From Moore's Law to Moo's Law - Ep136: Jim Mellon

Michael Liebreich Jim, thank you so much for joining us here on Cleaning Up today.

Jim Mellon Thank you very much for having me, Michael.

ML  Now, I first became aware of you and some of the things that you were doing as the Soviet Union was collapsing, and investors were looking at Russia and coming in and making investments; and I thought, well, there's a brave man. But tell me how you got from there to what you do today?

JM  Okay, so I was an emerging market fund manager for quite a long time. First of all, for a company called GT, which you may remember in distant history, and then in our own company, which was called Regent Pacific and subsequently Charlemagne management. And my partner and I, my business partner and I Jane Sutcliffe, read that Russia was privatizing its industry, and I know you did at the same time, in 1994. So, we went to Moscow, we bought up all these vouchers, and we started a business on it. It was one of those rocket ship businesses, which then flamed out in 1998, when they had the double devaluation. But that company still persists, and they are still investors in Eastern Europe - presumably not in Russia now. But since the year 2000, I've been focusing on investing my own money and developing new companies, because I sold half my shares on the public flotation of Charlemagne Capital, a bit like when you sold your business. And those businesses I'm focused on now are biotech, food supply disruption, property, and a variety of other interesting things, including quantum computing.

ML  It's a fascinating background, and I think the point here is that you kind of like to be at the emerging frontier of these big changes, and certainly... I was actually there in not 1994, but 1990, and I worked on Perestroika, but it was similar crazy times. But you've been on this kind of frontier. And you have a sort of methodology where you educate yourself, you write a book, and then you start deploying capital, is that right?

JM  That's true. I didn't write anything about Russia or the emerging markets, but then subsequently - and since I've not been a fund manager - I've been doing that. So, I've written books on the biotech industry, the longevity industry, the food industry, and latterly, I've written a children's book about the food industry seen through the eyes of one of my dogs. You being a dog lover, as well, you'll know that dogs take pride of place in the household, and we have seven of them. But one of them in particular is the author of this particular book.

ML  What you're basically saying is that I shouldn't have you on Cleaning Up, I should have one of your dogs.

JM  I think she'd be much more interesting. She's called Juno.

ML  So, I'll tell the audience when we've got Juno coming up. And we will put links into the show notes for your books, because I think they...

JM  All the money goes to charity, by the way; all the proceeds go to charity.

ML  I want to talk mainly about the food. So, the book is called Moo's Law, the company is called Agronomics, and it's essentially an investment vehicle. Is that right? So, tell me, what's the driver for this kind of revolution in agronomics, in foodstuffs? What do you see as the key driver?

JM  Well, we all know that food has a very major negative environmental impact. There's lots of debate about what percentage of emissions are caused by agriculture, but it settles around 25% - or animal husbandry in particular. I'm an animal lover, we are in our household animal lovers, we don't eat meat. So, a motivating factor for me, the main motivating factor for me, is the reduction in the cruel practice of intensive farming, as practiced mostly in the United States and in China. But for other people, it may be the environmental impact that agriculture has, or it may be just better health, because you know, there's lots of bad things associated with the production of food today, as we all know. So, the very negative impacts on the environment of an unsustainable food supply chain. And at the same time as this is happening, technology has evolved, largely out of biotech processes, that allows us now in a very short space of time to make food in laboratories, to make materials in laboratories, that don't have any animal linkage, except for the original stem cells that are associated with the animal materials. And it's happening at lightning speed. And so, the reason I called my book Moo's Law - it's obviously a rip-off of Gordon Moore's law on semiconductors - is because as the scale goes up of the production of these products, the price comes down. And ultimately, in my opinion, at least, the price of at least some of these products will come down below the price of conventionally farmed foods and materials, and it will be just another great benefit for mankind. And at the same time, a huge reducer of our pressing problem that you're at the leading edge of which is, we're warming up. We can feel it here and your house today, we're warming up. This didn't happen 20 years ago - we need to do something about it.

ML  It's interesting that you riffed off Moore's law, whereas in in my world, the equivalent is really the learning rates, the experience curves, that we've seen on wind, on batteries, but especially on solar power. So, Moore's law is a special case of a phenomenon of learning rates and experience curves. And in solar, what we saw was the little tiny solar panels that were used on satellites, and on pocket calculators, then got on to parking meters, and then on to the odd roof, and then on to bigger roofs, and then of course into... And what you now see is solar farms that extend to the horizon. And that scaling up, of course, drives the cost to just unthinkably low levels. So, that's the equivalent, that's the analog, I think, of what you're talking about.

JM  Absolutely right. So, in Spain, where we live, we have solar, and we've had it for a long time. And I'm going to replace the panels because the efficiency rate of the panels, as you better know than me, has gone from about 15% to 25%. And as a result, we can become rather than 80% self-sufficient, 100% self-sufficient, by just replacing 75 panels. So, it has a direct impact on us because electricity prices are very high in Spain, and we can be completely off-grid.

ML  So, I want to get into, in a moment, the different approaches to using that Moo's Law to change our food practices. But on the climate thing, it's interesting... I asked the question open to you, what are the drivers, because I was interested in what are your motivations, and you've talked about the animal cruelty first and foremost. Obviously, in my world, it would be more the climate imperative. And these figures, as you say they're contested, 25% is agriculture. But then that's methane, but it's also agricultural fuels, which are then going to be eliminated by trends in cheap, renewable electricity, batteries, synthetic fuels, maybe a little bit. But Adair Turner, Lord, Turner, who's the Chair of the Energy Transitions Commission, he came on just before Christmas onto Cleaning Up. And what he talked about was a completely different take on this, which I found fascinating. [It was] we're going to need biofuels. Because not everything... If we look at shipping and aviation, and you look at some of the very hard to abate industrial processes, we're not going to be able to go fully 100% electric, and there's a limitation on land to produce those biofuels. But if we could stop eating or making, or farming for meat in the same way, we're going to free up a lot of land, and that actually enables the transformation of the economy, so there's a different aspect to it. I don't know if that's something that that you have also calculated in.

JM  I hadn't actually thought about that, but it's a good point. Because 70% of all crops grown around the world go to feed animals. And the deforestation that we are all familiar with, is largely due to growing soybeans to feed animals. So, if you can reduce the percentage of crops that go to animals, then maybe there's more for biofuels, it's a very good point. I hadn't thought of it.

ML  So, basically there are multiple, very substantial, very powerful drivers, I think that's the kind of takeaway, whether it's cruelty, whether it's direct emissions, whether it's biofuel available, or biodiversity, returning that land to be biodiverse, to be reforested or whatever.

JM  Absolutely. And one of the things that we're trying to do... I'm talking to the government at various layers here, because the UK imports about half of its food - we don't need to import half of our food. We could be a leader in precision fermentation, which is one aspect of cellular agriculture, and the other one is making food in a cellular agriculture way, in laboratories. And if we encouraged farmers to situate the fermenters, or the bio-reactors on their land, and to get benefits from that, that would co-opt the farmers into being pro this rather than anti this.

ML  Let's go through the different approaches, because you've mentioned fermentation, you've mentioned cellular culture, but there are lots of different ways of thinking about this. I mean, there are people who will be listening to this saying, they should be talking about... everybody just needs to go vegan, and stop with this kind of tech utopianism. So, there's changes to diet using the existing food system as well. Or, there's all sorts of things that are mooted. How do you segment the different approaches?

JM  That's a great question. So, we're not investors in plant-based foods. And the reason is because they tend to be ultra-processed, they're not necessarily better for the environment, they're not necessarily better for human health.

ML  What about agroforestry? So, growing crops sustainably within natural environments? Did you look at that, or you just a priori said, no?

JM  I think that's a great idea, but we are very focused on cellular agriculture and precision fermentation, so we don't invest in anything else, because we want to have that focus to attract investment into this very specific segment. If we go into broad ag-tech and into reforestation and all that sort of stuff, we're diluting our...

ML  And what about insects? There's this whole thing about the great reset, and the World Economic... Klaus Schwab is going to force us all to eat insects. Did you look at insects?

JM  We have looked at insects. The problem is that there is a very big insect business already in Southeast Asia, but it's partly because it's humid, it's hot there. And if we want to recreate those humid and hot conditions, it uses a lot of energy in the northern hemisphere. So, I think it has a validity, but it's not something that we're particularly interested in or investing in. And similarly with vertical farms.

ML  Well, that's an interesting one, because vertical farms, there are those who say, we should be farming in cities. So, you've talked about getting the farmers on side, there are others who say, no, no, no, the farmers should go out of business, and we should do all of this in cities; leave the land to be rewilded or whatever, and in cities, we should be able to grow everything in vertical farms. Does that have any validity?

JM  The capital intensity of that, and the limited range of crops that are profitable from doing that, makes it a very uncertain business. So recently, you've had AeroFarms going bankrupt, you've got AppHarvest on the edge in America - these are two companies that attracted huge amounts of money. So, capital intensity of that, capital intensity of insect growing and so forth, is not something that attracts us. I don't see the return on that. However, it's a nice idea, and it's probably more suited to countries like the UAE, which are food short; they can't grow anything, they certainly don't have the pasture land to grow anything. So, maybe it's better suited to there than it is to here, where actually, our agriculture for lettuce and things like that is quite efficient.

ML  Yeah, so I have done a little bit of work on the economics of vertical farming. And I always found it sort of odd, this idea that you do it in the city where the land prices are incredibly high. Even if it works there, you'd still probably do it outside the city, and then of course, why go vertical and so on. But there is validity to the economics, as you say, I think it's probably fairly niche. So, you have settled on fermentation and cell culturing and your portfolio... I sort of segmented your portfolio according to those... But you do have some plant-based in there -  you so you don't do plant-based, but you do have a few - you've got some plant-based protein, gene-edited crops, sustainable chocolate.

JM  Oh, no, that's lab-grown chocolate, lab-grown palm oil. So, at the very beginning of Agronomics, they invested in something called Blue Horizon, and that is a plant-based company, but it's a very small part of Agronomics, and it's a legacy investment. We did invest in Tropic, which is a British company that does gene editing of crops, but it's not producing crops, it's just doing the gene editing to create more robustness in coffee and bananas. It's a really good company based in Norwich, which is actually a world-leading center for gene editing of crops.

ML  That's because we've got the Agricultural Research Centre.

JM  Exactly, yeah. Anyway, Tropic is a great company, and we have an investment in that. We probably made 10 times our money on that, we believe. But that's it. And so, everything else is cell ag, or precision fermentation.

ML  So, let's get some definitions. So, what is cell ag? And what is precision fermentation?

JM  Well, it's a bit confusing, Michael, because all of it is cell ag... But cell ag in the sort of pocket that I'm talking about, is where you take a stem cell - and it can be a stem cell from you, or from your dog Millie, or from any living being, any living being, which could include things like collagen or leather, and so forth - and you basically amplify those stem cells, differentiate them into what you actually want them to produce, feed them with the same sort of food stock or feedstock that they would get if they were an animal living on a farm or in a feedlot. And then, after a certain amount of time you harvest them, put them all together, and you've got a food. And that's the way it works. Can I just give you an example? So, beef is the most well-known sort of form of food apart from well, maybe chicken as well. But let's just talk about beef. So, it takes 28 months to grow the average cow in a feedlot. And by the way, those cows, intensively farmed cows, don't see the outside at all during those 28 months, they're just feeding in some sort of horrible shed. So, 28 months. There's a lot of useless stuff in cows like the horns and the head, and all this sort of stuff, that can't really be made into anything other than pet food. So, a cow will take in 25 times more protein over its lifecycle than it puts out in the form of meat as protein. What we do, is we're taking the stem cells - in the same way as I mentioned, amplifying them, feeding them and so forth. Over 40 days, one little sample from my fingernail of stem cells can produce seven or eight cows' worth of meat, which is 3000 kilos, in 40 days. Almost no environmental impact, and obviously, no cruelty, and no hormones, no antibiotics, which are widely used in animal husbandry, no contaminants, especially in the slaughtering process, which means that one in six people in the US has to go to the emergency department every year because of food contamination. And so, what's not to like about it?

ML  Let's talk about the feedstock, the nutrients, because the bit that you didn't mention is also to get that protein to the feedstock, for that cow that's growing over 28 months, is about 1% efficient between solar, the sun's energy... If you look at how much of that is captured by photosynthesis, and turned into proteins and fats that are used, it's about 1%. So, you've got kind of 1% of incident energy that goes into the feedstock, that goes into the cow, that then uses 4% of that. So, the entire process, as an energy balance is 1% to 4%. But you still have to produce a nutrient, so where does the nutrient come from that feeds the cells?

JM  Well, some of it comes from crops, obviously. So, you've got sugars, starches. The key factor is growth factors, which is what animals have within them, but you just replicate that. Now, the growth factors were originally the limiting factor on price and scale...

ML  And these would be hormones?

JM  Well, they're things like insulin, as an example. But there were very, very specific growth factors that were supremely expensive. And these came from the biotech industry. Something called Element 8 is an example of that. And they were very expensive, but in the last few years, the price has come down by 99%. Hence Moo's Law, right? So, you're getting vast reductions in the price of inputs. So, what I've omitted to say was that a cow takes in 25 times more in terms of protein than it puts out. In our process, it's two to one. Hence, you can see the opportunity. Unlike plant based foods, which don't have that economy of scale, or don't have the opportunity of lowering their prices to the level of conventionally farmed foods, and are ultra-processed, generally speaking... You can see that someday in the future, we'll have foods that are healthy, non-environmentally impactful, that will be cheaper than the current way in which we produce food. And you won't have the animal suffering.

ML  Let's move on to precision fermentation. Because I suspect that the reason it's all sort of connected is that the Element 8 that you talked about is probably produced through precision fermentation, or something similar. So, what is precision fermentation? What is your definition of the scope?

JM  Well, basically, it's a brewing process. So, it's using organisms like yeast to produce novel proteins. And the big Belgian beer company InBev - or it's American / Belgian - is a big believer that using the brewing process to produce foods is going to be ultimately bigger than their brewing process. So, we're in competition with them. And we hired a couple of people from them, and we've developed this company called Liberation Labs, which I think will be the world's largest contract manufacturer for precision fermentation. The problem is that precision fermentation, as you rightly pointed out, has been used for biotech for the last 50 years, and so the fleet of fermenters is very old - it's about 50 years on average, in age, and it's very limited in capacity. So, you're familiar with these new drugs, weight loss drugs, semaglutide drugs. They're going to sell $40 billion worth this year, and they're going to sell maybe $100 billion worth next year - by far the biggest drug ever produced on the planet. And they're produced in precision fermentation. So, there just is no capacity to produce these novel proteins in competition with the pharmaceutical industry. So, we have to build capacity, which is what we're doing. And our first factory is being built and will open by the end of next year in Indiana, in the United States. It's quite expensive to build it...

ML This is so reminiscent of solar. Because when they were making those little teeny solar panels for your pocket calculator, and for satellites and so on, the silicon was essentially produced... people were making microchips. So, there was a silicon refining process that was producing silicon for microchips. And then some people were buying a little bit off the side of that, and they were making the solar panels, and that was the supply chain. And then Germany instituted its Feed-in law, its energy Feed-in law, that enormously subsidized solar, and people started to buy this silicon. And there was a point where more silicon was used for solar than was used for microchips - I remember it very clear, sort of 2007, 2008. But of course, the supply chain was completely overwhelmed; the price of silicon went from $20 per kilo to $400. And then, of course, it came back down the other side, because investors... you know, capitalism kind of works on price signals. Doesn't work on lots of other fronts, but on that one, it's really good. And there was enormous investment in the silicon production, and the price went down to, of course, not just back to 20, but far below. A bit below, a bit below, but at vastly greater scale.

JM So, basically, these precision fermentation companies are producing, for the most part, dairy products, and they're producing the key components of cow's milk, which are whey and casein, in this brewing process. And egg products - 60% of eggs go into baked goods, and are not seen, so you don't see the shell or anything like that. So, there's replacements for those. Both categories are approved, they're on sale in the United States, but there just isn't enough production capacity. So, we've set up Liberation Labs, and... Maybe I should just talk very briefly about what we've done with Agronomics. When we started it, we invested in other people's companies. So, we invested in a meat producer, a fish producer, a collagen producer, a leather producer, etc. Then I realized that in biotech for the last 20 years, we've been backing scientists, entrepreneurs and starting our own companies. So, that's what we've been doing in Agronomics. And we've started a company for dog food, which is called Good Dog Food. It's based here in the UK; it will have a product on the market by the end of this year - first cell cultured product. In fact, Millie should try it, I'll get her some. And it will be... Pets at Home, which you're very familiar with has invested in this company, and it will be the distributor, or one of the distributors for the company, super exciting. First cell culture product ever in Europe, on sale from a company that we started ourselves. Liberation Labs, building contract manufacturing facilities around the world for precision fermentation companies - which can't afford to build them themselves, they're $300 million each, right? And then one for palm oil which we based in Bath in the UK, which is quite far advanced now. And then there'll be a variety of other ones. So, starting these companies gives us much more equity.

ML The palm oil one, is that Clean Food Group?

JM Yeah, yeah. And in fact, I'm going down to visit them. The British government to set up a research facility down in Bath and they're based there. And Good Dog Food, if you ever want to go and visit it, please do, is just based here in London, in Kings Cross.

ML So, you've got the cell based, and then you've got the precision fermentation. What is the role of genetic engineering in that? These processes, do one or both rely on CRISPR and other gene editing technologies?

JM No, not at all. I don't think any of the companies that we're involved with, apart from Tropic, is using any form of GM or gene editing, none at all.

ML So how are they... so why is it precision? How are you putting the precision into the...?

