In early October I sat down with Chris Andersen in his New York Office. Chris was a right hand to Michael Milken for many years. Chris, now in his 80’s still works as an investment banker. If you attended Davos on the Delta you would know Chris as the Mangalista Pig guy.

Chris just finished reading the book Sugar: The World Corrupted: From Slavery to Obesity. Which led him to tell me the story of the first big Milken offering. A $1B of junk bonds in 1982 to underwrite MCI advertising. $1B for advertising is a big number.

Put yourself in that time frame. Judge Green had just set in motion the break up of AT&T. We had party line phones. Telcom was on copper. You had to rent your phone from AT&T. Signs inside the Bell System said:

There are two giant entities at work in our country, and they both have an amazing influence on our daily lives. . . one has given us radar, sonar, stereo, teletype, the transistor, hearing aids, artificial larynxes, talking movies, and the telephone. The other has given us the Civil War, the Spanish-American War, the First World War, the Second World War, the Korean War, the Vietnam War, double-digit inflation, double-digit unemployment, the Great Depression, the gasoline crisis, and the Watergate fiasco. Guess which one is now trying to tell the other one how to run its business?

By the end of the 80’s, AT&T wrote off $6.8B in infrastructure as the world moved to fiber and wireless. Cisco, Microsoft, MCI, AOL, McCaw emerged. In the 35 years since, information services have expanded 100x. Entirely new markets formed.

I was at Van Trump’s producer conference this week. 1,000 farmers wondering “How do I de-commoditize my market?”

Here is the problem….. If everyone buys the newest genetics from Monsanto, it increases supply and drives down price. And for the farmers that grow a differentiated product, like organics, they still sell to the same grain elevator.

Whether the market is a monopoly like AT&T pre-1982, or a near monopsony of ADM, Bungee, Cargill, and Dreyfus (ABCD) setting price, the answer is the same — innovation stagnates. Innovation happens when the consumer’s voice passes back to production.

Milken is one of the smartest investors we have ever seen. He wrote 1B in debt because it unlocked the size of the market. When MCI started offering wireline services in different bundles, it revealed the size of the market to entrepreneurs. Milken revealed latent demand. With this information in hand, Milken led the 80’s underwriting the explosion in information technology.

I would argue that the food/ag market is operating circa 1985. And that Amazon or perhaps Indigo represents a proxy for MCI. It does not matter if these two companies survive because their reshaping of the market will drive the agriculture market for the next 50 years.

We know that Americans do not eat well. We spend about $1.5T a year on food. It is carb/sugar heavy. Carb’s are cheap and sugar is addictive. More addictive than cocaine.

If we are going to invest in food innovation, then how do we address the increased cost of good food and sugar addiction?

I think Milken would say — “Understand latent demand, expose it to entrepreneurs, and watch the market adapt”

I have been pondering Chris’s Yoda like lesson for the last few months. How do we do what Milken did? And this led to two simple thoughts:

  1. The size of latent demand is at least the substitute cost we spend on poor nutrition related healthcare (Diabetes, cancer, etc) — somewhere between $500B and $1T/Year
  2. Innovators need to make good nutrition more addictive than sugar

If we want to live to 120 and reduce the cost of healthcare that is all we need to do — #1 and #2. There is $500B to $1T of revenue available for every innovator that moves a healthcare dollar to good food. And while we are at it, we will de-commoditize farming, hopefully reducing farmer suicide.

And if good taste is not addictive, you only need to spend a little time in California to learn that good looking person

And what is the future for ABCD? AT&T figured out how to adapt and grow in the end. It just took external innovation to speed things up. Goliath needs David. A smart Goliath creates a David, sort of like sloughing the Queen when playing hearts.

So, now you know what we plan to do to disrupt the market.