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Authenticity Watch: Slow Money


 

From the invaluable Currents feature of the WSJ comes the idea of “slow money”, which seems to me to be basically an exhortation to invest in your local farmer, regardless of how weak a return you might get compared to other investments. According to Woody Tasch, the former venture capitalist now pushing the idea, the key is for investors to expand their idea of what a “return” is:

Mr. Tasch is thinking about farmers like Martin Ping of upstate New York, who invites customers to invest in projects like a cheese processing plant. Investors can expect only about a 3% return. But they also get a ready source of fresh-made cheese and the knowledge that they help preserve an agrarian landscape. “They have to redefine what return is,” Mr. Ping said. “I tell them, come out in the pasture and you can watch your money grow.”

I’m no economist, and God and RBC know what a lousy investor I am. But surely, if this is the sort of thing that jazzes me up, I’d be better off putting my money in a higher-return investment, and then using the extra money to buy artisan cheese or local tomatoes or goat milk or something. Or if I’m really feeling flush, I could just give the extra money to the farmer. My return on investment is the same, and the farmer gets not a loan but a grant.

Meanwhile, not everyone is keen on this, not least of all the farmers themselves:

They like the Slow Money concept but worry that it may be more cumbersome than a traditional bank loan. Specifically, they fear deep-pocketed local investors will demand a say in management decisions. Equally perilous: small-sum investors swamping the Lobaughs with requests for tours and samples, and interminable inquiries about the goats.

This reminds of the time I blogged about the fetish for “local bookstores,” and I got an email from someone who actually worked at one. The job was ok, he said, except for the locals who wanted to hang out all day long and be his friend.


 
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Authenticity Watch: Slow Money

  1. This is too funny!

    Is it possible authenticity AND humour can co-exist?

    Who'ld a thunk it?

  2. Yeah, this doesn't make sense to me, either. Rates of return across investment projects will be approximately the same, after correcting for things like preferences for risk and other idiosyncrasies. If you offer an explicitly lower monetary return, you have to compensate investors in a non-monetary manner. And that may just mean doing whatever it takes to make polite, earnest, well-meaning urban folk Feel Good About Themselves.

    • Low-level drug dealers seem like a good example of this. Their monetary return is explicitly lower (i.e. does not correspond to the high levels of risk involved) but they are also compensated in a non-monetary manner with substances that make them Feel Good About Themselves (at least temporarily).

  3. Sorry, can someone explain to me why we should be privileging economic growth at the expense of other valued goods?

    • Because it's the basic philosophy of capitalism. Resources go to those who can afford them that have the greatest need. It's not a perfect solution to the problem of scarce resources but it's pretty good. Unfortunately, it starts to break down a bit once we've solved the problem of scarce necessities, and moved on to the problem of scarce luxuries which is currently where we are.

      I mean, there are a few systems that provide resources first to those that have the greatest need, but they can have extreme problems with the "free rider" scenario unless they are small and transparent. It remains to be seen if we can move on to a place where the transparancy of the internet will allow us all to connect in such a way that we can perhaps move to one of these systems without the free-rider. After all, some guy managed to get a house for a paper clip, and a guy in Australia recently raised $3,000 or so in donations so that he could fly the president of a game development company in the states out to Australia to look at his game — but the whole thing was quite obviously being done tongue in cheek.. the guy never expected to actually get the donations but a whole bunch of individuals did anyway, because they liked the joke.

      So.. really, I guess I failed, I can't explain why we *should* be.. there are other alternatives, after all. But that's not where we are as a people just yet.

    • Or, you could make an argument for the inverse of that statement, instead of just posting a rhetorical question as if it were an argument.

  4. Authenticity Watch is the best occasional series of Potter Gold.

  5. "Equally perilous: small-sum investors swamping the Lobaughs with requests for tours and samples, and interminable inquiries about the goats."

    When I read this article the first thing that came to mind was how will the farmers deal with pushy-arrogant city folk who are going to sign up for this. I have also read about programs where people buy animals, say chicks, from farmer, let farmer raise the animals and then come collect dressed carcasses after a few months.

  6. Does it ever occur to anyone that investing in Farmer Jones might be somewhat less risky that investing in asset-backed securities or the banks that live or die from them and other incomprehensible (even to them) investment ‘vehicles’? Good luck in the stock market…I’m out!

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