5 acres (10x), and then scaling up to 50 acres (10x), etc... His discussion of this planting pattern takes place early in the video.
I am discussing this planting pattern because it provides an interesting example of how one might go about scaling up an enterprise. The number 10x was recommended by Stephen if you want to get serious about orcharding. That seems a bit extreme in general, but it is helpful to be as precise as you can be about how much you want to scale up your business.
It is also useful to imagine what you would need to do in order to achieve 10x growth. Perhaps you limit yourself to only imagining what it would take to achieve 2x growth - tweak this, tweak that. You can't tweak your way to 10x growth - some more fundamental changes will be required. These are often points at which a promising venture seeks additional funding (Series A, B, C, etc...).
Posted on August 16, 2018 @ 07:38:00 AM by Paul Meagher
One aspect of driving that I do not like is switching between low beam and high beam light. As a vehicle approaches I can't remember what state my beams were in and the indicator is obscured by the top of my steering wheel. I have to quickly duck my head down to see what the indicator says and then adjust the light beam intensity or not. I don't like taking my eyes off the road when vehicles are close so this is a significant safety issue as well.
Companies developing driverless cars must have figured this out by now? I would love to have a vehicle where I could activate automatic
control of light beam intensity. I suspect that this is already out there somewhere now but I don't research new vehicle technology enough
to know. I did some googling and came across a recent research paper Intelligent Automatic High Beam Light Controller (2018) that proposes a simple, low cost solution:
In order to make the driving at night time a safe experience and more friendly to the other drivers on the road an automatic high beam light controller is needed. This paper presents, a simple, low cost and easy to install, design for an intelligent automatic on/off high beam light controller. The proposed design was implemented using the required hardware and components. The experimental results show that the controller provides the driver with the required automatic control; by turning on and off the high beam light when facing other drivers. Moreover, the system will turn off the high beam light if there is enough lighting on the surrounding environment such as when driving inside cities.
This automatic high beam light controller example illustrates the point that I would like to make about the future of driverless cars. Instead of
expecting driverless cars to arrive on the scene some year in the future in all the new car models, I would suggest that the companies developing
driverless car technology are going to need to figure out how to modularize the different technologies involved (such as automatic high beam light control) and to gradually incorporate these modules into new car models. In other words, there will be a gradual transition to
driverless cars with new car models offering one or more modules that assume control of some aspect of driving such as high beam control.
Another feature might be to automatically stay between the median line and side of the road. It might not be available under low light conditions unless you have the high beam control module.
We often take for granted all the abilities that are required in performing a complex act like driving. The car industry might eventually agree
upon what the list of component abilities are and strive to make their component modules interchangable or reusable across car platforms.
In my opinion, what is interesting about companies developing driverless car technology may not be so much the end game - the fully automated driveless car. Rather, it is the component technologies they are developing and how those component technologies will be gradually released in new car models. I would argue that the roadmap of driverless car technology is to develop modules that automate different aspects of driving, not to fully automate driving in some high tech car of the future.
Posted on July 26, 2018 @ 07:45:00 AM by Paul Meagher
When we think about design, we perhaps think of it as one type of mental process or activity. A recent article
called Positive, Negative,
and Neutral Design argues that we can engage in landscape design by adding, subtracting, or doing nothing to the elements
in the landscape. Often we think about design as coming up with a plan and then implementing that plan by adding the elements
in our plan to the landscape. Another way to approach landscape design is to remove unwanted elements from the landscape. This is
called negative design. It is often less labor and resourse intensive than positive design. An example would be to create a pasture
for animals by selectively cutting away trees in a forest. This is the way agriculture would have spread in the beginning. Neutral
design involves "doing nothing" by letting the landscape evolve on its own. The basic idea is to approach landscape design with a
combination of positive, negative, and neutral mindsets to come up with a landscape design that works.
The author advocates an approach to landscape design that involves letting many flowers bloom and then culling what you don't want. In other words, plant many seeds/seedlings without alot of regard for whether they will survive or not, see what grows and what doesn't grow, and then cull out what you don't want. He calls this a weakly positive approach combined with a negative approach. It is often how
new farmers begin their farming careers by trying out different things, seeing what works and what doesn't work, and then focusing
resources on what does work and less or no resources on what does not work so well.