JM I think precision is just a name that implies food standard quality, basically, relative to brewing, for instance. But it's quite a technical process. One of the reasons I like this is because being involved in the biotech sector, where we bought IP and then subsequently sold it to big pharma companies, I think this is a much more interesting business than plant-based, because it has IP and know-how around it, in the form of patents and trade secrets. And so ultimately, I think most of these companies will be sold to - rather like biotech is sold to Big Pharma - we'll be sold to the big food producers. And already, the big food producers are investing in this sector. The world's biggest meat producers has just invested in a cell ag company, invested $100 million, that's JBS from Brazil. Cargill, Tyson, Nestle, Unilever, you name it, they're all involved, and they can see the writing on the wall.

ML Now for a lot of people who are not tracking the sector in any detail, and I almost include myself, to my shame, in that group. What they will be aware of... This will sort of pop up in their news feed, every so often there'll be somebody sort of in a white lab coat eating a hamburger, or maybe giving part to the journalist, and the journalist will try it, and say either marvelous, or tasted a bit like this... What stage are we really at in terms of going out to the market? Because people will be aware of Impossible Burger Beyond Food, which are plant-based. But then they do have some... Impossible Burger had this hemoglobin, Heme, which they had to make through a GM process, and precision fermentation, wasn't it a combination of the two?

JM Absolutely true. And so, they do the precision fermentation in Europe, but they're not allowed to sell it in Europe, so it goes back from Europe to America to be incorporated in their burger. Although it's likely to be approved in here in the UK, which is beginning to diverge from European food standards. But none of that is applied to what we're doing in cell ag or in precision fermentation. But it is correct that the Heme is made by precision fermentation, but we don't invest in that area.

ML Precision fermentation, you talked about egg protein. Is that currently being eaten by your average human in any volume yet?

JM No. So, it's a company called Onego, based in Finland, and I just visited it quite recently, like in the last two weeks. And it's very, very exciting. It comes out of a research institution in Finland, as does Perfect Day, which is the biggest of the precision fermentation companies, which is involved in dairy products. The same technology is being used for both. But you can eat their products, but at pilot scale production. Perfect Day is producing for the consumer market and anything it makes is sold straightaway. So, it's in Starbucks in the west coast as an example. But the limiting factor is the production, which is why we're so excited about building that out.

JM So, that is precision fermentation, presumably dairy, not egg in that situation, but people are consuming it every day.

ML So, that's the beginning of real commercialization...

JM Yoghurt, ice cream, cheese, etc.

JM That could be absolutely huge. Dairy is the biggest emitter, whatever way you look at it, on the planet, in terms of animal husbandry, and it's one of the cruelest industries. If you really want to upset yourself, watch a film called Cow, a BBC documentary, you'll be in tears at the end of it, I guarantee it. And it's completely ripe for disruption. It's about a trillion-dollar industry. So, it'll be multiple generations before it is completely eradicated, but it's happening now. And the resistance to that is not very strong.

ML And of course, the alternative way to get rid of dairy farming is almond milk and soy milk and oat milk. And each of them probably creates more environmental problems - almonds with water in California and so on. But then on the cultured cell foods, is it just people in lab coats eating it with journalists and saying it really does taste good, honestly, it does? Or has it got a bit beyond that?

JM Well, I thought that it would be several years before we got to the stage we're at now, to be quite honest. But in the last couple of weeks, two of these chicken products have been approved by the FDA in the US with no questions asked: Upside Foods and Good Foods. And they will have their product on the market by the end of this year, which is incredible. So, it won't just be eaten by journalists.

ML Or dogs.

JM Well, we'll have the dog product. And by the way, dogs are eating the absolute shavings off the abattoir floor at the moment. So, your dog and my seven dogs are going to be enjoying something that will be so much healthier for them, and will add to their longevity, which is what we were talking about earlier on. And with all the other stuff that's happening on dogs as well... 25% of the UK meat market is pet food, and 25% of the US meat market is pet food. So, it's a very big and growing market. And people like you and me will buy whatever is best for our dogs, almost without reference to the price, right?

ML I don't want to say what Millie actually eats because social media will go crazy saying, how could you possibly... But she's not eating dog food.

JM Okay, that's good. I'm sure she has a personal chef coming in every day!

ML Well, I had a very good exit with New Energy Finance, but it wasn't quite that good. Millie does not have a personal chef, unless that's how you're referring to my wife.

JM I'm sorry, I'd never do that.

ML So, it sounds... I want to push actually, I was gonna say it sounds too good to be true, but I do want to push on the question of sort of squeamishness, and public acceptance. Because it is one thing to have milk in a Starbucks, or an egg product in some catered product you don't even know is a cultured or a precision fermented ingredient. But what about... how close are we to getting a steak or a chicken breast, or... I suppose there's also, you haven't mentioned fish here, but I'm assuming that a similar approach has been taken to... Actually, I do know with shellfish that there are some similar approaches. How close are we to getting not pie-filler and hamburger meat, but actual slabs of meat?

JM I think that's years away. Because the costs are still very high to produce what you would regard as a steak or a shaped chicken breast or anything like that. So actually, the low-hanging fruit is the hamburger meat, is the stuff that goes into sausages, or into pasties and things like that, in terms of meat. And we are getting quite close. As I mentioned, two chicken products approved in the United States, both for big companies that are quite well funded. And so, you'll see their products on the market by the end of this year. But the products will be incorporated in a b2b way into other people's products, and probably mixed with plant-based foods. Because the cost of producing it is still too high, and so they'll mix it with plant-based foods and have a sort of blend. But they'll be slaughter-free. In terms of fish, you mentioned that, it's a really interesting area. We have an investment in a company called BlueNalu. By next year, they'll have their tuna fish product on the market; they've already got the off-take with Japanese sushi chains, so all of it will be sold straightaway. They have gone - which is what we like - for the very highest margin product, which is otoro tuna cut, which is $85 a pound, sell price, wholesale, and they can produce it at $25 a pound. So, they'll be instantly profitable on quite large volumes of production. And fish is a market that we really like because there's no really effective cartel that's against it.  Now, squeamishness. The meat industry is going to, and already is, talking about how, is it really environmentally friendly, which it is. We know that, you know that, but they'll do everything they can to just disseminate rubbish about how it's not. Is it really healthy? Can it give you cancer? The answer is no, you can't catch cancer, and these cells are dead by the time that they're in food basically. And is it natural? And the answer is yes. Because it's identical, it's bio-identical to the meat that you get off a chicken, or you get off a cow or a pig or anything else for that matter. So, there is already an organized lobby against this, and there'll be increasing amounts of it. But it's a bit like the horse and cart drivers in the 1890s, fighting against the car. You know, we're fighting against cars and petrol cars now, but they weren't then, and they took over the world. And this will be the same thing.

JM The funny thing is, when we look back at those sorts of big transitions - horse and cart to car - we say it was incredibly fast, it was 15 years, and this happened, and that happened. 15 years is a long time for us. When you're looking forwards at... I don't know what I'll be doing in 15 years, but I suspect it won't be...

JM Probably doing the same thing.

ML I'll be doing the same thing, I know, but not with the same intensity. But 15 years is quite slow, especially when you put the climate imperative in, and you say, well, we have to be at a certain point in 2050, 15 years is slow. But I can't see it happening much faster than that, if I'm honest.

JM That's true. It's a bit like when you're talking about nuclear power, you know, we might want to be entirely nuclear powered now, but it's just not possible to do it. But you know, you talked about solar, and you talked about wind, and it's quite remarkable what the UK has done in terms of both those industries, partly due to your efforts. And in 10, 15 years' time, it will become a matter of routine for us to be eating precision fermentation and cell ag products. And to be using them because it's not just about food, it's about things like leather. So, already leather is being produced and sold to the big luxury factories, at the same price as they can produce it using calf's leather, right? But equally high quality, and able to be made in any size whatsoever, rather than dictated by the size of the calf. Collagen is another example. Currently it comes from cadavers of both humans and cows. Most people don't realize that collagen used in beauty products can come from dead human bodies. Did you know that?

ML I didn't know. I'm still processing that the red lipstick comes from insects.

JM Well, I mean, insects are okay, that's fine. So, we will be using these things. Everything is now down to, first of all, the execution by the managements of these fairly new companies, as to whether they're any good at it. Secondly, the amount of capital coming into the industry. And third, whether carbon taxes, carbon credits and so forth, will be levied on conventional food producers, and given to these types of companies to accelerate the process.

ML On that one, I can give you a definitive answer, which is, absolutely not going to happen. And the reason is, because the farm lobbies are so powerful, agricultural voters are so powerful, that the idea of putting another cost onto either them or their customers, to give to a bunch of sort of tech bros - is how they will present this sector and this trend and these investors. Politically, I can't see that happening.

JM But it may happen in countries which don't have an agricultural sector. So, the UAE, Singapore, Hong Kong, parts of China, which is very, very keen on this, by the way. They may do that.

ML You would need to put a tax onto the embodied carbon in the imported x, whatever x is. It's not impossible, but I wouldn't... 15 years... speaking as an entrepreneur who just kind of barged ahead and built the information provider without expecting any support from governments, it might be quicker just to build the companies.

