My guest Jim Mellon is an accomplished investor, entrepreneur, author and philanthropist. His most recent book called “Moo’s Law” focuses on the investment opportunities in the field of cellular agriculture, which is a production of proteins and materials directly from stem cells.
Jim Mellon co-founded Agronomics to invest in a portfolio of leading companies in this sector, as he is its largest investor. In this conversation, we dig into this new area, we talk about the case for change, the challenges and opportunities, some of the people, and some of the nations that are driving and supporting these forward thinking cell-ag companies.
Mark Bidwell 0:38
Hi, it’s Mark again. Welcome back or welcome to the podcast. I’m very pleased to welcome this week Jim Mellon onto the show. Jim’s an accomplished investor, entrepreneur, author and philanthropist, with a particularly wide range of interests. His most recent book is called “Moo’s Law,” which is focused on the investment opportunities in the field of cellular agriculture, which is a production of proteins and materials directly themselves. Jim co-founded Agronomics to invest in a portfolio of leading companies in this sector, and as its largest investor. In our conversation, we dig into this new area, we talk about the case for change, the challenges and opportunities, some of the people and some of the nations that are actually driving and supporting these companies. Jim’s the latest in a series of accomplished investors that I’ve had on the podcast, with people most recently like Joel Greenblatt and Mohnish Pabrai. If you want to find out more about previous guests, many of whom are leaders in their chosen fields, check out the website outsidelens.com. Before I introduce Jim, one final thing. I’ve decided not to accept sponsorship on this podcast, and I think that it would be distracting and potentially time wasting for you, my listeners. As a consequence, I’d really would appreciate it if you could share the podcast with your colleagues and your friends. Follow me on LinkedIn and Twitter, and as some of you have done, take at a subscription on my newsletter, be it a monthly, a yearly, or better still become a founding member to get access to all sorts of benefits. If you want more information, as I say, please go to outsidelens.com. Now, without any further ado, here is Jim Mellon.
Mark Bidwell 2:30
Okay, Jim, very good to have you on the program. Let’s start by how did you get into the world of investing?
Jim Mellon 2:36
By sheer chance, Mark. Before I left University, actually, it was pretty good times, a long time ago, for graduates. They had a thing called milkround, I don’t know if you remember that as well, but companies would come and try and get people to join their various enterprises. I have been the son of a diplomat, I wanted to go overseas, and a company called GT Management, stood for Griffin and Thornton, who used to run the foreign and colonial trust, which, as you know, is one of the oldest trusts in the UK, they started their own business and they offered me a job in Hong Kong. So I had no idea what the job entailed, I had no idea what a stock or a bond was, even though I had studied economics at university, and off I went to Hong Kong. And that was the start.
Mark Bidwell 3:19
That would have been what, the 80s?
Jim Mellon 3:22
No, in 1979 was my first job, and then I was sent to San Francisco, and I had a very happy and good four years there. This is a bit anecdotal, but I’ll tell you anyway. I was running their US Fund, and the US market, from ’79 onwards was on an upward trajectory, and it was a fantastic time. Huge amounts of money relative to the times came into that fund, and I used to do bus tours with all the other fund managers of GT, which by then was a very fast growing company, around the UK to encourage IFA’s financial advisors to put money into the funds. And I met this guy called Alan Steel. And sadly, Alan Steel died of COVID last week, which was a tremendous blow to his family and friends, and obviously, I’m quite upset about it, because he was a very good friend in my early days, and gave us a good chance, so shout out to Alan Steel.
Mark Bidwell 4:15
Yeah, working for someone else, and at what point did you make the transition into running your own money?
Jim Mellon 4:21
But what happened was, the T of GT, Richard Thornton was fired from the company, very Mercurial character. I think at the age of 25, maybe 26, he turned to people in the company, none of them would go with him, except for me. And so off I went back to Hong Kong from San Francisco, became the managing director of his company. It was a turbulent time, but the company grew very quickly and was sold four years later to Dresdner Bank. I don’t if you remember that name. But anyway, I got enough money to both start my own company and to buy my house in Ibiza where I’m going to tomorrow.
Mark Bidwell 4:54
You’ve written a number of books, and I remember reading “Cracking the Code” which is all that biotech, which I think was written probably 10 years ago. Then you went into your another book around longevity called “Juvenescence”. And then your most recent book is “Moo’s Law” which you wrote during COVID. These are three very different spaces, and I’m curious, to use the Warren Buffett’s term of circle of competence, each time it seems like you’ve created a new circle of competence or extend extended your circle of competence significantly. How do you do this? How do you go from one segment into another into another? Talk us through your process on researching and getting up to speed in these areas.
