Lessons of the Week
I spent another week on ag, food, and supply chain insets. Thanks for all the great feedback. I remain unsure whether inset business models offer venture returns. There may be room for an Opower-like solution, perhaps matched to a credit hedge fund with a PACE funding mechanism similar to that created by Cisco DeVries for energy efficiency. The inset market looks more and more like the ESCO and energy efficiency project market.
I remain overly confident that insets and GLP-1 will speed up the path to nutrient density. More so than when Mr. McGuire told Benjamin about plastics. Nutrient density cures metabolic disease, which costs the global economy $14T annually. The feedback loops will move this shift with exponential force. Slowly, then all at once.
A few quick lessons:
They have what? 40% of Pepsi’s consumers don’t think potato chips come from potatoes.
Farmers want to improve their soil health more than do carbon markets. But they will take your money.
Livestock as a service: Integrated livestock may be a better soil health solution than cover crops alone. Opportunity for investing: Can you mimic this function with Biologics?
Regenerative roaming: Rather than collars, could we put a neural link in livestock to manage the herd digitally? No Fences. Unmanned Livestock Drones.
Individuality: 90% of Ivy League admits are world-class at one thing. Maybe you do not need to be well-rounded.
Groupthink: You don't need to think if you wear a seat belt. If you don't wear a seat belt, you need to be a more careful driver. Does groupthink suppress critical thinking?
Is it easier to get carbon from the atmosphere than from the ground? Carbon and sunlight are converted to methane. I doubt it.
When you are about to hit a deer, do not steer away. Hit it straight on. Press the breaks to slow as much as possible, but gas just before impact to gain control. It is hard to tell the driver in real time, so plan ahead.
I was reminded of my favorite quote from River Runs Through It....
“After you have finished your true stories sometime, why don't you make up a story and the people to go with it? Only then will you understand what happened and why." - Rev. Maclean to Norm about Paul.
Some Conclusions: Weakly Held
Nutrient density is a better long-term target than carbon. Nutrient density improves metabolic health and reduces waste. When you optimize for nutrient density you get carbon reduction in a sense for free. (Positive externality)
In the long run, insets are not about carbon but instead a “coxswains” price signal mechanism across a long supply chain. Carbon insets create a channel for offtake to send a price signal to the supplier. In a commodity market where the product is homogenized at the processor, insets offer a way to jump over the processor directly to the farmer, providing incentives for farmer innovation.
With price signals, processors like White River Soy Processing will emerge and build a mini-mills network focusing on nutrient density rather than a commodity.
To reduce metabolic disease, consumer preference needs a pathway to product innovation. That pathway is price. Row, Specialty, Tree, and Livestock each have their own structural barriers to change. They all converge at the grocery. Price signals from offtake (the consumer side of food) are the common mechanism to drive that change.
The first move in the quality movement was Six Sigma. But to get to Six Sigma, you had to redesign how the product is built. Leading to lean. The same will be true for nutrient density. How we grow, build soil health, and process food will all change a bit. Carbon Inset is just one early price signal driving this product shift. There will be other price signals from retail to drive metabolic health and longevity. Every SKU in the store is an opportunity for innovation and more nutrient density. And farmer profitability.
Food is Health, which is consumer-driven nutritional density. Food is Medicine, which is better food subsidized by Medicaid and Medicare. High-end stores will offer programs to keep customers healthy. Low-cost stores will become points of delivery for Medicaid-funded food, reimbursed through USDA and Medicaid.
At retail, the food is health pressure will manifest itself in 3 distinct ways
Premium products like Fairlife, which everyone buys
Better fresh in high-end stores - sweet potatoes that just taste better than potato chips
Frozen broccoli with package label "Air Fryer Ready"
Farmers aim to enhance soil health over time, and they often prefer integrating livestock and grazing as a strategy. However, managing livestock represents a distinct business model. There might be innovative opportunities in "Livestock as a Service" beyond the traditional growing season. This approach would necessitate a shift towards more free-range livestock management, eliminating fences, and establishing seasonal feedlots. Advanced technologies like collar devices or NeuralLink brain implants could help control large herds across over 300 million acres. Alternatively, new biological solutions might mimic some benefits of livestock, such as breaking down crop residues and revitalizing the soil biome. What innovative next-generation business model could scale livestock integration as a soil health practice while also boosting farmer profitability?
New in AI
Simple messaging apps like WhatsApp can incorporate AI text based training tools. An AI math tutor improves students’ math scores in Ghana. Now, imagine it teaches agronomy to farmers throughout the globe. Does this help Peru beat California in Fresh? (Article)
If mini-mills replace mass-scale centralized ones, does the logistics network for grain/outputs need a switch similar to aircraft industry point-to-point instead of hub-and-spoke?