JM Well, that's what we're trying to do, Michael. But the total addressable market is $5 trillion, by the way, it's absolutely vast. So, even if only 10% of it is garnered, that's a huge amount of money.

ML Exactly. And looking for the places, the niches, the segments, the countries, that's how solar took off beyond just the German subsidies, it went to where it made sense. But this business of... it's got to take off. In fact, one of the things that I have always done, I started doing with New Energy Finance, and I do now as an investor and as an analyst, is look for the points at which things take off. So, we talked about solar went from being pocket calculators and satellites and then it started to go to roofs. And there's this thing, I call it the "sneeze", because you wait for that moment, it's like waiting for the sneeze. So, precision agriculture or precision fermentation, it's kind of waiting for the sneeze - the sneeze will be huge, it's however many trillions, $5 trillion opportunity - and I guess I'm exploring now, when is the sneeze? When does it just go, and it gets large-scale acceptance by consumers, and a supply chain is in place for it to really take off. Is that this year, is it in two years, is it in five years, is it in 15 years?

ML Right, so already the cells are, as I said, whatever they can make... Next year we'll be producing, we'll probably have 600,000 daily litres of product. And the product is a powder form, so if you amplify that with water and all the additions that go into it... Depends how you define a sneeze. Is it the first indications of a sneeze, or is it the big sneeze?

ML The sneeze... The rule of thumb I've been using is sort of 5% When online commerce became... When you had a 5% chance of buying a washing machine online versus going into John Lewis; at that point companies are going bankrupt, they're being restructured, the new leaders, the new Facebooks, the new Amazons, the new Alibabas, it's that sort of scale. I's not at 1%, or half a percent or .1%. But it's when it gets to somewhere around, let's call it 3, 5, 5%, you really see a seismic...

JM Five years, five years,

ML Five years, 5% of protein might come from...?

JM 5% of the market for precision fermentation products. So, dairy and for eggs.

ML No, it's segment by segment, that's absolutely fine. Okay, so 5% of egg protein, 5% of dairy will come from precision fermentation in five years.

JM And when we meet up in five years' time...

ML We will meet and we'll check that, and I hope we'll meet well before then. Because the point about the timing is an important one. You've got Beyond Meat, which was at one point worth $15 billion; it was the darling, it did its - I don't know if it was an IPO or a SPAC - and it's a quoted company, and it's now down by 95% or something from that. Are you going to see the same over-inflated expectations, over-inflated valuations, followed by the kind of...? There's this curve, the curve of over-inflated expectation, and then it goes down, then it comes back up again. And if so, how are you going to navigate that as an investor? If everything you invest in is overvalued because you're up on that sort of part of the curve where everybody is trying to put money to work, and you're about to see the reality phase?

JM Okay, well, that's a very good question. So basically, on the plant-based stuff, Beyond Meat, Impossible etc. First of all, the products don't taste like regular meat, and so people are resisting eating them on a daily basis as a substitute. Secondly, they cost four times more than regular meat, because they are expensive to produce, the supply chain is difficult for these companies. And thirdly, consumers recognize that they're ultra-processed, and they're not necessarily better for the environment. So really, the leitmotif is not nearly as positive as for what we're doing in cell ag or in precision fermentation. And then there was an execution risk, and an overhype and all that sort of stuff during the pandemic. In cell ag, none of the companies have gone public; none of them have gone to that stage where, oh my God, we've got to invest in BlueNalu, or Good Dog Food or anything like that, none of them have gone public. I expect that someone will go public in the next couple of years with very interesting business plans, which are genuine business plans, rather than just sort of hype. And so, you didn't have that opportunity for people to be burnt, losing a lot of money in that particular cycle. On the other hand, people are very confused between the difference between plant-based meats and cell ag, so it's a problem for the industry. In our own case, Agronomics, listed at 5p, it went to 30-something p, it's now 11p. So, there's a lot of volatility. Meantime, the asset value and the genuine asset value -not some sort of bullshit, VC asset value - has quadrupled over the last four years. And I think it's going to more than quadruple over the next four years based on the stuff that I can see. So, we're not overpaying for companies. We raise money at quite high prices for Agronomics. Significant premiums for book value, and we are very, very conscious of valuations. So, this is a very different kettle of fish to the plant-based stuff. And I'm the biggest shareholder in Agronomics, I've never sold a single share.

ML You talked about that share price collapse for Beyond Meat being because of some disappointment, but actually, it's almost... That curve of over-inflated expectations, it could be about the timing - it could be nothing to do with the... The internet also had one of those where the valuations went sky high and then crashed back to Earth. And of course, then you got Facebook, you got Amazon, you got Google, you know, and it comes back up. But isn't that curve almost independent of the power of the sector?