Jim Mellon 5:32
That’s a good question. Basically, they’re all linked. So “Cracking the Code” was my attempt to understand the biotech industry when I got into it about 12 years ago. I teamed up with a couple of partners who are still my partners, Dec Doogan, formerly Head of drug development at Pfizer, and Greg Bailey, who’s a well known funder, not founder, but funder of biotech companies. We started a number of companies. One was listed in the UK, it’s delisted now because we’ve distributed all the assets to shareholders, , it was a very good investment. And then we started an oncology company called Portage, which is listed in the US now, it’s a few 100 million dollars in market cap, but more significantly, we started a company five years ago, the three of us, with $3 million, we had 54% of it, called Biohaven, just to show you that you can compress a period of drug development, and you can get a drug onto the market, which can be successful, largely due to Dec Doogan I have to say, in a very short space of time, and that company is now capitalized at 10 billion US dollars on the New York Stock Exchange. And its migraine drug is the number one drug in America, and I’ve no doubt it will be the number one drug in the world in due course. Now biotech leads to longevity, because longevity is based on the advances in biotech, and so we formed our company Juvenescence four years ago, we raised about a quarter of a billion dollars for that company. We have multiple projects in that business, because we don’t know what’s going to work, we just know that something will work to extend healthy lifespan and ultimately more years of life for human beings over the next 10, 20, 30 years. And that company, I’m sort of semi-executive, and I only spent about a quarter of my time in it, and I’m the chairman of it and the co-founder with the other two. And then, being immersed in the biotech world, although a non-scientist, I realised, as you do, Mark, that the cellular agriculture, which is the focus of “Moo’s Law” is based on biotech processes. I got really interested in that, and as you know, with Anthony Chow who you’ve met last week, or the week before we set up Agronomics, and it’s been an astonishing success, and I think it’s got a lot further to go actually.
Mark Bidwell 7:35
These are all areas, they’re cutting edge spaces, be it biotech, be it longevity. But agriculture or the world of food has been around for a long time. As an industry, agriculture employs probably 600 million families around the world in terms of growing and farmers. What is the case for change in the world of agriculture, from your perspective?
Jim Mellon 7:58
Well, you make a good point about employment, the six hundred million families, but most of those are subsistence farmers who are eating what they produce and maybe selling a little bit on the side to get clothes. The industrialization of farming is what we’re aiming to change. That intensive farming really only started after the Second World War. With your agricultural background, you’re fully familiar with all this. That has led to a significant increase in emissions from farming. It’s the largest source of emissions of any man made activity, including transport around the world, about 20% of emissions come from intensive farming. It’s led to the overuse of antibiotics, which causes pandemic risk. If we ever got a bacterial pandemic as opposed to a viral pandemic, God help us all. It’s led to the overuse and misuse of water around the world, 15,000 litres of water for one kilo of beef. This led to the deforestation of areas such as the Amazon as it’s chopped down to produce soybeans or other crops to be fed to animals, which are very inefficient protein producers.
Mark Bidwell 9:02
What is that rate of efficiency? I think you mentioned the other day, is it 27 to 1 or something?
Jim Mellon 9:06
It’s close, it’s 25 to 1 in beef, and then about 9 to 1 in chicken. That means that the cow has eaten 25 times as much plant protein as it puts out in one unit of beef. So it’s an incredibly inefficient factory in that regard, as intensive farmers do their cows as factories. And that leads to the last point, which is my main motivating factor in this, which is the unbelievable amounts of cruelty involved in intensive farming. I could scare your listeners with lots of stories, I’m sure you could too, but it’s absolutely disgraceful what human beings do to fellow sentient beings. One example is that the chicken today is three times the size of the chicken in 1950. Chickens are in cages, live for about 23 days before they’re slaughtered, and they can hardly move around. They have miserable lives, their bodies are competing to standard, and that’s no way to treat an animal. In the case of dairy cattle, dairy being the biggest emitter of all farming on the planet, the dairy cows are kept pregnant continuously, because that’s how they produce milk. Sometimes their backs break because their udders are so big, and they normally have a life expectancy of about three years. Whereas out in the field that’d be 20 to 25 years. That tells you everything you need to know about dairy farming. It’s a horrible industry and it’s on the way out. I confidently forecast that dairy will be gone as we know it within 10 years.
Mark Bidwell 10:29
Yeah, yeah. So that’s the case for change. It’s bad for the climate, it’s bad for the animals, itt’s bad for humanity and then health. In your book, there are a couple of terms that you introduce, and the title is wonderful “Moo’s Law”. Perhaps you can explain that and also the other one, which I like is griddle parity. Can you just explain those two concepts, because they’re fundamental to the thesis, aren’t they?