My wife is trying to get my son to get rid of clothes he no longer wears from his room. We are essentially asking him to engage in
negative design - remove the unwanted elements from his wardrobe. I suggested that perhaps my wife would have to do the negative
design for him and leave him with the positive design aspect of picking out the elements he does want from what was culled out. The
point here is that a negative design problem isn't necessarily more easy than a positive design problem and that we can approach the
same objective (remove unwanted clothes) from different mindsets [negative (son) OR positive (son) + negative (mom)]. My sons mindset is probably a neutral one - leave things as they are, its my room and I don't have a problem with how things are right now. That mindset will not survive my wife's desire to remove clutter so she can take more
control of the room when he leaves again for university. So the neutral mindset will have to go.
The article discussed in this blog was posted on the website, Making
Permaculture Stronger, where an inquiry into the merits of different approaches to landscape design has been going on for awhile now. The four approaches under consideration are winging it, fabricating, hybrid, and generating. In the 22nd post in his inquiry, Dan Palmer arrives at the conclusion expressed in this diagram:
Essentially, Dan is arguing that the traditional fabricating approach that involves designing all the elements up front and then implementing that design does not work very well in practice. One better approach, the hybrid approach, is to do the high level design so you are guided at the macro level, but to do the detailed design in stages as you implement parts of the high level design. This allows you to incorporate feedback as you proceed to the next part of the design, while maintaining the overall structure that you want to impose. I would argue the diagram is incorrect in that imposing and unfolding boundaries should meet in the center above the hybrid approach. The generating approach is a bit more radical in that even the high level design has the potential to be altered in light of feedback from the low level design.
The purpose of this blog was to consider whether design is one type of mental activity or process or whether it actually refers to a multitude of mindsets and approaches. My conclusion is the latter. There are multiple mindsets that you can use when engaging in a design - positive, negative, and neutral - and there are multiple approaches you might adopt which include winging it, fabricating, hybrid and generating. In contexts with alot of uncertainty winging it might be appropriate and it seems to me that engineers are often asked to use a fabricating approach. That same engineer might use a hybrid or generating approach when it comes to their home landscape design because they have the luxury of doing it that way. Sometimes you are given more creative leeway to work with the landscape.
Posted on June 12, 2018 @ 11:06:00 AM by Paul Meagher
I used to think time and motion studies were a relic of the past, something that was popular when we started creating assembly lines but which became less relevant as jobs became more service oriented or knowledge based. To some extent that is probably true but there are still many useful applications of time and motion studies. In certain industries it is still an important key to success because it leads to lower labor costs, greater efficiency of work and more reliable estimates of how long jobs will take.
Time and motion studies refers to two different types of approaches to analyzing work. A time study involves using a stopwatch
to figure out how long it generally takes to do a task. A motion study examines the movements used to execute a task with
an eye towards optimizing the sequence of movements. Video recording can be often useful for motion studies.
On my weekend at the farm, I was working on clearing out vegetation around the grape vines in my 2 small vineyards (total 2 acres). It involves many repetitive steps and I would like to optimize how long it takes to complete the work. I am actively trying to figure out the "one best way" to do this work but I can't really claim to know that for certain as I haven't studied the time and motion involved in doing the work in different ways. Nevertheless I did time how long it took me to drag a lawnmower up and down the vineyard for a single row of vines - around 8 minutes. I can now estimate how long it might take to do all 8 rows in 1 of my 2 vineyard areas (1 hour and 4 minutes). What I am ultimately aiming for is to estimate how long it would take me to complete all 3 stages of my vegetation management for each vineyard area so I can figure out if I can manage it or if I need someone else on board. I've guessed this in the past, but it would be better if I could come up with better estimates of the time required for the actual work involved.
Note that I wouldn't have to do the pull mowing shown in this video if I didn't have a ditch on one side of the row that prevents me from getting closer with a lawn tractor. Using a push mower is also more of a precision tool than a lawn tractor so can trim closer to the vines.
I am still in the early days of conducting proper time and motion analysis of vineyard work. I need to time how long it takes to do each stage and not just the "dragging the lawnmower" stage. Then I can add the times up and get an overall estimate. This can be compared to the actual time it takes to do the work which may include time to rest, to fuel machines, to fix machinery, etc... This is information I should know in order to better manage work in the vineyard.
I hope this discussion and case study helps you to decide if time and motion studies might be helpful in improving your operations.
Posted on May 31, 2018 @ 08:54:00 AM by Paul Meagher
How do you test whether consumers will like your product or not?
How do you reformulate your product so that consumers will like it more?
In the online world, A/B testing is a good way to figure out what works and to improve on what works. In the offline world there are a host of other techniques that are often used. A good resource to learn about some of those techniques is Sensory Evaluation Techniques (5th Edition, 2015).
