The Studio Era of Agriculture Begins
Thanks to the pandemic, we're re-entering a studio era after 80 years. This will reshape agriculture for good (and worse) when humans stop saying things like "when things become normal".
Dear Readers,
Hi! My name is Venky. I write Agribusiness Matters every week to grapple with vexing questions of food, agribusiness, and digital transformation in an era of Climate change. Feel free to dig around the archives if you are new here.
This free edition goes out to 28495 subscribers in Substack and LinkedIn, up by 400 last week.
Over the last two weeks, I published two subscriber-only stories - 5. payAgri, FBNisation of Indian Agtech & Dystopian Future of Agriculture🌱 and 6. Unbound Agriculture, covering Amazon’s Kisan (Farmer) Store Launch. If you toss both of these stories into one big pot and start stirring them, you start to get glimpses of the bigger picture that feels intimidatingly alive right now to me.
Thanks to the pandemic, the world economy is re-entering the studio era after 80 years to rebuild the economy and infrastructure for the post-covid Anthropocene realities. Venkatesh Rao recently wrote about this ($), and I have been thinking about its implications for the future of agriculture.
As he writes,
These emerging studio systems are rebuilding sector-level post-industrial software-eaten stacks, from first principles, on the rubble left behind by Covid, and shaped by the emerging logic of climate response. Studio systems are how the world is attempting to “build back better.” What was once a rare pattern restricted to a few maverick players in a few sectors is increasingly the default.
This is a big topic and there is so much to write about this. In this first part, I am going to focus on the ground conditions that are making it possible for studio systems to enter agriculture and the kind of studio systems we can expect to see once the smoky dust that prevents us from seeing the future settles in.
In the next part, I will cover the dark side of these studio systems and how they will come to bite us.
Let’s dive in.
01/ The period between 1927-1948 in Hollywood is known as the Studio Era. It was called the Golden Age of Hollywood where film production and distribution were dominated by a handful of “major” studios in Hollywood who benefited from the “new normal” that was created by World War I and World War II.
02/ It was the time when Francis Ford Coppola (For non-film nerds: The chap who made GodFather) famously wrote, “When the human race got the gift of cinema, they just went mad”. It was also the time when enthusiastic Jews, whose religion stipulated that “Thou shalt not make unto thee any graven image”, decided to become movie moguls and make motion pictures with graven images that never rest inside our heads.
03/ This period began with the introduction of sound in movies and ended up with anti-trust legislation against big, vertically integrated studios, resulting in a 1948 Supreme Court ruling a separation of distribution and production of movies.
04/ Today, when I see recent updates viz.,
a) Indian Ministry of Agriculture announcing their intent to build “National Agriculture Stack” while laying down the blueprint to build a Digital Agriculture Ecosystem
b) India launching Account Aggregator Framework to build consent-based monetization of data, particularly of individuals and small enterprises that could have massive implications in the way agricultural credit will be disbursed in this country through agritech platforms.
c) China acknowledging in their 14th Annual Year Plan (2021-2025) that “The foundation of agriculture is not yet solid” while putting a clear plan for the same, much evident in the pivot of vertically integrated platforms like Pinduoduo, echoing the same with slogans like ‘不忘初心 (“Not forgetting your original intent”), shifting their agritech play from an asset-light third-party model to an asset-heavy model with clear aspirations to become the world’s biggest grocer.
Pinduoduo’s Business Model - Image Source: Turner Novak
d) Amazon launching Kisan (Farmer) Store and agronomy services in India to build the necessary data flywheel that would power their food and groceries low-cost, high-margin private label operations.
My mind keeps going back to this Hollywood studio era. I think it’s an era with lots of lessons for the post-pandemic times we live in.
“The studio era was a period of vertical integration and control of the industry by a few large studios, such as Fox, MGM, Paramount, and Warner Brothers. These were comprehensive, end-to-end production entities. On one end, they signed on actors and writers via long-term contracts decoupled from specific projects, and on the other end, they controlled distribution.” - Venkatesh Rao
05/ If this sounds eerily familiar to those who can contextualize this for the world of Agriculture, it shouldn’t.
Replace the names of Fox, MGM, Paramount, Warner Brothers with Bayer, Cargill, Olam, Pinduoduo and you will realize that studioization of Agriculture has been taking place long before COVID.
06/ What’s different this time, circa 2021, when compared to the previous studio era, is a crucial difference: We are now seeing two kinds of players:
a) Head Studio players who are driving the digitalization of incumbent post-covid agricultural supply chain that is learning to cope with demand shocks and supply chain volatilities.
and
b) Tail Studio players who are building a brave new value chain infrastructure that is premised on prosumerization of agricultural supply chain, bridging digitally savvy farmers directly with consumers.
07/ Perhaps, I will revisit the naming convention later. For now, I will share my disclaimers: Don’t get misled by thinking that the Head ought to be more important than the Tail. Also don’t get partisan about which is important: Head or Tail. Both are important for reasons that will get obvious as I explore this mental model deeper.
08/ My Friend Carl Lippert calls this phenomenon by another name: The Farm Barbell with the Head Studio players focused on cutting costs, while the Tail Studio players focused on increasing margins.
09/ Don’t let those mystical diagrams of Heads Eating Tail confuse you. Be rest assured that in the long run, both are going to exist in the market with separate moats. But why is this distinction between Head and Tail of agricultural markets important?
Let me share my backstory.
I began to think about the head and tail when, in my last subscriber-only post, I covered payAgri’s acquisition in detail and contrasted payAgri with Samunnati’s FPC aggregation marketplace.
I asked a simple question: Is there really a long tail of marketplace business models when it comes to aggregating farmers and farmer producer companies?
10/ Underneath this micro question, what I didn’t elaborate clearly is this macro point: It’s never a question of Heads Or Tails. It’s always Heads And Tails. This nuance will become clear if we understand the historical context of the Long Tail phenomenon.
11/ Long Tail was popularized in 2004 by Chris Anderson when he realized that every market’s power law distribution curve has a head and a tail, and until the Internet came along, the tail of every market distribution curve never merited any attention.
As he writes,
We have historically looked at the market at the head of the curve in isolation, and we can now shift our gaze to the right and see that the tail is another market.
12/ Of course, when you are comparing heads with tails, it can get disorienting in terms of scale.
This disorientation is particularly common among those who fervently posit the argument that “local and organic” sustainable agriculture must be the basis of the world’s entire food supply. This argument, among many others, more recently became a punching bag of agricultural scientists when Sri Lanka floundered with its attempt to go full-stack organic farming and quickly reverted to the status quo once they saw the repercussions of their absolutist decisions.
13/ When I wrote “What is the Dystopian Future of Agriculture that awaits us if we extrapolate the present?”, this was the most important nuance that I missed writing about.
14/ However disorienting it can get, it is extremely important to get this scale nuance right. If you are an agritech startup player, at some point, it is extremely important to pick sides: Few years down the line, you are screwed if you try to mix head and tail agritech plays, or worse, occupy the no-man’s land between them on the barbell.
If you try to organize in Head mode and operate in the Tail mode (and vice-versa), you will fail.
If you attempt to present as Head Agritech player, but function as Tail agritech player, you will fail.
If you attempt to present as a Tail Agritech player, but function as a Head agritech player, you will fail.
Head or Tail. You have to choose. And either get big enough, or small enough, to make it work.
What are the implications of these studio systems for the broader system of agriculture? How would the shadow of these studio systems come to bite us? What is required for these studio systems to thrive in the uncertain future? We will explore this further.
So, what do you think?
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I see a lot of startups connecting the head and the tail. Some have grown new heads.