Grain Trading CEO Explains Basis Trading and Family Business Succession Planning

Philip Luce [00:00:00] And the industry needs young people. I mean, people of any age really, but, but there's, there's a little bit of a brain drain in agriculture. We, we've got a, when I started this business, I was 19, as I said, and I go to these meetings and everybody in there was a gray-haired person, and they're person of tremendous experience and knowledge and skills built up over a long period of time. I'm 46 now, so I'm closer to the old guy into the spectrum now.

Vance Crowe [00:00:23] I'm Ashley McFarland, a nonprofit executive living in Duluth, Minnesota, and you are listening to the Vance Grow Podcast. Welcome back to the podcast. I'm glad you're here. Today we speak with Phil Lu of the White Commercial Corporation. Phil and I have known each other for years, and I actually just recently got back from visiting Phil at the Master Management Conference where I was invited to be a keynote speaker. This conference was amazing. It was unlike any other conference I've ever been to because for the most part, it was really just about getting really good people together and getting them to talk. People that had similar business interests, maybe even were competitors with one another, but got them in a safe environment where they could talk about different challenges going on in their lives. Phil invited me to come down and give a totally unique talk, one that I'd never given before about how we make choices in our life, how do we make changes that can really impact not just the next few years, but really our entire lives and what impact things like our friends and our routines have on making those changes. The talk, we titled The Smoking Watch, and it details a bunch of different stories about changes both I've made and people that I've met throughout the years, whether on this podcast or in the Legacy Interviews. And so it was a big crowd favorite. We spoke all the way through the whole time. I ended up staying late into the evening chatting with people about the talk and have even gotten some emails and text messages about it.

Vance Crowe [00:01:55] So if your organization is planning a conference and you'd like to see if either that talk and I are a good fit for you or another talk, so I'm might do on succession planning or negotiations, then go to vance crow.com and fill out the contact form and we'll have a conversation about your event, what you're trying to get done, and if I'm the right fit for you. So without further ado, we are gonna head into this interview with my man, Phil Luce. Phil Lu, welcome to the podcast.

Philip Luce [00:02:25] Thanks. Glad to be here.

Vance Crowe [00:02:27] So I just got back from San Antonio where you were hosting your conference, and while I was at this conference, I learned all about basis trading. So let's begin there. First, what is the conference all about that white commercial puts on and what in the world is basis trading?

Philip Luce [00:02:44] Yeah, the conference is called the Master Management Conference. I don't know where the name came from because that conference has been happening since I think around the mid seventies. And I was born in the mid seventies, so it was happening well before my time. It, it has always been a gathering of white commercial customers years ago in the seventies, like I talked about, when the company was quite small, that meeting was in Don White's house. Don's our founder and since then we've, we've outgrown a house, so we have it in a hotel, but it's, it's a kind of a family reunion for us. We get customers from all over North America every January to show up and, and we move it around. But we used to do, we're we're based in Florida. I don't know if that, I don't think we've said that yet. We used to have one in Florida and then one in St. Louis. We did that for years, and then we moved to St. Louis one to Kansas City. And what we found is over time, people are more willing to travel more and more. So the world's getting smaller. And so we used to get a lot of attendance in the Midwest and less in Florida, but now people wanna go somewhere warm. So we tried in San Antonio this year for the first time, but it, it's just a chance for all of our customers to get together. I think the, the real magic of what White commercial is, is sharing ideas. We don't invent a lot of ideas, but we know people in the grain business, we've known 'em for many years, and we collect their best ideas and their stories of failure, just everything about them and, and either share it with our customers or ideally just once a year we get them together to share it with each other. And it's always, that's the, a phenomenally fun and educational event for everyone.

Philip Luce [00:04:17] I, I look forward to it. I mean, frankly, don't tell my family this, but I've, I've never looked forward to a family reunion as much as I look forward to this meeting.

Vance Crowe [00:04:26] So what, what business is white commercial in?

Philip Luce [00:04:29] Yeah, well, we are a commodity futures broker, and that just means we get paid to execute purchases and sales in the futures market. That is our revenue stream. The business that we're in has always been consulting, education and tribe building. That's, that's really what we, we, we charge brokerage fees that are frankly on the high end of the scale, but brokerage is not our value. Our value has always been sharing the ideas, like I talked about before. So we're a, we're an education company, we're a consulting company. We're a company that tries to build a family out of people that are doing similar things.

Vance Crowe [00:05:06] You know, I think it's Bear's saying just at the beginning, like, I get invited to go give lots and lots of talks, but I almost never have somebody on from the conference I was at, and I I you're not on because you like paid for an added thing or anything like that. I was just so taken by how unique the conference was that I was like, Phil, I I actually think like people in all different areas could tremendously benefit from this because my experience of most conferences, there's somebody putting 'em together, they've got some good ideas, people show up and they teach, you know, so you've got kind of a pro professorial model. I'm usually not the pro professor. I'm usually kind of a blend between entertainment and getting people to stimulate ideas. But your conference was way more designed around getting people together and, and just facilitating a conversation among people that could view themselves as competitors with one another.

Philip Luce [00:06:01] Sure. That that happens. This company started as white southeastern and I, I think I mentioned earlier, our founder's name was Don White, so that's where the white came from, comes from, we lost him at the age of 86 in December of 2017. But right up until that moment, he was the driving force of this company and, and also a genius of, of letting go. So he built a team of us, of myself and several other people a long time ago so that he could be the visionary and be the person who was involved until he was 86 without wearing himself out. But anyway, it's always been a homegrown thing for us. We, we, we, I know where I was going. Now the company started as white southeastern originally, and so Don lived down here in Florida and he started the company in Georgia and the Carolinas and Alabama, it's called White Southeastern. And he was teaching this concept of basis trading, which I assume we'll circle back to. And in those days, and still really, the southeastern grain market is very small. And so you very likely, if you're involved in any sort of association or group like ours, you will be there with your competitors. And that's easy for some people and very difficult for others. And every situation is, is different. And so I don't know how to assign a value to how open you are to being in the same room with your competitors and sharing ideas, but our philosophy has always been two things. We don't want to say no to people who want our help. So if we've got competing companies that want our help, it's very hard for us to say yes to one of them and no to the other. The other thing is though, if you're teaching good solid business principles, which we are, it, it makes the market better for everyone.

Philip Luce [00:07:37] Competition is real, but competition makes us all better anyway, and it, it ends up being good for the consumer. And our, our counter to, I don't want you doing business with my competitor has always been, we would like to help you and your competitor do sensible, valuable things in this market as opposed to one of you being a knucklehead and messing things up. So yeah, that, that's true there, there definitely are people who compete with each other from time to time.

Vance Crowe [00:08:01] So maybe a good place to start would be for me to present my understanding of how grain trading works, and you can kind of tweak this. So Farmer goes out, buys seeds, plants those seeds in the ground, puts all the chemicals on them that they need, you know, takes care of them, eventually harvest comes around, they go out, they harvest them, and then they've got to sell them to someone. So they either can store them in their own bins that they have at the, on their, on their farm, and that's become increasingly popular in the United States. Or they go to those giant grain elevators where they take, you know, semis and, and they pull up and, you know, they open up the bottom of the semi and all the grain flows out, and then that elevator pays them for the current price of that, or they could be paying that elevator for them to store it. And from here, throughout the rest of the value chain, it all becomes murky to me. What did I miss here? And how, how does it work from here?

Philip Luce [00:08:58] Oh, that's exactly right. All of the grain that gets grown in North America, well, you have a, you have a summer harvest and a, and a fall harvest, but harvest time is just a few weeks long. And the ultimate end users of that product, whether it's turning corn into ethanol or wheat into bread or soybeans, into mayonnaise or whatever they do, they need a year round supply. So all the supply hits the market in just a little short window, but you've got all year long, you need, you need supply. And so a couple things about that. There is a relationship sometimes where the grower will take that raw product directly to the end user, but those two parties aren't well set up to service each other. One of the reasons is, like I said, the farmer, well, like you said, the farmer harvests and needs to turn that into money, or they filled up their own space and they need to put it somewhere and they need to do that right now, you know, we've got this little window of time, all the grains come, all the grain that's gonna be grown this year is, has been harvested and needs to go somewhere. And what the end user really needs is an equal supply, you know, a good quality product and equal supply all year long. So right off the bat, those two parties aren't well suited for each other. They're, they're not enemies, they're just not well set up. And so enter the, the grain elevator like you talked about, which really is a service provider providing service to, to everyone, provide service to the farmer, doing the things you said, provide service to the end user, doing the things I said, which is providing a consistent quality on a consistent shipment schedule all year long. And what we found over the years is, well, this is just true of any, the market won't allow a middleman.