Jim Mellon 10:54
They are. So “Moo’s Law” is a ripoff of the famous Moore’s law which came from Gordon Moore, the co-founder of Intel. 53 years ago he came up with his idea that every 18 months the price of semiconductors, which had recently been invented, would go down by half and the efficiency would double. And that has more or less been the same for all of those 53 years, despite at some points people’s forecasting that it was going to come to an end. Moo’s law is a blatant ripoff from that, suggesting that as scale increases in the manufacture of foods in laboratory conditions, foods that are not derived from slaughtered animals, the efficiency will go up and the price will come down. And let’s give you an example. So in 2013, the first cell-ag burger was unveiled in London. I think Bill Gates or maybe Sergey Brin was the first person to have a taste of it. It was developed by Mark Post in Maastricht University in the Netherlands, and it cost at least 300,000 euros to produce. Today, we’re down below $8 per patty, and the trajectory is quite clear. Within a few years, we’ll be at, in about two years, I mean less than five, at this term that you mentioned griddle parity, which is another ripoff from the electricity industry, where grid parity is when the price of renewable gets to the level of the price of fossil fuel generated. And it’s the same in the meat industry, and will be at griddle parity within five years with cell-ag foods. And the very good news is that because cell-ag, which I’m very happy to explain later on, is so much more efficient than the cow, which is the inefficient factory, it uses two and a half times as many inputs as one output, versus 25 to 1 per cow, so 10 times more efficient. The chances are that we’ll see food prices being lower than they currently are with conventional agriculture in the next 10, 20 years, which is fantastic for developing nations and fantastic for consumers all around the world.
Mark Bidwell 12:56
Why don’t we get into the different categories then? You mentioned one, which is the biotech side of things, so plant based, for example, and cell-ag. Can you just talk about the different categories, and what’s going on in those categories?
Jim Mellon 13:08
Yeah. So we are looking at a total addressable market for this agricultural revolution, which doesn’t take into account by the way things like vertical farming, hydroponics, new techniques of growing crops, seed technology, that’s outside of this, although very exciting, is about $5 trillion, which is about two times the size of the entirety of the UK economy. And it covers the following: dairy, which is not done by cellular agriculture. It’s done by precision fermentation; then products from that, which is basically the creation of whey and casein, which are the two principal ingredients in cow’s milk, will be on the market next year in the United States. In fact, there are derivative products like ice cream that are already on the market in the US, but in a very limited scale. That is going to, along with plant based milks, completely disrupt the dairy industry, as I mentioned, to the extent that I don’t think you’ll see many conventional herds lacking in dairy in the next 10 years. That’s a $750 billion global market. The second is meat. And obviously there are plenty of species of meat. All of them are now able to be made in laboratories. They basically come from small samples taken from living animals, but not killed, and those small samples are about the size of my little fingernail. That can produce, that little fingernail worht of the sample extracting the stem cells, differentiating the stem cells into the ones that you want, which are muscle and fat, growing them in bioreactors which are big stainless steel tubes, introducing nutrients, so called media, is roughly equivalent to what cows or other animals will eat in a feedlot or wherever they’re being grown for slaughter, using growth factors to amplify the process. In 40 days, that little amount produces 3000 kilos of beef, with a fraction of the land, a tiny amount of the water, a tiny amount of the energy, none of the antibiotics or hormones using conventional farming, whereas it would take 28 months to grow the equivalent seven or eight cows 3000 kilos of beef in a feedlot. So the acceleration of the production of meat is absolutely incredible now. That will be on the market, generally, in about 18 months. The regulators are working with the companies, it seems to be going quite harmoniously. Already Eat Just is selling its chicken nuggets in Singapore, I think the UAE will have these products on the market earlier than other places, supermeet is selling its chicken nuggets in Israel. So it’s happening now. None of the companies that were involved in this are science fiction companies. They all have products that you can taste, or you can feel. The next area is fish.
Mark Bidwell 15:47
Before we do that, you mentioned some interesting countries, Singapore, Israel. This is a regulatory question, that’s why they’re launching in these markets to start with.
Jim Mellon 15:57
Very good point. It’s basically to do with food security, in my opinion, not so much in the case of Israel, which has got a very refined agricultural sector, but it’s obviously a sector that’s dependent on technology much more than elsewhere in the world, given the lack of water and the intense heat. But in countries like the UAE and Singapore, Hong Kong, etc, they import 95% of their food. The idea of producing your proteins in situ, without having to resort to imports, and the pandemic showed some real fragility in the supply chain for some of these countries, is extremely attractive. So Singapore wants to produce 30% of its food by 2030 domestically. It currently produces almost nothing. And the UAE has a clear strategy for this as well. So food insecure countries provide a template or a model for larger markets, such as the UK, the European Union, where you are, Switzerland, and the United States. And even countries like China are beginning to embrace this technology, albeit at a slower pace than in the developed world.
Mark Bidwell 16:58
Somewhere like Dubai, I guess they got quite a lot of energy required to produce, because these are quite capital intensive, these operations ultimately, are they? In terms of pots and pans, they require a lot of energy, I imagine, to operate these factories.
