Categories
Meat

Prime Future 136: 1975 should call the pork people

Does the name H.A. Etling mean anything to you? Me neither, until recently.

What about Certified Angus Beef, does that ring a bell? Of course.

We’ve looked at the Eggland’s Best model, an OG asset-light business model. But CAB is an even earlier asset-light business model; CAB is the largest beef brand that owns no cattle, no packing plants, no shackle space.

CAB generates revenue by licensing the use of its brand to packers, so its sole function is limited to generating demand for CAB-branded beef.

And yet according to CAB’s website:

“Ninety-five percent of consumers recognize the brand name, and consumers rank our brand most often as the best among all grades, types and brands of beef. More than 16,000 restaurants and grocery stores worldwide feature the brand.”

That 95% number is 🤯. The CAB brand sold more than 1.234 billion pounds of beef in FY 2022 making it by far the largest and most well-recognized beef brand in the US.

In a world where building a brand is like scaling Mount Everest, especially building a brand that endures, here sits a non-profit doing the hard thing. It’s hard to point to any single largest lifter of all boats with a bigger impact than CAB.

So what does H.A. Etling have to do with CAB, or innovators in livestock, meat, and dairy?

He was the producer mastermind behind the whole thing! An Angus cattle producer himself, he sent a letter in 1975 to the Angus Association outlining his idea for a franchise program for premium beef, which became CAB. Even today, CAB is almost identical to the original outlines of the program Mr. Etling proposed.

(The full letter is at the bottom of this newsletter and if Prime Future adds no other value to the world, I hope reading Mr. Etling’s letter refreshes your sense of optimism that sometimes little ideas become big things.)

Now set Mr. Etling’s 1975 letter next to this 2023 article, The Pork Industry Needs its Wagyu Moment:

“A large portion of pork products at the grocery store are bland, resulting in disappointed customers and flat lined sales. We need to produce and market better tasting pork.”

“We as an industry have allowed inferior pork to become the standard. This is pork that is bland, dry, white, has no marbling, tastes awful, and leaves one wondering why they bought it in the first place. There’s a reason why bacon costs so much when compared to other cuts of pork – it has marbling, it has taste, and it’s universally loved by so many because of this.

Overall, meat consumption has actually gone up but pork consumption has not moved, why don’t people want to eat more pork? We need to be producing pork that consumers actually want to eat.”

Can I get an amen?

While the article raises some great points, I don’t think the pork industry needs a Wagyu moment; that’s like jumping straight from crawling to marathon running, skipping every step in between.

What the pork industry needs is an H.A. Etling moment.

The pork industry today needs some of the very things Mr. Etling said the beef industry needed in 1975, such as:

  • A franchise program
  • A rigid contract and inspection program for that franchise program
  • Mechanisms to verify the product meets program specs
  • A brand that people can recognize and an advertising program

But first, you need a quality grade system to underpin it all.

Somebody needs to porkify CAB to start creating a high quality and consistent eating experience for pork consumers. But there’s a zero percent chance I’m the first person to say this.

So, people of pork: why hasn’t this already happened?? What’s kept it from being a thing?

And since we’re in a series about everyone’s favorite words, you know CAB ties in 😁

CAB’s model has allowed them to scale efficiently and to focus on the specific capability of marketing beef, something that if we’re being really honest, most beef brands aren’t great at.

And because of that model, CAB can make this claim: “Every pound of product is tracked from harvest to the consumer, ensuring the integrity of our product, logo and brand name.”

But ‘harvest to consumer’ only describes the last 2-3 of the 5-7 total links in the beef value chain which highlights the challenge around traceability in a fragmented value chain without vertical integration.

In the absence of owning animals their entire life (and beyond), being able to track product from harvest to consumer IS the win.

Particularly since we’re talking about tens of harvest facilities as opposed to hundreds of feedyards or hundreds of thousands of cow-calf producers.

This CAB example highlights that traceability & transparency can be sliced many different ways, particularly in longer, more fragmented, more complex supply chains. In beef, traceability &/or transparency sometimes cover birth to harvest to consumer and sometimes only cover birth to harvest or harvest to consumer.

Traceability & transparency capabilities are limited by the business model of a specific supply chain unless the industry’s traceability capabilities supersede a supply chain’s capabilities.

But then traceability & transparency are no longer competitive advantages, they are table stakes capabilities….unless taken to more granularity than the industry. And then you come full circle back to the question of who will pay for that additional granularity, can large brands get enough supply with high granularity of traceability &/or transparency, etc.

All that to say, we need more precise language to accurately describe the scope, depth, and degrees of traceability & transparency.

And finally, we can’t talk about H.A. Etling without talking about the power of ideas that come from within an organization or industry.

The idea for CAB wasn’t generated in a board room, it was generated by a cattle producer with a vision.

The idea that became Amazon Prime wasn’t Jeff Bezos’ idea, it was originally generated by a relatively junior engineer in a meeting with peers. (Here’s a fun article about it.)

And the idea for flaming hot Cheetos wasn’t developed by product development or R&D. It came from a janitor.

The point? Innovative ideas are the purest meritocracy.

What a time to be alive 😉

H.A. Etling’s letter that arguably changed the beef industry, a thing of beauty:

Categories
Supply Chain

Prime Future 135: Value is in the eye of the (brand) beholder

In the last edition of Prime Future, we kicked off a deep dive into traceability & transparency, and all the complexity (& baggage) those terms carry. Here were my starting hypotheses:

Today we start by looking for more precise definitions. Which matter because it leads into a chicken or egg discussion of which one comes first. Which matters because the drivers are different for traceability and transparency. And drivers matter because they may help us think about how this could play out in the next 10-20 years.

It turns out that defining these two concepts is actually a difficult exercise. Partially because definitions seem to vary by industry and are context specific. Partially because the practical definitions don’t necessarily mirror the textbook definitions.

Consider this list of cross-industry supply chain leaders’ opinions comparing the ideas of traceability and transparency:

  • “Traceability is the ability to track an item and its associated activities as it progresses through the supply chain. Transparency is the ability to demonstrate this information to stakeholders, regulators, trading parties, and consumers.”
  • “Traceability is tracking what happened. Transparency is seeing it while it’s happening. Whereas transparency focuses on mapping the whole supply chain, traceability looks at individual batches of purchase orders as they progress through the supply chain. The data used in traceability allows more targeted recalls, reducing scale and cost.”
  • “Transparency is the full view of the supply chain network. Traceability is the view of the supply chain details, including data from sourcing to delivery, which essentially maps the journey of raw materials to finished goods.”

Yet to (much of) the (US) livestock (beef) industry, the contrast in practice is something like:

  • Traceability as a stick, transparency as a carrot.
  • Traceability as a likely cost, transparency as a potential premium.
  • Traceability as mandated, transparency as voluntary.
  • Traceability as an animal disease thing, transparency as an anything thing.

We’ll get more into the specifics by protein another day.

Today I want to focus on what these capabilities a-c-t-u-a-l-l-y mean, and I think it’s something like this:

Traceability is the industry capability; transparency is the supply chain capability.

An important point here is that traceability and transparency are capabilities that enable potential value capture, they are not forms of value in and of themselves. Nobody’s putting “this product is from a transparent supply chain” on a retail package and expecting consumers to care.

