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Locked in a bad paradigm?

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Consider the choices a market, or even life, offers and be willing to change your approach for success.

Unless you have been living under a rock you know it’s graduation time. My daughter graduated from fifth grade and is moving on to middle school next year. They had a graduation/goodbye ceremony for her class. She received several awards which included “star student” and Honor Roll.

Realizing I was in the presence of an intelligent person I wanted to ask her a few questions. I did some research online doing some Google searches. Google tells me the average student loan debt is $39,000. Google also tells me the average income in Nebraska is $33,000, but we can do better than that because we just graduated from college so when I questioned my daughter, I used a salary of $36,000. And finally Google also tells me the average cost of living for a single person, not living in Lincoln or Omaha, is $28,000

I asked my 11-year-old, fifth grade graduate, if she would take that deal. Take on 39K in debt to get a 36K a year job, reminding her she must pay taxes out of that salary, and that she needs 28K to live on. She looked at me a bit cross eyed and said “Dad. That doesn’t even pay the interest.”

I kept asking her the same question, but I changed the scenario each time. I finally added a second full time job to pay off the loan and then keep the second job to invest the income from it in rental properties. She finally got tired of my game and asked if she could get both full time jobs, skip the student loan debt, and buy the rental properties sooner so she could quit the second job sooner.

Here is my point. We know what the right thing to do is. We all know mathematically this go to school and get a degree so we can get a 30 to 40 thousand dollar per year job won’t pencil out. But we have to do it.

Early start to long-term approach

Why do we do it when we know it’s wrong? I’ll tell you why. When my daughter was in kindergarten, she came home one day and told me her teacher makes more money than I do. The school my kid went to is a small Catholic school that simply can’t afford to pay teachers very well. So, I told my daughter that her teacher doesn’t make more than me. Then she piped off a few other professions and said they make more money than me. Again, I corrected her and told her those jobs do not pay better. Then the million-dollar line came from her mouth. She said “they have to, they all went to college.”

What we are witnessing here is the power of a paradigm. We are led to believe that we need to have a college degree in order to get a good job, and earn good money. We need the credentials. Even though at fifth grade we realize it is a mathematical and financial disaster we do it anyway.

We get our paradigms when we are very young. We get them from family, teachers, 4-H leaders, guidance councilors, day-care providers (if you spent a lot of time there as a kid), and so on. The paradigms we have are not ours, they were given to us. That is both good news and bad news. The good news? Paradigms can be changed. The bad news? They are extremely hard to change.

Knowing that about paradigms and realizing the mental model developing in her mind after that one day with the kindergarten teacher I sat her down and explained to her that some jobs you need a college degree, and some jobs you don’t. I know I need to make sure she has a mental model that will serve her well in this world. I bet if we asked her classmates if they’d take the first deal of 39K in debt, a 36K salary, and 28k living expenses they’d take the deal simply because “you have to go to college.”

We don’t always do what we know we should do because the paradigm controls our behavior. It is not our level of intelligence, or a prestigious degree that gets us winning results, it is our paradigm that gets us the results we get. This is why I begin all my marketing schools with the psychology lesson, to make people aware of the power of paradigms.

Power of the paradigm

The weighted average from Kearney, Neb., this week shows a paradigm at work. Six weight steers brought $1,222, seven weight steer brought $1,225, eight weight steers brought $1,245 and the nine-weight steer brought $1,280 per head. The Value of Gain from the six weights to the heavy eight and light nine weight steers was 25 cents. There is an overabundance of headlines right now about what to do about the high input prices. I have read a few of the articles and not one mentioned anything about doing a good job marketing and focus on profit as your primary target.

Here’s the deal, the paradigm is we must sell bigger cattle to get a bigger check. Even though the math doesn’t always tell us that, the paradigm does. So, we ignore the math and make them bigger. We then get in trouble because it cost us more to put the weight on than what that weight gain was worth. We didn’t get paid for it, in fact we subsidized the buyer by putting the weight on for him and letting him buy it for next to nothing.

Those other articles I mentioned are written from that author’s paradigm. They ignore the VOG, and the math and are instead focused on cutting costs. People, we can’t starve a profit into a business. We have got to have skill to make it work. Marketing skill in particular.

In my marketing school I have a slide with two scenarios. One scenario is to sell so many units at a small margin. The other one is to sell fewer units but at a much larger margin. Some people fall for my trick and right away say they want the deal with the bigger margin. They want the market toppers. Most people realize I have something up my sleeve and take a moment to think it over and realize they’d make more money selling more units at a smaller margin. But they had to slow down and think about it, because they too have the paradigm of selling market toppers.

This week on Twitter I saw a feed yard tweeted they passed on a really good offer (really good offer is my opinion). I am sure they passed because they could’ve gotten more a couple weeks ago, and it was recently posted that one packer had huge profits the first quarter. They wanted to show the packer how it is and hang on to their cattle. Had that feed yard taken the offer they could’ve had their order buyer buy those heavy steers I mentioned above in Kearney and made a handsome profit on the trade. Thing is, our paradigm is to brag about market topping cattle, even though they might lose money, instead of bragging about the profit margin. Again this is another example of how a paradigm trips us up.

I am running long and will wrap this up. I want to be clear on a couple things. Cow/calf people have paradigms too, and in all honesty most cow/calf paradigms are sillier than the ones I mentioned above. I am not trying to be rude; I have to come from a place of openness and honesty. Also, to be clear, I am not a fan of going to college, that is just my opinion. Do your own research, make your own decision, and make sure it is right for you and the direction you want to go, and that you are not just following some mental programming you were given.

A view from the markets

This week the VOG on feeders was strong up to six or seven hundred pounds, depending on what auction you attend. Feeder prices backed off a tad bit in places making some heavy weight steers a profitable buy back against fats this week. Heifers, then are certainly under-valued to fats. I think it should be clear now that depending on your mental programming and marketing skill there are some fantastic opportunities for feeder to feeder trades and fat to feeder trades.

Feeder bulls were 10-25 back and unweaned cattle were 10-17 back.

If you would like to learn more about how to overcome a paradigm holding you back and to gain marketing skill, check out our marketing school coming up in July.

The opinions of Doug Ferguson are not necessarily those of beefmagazine.com or Farm Progress

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