Index Funds and the Future of Food
As a mutual fund portfolio manager, in my first career, I contemplated market history and future trends that would impact the market performance. Now, as CEO of a soil health, AgTech company, I find myself thinking about both future trends in agriculture and, increasingly, the investment era of the Nifty 50.
In the late 60’s and early 1970’s, a couple of dozen public companies were anointed One Decision Stocks, based on their historic growth and future prospects. Only 15 years earlier, the dominant investment thesis for equities was they needed to have higher yields than bonds, because they carried more risk. But this group of companies had steady growth and regular dividend increases, causing a shift in perception where investors rationalized a purchase at any price. (Can you say, Tulip Bulb Mania?) By 1972, the companies on this list had an average P/E of 41.9 vs the S&P 500’s average of 18.9.
Today passive investing accounts for 45% of all stock based investment funds, up from 25% a decade ago. But in 1971, when Bill Fouse first proposed the idea of a fund based on an index, it was the era of the Nifty-50. People must have thought he was crazy. Can you imagine how hard it was for investors to hear about investing in 500 companies, when every Wall Street firm was pushing the same 40 to 60 names?
Marketplace Disruption — this is what it looks like: a crazy idea the works.
My background is in finance, not agriculture. I still think the best way to understand SymSoil and its products is as an index fund for soil microbiology.
Most ag biologics have a small number of species, grown in a laboratory and poured out of a bottle or bag. SymSoil products are completely different. Through our process, we capture thousands of species in the wild, crossing 7 types of life (fungi, bacteria and amoebae are 3 examples), and these are farmed. So, products are based on regionally specific, indigenous microbes.
Our process and approach is radically different from the mainstream of ag biologics, where conventional wisdom is driving the 40% CAGR. Every ag investor knows the business model — a whip smart PhD does research on a microbe which solves a problem. The PhD publishes papers and runs field trials, proving the value of the microbes they have researched. It is a reductionist approach, similar to finding a chemical that causes the plant to act like a child on a sugar high. The single microbe, or related microbes, does one thing and has a positive effect.
SymSoil’s approach: We are inspired by nature, and have developed a patent- pending manufacturing process to rapidly restore the complete soil microbe biome. Our unique value proposition is the ability to scale production of a highly valued biological known as Soil Food Web — it is highly valued for what it can do to restore the fertility of soil, but it is expensive because it is chronically in short supply.
Healthy soil has tens of thousands of species, crossing multiple kingdoms and phyla of Life. Each of the nodes in the simplified Soil Food Web above represents thousands of species that perform similar functions, sometimes under different environmental conditions. This is the source of Nature’s flexibility and robust response to weather patterns.
Unlike a small group of optimal microbes grown under single, laboratory controlled conditions, SymSoil’s manufacturing approach was developed by pragmatic practitioners, not academics. Farming microbes under natural conditions creates a heartier and more resilient collection of life forms.
Thus, SymSoil developed a new and disruptive production method which makes available to farmers, cultivators, gardeners and other growers a broad-based collction of soil microbes, including the 2/3rds which are currently unknown or unnamed and presumed unimportant life forms.
Maybe they are not unimportant to Mother nature. There is some evidence that the role of specific microbes can change significantly with the health of the plants (some pathogens only attack sick plants, and become beneficial to plants of the same species that are healthy). Plants grown with SymSoil are healthier and the food is more flavorful and more abundant.
Which explains why I find myself thinking about Bill Fouse, and his crazy idea, the first index fund, in the era of the Nifty-50.
History doesn’t repeat itself, but it often rhymes
This is what successful portfolio managers do best: recognizing similar patterns in different industries or as they evolve in different situations.
If you are a true contrarian, who in the early 1970’s would have been interested in learning more about the first index fund, and are an accredited investor who today is interested in sustainability and the future of food — reach out to us. You can learn more here