David Heinemeier Hansson of 37signals — that’s the guy behind Ruby on Rails — explains the secret to making money online at Paul Graham’s Startup School:
The secret to making money online
Wednesday, May 7th, 2008A $500 Million Week for Grand Theft Auto
Wednesday, May 7th, 2008
It looks like it was A $500 Million Week for Grand Theft Auto and Take-Two Interactive:
Grand Theft Auto IV, the latest iteration of the hit video game franchise, racked up first-week sales of $500 million, Take-Two Interactive, the game’s publisher, plans to announce on Wednesday. The report exceeded the sales expectations of analysts.
Electronic Arts wanted to acquire Take-Two Interactive before these big numbers came in.
I come not to bury dual-class stock structures, but to praise them
Tuesday, May 6th, 2008Marc Andreessen comes not to bury dual-class stock structures, but to praise them:
A dual-class stock structure means that a company has two different classes of common stock. Each class of stock has the same economic ownership of the company, yet different voting rights.In a typical scenario, Class A shares have a single vote per share, whereas Class B shares have 10 votes per share, for any shareholder vote.
Using this mechanism, for example, the Class B shareholders might only own 20% of the company in economic terms but have a clear majority voting position relative to the Class A shareholders.
In short, Class A shareholders have shares labeled with the earlier letter in the alphabet, but Class B shareholders control the company — in stark contrast to the more normal single-class stock structure which is more classically democratic: “one share, one vote”. Since Class B shareholders will typically be some set of founding management or founding investors in the company, in practice the presence of a dual-class stock structure means that the founders control the company and can overrule all other shareholders on a wide range of issues, including if and when to sell the company.
Both public and private companies can have dual-class stock structures, but the controversy around dual-class stock structures is usually confined to public companies, due to the presence of public shareholders. And so I will focus purely on public companies.
I used to be an absolutist against dual-class stock structures — I used to believe that dual-class stock structures were obviously a bad idea, that the democratic single-class approach of “one share, one vote” was more fair to public investors and more likely to lead to a healthy company in the long run, since total founder control of a public company can allow the founders to overrule normal market forces and the interests of their public shareholders.
And in fact, practically all investor advocates and shareholder activists agree with that stance — dual-class stock structures are at the top of the list of techniques that entrenched managers can use to foil the normal market discipline of a public stock, and to frustrate outside public shareholders who can easily become disenfranchised even when they have majority ownership of a company… with a long-run outcome similar to the kind of insularity and inbreeding you find in royal families. These days, the New York Times Company has of course become the poster child for entrenched bad management operating against the interests of their public shareholders due to its dual-class stock structure — how could anyone possibly be in favor of that?
And on the face of it, a dual-class stock structure simply seems unfair — how can someone own part of something but have a tenth of the rights of someone else who owns the same amount?
After 15 years in the technology industry, though, I have done a complete 180-degree turn on the topic — with some caveats.
I come not to bury dual-class stock structures, but to praise them.I now believe that dual-class stock structures are a great idea for a technology company that is in the process of going public, under the following conditions:
- The key leaders of the company — typically the founders — who will own the controlling Class B shares, are also major economic shareholders in the company. They own a significant portion of the company and are therefore highly incented to maximize the value of the company over time.
- The key leaders of the company who own the controlling Class B shares have a long-term goal of building a major franchise, and the commitment required to execute against that goal.
- The controlling Class B shareholders have a commitment to treat Class A shareholders fairly and equally in all respects other than voting power.
- All public shareholders understand what they are getting into up front — no bait and switch.
The key to the whole thing is shared goals — particularly the shared goal of long-term value creation, particularly the creation of a long-term franchise, the kind of franchise that can require 10 years or longer to build.
With such goals, I now believe the interests of public shareholders will often be better served by ceding voting control to the founders and key leaders of the company.
This is a provocative statement, so let me back it up.
In practice, the world at large, the markets in which companies operate, and Wall Street in particular, throw up all kinds of short- and medium-term noise in the face of every public company, all the time.