Philip Luce [00:10:33] So the grain elevator is a middleman. The market won't allow a middleman to exist if they aren't providing some value. So that, that's the job of the, of the grain elevator is how can I be valuable to the producer of this commodity? How can I be valuable to the user of this commodity? And frankly, once the, once our customers who are the grand elevators, sell it to the end user, I, I don't know exactly what happens either. Our job is to take it from the farmer, collect it, make it into good quality, and deliver it consistently to the end user who takes it and smashes it up and turns it into products that

Vance Crowe [00:11:05] We use. So this is, so, and when you guys enter the picture white commercial, it's that a farmer needs to find an elevator to sell it to, or they already have an elevator to sell it to. You're helping the elevator get it sold to whoever, whoever wants it, whether it's ethanol or the person producing mayonnaise,

Philip Luce [00:11:23] Right? Yeah. The, our customers, the farmers know where our customers are. So we, we can't really help with that. Our customers are trading a, a commodity that changes in price all the time, minute by minute. You know, if, if you watch any of your viewers or listeners who are involved with the futures market know that the value of a commodity can change several times a day. And right now we're in an environment where that's happening. And so what we teach them how to do, if, if you buy, the farmer comes in and delivers you a load of corn and you pay him $4 a bushel and you just say, okay, I'm gonna wait until the end user needs it. And a week goes by and now corn's worth $3 80 cents a bushel, the user needs it. You need some cash flow. Well, you've lost 20 cents a bushel while you waited. And so what we teach our customers to do, and and truly, you know, in the, in the seventies and eighties when, when this company was being started, this was a mystery. It's not a mystery anymore. We rarely find people now who don't understand what I'm about to say, but we do find a lot of people who could get better at it. But what we teach 'em how to do is become price neutral, buy the grain from the farmer, hedge it by selling a futures contract. So I've bought grain, I've sold futures, I've locked in some differential between the value I paid the farmer and the value of a futures contract. That means I'm now neutral to price movement because if the price goes down, the futures I sold are worth money. The granted I sold, the granted I bought is worth less money. And those things kind of move back and forth. And it's easier to explain this if I've got a piece of paper to draw on. But essentially what basis trading is, which is what I'm talking about, you lock in a basis by establishing a cash price, which means I paid the farmer a price, you establish a futures price, which means I've sold futures on the Chicago Mercantile Exchange.

Philip Luce [00:13:02] The difference between those two prices is the basis I've locked in the basis price movement now doesn't really affect me anymore. What I'm trying to do now is trade the differential. The basis is the differential between cash and futures. The elevator's job, while providing the service I already mentioned, is to buy grain when the differential is large between cash and futures and sell it when it's small, buy low basis and sell high basis. That's the, that's the name of the game.

Vance Crowe [00:13:26] So when they go out to do the futures, that's like an ethanol plant saying, Hey, we know in June that we're gonna need X amount of corn and we don't want the price volatility. We think maybe it'll go up from $4 to four 50 a bushel. And so we're deciding, hey, even though we're gonna pay more than whatever the cash price is now, we're willing to pay a little bit for you to store it and a little bit to have that certainty of what the price is. Is that right?

Philip Luce [00:13:53] In a sense, if, if you were to buy corn from the farmer today and sell it to the ethanol plant for June delivery, that's not a basis transaction. That's just the industry term would be selling the carry. So there's, I'm paying this price today, there's some higher price available later, and I'll sell that, I'll sell that price, I'll hold the grain and I'll deliver it in time that that's selling the carry, which is, which is also a way business can be done. What this is, is what basis trading is, is instead of selling to the ethanol plant, I'm gonna sell a futures contract, which is kind of like selling to the ethanol plant, but it's, it's much more general than that. I haven't actually sold the corn. I've sold a future value of corn on a commodity exchange. And then sometime down the road, the ethanol plant's gonna want it. I'm gonna sell the ethanol plant, the corn, I'm gonna buy back those futures. And then I have to do some accounting to, to talk about how all it all ended up. So the, the futures is a stand in for selling to some party for later delivery. You can, what does that mean to, you can just buy and you can buy corn and sell it to the ethanol plant, and that works too. If, if there's the margin there to do it. If not, then you use it futures market.

Vance Crowe [00:14:56] What does that mean to buy back the futures you're saying because you, you've, you know, I'll let you explain it.

Philip Luce [00:15:01] Sure. A futures contract is a, an agreement to, if you sell futures, you're agreeing in theory to deliver a commodity, a certain quantity and quality of a commodity to a delivery point at a price. Now, most of the futures contracts get bought and sold are not executed that way. So for example, if I sell July futures today, I'm agreeing to deliver whatever commodity futures I sold sometime in July of 2022 to a CME delivery point, which is gonna be a grain elevator on the Illinois River if it's corn soybeans at a given price. And if I wait long enough, I will have to do that sort of, but what really happens is I'm gonna sell that corn to a, an end user, and I'm just gonna go back into the same market. I sold the futures contract and I'm just gonna buy it back. It's, it's just a, it's just a, a way, you know, the, the board of trade, it's called the Mercantile Exchange now, but it was called the Chicago Board of Trade for a long time, was, was assembled in the 1800 sometime as a means for people who are interested in future delivery of a commodity or in hedging price risk because they, you know, they wanted to buy a commodity later, but they didn't want it to go up in price while they waited, rather than find each other, rather than you and me finding each other and making a deal, we could both go to this central place and, and buy and sell futures contracts instead of buying and selling the physical commodity. And this is something that pro your users who are in agriculture will, will probably be more familiar with.

Philip Luce [00:16:35] And some of 'em probably could explain it better than, than I can do. But that's the, that's the basic, well,

Vance Crowe [00:16:40] I've been around in agriculture for, I don't know, about seven or eight years now. My understanding or knowledge of the whole process just stopped right at the, you know, the, the harvest happens, right? Yeah. And then I would pick it up somewhere where food began. And what you don't realize is the space in between there is really where money exists, right? Like there's certainly money on the food and the retail aspect of that, but the, this is where people are, you know, making or losing a whole lot of money. And, and, you know, I really had just always understood the price of corn is the price of corn, not, not understanding how many different levers there are to pull, not least of which, one of the things that was the most surprising to me. And I, I feel a little silly saying this, in fact, you know, I'm really exposing the, the vast amount of ignorance I have in this field by, by being so candid. But I think there are a lot of people that are like this, but I did not realize just how much prices could fluctuate between regions, right? Because you could have somebody growing grain in Montana versus somewhere down in Atlanta, and their prices are totally different. And that's because transportation costs are gonna be different where the green elevators are and even demand out where those locations are,

Philip Luce [00:17:51] Right? Yeah. To use the Montana and Georgia doesn't work for the example because they don't grow corn too much in Montana. But if we say, when we say Georgia and Illinois somewhere, or Minnesota might be a better example there, there are, Georgia is a place that uses a lot of corn. They feed a lot of poultry there, they had ethanol plants, they don't so much anymore, but they feed a lot of animals there. Use the corn for different reasons, but because of the terrain, the soil, et cetera, they don't grow a lot of corn in Georgia. So Georgia is what's called a corn deficit area. Now, if you're, there are corn farmers in Georgia, and they do produce their own corn, that corn typically is significantly more expensive than the same quantity of corn in Minnesota. And the reason is Minnesota is a huge production state. They have a lot of usage in Minnesota as well, but they grow way more corn than they use. And so part of what goes on is if you wanna use economics terms where we're arbitraging inefficiencies essentially. So what happens is, in order for the state of Georgia to get the amount of corn that it needs, they have to pay a price that will, that will cover someone's cost of growing the corn in Minnesota or Iowa or wherever, putting it on train or a barge or a to, to Georgia. It's gonna be a train most of the time. And going past every other point between Minnesota and Georgia where somebody wants corn, you know, that that's the idea is so you do get these massive cash price differentials, you know, that could be a dollar a bushel in some cases, you know, a a a bushel of corn that's worth $6 in Georgia might be worth $5 in Minnesota.

