Johnny Appleseed, Agribusiness Man

Once upon a time, a barefoot man with a pan on his head set out to build a business in one of the most unpredictable and challenging sectors on Earth. 

That's how Johnny Appleseed became more than just an American folk hero, he became one of America's most innovate agribusiness people-- pioneering a tree nursery business on the nation's frontier in order to meet a fast-growing demand for apple cider and vinegar.

Today, we're diving into Johnny Appleseed's story to understand:

• Why agricultural and food businesses are so unique
• How we went from intuitive management to formal agribusiness tools and strategies (and why it matters)
• And what all this means for the ag industry today, as the sector continues to be rocked by new tech like AI and robotics, an unpredictable policy landscape, and unprecedented supply chain disruptions

You'll walk away with an answer to the question, "Is food and ag really that different?" and deeper clarity on why strategies that work so well in other sectors fall flat in the agribusiness space. 

Transcript

SPEAKER_04 0:00

Once upon a time, a barefoot man with a pan on his head set out to build a business in one of the most unpredictable and challenging sectors on earth. He wasn't building computers in his garage or creating chemicals in a lab. He was planting seeds and growing trees, while simultaneously creating a new business model, finding customers, and navigating unique natural, political, and financial pressures. This isn't some obscure figure. You've definitely heard of him before. His name was John Chapman, or more famously, Johnny Appleseed.

SPEAKER_00 0:36

John Chapman is a very unique character in American history, in part because he's mostly misunderstood. I think we all have this Disney World version of what Johnny Appleseed meant, where he just walked around randomly and gave people apples. He was strange, but he was also a very interesting businessman.

SPEAKER_04 0:55

So most of us have some familiarity with the full hero version of Johnny Appleseed, but none of this sounds quite like the portrait of a brilliant entrepreneur, or does it?

SPEAKER_00 1:06

So his actual model was walking around and planting established orchards in different places throughout the Midwest to at some level claim the ant landownership of the area. So what he was doing essentially was establishing his ownership footprint and then leaving, asking somebody else to handle the property and capturing the value on the back end of what that orchard would be. So he was establishing a business.

SPEAKER_04 1:34

This is where things start to get interesting. Despite his reputation for planting apple trees willy-nilly, John Chapman was actually establishing tree nurseries, intending to grow apple trees that he could then sell to pioneers who had need of apple products like hard cider and apple cider vinegar, but had limited access to buy these liquids on the frontier. The idea of growing and selling trees themselves, rather than apples or cider, was not unusual at the time, but it was a hard business to get into because owners had to figure out how to keep a business afloat from the day the seed goes in the ground until the first apple harvest.

SPEAKER_00 2:13

And if there's one thing that you know about agricultural production is that it is inherently tied to biological lags. So if I'm planting apple seeds to establish my orchards, I now have to get a whole lot more creative about how what I'm gonna do for the next 10 years before I have a legitimate orchard.

SPEAKER_04 2:30

So what did John Chapman do in the years before his orchards came into production? He moved around the country, establishing a diversified network of nurseries that would mature at different times, be exposed to different natural risks, and give him access to distributed markets from Pennsylvania to Kentucky to Ontario. That's why in American mythology, Johnny Appleseed is a pioneer folk hero, but John Chapman was a pioneer in the world of agribusiness. Many of the challenges he faced hundreds of years ago are still common problems in agribusiness today, from managing high costs and risk to bridging the gaps between consumer demands and biological realities to establishing novel property claims. So, what's the difference between John Chapman's efforts and those of today's agribusinesses? Today, there's agribusiness blueprint. This is Agribusiness Blueprint, a limited series podcast about American agriculture's most impossible challenges and the agribusiness leaders who solve them. It's very easy to talk about like supply chains, the food system as an idea, but it's actually hard to link those together. And my co-host Trey Malone, associate professor of agricultural economics and the Bolgi Chair at Purdue University.

SPEAKER_00 3:53

Ultimately, everybody eats, everybody has an opinion on what their food system is supposed to look like, but virtually no one knows how this thing actually operates.

SPEAKER_04 4:02

Together, we're on a journey to tell familiar stories, like John Chapman's, like you've never heard them before, and a few news stories that will challenge what you think you know about the people and businesses that make food and agriculture work.

SPEAKER_00 4:17

But who are you? For as much as we've imagined people to have these farm backgrounds, a lot of times that's not the case. Regardless of whether you're a seed salesperson or if you're working in fertilizer or you're just a farmer or you're just ag curious, there are, I think, a lot of opportunities here to really sit down and think hard about what makes your industry unique relative to other simpler industries and leverage that for something that might be a bigger business opportunity.

SPEAKER_04 4:47

So, whoever you are, and whatever your background, we're excited to have you along on this journey into the heart of food, agriculture, and the business that makes it all grow. Welcome to Agribusiness Blueprint. Our look back at the work of Johnny Appleseed led us to his final resting place in Fort Wayne, Indiana, and to another more modern agribusiness pioneer who hails from the same region.

SPEAKER_03 5:13

Johnny Appleseed was a very big person around my home community.

SPEAKER_04 5:17

That's Dave Downey, professor emeritus of agricultural marketing at Purdue University.

SPEAKER_03 5:22

And I had no idea that all this lay behind it. Creating those relationships using distribution channel strategy of creating dual revenue streams, of creating opportunities for oneself into the future. Intuitively, he was doing a lot of things right. And he was doing them for the same kind of reasons we're looking at today in modern agriculture.

SPEAKER_04 5:43

To Dave, this is solid evidence that agribusiness has been around for as long as any business, even though the word agribusiness was only coined in the middle of the 20th century. This journey from intuitive businesses like John Chapman's to the formal idea of agribusiness is what we're going to talk about today. How that evolution happened, why it matters, and how the agribusiness tools we've built continue to help business leaders in light of new pressures, from artificial intelligence to supply chain disruptions. So to understand the origins of agribusiness, we have to start by thinking about what makes companies that make food and ag products different from those that don't. And as the Johnny Appleseed story illustrates, these factors are not new.

SPEAKER_00 6:29

Yeah, it's true that we've been doing some version of agricultural business since the beginning of agriculture. If you look back to history, we could probably say that one of the first real agribusiness companies was the East India Company, right? So this is like 1600s, was the founding of the East India Company. And what they were doing was they were identifying some type of agricultural commodity and finding a market for it and then pulling that product into that new market. But it wasn't really until 1957 that somebody actually called it agribusiness. And it was not until the 60s that we really started formally defining exactly what agribusiness decision making looked like.

SPEAKER_04 7:09

I don't know the most about the East India Trading Company, but I think of it as just kind of like the original corporation, like the original company. And that being said, what makes it an agribusiness specifically? What in your mind sets agribusinesses apart from just like regular businesses, corporations, firms, whatever the kind of generic idea of a business is?

SPEAKER_00 7:29

So if we talk about the East India Company, I mean their core products were cotton, silk, sugar, salt, tea. All of these things are agricultural, agri-food products. And what they were doing to some extent was trying to identify some type of customer need and connect that customer need to what an agricultural producer was doing. But what makes their business model unique from, say, a concrete business is that all of this stuff has a shelf life. There are so many more uncertainties that are underlying the agricultural decision-making process, whether it be weather, whether it be trade, whether it be labor. There are so many different challenges that exist in agriculture that most firms don't really have to think about. We can't just turn off the spigot for asparagus. One day we have asparagus, the next day we don't have asparagus. That's not how it works. If I'm making a decision for a chestnut orchard, that's a 30-year decision. That's literally trying to guess what a customer wants, not tomorrow, 30 years from now, and trying to make some formal decision-making process given the uncertainties underneath that project.