The Optimistic Thought Experiment
Sunday, May 4th, 2008In The Optimistic Thought Experiment, Peter Thiel emphasizes the following points:
- Any investor who ignores the apocalyptic dimension of the modern world also will underestimate the strangeness of a twenty-first century in which there is no secular apocalypse.
- There are no good investments in a twenty-first century where globalization fails.
- Almost every financial bubble has involved nothing more nor less than a serious miscalculation about the true probability of successful globalization.
- Financial bubbles and exaggerated stories about globalization are nearly synonymous because the greatest uncertainties about the future of the world have involved questions about the rate and the nature of globalization.
- Because there is not much time left, the Great Boom, taken as a whole, either is not a bubble at all, or it is the final and greatest bubble in history.
- There is no good scenario for the world in which China fails.
I’d consider myself more inclined than most to consider the catastrophic effects of low-proability disasters — but Thiel seems to find this thinking central to his “macro” view:
Because there is not much time left, the Great Boom, taken as a whole, either is not a bubble at all, or it is the final and greatest bubble in history .But because we do not know how our story of globalization will end, we do not yet know which it is. Let us return to our thought experiment. Let us assume that, in the event of successful globalization, a given business would be worth $ 100/share, but that there is only an intermediate chance (say 1:10) of successful globalization. The other case is too terrible to consider. Theoretically, the share should be worth $10, but in every world where investors survive, it will be worth $100. Would it make sense to pay more than $10, and indeed any price up to $100? Whether in hope or desperation, the perceived lack of alternatives may push valuations to much greater extremes than in nonapocalyptic times.
The reverse version of this sort of investment would involve the writing of insurance and reinsurance policies for catastrophic global risk. In any world where investors survive, the issuers of these policies are likely to retain a significant portion of the premium — regardless of whether or not the risks were priced correctly ex ante. In this context, it is striking that Warren Buffett, often described as the greatest investor of all time, has shifted the Berkshire Hathaway portfolio from “value” investments (no internet, no growth, often just businesses with stable cash flows) to the global insurance and reinsurance industries (perhaps one of the purest bets on the optimistic thought experiment).
If the preceding line of analysis is correct, then the extreme valuations of recent times may be an indirect measure of the narrowness of the path set before us. Thus, to take but one recent example, in 1999 investors would not have risked as much on internet stocks if they still believed that there might be a future anywhere else. Employees of these companies (most of whom also were investors through stock option plans) took even greater risks, often leaving stable but unpromising jobs to gamble their life fortunes. It is often claimed that the mass delusion reached its peak in March 2000; but what if the opposite also were true, and this was in certain respects a peak of clarity? Perhaps with unprecedented clarity, at the market ’s peak investors and employees could see the farthest: They perceived that in the long run the Old Economy was surely doomed and believed that the New Economy, no matter what the risks, represented the only chance. Eventually, their hopes shifted elsewhere, to housing or China or hedge funds — but the unarticulated sense of anxiety has remained.
I like his take on China:
To say the least, there are many eerie parallels between the Chinese stock market of early 2007 and the Nasdaq of early 2000: an abstract story of long-term, exponential growth; rampant speculation; and unprofitable or overvalued companies.One intermediate possibility is that the China of 2014 will be like the internet of 2007 — much larger, but with winners very different from the ones that investors today expect. The largest New Economy business is Google, a company that scarcely registered in early 2000. Might it also turn out that the greatest Chinese companies of 2014 will be concerns that are private and tightly controlled businesses today, rather than the high-profile and money-losing companies that have been floated by the Chinese state?
At the very least, outsiders need to understand that China is controlled for the benefit of insiders. The insiders know when to sell, and so one would expect the businesses that have been made available to the outside world systematically to underperform those ventures still controlled by card-carrying members of the Chinese Communist Party. “China” will underperform China, and a “China” bubble exists to the extent that investors underestimate the degree of this underperformance.