Philip Luce [00:19:25] And the reason is it costs a dollar of, of work to get that corn from the area of surplus to the area of deficit. And that's going on all the time. That's going on between Minnesota and Georgia. It's going on between one part of Minnesota and another part of Minnesota. It's going on between all, it's going on on a macro and micro scale all the time. And that's what the grain elevator is. The grain elevator at other trade cross country traders like Schooler and Lansing grain and people like that, the, the, the, the cross country traders not exploit. They just see and fill those inefficiencies across long distances and the grain elevator sees and fills those inefficiencies in, in the local market,

Vance Crowe [00:20:06] I think exploit's the right word. Like we have this kind of bad, you know, it's a pejorative term people think of. Yeah, there you go. But, but it turns out right, like exploiting is exactly what capitalism does so well as it finds somewhere where, where somebody, you know, missed an opportunity and somebody else can pick it up. You know, when you think about these traders, because I'm, you know, I'm a children a child of the eighties, so you know, if I'm watching Wall Street or, or any of the movies that were going on, it seemed like commodities traders were dealing in information and trying to figure out, you know, where's the frost coming from? And oh, you know, is there a border war going on with the Ukraine? It, it did not appear to me that white commercial cared too much about those types of issues. It was, did I just not sit in on the right sessions?

Philip Luce [00:20:52] No, you're exactly right. There, there are many types of people that use the futures market, and in fact, I think the, the overwhelming majority of people who use the futures market are not directly tied into production agriculture in any way. You and I could open a futures account and trade and, and we'd be, what we'd be looking for is just like a day trader in stocks, buy low and sell high. So we'd be looking for some piece of news that says there's a bunch of rain somewhere, so it's gonna be a big crop. So we'd sell futures assuming we could buy 'em back cheaper later, or Russia's gonna put a bunch of tanks on the border of the Ukraine so that wheat's gonna be held captive, so wheat prices are gonna go up. So we'd buy wheat futures and, and you know, assume we could sell 'em higher later. That that's a, that's a trader mentality and it's, there's nothing wrong with it, it's just not what we do. The, the country elevator is, like I said, providing services. We are a place for farmers to come and get service when they need to get the grain out of the field and into a bin somewhere. They're providing a service for the ethanol plant, the feed mill, the barge shipper, whoever, when they need a consistent, steady supply of quality. And that's a different game. Like I said before, the, the basis trader tries to be price neutral. So we get into a hedge position, own the physical commodity, sell the futures, then you sell the physical commodity, buy the futures back. And all we care about is the difference between the two things. Again, I, I wanna buy a big differential. This is one of those inefficiencies at, at harvest time. That's the point of greatest supply throughout the year, and I want to pay the farmer the highest price reasonable for that commodity, but I also want to own a, a, a, a big differential between cash and futures.

Philip Luce [00:22:31] And so harvest time is the point of greatest supply. That tends to be the point of the, of the widest differential, the lowest basis we'll call it. And then as the commodity gets used up throughout the year, the, the differential tends to come together as we use up more and more of the supply and the, the beautiful, you know, the, the oversimplifying. But what we always like to say is the perfect scenario is I buy corn from the guy on one side of the elevator who's a farmer, and I pay him $5 a bushel for the corn. Six months goes by, I sell the corn to the guy on the other side of the elevator, and I, and I sell it to him for $4 a bushel. So I paid this guy six or whatever, as I say, five or six, doesn't matter. I paid this guy six, I sell it to this guy for four and I make 50 cents in the middle. I bought a product for $6 and sold it for a $2 loss and still made money. That's the, that's the beauty of what we do. Everyone gets to win. I mean, one of the reasons I love what I do so much is we don't have to take anything from anybody to get our job. And that includes me. I, I'm getting paid a, a tiny little fraction of a penny for these transactions. And there's money in the market for all of us there, there, the market gives the farmer an opportunity to sell a high price, gives the end user an opportunity to buy a low price, gives the elevator the chance to be price neutral and still make a margin in the middle. And also the elevator gets to pay me and we all go home a winner in this scenario. And it's, it's a, it's hard to believe almost, but that's, that's what's fun about it.

Vance Crowe [00:23:54] Yeah. And so you just brought up something important, right? Which is you're not the grain elevator white commercial is is somebody placing the trades. So what is the value that you provide in, in this scenario?

Philip Luce [00:24:06] Yeah, well, as I said at the beginning, we're, we've always been an education company and predominantly what we've done is find out what works for somebody and then try to teach it to a whole bunch of other people and then get those people together to teach each other, both from failures and successes. You saw a little bit of that last week. So our, our val, first of all, you have to have a broker to clear trades. Now you can sign up for an online account, you know, which you, you can do the, the Robinhood of futures, so to speak, and, and you don't get any help from anybody, but you can execute trade. So there's minimal value in trade execution. The value that we provide is we teach people how to be better basis traders. We, we all, and we do a bunch of other things too. We, we've got a CPA on staff, we help people with grain accounting, with valuations of their businesses, with all kinds of things like that. We, we, as I said before, we build this tribe, we get people together to talk about practical business things. To your point, our our meetings aren't about sociopolitical events or weather across the world or anything like that. Those things aren't meaningless. I mean, they, they have some, some application to what we do, but largely we're talking about business stuff just in this particular arena of basis trading. But we're really talking about how do you take care of your employees and customers on both ends of the transaction? How do you, how do you be a positive force? And one of the things I really, really love about this business is our particular niche involves a lot of small country elevators that I'm calling 'em, which means they're out in, you know, they're out in a rural community somewhere.

Philip Luce [00:25:37] They're not in St. Louis or Omaha or someplace. Nothing wrong with that, but our niche has always been small businesses, and these people are on the school board in their town and they're on the council and you know, they, they're really interested in the health of their local community. And a lot of times they're the biggest business in town. Sometimes they're the biggest employer in town.

Vance Crowe [00:25:58] Yeah. People don't realize when they look at an elevator, right? If you're from the city and you're driving down the interstate and you look over and you're like, oh, there's a grain elevator. People don't realize there's millions, tens of millions of dollars sitting in those elevators. And, and I mean, they are essentially, I'm in a lot of ways they're, they're solar batteries, right? Right. They're just filled up with all that solar radiation that turned into corn seed that is now sitting in those bins. But if you're in a small town where there's a bank, a grocery store, and the grain elevator, that grain elevator isn't just the largest bus business, it's the largest business. 10 x

Philip Luce [00:26:33] Yeah, that's right. A a huge amount of money flows through the, the grain business and, and a lot of 'em too have crop input business. So fertilizer money flowing through there, just a massive amount of money. And the, the goal is because these people are community minded, as I said, the goal is to bring money into the community from the futures market. So all these trader types that we're talking about, you know, they get excited and run the market up. And our customers now have an opportunity to go out to the growers and say, listen, the price of X commodity for harvest delivery is very high. Let us buy some of that from you. You know, maybe harvest is six months away. Let's, you know you're gonna grow some, let's lock in this high price. And what tends to happen, it, it, it is not a rule or anything, but what tends to happen is you've got this seasonal pattern in prices where before the crop gets planted, things are just kind of moving along, doing whatever they do. When you get into planting and growing season, there's all these concerns. It's too hot, too cold, too wet, too dry. Something's going on in China, something's going on in South America. And so you get this price run up that says either we're not gonna grow this or somebody else isn't. And then usually because the market is made up of people and people are emotional, you get this price rally and then it declines in the harvest time. Now it doesn't always happen that way, but that's that over 20 year period, that's what it looks like. And so our customers, when the price is high, and this is gonna be, again, several months before harvest, the crop's just in the ground. Maybe you drive by the field, you know, two inches tall, poking out of the ground. Our customers think, look, you're gonna have to bring this to us anyway in several months. The price is really high right now, let's lock that price in. And now when, when this happens, all this money essentially comes to town from the, from the futures market and nobody really loses.

