Land as Insurance, Part 3: The Role of Farms
In an attempt to understand how to create insurance for my family around food, water, energy, and money, I came up with the idea of collective farm ownership. Here’s how it works and how it can provide insurance. Keep in mind that this is only my preliminary thinking, that details will be subject to change, and I very much welcome feedback.
Farms as Superorganisms
A farmer friend of mine once said that “ a well-managed farm is a superorganism.” What I took it to mean is that every system is connected with every other system. Waste products from one system provides inputs to another in such a way that the whole farm becomes a giant food web with humans at the center managing the web. Through management we can meet our caloric, energy, financial, and water needs by skimming off the top in such a way that we only consume the interest, allowing the system to accrue natural capital in all its forms over time.
Managing Financial, Food, Energy, and Water Black Swans
Financial: One of the risks I see looming on the horizon is the sudden collapse of a woefully unsustainable financial system. Without going into detail (there is plenty on the internet if you have not thought about this), the financial system suffers from some serious mathematical flaws that will eventually undermine it. The problem is that we don’t know when or how this will happen. Currently, there are also an emerging bunch of crypto-currencies which offer a completely new way of exchanging value. In one sense, crypto-currencies may act like digital cameras. If and when they take off, the existing currency system may have its “Kodak moment” where a new paradigm will make the former one (debt backed currency and central banks) obsolete. While crypto-currency can be regarded as a hedge, the problem is that choosing a winning crypto-currency out of a bunch of early entrants is going to rely more on luck and less on skill. Luck is not something you want to rely on in your hedge.
Personally, I think the ultimate hedge is investing in natural capital. We know for a fact that soil, water, perennial food production and solar capacity will always have value and utility regardless of the state of the financial system. All of these things are enduring assets that will buttress your situation in good and bad times.
Water: A well-designed and productive regenerative farm can provide insurance for a secure water supply by ensuring that the land base harvests rainwater, has access to water rights above or below grade, and is located in a suitable location within the watershed.
Food: If the water system is well designed, perennial food systems (plants that come back every year without replanting) can be installed. These systems become more productive and stable over time, require little maintenance, and are there when you need them. When you don’t need the productivity in good times, the food can be sold to local markets or fed to livestock.
Energy: The main energy source for this planet is the sun. The primary solar collectors on this planet are plants through photosynthesis. Farms can be designed to grow fuel in a way that enhances its agricultural output. Fuel wood can be grown with septic effluent, greywater, and other waste streams, turning a waste product into thermal fuel. Trees can be chosen so that they are coppiceable, growing back after cutting without replanting. Because these trees grow from a pre-established root stock, they also grow back faster and are ready for harvesting sooner.
The Problem With Farms Right Now
The problem with farms is that even with the best designed systems, living on a farm is totally different than living in the city. Most people love urban life and cannot imagine managing a farm. The other issue with farming right now is that the cost of food is so cheap due to cheap energy, immigrant labour, and industrial farming practices that mine the soil instead of building it. Getting into farming is a hard nut to crack and success in farming largely relies on your ability to direct market your unique products in order to capture the whole value chain. This means that farmers have to be unique, good at production, and incredible at marketing. If that wasn’t enough, farmland prices have risen an average of 10% per year over the last decade. Buying a farm for food production that is currently undervalued just doesn’t make business sense.
Enjoy the City and Guard Against Risk: Farms as Black Swan Insurance
But here’s an idea: Imagine if there was a corporation or co-operative that you could own shares in. The purpose of this corporation would be to hedge against certain classes of black swans. It would do so by buying farmland that had all the right ingredients to create the black swan hedges we’ve been talking about. People could then purchase shares for ownership to a percentage of the productive assets that also entitle them to certain benefits. Shareholders would pay monthly fees, just like an insurance policy, and these fees would keep the farm operational.
Let’s keep going. The corporation would hire a designer and manager to design and manage the property for maximum perennial, annual, and livestock productivity using natural ecosystems (the most productive systems on earth) as analogues. These systems would employ nuts, fruits, tubers, aquaculture, and terrestrial livestock to optimize food, soil, water, and fuel systems.
Once a holding capacity for the land is established, a certain number of tiny homes could be built and deployed as Airbnb as additional revenue streams and as emergency homes in the time of crisis. These homes would be owned by specific shareholders that purchased the right to have a backup home on the property. Essentially, it is like a community surrounded by a productive and ecologically sensitive farm instead of a golf course. The residents of this community would only occupy the space on weekends, or when SHTF. If land use bylaws did not allow for weekend homes on the property, the homes could be built as container homes that are unoccupied until SHTF, at which point land use bylaws would likely not be enforceable.
Food grown during good years could be sold to existing markets or redistributed to shareholders. Harvesting and maintaining the farm could be done using a similar model as yacht clubs where shareholders pay maintenance fees at an agreed upon labour wage or contribute a pre-specified amount of annual labour – their choice. Of course, these farms would provide many additional benefits such as sequestering carbon, cleaning the air, fixing the water cycle, increasing biodiversity, and transforming the existing farming system. With enough of these corporations around, societal anti-fragility would increase, much in the way dachas did in the former Soviet Union through the dacha system.
Just like with insurance, at the end of your term, if SHTF did not occur, you could sell your shares for the same principle amount you paid in. (Share price + monthly premiums not including deflation/inflation) The corporation would then resell those shares at a market adjusted price to a new person wishing to buy a black swan insurance package.
I believe having money invested in a corporation that owns natural capital and capacity, perennial food systems, fuel and fibre production is a great way not only to hedge against the existing financial system, but to ensure a future food and water supply, provide emergency housing, grow an aligned community, and most importantly forge the path towards a better world. An investment of $50-100K plus small monthly dues would provide a good starting place for an individual or family to this form of insurance policy, and because it’s held in land it’s a fairly secure investment.
Imagine what would happen if thousands of these corporations started appearing? It would provide a truly diverse investment strategy outside of conventional financial products, and it would be a way to deploy money into the regenerative economy and fix the planet.
I welcome your thoughts!