Finding Asymmetric Upside in Ag Retail and Agribusiness

Opportunity lies in being different, not just being better.

In ag retail everyone is seeking out opportunities for improvement and to out compete. The ag retail business is traditionally low margin and eeking out a profit year to year often comes from smart supplier program management, astute management of working capital and finding a non-traditional customer to sell too. While these realities are unlikely to change anytime soon, there are other opportunities to look for upside in the ag retail business.

The opportunity for ag retails is not in only maxing out programs at the end of the year, or hope it rains so they can sell fungicide. The upside needs to come from being fundamentally different in the market place and identifying asymmetric opportunities to deliver in the market that will help accrue customers and profit to your business.

Defining Asymmetric Upside

An asymmetric opportunity is simply one in which the upside of a decision or action is much greater than the downside.

Reading Nassim Nicholas Taleb’s book “Antifragile: Things That Gain from Disorder” was where I first encountered the concept and a definition for what he calls “Fundamental Asymmetry”:

Fundamental Asymmetry: When someone has more upside than downside in a certain situation, he is antifragile and tends to gain from (a) volatility, (b) randomness, (c) errors, (d) uncertainty, (e) stressors, (f) time.

Every asymmetric opportunity starts with a contrarian idea. If it doesn’t, there’s no asymmetry.

Asymmetric outcomes are a function of supply and demand. If everyone does something, the reward gets diluted because of large scale participation. This commoditizes the action.

This can be brought to life very simply in ag retail. I often hear “we are high service” or “we scout fields” or “we will deliver chemical at 11pm at night during planting”. Guess what? Those are table stakes. Every retailer worth their salt does these things. They aren’t the differentiators that bring disproportionate customer delight or monetary upside.

Said another way, if few groups do something, the reward will get concentrated into the few that took on the risk.

This concept gets talked about in investing primarily; whether investing in publicly traded stocks or venture capital investing.

The same is also true in business settings: Invest in capabilities and areas that are unproven. Invest across different time horizons. Invest in areas that are complex. This can mean investing in assets, talent, services or other infrastructure that your competitors aren’t.

Asymmetric opportunities are hard to identify and even harder to execute. But that’s the beauty of it. If it was easy, everyone would do it!

Where Does Asymmetry Lie?

Most asymmetric opportunities come from 5 different places: