Shownotes
Being the fourth generation President and Chief Executive Officer of Babson Farms Inc., Taylor Kirkpatrick takes his responsibility very seriously running the family office. His job is running the family business and managing assets created over 100 years ago by his great grandfather. Right now, Babson Farms’ core asset is based on agricultural holdings, with supporting operating businesses like captive crop insurance company, tiling company, drainage, bin storage, trucking and transportation operations. Taylor shares that running the family business is a demonstration of patience and fortitude because you’re charged with seeing the future and trying to take advantage of an opportunity that might occur in the future. He always keeps the mindset that like everything in life, it’s a marathon, not a sprint. You have to keep a generational thinking, map out strategies and figure out how to do things on a daily basis as well as look at the bigger picture.
Successfully Managing a Family Office with Taylor Kirkpatrick
We have a treat now. We’re in Babson Farms and we’re with the CEO, Taylor Kirkpatrick. Taylor, welcome to the show.
Bob, thanks for having me.
Do us a favor, tell us a little bit about your business and who you serve.
The easy answer is Babson Farms is a family office, which is a term that a lot of folks may or may not be familiar with and what it is, I serve one family managing their assets. These assets were created 100 years ago when my great grandfather, Henry Babson, went and visited the Thomas Edison at the Columbian World Exposition in 1893 in Chicago and said that he was willing to go and sell the phonograph for Thomas Edison outside of the United States. He took a prototype of the Edison talking machine and went to China and India and sold several thousand of those over the course of about two years.
When he came back, he took those winnings and started a mail-order catalog that competed with the Sears catalog in the South side of Chicago called Babson Brothers. That sold everything from sundries and fabric and things like that to dairy equipment and other farming equipment. He was selling a piece of equipment that he realized was not that great. It was difficult to clean. There was some sanitation issues. It would taint the central plant of the milk if you didn’t have clean vulcanized rubber tubes and things. He ultimately invented and patented and then sold the majority of the world’s dairy equipment called Surge Dairy Products for a period of about 50 years. In the‘70s, we had a liquidity event when we sold that to Westphalia which is a German conglomerate. The proceeds from that sale lead to the core assets that we have now.
Our core asset is based on agricultural holdings that we have, which are mostly in North Central Illinois. We have a bunch of farms that grow corn and soybeans up in North Central Illinois. Then we have supporting operating businesses or products and services that we use ourselves. Then we said, “We can do this in-house and then we can also help our neighbors as well.” Those are everything from a captive crop insurance company to a tiling company, which is a drainage situation to bin storage and some trucking and transportation and then GIS mapping services. Those are the types of things that we do for our customers and that’s what we’re trying to do. When you say who do we serve? The question for me is the constituents are the family themselves. That’s everybody that is a lineal descendant of Henry Babson.
Then there are also the employees that we have that worked within these businesses and then the partners that we have. We have operating partners that manage and work on all these farms. We have to make sure that we’re being smart about doing what we can and helping the family members achieve what it is that they want with the proceeds of these businesses. Then also making sure that the employees are happy and that the operating partners are happy. Then the end-user is for us, we don’t see that down the chain, but we’re selling this corn and soybeans out to either ethanol plants or to the elevator, to the river, on the futures market.
Here in the office, I met a nice lady in the front. We chatted beforehand and you said you guys had a discussion about the firsthand success that Babson had when he went to China. I understand that there was a small hiccup.
When he was making the cylinders, this was the RCA Victrola which ultimately won is what everybody thinks of when they think of a record, that flat desk. Edison had a play on a cylinder on a drum. That was the way that he was trying to record the music. When he knew he was going to go to China, Henry Babson went to Chinatown in Chicago and recorded what he thought was somebody so that they could demonstrate the efficacy of this product in China. What he did is he recorded Cantonese Chinese versus Mandarin Chinese. When he went over, everybody looked at him quizzically and he couldn’t figure out why this wasn’t working. He found out that it was the wrong dialect that he recorded it. He had to come all the way back to the United States to record in Mandarin. That was a little hiccup, but I guess one learns to adapt and overcome those exciting moments.
You don’t just stand up and go to China and then you get to go, “I’m going to go and sell in China and I don’t speak the language.” He also, with success, got involved in the horse market. We were chatting about just the logistics of what he was trying to do. It was in the Arabian market.
When he was traveling, he fell in love with a type of horse, the Arabian horse, and decided that if he would ever made it big, he was going to try and bring Arabian horses to the United States. When he did get some success, he went and traveled around the world and went to several different countries to try and find the right stock and ultimately ended up with six mares and two stallions that became known as the Babson Blood or Babson breed of the Arabian horse in the United States. It took him years to find those horses and he had to travel all over the world to find them. When he came back and finally did get them here, it was this hand wringing that took months because to get them from a boat to a train to a truck to get them to the ultimate farm that he had in Dixon, Illinois was a real process.