Many of these techniques have been used in the development of food products. For example, a brewer might want a high level of hop character in their beer and to do that the brewer purchases different lots of hops that cost different amounts of money. If the brewer purchased 5 different lots of hops then s/he can offer 5 different versions of the beer to a test panel and get them to rate the intensity of hop flavor on a 0-9 scale. The objective of the brewer is to produce a hoppy beer for the least amount of money. A panel of 20 tasters were used. They were randomly exposed to the beers with different hops used. They are exposed 3 times to the same beer type. Mean ratings for each beer type along with other types of analysis were used to determine which hops produced the desired level of hop character. All other things being equal, if two different types of hops produced the same level of desired hop character, then the least expensive hops should be used to make the beer.
This example illustrates that the goal of sensory evaluation techniques is often not to simply come up with the best formulation of a product, but also to come up with a formulation that is as cost effective as possible. You may, for example, use different types of sweeteners in your product formulation that cost different amounts of money to determine if you can get an identical taste using a cheaper sweetener.
Because the lead author had a professional interest in flavor compounds in beer and hops, and was vice president of research at Stroh Brewery Co. in Detroit Michigan, there are some good practical examples of how to apply sensory evaluation techniques in the context of making beer.
Reading a book on Sensory Evaluation Techniques is not exactly easy or enjoyable reading. One way to read the book is to only read enough to figure out what technique might be useful for the particular product development or testing objective you have and then to delve into that technique. Another way to read the book, and the one that I find myself using, is to read the case studies illustrating how a particular technique was employed. Reading these case studies is often quite interesting and can give you ideas about how you might want to apply the technique to your own product development problem.
Posted on May 25, 2018 @ 10:13:00 AM by Paul Meagher
I drove down to the farm property on thursday to sell some square bales of hay from the barn. After my online and farm work was done for the day I went to visit
a local swimming hole and was pleasantly surprised to see that someone did some trail development since I visited last fall. I explored the trail
for awhile and, given my recent interest in Forest Bathing, I felt like this was a trail where a person could do some serious forest bathing. I took some
footage of a deep woody to riverine section of the walk. The ideal forests in this area are called Acadian Forests and are characterized by a diverse mix of hardwoods
and softwood species, often with brilliant colors in the fall. It is springtime during this walk so the leaves are still in the process of emerging. At one point in
the footage, I look at a rock type that is interesting and reminds me of coral rock.
On my drive down I decided to listen to Bill Mollison's 1983 Permaculture Design Course.
When I hit the play button, the part that started playing happened to be about the many ways in which water and trees are interconnected. He refers, for example, to a forest as a "standing lake" and trees as "columns
of water". He discusses how much surface area an acre of Eucalyptus Trees might expose to the atmosphere and comes up with an estimate of 1200 acres (there are studies on this). An intact forest is a huge condensing surface for water helping to regulate the humidity of the forest and the surrounds. He also discusses forest-based rain which occurs when humid air released by a forest supplies water to the atmosphere that causes rain downwind from that area of the forest. That area of the forest in turn adds humidity and the cycle is repeated. Remove large sections of forest and that type of rain does not happen.
I have some skepticism about these claims as do many scientists, but I do acknowledge that Bill is putting forward his own mechanical theories on the origin of precipitation which are quite testable. There is some evidence to support his claims. Bill views trees as a "living system" that has a more profound effect on the availability of water in the landscape than most scientists would claim.
Bill's discussion of trees and water offers another reason why the term forest bathing is so apt. If a forest is a standing lake why wouldn't we call it bathing when we walking in or near a dense forest canopy?
I don't think forest bathing is something I will do everyday. Sometimes I will just go for a walk around the block for my physical exercise. When I am at the farm I will do more forest bathing because there is lots of forest land around here and lots of it I haven't yet explored. When I am in my favorite spots in a forest, next to a steam, I am generally not thinking that I want to forest bath here. I have interests in hydrology, forestry, and permaculture that caused me to be there and are contributing to my enjoyment of the forest. The fact that I am forest bathing is often of secondary concern but sometimes, in particularly beautiful sections of forest, I may feel compelled to make forest bathing a priority so I don't miss the feeling of beauty that the forest is radiating.
The term forest bathing might also be used to help remind us that trees and water are interconnected in many ways. The forest is not just a carbon sink, it is also a water sink and source.
Happy memorial day weekend and I hope you have the opportunity to do some forest bathing and figure out what it means to you.
Posted on May 17, 2018 @ 10:57:00 AM by Paul Meagher
There are many types of thinking but for the purposes of this blog I propose to divide the universe of thinking into two types: Magical and Functional.