Philip Luce [00:28:10] That's just, it's just, you either take advantage or you don't. If you don't sell that and the price goes down, the money just went away. But if you do sell it and the price goes down, that's money coming to the community that gets spent, you may know this better than me, but something like seven times, every dollar that comes into a small town gets spent seven times because you pay your employees and they buy shoes and et cetera, et cetera. And it, it's really fun, really fulfilling to be able to work with people in these small towns. You're working directly with someone who can learn a concept, make a decision, and, and experience the benefit and see the benefit experienced in their community. So I've only done this, you know, I've never worked for a large company. I, I've worked for white commercial since I was 19 years old. So I, I don't know that this type of fulfillment isn't available elsewhere. I assume all work is noble and has the chance to be fulfilling, but it, it's really, really trips our trigger at white commercial to be able to, we're not doing anything for people. We're just presenting ideas to people, giving them a community of people to work with. And when all of that clicks, it's just magic so on. And it's directly to the benefit of small towns.

Vance Crowe [00:29:16] On the first morning that I was there, I, I woke up, I had breakfast, and then you had an early morning session on basis training. And I was like, all right, basis training 1 0 1. And I show up there, and I don't know what I was expecting, but what I found was there was probably like 30% of the people were year, their, you know, mid twenties, maybe a little bit earlier than that, but most, for the most part, maybe they'd been running a shovel at the grain elevator or they'd been working on a truck or they'd been doing something and somebody in the grain elevator said, Hey, you really ought to learn this. And so you've got some young people there, then you've got some older guys there. So you've got people there that are, you know, maybe they, they worked for quite a few years and then they got into grain trading and, and somebody said, Hey, I want you to do this. And then you had like way older guys there and women and like, it was just a really interesting mix of people that were there to learn that basics. And I did that class for an hour and it went on for the rest of the morning. And I got up out of there after having had the experience of being around people that are sitting there pencil and paper in hand, you know, trying to figure out like, okay, exactly how do I trade a futures? Okay, and I'm gonna put it over the money over here and this is how I do the accounting and let me check my math. So you had that excitement. And then I walked up outta that room and went into the other one, which was a forum on succession planning. And I was super interested in this because lately I've been invited around the country to go give a series of talks on succession planning. But mine is more philosophy, right? There's different kinds of succession planning.

Vance Crowe [00:30:48] This is for people, they have a business and they need to get out, right? Are you gonna pass it down to your kids? Are you gonna sell it to a venture capital fund or an, you know, private equity? What are you going to, what are you gonna do? And there's the philosophical concepts that I kind of work on, which is a little bit rare actually, I would say really rare. Then there's the one that the bankers show up and talk about, which is the, this is how you have the conversation with your kids and you know, you get your legal documents in order, but then because of you guys, I realized there was this third kind, which was entirely forum based. The the head of the, the, the chairman of your organization. John stood up there and just said, Hey, we're gonna have a couple guys tell some stories. Roger Right, right over there. Why don't you tell your story? And Roger stands up and tells a story that was like, not all good, right? Like, some pretty bad shit happened to Roger.

Philip Luce [00:31:38] Yeah, yeah.

Vance Crowe [00:31:39] And then they start talking. So what was your takeaway from the succession planning? Had you guys done that before? That was amazing.

Philip Luce [00:31:46] Yeah, we, we, John has really, has really spearheaded that for us. But we as a company started talking about succession planning, probably, probably eight or 10 years ago was the first time. And it sort of, you know, it hasn't been steady since then. It's sort of progressed. But initially I think that because we're used to saying this is what a successful business looks like, I think the initial approach was this is what successful succession planning looks like. But then when you get into the realities pretty quickly, we realized there are commonalities among all successful business transitions for sure. There's some kind of specific plan, there are some deadlines, you know, there are some conversations awkward and otherwise that have to happen. So there, there are these big things that happen, but especially, well, maybe not especially, but every situation is different. That's what we found out. You know, we, we've, we've got people who are family businesses, not family businesses, family business, but not gonna transition to the family. There's all of these complications and situations. And so rather than being prescriptive, we did what we always do, which is collect ideas from people and, and share them around. And what we found is just like you noticed, there are some people who have really just kind of stumbled out of succession, barely alive, you know, just a tough, tough go of it. And there are other people who've had a tremendously successful succession program to their family or someone else. And there are a lot of people that haven't started yet at all, and a lot of people that are somewhere in the middle. So rather than try to prescribe to people, here's what you should do other than in these big broad, you know, again, you need a, you need a plan.

Philip Luce [00:33:19] You need to communicate to the key players. You need to have some things on the calendar. You need to decide what the value is and how you're gonna measure that. There are some big things that have to happen, but generally speaking, the most value is let people tell their stories. Here's what we did that worked, here's what we did that didn't work, here's what I wish I'd have done differently. We're in the middle of it and I'm thinking about changing it around. And, and there's just a, a massive amount of value in getting people together who are like-minded and facing similar challenges and just letting them talk to each other.

Vance Crowe [00:33:46] Yeah, there's nothing a bank can ever tell you that is like what happens in that room, because in that room there would be people saying, you know, my brother and I ran this business for many years, but I only had daughters and none of them wanted the, the farm. And it turns out my brother's son, he's just not cutting it. You know? He is, he just doesn't have it. And we, you know, we love him. We, we want, well what's best for him, but we both know that if he takes over that thing, then it's not gonna work. So now we're in a new situation where we gotta figure out do we pass it on? Do we sell it? How do we value it? And so you have these conversations about things that, or ordinarily if you're the head of the largest business in your community and that, and you don't want you, you know, hey, I could sell this to a large co-op that's a regional one that's not gonna care about anybody here. Or I could, I could shut it down. You know, these people, because like you had said, are largely involved in the community, them keeping that business open is more than just, I want to get paid out for the equity that I've put into this business. And, and I think that there's very few places that people are at the, the top of their mountain, wherever their small community is. They don't have many places to talk about this.

Philip Luce [00:35:02] Absolutely not. It's a, we find across all concepts of business and succession is certainly one, there is a tendency, this is probably a human tendency, but we run into it in our business all the time, is I'm probably the only one that has this problem. Everyone else has this figured out and it's just me. And I think that goes back to the magic of getting people together. 'cause you find out everybody has the same problem or, or the same opportunity or the same challenge. Problem's probably not the right word for it, but people, a lot of people tend to think they're the only one facing down, whatever it is they're facing down. And it turns out that's just not true. And, and that's much broader than the grain business, but we see it all the time. And it's par partially because people are geographically separated from each other. You know, you, you don't get to sit down and talk to another owner of a grain elevator all the time. That's, it just doesn't, doesn't happen to people next door or your competitor. So you don't necessarily want to share all your secrets with them and, and the people who aren't your competitors are far away. And so fortunately the world's getting smaller in a lot of different ways. And so that's, it's easier to get people together. We had a, last year we had a session just like this, a, a zoom recording of, of, I think it was nine people who are at different places in the succession thing and they talked to each other and then we recorded it and sent it out to our customers. And, and you find out everyone has the same challenges everyone has, might have a different way of dealing with it. And there's, you mentioned you get into these family situations, there's so many different faces that can take

Vance Crowe [00:36:27] Well, and I think, I think not only faces, but people get locked into answers, right? You get locked into a, well, this is just what needs to happen. There was a group in there, I don't think I'm talking outta school if I don't mention names, but like there was one family in there, they had four kids that were involved in the family business. And it turns out the youngest brother was the one that was kind of chosen to be the CEO. And you know, you think about that and I think about my youngest brother being chosen over me regardless of whatever his skillset is. You know, that would, that would itch, that would burn a little bit, right? And, and like you hear people, you watch the room kind of be like, whoa, is that really what you did? And then they talked about what went well, how did they set up the voting structure to make that work? How did they do these things? And you can tell people have light bulbs going off later on that evening. I, I was talking to two guys that were like, I didn't think it was an option that I didn't have to choose the oldest son. So now I'm gonna think about that.

Philip Luce [00:37:24] Yeah, I, I think there, we've really stumbled across some, some genius solutions. And in that particular case you're talking about was the youngest of four siblings. They have equal financial share in the business, but he has more voting rights than anyone else. And, and the reason is you need someone to be able to break the tie, you know, and a lot of, I I'm not in a family business, so I'm, I'm just speaking from observation, but a a lot of problems come up in succession planning when mom and dad wanna be fair to everyone and they think fair means equal. And maybe in certain ways it doesn't. And I can, I, I'm a father of an only child, so I, I just have to imagine this, but I can see why it would be very difficult to say, okay, child number one, you get this and child number two, you get this plus all this other stuff and just, it doesn't feel right. And that particular family you mentioned is highly functional. And it was great to see that they figured out a way that the financial rewards are equal and people are, and they listen, this, these kids have been kids they're called, some of 'em are older than me, but

Vance Crowe [00:38:29] Yeah,

Philip Luce [00:38:29] These, this family has been contributing to this business for a long time and they've, they've earned something, you know, but they, they, so they, you're right. That was an absolute genius solution to say the the right person to be the CEO job is the youngest son the right way to, to split up these business profits is equally, but we need someone to have the the veto power. The what? The tie breaking power. And so we're just gonna make these, these shares of stock weighted so that the CEO child has the most voting power and that, that solution worked great for that family. And, and what's cool is that idea came out, people talk about it and now some version of that will work for someone else.