Bringing this thought back to technology:
As with the distinction between China and “China,” there also exists a critical distinction between technology and investments called “technology.” To take a particularly easy case from the prior technology bubble, a “technology” company that sells pet food online by purchasing Super Bowl advertisements offline may not be a technology company at all. The solutions to hard engineering problems are not necessarily valuable, but it is unusual for the solutions to easy engineering problems to have much value in the long term.A more subtle “technology” bubble may be occurring this time. A large number of large capitalization companies are effectively short innovation: companies such as Microsoft, Dell, IBM, Cisco, HP, and others. They benefit by modest changes to the status quo, but are threatened by massive innovation. This does not mean there are not massively innovative companies out there: Google and Intel, to name the two best-known brands, are. Merely, there is a difference between technology and “technology.” After all, even GM uses an impressive amount of electronics and computers.
And on to hedge funds:
Hedge funds (and “hedge funds”) seek high returns without the regulations that hamstring mutual funds and using leverage unavailable to mutual funds and even (except to a limited extent) to individual investors. The difference between a hedge fund and a “hedge fund” is this: a hedge fund seeks to allocate capital from less efficient uses to more efficient uses; a “hedge fund” seeks trading strategies. Mostly, “hedge funds” merely seek to replicate successful strategies of the past until they don’t work.
Ouch. Thiel clearly dislikes the “micro” view:
The retreat towards tactical cleverness hides a lazy agnosticism about the most fundamental questions of our age. Because we find ourselves in a world of retail sanity and wholesale madness, the truly great opportunities exist in the wildly mispriced macro context — rather than in the ever-diminishing spreads on esoteric financial markets or products. Indeed, one could go even further: What is truly frightening about the twenty-first century is not merely that there exists a dangerous dimension to our time, but rather the unwillingness of the best and brightest to try and make any sense of this larger dimension.
Tesla rolls out its long-awaited electric sports car
Saturday, May 3rd, 2008Tesla rolls out its long-awaited electric sports car:
After several years of development, the Roadster — with sleek lines like a Ferrari or Porsche and a sticker price of $109,000 — officially moves from the drawing boards to the market next week when Tesla’s first store opens. It’s near the University of California, Los Angeles, in the city’s toney Westwood neighborhood where Beverly Hills, Brentwood and Hollywood practically intersect.“Because it’s Hollywood and glamorous, this is the flagship store,” Snyder said.
The next store is to open in a couple months near Tesla’s headquarters in the Silicon Valley city of San Carlos, where the car was developed with venture capital of more than $40 million from such investors as Google Inc. founders Larry Page and Sergey Brin. More stores are planned for Chicago, New York and other cities by early next year.
Although a fully loaded model can set a buyer back as much as $124,000, that’s still cheap compared with a high-end Ferrari. And its 6,831-cell lithium-ion battery pack gives off no emissions.
The car goes from 0 to 60 mph in just under four seconds and tops out at 125 mph. It goes 225 miles on one charge and can be fully recharged in 3.5 hours, which Tesla officials say should allow most people to drive it to work and back and recharge it at night like a cell phone.
Driving from Los Angeles to San Francisco, however, would require stopping in, say, Fresno and plugging its adapter cord into a motel room wall socket.
Why would you say, “with sleek lines like a Ferrari or Porsche,” when the car is built on a Lotus chassis?
Anyway, “It will be awhile before anyone can walk in and drive a Tesla home off a lot”:
“Delivery is running about 15 months,” Allen said, adding the company was surprised by the demand.Tesla began taking orders last year for the 600 Roadsters it planned to produce in 2008 and had sold all of them by October, Allen said. The first ones began rolling off the production line six weeks ago, and Allen said all of the 2008 models should be delivered to their owners by March of next year. The first ones should begin going out the door later this month.
Meanwhile, orders are being taken for 2009 models, with plans calling for production of about 1,500 cars.
Omnidrive: Officially Cooked?
