Clay Christensen walks into a bar🍸; Rioting Ryots across India🚜and Europe; Inner Plant Strategic Tradeoffs🎧, Inari, Jio Krishi, Orbit Farming, Qul Fruitwall, eFeed Vetvantage,
Clay Christensen walks into a bar🍸; Rioting Ryots across India🚜and Europe; Inner Plant Strategic Tradeoffs🎧, Inari, Jio Krishi, Orbit Farming, Qul Fruitwall, eFeed Vetvantage,
State of Agritech - 29th February 2024
Ministry of the Future
Clay Christensen walks into a bar 🍸
with an agritech investor to make sense of the changing agri-input climate.
Had you invited the legendary HBS professor Clayton Christensen (1952-2020) in his prime years to teach the Theory of Disruption to five-year-olds, I have a sneaking suspicion he would have started with the story of David and Goliath.
I recently narrated it to my six-year-old rascal. He loved it. For it powerfully illustrates how humans can easily be bedazzled by warped notions of strength.
“Appa, you think I can be stronger than you?”
As a ‘rehabilitated’ management consultant with a shady ‘conslutting’ past, Clay’s theories are a cherished favorite in my chest box. Sure, his theories have failed to predict the stupendous success of Apple and Tesla, but that doesn’t diminish his seminal contribution one bit in providing a powerful thinking tool for strategists shaping the future. In case you haven’t heard me swoon over “Law of Conservation of Attractive Profits”, well, now would be a good time.
“When attractive profits disappear at one stage in the value chain because a product becomes modular and commoditized, the opportunity to earn attractive profits with proprietary products will usually emerge at an adjacent stage.”
If that sounds like a mouthful, allow me to translate it into simple words: Market niches that are dominated by integrated products are bound to be disrupted by modular products.
How is the agri-input landscape changing?
In my field visits, I am witnessing two significant shifts in the Indian agri-input landscape.
→ Cash and Carry Sales have become the new norm, replacing credit sales of agri-inputs by farmers.
→ Indian Agritech ecosystem are busy ecologizing the agri-input retailer at the expense of the distributor.
The Law of Conservation of Attractive Profits predicts that incumbents who once integrated backward, competing through exclusive supplier relationships, will now be taken over by aggregators who aggregate modularized suppliers to integrate forward with customers at scale.
In doing what Syngenta is doing with Centrigo and what Bayer is doing with Farmrise, what are they really doing, when you look at the global market landscape?
Making smart moves based on the predictable future predicted by the Law of Conservation of Attractive Profits.
As much as King Saul underestimates David because we often tend to (falsely) equate power with physical might, agri-input firms underestimate agritech startups because they tend to equate power with channel + sales distribution might.
Would channel strength be a significant moat when digital distributors start building a long tail of every single active ingredient out there, thanks to changing farmer behaviors of googling every single active ingredient out there in the market?
Although history rhymes with several examples from corporate battlefields, because it is counter-intuitive, we often fail to see the asymmetry of power involved in challenging rules, in substituting agility and speed for strength.
The story doesn’t end here.
Every block I’ve highlighted under Integrated Modules for the Agri-Input Players is getting disrupted, when you look at the global and the Indian agri-input landscape.
The agri-input formulation block is getting disrupted by players like Piatrika, Inari, InnerPlant, and Sound Agriculture because R&D costs to come up with a new active ingredient just don’t make economic sense anymore.
The Agri-Input Distribution block is being disrupted by new-age retailers who are setting up “phygital” retail shops while becoming digital distributors who aggregate the demand for agri-input players without taking any inventory overhead.
But what about investors? According to Pitchbook’s latest data, VCs returned 5.6% of their AUM (assets under management) to investors in 2023 — the lowest for 15 years.
Trust Howard Marks to distill the essence of what is happening underneath
“We’ve gone from the low-return world of 2009-21 to a full-return world, and it may become more so in the near term. Investors can now potentially get solid returns from credit instruments, meaning they no longer have to rely as heavily on riskier investments to achieve their overall return targets. Lenders and bargain hunters face much better prospects in this changed environment than they did in 2009-21. And importantly, if you grant that the environment is and may continue to be very different from what it was over the last 13 years – and most of the last 40 years – it should follow that the investment strategies that worked best over those periods may not be the ones that outperform in the years ahead.”