Magical thinking occurs when we don't understand the functional nature of something. Functional thinking occurs when we are attempting to understand how something functions or have figured out how something functions and can apply that knowledge to solving problems.
The world is very complex and our understanding of many aspects of it are at a magical level. How does your car work? How does the forest work? How does your home plumbing work? How does your home electrical system work? How does your computer work? You may think you know the answers to these questions but as soon as you are confronted with the problem of fixing or evolving these systems, some magical thinking is often revealed.
On my walk today I wondered how much of our thinking about starting a business is magical version functional. Some entrepreneurs believe that passion, hard work, and faith are key. This seems pretty magical to me but I don't know that I can criticize it too much in terms of results. Many of our ancestors had this ethos.
There is a bit of magical thinking involved in starting most businesses. The most critical piece of magical thinking are the leap of faith assumptions that define what the startup believes to be true, but without much actual supporting evidence in the early stages of the business. A major goal in lean startup theory is to test these leap of faith assumptions so they become a functional theory of the firm. Some magical thinking is at the core of starting a new business but it generally gets converted to functional thinking as the leaps of faith are tested and refined in the marketplace.
The term magical thinking is often used as as a put down in debates. A recent example is The Magical Thinking of Ecomodernism. The solution to alot of the problems of modernity may not be solved simply through a clear functional understanding of how things work, it may also require some magical thinking involving passion, hard work, and faith that local solutions can be found.
The book is a joy to read. It includes lots of forest imagery from Japan and you can learn alot about Japan from his discussion of Japanese forest culture and the role that forests play in contemporary cities in Japan. They really do appear to take the concept of forest bathing seriously in Japan with certain forests certified specifically for forest therapy.
Forest bathing sounds like it might be new-age tripping, but Dr. Qing Li reports alot of the research he has done over the years measuring levels of stress hormones, levels cancer killing immune cells, sleep duration, mood changes and other aspects of physical and mental health that changes as a result of exposure to forests. How much exposure, where, when, and why are all discussed in the book. You can get a preview of the art and science of Shinrin-Yoku by watching Kirsten Dirksen's interview with Dr. Qing Li.
I was under some stress this week and decided this morning that I needed to do some Shinrin-Yoku. I found a logging road leading through a young forest to an old pasture full of wild apple trees. When I exited the young forest I was drawn to a small stream that I wanted to follow back to the headwaters. I never got there but following a small stream through a wild apple tree forest is my idea of beautiful so it was an immersive way for me to forest bathe. I did manage to forget about my worries and stresses. On my drive back home I also had a breakthrough on the problem that was causing me the stress. Appears that stressing about a problem may block solving the problem. Shinrin-Yoku has many benefits.
Shinrin-Yoku is an approach to mental and physical health that is becoming more relevant as we spend more time indoors, in urban environments, and with our electronic devices. Shinrin-Yoku is about using all your senses again to experience nature. It would appear that forest trails between 2 and 4 kilometers offer a good dose of forest therapy. Doing it in the afternoon may offer more benefits than in the morning but for me the morning is when I find it easiest to do.
You don't need to live in a rural area to practice Shinrin-Yoku as many cities support nice walking trails through wooded areas. Some forests are denser with trees and better places to practice Shinrin-Yoku. One interesting figure in the book is the 40 most beautiful forests in the world which might be a good bucket list for those wanting to do some forest bathing tourism.
Posted on May 1, 2018 @ 07:12:00 PM by Paul Meagher
Wikipedia defines a fudge factor as an ad hoc quantity or element introduced into a calculation, formula or model in order to make it fit observations or expectations.
A common use of a fudge factor is in project management where you estimate how long a project might take and then multiply that time by some fudge factor to account for events or difficulties you can't anticipate. The size of the fudge factor might vary by task type or by how much estimating skill you have.
Another use of a fudge factor is in pricing your services. You might, for example, price your services differently depending on how busy you are. If you are busy already then you might multiply your going rate by some premium (e.g., x1.20 = 20% more) because you don't really need to add more work to your plate. If the customer bites at that price then it would be worth taking on the extra work but if they don't then you already have more than enough work at your going rate. Many different factors might influence your service pricing and the corresponding fudge factors you might want to use.
Fudge factors are also common in valuation where the value of a company is estimated to be some multiple of earnings (or some other quantity) common to companies in that industry. This reduces a very complex analysis to a simple rule of thumb that may or may not prove to be predictively accurate.