Saturday, May 3rd, 2008Josh Catone at ReadWriteWeb asks if Omnidrive is officially cooked:
Omnidrive, the Australian-based online storage solution that we named “tops in its class” last summer and was once called the “clear leader” in the space by TechCrunch, appears to have quietly joined the deadpool. Last week, the site’s domain name expired and the site is now displaying a Network Solutions parking page with the notice “omnidrive.com expired on 04/24/2008 and is pending renewal or deletion.” This is not the first brush with the deadpool that the company has had, but it certainly appears to be the last.
If you don’t follow Web 2.0 startups, the news isn’t particularly interesting, I suppose, but this comment from one Clay Cook jumped out:
I am (or should that be was?) an Angel Investor in Omnidrive.I personally have not heard from Nik for about 2 months, and suspect Omnidrive it is out of business/cash.
I will be blogging about my disappointing and frustrating experience in regards to Nik and Omnidrive soon. Will pop back in here and add a link when I do.
Wow.
Reason Magazine Interviews Peter Thiel
Saturday, May 3rd, 2008Reason Magazine Interviews Peter Thiel — and he’s even more impressive than I previously realized:
reason: You were a Stanford undergrad and law student. After you graduated, your career seemed to be taking a policy wonk direction.Thiel: As an undergraduate at Stanford, I started The Stanford Review, which ended up being very engaged in the hot debates of the time: campus speech codes, questions about diversity on campus, all sorts of debates like that. I ended up writing a book on it, The Diversity Myth, the thesis of which was basically that there was no real diversity when you had a group of people who looked different but thought alike, and what really was needed was a diversity of ideas.
In parallel I was obviously on the law track. I worked at a law firm in New York very briefly. I’d always been good at math — I was a nationally ranked chess player as an undergraduate — and I shifted over into trading financial derivatives at Credit Suisse Financial Products in ’94.
reason: How did you make that transition?
Thiel: They gave me a math test, and I got all the questions right.
I moved back to California in ’96. I started a small fund and started investing in tech companies. In the course of that, I invested in PayPal in late ’98. I came on board as the interim CEO, and it evolved from four of us to a 900-person company. At this point, it’s up to about 7,000 people working for the PayPal division of eBay. Basically creating this new payment system from scratch, which was one of these Holy Grail type of things that a lot of people had been focused on. The basic thought was if you could lessen the control of government over money and somehow shift the ability of people to control the money that was in their wallets, this would be a truly revolutionary shift.
I suppose the actual topic of the interview is Thiel’s philanthropic support of the Singularity Institute.
A Classroom Path to Entrepreneurship
Saturday, May 3rd, 2008Babson College in Wellesley, Mass. offers A Classroom Path to Entrepreneurship:
At Babson College in Wellesley, Mass., for example, entrepreneurship is part of the school’s identity. Always listed among the top business schools for entrepreneurship studies, Babson was a pioneer in the academic discipline as far back as the late 1970s.Most colleges do not offer entrepreneurship courses until the junior or senior year. But at Babson, incoming freshmen take a yearlong course in which they are required to start and run a small business. Each class of 25 to 30 students is given $3,000 in seed money and is required to create a company to sell a real product that will exist for the school year. According to Professor Andrew Zacharakis, the students have never had a company fail to make back its initial financing. Most often, the companies make a profit, which is donated to charity.
“Our professors do a really good job of helping kids become active learners,” Professor Zacharakis said. “In high school, they sit back and listen to the teacher. Here, the professor is more of a coach. You are given a framework to think about how it works and you are expected to apply that.”
On Babson’s leafy suburban campus, budding upperclassmen entrepreneurs are the superstars, says Philip Tepfer, a 22-year-old senior who already has started his own apparel business, Sail (Proud), which sells clothes for sailing.
“Entrepreneurship is deep within the culture here,” Mr. Tepfer said. “They are always pushing us to go out and do something on our own.” Mr. Tepfer said his nascent business will reach $40,000 in sales in its first year and he projects more than $300,000 by Year 2. “Yes, there’s risk,” he said. “But it’s better than working at the campus coffee shop.”
