Dr. Brent Gloy and David Widmar, Co-Founders, Agricultural Economic Insights (AEI)
Escaping 1980 – Understanding the Farm Crisis and its Impacts on Agriculture Today by Dr. Brent Gloy, David Widmar and Sarah Mock
The 1980s farm financial crisis impacts everyone involved in U.S. agriculture today in one way or another. We either lived through it personally, or we’ve grown up in its long-standing shadow. The seven-episode Escaping 1980 podcast unpacks this crisis to better prepare and position ourselves, both personally and professionally, to be more resilient in the future.
Brent and David shared three key lessons from the podcast they believe apply beyond the 1980s crisis:
- A lack of data makes decision making more difficult.
In the 1980s, bankers literally sifted through paperwork trying to identify how many farms would be upside down if farmland values continued to fall. Even with the “modern” information systems available then, the lack of access to useful data directly impacted both farmers’ and policymakers’ decision making. This phenomenon was at work again during the 2008 financial crisis and, most recently, the pandemic. After each emergency, we created a new set of tools, technologies and policies to address the situation. But still, time and time again, we find ourselves unprepared for the next plot twist. “Despite our search, systemic risk has a way of finding us, and in new ways.” – Escaping 1980 - We miss the point when we focus on overly-simplistic — and wrong — summaries of very complicated situations.
The Carter administration’s 1980 grain embargo, too much debt, Paul Volcker and soaring interest rates are factors often cited or blamed for the 1980s farm financial crisis; however, it was the result of all of these factors and others. Often, attempted analysis of crises results in overly-simplistic versions of reality, which can allow wrong conclusions (persuasive conclusions with good narratives but not necessarily fact-based) to take hold. If we only focus on one factor of a much more complex scenario, we miss the point. Hindsight bias can also feed into this problem. When reflecting on a situation, think about the information you (and policymakers) had at the time. Hindsight isn’t always 20/20, and the outcome you experienced was probably not inevitable. - Somehow, we keep getting surprised.
Every time we experience a catastrophic event (the 1980s farm crisis, a global pandemic, etc.), why is our natural reaction to be surprised? We will never fully know what the future holds, but we can be more proactive in considering potential scenarios to put safeguards in place against what Former Defense Secretary Donald Rumsfeld famously coined “the unknown unknowns”. As Sarah Mock said during the Escaping 1980 webcast, “The best prepared are those able to think through how they would react in every possible situation. Having a resilient business might not feel as good as buying a new combine, or investing in land, or having something else tangible to point to, but that resiliency is how we will survive the ‘next 1980’.”
Advice For Your Future Self
Good advice:
- …is founded on good data.
- … is evidence-based rather than based on a gut feeling.
- … includes actionable, measurable steps.
- … is not so specific that it only fits one situation.
- … avoids hindsight bias by not assuming the results you experienced before are the only possible outcome.
- … avoids confirmation bias by considering points of view that differ from yours.
Listen to the full authors discussion of Escaping 1980 here.
