By Chris McClure Contributing Editor
Maintaining a proper perspective each day is one of the most difficult challenges we face. It fits right in there with attitude. The primary difference is that perspective relates the present to the longer term, while attitude is focused on the present. Interestingly, perspective can help with attitude.
Demand, supply, pricing, timing and the psychological factors that play on the markets are closely linked to the cattle and other cycles, which occur on a yearly and on a multi-year basis. It is easy to become fixated on the present and forget the context of these cycles. Keeping that perspective of where we are in these cycles helps inform our decision making. In a world of increasing volatility, it helps to remember that it is primarily a fluctuation along a more predictable curve. Although it is tempting to capitalize on that volatility, it isn’t always the best financial move. Managing the risk of volatility is probably a better long-term play.
When fortune smiles, it is easy to become somewhat complacent toward our situation. History is often the best predictor of the future, after all, and we were talking about cycles. The ups and downs of cattle feeding are deeply etched in the faces of the old hands but, perhaps, beyond the memories of the younger heads that still have all their hair. Just when we think there will never be another bad day, along comes a BSE or COVID event that rocks our world. Ride the ups, but hedge against the downs, which are coming.
When things get tight, what do we often do? We hunker down, watch expenses, closely evaluate our operations for lost efficiencies, etc. So, what should we do when times are good? The same things – watch expenses, closely evaluate operations, etc. It is also when we should consider investing in technologies that will give us an edge. Too often, people invest in things they believe will “save their bacon” after the “bacon” is already a charred, smoking mess in the skillet. Just because the money seems to be magically appearing in your pocket doesn’t mean it will always be that way. A big chunk of it needs to be reinvested into making the business better – more efficient, more agile, more robust.
I realize that the cattle feeder mindset is sometimes that of a gambler. He wants to bet it all, hoping for the big win. There’s a streak of that in my makeup; however, I spent quite a few years in banking, and that is a much more conservative mindset. We don’t see very many bankers go broke – at least not the conservative, small-town bankers whose family started the bank a hundred years ago. We do see them go broke when they get in the high-flying expansion mode of buying up other banks, hoping to spin a bigger entity off at an obscene profit. I’ve seen a number of those take their stockholders to a significantly lower net worth. It’s the carrot-and-stick relationship of risk and reward. Potentially higher rewards accompany higher risk – but so does the converse, namely greater losses.
When things are going our way, we are often infected by an ebullient attitude – much like some drunks. In fact, that’s a good comparison. We become drunk on our success, whether we achieved it, or it was merely a circumstance of being in the right place at the right time. We become enamored with our own good fortune and blinded to what allowed us to pluck the treasures out of the sand. We lose perspective. We forget that it was hard work, attention to detail, doing the right things well and remaining focused that put us in a position to reap the rewards.
An old cattle feeder once told me that the key to success in cattle feeding is to remain consistent. He warned me that there would be good times and there would be bad, but the key was to stay in the market and persistently execute your program. He said that he always sold and bought in the same market and then hedged his risk. If he had five pens coming out, he was putting five pens on feed – every month. He had a long-term perspective and never let a temporary market affect his long-term plan.
I don’t know if it was that perspective that did it, but I never saw him without a smile on his face and an infectious attitude that made your day better.