Jim Mellon 17:12
The estimation is they use about 7% of the energy that conventional agriculture does, and of course, these countries have solar radiation. So the use of solar radiation to produce this stuff cheaply is going to be an absolute sine qua non in the Middle Eastern countries. It’s not just the UAE by the way, Qatar has done a deal with Eat Just. I’m sure the Kingdom of Saudi Arabia, where I’m going next month will be doing the same with other companies. Oman is quite farsighted in this as well, so it’s really across the Middle East that you’ll see this development. But these countries, some of them at least, have the benefit of not just food insecurity, but also money, and a desire to create local high tech jobs, which this satisfies entirely.. They also don’t have a domestic agricultural industry, so the lobbying that you might get in the US or in Europe doesn’t exist. So it’s a perfect pilot study in the place basically.
Mark Bidwell 18:03
Interesting, interesting. So we’ve done dairy, done meat, and then I interrupted you, fish is the next one.
Jim Mellon 18:08
The fish industry is really interesting, because there is no strong lobby. Everyone knows or should know that fish is now, if you eat it every day, it’s endangering your health because there’s more methylmercury building up in fish, there is microplastics from the ocean, there is fishing to extinction going on in multiple species. And there’s the destruction of the oceans, which we all know about. So alternative fish made in labs seems to make perfect sense. In California, there are a couple of interesting companies Blue Nalu and Wildtype that are doing exactly that. And because they’re regulated by the FDA and the USDA, their regulatory pathway is clearer. So we expect Blue Nalu to be on the market with tuna fish next year in the United States. And the griddle parity on that will be faster than in meat, at least we estimate so. All of these companies have their products, you can fry it, batter it, make it a ceviche, eat as a fillet, and the fish have no contaminants. There’s no waste, no hormones, no antibiotics, no micro plastics, no toxins. It’s just tremendous. And that’s about a two to $300 billion industry. And then lastly, there’s materials, lastly but not least. And already, leather is being produced in labs and sold to the big fashion houses, and it can be produced in any size, rather than just dictated by the size of the calf. And you’ve also got cotton being produced in laboratory conditions, cocoa being produced in laboratory conditions, collagen being produced in laboratory conditions, all of which represent very large markets. So there is an almost infinite range of possibilities and the market is $5 trillion. It’s bigger than the electric vehicle market will ever be, and there’s as yet not very much hype about it. But the first wave is plant based stuff, we’re all familiar with plant based. The second wave the cell-ag and then alongside that is the picks and shovels that you pointed out, the tubes or the bioreactors, and the growth factors and all this sort of stuff. One thing I will say is the price of growth factors, which was the highest input cost, this gets back to Moo’s law for the production of cell-ag products, has fallen by 95% in the last year, which is incredible, so we’re on our way here.
Mark Bidwell 19:52
And that sounds like the cost of solar panels, which has collapsed recently or has come down significantly.
Jim Mellon 20:23
Yeah. Solar panels keep on coming down in price, but there is still the installation cost of solar panels, you don’t have that in with the growth factors. That’s why you get yourself a solar panel installation in a hot country like I do in Spain. The price has come down a bit, but not dramatically. But in this, the growth factors were costing millions of dollars per gram, and now they’re nearing the price of insulin as an example, which was cheap as chips to produce in a recombinant process. I’s just technology, and it’s just scale, basically. But it makes a very big difference to the ultimate price of the goods.
Mark Bidwell 21:03
That’s the landscape. We touched on some of the challenges? Regulatory is one, you talked about the lobbies, lobbying groups which are very powerful, obviously, in the US, and here in Europe. What are some of the other challenges facing the ramp up of these technologies?
Jim Mellon 21:18
Well, the technologies are not using GM. So the accusation of these Frankenstein type foods is completely ill founded. But there is a challenge, no one knows really what the performance of the stem cell lines will be like at massive scale. That’s technological challenges yet to be tested. Now, obviously, in modeling, it all seems fine. But we don’t know yet. Secondly, the challenge of going back to animals continuously to take stem samples, which hopefully will be overcome by the use of induced pluripotent stem cells, which are immortalized. There’s a company in Cambridge called BitBio, whose technology is being used by Meetable, which we think is the furthest advanced in terms of the meat companies in that technology, this is a Dutch company, and if they can get that right, a reduction in growth factor prices will be a big plus for the industry. The next thing is the scale of bioreactors, no one’s actually built a bioreactor that’s much more than 2000 liters, so we need to build them at 500,000 liter scale. I think that what we’ll end up with is sort of disposable bioreactors, single-use bioreactors we use a plastic sleeve, which is then disposed of after every use. And then there’s the challenge of getting the cells to line up in the right way, at the moment using scaffolds, but they’re trying to work out a way in which they don’t need to use scaffolds. But the biggest risk of all is execution risk, like in any nascent industry, some of these companies will just not get it right. So we have a portfolio approach, we’ve got 14 companies, we’re pretty sure that one or two of them will fall by the wayside. We think most of them will be bought by the biotech companies or bought by the pharma companies, and modelled to go their own way and be listed in the US, a bit like Oatly or Beyond or whatever, but with a much bigger opportunity, because they all have defensible IP, unlike the plant based stuff, and their margins will be significantly better than producing plant based foods.