JM Oh, definitely. And it's probably going through one of those curves at the moment, which is why when we negotiate with these companies, we say, look at the venture capital industry. This is not two years ago, this is something [where] you're going to have to accept the canapes when they're going around at whatever price that you can get for them, basically.

ML The venture capital industry fascinates me. There's so many smart people who know everything about the sectors they invest in, but they don't realize that their own industry, the defining characteristic is, it's cyclical.

JM Absolutely, I completely agree with you. And what I find objectionable in the VC industry is the fact that they think there's a sort of Bible of how it works. You know, this is the way it works, the liquidation preference should be this, the terms should be that, there should be a first investor who creates a term sheet and all this sort of stuff. And that, to me is just BS - just rip it up, everything has changed, we're in a different world. So yeah, I'm particularly conscious, because I'm Scottish, of how we get the prices down. You don't just accept whatever they want in terms of valuation.

ML Final question, you've touched on cost, so I think I know the answer, which is that ultimately it becomes the cheapest way to produce these proteins and these foods, so I think I know what the answer will be. But for whatever interim period, however long that's going to be where it's more expensive, is this just sort of rich country, rich person self-indulgence, where we don't want to cause cruelty to animals, or we don't want to put pressure on the climate, and so those people who can afford and who shop in nice air-conditioned supermarkets can do this. But the vast majority of the world is not shopping and eating and consuming and worrying in the same way. So, is this something that's of interest only to a few 100 million very rich people? Or is it truly going to be a global thing?

JM It will be a global thing eventually, but I think in the early stages, it will be the early adopters who are in the rich countries. And I use the example of pharmaceuticals, because I see big parallels between bio, which is my main industry, and this in so many ways. But in bio, there's a price for innovation, which is the price of high-priced drugs. And so, as an example, in the 1980s, you may remember that there were ulcer drugs, anti-ulcer drugs were the most expensive drugs on the market. You know, things like Tagamet, omeprazole, and so forth. And they were very expensive prescription drugs, and they were only available to people who could afford them, but people were dying of ulcers, so they took them. Now you go into Boots and they're one cent on the pill, basically.

ML How do you deal with criticism that says, look, there are people who are hungry...? In some cases, not just a bit hungry, but actually, malnutrition for children and potentially even shortened lifespans because of lack of nutrition, lack of food. And there you are doing this marvellous thing, but it's a lot more expensive. And the drivers that you talked about were not, let's feed the world, they were, oh, let's not being cruel to cows.

JM Look, I told about my personal motivation, but I think let's feed the world is a major motivating factor for a lot of people in the industry, and it's also one of the motivating factors for me. But everything is about displacement. This is going to be a multi-generational industry. So, it's going to chip away at the conventionally farmed foods over a long period of time. By displacing the way in which conventionally farmed foods are produced, you are freeing up crops that are not going to be fed to animals, but can go to the hungry in the third world, or in poor parts of the world; you are allowing the prices of conventionally farmed foods to remain relatively low or to go down for the third world because the price pressures from rich countries, such as the United Kingdom and the United States, will be less because we'll be buying more of these cell ag products. So, yes, it's only going to apply to a few 100 million people to begin with, but those few 100 million will allow displacement, which will be beneficial to other countries.

ML So, final question, we've already established 5% of milk and egg protein in five years. 2050, what percentage of all protein in the human diet would come from these technologies?

JM Well, A. T. Kearney thinks that it will be about 35%. The limiting factor is the amount of infrastructure spending required to build the factories to produce it, not the demand. Because once people get used to it... I mean, people have got used to eating processed foods in the last 20 or 30 years, God help us all. It's not been good for us, but they will get used to eating this, it'll become part of the daily routine. The limiting factor is infrastructure. And we estimate that just in precision fermentation, we'll have to spend $1.4 trillion to get 10% of the market to build 3000 plants around the world. So, it's a huge opportunity. But it's also going to be a very long process. Any farmer who thinks, my industry... like the traditional sellers of retail products were completely disrupted by Amazon - it's going to be a much longer process than that. But the prize is much, much bigger, because it's something we do every single day. And we have to do every single day.

ML I love numbers like $1.4 trillion, because they sound enormously big, but actually, you divide it into 30 years or 20 years, and then you compare it to things like the food supplement industry in the US, which is $50 billion per year, and it's completely affordable.

JM Yeah, it's totally affordable, and the returns will be good for infrastructure investors.

ML And on that note, thank you so much for coming here today and spending some time with us.

JM It's been a real pleasure, thank you very much, Michael.

ML Thank you, Jim.