I recently did some year-end accounting for my farm and had to apply a fudge factor to my books to account for some uncertainty in my final numbers. A farm is like a small manufacturing plant that incurs lots of different types of expenses and receipts. The farm accounting fudge factor involved not claiming a certain amount of expenses that my bookkeeping told me I could claim. I left them unclaimed because I wanted to give myself a margin of error in case I was ever audited. The use of fudge factors in accounting is generally frowned upon and for good reason (see below), however, there is a cost to striving for extreme accuracy and there are judgement calls as to whether certain expense should be claimed. There is also procrastination and deadlines that force you to spend less time than you would like re-examining your receipts and numbers. To protect myself, and to terminate the accounting process faster, I used a fudge factor that involved not claiming a certain amount of expenses on the off chance that I might be audited. If audited, the government may end up owing me money. I can sleep soundly at night knowing that.
Fudge factors in accounting are often used to inflate earnings to make a company look more profitable than it is. Such practices are often called "creative accounting". Creativity in accounting is apparently a bad thing but you will often hear people say a good accountant will pay for themself - not because they are "creative" but are good at finding ways to decrease income and increase expenses. See The Ethics of Creative Accounting for more discussion of "creativity" as it applies to accounting.
Does the use of a fudge factor indicate that there is a problem with your approach to estimating, pricing, valuation, and accounting? It very well could be, but I also think that there is just alot of uncertainty out there that that involves diminishing returns to try to tame. You can keep on trying to estimate how long it will take to build a house but mother nature, suppliers, workers and financial institutions can all throw a wrench into your meticulously prepared estimates. People of action may be happy with throwing a fudge factor onto an estimate and getting on with the business at hand.
What causes these adjustments to be called fudge factors is that they seem ad hoc, not based in any solid theory but perhaps based on experience. The definition of a fudge factor does not indicate why we might be tempted to introduce an ad hoc quantity into our calculations. In this blog, I've provided a few reasons why we might be tempted which often comes down to a fudge factor being a strategy for dealing with uncertainty and time constraints. Because entrepreneurs and investors are often mired in uncertainty and have a limited amount of time to get things done, fudge factors may be the key to moving forward.
Posted on April 18, 2018 @ 09:31:00 AM by Paul Meagher
Last weekend I decided to walk the watershed at my ridge top farm property. The lowest area of our property has a marsh area that eventually turns into a running stream. It is the headwater area for the stream. The stream then runs for about 500 feet to the end of our property onto our neighbor's property.
As I followed the stream down I noticed 5 tributaries that joined the stream. In some cases these "tributaries" appeared to contribute almost the same volume of water so it would be difficult to say which stream was the "main" stream. A watershed does not have to end where the water meets an ocean or lake. You can arbitrarily stop at any point in your journey down a stream and say that you are only interested in the watershed before that point. For me, the end of my journey and my watershed was about 2 kms (1.25 miles) down the stream where
the first large pool of water forms. Because it is next to a road called MacKillop's Road, I decided to call the watershed the MacKillop Pool Watershed.
It came as a bit of a surprise to me that intimate knowledge of a watershed is now within my reach. All I had to do was follow all the tributaries back to their headwaters and I could better understand how the landscape creates the flow that is observed draining into the MacKillop pool.
I walked one tributary which took me far into the woods and increasingly into wilder country. Some bears are waking up and some coyotes are roaming so I decided to stop my journey before reaching the end. I'll finish the walk with a partner in the near future to see where the headwaters lie.
The next tributary I walked was the first tributary that meets the stream after it exits my property. I followed that stream quite a distance to a neighbors farm where the stream originates around a wet area of his field. I encountered the most debris so far on that tributary which I intend to clean up on my next walk when I have something to transport it out with. One of the main causes of debris in this area is the open fields and wind blowing stuff off properties that end up in low points in the landscape such as streams. One item that blew into the stream was Santa Claus (and some white silage wrap).
I still have 2 or 3 more tributaries that I will need to walk in order to visit the full MacKillop Pool Watershed. I'm looking forward to what I might observe and learn on these walks.
Fallen trees, dense alders, and spruce thickets are some of the obstacles that I frequently encountered as I walked the watershed. It is not a walk you do for pure pleasure. I carry a Fiskars billhook to help me get through really dense areas (and if I encounter some animal that wants me for a meal). One way to walk a watershed is by looking for "reaches" along the watershed. The term "reach" is used in geology to refer to a level, uninterrupted stretch of a stream. I find myself wanting to use the term "reach" to refer to the land beside and/or accross the stream that looks like the best way to get to the next point along the stream. When you are in the midst of many obstacles to your path, your plan is reduced to trying to "reach" the next viable point ahead.