Then after breeding them, it was another several years to see whether or not these were things that people thought were going to demonstrate the right characteristics to be the right Western Pleasure Saddlebred horses. His process was a demonstration of patience and of intestinal fortitude. It ended up being a very successful operation and it arched and crested with about 110 horses in the stables. Then the world moved on past the Babson Blood and ultimately decided to look for other characteristics. There is still a lot of Babson Blood that’s out there that’s crossbred, but there aren’t that many purebred Babson’s anymore.
Family Office: We try to think not about what we can do in the next year or three years or five years, but what’s going to happen in 20, 50 and 100 years.
Obviously, he took the long view. It’s still evident today because Babson is still here.
That’s our goal. We try to think generationally. We try to think not about what we can do in the next year or three years or five years, but what’s going to happen in 20 years, 50 years, and 100 years. One of the old saws about the land they don’t make it anymore is the reason that we still continue to hold onto these agricultural holdings. I don’t think you’ll see us sell out of them for the next twenty generations.
You’re fifth generation?
I’m Gen Four.
We were chatting about the family office similarities. You had an old axiom about family offices.
It’s funny because when you see one family office, you see one. Every family office is very different and some families have huge dispersion and many, many family members and some are very small. We’re on the small side of things. Even through Gen Four and Gen Five, we’re still in the single digits as far as lineal descendants. If you compare that with some of the bigger families that everybody knows whether that’s the Pritzkers, the Rockefellers or the Coors family here in Denver or anything, those folks are numbering in the hundreds in many cases. They come with their own set of problems and having a small, very focused group of constituents also comes with its own excitement.
For a lot of folks, they run their business for their customers. For you, you’re running the business for not only these family members, but future family members. What’s it like to take and operate in that environment?
It’s a responsibility that I take very seriously. It’s difficult because there are times when you feel as though everybody knows that your heart’s in the right place and you’re trying to do the right thing, but just because of the added dynamic of trying to run a business and trying to create additional wealth on behalf of other people that don’t have the opportunity to participate. They feel as though they’re passively watching, but being able to judge your successes from the sidelines, it’s tricky. Taking on that responsibility at the beginning, it had a detrimental impact on my relationship with my brothers to a certain extent in that some of the baggage that came with them knowing me as a brother for my whole life and knowing where my capabilities were and where my weaknesses were as well, that was something that made them anxious and the change that occurred made them anxious. The good news has been through probably way more luck than through my own ability, we’ve had a pretty good run of things. The level of changes has dropped dramatically over the last couple of years. As we settled into the groove and the dust has settled, everybody has become much more comfortable with the path forward and this strategy that we’ve articulated about how we are going to continue to grow this business.
The change from the original Babson and Victrola and I think it was on wax that they did the recording. We now have internet and digital. Over the lifespan of Babson, we’ve gone from rudimentary technology to incredible technology. You’re in charge with seeing the future, trying to take advantage of where an opportunity might occur in the future and you’re also in charge with day-to-day operations. What do you do on a daily basis or how do you take and populate your mind with the stuff that allows you to get 100-foot view, a day-to-day view? What do you do?
I’m a believer in the more things change, the more they stay the same in some ways. One of the things that we focus on is on the day-to-day side, it still comes down to relationships with family members, with the employees, with the operating partners and with ultimately our end-users. The level of loyalty and respect and creating an environment that is a place that people want to come to work is all still going to be there forever. That piece will always stay the same. The way that things have evolved as it relates to things like technology, we do a lot to try and stay informed about and abreast of different technologies certainly within the ag space but also just another investment spaces. We pilot these new technologies that are trying to be predictive as far as picking the characteristics of the seed that we use. We do precision farming to the extent that we are sending out soil samples every year so that we know exactly how much of the different nutrients that we have in the soil, P and K, and we know what kind of fungicide and herbicide we should be applying and in what capacity. That changes from acre to acre on the fields because depending on the undulations and the amount of water that is leaching those off of the fields, that impacts it very differently from one corner to another.
The level of loyalty and respect and creating an environment that is a place that people want to come to work is going to be there forever.
We’re also very comfortable with the idea that we’re stewards of this land. We make the additional investments to try and do things like keeping the waterways clean and being above the EPA standards as it relates to fertilizer going into the watershed. We are the gold standard as far as how we keep it measured and keep it under control on the properties that we own. Then as far as the investment side, I am a big believer in the fact that the world is going to continue to evolve and it’s going to continue to change much, much faster than it ever has before. I’m leaving to go to Austin to go to South by Southwest to go to the Intelligent Future Track of that.