SPEAKER_04 8:41

These conditions are what make agribusinesses unique from all other businesses. And what made it important for agribusiness to develop its own management strategies. It's because most food and ag products come from living sources, which makes them seasonal, perishable, and vulnerable to natural and weather threats. After all, companies don't have to worry about concrete, cars, or sneakers dying partway through their production process. Food and ag businesses are also unusually exposed to market volatility, trade pressures, and government intervention because food and ag products are more directly linked to human survival than most others. And in part because of all these unusual pressures, agribusinesses themselves tend to look different than other businesses.

SPEAKER_00 9:28

So there's also a concept called asset fixity, which is a very academic way to say once I build a very expensive asset, it's very hard for me to shift gears with that asset. So think about how expensive it is to buy a combine or a tractor. Think about how expensive it is to build a processing plant. Up in the the Midwest, we've been spending a lot of time talking about cheese plants. It takes years to build a cheese plant. So what happens if all of a sudden we don't need a cheese plant and that that asset fixes in a place where we now have to basically lean into what we have. Not sure if you know where the the the US largest pumpkin state is.

SPEAKER_04 10:09

Is it Illinois?

SPEAKER_00 10:10

It's Illinois. Why? What's so special about Illinois to grow pumpkins?

SPEAKER_04 10:16

I don't know. Farmland?

SPEAKER_00 10:17

They have a processing plant.

SPEAKER_04 10:19

Oh.

SPEAKER_00 10:20

What it is, is is they they they have, I think, the the largest processing plant in the United States. And so that is a perfect example of how the asset that we have to build for agriculture oftentimes can create this rigidity in the decision-making process.

SPEAKER_04 10:33

Any one of these is not unique to ag. There are other industries that have a perishable product. There are other industries that are vulnerable to weather and natural events. But I feel like the unique thing about ag is it's it's all of it together.

SPEAKER_00 10:47

Yeah. Well, and it's it's all of it together combined with a unique culture, right? So the culture part of agriculture is something that we really can't leave out. You know, yes, there are probably other industries that deal with very similar problems. I would say that most of those industries are not dealing with all of the problems at the same time. But I would also say that most of those industries don't have the same underlying cultural value that agriculture does. I mean, when we think about the founding of the United States, there was this vision from Thomas Jefferson or, you know, Thomas Paine and all these guys thought that the perfect society was built on agriculture. And so from the founding of the United States to today, there has always been this cultural difference in the way we talk about ag that creates, I think, unique business problems that even if you did have some of the same risk thresholds that we do in ag, you don't have the cultural risk that's associated with ag, which I think creates a completely different decision-making environment.

SPEAKER_04 11:47

Though this unique combination of challenges has been recognized to some extent for centuries, it took a while for the academic world to begin understanding agribusiness challenges in a rigorous and methodical way, and to start using that understanding to make agribusinesses more resilient to these pressures and more successful overall. That work started all the way back in the 1950s with the efforts of a young ag economist by the name of Ray Goldberg.

SPEAKER_00 12:14

He came from a very small town. He was a farmer first and foremost. He was connected to agriculture in a way that I think most folks that end up at Harvard were not. And he developed something that is now kind of the well-known short course in agribusiness at Harvard.

SPEAKER_04 12:29

When we set out to make a podcast about agribusiness, we knew we had to talk to Ray Goldberg, who, in many ways, is the godfather of the whole discipline and remained an active participant in the Harvard Agribusiness Seminar that he helped create for nearly 70 years. Since we started production on this program, Ray has passed away. But we did get a chance to hear from him on how he remembers the earliest days of the discipline. Here's Ray.

SPEAKER_02 13:03

I thought that agribusiness was more inclusive, more global than just agricultural economics. And little did I know that eventually there would be more people majoring in agribusiness than in agricultural economics.

