FISH AS AN ASSET

Most of us spend the bulk of our lives holding down a job, trying to meet our daily expenses and hoping to put enough money aside that we will be able to stop working before we tip headfirst into a grave. 

Different folks find different degrees of success in achieving those goals. 

Some never make enough to get by, and spend all of their lives struggling against crushing poverty.  Others live right at the edge, repeatedly shifting across the thin line that divides need from sufficiency.  And then there are some who make lots of money, but spend even more, and are condemned to debt by their lack of discipline.

Finally, there are those, from all walks of life, who allow numbers to guide their lives, budgeting expenses to match their incomes, while holding cash in reserve for unexpected contingencies and, should they live that long, to let them live comfortably once they retire.

The latter folks tend to live less tumultuous lives.  While they may never know the bacchanalian joys experienced by those inclined to free-spending sprees, they also don’t need to spend much of their time hiding from bill collectors.

Fisheries management is a highly technical, data-dependent discipline, which requires years of training and more years of hands-on experience to practice competently.  Because of that, fishermen often view it as a sort of arcane science that is beyond their understanding, and thus are unfortunately susceptible to those who seek to manipulate their opinions, and claim that management efforts are about as valid as voodoo.

Fishermen thus need a basic understanding of the management system, so that they will be able to tell the difference between real science and disinformation spread by people trying to warp public perceptions of the management process.

Few fishermen will want to delve deep into the scientific literature, and it’s likely that none will ever develop the knowledge and skills needed to create, or even responsibly critique, a stock assessment.  However, the concepts needed to understand the basics of management are no farther away than an angler’s checkbook.

It starts by recognizing fish stocks for what they are, a public asset that needs to be conserved and managed, and not merely a gift from the sea that can be wantonly exploited without restraint or thought for the future.

Most of us have gotten that far.  But to fully realize the potential of the “fish as financial asset” analogy, that’s only the first step.

We next have to appreciate that the everyday needs of recreational and commercial fishermen make demands on our fish stocks, just as the everyday expenses of life—food, clothing, housing—place constant demands on our bank accounts.  If there isn’t enough cash available to meet those everyday demands, people buy lower-quality foods, wear shoddy clothes and perhaps find themselves evicted from their homes; their creditors also suffer, as they may not be paid for goods and services already provided.

Similarly, if there aren’t enough fish around to support the needs of the fishing community, not only are fish stocks likely to be overharvested and driven down to even lower levels, as occurred with Gulf of Maine cod, but the fishermen themselves will suffer.  Anglers soon lose interest if they have nothing to catch, and even though prices often spike higher when fish are scarce, commercial fishermen still need to be able to find enough fish to sell if they are to make a viable living.

Of course, some folks turn to credit cards when short of cash, hoping that they’ll soon have enough income to pay their bills when as they come due, and pay off the credit card companies, too.  Sometimes that works; more often, such folks only end up digging deeper holes for themselves, and end up in bankruptcy court.  Similarly, some folks will argue to keep harvests high when fish stocks decline, trusting that, in its own time, nature will return such stocks to abundance.  That, too, was tried in New England, and that’s when the groundfish stocks crashed.

So the trick, with a business, with personal finances and with fish stocks, is to treat them as going concerns, which must not only supply current income, but which will retain sufficient principal to assure a good income in the future, even if there are some unexpected adverse events.

To do that, you first have to figure out how much money you have, how much money you’ll need in a typical year, and how much you ought to set aside for unexpected contingencies.  If you’re managing a fish stock, you need to know the size of that stock and how much will be harvested each season, padding the latter figure a bit to allow for scientific unknowns and uncertainties.    

Then you have to look at other factors to determine whether the pool of assets—or stock of fish—is large enough to provide for your annual needs.  If you’re dealing with financial assets, you need to know what your likely annual return is, and how much that return will be taxed.  If you’re dealing with fish, you need to figure in average recruitment and natural mortality from predation, disease and other causes.  And you have to remember that returns, recruitment, taxation and natural mortality are all subject to change, and that an after-tax income that merely matches expenses, but doesn’t exceed them, or recruitment rate that barely equals mortality, is an accident waiting to happen as soon as conditions change.

As most of us have learned to our dismay, it’s not unusual for expenses to be greater than income.  At such times, people and businesses who are willing and able to cut expenses and invest in new ways to grow income will overcome the hard times; those who merely proceed blindly, hoping and assuming that the financial cycle will right itself without any effort on their part will usually go broke.  And when businesses go broke, they don’t just bring themselves down.  Employees, customers, suppliers and even the lunch cart that parks outside its doors can be badly hurt as well.

Fish stocks are no different.  When they are too small to meet fishermen’s demands, managers have only two choices.  They can either insist that harvests be reduced enough to prevent a decline in abundance, or they can adopt measures that will grow abundance and, in time, allow higher levels of harvest.  If they fail to take such action, and heed those fishermen who are only concerned with short-term profits or argue that “fish run in cycles” and will soon be abundant again, stock collapse is a virtual certainty.  And when fish stocks collapse, recreational and commercial fishing businesses collapse with them.  Ecosystems can be thrown out of whack, and coastal economies harmed.

I can speak from personal knowledge about both sorts of collapses, because I was a lawyer at Lehman Brothers, Inc. in September 2008, when the markets came tumbling down, and I was a striped bass fishermen in the late 1970s and 1980s, when the bass stock suffered a collapse far worse than anything that the markets experienced a decade ago.

Both could have been avoided with a little less focus on maximizing yield, and a little more precautionary management.

We ought to think of that now, as we look at summer flounder.  Recruitment—the stock’s income—has been down for the past six consecutive years, and spawning stock biomass—the stock’s principal—is down to just 58% of the level needed to maximize yield.

Yet there are some folks out there who want to completely ignore those factors, and are calling for status quo harvest, rather than reducing the amount that the remove from the population each year.

Even in today’s world, and to an administration in Washington that thinks of nothing but business, that should look like a foolish idea.

As I said, I was at Lehman Brothers.  I know how such thinking turns out.