In his recent essay,
argues that this boils down to structures and proposes new venture investment structures. The surge of Studio Agriculture and Narrative Capital models attests to the growing maturity of these structures. How would these structures fare and evolve in the “full-return world” which Howard alludes to? Are they resilient enough? Perhaps. We will find out.His Podcaster’s Unedited Voice
{Subscriber-Only} Inner Plant Strategic Tradeoffs 🎧
What would have happened had Monsanto launched the fungal-resistant soybean trait (which characterizes InnerPlant’s core technology) in 1995?
In my recent conversation with Shely Aronov, we explored this thought experiment. It yielded fascinating results, as we explored how the agri-input landscape was evolving and how things would look ten years from now.
If you want to know how the agri-input landscape will look ten years from now, it is important to pay attention to InnerPlant.
In my recent podcast with Shely, we talked about the Big 6 Agri-Input Players monopoly and wondered if innovation can break it. We also explored the implications of the recent dicamba ban in the US; why antitrust mechanisms fail to work in food and agriculture systems; how natural selection plays out in the case of innovation pioneered by Inner Plant and a lot more.
You can tune in here to listen to this members-only conversation
Ministry of Geopolitics and Hunger Games
Rioting Ryots across India🚜and Europe
Farmers in India are protesting against the industrialization of agriculture while farmers in Europe are protesting against the de-industrialization of agriculture.
If you can pardon the child-unfriendly language coming ahead, I need to get this out of my system.
You know that the entire global food and agriculture system is fucked up when the Farmers in Europe are protesting against the very same solutions which pundits are currently prescribing in response to the simmering anger unleased by the protesting farmers in India.
There are no straightforward, singular definitions for “farmers” in India for good and bad reasons, unless you really want to tie yourself up in knots.
Even the Minister of Indian Agriculture has no clarity about the definition of a farmer in India.
I don’t blame him.
It’s fiendishly complex to model the Indian smallholding farming system when farmers moonlight as arhatiyas (commission agent), traders, labourers, transporter and gig worker in the food and agricultural system out of compulsion while everyone else want a piece of the moonshine from the mythical aura surrounding the word ‘farmer’ for taxable and non-taxable reasons.
If such is the case, do you think this “wicked” problem would be solved when we magically discover the fiscal strength in this country to pay the equivalent of what the average European farmer, ‘according to the European Commission data, received €6,700 annually (roughly Rs 50,000 / month) in 2021 as direct income support’ (Source)?
There is no doubt. European farming system has survived so far because of this support.
(Heidi Farming, as my friends from Switzerland love to call it, referring to a character from a famous children’s book and keeping the landscape in a way those characters would recognize) But, as it is now increasingly clear, it is completely unsustainable.
When government policies forces European farmers to be custodians of the environment instead of remaining food producers, what do you expect farmers to do?
Where these protests happening across India and Europe converge is the irony of creating a Hobson’s choice between a farmer and a farm.
You are screwed no matter which one you choose among the two.
I’ve been tracking India’s Farm Laws since their inception and have looked at their ramifications for Indian Agriculture closely.
My analysis of Farm Laws and farmer protests so far:
Part-1: Setting the Context 🔒 | Part-2: No Country for Middle-Men | Part-3: In Defense of the Government 🔒 | Part-4: Samudra Manthan in the World of Agriculture: | Part-5: "Annadata" Conundrum" And Mapping the Cultural Wars of Agriculture 🔒 | Part-6: Can I offer you a grey pill on farm laws? | Part -7: Greta Thunberg and the aftermath of Farm Law Politics in India | My TEDx Talk on the need to dialogue in context with the farm laws.
It reminds me of the classic card magic trick in which you are mesmerized by what you see on one hand, without noticing the other hand that is fooling you. We are being deluded to believe that this debate is a simple choice of picking
Chimera of MSP to improve farmers’ incomes Over Myth of Free Markets
Status Quo through Corrupt APMC Mandis Over Irresponsible VC Sponsored Trader-led, Market and Price Speculation Experiments conducted by Agritech Startups.
Making Few Rich Farmers Richer Over Keeping Many Farmers Poorer
Prioritizing Food Security to combat the pernicious effects of Climate Over Food Inflation for Consumers who are paying the costs of a broken food system through their healthcare costs
Regulation Over Free Trade
Prioritizing the Farmer as Food Producer stuck in an broken food and agriculture system Over Farmer As Custodian of a romanticized landscape that exist only in our fantasies.
Picking either of the two will not change ground realities, unless, farmers and more importantly, us consumers, ask fundamental questions about the food we eat, the cost of food production, the food systems we have built at scale, and how we incentivize farmers to grow healthy food that nourishes their lives and consequently ours.
Unless we stand up and acknowledge the gravity of the mess we are currently in, we will screw not just farmers’ lives but also our lives.