SPEAKER_04 13:53

While Ray and his team at Harvard were tackling one aspect of agribusiness, others at land-grant institutions, including Purdue, picked up this concept and started running with it. But what tools did they build to apply these new concepts to real businesses on the ground? That's after the break. Agribusiness Blueprint is brought to you by Purdue University's Center for Food and Agricultural Business. This year marks the center's 40th anniversary, and its mission remains the same: connecting evidence-based insight with the decisions agribusiness leaders make every day. From strategy and marketing to sales, finance, and risk management, the center helps organizations and professionals navigate what makes agribusiness fundamentally different. Learn more about the center's programs and research at agribusiness.purdue.edu. Now, back to the show. So while Ray Goldberg and his team were defining the word agribusiness at Harvard, folks at Purdue, including Dave Downey, were working on this concept a little closer to the ground. Dave was a young man at the time in rural Indiana, and he was witnessing firsthand the rapid transition that rural and agricultural businesses were facing in the years after the Second World War.

SPEAKER_03 15:10

When I first started working with agribusinesses, literally most smaller local agribusinesses kept all of their records, if they had them, in a cigar box. And then toward the end of the year, when tax time came around, they'd pull out and see what they got, looking at their checking account and see if there's any money left in it. And that was the way they managed the business. But as we begin to already see consolidations, new technologies that were difficult to afford, unless you were larger, begin to come into play as we begin to think about how we really made money in this business. And now it was the point where they need to do it a bit differently. As this began to happen, their suppliers began to get more larger and more sophisticated. The suppliers started acting differently, keeping much better records and using management tools. But most people didn't have a background in management tools.

SPEAKER_04 16:05

So in this new world where the commercial scale of things was increasing dramatically, technology was changing a lot of things, so many different factors were changing all at once. What do you say to a farmer who with a cigar box full of receipts to say you need to become a sophisticated financial business? I don't know, by like next year, if you could.

SPEAKER_03 16:26

Well, we begin to need to take a different approach to how we do business. And that required better replicating systems. It required maybe thinking about this thing called marketing, which was up to that point just selling stuff. Thinking about financial management, which up until that point mostly had been cash flow type approach to business. And thinking about investment, now we started thinking about larger tractors, we start talking about bigger acreage, the cost of acreages are going up, all of those things were changing the whole atmosphere of how we did business. So it's time to begin thinking about different things.

SPEAKER_04 17:04

It's easy to talk about thinking differently, but it's much harder to teach it, especially to farmers and agribusiness people with decades of experience doing business their way. So the folks at Purdue, including Dave, experimented with bringing a new tool to agribusiness. Not a lecture series or a white paper, but something that could give people in the agribusiness community firsthand experience in these new ways of operating.

SPEAKER_03 17:32

So what we began to do was create a simulated agribusiness like a farm supply retail business that's selling fertilizer, chemicals, and seed to farmers in a local market area. And we said, what kinds of things do you need to make decisions about? Well, you've got to figure out how much of the product to buy, you got to figure where inventory level should be, you've got to figure out what a cash flow might look like, you got to figure out what the pricing should be, you've got to figure out how many people to hire, how you promote, how you advertise. So this became the decision-making points in this simulated business that we created. Well, each team made their own best decisions, fed it into the computer, and it kicked out what their PL, what a balance sheet would look like, what a cash flow would look like, what their inventory levels were, what their operating costs might be. And we said, okay, that was for the first three months of the year. Here's your results.

SPEAKER_04 18:34

These simulations would go on for multiple quarters, giving teams the chance to course correct, to compete with others for market share, and to finesse their inventory levels, pricing, and margins at their simulated farm supply businesses, grain elevators, or even supermarkets.

SPEAKER_03 18:50

And then interesting thing happened. Some of their bosses started to say, tell me what you learned. Show me what you learned. Maybe we ought to have everybody in this company do something like that because now they're coming back talking about a different language that their boss had been talking to them all along.

SPEAKER_04 19:08

If you're thinking that this story about farm and food folks doing business simulations 50 years ago sounds quaint, you might be underestimating how important this work turned out to be. These simulations were explosively popular, and learning this skill quickly became a kind of prerequisite to working in the agribusiness world. In fact, at one point, 50% of all fertilizer in the United States was sold by a retailer who'd been through the program at Purdue. And though this kind of program might not sound like what you'd expect a university's ag department to have on offer, from Trey's perspective, it's actually perfectly in line with the mission.

