Commodities

“Let me tell you my story once again of the devil and the farmer. The devil goes to a Midwestern farmer and he says, “OK, if you sign this contract and give me your soul, I will triple your profits, your meager profits that have always been a struggle for you. And I will do it for 100 years for you and your descendants.” The farmer is desperate, so he signs. The profits are tripled and all is well. Now footnote 21 of the contract – there are always footnotes with the devil – says the farmer will lose 1% of his soil every year. Because that’s what farmers are all losing anyway, big deal. So he signs, and 100 years later there’s no soil at all left for his great-great-grandchildren. He has given up soil as well as his soul….The expected value of the deal with the devil was $5.5 million. The no-deal farmer up the road who stuck it out the hard way had a present value of only $2 million. As I’ve noted before, at least when the starving crowds arrive from Chicago, the farmer dies rich. As currently configured, every MBA ever produced would sign that contract, or fail the course. That is capitalism. Ask Milton Friedman once again. A corporation’s responsibility is to maximize profits, not to waste money attempting to guess how to save our soil.” ~ Jeremy Grantham, GMO