Larry Page on how to change the world
Thursday, May 1st, 2008I enjoyed Fortune‘s talk with Larry Page on how to change the world:
What are you thinking about these days?If you ask an economist what’s driven economic growth, it’s been major advances in things that mattered – the mechanization of farming, mass manufacturing, things like that. The problem is, our society is not organized around doing that. People are not working on things that could have that kind of influence. We forget that it really does matter that we don’t have to carry our water; it’s not that much fun to walk miles and miles to try to find water and then carry it back under human power. And our ability to generate clean, accessible water is based on basic technologies: Do we have energy? Can we make things? My argument is that people aren’t thinking that way.
Instead, it’s sort of like “We are captives of the world, and whatever happens, happens.” That’s not the case at all. It really matters whether people are working on generating clean energy or improving transportation or making the Internet work better and all those things. And small groups of people can have a really huge impact.
How can we increase the number of people doing such work?
There are a number of barriers in place. Let me give an example. In our first founders’ letter in 2004, we talked about the risk profile with respect to doing new innovations. We said we would do some things that would have only a 10% chance of making $1 billion over the long term. But we don’t put many people on those things; 90% work on everything else. So that’s not a big risk. And if you look at where many of our new features come from, it’s from these riskier investments.
Even when we started Google, we thought, “Oh, we might fail,” and we almost didn’t do it. The reason we started is that Stanford said, “You guys can come back and finish your Ph.D.s if you don’t succeed.” Probably that one decision caused Google to be created. It’s not clear we would have done it otherwise. We had all this internal risk we had just invented. It’s not that we were going to starve or not get jobs or not have a good life or whatever, but you have this fear of failing and of doing something new, which is very natural. In order to do stuff that matters, you need to overcome that.
He goes on to discuss automotive safety and geothermal and solar-thermal energy, before making a point about who solves “big” problems:
What kind of background do you think is required to push these kinds of changes?I think you need an engineering education where you can evaluate the alternatives. For example, are fuel cells a reasonable way to go or not? For that, you need a pretty general engineering and scientific education, which is not traditionally what happens. That’s not how I was trained. I was trained as a computer engineer. So I understand how to build computers, how to make software. I’ve learned on my own a lot of other things. If you look at the people who have high impact, they have pretty general knowledge. They don’t have a really narrowly focused education.
You also need some leadership skills. You don’t want to be Tesla. He was one of the greatest inventors, but it’s a sad, sad story. He couldn’t commercialize anything, he could barely fund his own research. You’d want to be more like Edison. If you invent something, that doesn’t necessarily help anybody. You’ve got to actually get it into the world; you’ve got to produce, make money doing it so you can fund it.
A Crushing Issue
Tuesday, April 29th, 2008Joel Millman looks at A Crushing Issue facing Mazda — how to destroy brand-new cars:
It all started about two years ago, when a ship carrying 4,703 shiny new Mazdas nearly sank in the Pacific. The freighter, the Cougar Ace, spent weeks bobbing on the high seas, listing at a severe 60-degree angle, before finally being righted.The mishap created a dilemma: What to do with the cars? They had remained safely strapped down throughout the ordeal — but no one knew for sure what damage, if any, might be caused by dangling cars at such a steep angle for so long. Might corrosive fluids seep into chambers where they don’t belong? Was the Cougar Ace now full of lemons?
The Japanese car maker, controlled by Ford Motor Corp., easily could have found takers for the vehicles. Hundreds of people called about buying cheap Mazdas. Schools wanted them for auto-shop courses. Hollywood asked about using them for stunts.
Mazda turned everyone away. It worried about getting sued someday if, say, an air-bag failed to fire properly due to overexposure to salty sea air.
It also worried that scammers might find a way to spirit the cars abroad to sell as new. That happened to thousands of so-called “Katrina cars” salvaged from New Orleans’ flooding three years ago. Those cars — their electronics gone haywire and sand in the engines — were given a paint job and unloaded in Latin America on unsuspecting buyers, damaging auto makers’ reputations.
Mazda saw no easy way to guard against these outcomes. So it decided to destroy approximately $100 million worth of factory-new automobiles.
Sad, really.