What they are doing is making a brand promise on a retail package, backed by some degree of information, that matters to an end consumer, such as grass-fed or grain-finished, cage-free or free-range, etc.

Which comes first, the chicken or the egg?

A twist in the definitions is that supplier data, required for transparency, could include product data, which could provide traceability. If a brand has the data infrastructure set up, suppliers are capable of supplying product-level data necessary for traceability, and the incentives are aligned, then a brand with supply chain transparency could also achieve product traceability.

Which raises the question, which comes first, traceability or transparency?

If 4 things could be true here…

  1. Transparency enables traceability.
  2. Traceability enables transparency.
  3. Traceability and transparency are independent capabilities and do not build on one another.
  4. Traceability and transparency are independent capabilities that indirectly support one another.

….which one is it?

Yes.

I wanted to reach a clear conclusion about whether traceability or transparency has to come first, and which one has more compelling drivers behind it. But my conclusions are that 1) either can be a starting point, and 2) in the end they likely converge and operate in parallel, at least by those who aggressively pursue competitive advantage.

These capabilities can be combined in varying ways across different proteins, different geographies, different degrees of government-mandated traceability, and in different markets with varying degrees of consumer willingness to pay for transparent supply chain claims about specific attributes.

And these capabilities can be applied to varying degrees of granularity and specificity, something that is likely to become an increasing point of differentiation as this trend continues.

Presumably, in some markets/proteins/geographies, industry-level traceability is or will be the foundation that transparent supply chains are built. In others, it is or will be the exact opposite.

This also seems to be a place where the role of export markets in an industry’s sales channel portfolio plays a starring role. Where export markets are a massive driver (e.g. Australia & New Zealand beef), mandatory industry-wide traceability is old hat. Traceability is the leading capability in these markets.

Whether it’s driven by government mandate or industry coalitions, nationwide traceability schemes seem to be the result of high-value export markets.

But I’m not touching the politics of traceability with a 10-foot pole, so I’ll leave it at that observation and move on.

In less export-focused markets, transparency plays the leading role. If transparency is a purely commercial activity, there are a few flavors of commercial benefits:

  1. Get more money per pound (premiums)
  2. Avoid getting less money per pound (discounts)
  3. Maintain or build market access (getting new customers, keeping existing customers, growing business with existing customers)

And these 3 drivers are ultimately driven by brand managers.

Take Horizon Organic milk, who announced last year that they would be carbon positive by 2025 by working with their 600 farmer suppliers.

Idk whether the brand manager doesn’t know that ‘carbon positive’ is the exact opposite of what climate-conscious consumers are interested in or if this was a strategic move to generate buzz around the brand because of the confusion but regardless…

A supply chain-specific carbon footprint is exactly the type of marketing outcome that a supply chain transparency capability enables.

There’s a third concept that could also be a driver of transparency initiatives, and its the concept of supply chain visibility. One explanation I read described transparency as an external-facing capability with commercial benefits, while supply chain visibility is the use of the same information for internal operational benefits.

Imagine doing the one thing (building the transparency capability) and unlocking value via topline revenue (either increased market share or increased price) and simultaneously decreasing costs. That’s a one-two punch to drive the bottom line…

…IF the marketing strategy is aligned with the supply chain strategy.

…IF supply chain participants are incentivized appropriately, meaning those commercial and operational benefits are shared fairly among supply chain partners. Whatever fairly means.

All that to say:

(1) Supply chain transparency, and/or voluntary product traceability, will have the highest adoption where it leads to commercial impact and operational impact for a supply network.

(2) The biggest barrier to supply chain alignment that achieves that commercial impact & operational impact is trust among the supply network, not technology.

(3) Value is in the eye of the brand manager. The tradeoffs around pursuing supply chain transparency, supply chain visibility, and supply chain-specific product traceability will be made at the brand level.

For beef and pork, this means there’s still a whole discussion to be had about whether transparency will get anywhere near the ‘mountain of meat’ of commodity production where there is no brand. Another question for another day.

What a time to be alive😉

Categories
Supply Chain

Prime Future 134: “Consumers want to know…”

Every livestock & meat conference the last 15 years:

“cOnSuMeRs want to know wHeRe their food comes FrOm.”

Like it’s the answer to all the questions. Like it’s easy.

Which consumers?

What do they want to know?

How do they want info presented?

How much are those they’s willing to pay for this add’l info?

Consider this week’s newsletter the tee-up for a deeper dive into traceability & transparency.

As one does in 2023, we start with ChatGPT:

Let’s accept those definitions and benefits as a reasonable 30,000-foot view summary. It’s all neat and tidy and rationale and obvious.

But zoom in to 29,999 feet or below and it quickly gets complicated & messy:

  • What capabilities <people, processes, systems, technology, pricing, business models> does it take to achieve traceability / transparency?
  • Where are the costs incurred and the value captured?
  • What can we learn from companies doing these things well? What did they learn the hard way?
  • What are the biggest bottlenecks to realizing these aspirations?
  • Are push (regulation) or pull (commercial) dynamics more likely to impact trajectory and long-term outcomes?
  • How much overlap is there between these two ideas and how can that overlap be leveraged? I’m guessing no, but are the ideas ever at odds with one another?
  • How do the dynamics differ across the different proteins?

One reason this whole topic is interesting is that implications span all the way from what happens at the farm to what happens in the board room of major processors/retailers/foodservice companies. And to ignore either end of the spectrum is to likely get it wrong.

Here are my starting hypotheses:

  1. Transparency or traceability? A distinction without a difference.
  2. No one cares until someone is willing to pay. Additional cost only makes sense if it creates additional value that can consistently be captured.
  3. In order for any variation of traceability/transparency to be a long-term sustainable thing, it has to create value for 👏🏽 every 👏🏽 single 👏🏽 part 👏🏽 of the value chain that participates.
  4. As premium brands push the boundaries of supply chain capabilities, there will be halo effects on commodity production.
  5. The limitations are market-based (trust, commercial terms) not tech-based.
  6. The right combo of product, production attributes, business model, supply chain alignment, people, processes, tech, and brand will create some very big winners as a result of transparency. It’s not for everyone tho.

As we explore some of the questions above, let’s see which of those hypotheses hold up.

What insights, hypotheses, or questions, do you have about these topics?

Categories
Animal AgTech Business Model Innovation

Prime Future 133: new year who dis

With the start of a new year, I’ve been thinking about what we’re doing here, and how I want to evolve Prime Future in 2023.

While my why has not changed since the beginning:

  • learn out loud
  • find my like-minded industry people

I have increased clarity on what I’m not about:

  • I am not here to ‘fix a broken food system’. Food supply chains largely held in one of modern society’s wildest black swan events (COVID). I haaaate the sound bite-ness of this overused line but it’s true for the most part: animal protein is abundant, affordable, and nutritious. So let’s not act like we need to start from zero, k?
  • Alternatively, I am not here to defend the status quo. What got us here won't get us there. I loathe the term agvocate, but I think I loathe the idea behind it even more – it’s an inherently defensive posture that does nothing to move the needle. Some things are going to have to change about how animal protein is produced and marketed, and that’s great…early adopters will find/create opportunity.
  • I do not think carbon credits will create more revenue for ranchers than beef. An astute friend of mine recently made this observation: in an industry that is really good at creating value from its byproducts, I can’t even name one example where a byproduct of a commodity became more valuable than the primary commodity itself. (Open to counter examples here!)

