The Wrong Kind of Entrepreneurs Flourish in America – Bloomberg

Crony capitalism is an extremely important topic for the community food system to ponder. This is how I define what has happened a few times when online aggregators or other techies spend all of their money building fancy software and no money or time investing in distribution systems or training staff and then throw up their hands when the farmers  don’t immediately flock to their door to sell their items below retail or the weekly market shopper doesn’t become enamored of their online tool. This may also best describe the situation when new, poorly-planned farmers markets open without adequate time to plan or to talk to the community it wants to serve or build relationships with producers a season or two before opening day. (Sometimes these folks call me a few weeks before they plan to open a new market and are dumbfounded when I tell them they should have begun planning 18-24 month before!)

I want to be clear that I am NOT talking about the majority of markets, but those thrown together (often by a developer or another outside interest) that simply see the market as visual dressing to sell their apartments or product without any effort made to whether there is a need and if the vendors will make any money.

This is why I believe farmers market managers roles should be financially supported by other food system initiatives, and experienced market managers should be brought in as consultants or facilitators to use their expertise in curating other relationships between buyers and sellers for new market ideas, for intermediate sales (specialty stores and restaurants), and even when building value chains for institutional buying.

 

But Robert Litan and Ian Hathaway, writing in Harvard Business Review, have a more dire hypothesis. They surmised that many American entrepreneurs are no longer looking for ways to produce more useful stuff, and are instead looking for new techniques for extracting money from each other and from the government. In other words, crony capitalism may be slowly cannibalizing productive capitalism.

The Wrong Kind of Entrepreneurs Flourish in America – Bloomberg

Advertisements

Bob Dylan and Contract Theory

As excited as many are about an American folk/rock singer composer winning the Nobel Prize for Literature, the economic prize is also worthy of mention here. First though, my favorite song lyrics of Mr. Dylan:

I ain’t gonna work on Maggie’s farm no more
No, I ain’t gonna work on Maggie’s farm no more
Well, I wake in the morning
Fold my hands and pray for rain
I got a head full of ideas
That are drivin’ me insane
It’s a shame the way she makes me scrub the floor
I ain’t gonna work on Maggie’s farm no more

I ain’t gonna work for Maggie’s brother no more
No, I ain’t gonna work for Maggie’s brother no more
Well, he hands you a nickel
He hands you a dime
He asks you with a grin
If you’re havin’ a good time
Then he fines you every time you slam the door
I ain’t gonna work for Maggie’s brother no more

I ain’t gonna work for Maggie’s pa no more
No, I ain’t gonna work for Maggie’s pa no more
Well, he puts his cigar
Out in your face just for kicks
His bedroom window
It is made out of bricks
The National Guard stands around his door
Ah, I ain’t gonna work for Maggie’s pa no more

I ain’t gonna work for Maggie’s ma no more
No, I ain’t gonna work for Maggie’s ma no more
Well, she talks to all the servants
About man and God and law
Everybody says
She’s the brains behind Pa
She’s sixty eight, but she says she’s fifty four
I ain’t gonna work for Maggie’s ma no more

Many of Dylan’s interpreters suggest this is a criticism of capitalism or of the military industrial complex. That actually leads us to a chat about the economic prize this year, given to Oliver Hart and Bengt Holmström for their contributions to contract theory. (Disclaimer: not only am I not an economist or a lawyer, my understanding of these theories is very casual and centered on my community organizing work. I may over or understate many of these theories and will always edit when better information comes my way. Feel free to add to my knowledge via email as needed.)

Contract theory focuses on the relationship between the parties in a contract, especially those which are asymmetrical in terms of how much information each side has access. The world contains scads of examples of information asymmetry: citizens and media, citizens and police or the military, employees-employers, consumers and technology providers etc. When one party has access to more information than the other, the fairness of the contract should be questioned. The other contract issue relevant to markets and farmers is what are called incomplete contracts. This covers the likelihood that a contract in present time cannot always cover every possible outcome and so often must be renegotiated at some time; in th, t case it is possible that renegotiation can go off the rails because of lack of trust.

In many ways, these scenarios describe much of what drove farmers and their advocates to the creation of the alternative food and farming movement.  The desire for fairness and trust for both producers and for eaters led to transparency being one our chief indicators of success and in keeping the heart of our movement in direct marketing channels which offer simple ways to create fairness. But even within those models, there can be an information asymmetry. For example, some farmers markets have created systems where information only flows from vendor to market and not the other way around. In others, vendors cling to systems that ask little of them as far as information sharing with the market. One way to gauge whether this is an unequal contract is at the time that the agreement is being changed.

Still, the very nature of the mutual dependency and face to face nature of farmers markets and their vendors can usually correct these small imbalances. Same goes for other type of direct marketing contracts, especially CSAs which began as simple contractual relationships between producers and eaters for a single season and a single farm. More recently, some CSA relationships have become imbalanced: like when a farmer offers a member a credit for a bad season, even though the contract in a CSA explicitly states that the shopper loses their investment if the crop fails. Or, when a CSA farmer begins to morph into an aggregator of goods from nearby farms and cottage industry producers without creating a updated contract with their shoppers that outlines the new rules of bringing those goods to the shopper.

However, the concern over unfair contracts really “scales up”  when systems move into intermediate (back door or bin sales) and wholesale (middle-man or pallet sales) contracts. Here, I’ll focus on intermediate sales, as wholesale sales are a whole other kettle of fish and in most cases, are beyond the capacity or interest of small family farms. (The reason for that is that few of those systems have really changed anything about their purchasing policies or their regulations for small farms, and so the costs and risk are all on the side of the farmer still.)

