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 80s, still works as an investment banker. If you attended the conference in 2018 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 offering 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 still 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 80s, 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 have formed.

I was at Van Trump’s producer conference recently. There were 1,000 farmers there 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 80s 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. Carbs 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”

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

Innovators need to make good nutrition more addictive than sugar.