Seasteading
Monday, April 28th, 2008Alex Tabarrok cites Patri Friedman (son of David, son of Milton) and Wayne Gramlich, from their seasteading manifesto:
A small but passionate minority is deeply dissatisfied with current political systems. These people seek the autonomy to live under and experiment with different political, social, and economic systems than currently exist. It is this search for sovereignty, for the freedom of self-government, which is the fundamental motivation for seasteading.
Why is this coming up?
In interesting news, The Seasteading Institute has secured funding of $500,000 from PayPal founder Peter Thiel to help make the idea a reality.
Tabarrok’s thoughts:
Long-term trends are somewhat favorable for seasteading because with a cell phone and internet access more and more people could live on a seastead and make a living. Cruise ships are already floating cities with few regulations or taxes. Harold Berman argues that the rise of the West was due to competitive law. Homeowner’s organizations, hotels and condos are private governments (for more see my edited book The Voluntary City.).
Of course, seasteading is only necessary because there’s no established way to perform a leveraged buyout of a sovereign state.
Gas May Finally Cost Too Much
Sunday, April 27th, 2008Gas May Finally Cost Too Much — for a few percent of drivers:
For 20 years now, county workers in Palm Beach County, Fla., have been counting cars with sensors at strategic points along its 4,000 miles of roads. Nearly every year traffic volume has climbed at least 2%. But in 2007 there was a slight decline in the number of vehicles on the roads. This year traffic is down 7.5% through March. “We’re seeing a very significant change,” says county engineer George Webb. “We’re having a good time speculating why.”It’s not just Palm Beach. Traffic levels are trending downward nationwide. Preliminary figures from the Federal Highway Administration show it falling 1.4% last year. Now, with nationwide gasoline prices having passed the inflation-adjusted record of $3.40 a gallon set back in 1981, the U.S. Energy Information Administration is predicting that gasoline consumption will actually fall 0.3% this year. That would be the first annual decline since 1991. Others believe the falloff in consumption is steeper than the government’s numbers show. “Our canaries out there tell us they are seeing demand drop much more considerably than the fraction the EIA is talking about,” says Tom Kloza, chief oil analyst at Oil Price Information Service, a Gaithersburg (Md.) market research firm.
Is oil-guzzling America changing its ways? Some think so, though it’s worth noting the U.S. still consumes one-third of the world’s annual gasoline output.
I don’t think these stats say quite what the writer thinks they say:
Just look at the latest auto sales figures. Sales fell 8% overall during the first quarter of 2008, and those of gas-hungry SUVs and pickup trucks dropped off a cliff, down 27% and 14%, respectively.
I doubt auto sales dropped 8 percent because potential drivers gave up on the idea entirely.
Crazy English
Friday, April 25th, 2008
Li Yang, the founder, head teacher, and editor-in-chief of Li Yang Crazy English, is China’s Elvis of English. He teaches under the slogan: “Conquer English to Make China Stronger!”
Oh, and he teaches via a technique that one Chinese newspaper called English as a Shouted Language. You see, shouting unleashes your “international muscles”:
Li long ago expanded from language instruction to personal motivation. His aphorisms mingle Mao with Edison and Teddy Roosevelt. Li’s shtick is puckish and animated. He mocks China’s rigid classroom rules, and directs his students to hold his books in the air, face the heavens, and shout in unison — a tactic known in Crazy English and other teaching circles as T.P.R., or total physical response, a kind of muscle memory for the brain. His yelling occupies a specific register: to my ear, it’s not quite the shriek reserved for alerting someone to an oncoming truck, but it’s more urgent than a summons to the dinner table.
If you’re working in a big group, you’re fighting human nature
Thursday, April 24th, 2008Matt of 37signals cites British author Antony Jay to support his point that if you’re working in a big group, you’re fighting human nature:
Jay draws attention to units of around this size in many fields beyond the corporation. A committee works best with about ten members; if it grows much beyond that size the extra people do not take a fully active part. Nearly all team games use a group of about ten on each side. Juries have 12 members and the Jewish minyan 10. In an army, organization often decides life and death, and under this pressure armies, too, adopt a basic unit of about ten; the British army, the US army, the ancient Roman army and that of Genghiz Khan, in fact every long-standing successful army, has built up its larger formations from squads or sections of about this size.That mention of the Roman army takes us back some two thousand years, and Jay traces the ten-group back still farther, back to the foraging communities. The ten-group, found today as a structural unit in successful corporations began, he argues, as the male hunting-group of pre-agricultural times, still with us and still functional.
