We spend time every year at our family ranch in Argentina. The first question people generally ask about the ranch is “Why?”
Why get involved in a difficult property, in a distant part of a dysfunctional country, operating in a language we don’t really speak, and working with people whose customs and beliefs are beyond our understanding?
That question has no ready answer. I can only say the natural beauty of the place is breathtaking. Because of the way it has been worked – with stone walls, hidden valleys, Indian ruins and so forth – it is unlike anything available in the U.S. It was also much cheaper…
I compared prices of a few properties in New Mexico and Arizona.
First, they were much smaller.
Second, although they have more or less the same natural beauty, they lack the charm added by generations of irrigators, stone masons, and tree planters.
And third, they cost about 10 times as much.
As for the business, climatic, cultural, and linguistic challenges, I find them interesting and worthwhile… at least, for now.
But it is a lot of work and investment. So what do we get out of it?
The typical investor looks for large, fast, liquid returns. The best investment for us is one that brings steady returns over a long period of time.
Buffett’s Best-Kept Secret
Legendary investor Warren Buffett made a similar point in an article in Fortune magazine. He referred to a farm he had bought many years before.
He noticed that the farm required little of his attention… and yet, it had gone up nicely in value. And what most investors regard as a handicap – relative illiquidity – turned out to be a plus.
Farms are not marked to market on an hourly… daily… or even annual basis. There is little temptation (and sometimes no means) to sell high… or to sell at all. Farmers tend to hold on… and property values tend to grow along with the general market.
This gave Buffett a good return on his modest investment over a number of years.
Buffett did not mention it, but a farm or ranch can yield returns in other forms. But only because it is not like a stock or a bond. It is not easy. It is not “hands-off.” It is not liquid. It is not quick. And the returns tend to be slow and low.
In our case, we are earning returns that go far beyond money. We are learning Spanish. And ranching. And the wine business.
So far, what we have learned is that these are all tough businesses… not for amateurs or dilettantes. Farming in Argentina is in a class by itself. It is made more difficult by trying to manage it remotely most of the time.
Each of these things could take a lifetime to learn and a whole book to describe. Since I’m already past official retirement age, I won’t do either.
Instead, I’m just getting started on them. At best, I’ll get these projects headed in the right direction and sufficiently funded so that the next generation can pick them up… learn more… and make some real progress.
Or they will know better than to even try!
Family Connections
Some things take more than a single generation to master. Families build contacts, reputations, and knowledge over decades. If a member of the Beretta family wants to do a deal in the arms business, he can draw on generations of experience, family connections, and credibility.
That is true in show business, too… where many of the best-known directors and actors come from “Hollywood families.” I’m thinking of Michael Douglas (son of Kirk Douglas), Jeff Bridges (son of Lloyd Bridges), and his brother Beau Bridges (whose son, Jordan, is also an actor).
Frank Capra, one of Hollywood’s great directors, had a son, Frank Jr., who was a producer… and a grandson, Frank III, who is a director. The Coppola family dynasty includes a Francis, a Sophia (a director like her father), and a Roman (a successful screenwriter).
Ideally, successful families need to be producers, not consumers. They need to be active in businesses and careers, not just investments. And they need to be engaged in projects that span several generations… so that knowledge, expertise, and connections can accumulate.
It is also nice if they can develop a sentimental attachment to the productive side of their lives. This helps hold the family together and focus it on its source of wealth.
At least, those are the things I tell myself when I lay awake at night at the ranch wondering what the hell I am doing in such a godforsaken place… and in such a tough business.
Toughen Up
Life on the ranch “toughens you up.” And I have the bruises to prove it. I’ve been chased by a raging bull… thrown from a horse… and nearly arrested.
But the bruises to our finances and our business reputation are probably more useful. This is where “toughening up” might pay off…
Regards,
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Bill Bonner
Editor, Bill Bonner’s Diary
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