Vance Crowe [00:39:08] Yeah. John said something really interesting during that succession plan. I wrote it in big bold letters in my notes. And when I was looking at 'em this morning, I just couldn't help but look at it. And it was, when you're gonna get into succession planning, you need to have two things. First, start with a date so that way you don't put it off. And then the other dates can flow from that one. And then the other one was have what, what it is that you wanna get out of this? Like what is your point? And if it's just money, well like, then, then that's a much simpler conversation, right? That's, that's, but for most people, if you've built a business, you have something that you wanna see your family name live on, you wanna make sure your town survives, you have something else. And you think about that as like, hey, if you can capture motivation that's deeper than just let's get the maximum amount of dollars that puts you in the best negotiating position you could possibly be in because there's more things you care about than just can the, can the person I'm sitting across the table from just meet my financial goals, which I, I thought like really opened up some, some doors,

Philip Luce [00:40:12] Right? Yeah. We, we, I I should say we do business with cooperatives as well. And, and we, we think that the cooperatives that are drawn to us are the same kind of people as the rest of our, you know, they're, they're, they're oriented all, all the same thing you're talking about. It's a different business structure. So succession means a different thing, but I, I don't wanna even get the sense out there that we're bashing cooperatives. 'cause we're not, we, we, in fact, we have our cooperative customers come into these succession planning meetings all the time with a little different focus. But their desire is the same thing you're talking about. We wanna keep, we wanna make this co-op strong. I've built this up as the manager of this co-op. I need to bring in another manager who can keep this going after me. All, all these same type of issues.

Vance Crowe [00:40:54] I, I just, just spoke two weeks ago to a co-op about succession planning. So they are definitely interested in succession

Philip Luce [00:40:58] Planning. They're, they're very interested for all the same reasons you mentioned. Now, I think it is a truism that the bigger an organization gets, the, the less they are focused on certain things. And, and for better or worse, that just seems to be how it is. Now, that's not universally true by any means, but it's also not true that every single independent business out there is out there for the good of the community. And you mentioned, you mentioned that to that you get all kinds of people in all kinds of situations, but there is a, a huge drive toward keeping what we've built one way or, you know, keeping it in the family. We've got four and five generation businesses and, and to take a family generation through a family business through five generations is astonishing, is really something. But by the time you've done that, it's really, it's, it's in your fiber now. The idea that we're just gonna sell this to a big company and get on down the road with our pockets full of money is, is just unheard of. And anecdotally, I've seen many of our customers over the years get to a stage where the only option for them was to sell out to a company. And, and they did very well financially. And I, and I'm god bless 'em, I mean, it was, I'm glad to see that happen almost without fail within a couple years that business is not what it was and sometimes just goes away forever. And it's, you just hate to there. There's certainly a, a drive in our, in, in our type of customer to not let that happen. If, if there's a way to not let it happen, that's what you want.

Vance Crowe [00:42:24] I mean, it really seems like, particularly in farming, but I, I, you know, and I'm, I'm on the board of directors for a community bank and so we get to look into how these businesses are being passed on in a lot of cases. And there's something in the ecology of our current modern world where it's much more difficult to pass on some kind of family business. I mean, there's a real reason why the private equity has just exploded and, and why there's so many people that when they go to get their business, when they go to get the equity out of their business, the only people that can give them that money, right? Is, is the private equity. But like you, you look at that and you see the, I there's very, there's, there's nothing wrong with going to private equity and selling out and making a ton of money for your family and then reinvesting that or doing something else. There's nothing at all. But it is a different ecosystem that you're living in. Once that business has gone into private equity, because the people that are buying that business have really do have one central goal, make money and cut what you need to, and, and, and, and it's not necessarily extracted as fast as you can, but if they aren't extracting money outta that business quickly, then they're not servicing their own shareholders.

Philip Luce [00:43:37] Yeah. That, that's, that's, that's exactly right. And speaking of extracting money, this is something that, that John discovered, so I don't want to take credit for it out of turn, but one of the, just like you said, one of the reasons it can be so difficult to pass on a farm or a grain business is because you've got these assets and they're really valuable and expensive assets and you've spent a lot of time investing in them and paying them off over a long period of time. And the, the normal and understandable mode is keep all the money in the business because we need to reinvest, we gotta grow, we gotta build bigger grain bins and faster dump pits and provide better service. And if you don't make it a point to take some money out as the owner of a business and, and put it outside the business so you have it, it's, it's impossible, almost impossible to sell it to your kids or to the next generation because you need, you have nothing, all of your equity in the business, but now you've got this millions and millions and millions of dollar business that you're talking to your 30-year-old daughter about saying, Hey, how'd you like to go into, you know, many tens of millions of dollars of debt? And she doesn't want to do that. And you can understand why. And so John's pointed out, and he's been very good at, at, at telling people who want it, who will hear this, even though you need to reinvest in your business, you have to keep capital in there. It's really important to the success of your ultimate transfer that you have some assets outside the business, otherwise your hands are very much tied when it comes to

Vance Crowe [00:45:03] Man. That's, that's really, that's very insightful. I, so, you know, I do these Legacy Interviews where I interview people at the end of their life and not always, sometimes they've got 20, 30 years left. But in fact, just a couple of weeks ago I was interviewing a guy who said it pain him because he wasn't going to be able to, he had one son-in-law that was interested in buying his farm, and he was like, but my son-in-law was gonna have to come up with at least a million dollars to be able to make this thing work. Like if I was gonna give him some land so that he could get up and running, I was also going to have to give him cash. Or he was like, you know, we, we tried to make it work every way we could, but I couldn't actually saddle my children with debt in order to give them an inheritance. He was like, it just wasn't gonna work. And I really, I was like, oh, you know, that's just the, the way it, it crumbles. But I had never thought about the fact that, well, you could, you could hand, you could start solving this problem earlier by doing what you're saying, taking money outta the business.

Philip Luce [00:46:00] Yeah. And it, I think it has to be early just because you do need, I, you know, I, I don't know as much about farming, but I do know it's, it's asset intensive, it's capital intensive, so you can't just strip the profits from the business every year. It can't work that way. So it has to be, I, it seems to me like it has to be a, a reasonable withdrawal of equity over a long period of time. And again, like you said, if you wanna make a, a sale to an equity, you know, private equity or big company or whatever, and walk away that there's not evil, there's nothing wrong with that. But if your mission is beyond monetary, the mission is to perpetuate this family farm, this family grain business, or even this local grain business, not in the family anymore, but I'm gonna sell it to my employees or something. You, you, if you haven't done some work to set yourself up there, then you either have to walk away with nothing or you can't sell it to the next generation. And that's easy to say and hard to do, but, but it's hugely important.

Vance Crowe [00:46:55] You know, the other thing that came up over and over and over again was you have these guys, they're, you know, late fifties, early sixties, and they're saying, Hey, we, we just got a new guy on. He's been working for two years. We're really hoping maybe we can pass the business onto them. And you, and you see how much it pains them to have not had employees that have stayed on for a long enough period of time to have built up a nest egg that they could buy into the business, they could buy a partnership. That was something that really struck me. And you think about the guys that were in that first room where we were learning about basis trading.

Philip Luce [00:47:29] You

Vance Crowe [00:47:30] Know, you can't expect a guy that just just got done driving a truck or rolling a shovel around the, the grain bin that's now doing basis training to be able to come up with, you know, several hundred thousand dollars to, to buy in, in a partnership. But it's really hard because these guys are also saying, well, I had, you know, one guy that was on for 15 years and then he decided to go take a job somewhere else and we lost that succession planning. Man, it is, whew. It is a, a, a tough business if you wanna be able to pass it on.