I enjoyed these Antony Jay quotes on other topics:
He’s suffering from Politicians’ Logic. Something must be done, this is something, therefore we must do it.‘Referring the matter to a committee’ can be a device for diluting authority, diffusing responsibility and delaying decisions.
The uncreative mind can spot wrong answers, but it takes a very creative mind to spot wrong questions.
You can judge a leader by the size of the problem he tackles. Other people can cope with the waves, it’s his job to watch the tide.
You can stop focusing on extraneous collateral and pay attention to what matters instead.
When Neighbors Become Farmers
Tuesday, April 22nd, 2008What happens When Neighbors Become Farmers?
Unlike traditional home gardeners who devote a corner of the yard to a few rows of vegetables, a new crop of minifarmers is tearing up the whole yard and planting foods such as arugula and kohlrabi that restaurants might want to buy. The locally grown food movement has also created a new market for front-yard farmers.“Agriculture is becoming more and more suburban,” says Roxanne Christensen, publisher of Spin-Farming LLC, a Philadelphia company started in 2005 that sells guides and holds seminars teaching a small-scale farming technique that involves selecting high-profit vegetables like kale, carrots and tomatoes to grow, and then quickly replacing crops to reap the most from plots smaller than an acre. “Land is very expensive in the country, so people are saying, ‘why not just start growing in the backyard?’”
Environmentalists embrace the practice because it cuts the distance — and the carbon dioxide — needed to get food from farm to consumer. It also means less grass to water and fertilize and fewer purely ornamental plants. The Environmental Protection Agency estimates that nearly a third of all residential water use goes to landscaping. Why not use it to grow food instead?
Although decentralized gardening may bring food closer to end consumers, that does not mean that it will reduce the energy used — or carbon dioxide produced — to transport that food to end consumers, because it is much, much more efficient to transport goods in large quantities over long distances via ship, train, or truck, than to transport small quantities over short distances via car or small truck. That is the localvore’s dilemma.
Here are some numbers:
Start-up costs for a one-eighth-acre farm run about $5,500, says Ms. Christensen of Spin-Farming. That includes a walk-in cooler to wash and store fresh produce, a rotary tiller and a farm-stand display. Annual operating expenses, including seeds and farmers-market stall fees, can add about $2,000. Such a farm can generate $10,000 to $20,000 in annual sales, she says. That’s “an entry point into farming to see if they have a talent for it,” Ms. Christensen says. “Those that do will eventually be able to expand and increase that income level quite substantially.”Susan and Greg VanHecke planted a small, 6-foot-by-20-foot vegetable garden in the back of their house in Norfolk, Va., two years ago to help teach their two children to grow and eat more vegetables. Reaping a bumper crop last year, Mr. VanHecke asked the owner of a local restaurant called Stove for whom he once worked as a sous-chef, to buy vegetables. Soon, Mr. VanHecke was making weekly deliveries to the restaurant, averaging about $100 in sales per week. The VanHeckes have added another restaurant customer this year and are tearing up all their backyard flower beds to grow more vegetables.
They’re also trying to figure out how to more easily fit farming into their otherwise busy schedules. Even minifarms take a lot of time, and suburbanites with full-time jobs find themselves a little stretched.
The VanHeckes decided to be practical and replace their labor-intensive lettuce crop with easier vegetables. “My husband would come home from his all-day job [as a Navy officer] and snip leaves and wash them one-by-one,” says Ms. VanHecke, 43. “Things like tomatoes, you can just rinse them. You don’t have to spend your whole evening [on] them.”
(Hat tip à mon père.)