TEPAP – Day 2 Jim Nolen

For anyone that has attended TEPAP, the days get long and conversations run late into the evening so I’m a few days behind on my posts.

The first speaker on Monday was Jim Nolen from the University of Texas. One of the key points he made is public companies get feedback from the market. For private companies, the only place to get financial feedback is from their accounting systems and managerial accounting is critical to provide that.

He also made a good distinction between accounting and finance. Finance is generally focused on managing the balance sheet while accounting focusses on the P&L. He emphasized the need to understand the relationship between the balance sheet and desired growth rate. Growing too fast can kill a business when sales grow faster than the balance sheet can support that growth. For many operations, this will probably be their downfall in the next couple of years.

We also had a discussion on relationships with your banker, especially during tough times. As someone who has served on bank boards, he gave us some good advice on working with your lender during times when margins are tight.

I had a chance to get his comments after his discussion and you can listen to those here.

Jim Nolen Inteview

The second speaker was Peter Zeihan who gave us an overview of world geopolitics. His big message was that the United States is positioned to be the world leader for several decades.  The two driving factors behind that are people and energy.   Demographic trends throughout the world are working against most countries as their populations are aging and their won’t be young people coming into the work force to support social programs or spur economic activity.

The second factor is energy.  The United States is in the process of disengaging from the rest of the world because we are functionally energy independent and no longer dependent on the middle east.   The rest of the world due to debt levels and shortage of energy in the future will be in a much weaker position than America.  

For agriculture specifically, he was bullish on American agriculture in the medium to long term because we will have access to capital and resources which won’t be guaranteed for the many agriculture producing regions.  If you would like to read more, you can get his book entitled THE ACCIDENTAL SUPERPOWER