SPEAKER_00 19:48

The other thing that makes agribusiness unique from business extension. So colleges of agriculture in the United States have a three-part mission. We are commissioned to A, do research that's relevant for the people that live in that state. The second thing that everybody thinks about is that we're also supposed to teach the students in the state. And the third one that I don't think everybody knows is that we're also supposed to find ways to extend the research from campus to the students that we taught and to the stakeholders that live in the state that we live in. And so in the 70s, what they're saying is we need to come up with a way to extend this knowledge from the research that we've done to get it to people, not just at the student level, but the people who needed this stuff as fast as we could possibly deliver it. And so they would run simulations. At the time, this was a groundbreaking change. I think they were the first ones to ever use simulations in an agricultural context. I don't think anybody before the Dave Downies of the world had even thought that computers would have this value. And so it falls out perfectly from what was the land grant mission then.

SPEAKER_04 20:57

So this is the origin of the discipline of agribusiness. And these simulations are one of the tools its practitioners developed to help farmers, business owners, and employees prepare for and adapt to rapid technology changes, economic changes, and policy changes too, with the goal of helping them stay competitive in a fast-changing business world. But at the heart of all of this work remained these intangible aspects of agriculture that continue even today to set this industry apart from any other. A big part of the culture of agriculture is the fact that personal relationships and trust remain essential to doing business in the space. And this has remained true despite the fact that policy, markets, and especially technology have continued to change at an ever increasing rate. And the thing is, the importance of the personal is not limited to the relationships between farmers and their suppliers. As Trey learned in a study he worked on, even who a farmer is buddies with can affect the way they make decisions on the farm, which can in turn have a big impact on the health of the business and the sector overall.

SPEAKER_00 22:20

So there was this long-term soybean tillage intensity project that was going on in the state of Michigan. And so they had all these really fancy agronomists who would make these recommendations and they kept finding that these folks were just not listening to their advice. So they'd say, you should, you know, practice conservation tillage this year or whatever, and then the farmer wouldn't do that thing. So the they came to me and they said, okay, what do we do with this? And I think there was this assumption almost that maybe the farmers were wrong and they just weren't listening. And so I asked, Who are these farmers? You've known them for a long time. What's their background? How well do they know everybody else in the room when you're making these recommendations? Well, nobody'd ever asked those questions. So what we did is we actually calculated the social network of all of the farmers in the group. And then what we could show was the more socially connected a farmer was, the less likely they were to adopt the conservation tillage recommendation. So the point there, there was a social risk that was associated with adopting the new practice. And I anytime I think about a farmer, it's always good to have a persona in your head. My granddad's my persona. And when he does anything social in his life, it usually starts at the co-op. That's his place to go pick up his coffee in the morning to drop off the donuts on a Wednesday. And if there was some risk associated with him getting made fun of by his friends or not being able to go see his friends at the co-op because of some new farming practice, odds are he's not going to do the thing. Even if it costs him money, the social cost associated with that relationship on farm would prevent, I think, a lot of more on the fence decisions than is kind of the norm in a lot of industries. So it really highlights a very important part of agriculture that is there are a lot of people out there who are making a lot of personal decisions in a business that is a part of their family and their community. And those social connections are really what decide whether or not some new technology, some new practice, some new business is going to take root or is going to fail. And those social relationships, I think, are so much more profound in this space than any other industry that exists.

SPEAKER_04 24:34

And not something you think is going to be subsumed by ChatGPT anytime soon?

SPEAKER_00 24:39

No way. So last week we had a meeting with a room full of farmers, and I asked them, what is the thing that you wish we would have taken more seriously now if I asked you this question five years from now? And the big thing that everybody in that room asked about was AI. Now, what we found in that conversation is that no one is ready to outsource any of the decision making on their operation to some type of robotic, AI, large language model, whatever it might be. Now, there is, I think, this opportunity for augmented intelligence on farm. And so this is a place where I think there is a lot of potential for the direction of where agribusiness management can go. But at the end of the day, it will still be human beings that are having to make management level decisions.