Philip Luce [00:47:58] It is. And a couple of, a couple of thoughts about that. First of all, as you heard throughout the meeting, I, I'm in the middle of the receiving end of succession planning now, and I was exactly the kind of person you're talking about. I, I was an employee of the company for 20 years before we even talked about it. And I think there were some vague plans out there, and I was trying to be useful and everything, as you know, but I was around a long time, so I was a known quantity. And my partner who's, who's also involved, and actually there, there are three of us that are, that are working on that. And we've all been around a long time and, and had a chance to prove it. But thinking now from someone on the other side, it would be very difficult to know someone for two years and have these long term plans for them. And, and I think, again, easy to say, hard to do, but I don't know how you keep someone around for as long as you need to, to not only build them up financially to the point where they can, where they can buy in, but also to be interested without,

Vance Crowe [00:49:06] Without dangling a carrot in front of him and being like, just stay on one day. I'll give this to you. Right? Like

Philip Luce [00:49:12] There has, yes, there has to be some kind of communication that you are a candidate if you're interested or it's amazing. Also, this is branching out into another thought process. Now we've, we've run into several people who just kind of thought, you know, they had some key employee who, who would be a, a prospect for transition and they say, Hey, you know, Joe, we'd like to bring you in for as an owner. And Joe says, no, thank you, but, but you've, you've gone along for 15 years thinking Joe is building, or you know, Sarah or whoever building their way up into this key employee and you never said anything to 'em, never said word one. And so now you've, you've got this thing in your mind that you've never communicated and you say, Hey, I'd just like to be an owner. And they say, oh man, I I love the paycheck, I love the work. I don't want the risk. And, and the communication is a, is a huge part of this. And there's also a lot of awkward conversations. I mean, you, you heard one of mine, I just wander in the office, said, Hey, hey, sell me some stock. And they said, no.

Vance Crowe [00:50:06] Well, your story's worth telling. So you, you started off as a guy, you know, you were in college and you're cleaning out horse barns to, to make a little bit of spending cash and you're studying to be an English major and you run into Don White.

Philip Luce [00:50:20] Yeah. This nine out of 10 of the big life changing things that have happened to me have been a direct, direct result of who I got married to. And this is one of those things. She, she, she's changed my life in a lot of ways, but how, how that came about is actually the, the lady I met my wife now, we've been married for 27 years. I was in high school with her brother. We were pretty good buddies. And so I kind of knew the family and I'd seen her. I, I didn't really know her. She was in a different school and things. But anyway, we, we got engaged and, and right around the time we started dating, her parents moved to Guatemala to be missionaries. They were down there for the first seven years of our marriage. And so when I, when I asked her to marry me, she said, yeah, but you have to ask my dad. So, so I called her dad and I said, Hey, I, I'd like to get married to your daughter. And he, he said, you know, he gave me a little interview to, to see, see what I was thinking. And, and he said yes. And then two or three weeks later, I found out I was going to go Guatemala. And a man named Don White had bought me a ticket. And I never met Don White, never heard the name, didn't know anything about him. We lived in the same town for, at this point, it had been nine years, I guess. Anyway, we, I I flew down there to Guatemala with this man I'd never met before. And he asked me a bunch of questions and we sat by each other and flew down there, we're down there nine days and then flew back and drove back from the Miami airport, which is about an hour and a half one way. And I told him just what you said, I'm, I'm in college, I'm studying English, I think I want maybe wanna be a journalist.

Philip Luce [00:51:51] And he said, oh, I've got this company and we write some books in newsletter. I had no idea what the company was, didn't care, frankly. I mean, I, I was 19. I, I don't know, I didn't want to necessarily work at the horse tables too much longer, he said, anyway, so you're good at words. Yeah, I, I like to think I'm pretty good at words and, and he said, well come in and interview with, with Sherry. As it turns out, Sherry's one of the partners now. So I went in there and talked to her and told her all that story about journalism and English, and, and three weeks later they offered me a job at a 20% raise from, from what I was making. I was, I was a $5 an hour employee at the horse table and they, they got me in there sick. So I was out of the sun. I was in an office that, and I'm, I like to work on stuff, but I don't like to have to work on physically. I mean, I, I've got a little wood, wood shop, strong word, but I like to build things and I like to fix stuff. And I like to eng you know, engineer solutions, but I don't like to have to do it. You know, I've got, I've got a jeep that I putter around on and, and fix things when they break, but when I was younger, I was fixing my car because I had to go to work and I didn't, I don't like that. So I was always thinking about how can I work with my head instead of my hands? So I was thrilled, go to work in this office and they would hand me stuff and I'd sort of proofread it and see if I could punch it up a little bit and make it better. And just reading this stuff and, and talking to the employees and started to get an idea of this whole thing of basis trading, which took me a while. I mean, it's not something that you just grab onto immediately, but people think it's numbers, but it's really pictures. And I'm a picture guy, and so you see these relationships moving around. And anyway, for, for the first five or seven years, I just tried to be useful enough at enough things that, that no one could fire me.

Philip Luce [00:53:30] That was the idea. So I, I learned how to fix computers and you know, back in those days we had the satellite quote machines and I'd be the guy who'd go out and clean off the little satellite receiver or reposition the dish or, you know, follow the cable and see where it got it short in it, just whatever. Like what can I do besides proofreading that makes me hard to get rid of. And I should clarify why commercial's not getting rid of people all the time, but I was 19, I didn't, I didn't know any better. I was, my, my concept of the working world was that you get a job and someone pays you a wage and the more useful you are, the more they'll keep on paying you wages. So I just wanted to, I just wanted to be as productive and as, as have as wide of a range of things I could do as possible. So that,

Vance Crowe [00:54:14] What did your parents do for a living?

Philip Luce [00:54:18] My dad, my parents got married when they were 19, I should say that. And I got married when I was 20. So I, a lot of people don't recommend that. It's worked out pretty well for, for both of us. But they, they, they both came from big families. My mom's one of six. My dad other way around, my mom's one of eight. She was a farm girl in southern Indiana. My dad's one of six and family's at least their families being what they were at those times. The kids weren't especially encouraged along the lines of an education. I mean, you sort of respected to go to school, but people weren't really checking on report cards and stuff. And so my dad was a, you know, straight C student and didn't care that much and, and didn't, college wasn't even on the table really for him, which is fine. My mom got a full ride to Indiana University and I think went for three days and said no way. Went back to the farm. So my dad has done a lot of blue collar type of jobs when we first moved to Florida when I was, when I was 10 years old. And he had his own business painting signs, but it was a, it was more of a, wasn't a business, he would just go around, find people with old faded signs and, and paint 'em. And he was good at it. And he did that for a while. But for the last, the last 30, 25 or 30 years, he's been a truck driver and he probably, temperament wise and interest wise, I feel like he should have been maybe a professor or something, or a lawyer. But, but he is a truck driver. And our concept, my mom nannied for some people and she worked at a tutoring company and, and she loves kids and she's awesome with kids.

Philip Luce [00:55:55] And so she's, she's taking care of kids mostly. She worked at a laundry place for a while, like a commercial laundry place. They, they've just done jobs, you know, they're, they're wonderful people, but they, they're blue collar and that was sort of the expectation.

Vance Crowe [00:56:08] And so there you are, you're earning a wage, you're making yourself more valuable. You kind of come from this blue collar family. And it, I think you said you were 24 when you walked into the office and said, I I want to buy into the company.

Philip Luce [00:56:21] Yeah, I, I didn't, I truly had no idea what it meant at all. What I knew was I love what we're doing, all the things I told you before, you're helping these people, even with little simple things. I mean, I wasn't, you know, I wasn't being trusted with, with big important decisions at 24 years old, nor should I have been. But you're teaching people skills and you're watching 'em putting into use and you're going to this conference, you know, and not really totally getting it, but feeling what you felt. And this is cool. I, I want be involved in this. How can I be involved? And I didn't know what the company was worth, didn't know what a share a share of stock sold for. I just knew I don't want to do something else. I want, I want be here, I want to be involved with this forever kind of thing. So I walked into John's office one day, I figured, you know, you, you don't know if you don't ask. So I said, Hey, what about if I buy some stock? And, and he was, he was gentle, I guess, I guess with his answer, but straight, you know, essentially he said, nah, it's not gonna work right now for a bunch of reasons, you know, we need strong partners. And it took me a while to figure out what that meant. And of course, I, you know, he was probably around the age I am now, 46. He was probably about that age and, and he was definitely in growth mode and building the company mode. And, you know, I I don't think was interested in a partner, certainly not in me. And I, I completely understand. I don't mean that in any way negatively. I I I would give, you know, a five year, 24-year-old employee a similar answer. Now if that person asked me like, it's maybe, but not now, it's not the right time. And, but what, what he did do, and I like to think I at least had some impact on this, but I i, of course, if he didn't think I was the right person, it wouldn't ever, would never have happened.