I go to conferences and symposia several times a year to try and stay on top of those types of new technologies and how one can invest in and benefit from those technologies. We, as a family on the investment side, have invested everything from Blockchain to driverless cars to technologies that are being created outside of the United States. We have invested specifically in countries like Israel where they do have this startup nation component to them. We’re trying to be smart about how we invest and maybe getting a little bit out of the tracks of equities and fixed income and looking at alternative investments, looking at direct investments in private equity and real estate.
You do have a background. You worked in that industry prior to this job.
I worked in a couple of mutual fund companies involved in product development there. Then I was an investment banker doing mergers and acquisitions for a period of about twelve years.
You’ve seen the good, the bad and the ugly?
I have.
You have language skills?
I do have some language skills. I was a French major in college, which was helpful once in my life, which I was in a Boston market. I was ordering two rotisserie chickens and the ladies in the back were from Haiti and I heard them saying to each other in French like, “That fat bleepity-bleep needs two chickens.” I was able to say to them in French, “I speak French and it’s for a dinner party.” It helped me then. It’s a little tongue in cheek. I lived in Paris for eighteen months after I worked in the mutual fund industry for about five years.
You take that timeframe and you were in Paris, what effect do you think that had on your perspective and behavior in your current role?
It was a wonderful time to be there. I was able to take a step away from being in the work grind. I took cooking classes and art classes and I wrote a book then that was published in the United States later. I was able to touch on some of the components of life. It’s hard to find the time to balance when you work in business and when you have a family and all the rest of that stuff. It was a nice departure for me. It was also nice to get back into the mix as well.
When we were chatting and all of us had bucket lists and probably one of the things they may not know about you is your most recent performance.
I’m hesitant to say, but I’ve always enjoyed stand-up comedy. I did a two-minute set at the Comedy Works here at Larimer Square in Denver. It was just a kick. It was one of the greatest experiences as far as when you get that first laugh up on stage and you hear 200 people enjoying what you’re talking about and it’s something that was your own joke or your own idea. That’s pretty powerful. I’m definitely on the docket to do it again.
You wrote a book and you did comedy and both of them have an element of a hook. I think about the skill set to do that. That application when you’re working, you were talking about culture. Trying to preserve the culture of your organization and communication skills between France, the book, and in comedy, do you think those are benchmarks or indicators of the culture that you’re trying to keep going?
There are times when in this business, there are conflicts. Comedy is a terrific way to diffuse when tensions are very high in a room. I’m proud of the fact that even though there’ll be times when it has to be confrontational, when you’re unhappy about something that’s happened, when you’re at the place where both sides are about ready to have some détente, it’s nice to be able to diffuse that a little bit with a joke, get everybody to calm down and realize that the world still turns and all that stuff. That’s certainly a technique that I’ve employed for a long time. I would also argue that people should want to go to work and that creating an environment that people feel like is collegial and that they can laugh and share stories and enjoy each other’s company is important to the culture of the organization. I hope that my jokes aren’t too corny or aren’t too offensive or don’t do anything to make anybody feel uncomfortable. I always try and infuse a little bit of humor into every meeting.
That’s one of the things when we chatted on the phone first time and I’ve gone like, “I think we’re going to get on because you have a good sense of humor.” You’re an imposing figure. How tall are you?
6’5”.
A 6’5” guy who has written a child book, comedy and CEO, I would say that’s not a normal combination. You’re widely read. What is the most recent book or influential book that’s altered your perception on your job?
I read a book that I enjoy giving out copies to other people called Against the Gods and it’s the remarkable story of risk by a guy named Peter Bernstein. When I think about my role as a CEO, in a lot of ways, it’s Chief Risk Officer. It’s trying to determine after you’ve articulated the strategy and so on, how you are going to navigate the risks that are inherent in the business? For us, there are everything from Mother Nature to commodity pricing to execution risk to personal liability in the event of using big equipment that’s out there, planning or cutting or tiling or doing whatever it is that we do. This book is a great example of how the notion of bringing risk in our control and it’s distinguished in the modern times from the distant past. While I can’t claim that all of our future risks can be understood, measured and predicted, it does a good job of crystallizing where we are by understanding where we’ve been.
Everything from probability theory to statistical sampling to other diverse activities that it’s everything for testing new drugs to stock picking to wine tasting to the development of business, forecasting and game theory, insurance and derivatives. Those are...