SPEAKER_04 25:29

You know, it's funny, it echoes my experience. I used to work in ag tech, and we had a data product, and I spent a lot of time talking to farmers about like, hey, we've crunched all the numbers. Here's your 300-page report that we produced, here's, you know, our recommended seeds and precision application rates and planting dates. And I mean, farmers were excited about it. They were interested. They'd hear you out. And then, you know, the end of the call was always, do you think you're going to use the information we gave you? And it's like, I'll take it into account. Yeah. It's certainly not, oh yeah, I'm just gonna 100% rubber stamp this and like this is my plan now. And it's funny that we thought we were gonna take a leap from we didn't trust actual people delivering the information, but maybe if it's not a person, then they'll just listen to it.

SPEAKER_00 26:14

Somehow that's gonna work. So so we uh we just finished, I think, what was the largest uh survey of agricultural salespeople in the history of the United States, and we asked what share of their time they spend doing different things in the business, and we compared that to other business-to-business firms and salespeople. And what we found was by far and away in agriculture, the thing that sets it apart from a sales perspective is the amount of time that's spent on the relationship management side. So if you think as a business that you're going to be able to outsource the relationship management of your business in agriculture, you're probably wrong. Because at least the way that the time allocation works for your salespeople, that apparently is where most of the value is created for your people. And so I think in the world of ag tech is a perfect example of make sure that you understand your customer. You know, Johnny Appleseed understood that his customer was people who wanted to drink cider. In this case, make sure that you understand your customer in a way that you don't just accidentally outsource to a robot the thing that actually created value for your customer.

SPEAKER_04 27:20

So whether you're thinking about Johnny Appleseed, the East India Company, or even today's farms, many of the challenges these businesses and entrepreneurs face are similar, despite their different products, eras, geographies, and tech landscapes.

SPEAKER_00 27:35

We I think are now in a place where we're having this bigger conversation about how does agribusiness fit into the rest of the world, into other industries, into other conversations. We talk about COVID-19 like it really changed the way that the food system worked. I don't know, the trends were already started. It might have accelerated some of these trends, but most of the trends that you would maybe try to attribute to COVID-19, for example, this push away from just in time production to just in case production, these were things that were already being started. So for as much as we were building the plane while we were flying it in the 1950s, I think we're doing the exact same thing right now. I think we are dramatically increasing our intensity and focus on AI, digital transformation. You know, these these big, big questions where once upon a time it was the industrialization of agriculture, and now it's the digitalization of agriculture that I think we're we're really confronting.

SPEAKER_04 28:34

So over the next several episodes, we'll cover trends like these and many more, talking through the tools agribusiness professionals use to understand and manage them now, and how we think they're likely to change the industry in the future. Along the way, we'll learn a little history, a few business principles, and we'll tell a lot of stories about how agribusinesses have navigated the last century of transformative technology and policy, booms and busts, and the kind of crises that shape careers and lives. Through all of it, we'll gain a deeper understanding of how the agricultural industry works and what your role in it might be. Today and tomorrow. Next time. When I hear people use the word empathy, it's about empathy for the customer. And I think, yeah, well, what about your salespeople? But that's next time on Agribusiness Blueprint. Agribusiness Blueprint is a production of Purdue University's Center for Food and Agricultural Businesses. We're your hosts, Trey Malone, and me, Sarah Mock. The show was also produced and mixed by me with editing support by Trey Malone and Mike Bolgy. Additional support from the wider team at the Center for Food and Agricultural Business. To learn more about the programs, classes, and continuing education opportunities through the Center for Food and Agricultural Business, visit our website at agribusiness.purdue.edu and follow us on LinkedIn for the latest news and updates. For specific questions about the show, contact Trey Malone and the Department of Agricultural Economics at Purdue University. Agribusiness Blueprint is sponsored in part by the Agricultural Food and Research Initiative Competitive Program of the USDA National Institute of Food and Agriculture, NIFA, award number two zero two two six eight zero zero six three six four three three.