Philip Luce [00:57:58] But what it, I think what it did do was give him at least the knowledge that I was interested. And I just, so I just kept on working. And, and, and kind of to your point earlier about long-term employees, at some point, the way that, the way that you get an employee to buy your business is you pay them an amount of money that makes it possible. Now, what he's counting on me to do is don't spend all that money, you know, and it wasn't, I, I, I don't, I don't mean to say that I was making some extravagant salary, but you know, from blue collar kid didn't, didn't know any better. Over time as I was more productive, the salary went up. And Don White and John and I have an uncle too, that, that wasn't involved in the business, but they were really influential in helping me understand what money is for. And you know, the wage earner background is you earn money, you spend money, you earn money, you spend money, and you just sort of get by. You're just cash flowing your lifestyle all the time. And fortunately, going back to my wife, I married a woman who, who is not cheap, but she's frugal and sensible. And so she's, she's, she, you know, I, I, listen, I I know people who are married to people, both husbands and wives who, who just are always looking for the next big thing. We gotta have the next big vacation, the next big increase in the type of clothes we buy and the type of car we drive, the type of

Vance Crowe [00:59:18] House we live in. Oh, when you're young and you're getting married, you have no idea how valuable it is to, to have a, a spouse that that really values like long-term thinking and, and you know, it's way, way better to have fights over, you know, can we be any cheaper on this than it's to being like, yes.

Philip Luce [00:59:37] Oh

Vance Crowe [00:59:37] God, can we please buy this thing? I'm, I'm, I I had no idea until, until my wife and I finally started making real plans for the future that I was like, oh, it is really valuable that my wife doesn't care about new cars and fancy clothes. Maybe she does, maybe she does care about those things, but she doesn't tell me, right?

Philip Luce [00:59:54] So that same story for me, I mean, I, I'm not really oriented that way either. I'm not, fortunately, I've always said I'm thankful I'm not a car person because I know people who are really passionate about cars, and it's cool. I, I don't, you know, I, if you wanna be passionate about cars, that's great, but it seems very expensive to me. So I'm happy that that's just not in my DNA, you know, if I have, if I spend too much money on stuff, it's, it's, you know, $500 musical instruments that I can't play. Well, that's pretty, which is better than $50,000 or $80,000 automobiles. But anyway, all all that aside, I had good teachers about, you know, that, that taught me it's good to live below your means for all. Forget about buying into a company. I mean, living below your means. When my wife and I got married, there were so many emergencies, you know, we, we were both working and we were working pretty hard and doing okay. And, but if the car broke down, it was a problem. You know, it was a, if it was a thousand dollars car repair bill, it was a, a real problem, or if somebody got sick or whatever, all the things you can imagine. And as we built up a little nest egg, you just have, it's absolutely true that money doesn't buy happiness, money doesn't buy contentment, but it does change the definition of emergency. And that is, that's a tremendously valuable thing. And if anybody is listening to this and, and thinks, yeah, easier said than done, I, I get it. I mean,

Vance Crowe [01:01:18] I was that same way. I, I think I maybe told you this, like, I remember when I was living at different times in my life, and I would walk past a restaurant where there would be like outdoor dining, and I had been like, huh, look at those losers. They don't even know. Like, that's such a waste of money, right? Like,

Philip Luce [01:01:34] Yeah,

Vance Crowe [01:01:35] How could they spend $20 on a meal? Because I genuinely, like, I, I had to internalize that because I had no chance of going out for a $20 meal. Like, I had

Philip Luce [01:01:46] Nothing.

Vance Crowe [01:01:47] And when you finally get above that point where you can, I mean, forget car repairs, for a while there, I didn't have enough money to buy a car. Like, so like when you get past that, your ability to think wider than the next moment or the next week or the next month

Philip Luce [01:02:07] Really

Vance Crowe [01:02:07] Goes up. And then that's compounding interest because you're able to use that thought power on, on all kinds of other things that then continue to allow you to get outta that cycle and further and further away from that poverty line.

Philip Luce [01:02:20] Yeah. There, there's always someone with the worst story. So I, I, I don't, I don't try to compete on stories, but I, I, I'll just say, I, I know what it's like to not be able to live below your means. There's no ch you know, there's just no chance. You, you get paid and you write your bills out, you buy some groceries and you're done. And there's no, there's no living below your means. We've been there. I mean, when, when my daughter was born, my wife and I both worked full-time and frankly at that point, and probably still now in some ways, she was a much more committed worker. That, that doesn't sound good when I say it that way. But she, she's, she's just excited about work. But anyway, she became a mother and that all changed. She said, I can't do this anymore. I need to stay home. And I agreed. And so she quit working, which was a, you know, a significant, not quite 50%, but close to 50% income break. And we were a one car family for a while, and I rode a bike to white commercial for a couple years in the rain, in the sun, in the cold, in the heat, whatever it was. It doesn't make me a hero. There's plenty of people living a much harder life than me, but there is, I, I did learn that there is a way, there's some number you can't live below. I mean, there's some, some level of low income. You just, you truly cannot live below it. But as soon as I had an opportunity to change that, fortunately for me, somebody taught me and we started living below our means. And it's been, like you said, it compounds to everything and it's life changing, and it, it creates opportunities in the future that seem impossible. You know, for example, when when the time came that I could buy stock and white commercial, I, I was able to, to come up with a, a significant check to make that happen, that a number that would've seemed impossible.

Philip Luce [01:03:58] And, and again, that doesn't make me hero either. It just makes me someone that had some good teachers and, and found a good situation, you know, white, white commercial has, has been always ready to invest in employees. And, and we're, I fully intend what, when I'm, I guess I am now.

Vance Crowe [01:04:13] Yeah, I mean, like, you don't miss, the punchline of the whole story is yeah, you went from cleaning out horse stalls to working at one company for 24 years and 20, I just recently named the CEO of white commercial.

Philip Luce [01:04:26] Yeah. And it's, it's cool. We don't have a lot of CEOs in my family. I mean, it's a, we have no big shots. White commercial doesn't have room for big shots. And I don't intend to be one, but it's really cool. I, I'd be, I'd be lying if I said it wasn't so, I, I don't want to downplay the honor of it. It's, it's amazing. And it, I I may be the first CEO in my family for many generations on either side. Maybe I, I guess I don't know that for sure. At the same time, you know, we're a, we're a small company and we're, we're gonna keep showing up and doing good work every day. So I, there's some balance there between celebrating the, the tremendous achievement for me personally, but also realizing a couple things. There's no value in being a big shot long term. So I have no interest in it. And truly without question, there are people making contributions on our team every day that it would be absolutely impossible for me to do my job without them. You know? It's, it's just not about me at the end of the day at all.

Vance Crowe [01:05:27] I think that's the, that's the, that's the right attitude. You know, I have a lot of younger people that listen to this podcast, surprisingly, I get a lot of emails and text messages and, and when I was sitting in on your basis trading class, and I was totally enthralled, they were like, oh, you really ought to, you gotta hear about this other program that we have this class that trains people. So I, I, I am I think maybe the whole calling that I wanted to have you on the podcast, you got great stories. You and I have been talking for the last, you know, we, we've been talking forever, so I like, but the real reason I wanted to have you on the podcast was to explain this opportunity because for all those young people that are out there that are like, either college isn't right for me, or Yeah, I don't, I don't know what I want to do with my life, or I don't know what opportunities are. It seems like you guys are kicking open a door and I wanted to give you a chance to explain the, the program you guys have set up.