And increased clarity about what I am about:

  • I’m bullish on the future of animal protein. And the future likely looks very different from the past.
  • What are the macro-trends across livestock, meat & dairy? And what are the micro-implications of those macro-trends?
  • Looking at the world from a cross-species, cross-value chain perspective. I want to understand at a practical level and big picture.
  • Keeping the main things the main things: the twin pillars of producer viability and end customer satisfaction. Everything in the middle of the value chain sorts itself out of the twin pillars are sound.
  • Data is the answer to many many questions but only when technology fits a production context – durability, connectivity, time, usability, cost, etc – and the value proposition is right.

I’m here <gestures vaguely> because what interests me is innovation that creates real value, especially business model innovation, whether that innovation is tech-enabled, or not.

With that backdrop, here are my three intentions for this year with Prime Future:

  1. Keep two lenses active:
    • What’s likely to change in the next 10 years?
    • What’s likely not to change in the next 10 years?
  2. Go to the source. Ask the questions. Talk with really smart people and then do my own analysis; draw my own conclusions.
  3. Get global. My little US bubble is tiny, there’s a whole world of livestock production systems and creative innovations out there to learn from. This year I want Prime Future to get way more global.

Some questions I want to explore this year:

  • What can beef and dairy learn from pork, poultry, and aqua? Vice versa?
  • What can the US learn from New Zealand, Sadia Arabia, etc? Vice versa?
  • What can livestock learn from the crop side of the industry?
  • What can livestock learn from energy or other unrelated industries?
  • How is the animal nutrition world changing?

And finally, process over outcomes.

The last few years have been a journey in realizing that I control my day-to-day choices much more than I control outcomes. When you say something like “process over outcomes” people tend to get jumpy and think of bureaucratic organizations, but I mean “process over outcomes” as an individual.

An example is investing. I could set the goal to have a portfolio of x by the end of the year, but the stock market could drop 50% in Q4 and leave me with a seemingly bad outcome for the year. Or, I can focus on my process by setting a goal to invest x% of my monthly income in the stock market or real estate. In the short run, I have much more control over my personal process than outcomes. Over time, that discipline should pay off.

So here’s how I’m thinking about Prime Future processes:

  1. Continue publishing weekly.
  2. Start conducting 1 interview per month with an operator who has either started and/or grown a business over a period of time.  (open to ideas!)
  3. Start writing 1-2 sponsored deep dives per quarter about interesting companies that communicate something about the future of the industry. (open to ideas!) Examples from last year include The Magic in Solving Invisible Problems and Rising from the Averages: A Cattle Story.
  4. Stop writing my first draft on Friday/Saturday. I keep a running list of potential ideas which I narrow down to a topic I want to write about on Friday afternoon or Saturday morning. This leaves me with only the weekend to edit before publishing Monday morning. I want to stop this.
  5. Start writing the first draft on Monday afternoon, so I have an entire week for the hardest, and highest ROI, part of the writing process: editing.

I hope you are kicking off a fantastic 2023! What a time to be alive 🙂

What would you like to see more, or less, of in 2023 Prime Future?

Categories
Leadership

Prime Future 132: A learning list

I’m in full 2022 wrap-up mode which means trying to capture all the learnings from another year while mentally preparing for a brand-new one.

My favorite new habit this year was to keep a running list of books I read and a few takeaways from each one, a learning list, of sorts. I love this habit so much and want to keep it going for the rest of my life.

So today’s newsletter is a hodgepodge sample from that list:

"All drama in leadership and life is caused by the need to be right." – The 15 Commitments of Conscious Leadership. Ooph, does this resonate deeply with anyone else or just me?? 😵‍💫

“Always measure backwards. When we compare our current position against where we’d like to be (the gap), we tend to get frustrated. When we measure our current position against where we started, we tend to be deeply motivated because we see progress.” – The Gap & the Gain by Dan Sullivan.

WD Farr was one of the first cattle feeders to bring the feed to the cattle, instead of the other way around. He was also a catalyst for meat grading, which was a game changer in the US beef industry in creating a standard that gave consumers confidence in the consistency of the eating experience. Perhaps most poignantly, WD believed that “cattle would have to be bred and sold on a performance basis like hybrid seed corn. ….would increase the quality and yield of slaughtered animals, reducing the fatty wastes that increased the price of meat to consumers. Unfortunately, the beef industry works on averages. The poor, inefficient animals in every herd drag down the good animals. I do not believe any industry can exist on averages for a long period of time.” – Cowboy in the Boardroom by WD Farr.

An early innovation in meat packing was moving from vertical cross-species plants (aka multi-story) to horizontal, single-story, single-specie packing plants, and the simultaneous move from plants near population centers to plants near animals, which was enabled by refrigerated transport. – Meat Then & Now by Dell Allen.

“The skill of optimal quitting is what separates amateur and pro poker players. A common misconception is that quitting will slow or stop our progress but the reverse is true. By not quitting you miss the opportunity to get closer to your goals. When you stick with something when there are other opportunities out there, that slows you down. Quitting gets you where you want to go faster.” – Annie Duke in Quit (some additional thoughts in the context of starting & growing businesses)

Change your identity to change your behavior and habits. In order to build the habit of going to the gym, I have to first see myself as someone who has the habit of going to the gym. Or as someone who takes smart risks and builds businesses. Etc, etc. etc. See myself as someone who _____ in order to have the motivation to build the habits of someone who _____. – James Clear in Atomic Habits (paraphrased)

Be My Guest is an autobiography by Conrad Hilton, as in the hotel guy. Forget flash in the pan tech founders, this was a story about building something that lasts and building it one hotel at a time. But interestingly one of the takeaways was to know your investors before you take their money: one of Conrad’s investors didn’t like how a deal had turned out post-1930s economic depression so he walked into the hotel and shot Conrad’s business partner. Yikes.

The 'technology' that changed the landscape and power dynamics of the US Plains was when the Spanish introduced horses into North America, which completely transformed the way some Native American tribes operated, particularly the Comanches who were virtually unstoppable when mounted on horseback and therefore reigned supreme across the plains for 200+ years until the Texans/US military came along in the mid-1800s. The intersection between this and the early cattle industry is that when the buffalo were cleared from the Plains, the Comanche’s food source and way of life went with them, along with many other Indian tribes, so they had no choice but to surrender to reservations. – Empire of the Summer Moon by SC Gwynne

Three things from Accidental Superpower by Peter Zeihan:

  1. Geographic features determined every country’s culture, economy, and politics, particularly waterways for trade.
  2. Because of each province’s unique geographic features, Canadian provinces are more economically integrated vertically with the US than horizontally with one another.
  3. The Japanese occupied all the economically relevant regions of China during WW2. (I had never heard about this and need to learn more, any good book recs?)

The Zimbabwe economy shrunk by 50% in 5 years when Mugabe rose to power in the 90's and took land from large commercial farmers and gave it in small pieces to new farmers who neither knew how to farm, nor how to farm effectively. The impact was drastic and horrific for the people of Zimbabwe. – When a Crocodile Eats the Sun by Peter Godwin (it’s a memoir about his experience during Mugabe’s rise).