The term "reach" is one that might be useful for entrepreneurs to have in their vocabulary. On the one hand you have a business plan which tries to map out the equivalent of a watershed, and then you have a reach which is how you actually navigate that watershed in a world full of obstacles. From where you are at, you need to continually look around you and figure out what is the best way to get upstream. There is no point in planning too far ahead given the uncertainty of the obstacles in your path so you look for a "reach" that at least keeps you moving in the right direction. And as you find and cross a series of reaches, you may eventually achieve the goal of getting to the headwater.
I didn't have a chance to go for my river walk for a few days so was restricted to only thinking about flow. The last couple of days I have
resumed my walks and vividly observed an interesting feature of water flow called backflow.
If you watch the water in a river go past you, you probably noticed areas in the stream where water seemed to swirl away from the
main body of the river flow and go backwards. It can be difficult to visualize what is going on in these areas just from observing
the water ripples. Fortunately, the last couple of days there have been ice plates floating on the river that can be used to help visualize these backflow forces. In this video, you can observe the ice plates whirling back into the eddy pool.
An observation is not really an observation until you make a statement about that observation that you believe to be true. For example:
The residence time of water in a stream is increased in backflow sections of a stream.
Water stays in the river longer where there is backflow because it cannot escape the backflow forces. This seems to be what is going on based on seeing the release and continued recruitment of ice plates into the backflow section of the river.
The art of observing is also the art of making observation statements that have some generality and importance. I could formulate the observation statement "there is a yellow rock protruding from the stream" but who cares about that observation statement? It is, however, important to make mundane observations in certain contexts. If you are designing a garden or landscape for a client, it would be important to note things like "ditch is overflowing", "client has 2 dogs", "sun at noon is over the
bird feeder from center of deck", etc... In the case of my backflow statement, it is a useful reminder that water does not flow at a uniform pace down a stream, the residence time of water may differ in different sections of the stream.
In Lean Startup Theory the goal is to learn about your market as quickly as you can by interacting systematically with it. There are some
specific recommendations from lean startup theory about how to measure this learning progress, but one simple metric might be how many significant observation statements you are able to come up with about your market and the running of your business.
These observation statements do not have to lead to immediate benefits in performance but the idea is that as you build up observation statements, and a truer picture of the world, that there would eventually be benefits in terms of better design or better running of your business.
We are not passive observers of nature and the observations that we make are often to see what effect various manipulations might have. These active observations are also an important part of the observations statements you might generate.
One way I intend to learn more about rivers to by making more observation statements. The backflow observation statement is a starting point. It leads me to wonder if I would be more likely to catch trout in backflow sections of a river than in other sections. If true, this could be regarded as the payoff for making these observations, but the payoff for me is to enjoy my river walks more by observing and learning from nature. A more general point is to suggest that a good way to measure learning (business or otherwise) is through the number and quality of observation statements generated from passive and active observation contexts.
Bill Mollison's 1983 Permaculture Design Course offers a good discussion on observation and making observation statements. Alot of his course consisted of making observation statements, debating them, relating them to other
observations and to theories, and making design suggestions based on the observation statements. Bill advised new landowners to spend some time observing and making observation statements about their property (e.g., 15 Things to Observe Before Starting Your Permaculture Design) prior to making any design changes to it as this is likely to generate better designs.
Posted on April 5, 2018 @ 06:06:00 PM by Paul Meagher
I'm getting ready to go out in the blustery cold wind to do some grape vine pruning for an hour or so. Sometimes I wonder why I do it? The question presupposes that we should live our lives in perpetual comfort instead of challenging ourselves against sometimes unpleasant circumstances.
The title of this blog was inspired by an essay in George Monbiot's book of essays called How Did We Get Into This Mess? (2016). The essay is called "Addicted To Comfort" and here is a sample of the impressive protest writing on display in that essay (and the book in general):
Had our ancestors been asked to predict what would happen in an age of widespread prosperity in which most religious and cultural prescriptions had lost their power, how many would have guessed that our favourite activities would not be fiery political meetings, masked orgies, philosophical debates, hunting wild boar or surfing monstrous waves but shopping and watching other people pretending to enjoy themselves? How many would have foreseen a national conversation - in public and in private - that revolves around the three R's: renovation, recipes and resorts? How many would have guessed that people possessed of unimaginable wealth and leisure and liberty would spend their time shopping for onion goggles and wheatgrass juicers? Man was born free, and he is everywhere in chain stores. ~ p. 25
To experience the fullness of life, it is necessary to get out of your comfort zone. I expect that once I start pruning I will realize that it is not such a bad thing to be doing. I will, however, pull on longjohns to add confort. I am not a masochist.