Mark Bidwell 23:18
The one challenge you didn’t mention is distribution. And in the world of AgTech, that’s always the challenge of getting the technology into the market, because it’s blocked often by the big players, Syngenta among the other buyers, and also a very small number of food companies. Distribution isn’t necessarily a challenge in this space, is it?
Jim Mellon 23:39
I think that the big food companies like Unilever, Nestle, Kellogg’s, and so forth, will just buy some of these companies for their technology. And because frankly, speaking, these companies they’re not growing animals to put into their foods. Of course, Cargill, Tyson, JBS might take a different view, but they typically are selling their products through the big food distributors who are agnostic about that, as long as it’s legal and healthy, whether it’s cell based or made in a feedlot, they don’t really care. So already, you’re seeing interest from the big companies, including actually the meat producers and investing in some of these companies that are relatively early stage. I think this will be okay for the food to come into the supply chain. And the other interesting thing is because there’s no bacteria in production of these products, the shelf life is considerably longer than with conventionally farmed foods. That’s great news, particularly in developing countries.
Mark Bidwell 24:35
I think something like, I’m gonna get this wrong, but something like 50% of food gets wasted from the field to the fork essentially, right?
Jim Mellon 24:42
The estimates vary, but it’s 30% to 50%, you’re right. That doesn’t happen here. I mean, how good is this, ticks almost every box. And even if you’re a farmer, farming dairy, it’s a precarious life at the moment, you could situate the bioreactors on your land, you could liberate the land for maybe some housing, or growing crops for human consumption, which is much more profitable than growing crops for animal consumption. Even if you’re a beef farmer, there must be something that you can turn your attention to that’s more profitable than what you currently do.
Mark Bidwell 25:13
I’m glad you touched on that. This is disrupting soybeans, corn, the big crops, but it doesn’t have any impact at all on fruit and veggies, for example, right?
Jim Mellon 25:22
Not at all. The chances of being able to grow this stuff successfully in labs, at competitive prices, like fruit and vegetables is, just don’t do that, not worth it. It’s much more suited, obviously, to vertical farming, which is another story which is exploding everywhere. So for farmers, there’s plenty of opportunity out there to grow more profitable crops that go into the human mouth rather than to animals’ mouths.
Mark Bidwell 25:45
Yeah, yeah. You’ve deployed almost half a billion dollars, in this space, is that right?
Jim Mellon 25:50
Correct.
Mark Bidwell 25:52
As an investor, you’ve got 14 companies in your portfolio. You say the biggest challenge is execution. If you think about some of the founders who are running these businesses, what are they getting right? And also, what’s the common mistakes that you see some of them making?
Jim Mellon 26:08
Yeah, great question. Well, it’s a pretty new industry, we’ve only started investing a couple of years ago. So the wheat has yet to be separated from the chaff, particularly in commercial scale up. But what we are seeing is that the companies that have veteran founders with experience of the food industry are probably doing better than those that don’t. Blue Nalu, the fish company from San Diego is an example that seems to be extremely well managed, well capitalized, very good strategy, very good regulatory framework, understands the market, for all the consumer stuff it has pre bought its equipment for scale up, so they’re creating the factory in advance of the need to scale up. And that’s an example of a company that’s got both good financial backing and a veteran and an experienced management team.
Mark Bidwell 26:52
And who’s the founder of it, I don’t know the person’s bio, but were they from tech? When you say, veteran, were they from the old world of food, or were they from Silicon Valley, and they just hopped into this space? What do you mean by veteran?
Jim Mellon 27:05
In that company is the combination of the two. So old style food coupled with tech. And actually, I think that’s the best combination. Then you’ve got companies like, Eat Just or Just Eat or whatever they call themselves this week, which is the most heavily capitalized of the companies. They’ve got a combination of plant based foods in the form of the egg product, and chicken nuggets that they’re growing in labs. They are very, very good at promotion. I think there’ll be the first one to go public in the United States. Their founder is called Josh Tetrick, I interviewed him for the book. He is a perfectly affable guy, mission driven, but is there too much promotion there and not enough execution? We can’t find that out until later on. And then you’ve got people jumping into some ludicrous areas, frankly, in this opportunistically, like fur. Honestly, if you wear a fur coat, even in Switzerland on the street, you’re probably going to get someone spray paint on it. So why would you want to grow fur in a lab? It just seems to be crazy to me. Caviar is another example of that. Yes, you can disrupt the caviar market, it’s not that big. So we’re going for the established larger markets, and particularly in meat, for unstructured beef, because of growing a steak with marbling and all that sort of stuff is going to be quite hard. Whereas unstructured stuff that goes into sausages, patties, pastries and so forth is much easier, and it represents 60% of the US market as an example. Lots and lots of focus groups have been done on whether consumers will accept this stuff, and the answer is generally yes, pparticularly in the younger cohorts, which is obviously the market you want to get. Those are very good acceptants. You can see that already in plant based milk, it has almost taken the world by storm. And then, of course, food that’s vegetarian, like the Oatly or Impossible has also done incredibly well during the pandemic. Meatless Farm is here in the UK, if you know them, and Quorn which is another UK company, have done extremely well in the pandemic, but none of their products really are as good as the stuff that’s going to come out of the labs, because, they are quite processed in many cases, and they’re not necessarily better for human health.