Jews were not even allowed to own property throughout Europe in the 1400s-1700s so being a merchant or trader was the only option available. Interestingly for some of those early pioneering souls who came to America to escape anti-semitism, they found those merchant and trading skills were a superpower they could put to work in the growing early commerce of America…and they built entire industries and lasting institutions. Amazing. – Tower of Gold: How One Jewish Immigrant named Isaias Hellman Built California by Frances Dinkelspiel (I am a sucker for an immigrant success story and this one is epic.)

You think the meat industry is the only industry with extreme concentration? Lol. It’s actually true of most industries today. Monopolized by David Dayen is fascinating but almost makes you want to curl up in the fetal position, read at your own risk.

“The opposite of distraction is not focus, it is traction towards our goals. The opposite of distraction is momentum.” – Four Thousand Weeks by Oliver Burkeman.

The Revolutionary War was not two-dimensional, the American militia vs. the British military. It was multi-dimensional chess with each side vying for additional support from Europe (France, Spain) and locally from various Indian tribes. Truthfully my takeaway here is that few things are black and white, there's often way more than 2 sides to any complex story. – The Taking of Jemima Boone by Matthew Pearl

“Find your foxhole people. These are the people you want in the foxhole with you when you go into comedy battle. Find these people, be around them, and be one of them. One of the signs of these foxhole people is that they find positive stories in the world around them. They do it reflexively. …had decided there was something good before he had decided what was good. He assumed there was a silver lining and then he found it.” – How to be the Greatest Improviser On Earth by Will Hines.

After WW1 the German Mark held just 4% of it's pre-WW1 value. I’d never heard a number put to this before, and it makes the post-WW1 economic challenges that set up the rise of Hitler even more clear. – The Warburgs by Ron Chernow (This also adds context to the history told in The Alchemy of Air about that same time period when synthetic fertilizer (invented in Germany and primarily manufactured there) was exploding, commercially.)

The Warburgs was a phenomenal book about an incredibly resilient family that kept getting back up and building every time their business was destroyed by factors outside their control, aka economic depressions, WW1, and WW2. One of the offspring of the lineage was obsessed with outcompeting his cousin, and the author summarized it this way: “Siegmund Warburg died, a deeply unhappy man devoured by a dream.” This made me think of the book Wanting by Luke Burgiss about the power of mimetic desire in our lives and how damaging it can be when left unchecked.

Execution matters. The famous rallying speech that Churchill gave was not only not praised at the time, it was actually criticized because Churchill was slurring his words and sounded sluggish. It was because he had a cigar in his mouth and couldn't be bothered to remove it, despite his advisors’ counsel. (obviously not an issue in the grand scheme because hi hello it was Churchill and he got the job done, but still an interesting example of why details matter) – The Splendid and the Vile by Erik Larson

And finally, Midnight in Chernobyl by Adam Higginbotham was basically a 400-page guide in how NOT to do leadership. The secrecy, the bureaucracy, the blaming and shaming, and the CYA mentality instead of focusing on containing this massive problem with massive consequences. A total failure of leadership, from the low-level plant supervisor to the very tip-top of the government regime.

What did you learn from your own 2022 reading?

Book recs welcome here 🙂

Categories
Business Model Innovation

Prime Future 131: Why haven’t other proteins been Eggland’s Best-ed?

The most tragically underrated animal protein? Eggs.

Which is weird because eggs are seemingly a magical food from a nutrition standpoint.

My fitness journey led me to the egg case this year…a lot. Per capita consumption in the US is ~294 eggs. I start almost every day with three eggs, so I’ve got a run rate ~4x per capita consumption. lol

I’m ok with it though because eggs also have that price per gram of protein superpower, even with record-high prices right now in the US because of bird flu.

If possible, perhaps the retail egg case is even more interesting than the egg itself. And that’s our actual topic today.

I recently spent a weirdly long time looking at the egg case in a couple of different grocery stores; here are my takeaways:

(1) There is (finally) a tiny space for ready-to-eat products, aka egg snacks.

If the past 10 years were when the meat snack category stepped up its game in a big way, and it did, it’s only in the last few years that the egg snack category has become a real thing. Here for it.

(2) For the Whole-Foods-esque shopper, there is some pretty packaging and a lot of marketing confusion.

One of my favorite egg-producing companies is a family-owned business with 8 million hens. Sure, 8 million is a large number, but it’s nothing compared to the largest producer in the US who has ~47 million hens…you might even call 8 million small, relatively speaking.

This raises some questions about all the ‘small family farms’ branding in the Whole Foods egg case; what is a small family farm? What’s the definition of small…of family…of farm? Who decides?

(3) Ten years ago the largest claims on a carton seemed to be about antibiotic use, now it’s primarily about housing systems.

Which has led to a confusing free-range vs. cage-free vs. outdoor-access debacle. Please let there not be a test.

And at $12.49 per dozen, like, what even is this?

Wait, are these eggs meant to be gifts? WHAT IS HAPPENING

(4) For the non-Whole Foods shopper, eggs are a commodity.

Almost 30% of the hens in the US are now in cage-free housing. The shift towards specialized housing has been relatively rapid. While the obvious question is, at what percent specialized housing do eggs produced in those environments stop generating a premium, in the egg case today it’s not uncommon to see a mismatch between pricing and housing systems declared on the carton.

As Whole Foods goes so goes the industry? ….and so goes the premium as the new thing becomes commoditized.

So maybe the better question is, what will the next marketing dimension of differentiation be? Genetics? Technology?

(4) The most fascinating innovation in the entire shell egg category turned 30 years old this year:

the creation of the Eggland's Best brand and, more importantly, the business model.

Here’s how the company website describes the origin story:

“In 1992, we set out to create a better egg. Egg consumption was in decline. Consumers were concerned about cholesterol, and fresh, quality eggs were hard to come by. So we asked ourselves how we could deliver the freshest, best-tasting, most-nutritious egg possible and make it accessible for everyone.”

What’s notable is that in 1992 there was little effort being put into branding eggs (and Whole Foods was still a <10 store twinkle in the founders’ eyes) so the creation of a brand in and of itself was a novel idea.

Interestingly the dimension that EB differentiated on was neither medication (like in the early 2000’s) or housing (like the 2010’s – now) but on feed formulation.

EB leveraged the 1990’s cultural focus on human health with a message about the link between animal feed and egg nutrition characteristics.

From their website:

“As the saying goes: “you are what you eat.” We understood that to create a better egg, it would have to be better from the start. Through rigorous research and careful sourcing, we formulated our own unique patented feed to give all of our hens a wholesome, all-vegetarian diet. This nutritionally superior diet means Eggland’s Best hens lay naturally superior eggs.”

More novel still was the use of a franchising business model in animal agriculture.

Eggland’s Best did not and does not own any hens; they work with producers who meet their specs, comply with their production standards and license the use of the brand.

A pre-cursor to Airbnb and Uber, Eggland’s Best was a super early asset-light business model: the most well-known egg brand by a company that owned no chickens, no chicken houses, and no farms.

I can point to only a few examples of the Eggland’s Best business model working successfully in the other proteins, why is that? I want to explore that question in 2023, so I welcome your insights & hypotheses.

