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Rhishi Pethe

106. Software is Eating the World

Published over 2 years ago • 8 min read

“Software is Feeding the World” is a weekly newsletter for Food/AgTech leaders about technology trends.

Greetings from the San Francisco Bay Area, which has been experiencing a massive drought for the supply of new housing for many years (and water too).

Today’s newsletter is a bit weird. I am exploring some ideas at a macro level around the impact of software on food and agriculture systems. If I can invoke Devon Zuegel, my epistemic status and effort for this week’s edition are “low-medium”.

Software is Eating the World

If you didn’t know, the title of this newsletter comes as a word play on Marc Andreessen’s famous 2011 article, “Software is Eating the World.”

One of the central thesis of his 2011 article was as follows:

My own theory is that we are in the middle of a dramatic and broad technological and economic shift in which software companies are poised to take over large swathes of the economy.
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More and more major businesses and industries are being run on software and delivered as online services — from movies to agriculture to national defense. Many of the winners are Silicon Valley-style entrepreneurial technology companies that are invading and overturning established industry structures. Over the next 10 years, I expect many more industries to be disrupted by software, with new world-beating Silicon Valley companies doing the disruption in more cases than not.

Note: “Silicon Valley” does not refer to a geographical location, but technology companies following the ethos of Silicon Valley.

Marc Andreessen recently talked with “EconTalk host Russ Roberts why software is still eating the world, why he's an optimist, and why he's still bullish on Bitcoin and the blockchain.”

Marc talked about how technology and social media had completely changed the business model for publishing, entertainment, and media. It has impacted the producers in the space (for example, a writer or a reporter or a musician) as there are no more gatekeepers. It has been fantastic for consumers, but not so great for producers. The rise of the creator economy in recent years has changed the dynamic again. Whether you believe in crypto/web3/NFT or not, the potential of these technologies to give power back to creators is a big reason behind the euphoria.

Marc and Russ talked about how technology has struggled to disrupt industries like education, and healthcare here in the US.

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Source: AEI​

If you adjust relative to the overall price level, food prices at home and away (2017) have stayed similar compared to 1980.

There are different theories on why the prices in medical care and higher education have gone up.

One theory is based on regulation, supply, and demand. Marc posits that governments in the US restrict supply through processes like accreditation, and juice up demand through incentives and subsidies. It is bound to lead to higher prices. (The lack of new housing supply, legislation like Prop 13, and high demand is considered to be one of the main reasons for the insane rise in real estate prices in the San Francisco Bay Area.)

Another theory uses the Baumol effect to explain the rise in prices not just in health care and education, but also in price of summer camps, veterinary services, and Broadway shows.

It was simply inevitable that these services would get more expensive over time, at least relative to private sector manufactured goods like televisions and cars. The rising cost of services is an unavoidable side effect of rising affluence generally.
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A lot of service workers are doing jobs that are unlikely to ever be fully automated. Nobody wants a robot for a teacher or a nanny, for example. And even if we get software with advanced diagnostic capabilities, patients are still going to want doctors to explain the recommendations and nurses to provide hands-on care.
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Source: Vox​

In his 2011 article, Marc Andreessen had warned about the difficulty for software to eat existing companies, especially in an established industry like agriculture.

The new companies need to prove their worth. They need to build strong cultures, delight their customers, establish their own competitive advantages and, yes, justify their rising valuations. No one should expect building a new high-growth, software-powered company in an established industry to be easy. It’s brutally difficult.

In a follow up article from 2016 (5 years after the original article), the author warned about the difficulty of the transition.

“For a traditional industrial or service company, making the transition to acting like a software company is a massive undertaking. You need to hire new people in every part of your organization; restructure around different economics; reestablish customer, partner and supplier relationships and expectations; overhaul infrastructure. The list is long and full of terrors.”

The author recommends,

Focusing on your core when it comes to technology makes it easier to focus on your end-customer experience.

Agriculture is an established industry with its unique concentrated structure in different parts of the value chain (seed & chemicals, equipment, off-take etc.). Most of us would agree that software has struggled to disrupt the agriculture industry, even though many technological innovations have been made over the last 10-11 years.

Barring a few exceptions, most established agriculture companies have struggled to make digital transformations driven by technology and software.

Shubhang Shankar very succinctly pointed this out in his August 2020 article, “Look Back in Anger Or Disruption that Incumbents can love – AgTech in the 2010s.”

Shubhang’s main point was that AgTech investments were targeted towards farmers who are he most efficient.

The challenges of AgTech might now be patently obvious – in the 2010s, AgTech investment was disproportionately oriented towards markets whose farmers are among the most efficient in the world and developed products that were expensive and didn’t offer a clear ROI.

It is not all gloom and doom though, as AgTech investment has continued to climb across the entire value chain, though we as an industry have struggled to deliver new business models.

The saving grace for AgTech in the 2010s was that at least from a technology perspective, there was significant experimentation, especially within the digital segment, that was differentiated from the internal R&D programs of the majors. However, if the assessment paradigm changes to business models, the industry could be legitimately characterized as a tautomer of the existing system. AgTech has not delivered any new business models, or crashed timelines or costs of bringing technology to markets, nor brought any new segments of under-/non-consumption into the fold of the market.

Going back to the example of media, and entertainment, when technology creates true disruption in agriculture, what will it do to producer’s livelihoods?

Access to land is a key difference between a musician and a farmer. Even though music is not a commodity product like corn or soy, new business models enabled by technology ripped through the existing structure.

Will it completely change what it means to farm in the future?

Will technology squeeze already thin producer profits similar to being a musician or a reporter? Will the existing industry structure drive any new value created by technology away from farmers?

Will it completely change what it means to farm in the future?

Will it result in land consolidation in countries like India (>50% of population is engaged in farming), and will it drastically reduce the number of farmers?

I don’t know the answers to these questions. I would love to hear from you.

Job Board

Organization: Mineral (X, the moonshot factory)

Location: Mountain View, California

Rhishi’s note: Full disclosure - I work at Mineral. You will get to work with the amazing Megan Fallon, Erica Bliss, and Charlie Guo (TPM role). The only downside is you will have to interact with me as well! ;-)

Organization: Ambrook​

Easy-to-use finance software with tools and spending cards that save producers time and money. Made for agriculture.

Location: Remote

Rhishi’s note: Mackenzie Burnett (Ambrook CEO) is one of the most energetic, mission driven, and smart leaders around.

Organization: Earthshot Labs​

Earthshot: Planetary scale regeneration & the carbon market done right.

Location: Remote

Organization: Perennial (formerly known as Cloud Agronomics)

Perennial is building the world’s leading verification platform for soil-based carbon removal.

​Many positions across commercial, data science, engineering, operations, and product in Australia, Boulder, Colorado, or remote.

If you want to submit a job for the Job Board, you can fill out the following Google form. This is a free service.

Technology trends

Iterative development approach from John Deere​

As part of its digital transformation, Deere is moving towards a more iterative product development model.

When we launch a new product now, it’s more iterative. The purpose of working iteratively is to allow more flexibility for changes. We can bring a high-value solution to the field, understand it with a customer, and then scale it from there.
Our recent acquisitions, like Bear Flag Robotics and Blue River Technology, are good examples of those iterative launches working well. It has helped us improve the speed of decision and thinking about how we prioritize the greatest value delivered to the customer differently than we were able to do before.
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I would anticipate, though, that it will be a rapidly adopted offering if we get the business model and the value proposition right. When we do those two things right, we also win on the equipment with the grower, our digital interface, and dealer support, it will take off. If any one of those things are out of balance, we'll know about it in very short order, and we will adjust. When it comes to sprayers, we see it as a way to improve sustainability of the application. A 70% reduction in overall chemical is substantial.

Software by its very nature allows for faster and rapid iterations compared to pure hardware. The challenge within agriculture is to balance the natural cycle of crops with the rapid iteration available with software.

Who benefits from “Right to Repair”

The right-to-repair (RTR) movement calls for government legislation that requires manufacturers to provide repair information, tools, and parts so that consumers can independently repair their own products with more ease. The initiative has gained global traction in recent years.

So what would be the impact of the right to repair? It is not very clear, but latest research and modeling suggests potential seen & unseen effects.

The right-to-repair legislation would understandably hurt manufacturer profit, but it is less clear how manufacturers would adjust product prices (and redesign product durability) in an attempt to mitigate the (inevitable) profit loss once the bill is enacted and what the welfare and environmental implications are.
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Conventional wisdom suggests that giving consumers the right to repair benefits consumers, improves overall social efficiency (although to the detriment of manufacturers), and reduces the environmental impact.
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Our research challenges these intuitive predictions. We find that, when the unit production cost is on the low end (e.g., cellphones, micro-waves), the right to repair benefits consumers but harms the environment.
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This continues to be the case for an intermediate production cost provided that the post legislation independent repair cost is not too low.
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Otherwise, consumers are worse off, and the environmental impact decreases if it is mostly generated in the production and disposal phases (e.g., high-end computers), but can nevertheless increase if the use impact dominates (e.g., cars, tractors, refrigerators), leading to a lose-lose-lose outcome for manufacturers, consumers, and the environment.
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Our results tell a cautionary tale and urge legislative authorities to factor in the inextricable link between the repair and product markets in their assessment of the right to repair.

Journal Article: Chen Jin, Luyi Yang, Cungen Zhu “Right to Repair: Pricing, Welfare, and Environmental Implications”, Management Science, 10.1287/mnsc.2022.4401, https://pubsonline.informs.org/doi/abs/10.1287/mnsc.2022.4401.

So, what do you think?

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About me

My name is Rhishi Pethe. I lead the product management team at Project Mineral (focused on sustainable agriculture). The views expressed in this newsletter are my personal opinions.

Rhishi Pethe

Agriculture and Technology or AgTech

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