Mark Bidwell 29:23
And you mentioned earlier on, from an investor point of view, some of these companies have got quite significant IP. What other moats will the winners be able to put around them? And what are you looking for, what’s the ideal characteristics of one of your investments? I’m trying to think about from a traditional point of view, if you look at a company and how defensible it is, IP is one piece, but where else do these competitive advantages come from?
Jim Mellon 29:51
I think raising capital is a very key point actually, Mark, because once you get to the scale that we’re looking at in the next two or three years, you’re going to need to build factories. So a factory for 100,000 people’s all year round protein needs, lasting 20 to 25 years will cost about $100 billion. So if you look at a country like the UAE with 10 million people, you’re looking at a considerable number of factories, right? I think, off the top of my head, that would be 100 factories, each costing 100 billion. However, because of the efficiencies and because of the margins, the ROI on those factories will be 30% in its lifetime, which is incredible for an infrastructure development. So the companies that can get access to that capital, and that’s a skill in itself, will I think have another moat that will be almost impenetrable to those that are unable to convince investors that they are deserving of this scale of capital, which is large.
Mark Bidwell 30:54
As you talk about that, it’s a very different kind of investment, I guess. It’s almost like investing in a, not quite a toll road, or a hydroelectric power station, but it’s an infrastructure investment versus a technology investment, per se, isn’t it?
Jim Mellon 31:08
It is, and it’s the next phase of our plan for Agronomic stroke of new agrarian is to get involved in that. It takes more than just companies, it takes strategic investors and local food distributors and so forth. It’s a monumental undertaking, but it’s one that’s going to happen. We are in the end of the horse and cart era of the food industry. There’s going to be resistance problems, obstacles, blah, blah, blah. But you know, it wasn’t more than three years until the motorcar had completely supplanted the horse and cart, and I think this is the same.
Mark Bidwell 31:43
Without giving anything away, does that explain your work in the Middle East? Because these governments I guess, they’re used to big capital expenditures, they’re rich, they’ve got energy independence, they got power, they take a lot of boxes, I guess, don’t they?
Jim Mellon 31:58
They do, but they also have forward thinking governments. Last week, I came back from Dubai. After the event in the Isle of Man, I had a tour of the Expo in Dubai, which is going to open in about 10 days time, and it is absolutely incredible. It’s four and a half square kilometers of amazing stuff that has never been seen in the world before. And you think back 50 years, and these countries were literally a few fishing shacks and a couple of forts, and now they are among the most vibrant metropolises and forward thinking places on earth.
Mark Bidwell 32:35
Extraordinary. People might well be thinking about the taste. What’s been your experience? Many of us have had a Beyond burger now and I suppose if you put enough cheese on it, a little bit of spice, it’s kind of okay but it’s not quite the same. Am I missing it, am I out of date now?
Jim Mellon 32:53
Well, Beyond is a plant based burger, so it’s not the same as a cell-agriculture burger, which will be identical in every respect, including taste, to the ones that you buy in the supermarket. It’s a completely different kettle of meat, in this case, not fish. So in terms of tasting, funny enough, tomorrow, I’m going to Oxford because Ivy Farms, which is our home grown, cell-ag company is doing a tasting and I’m one of the I think two or three tasters of their first product. I’ll let you know, but I imagine the taste is identical. And people who’ve eaten, including my colleague, Anthony Chow, who’ve eaten the chicken nuggets, he did so in Israel, so that you can’t tell the difference. And he’s a meat eater, and I’m not, so you know, he would know.
Mark Bidwell 33:40
That’s good. When you touch on where you think the major launches are going to happen, it’s Singapore, it’s the Middle East, and potentially China. What about close to home, what about in Europe or in the US?
Jim Mellon 33:53
Well, the US will be fish beginning of next year, at the latest middle of next year.
Mark Bidwell 33:57
And that’s Blue Nalu, your company in the space?