Ben Falk echoed this sentiment in his excellent recent video on maple surgaring. Ben Falk turns philosophical in this section of the video and ends with the admonition to "Stay vigorous, don't make things too easy".
I think entrepreneurship and private investing are also exercises in getting outside of comfort zones. These snippets are useful reminders of that.
Posted on April 4, 2018 @ 11:58:00 AM by Paul Meagher
This blog is a continuation of my recent blogs on rivers and flow patterns (see Part 1, Part 2, Part 3).
If you want to understand river flow you will need to study some watershed maps. The watershed of a stream is the collector area that feeds water to that stream. Properties of the watershed determine how that watershed responds to a rain event. The watershed response determines stream flow volume.
A digital elevation map (DEM) can be used to render the surface of the watershed landscape. Other maps can be overlayed onto this map to indicate, for example, infiltration rates and hydraulic roughness. Finally, if you overlay a grid onto these maps you can compute on a cell-by-cell basis (using slope, infiltration, runoff, roughness as parameters) the contribution of that watershed cell to the stream flow. You can add precipitation to this model to compute the response of the watershed and predict flow volumes.
This is a physics-based approach (versus the more common empirical/statistical approach) to simulating and predicting stream flow. It sounds fairly simple in theory but there are many details that need to be figured out if you ever wanted to do this in practice. A good book for learning those details is Distributed Hydrologic Modelling using GIS (3rd Ed., 2016) by Baxter E. Vieux.
A Geographic Information System or GIS is a piece of software that not alot of the general public uses. Now that I have a reason to use one, to map watersheds, I began looking around for a free opensource GIS system. From my research, the premier opensource version appears to be QGIS.
I am using a windows desktop operating system for the software so I downloaded an older stable 64-bit version (2.18.18-1-Setup-x86_64.exe) from http://download.osgeo.org/qgis/windows. This is a large download that installs alot of opensource geo software for windows so expect download and installation to take awhile. The latest version (v 3.0.x) can also be downloaded and run alongside the older version if you want to experiment with a buggier version of the software without as much tutorial support as the stable version. The QGIS software can also be run on other operating systems by finding the appropriate repository to download from.
My first impression is that QGIS is full of features that would take quite a while to master. There appear to be good learning resources out there for it. It is used in industry and by governments so it is not immature software. Powerful geomatic software is now within the reach of the average Jack and Jill.
To understand river flow we have to understand the larger context of the river. That larger context is called the watershed and it can often be defined precisely based on how the land drains.
A watershed is like the market for a product or service. It may be a small watershed that supplies a small first-order stream or it may be a large watershed that supplies a third-order stream. Properties of the marketshed determine the flow of traffic to your product or service. If you have alot of time on your hands, you might use GIS systems, overlays, and grid-based computing to model how consumer traffic might flow to your product or service.
Those who advocate for a bio-regional economy often make use of the watershed concept to delimit what is considered to be the local economy. Proactively, you should make an effort to trade with those who you share a watershed with. That seems like a crazy idea in some ways but in other ways it is reflective of how things worked historically and that history still bares an imprint on current trading practices if you look at trade through a watershed lens.
Another reason to trade with someone who you share a watershed with is because if that person lives upstream or downstream from you, then you are all interconnected by the various uses that you make of the water resource. Water quality and volume is a function of the whole watershed, not just some section of it. This is a very important connection that watershed users share and could be the basis of thoughtful trade patterns. Restricting your trade to just those within a certain distance from you (e.g., 100 mile diet) can cut across watersheds. That may not be that important to you, but it is a factor that is perhaps less arbitrary than a simple distance measure for defining what is local or not.
In conclusion, mapping watersheds is useful for understanding and predicting water flows. Techniques and technologies used for mapping watersheds might also be relevant to mapping marketsheds. Finally, the quest for sustainability dictates that the marketshed and the watershed should become more aligned.
The book covers different approaches to river science, more specifically flow prediction, involving neural networks, markov chains, information theory, spectral analysis, chaos theory (fractals), complexity theory (cellular automata) and monte carlo methods. I was a bit disappointed at first because I was looking for something a little more meaty about the mechanics of river flow and this seemed a bit too high level. I eventually picked up a book on hydrology for lower level details (Environmental Hydrology , 2015) which complimented Sean's faster-paced high level discussion of how river flow can be related to physics, geology and astronomy using modern tools and techniques. Sean discussed may interesting and complex topics is relatively short book (204 pages) in a way that was easy to read and entertaining. I recommend it if you have an interest in rivers and flow patterns.