Two disclaimers to wrap around this conversation:

  1. Where there’s a market, there’s a way. If people are willing to pay for bougie blue eggs and the producer’s economics work, then by all means somebody raise bougie blue eggs. There should be a premium option in every category.
  2. Once again, production systems are complex ecosystems. Pulling the ‘more space per bird’ lever can increase metrics like mortality but “more space, higher mortality” doesn’t look great on an egg carton, ya know? I say that not in a “we need to educate consumers” kind of way (barf) but in a “such is the world we live in, and egg producers have to make the hard decisions of balancing current consumer trends against future consumer trends against production realities and cost constraints when making huge capital outlays.” Maybe that balancing act is even a feature of the modern ag economy, not a bug? Either way, it’s a reality.

Anyway, happy holidays. Maybe Santa will leave $12.49/dozen eggs in your stocking🤞🏼

Question: how does retail shell egg marketing look different in other countries?

Categories
Artificial Intelligence Emerging Tech

Prime Future 130: Merry ChatGPT Christmas

Last week OpenAI beta launched ChatGPT, an AI-generated chat feature. Maybe that sounds simple or uninspiring, but once you interact with ChatGPT, you realize this is something new (and slightly addicting).

This leaves you with the impression of “wow, this is actually going to be A Thing, probably A Big Thing.”

If you haven’t dived into ChatGPT yet, my goal today is to give you a sense of what it is and begin considering the So What & Now What.

Let’s start with an example of a relatively basic question:

Not bad. Let’s get more subjective:

Interesting. We can also ask for something more creative:

I mean, I too, don’t care because I love bacon too much.

My favorite is the trick question:

Good to know. And then there’s this lol tweet by Anand Sanwal @asanwal:

“Most company culture principles are basically this level of drivel #chatGPT did this in 2 seconds You’re welcome”
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Tech Twitter has run amok with people sharing ChatGPT responses. I love seeing other’s chat examples, but 10/10 recommend just creating an account and playing around with the tool. It’s hard to appreciate the magic of it until you experience it firsthand.

Until then, here’s how I would describe the obvious benefits:

  • the immediacy – all of the above responses were generated in <2 seconds
  • the layout & logic – the tool can structure an essay well or lay out an argument logically
  • the creativity – this is what amazes me most

But there are limitations. For starters, how you phrase a prompt determines if you get a mediocre non-answer or something almost helpful:

But, uhhhh one other clear limitation is that the current version of the ChatGPT model doesn’t ‘know’ anything post-2021. <clears throat👆🏼>

The good news is that ChatGPT seems to know its limitations:

But, of course, there are limitations….all technology has some limitations, but also this has only been live for like 10 days! So let’s assume it’s going to get much better, soon.

By the end of day 5 after ChatGPT launched, it had 1 million users. It’s amazing to think about how much training data the models are getting as people go nuts testing the boundaries of ChatGPT’s capabilities.

Ok fine, cool tech…so what?

In my mind the big So What questions are:

  • How will individuals incorporate ChatGPT capabilities into their workflows?
  • How will companies incorporate ChatGPT into internal processes? Into customer-facing processes? Into tech products?
  • Specific to livestock, meat & dairy, what opportunities will ChatGPT create? For food brands to engage with consumers? For producers buying inputs or selling commodities? For processors engaging suppliers, labor, or customers?

Many people way smarter than I am have been speculating on the So What, and the POV’s are all over the place, ranging from this:

To this:

If you talk to people about the potential of artificial intelligence, almost everybody brings up the same thing: the fear of replacement. For most people, this manifests as a dread certainty that AI will ultimately make their skills obsolete. To put it bluntly, we think the fear, and the guilt, are probably mostly unwarranted. What we’ve seen so far about how generative AI works suggests that it’ll largely behave like the productivity-enhancing, labor-saving tools of past waves of innovation. 

AI doesn’t take over jobs, it takes over tasks.

If AI causes mass unemployment among the general populace, it will be the first time in history that any technology has ever done that. Industrial machinery, computer-controlled machine tools, software applications, and industrial robots all caused panics about human obsolescence, and nothing of the kind ever came to pass; pretty much everyone who wants a job still has a job.

The principle of comparative advantage says that whether the jobs of the future pay better or worse than the jobs of today depends to some degree on whether AI’s skill set is very similar to humans, or complementary and different. If AI simply does things differently than humans do, then the complementarity will make humans more valuable and will raise wages. We think that the work that generative AI does will basically be “autocomplete for everything”.

I would just suggest this: whether your first reaction to hearing about this technology is fear or excitement says more about you than it does the technology.

ChatGPT reminds me of the saying “the street finds the use” for new technology. I’m curious to see what those uses are, what the business models are around this technology, and how quickly (or not) large language models like ChatGPT are commoditized.

While nobody yet knows exactly what the impact will be, it seems safe (and a massive understatement) to say this capability will have Some impact on Some people in Some ways.

Oh and luckily this rolled out just in time to liven things up if family holiday time gets boring. Merry ChatGPTChristmas, ya know? 😉

Categories
Carbon Regenerative Agriculture

Prime Future 129: Feature, not a bug.

I hate voicemails. To keep that savagery out of my life, I keep my voicemail box full. Since 2013 a full voicemail inbox has been a feature of my personal system, not a bug.

Now for a slightly unseemly example…Howard Schultz grew his caffeine juggernaut on the then-novel idea of a coffee shop as the third place: home, work, and Starbucks. This required predictability of the customer experience from Starbucks to Starbucks, which obviously required a high degree of standardized SOPs to create that consistency. Doesn’t it seem notable that a company whose stores around the world function so consistently, yet globally its restrooms are so consistently disgusting?

My theory is that Starbucks wants you to walk in the doors for the third-place effect but they don’t want you to linger too long. They need a subtle way to convince customers not to stay too long. IMO, they solve this by not cleaning the restrooms often enough, in a way that is built into company SOPs.

Ergo, disgusting restrooms at Starbucks are a feature of the business model, not a bug.

So, uhh, obviously (😂) our topic today is, WHY IS NO ONE TALKING ABOUT THE ROLE OF SOIL CHARACTERISTICS IN CARBON SEQUESTRATION?

Anyone who grows things for a living, or took even a smidge of soil science coursework, knows that soil is one of those topics that seems simple on the surface but is more complex even than the Alameda/FTX relationship.

Here’s my beef with the carbon sequestration conversation happening across boardrooms and ag conferences everywhere:

It is costly to measure soil carbon. Without a low-cost high-reliability carbon measurement tool, most carbon programs are based on a model, a forecast. To be clear, a model/forecast is just a spreadsheet with calculations built off assumptions…many, many assumptions.

My concern is that these models tend to reduce complex ecological systems' capacity to sequester carbon to the same type of model you might use to forecast widget production in a widget factory.

Say it with me: complexity is a feature of nature, not a bug.

There are likely many factors that affect how much carbon can be sequestered on any given acre of land, including uncontrollables like rainfall.

But a glaring gap in this evolving discussion is the impact of soil type on carbon sequestration. Doesn’t soil type just HAVE to have a huge impact on the amount of carbon sequestered? Yet I don’t hear it discussed as a variable in the carbon convo.

The problem is if carbon models effectively ask something like “are cover crops or <insert management practice> being used on a field?” when the more indicative question is something like “are cover crops or <insert management practice> being used on a field with clay soil and xyz soil properties?”

All soil is not created equal, so there’s zero chance all soil will sequester carbon equally.