Jim Mellon 33:58
Yes. Blue Nalu, yeah, but it’s not my company, but the one I’ve invested in. Then you’ve got leathers already on the market. You’ve got collagen already on the market, you’re going to have whey and casein produced by precision fermentation. Well, it’s already partly on the market and full scale by the beginning of next year, from Clara, Perfect Day, the formar of which is a Berlin based company doing cheese. And I think in Europe you’ll see within 18 months the meat products and the same in the States on the market, but there’ll be pockets around the world which will be earlier. Very soon Mark, I think we’re to see this stuff, a bit like you know, the Beyond meats have appeared on supermarket shelves and taking up increasing amounts of space in Tesco, and Migros where you are in Switzerland, almost imperceptibly in the last few years, it’ll be the same with their stuff. I’m confident about my dairy prediction. I think in the meat case, I may be a little bit less confident it might take 15 as opposed to 10 years for a very significant market share to be achieved. In materials, it’s going to be quicker because there’s no regulatory hurdles to overcome, But we are the dial-up phase of the Internet of what is going to be a vast industry.
Mark Bidwell 34:00
Yeah, and you touched on some of the size of the bioreactors. These are physical pots and pans that don’t defy the laws of gravity compared with bits and bytes, which clearly do in many respects defy the laws of gravity. There are different types of challenges from the launch to the internet world, for example.
Jim Mellon 35:22
That’s true, however, if you go to a brewery, you see huge stainless steel tanks, and the technology does exist. It’s just a question of adapting it with stirrers, and the right heat and process of the tubes that lead in and out to this particular activity. So structurally, it’s entirely possible to build vast silos basically, and that will happen. However, I don’t think you’re going to have huge centralization. You won’t see one great big plant in Switzerland serving the whole country. You’ll have factories around the country that are closer to the point of consumption. That will apply all across the world.
Mark Bidwell 35:59
So for the investors listening to this Jim, and the answer probably might be investe in the fund. But how do they get a piece of the action? What advice would you give to people listening to this and saying, I agree with the thesis, I want to participate. Because some of these companies are public, but not many of them, they are still quite young.
Jim Mellon 36:19
There are no public companies apart from Agronomics, which is our own one, which I’m the biggest investor in, so I put my money where my mouth is, and I earn 15% of that company, that’s quite a big company now. It’s like, several 100 million dollars in size. It’s very well run, it’s got good exposure to all these companies. If you’re a private investor, I can’t recommend it, because I’m on the board of it, but I think it’s worth looking at. And some of the companies will go public, you just have to watch out for them. So I would recommend that people look at the Agronomics website for upcoming listings of some of the underlying companies that will be, I think, three or four of them in the next year, particularly in the United States. Take note of that, and do your analysis on whether you want to invest in them or not. The plant based or alternative protein companies have gone ballistic on the market, Beyond Meat is about $10 billion, Oatly is about $10 billion. There’s no reason to suppose that the cell-ag stock won’t have a similar, perhaps even greater market reception. ,
Mark Bidwell 37:17
And we’re, what do you think, five years behind?
Jim Mellon 37:20
Well, it depends what you’re looking at. In terms of being on the market, a couple of years behind, being a griddle parity maybe five years, but that’s a blink of an eye. Just at the time when the world absolutely needs this, technology has stepped up and is available to us. This is a wonderful confluence of human ingenuity and pressing need.
Mark Bidwell 37:46
Compared with biotech and longevity, how do you rate this opportunity on the trajectory of your career? How do you think about this versus the other opportunities you’ve explored in detail?
Jim Mellon 37:56
I think these two are the most amazing that have come my way. In terms of longevity, there is significant competition and viable competition for Juvenescence. It’s not entirely clear who the winner will be, we’re the best capitalized, but it doesn’t mean we’re going to be the winner, and it’s not entirely clear what the products will be. In terms of this agriculture stuff, we know what the products will be. They’re the ones that are familiar to everyone on a daily basis. We know that the companies already have the products, the r&d phase is largely over for these companies. And we know that governments and everyone else is extremely keen that this should happen. I think that in terms of quick return, it’s going to be the agricultural stuff that will be the #1 and then longevity will take longer, largely because it’s a biotech industry, and everything has to go through multiple trials and it always takes longer than expected.
Mark Bidwell 38:55
Fantastic. I sent in advance three questions to you, which I just wonder if we could end with, because I know you’ve got a hard stop. First question, what have you changed your mind about recently?
Jim Mellon 39:07
I change my mind all the time, Mark. If you’re in the investment world like I am, covering fair gamuts of investments, you have to be very adaptable. My mantras are curiosity, adaptability, and application, another word for hard work. But most recently, I’ve changed my mind. In our household we haven’t eaten meat for years. And I’ve kind of kidded myself that it’s okay to eat fish because they don’t seem to be sentient to the same extent as animals that are land based. I think we are now coming to the conclusion, we’ll just wait for the Blue Nalu product before we go back to eating fish and we’ll eat an entirely not vegan, but vegetarian diet. That’s a kind of personal thing, but in terms of my investment philosophy, it’s just always evolving. One day to the next I can have a different opinion.
