Farm Philosophy

Over the years of working in credit, learning economics, and especially after becoming a father, a lot of thought has gone into more of the philosophical side of things. The desire to accumulate wealth and accomplishments, to be successful, and to leave something for your children. Or, perhaps to not do so? Haven’t we all seen families torn apart when a farm is divvied up? I would argue it seems to be the norm, rather than the exception.

One source I find particularly interesting on this is work by Adam Smith. Smith lived in the 1700’s and his work The Wealth of Nations, published in 1776, was what largely brought him to international fame and credited him as the founder of the field of economics. However, Smith had a previous work, The Theory of Moral Sentiments, that pre-dated his more famous book, and actually spanned well beyond his book on economics as Smith later published a revision of it after the Wealth of Nations. In a sense, this book stayed with Smith his whole life. What was the book about? It was about how people interact. It was about our ambitions, our desire to be liked. It was about “how to live the good life”. My exposure to Smith in this work was not direct. I came about it by listening to an audio book by Russ Roberts, the host of the popular Econ Talk podcast. Russ wrote How Adam Smith Can Change Your Life, which I would highly recommend to anyone wanting to read or listen to the audio version.

Different philosophies are not “right or wrong”, but they do lead to different outcomes. As you read about Smith, I believe it is at a minimum thought provoking, and at a maximum, worth trying to incorporate into one’s life.

A Philosophy for the Farm

Adam Smith, Russ Roberts, and putting business, wealth, and family in their proper place

The farm is a means, not the end

Adam Smith's The Theory of Moral Sentiments is not primarily a book about markets. It is a book about human nature: our desire for approval, our tendency to admire wealth and status, our capacity for self-deception, and the importance of judging ourselves through what Smith calls the "impartial spectator" - the perspective of a fair and disinterested observer. Russ Roberts, in How Adam Smith Can Change Your Life, draws these ideas into modern questions about work, ambition, money, friendship, family, and the good life.

For a farmer, the central lesson is simple but demanding: the farm should serve the life; the life should not be sacrificed to serve the farm. A productive farm, accumulated land, good machinery, and financial success can all contribute to a good life. But none of them is identical to a good life. Trouble begins when acreage, net worth, machinery, or the preservation of a family operation becomes a measure of personal worth.

Growth should have a purpose

Smith was not opposed to ambition, industry, prudence, or the accumulation of wealth. The more Smithian question is why we want more. Farm growth can be economically rational and personally meaningful: it may lower costs, create opportunity, improve financial security, or provide room for another family member. But growth is not self-justifying merely because another 500 acres became available.

Before expanding, the farmer should ask: What will this additional scale actually add to our lives, and what will it require from us? If another 1,000 acres requires substantially more debt, machinery, labor, stress, and time away from family, those costs belong in the decision just as surely as expected profit does. "Bigger" is a description of scale, not a definition of success.

The neighbor's opinion is an expensive input

Smith was acutely aware of humanity's attraction to the visible signs of prosperity. That insight fits agriculture remarkably well. Machinery is functional capital, but it is also unusually public. Everyone can see the tractor, combine, truck, shop, bins, and acres being farmed. It therefore becomes easy to purchase not only productive capacity, but status.

A useful test is: Would I still want this machine if nobody outside my operation ever knew I owned it? If the answer is yes because capacity, reliability, timeliness, labor savings, or repair economics justify it, the purchase may be entirely sound. If the answer changes because neighbors will see an older machine, then some portion of the purchase is really an expenditure on admiration. There is nothing wrong with enjoying nice equipment. The danger is needing visible equipment to prove that the operator is successful.

Let the balance sheet be a tool, not a scoreboard

A farm balance sheet measures assets, liabilities, liquidity, and net worth. It cannot measure a strong marriage, healthy children, friendship, peace of mind, integrity, or time. A farmer with $10 million of assets is not, by that fact alone, living a better life than a farmer with $3 million. Roberts' reading of Smith repeatedly returns to this distinction: wealth can provide comfort, independence, and opportunity, but people routinely overestimate how much status and possessions will improve their happiness.Succession: preserve the family or preserve the asset?

The philosophy becomes especially important in farm succession. "Keeping the farm together" is often treated as an unquestioned good. Sometimes it is. Continuity can preserve a viable operating unit, honor generations of work, and give descendants an extraordinary opportunity. But keeping the farm intact is still a means toward human purposes; it is not automatically the highest purpose.

If keeping every acre together requires deep resentment among siblings, permanent inequality that nobody can defend as fair, decades of conflict over control, or the destruction of relationships, the family should be willing to ask a difficult question: What exactly are we preserving? It is possible to successfully preserve the real estate while destroying the family the real estate was originally intended to support.

Honoring earlier generations does not necessarily mean freezing their assets in the exact configuration they left behind. Their deeper inheritance may have been thrift, courage, work ethic, stewardship, honesty, love of family, and concern for future generations. Selling a parcel does not necessarily destroy those values. Preserving every parcel while siblings cease speaking to one another may do far more damage to them.

Use Smith's impartial spectator

Smith's "impartial spectator" provides a practical decision tool. Imagine a wise outsider who knows the farm, the finances, and the family, but receives no status from the outcome. This observer does not care whether the neighbor farms more acres, whether the combine is new, whether the farm has been in the family since 1887, or what people at the coffee shop will say.

Ask what that observer would say about the next land purchase, machinery trade, expansion, refinancing, or succession plan. Would the decision still make sense without pride, fear of appearances, family mythology, or competition? Would it still seem fair if you did not know which sibling's position you would occupy? That perspective does not dictate the answer, but it can expose motives that ordinary financial analysis misses.

A philosophy of enough

A Smithian farmer need not reject ambition. Build an excellent operation. Take intelligent risks. Improve the soil. Accumulate capital. Create opportunity for the next generation. Enjoy good machinery and take pride in competent work. But keep these goods properly ordered.

Do not mistake acreage for worth. Do not mistake machinery for success. Do not mistake admiration for happiness. Do not mistake preservation of assets for preservation of family.

The deepest question is not, "How large a farm can I build?" It is, "What kind of life am I trying to build, and what role should the farm play in it?" The farm can be an extraordinary source of livelihood, meaning, independence, and inheritance. But when wealth, status, or identity moves above relationships, character, and human flourishing, the means has quietly become the end.