If these types of questions aren’t answered in ways that pass both the scientific and common sense smell tests, my concern is that it will be producers who suffer the eventual fallout. (Others in the value chain would suffer that fallout as well but my primary concern is about the impact on producers and consumer perception.)

I asked on Twitter who is working on the connection between soil type and carbon sequestration. The good news is there are definitely folks working on this question, the bad news is that work doesn’t seem to have yet made it into the real world. (Here’s the link to the replies, especially the few scientific papers folks suggested…in case that’s your jam.)

I was originally thinking about soil type as the basic categories of soil texture (sand/clay/loam) but smart folks pointed out that “soil type” is too broad; there are multiple soil characteristics that could impact sequestration.

“@ecology_awesome
@JanetteJoyB @R_C_OConnor @hnw2 @dphuber @brookebosborne Things that come to mind to link soil type and C sequestration are 1) moving beyond texture to explore physical attributes that dictate/predict soil C storage, 2) thinking about C chemistry/type in addition to total amount (including inorganic C) and 3) ensuring we go deep enough”

Not only are those characteristics likely to individually impact carbon sequestration potential, but it seems reasonable to hypothesize that the combinations of individual characteristics would also impact carbon sequestration potential.

“🚜Paul McGill ☘🐑🌳🐂🌾🏏🌽🌲🏉🏇🏽🥐🥩🍻🧶🎾♥️🌏 @PaulBMcGill
@JanetteJoyB Look at it from all the more valuable parts of soil & farming – water holding capacity. Soil structure, drainage, biology, nutrient storage, micro-organism feed source etc etc. ‘Carbon Sequestration’ is just part of all the different processes of soil organic matter”

My biggest takeaway from the replies was that because there's still much we don't understand about individual soil characteristics, there's MUCH we don't understand about the interaction between soil characteristics and production practices that could sequester carbon.

*CDR = carbon dioxide removal

But this might be the punchline:

Chris Tolles @chrismtolles “@JanetteJoyB @LWR_Inc “How do we account for _____?!” is the central Q of almost everything in soil CDR. 😛 TLDR we need to 100x govt investment in fundamental science maybe kinda like this: carbon180.medium.com/why-we-need-a-… cc @carbon_180 @cristelzbq

carbon180.medium.comWhy we need a Soil Carbon MoonshotOur proposal for an ambitious, interagency soil carbon research program

I haven’t read the entire proposal about the Soil Carbon Moonshot but I *loved* the framing of the Executive Summary:

Experts estimate that globally, soils could store up to 5 billion metric tons of CO2 per year, an amount equal to 13% of total annual greenhouse gas emissions. For producers, storing carbon in soil is a pathway to increased revenue, better yields, and strengthened climate resilience.

Despite the potential, there is virtually zero dedicated funding for soil carbon research today and related efforts across the federal government are fragmented. While soil carbon is gaining momentum with policymakers, private companies, and farmers alike, many knowledge gaps remain, and reaching scale will require strategic investments in research.

What remains most acutely unknown is the measurement and verification of carbon stored in our soils from acre to acre. For one, few rigorous soil carbon protocols exist, making it difficult to reliably ensure that carbon stays sequestered over long periods of time.

Existing protocols, to fill in a complete picture of an operation’s soil storage potential, often rely on models informed by insufficient source data to predict soil carbon.

Measurement aside, soil carbon research to date has neglected to explore the economics and real-world implementation challenges that farmers face and has stopped short of developing best practices for the diversity of regions and operation types that makeup US agriculture, including specialty crop, dryland, livestock, and small-scale operations.

If we can advance our understanding of soil carbon — with practices embraced by farmers, tools that accurately measure climate benefits, and incentives grounded in science — the US will be positioned to develop and deploy the next generation of climate solutions for the agriculture sector.

To meet this challenge and scale soil carbon in a science-driven way, we need an ambitious, interdisciplinary, coordinated interagency research program: a Soil Carbon Moonshot (SCM). Only a moonshot program can marshall the necessary resources from across the federal government to pursue ground-breaking research and speed up innovation where solutions may not yet be profitable or scalable.

We’ll return to this soon because the whole ag research economy is something I’ve been exploring, both the history and potential future scenarios.

One last thought. The question of soil complexities & carbon potential is relevant to our recent discussion about the Dust Bowl:

There is a lesson in the Dust Bowl: no matter how much we think we know, we need a heaping dose of humility when it comes to nature and our collective understanding of nature’s systems and complexities.

There’s all that We Know We Don’t Know. Think of how limited our understanding is in many areas of science from the human brain to soil health to human & animal microbiomes. Then there’s all that We Don’t Know We Don’t Know.

But perhaps most humbling, are all the things We Think We Know That Are Yet To Be Proven Wrong.

Like folks in the 1920’s plowing up ground with the confidence of “the rain follows the plow” and the confidence that wheat prices would continue up and to the right. In hindsight and with modern meteorology and agronomy, we know that idea couldn’t have been more wrong.

It’s easy to think how much smarter we are as a society today but I have to assume there are things that we accept as true today that in 100 years, society will laugh at how silly we were for believing some things.

When we're dealing with nature, it's risky to assume away complexity or the interdependencies of ecosystems.

Ecosystem complexity: brilliant feature, not a bug.

(If you can fill in some gaps on the interaction between soil characteristics and carbon sequestration potential, hit reply and shoot me an email with your comments – would love to learn more.)

Categories
AgTech Animal AgTech Venture Capital

Prime Future 128: The overlap between FTX and funny business in cattle feeding

The FTX implosion is a train wreck and I 👏🏽can👏🏽not👏🏽 look away. It’s shocking because of the scale of the implosion and the depth of the chaos, and this is just the early hazy days of the aftermath.

But we can learn from anything, right? This one is instructive far beyond the crypto world, all the way into the livestock world.

If you aren’t familiar with the FTX story, this and this give a good overview.

“FTX failed after its founder and former CEO, Sam Bankman-Fried, and his lieutenants used customer assets to make bets in Bankman-Fried’s trading firm, Alameda Research.

Launched by Bankman-Fried when he was just 28, FTX became one of the largest crypto exchanges in just three years with a valuation of $32 billion. Bankman-Fried used aggressive marketing, including a Super Bowl ad campaign, and the purchase of naming rights to the home of the Miami Heat basketball team.

FTX and FTX.US crashed due to a lack of liquidity and mismanagement of funds, followed by a large volume of withdrawals from rattled investors. The value of FTX’s native token, FTT, plummeted last week, taking other coins down with it including Ethereum and Bitcoin.”

What’s the parallel to livestock?

When funny business happens in livestock, it’s likely to happen in the cattle feeding business. In the vertically integrated swine & poultry or in dairy where animals do not frequently change hands, there just isn’t much room for shysters to maneuver. So cattle feeding seems to attract them all…in the US anyway.

Of course, the funny business is rare; by and large the cattle feeding industry is professionalized and well-managed. Importantly, the bad actors are a thorn in the side of the 99.99% of good actors.

But do a quick scan on the google and you’ll find plenty of headlines about, umm, ‘mismanagement’ in cattle feeding from the last few years including some big companies on the receiving end of that bad behavior. (To be fair the Big One was $240M not $32B like FTX so that’s something?)

My hypothesis is that the root causes that allow bad actors in cattle feeding echo the root causes that undid FTX.