The hope is still that restaurant owners and wholesale buyers will build contracts with producers with the same transparency and information sharing as those in the direct marketing sector, but often that has not been the case. The key to mutually beneficial agreements on all levels of our food work relies on building contextual contracts and incentivizing them for all  involved. What are the main benefits for a producer to sell at a  lower cost to a chef? Well, two might be consecutive, consistent sales and the ease in delivery (meaning the farmer can deliver when most convenient to him or her and get quick payment), and yet rarely are these benefits described in agreements for most of our producers when they sell at these levels. What is the main benefit for the buyer? Often it is the quality of the product or the name recognition of the producer attached to the goods and yet rarely are those benefits understood and outlined in these agreements.

One way to incentivize the fairness of the contract in these situation may be to create a shared asset owned by all of the parties, such as a mutually owned cold truck or even branding. Another way to make them contextual might be to have an external party monitoring the agreement. Maybe this is where farmers market leaders can grow their influence?

And of course, markets managing transactions through card technology has led  to lopsided contracts with processors. Markets scramble to understand these complex agreements which exist over different eras of management and open markets  to many new layers of liability.  Another issue is that the energy that markets must reserve for reaching and encouraging benefit program shoppers is often wasted by the lack of good information about the client lists from local or federal government authorities. Too many markets I talk to have no idea how and where to reach these shoppers in their area and when you take in the short time that the majority of these shoppers remain on these programs at any one time (also not shared by most government entities), successful outreach becomes even more unlikely. The market vendor in this situation is also underrepresented in a fair contract, as most markets – or the processors working directly with farmers – use boilerplate agreements about card processing with their vendors.

So, one can see from just these few examples that center around direct marketing and intermediate farmers how many contract issues arise. So maybe before the alternative food system becomes another one of Maggie’s farms, let’s spend some time on increasing transparency and incentives for everyone’s benefit.

“Juice wasn’t worth the squeeze”

So the story of the flameout of Dinner Lab is something to ponder. As a New Orleanian who watched it up close, I was mystified by what they were trying to sell; turns out, they were too. Even with 10 million bucks in venture capital available.
This type of badly managed tech “solution” often seems the food system equivalent of living in Tornado Alley: A high probability of sudden and uncoordinated disruptions with widespread destruction left behind. Of course, there are many excellent tech innovations that have also helped organizers too; just make sure that you investigate the goals, backers and the operation before encouraging farmers or markets to join up.

At each meal, Dinner Lab had guests provide detailed feedback on that night’s menu. The company thought it could make money off that data, but they learned there was no market for the information.

Since closing, Dinner Lab has ignored numerous messages from NOLA.com | The Times-Picayune about whether paid members would receive a refund.

Likely they will wait as long as the GoodEggs vendors waited for recompense for the orders they had prepared for delivery when that business closed without warning in mid week last August: forever.

Source: Dinner Lab autopsy: ‘Juice wasn’t worth the squeeze,’ CEO tells Forbes | NOLA.com

NOLa ‘food port’ Roux Carré opened Nov. 27 

I’m a big fan of the entity that operates this project in Central City. What is interesting on a sytem level is that, just like another neighborhood in town, there are actually two different projects focused on food access there. (In the other neighborhood you can view St. Roch Market and Mardi Gras Zone to see what I mean. And compare the NOLA Food Coop for good measure, as all three are within 8-9 blocks of each other.)

On OCH, the Roux Carre project shares the street with another project that I wrote of recently, the Dryades Public Market. On paper, it might seem that these two have a lot in common, but in reality I think how they were formed, and by whom and what items they sell are quite different. I plan on spending some time there this month to check them both out and will post some pictures.

And how do you like the term “food port”?

Caribbean, Latin and Southern-inspired food court on Oretha Castle Haley Boulevard

Each vendor has a 175-square-foot “pod” to set up its operation, and a retractable window opens into the space from where they can sell their food. A large, industrial-size communal kitchen includes ovens, a flat grill, stoves and prep space and storage.

By getting low-cost and low-overhead entry, aspiring restaurant owners are able to build a following for their food while receiving training in food service, retailing, accounting and payroll. There is no limit to how long a vendor may stay at the location, although Cassidy suspects most want to take off on their own eventually.

“It’s really an incubator for these small businesses,” Cassidy says. “They’re all really good cooks; we want them to learn how to really run a restaurant, so, if they want, they can leave here and do that.”

Source: Central City ‘food port’ Roux Carré opens Nov. 27 | Blog of New Orleans | Gambit – New Orleans News and Entertainment

Joanne Clevenger: A Girl Scout with Gumption

One of the great restauranteurs of our age, and found right here in New Orleans. She speaks of her work with such love and respect, yet clearly suffers no fools. And yes, she is a supporter of local farmers and fishers with countless sightings at area farmers markets to her credit.

Delhi’s cheap food war: Street vendors fear city’s canteen scheme will threaten their livelihoods

Officials say they have studied the budget “mother restaurants” in the southern state of Tamil Nadu, introduced by its popular matriarch leader, which serve up fresh local dishes for next to nothing and have been widely praised for their success.

The common man canteens form part of a raft of pro-poor measures promised by the Kejriwal’s AAP since it returned to power in Delhi earlier this year.

“For a daily-wager, spending up to 20 rupees on a meal is not a small amount,” said Ashish Khetan, of the Delhi Dialogue Commission, which was behind the common man canteen idea.

Street traders fear the new establishments will be far more widespread than the existing government stands, which number 38 in a city of 17 million people. At one of the battered yellow cabins during the lunchtime rush, diners were largely unaware of the new plans, but many were encouraged to hear that prices would be low.

Delhi’s cheap food war: Street vendors fear city’s canteen scheme will threaten their livelihoods – Asia – World – The Independent.