To begin predicting river flow, it helps to have a time series consisting of a river flow measurement recorded at regular intervals of time (e.g., daily, monthly). Hydrologists try to predict these flows using different types of models. One type of model is an empirical one that statistically relates flow rates to dominant factors like rain fall, snow depth, temperature, previous day's streamflow, watershed topography, etc... These are often the types of models that are developed in practice for streamflow forecasting. Another type of model is a process model that uses physics equations to represent meteorological inputs and internal watershed characteristics. You run the model with the proper inputs and the model simulates expected stream flow. A final type of model is what I would call phenomenological that is based on extended observation and interaction with river flow. A beaver, for example, uses a phenomenological model to predict and alter river flows.
Humans are fortunate that we can develop empirical and process models of stream flow patterns, but it is interesting that a beaver can have a profound beneficial effect on water flows using only a phenomenological model based on observation and interaction with flows. In the Devon area of England, the wildlife trust has re-introduced beavers to an enclosed 6 acre area to study how they alter their immediate environment and downstream areas. Their main findings were that 1) beavers significantly increased biodiversity in that area, 2) they altered flow patterns so that downstream areas are less likely to flood because of the impounding and slow release of water from their dams, and 3) their dams act as a filter cleaning agricultural pollutants from the streamflow. Some of that research is reported in the Devon Wildlife Trust Beaver Project Update (PDF).
I would like to draw you attention to one graph from that report that shows the evolution of the dams over time. Starting from 0 dams in 2011 they have constructed 13 dams and completely altered and enlarged the flow of water through the landscape
I think it is worth keeping the beaver in mind when we think about modelling the flow of automotive traffic through a streetscape, the flow of foot traffic through a mall or store, or other flows that are of concern to us. We can certainly construct sophisticated models to explain and predict these flow patterns, but phenomenological models developed through sustained observation and interaction can also be powerful ways to understand these flows for the purposes of modifying them in beneficial ways.
Posted on March 7, 2018 @ 09:55:00 AM by Paul Meagher
On my morning walks by the river I take note of how much water appears to be flowing in the river. Lately the flows have not been that high because most of the snow has already melted and there has not been that much rain or snow for the last few weeks. Previously, when the snow melted the riverbanks overflowed onto roads and it was a very different river.
How do you explain and/or predict the flow of a river?
To predict flow you need to start by having a good measurement of existing flow. A standard technique is to measure the width
of the stream and the depths of the stream at various regular intervals then sum over these trapezoidal area estimates (A = Σ ai). You would then have to measure the velocity v of the water perhaps by floating a cork in water between two markers and timing how long it takes. Once you had area and velocity measurements you could compute a flow volume (Q = A x v). This flow volume would vary from day to day.
What factors might you use to explain and predict a river flow?
Explaining a river flow is different than predicting a river flow. A big factor in explaining a river flow volume is the number and size of tributaries leading into it. This factor stays fairly constant from day to day so is not very useful in predicting the daily variation in river flow. Other factors like precipitation, ground saturation, ground permeability, evaporation, etc. might be more useful in predicting the day to day expected flows.
Most cities are built along a river. Around half of those cities withdraw a major part of their water supply from upriver. Depending on the size of the city and its seasonal demand for water, this extracted volume could be a significant factor influencing flow rate.
A home property can also be the focus of an investigation into daily flow volumes. What factors explain and predict the amount of water you use on your property on a daily basis? Those on metered water have an advantage over non-metered users in that they can figure out those factors better because they have accurate flow measurements to go by (depending on how that usage is reported).
Cashflow is another type of flow that concerns entrepreneurs and investors. What are the factors that explain and predict the cashflow of a company? What is the time frame of concern in our cashflow projections - a day, a week, a month, quarterly, etc... The time frame determines how frequently we would have to measure cashflow to determine if the cashflow model is correct. Comparing cashflow models to riverflow models offers potential insights.
Donnella Meadows in her book Thinking In Systems: A Primer (3rd Edition, 2008) uses a slightly more complex stock and flow diagram to explain and predict the volume of living wood in a forest and also the lumber inventory associated with that forest:
There are many mathematical and graphical techniques you can use to explain and predict flows. The study of river flows offers a useful foundational metaphor for thinking about other types of flows (e.g., the flow of electricity is often understood in terms of water flows). The techniques needed to explain and predict stream flows might also be used to explain and predict these other types of flows as well. Something to think about the next time you are walking beside a river and looking for something to occupy your mind.
Posted on February 22, 2018 @ 08:15:00 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.