This is oversimplifying, but there are (at least) two layers of blame in the FTX story:

  1. An entrepreneur carried away by greed, incompetence, and/or hubris.
  2. Investors allowed an entrepreneur to operate with woefully insufficient governance.

There are a lot of advantages of youth, but it’s hardly surprising that a 30-year-old founder of a company valued at $32 billion maaaaay have been tempted to buy into his own hype.

It’s also hardly surprising that a 30-year-old did not have the experience to build a complex financial company with the appropriate guardrails or to know/admit that he needed to hire a management team that could build guardrails into the business, or even to know/admit that he could benefit from a board of directors with the expertise to advise on such matters.

The generous explanation of the situation is youthful hubris and incompetence; the less generous explanation is unbridled greed and negligence. Reality is probably somewhere in the middle, as it usually is.

So, uh yeah, looking out for red flags of those traits in business partners seems like a reasonable rule of thumb.

But nobody looks for shysters to do business with; any sane person runs from the red flags around character.

So the real FTX takeaways are around the governance processes that counterparties put in place with any partnership or investment, whether a cattle-feeding customer, an angel investor in a super-early-stage startup, an established company building a partnership, or a venture fund investing in a growth company.

The practical FTX takeaways are around 3 layers of governance:

(1) Conduct thorough diligence.

I 10/10 recommend the book Bad Blood about Theranos and the company’s journey raising hundreds of billions of dollars to build & scale their technology that could run hundreds of tests from a single drop of blood, only to have the house of cards fall spectacularly. It’s basically a story about inept due diligence.

The author describes how an executive from one of the pharmacy chains that was exploring a partnership with Theranos raised concerns when Theranos management would not allow them to see inside the lab as part of due diligence before signing a major commercial partnership. The exec was saying ‘hey this doesn’t pass the smell test’ but the FOMO train was already running away internally and the exec’s concerns were dismissed.

That story speaks to the value of having multiple perspectives evaluate a potential counterparty.

Another diligence lesson from Theranos was that every new investor that came in assumed that the big-name investors that were already invested wouldn’t have invested without having conducted diligence. This happened in funding round after funding round, going back to the original pre-seed investor by a high-ish profile VC whose daughter was childhood best friends with Elizabeth Holmes….

That speaks to the value of doing your own homework, not looking at anyone else’s paper for the answers to the test because even smart people get it wrong or have different objectives than you do.

Theranos, and now FTX, are these gross extremes of why the most basic diligence – just asking the simple questions – shouldn’t be skipped. Even in the frenzy of a bull market, even in the frenzy of venture hype…even in the frenzy to lock in that cattle supply.

(2) Process controls in place.

CME Group CEO Terry Duffy had harsh commentary on the business model of FTX and the lack of risk management and process controls. Duffy pointed out, “you don’t have to accept anything as innovation that puts risk management in the back seat and that’s exactly what was going on.”

First, not everything needs to be innovated on. Sometimes incumbents are just slow to change and sometimes incumbents are the way they are for really really good reason.

Second, at a minimum, good governance includes understanding the internal processes and process controls that a company has in place.

(3) Board oversight that, ya know, actually oversees.

The myth of entrepreneurship is this idea of “not answering to anybody”…that’s not a thing. For starters, every business answers to customers. Second, every business with outside investors answers to a board…the well-managed businesses anyway.

Founders can stack the board with their drinking buddies, or they can run the business like a grown-up and assemble a board with people who 1) understand what fiduciary duty means, and 2) actually contribute to the management team running the company. IMO the best founders know how to leverage their board’s expertise for the benefit of the company….they don’t see the board as a negative or even neutral but as a positive, as a resource.

But cattle feeders are not venture-backed startups with boards, especially when they are family-run or independent operations, so maybe that piece of governance doesn’t translate very well for our parallel.

If you read much at all about fraud / funny business in cattle feeding, much of it stems from the fact that by eyeballing a pen of cattle you cannot tell whether those cattle have only your lien on them, or someone else’s also, or who owns them…or the absence/presence of “ghost cattle”.

While technology can solve a big piece of the cattle provenance puzzle, technology alone cannot prevent funny business in cattle feeding or any other type of partnership/investment.

The lack of good governance leaves the door open for bad actors to act badly in any partnership or investment.

I suppose the caveat is that the purpose of verifying robust governance is about reducing the likelihood of funny business even though the Enrons of the world prove the risk may not go to zero. (Btw the WSJ podcast series Bad Bets on how Enron unfolded is 🔥.)

One more thing – I hate these dumpster fires. Easterday, Nikola, Theranos, WeWork, FTX. Sure they make for entertaining podcasts but just like the shysters in the cattle feeding business are bad for the good operators, the knucklehead founders are bad for the good innovators.

But they do serve as cautionary tales.

What are your takeaways from the FTX fiasco?

For those interested in the venture capital side of things, this article is quite relevant:

An exchange? That’s not an unknown business model. Frankfurt exchange has been running for over 4 centuries. We know how this works. We know how brokerage works. When Matt Levine writes about how this is insane, he doesn’t need to, like, study up on esoteric secrets of cryptography. Whether you’re trading baseball cards or stocks or currencies or crypto, a margin loan is a margin loan and a fee is a fee.

What they (investors) should have known however are the basic red flags – does this $25 Billion company, going on a trillion by all accounts, have an actual accountant? Is there an actual management team in place? Do they have, like, a back office? Do they know how many employees they have? Do they engage professional services like lawyers to figure out how to construct the corporate structure maze? Do they routinely lend hundreds of millions of dollars to the CEO?

Sure Temasek didn’t get a Board seat, but did they know there was no Board at all? Or how exactly Alameda and FTX were intertwined, if not all the other 130 entities? It seems sensible to ask these things, even if you’re only risking 0.09% of your capital.

These are hardly deep detailed insane questions you skip in order to close the deal faster.

This isn’t Enron, where you had extremely smart folk hide beautifully constructed fictions in their publicly released financial statements. This is Dumb Enron, where someone “trust me bro”-ed their way to a $32 Billion valuation. 

First, focus on the basics: if you’re looking at a large financial company where there is no HR team, no accountant and no Board, try not to write multi hundred million dollar cheques. If the founder is regularly taking out absolute mountains of cash from the company to buy properties, donate to charity or blow it on burning a bit of capital for seemingly silly deals, that feels like bad governance.

Second, don’t fall in love more than necessary: Try to internalise the following: “human ability is normally distributed but the outcomes are power law distributed”. What this means is that just because someone builds a company that produces extraordinary outcomes, 10000x the average, doesn’t mean that they were 10000x as capable. Achievements are created from multiplicative outcomes of many different variables. So if you’re investing in a “10x founder” it doesn’t mean that they themselves are 10x the capability of everyone else, but what it means is that their advantage, combined with everyone else’s advantage, can get you to a 10000x outcome.

Which means the adulation we pour on top of some folks creates its own gravitational field, and makes others susceptible to falling in love.

The most difficult task is to not let someone else control your decision making for you, which is what you give up. If your job is to get seduced by the right narrative by the right-seeming person, guess what you’ll get seduced by anyone who can tell a compelling narrative.

Do NOT make decisions thinking surely someone else has done their part. As the names get bigger, a new investor thinks “hey, surely Sequoia and Temasek and all these big guys would have done their diligence, this makes me comfortable”, which just isn’t true.