Philip Luce [01:06:24] Yeah, well let me, let me back up a minute and say that, that Don White's dream and goal was always to educate the industry. And, and we did that within the confines of white commercial as much as we could. You know, one of the Sherry who's again one of our partners years ago wrote, wrote a book used to be called The Merchant's Edge. Now it's called the Art of Grain Merchandising. And it's kind of the bible of basis trading. And some of the biggest buyers of that book are a DM and schooler and vallon grain and, and large grain companies that hand the book to their trainees when they come in the door. So that's one way that he, that he accomplished that, that dream with Sherry's help. The other way is, of course, we educate the industry with grain elevators through white commercial, but Don left most of his wealth in, in a, in a foundation called the Agricultural Scholarship Center for Basis Trading Education. And one of the things that, that, that, that foundation does is give scholarships, just regular cash scholarships to college students who are pursuing some kind of agricultural degree at a college. And so there's an application process, you know, that you demonstrate need and demonstrate interest and that sort of thing. So that, that's piece of it. And then the other piece, and this, this is kind of John's brainchild a few years ago, that foundation, which is separate from white commercial, I mean, we're, we're kind of tied in together. They use some of our education programs, but it's Don White's legacy to, to the whole industry is something called the Merchandising Skill Building program. And what that is, is the scholar, the money that's in the foundation funds these small groups of people that I think, you know, eight to 12 individuals that some of them are in college, some of them are employed at a grain business already.

Philip Luce [01:08:03] Some of them are kids coming off a farm that are trying to find their way. There's no requirement to be in college. Is is kind of, to your point, you can be, but you don't have to be. And you could be 30 years old and into your career already. And it's about a six month program that does two things. It creates this group of peers that, that study together. But then they, they take some of our formalized online education, but then they also come to these live events. Some of them were at this conference you were at last week. They go and visit, you know, a barge loader down at the gulf somewhere. They go and visit these grain processors and grain elevators part. There's a, there's a piece of it that tries to find each one of them an internship for several weeks at a grain facility somewhere. It's just a, an intense practical introduction to the grain business. And it's open to anyone who, who is willing to apply and, and show that they intend to, you know, we don't, we don't control, I should say the, the scholarship center doesn't control where you end up, but we look for candidates who are interested in agriculture and try to teach them these skills. And, yeah, let me plug that. The, the website is called a SC Agricultural Scholarship Center, a SC apply.org. And so by all means, if you're listening to this and you're intrigued about a career in grain accounting or grain merchandising, or working for a big grain company, working for a small grain company, even if you're a farm kid or anybody who doesn't know if you're interested or not, but you'd like to find out, by all means, go and apply for that. It, it's a, the, the relationships that have been built are phenomenal.

Philip Luce [01:09:34] And, and I do think it's beyond Don's wildest dreams. It succeeded in doing what he wanted to do, which is build skills in the industry and, and try to keep people interested in agriculture trust.

Vance Crowe [01:09:45] I mean, one of the big things that I found really compelling about it is there are so many people that are saying, I wanna be in agriculture, but they don't have a chance to go farm. I mean, maybe they could, could get, you know, elbow their way in and get lucky and rent some ground and maybe you build good relationships and that happens. But for those people that aren't gonna do that, the whole grain elevator part of the agricultural system is completely fascinating, absolutely tied to farming and has so much potential. You know, you hear these guys talking about their succession planning, and if you're okay with living in small town America, you wanna move your family somewhere neat and interesting. It seems to me like this is an answer to a lot of, a lot of like, social challenges that are going on right now. Like the for, for the right person, this kind of education could open up doors and introduce you to people that would, that would really make your life a lot better. So I, I was very interested in having you come on to talk about that.

Philip Luce [01:10:43] Yeah. And, and the industry needs young people. I mean, people of any age really, but, but there's, there's a little bit of a brain drain in agriculture. We, we've got a, when I started this business, I was 19, as I said, and I go to these meetings and everybody in there was a gray-haired person, and they're a person of tremendous experience and knowledge and skills built up over a long period of time. I'm 46 now, so I'm closer to the old guy into the spectrum now. It's crazy how fast it happens, by the way, and I should say that if you're, if you're young and thinking you have a lot of time, it is absolutely astonishing how fast

Vance Crowe [01:11:13] You wake up and you're 40 and you're like, I didn't, I never imagined I was going to get to 40, let alone what I'm gonna do now that I am 40. Un

Philip Luce [01:11:20] Unbelievable, unbelievable. But anyway, that generation is retired, you know, that we've talked about succession, it's a huge issue in farming and in the grain business, people are, are retiring or, you know, living, dying in the chair if they live long enough. And we need people to come in and run these grain businesses. And again, I'm a small company guy just because that's all I've ever known. But if you want to, if, if you're a young person that wants to be in a position of serious responsibility early in your career, I mean, you can go to a country grain business and be making significant, impactful business decisions, essentially running the business in a couple years. I've seen it happen over and over again. Some, a lot, a lot of times somebody coming outta college. College is not a prerequisite, I don't think. I think ambition and willingness to apply yourself and, and curiosity or prerequisite college education is, is fine. It's not necessarily, it's not a requirement at all. Or I'll just say that, but I could introduce you to many mid twenties individuals who got into a small company and were, they didn't own it, but they were essentially running that business by the time they were 26 years old. I mean, serious, serious responsibility, meaningful responsibility at an, just by being curious and showing up and, and building skills. It's incredible

Vance Crowe [01:12:36] To me, one of the best things that ever happened to me was that I wasn't afraid to go to, you know, be a deckhand or go to Africa. I was afraid to apply to large corporations. 'cause I was like, why? Why would they ever hire me? You know, these grand places with these big brand names. They would never, and so I took jobs at really small places and now looking back on it, that fear was really good for me, not because it was correct, because now looking on it, you're like, if you can get a job at a small business, you can get a job at a major corporation. This is not the NBA that you're going to work at. This is something different. But the benefit of going to a small place that is in dire need of people to work hard is that they start letting you take on any responsibilities you're willing to take on. And I mean, I was working at a small community public radio station and within a year I was already on the, on the air and getting to run pledge drive and getting to run all the membership things. And you know, because when you go to a place where they need you, you're not a cog anymore. You are an an amoeba that can grow into all these different areas and you can keep absorbing more and more cellular life. And eventually you grow big in a way that it can happen in a corporation, but you really have to manage things more than just your career. Then you gotta manage politics and you gotta manage other things. I really believe the small scale thing is a way for people that can't imagine ever getting to the top to actually get to the top.

Philip Luce [01:14:07] Yeah, well I'm a product of it, so I I believe in it for sure. But yeah, there's a lot to be said for being that young person who you're demonstrating your willingness and your curiosity and your, your initiative to the person who matters. I mean, when I went to work at white commercial offices every day, Don White and John Werner and Sherry Lorton were there, they were right there. I saw 'em every single day. You know, it's not like the whatever the president of a DM is. I'm not, I'm not bashing a DM in any way, but you're not going to get to show yourself to that person, right? But in a small company, you're, you're showing what you have to the owners of that company every day. And exactly what you said, if, if you're willing to take on responsibility, you can have it. And it's the grain business needs people needs young people that will do that right now. And if you to, to your point, if you want to get introduced to that ASC apply.org is a good place to start. There's no, you know, you can fill out the application, there's no, there's no obligation to do anything, but you'll, you'll learn more about it.

Vance Crowe [01:15:11] Well, Phil Lu, this has been fantastic. Thank you so much. I know when you invited me to the first time to do the white commercial conference, you begrudgingly had to call me up and say, ah, we gotta back it off. And I had no idea what, if I had known what was gonna happen at that conference, I would've been a lot more miffed. But then a year later you were like, Hey man, I think we're on again. So this was a big honor and I really didn't know how big of an honor it was to be invited until I got there. So thank you so much for having me and thanks for coming on the podcast, man. Yeah,

Philip Luce [01:15:41] You're welcome. We, we, we do this conference in a very homegrown way. We only recently started having guest speakers, so we're pretty choosy about, about who we allow to come and talk to our people. And I got, we've had only good feedback on what you had to say, and, and that's what I expected. Frankly, I, I expected you to be thought provoking and interesting and that that's what happened. And that's, I I I think we've got the beginnings of a long-term relationship here. Business speed. I mean, I think, you know, you and I of course are working on a friendship and that's great, but I, I think from a business standpoint, there's probably more there for us to do as well. And I mean, heck, we got an hour and 20 minutes in this, didn't even talk about Juujitsu, so

Vance Crowe [01:16:20] I know, I was actually, that's, that's, we'll have to have you back on. We'll, we'll talk to jujitsu, so that'll be a good time. Alright Phil, thanks so much for coming on.

Philip Luce [01:16:28] Oh, thanks for having me. It's a pleasure.