Mark Bidwell 39:56
And the fish is to do with the health, or it’s combination of health and the damage being done to the oceans?
Jim Mellon 40:02
First, it’s animal cruelty, cruelty to sentient beings. The average American eats 7500 land animals in their lifetime, and many 1000 fish, without even thinking about the suffering that those animals go through. I just think we hve to on this planet, realize that we may feel that we’re superior, maybe we are superior for the moment, but there are true feelings, true lives that we are taking through outright murder on a huge scale on a daily basis. For instance, 20 million chickens a week are slaughtered in the UK.
Mark Bidwell 40:39
And there’s a graph in the book, I’m just looking at it at the moment. What is it, 10 billion or 100 billion animals a year are slaughtered?
Jim Mellon 40:46
It’s 80 billion are slaughtered every year and 2.5 trillion fish, but there are 10 billion animals living at any time, which are waiting for slaughter on the planet. Just think about those numbers. If people actually saw how pigs and birds and cows are treated, they might think twice. There’s plenty of information, and in my book, all the money goes to charity from the book, so please read it. At the back, there’s plenty of guides to where you can find information about just the awfully cruel practice that is in industrial farming.
Mark Bidwell 41:20
Just going back to a point you made earlier on about some of the founders. Is it important that the founders are purpose driven, or are you looking for hard nosed business people who are just trying to make change for commercial reasons? How do you think about the purpose in the boardroom, if you like?
Jim Mellon 41:34
I think the two go hand in hand. I haven’t met a founder who isn’t driven by animal welfare issues. It’s interesting because I think most governments and most consumers are driven by environmental considerations, which are considerable, but almost every single founder that I know is driven by animal welfare considerations.
Mark Bidwell 41:56
Interesting. Second question, where do you go to get fresh perspectives, especially when you’re facing tough challenges, Jim?
Jim Mellon 42:04
Yeah, that’s a good question. I was thinking about your questions, they are really quite thought provoking. It depends what you mean. In the one sense, I read a hell of a lot, I regard reading as my job. From reading, I get my little snippets about emerging markets when I was involved in that, and then, in this particular case, reading about cellular agriculture, which was very obscure just a couple of years ago, and the opportunity there of persuading Anthony, my long standing colleague that this was a great area for him to pivot to, and head up, that all comes from reading. But in terms of where I physically go to recharge the batteries, I love going on cruises, on my own. Dafina doesn’t like them,, and so it’s great for me, and that’s where I draft out my books. So all of them have been on a transatlantic crossing, where there’s no one to annoy you. And there’s the waves to stabilize your mental state, and you can’t go on the internet. That’s where I sketch out my books.
Mark Bidwell 42:57
Brilliant. And then thirdly, how has a failure set you up for future success?
Jim Mellon 43:04
Well, there’ll be multiple failures. There’s no investor and I’m not in the pantheon of very great investors, but I think I’m quite a good investor, who doesn’t have 48%, mistake ratio to 52% success ratio, that’s the way it is. The longer you live, the longer you do it, the more scars you get, the more able you are to both assess opportunities, assess people based on experience. So would I give my money to a 21 year old to manage? The answer is no. 40+ with lots of experiences is much more compatible with what we do, we give money to outside managers, as well as managing some ourselves. But I think the biggest life lesson that I’ve learned, Mark, is that when you start out, you are in a hyper competitive mode. Everyone else is a competitor or potential competitor, hoard ideas and your purpose is highly solitary. Today, everything I do is in collaboration with others. We’re completely open we want our purposes, which is basically the eradication of animal cruelty and the reduction in climate change, and also the improvement in human health span with longevity science to be effective for all humanity. And so for that reason, we’re actively encouraging industry associations, cross-collaboration, sharing of opportunities and platforms with other companies, because it’s just so much nicer to live a life like that, but also it just has a much greater acceleration effect for the industries concerned.
Mark Bidwell 44:35
Yeah, absolutely. Jim, it’s been a pleasure as I knew it was going to be. Many thanks for this. Where can people get in touch with you if they want to learn more?
Jim Mellon 44:43
The best place is to go through our office, [email protected] . Laura is an Oxford scientist who will be able to point people in the right direction about this industry.
Mark Bidwell 45:00
Super, and then I’ll put the details of the book and your website on it.
Mark Bidwell 45:04
Mark, I know that you’re going to be having a conversation with Anthony in the near future. And it was a real pleasure meeting you last week, or 10 days ago in Switzerland. And I look forward to the next encounter. And thank you for having me on and what great questions, especially the three thought provoking ones, which I had to consult with Dafina before I came on the show.
Mark Bidwell 45:42
That’s why we set them in advance. It is intended to give you a little bit of pause for reflection. So many thanks, Jim. Have a good rest of the week, and we’ll keep in touch.
Jim Mellon 45:51
Thank you, Mark. Thanks so much.