FTX isn’t an example of crazy overextension, like WeWork, or outright fraud, like Theranos, but sheer unadulterated incompetence and hubris. The first two are understandable mistakes to overlook because investors are in the risk taking business, and are not detectives. The third is a failure of seeing things right in front of one’s eyes.

FOMO is real and investors are not at all immune, even professional VCs. In many ways, the venture capital model makes complete sense: in order to get outsized returns you take outsized risks which is why investors in venture capital funds (or angel investors in early-stage companies) should recognize that any one investment is likely to go to zero, but the goal is that the portfolio is constructed in a way that any one investment could return the fund.

But then I read stuff like this…

“So weird that we ended up with fast, bolt, pipe, bird, ftx et al in the past few years. No idea how that happened
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…I can only hope a partner at one of the most storied venture funds did not actually say this. Instead of investing out of high conviction in a thesis and betting on companies with the potential to generate real value for all shareholders, the play is to follow the hype and just sell the asset at a higher price to someone else who bought into the hype before the hype dies???

That is hardly inspiring, or even respectable.

But FOMO is also the most likely explanation for all of the money that has simultaneously flocked to alternative meat startups or indoor ag startups or pick your other flavor-of-the-year venture-backed categories.

There has to be a better way to fund the future. What is it?

Categories
Leadership

Prime Future 127: more Ridiculous Generosity

I wrote about Ridiculous Generosity last year & I believe it, even more, this year.

I’m grateful you’re here.

Prime Future 77: Ridiculous Generosity (link)

It’s Thanksgiving week in America and if the pilgrims had celebrated with prime rib instead of turkey, it would be my definitive favorite holiday. Alas, I still love the idea of pausing life to be grateful even if it means eating turkey.

Gratitude inevitably leads to generosity.

A mentor of mine was recently talking about business relationships and said “I may have made some decisions that looked dumb to outsiders, but my bent towards generosity has never once disappointed me.”

I love that idea. When you say the word generosity, people usually think of things like donating to a charity. But there’s another aspect of generosity that is rarely discussed but is just as powerful. It’s relational generosity or generosity of influence.

Andy Stanley talks about the leadership principle of generously leveraging your influence on behalf of other people which reminds me of this:

“At critical moments in time, you can raise the aspirations of other people significantly”

I know that people can create an inflection point in someone else’s career with generosity because I’ve experienced it again and again. When I was young and dumb and clueless (so like, yesterday), people invested in me with their time and wisdom. And people connected me with other people. And all of those people, bit by bit, completely expanded my view of the world and the possible.

People have shown me Ridiculous Generosity.

The leaders I respect & admire exercise Ridiculous Generosity, it’s core to their ethos. Ridiculous Generosity is a mental model of how to engage the world, a life philosophy.

My hypothesis is that Ridiculous Generosity is rooted in an Abundance Mentality.

Folks with a scarcity mindset perceive that if you win, then they lose…so of course they don’t help anyone else. But those with an abundance mentality perceive that not only is there room for everyone to win, there is room to grow the pie so that everyone wins bigger.

Ridiculous generosity is the other side of the ‘play long-term games with long-term people’ coin.

Playing long-term games with long-term people means putting an abundance mentality to work even when a scarcity mentality tries to creep in. It means helping people today whether the payoff is in 15 minutes, 15 years, or the payoff never happens.

Because of the Ridiculous Generosity I’m so grateful to have received, few things in life bring me more joy than making thoughtful connections for other people. Here’s how I’ve seen Ridiculous Generosity in action:

  • make the thoughtful & well-timed intro (PSA: only after both sides opt-in)
  • share the learning
  • send the 10 word text to answer the question
  • offer the meaningful advice or insight
  • share the link to the friend’s new project
  • grab coffee with the newbie
  • have the brainstorming session
  • give the feedback to the person who asks for the feedback, even when it makes you a bit uncomfortable
“Being a feedback magnet is a game changer in your career. 1. Feedback is the only way to see your blind spots. 2. Your colleagues have feedback for you, but they’re not saying it b/c it’s uncomfortable for them.”

Have I mentioned this is still aspirational for me and I don’t say this as someone who has this nailed? This is #goals.

Ridiculous Generosity isn’t necessarily about the big business decisions or the decisions that cost real dollars, time, political capital, or reputation risk. Though it could bleed into those through a relentless focus on long-term win-wins.

The real power of Ridiculous Generosity is in the daily interactions that cost little to nothing besides bending toward generosity.

You might be thinking this is all fine and well, but we each have finite time and finite focus. I 100% agree. Even if we wanted to help everyone, we can’t….the time math doesn’t work. So Ridiculous Generosity *has* to have boundaries around it. The two big ones for me are:

(1) Not everyone receives Ridiculous Generosity. It’s kinda like qualifying sales leads, only in this case it’s qualifying people asking for a favor. Maybe you only show Ridiculous Generosity to people you already have a relationship with, or only to people who’ve shown that they are serious-minded, or only to the cold outreacher who put in the effort with a thoughtful ask that shows they’ve done their homework. Maybe when the random person reaches out asking for a call to talk about x, you ask them to first email the specific questions they’d like to discuss. (Funny thing, this is where a lot of requests suddenly go silent because the person wasn’t serious about it so the qualifying filter paid off.)

(2) Ridiculous Generosity has time boundaries. There are times when you can barely squeeze another email into the day, let another phone call or coffee date. And that’s ok. If it’s someone you want to help and you don’t have the mental or emotional or calendar capacity right now? Tell them to check back in some specific time frame. If it’s someone that you really don’t want to help? Tell them that. Well, soften it and say it kindly but yeah, let them know this is not something you will be helping on. Even when we can't be as generous as we'd like, we can always be polite.

This actually reminds me of when we talked about the idea of discernment and that knowing WHEN to do something can be higher impact than knowing WHAT to do.

If I were to rewrite the Ecclesiastes framework for people building & creating, it would look something like this… There is a right time for everything.

A time to expand optionality and a time to hyper commit.

A time to ignore to the skeptics and a time to listen carefully.

A time to meticulously plan and a time to just👏🏽get👏🏽started👏🏽.

A time to generously schedule intro calls and a time to ruthlessly guard your calendar.

A time to talk to every single sales leads and a time to relentlessly qualify leads.

A time to burn the ships and a time to hedge your bet.

Lastly, make it easy for people to help you.

Some ideas:

  • Send an email that they can forward on to make the intro you are hoping for.
  • Follow up after the intro to let them know the outcome.
  • With people you trust, be clear about where you’re trying to go – if people know they can help.
  • Just ask politely, recognizing that you are asking for a favor. People who demand or expect Ridiculous Generosity don’t get it. An extreme example is that I once worked for a company that had a corporate bully in a senior position who was eventually ‘invited’ to leave the company. The bully then wanted an intro to the new company I had joined but instead of asking me for an intro, he sent me an email telling me to make an intro. lol nah bro.

(Most) people like to help people. And we all like to help people who help us. I find it interesting that generosity is a bit of a currency in both the startup world and in the ag world, maybe there’s a correlation between people doing hard things and an embracing of generosity?

Here’s to more abundance mentality.

Here’s to turning gratitude into Ridiculous Generosity.