Adventurous Investor in Conversation with Andrew Craig of Conviction Life Sciences
Earlier this week I managed to finally catch up with Andrew Craig of Plain English Finance and putative manager of what could be the first fund IPO of 2022 - Conviction Life Sciences. This has just this week launched an offer with a focus on buying into small to mid-cap listed biotech firms in the UK and Australia.
Andrew has identified a target list of more than a dozen really interesting firms where he thinks the market has got valuations completely wrong.
A good primer on the fund is a recent FT article here: https://www.ft.com/content/5d149923-f9d5-4199-be62-067d86c137fe
It’s a really interesting discussion with Andrew and I’ll be returning to the subject in a future MoneyWeek article. We don’t only talk about the fund and that biotech opportunity but also about the broader shift towards the life sciences and the inability of the markets to put a sensible price on companies below the radar of big US investors.
Important - please see the disclaimer at the bottom of this newsletter before listening to the podcast
What’s next in tax land
None of us should have been surprised by the tax changes announced in the budget. The government has identified a big black hole and they’ve enacted some fairly radical measures which will hit wealthier types. That redistribution focus feels about right (they’ve also not cut as much spending as I thought they would) but it obscures the fact that really, everyone - including basic-rate middle-class taxpayers - is going to need to pay much more if they want the public services we need. Just focusing on the top band taxpayers simply feeds the myth that the rich can pay for everything - they can’t and they won’t.
But I expect more pain to come and if I were a betting man - which I’m not - I’d wager that sooner rather than later we’ll get equalization of CGT and Income Tax rates, the end of higher rate pensions tax relief (long overdue in my book) and an even harder look at EIS reliefs.
Alternative Proteins
Regular readers will know that I also co-founded a website dedicated to the emerging changes in our food and agriculture system - its called www.FutureFoodFInance.com
I’ve long been interested in alternatives to meat ranging from plant-based ones through to cultured (lab-grown) meat.
Partly for that reason I recently hosted Agronomics virtual capital markets day.
You can see the recording of that capital markets broadcast here: https://events.masterinvestor.co.uk/past-events/agronomics-capital-markets-day/
I talked to six Agronomics portfolio companies about everything from precision fermentation-producing egg yolk to cultured alternatives to tuna. Now, I do have some doubts about the timescales and costs of cultured meat but I also think that this new technology (and engineering) could be a huge game changer if the scale-up process and pricing work.
But first, these clever, pesky startups need to get past regulatory approval. That’s been a long time coming but at long last, we are now seeing some first signs of progress. This week for instance another Agronomics portfolio business called Upside Foods “received a 'No Questions' letter from the US regulatory body the US Food and Drug Administration ("FDA"), accepting their conclusion that their cultivated chicken is safe to eat. This is a momentous achievement for UPSIDE Foods and a pivotal moment for the entire cultivated meat industry. This represents the first company to achieve a green light from the FDA in the US, and a validation of the sector shifting from research and development, towards commercialization”.
According to the Agronomics team
“We expect this to be the first of many FDA approvals for the sale of cultivated meat in the US. The FDA's decision is a major milestone in the evolution of the global cultivated meat sector and another step towards the commercialisation of cellular agriculture. The news comes almost two years after the Singapore Food Agency (SFA) gave regulatory approval to Eat Just's cultivated chicken, which is now sold through its subsidiary GOOD Meat. At full-scale commercialisation, cellular agriculture has the capacity to make a meaningful contribution to the world's food production sustainably. It is projected that by 2040, cultivated meat could reach 35% of the global meat market.”
More at www.agronomics.im
Iran - what next
Whilst all our attention in Europe has been focused on events in Ukraine and Russia, much of the Middle East has been looking eastwards at Iran.
Arguably, another third major Iranian revolution is brewing as a legacy regime gets ever tougher in its crackdown. If the Islamic regime falls - and is replaced y a secular regime - the impact would be truly tectonic. Until now I thought it might be replaced by a more mildly religious regime, partly because the mullahs seem to have deep support in the provinces and amongst the working class.
But that might be changing according to Ali Ansari, who is a Professor of Iranian History & Founding Director of the Institute for Iranian Studies at the University of St Andrews. He is also a Senior Associate Fellow at the Royal United Services Institute.
In a guest column for Professor Lawrence Freedman’s newsletter called Failures of Imagination, Ansari suggests that this time it really is different….
“The protests in 2009 were at times larger, but less frequent and less immediately violent. This time round, the anger is palpable and the demands much more fundamental. Few people are seeking reform. Their demand for civil, political and human rights, echo the revolution of 1906 not 1979, (many indeed explicitly refer to Constitutional Revolution as their intellectual point of origin), and the fact that these demands are being reiterated by a new generation over a decade after the crushing of the Green Movement, is a testament to the enduring power of ideas. They are also explicitly secular and replete with pre-Islamic nationalist motifs drawn in part from the country’s highly popular historical mythology. In a revealing admission, interrogators have admitted they have no idea what young people are demanding, so alien are these to their own Islamic world view.”
And what of the chances of success for the wannabe revolutionaries?
“The Islamic Republic is facing a perfect storm. It could show strength by conceding errors and promising to reform. Some have suggested that it may just choose to relax or indeed reform the mandatory veiling laws. But history and ideology will work against that – the regime has chosen to see the relaxing of the veil as an existential challenge to its core Islamic doctrine. Moreover the veil is emblematic of a much wider problem with women’s rights and rights in general. The sort of changes now being sought would undermine and effectively overthrow the wider Islamist project being pursued by the Islamic Republic. While an assured Supreme Leader might have an ‘epiphany’ and force through systematic change, an ailing one is in no position to try.
“So, the regime will attempt to double down on repression, trusting in its security forces and Islamic militias to keep faith in the system. If these begin to fracture with the fatigue of fighting an enemy it does not understand and cannot seem to control, then the regime will be in serious trouble. There are already attempts to call on the regular armed forces to back the people and to split from the ideological guardians of the revolution, the Islamic Revolutionary Guards Corps.Vacillating between the deep anxiety and arrogance that characterises paranoid regimes, it will continue to blame foreigners, and denounce their opponents as heretics and traitors, while reassured by a conviction that the protestors lack stamina and will sooner or later fade away. Like their ally Putin, they have assumed that their opposition will prove incompetent, and the West will lose interest. But like Putin, they may find their opponents are more competent and determined than they appreciate and that, with little left to lose, they too can count on reserves of strategic patience. These protests are deeply rooted, the anger is well grounded. The authorities of the Islamic Republic have been anxiously fighting bushfires for well over a decade keen to avoid them spreading. It is too early to predict what the outcome of this round of protests will be. What we do know is they are broader and deeper than before, encompassing a much broader swathe of the public. They represent a culmination of decades of political corruption and economic neglect.
“If momentum is maintained and state violence increases (which few doubt), there will come a time when the cracks in the beleaguered state edifice begin to grow wider with sympathy strikes and fatigue in the security forces leading to defections. At this stage the supportive hinterland will come to life, leaders will emerge, and manifestos defined. Few doubt that fatigue has set in, but neither do people believe that the endgame for the Islamic Republic will be quick or tidy. Even if the current round of protests subside it will not be long before another begins, such is the lack of imagination possessed by the authorities. For Iranians who are beginning to think the unthinkable and imagining a future beyond the Islamic Revolution, the fundamental rights they are fighting for are not simply an idea whose time has come, they are long overdue.”
More at
Battery powered kettles
Economist and commentator Noah Smith has decided to invest in a battery startup - with a difference. The firm is called Impulse and its invented battery-powered kitchen gadgets, starting with a kettle…
“….batteries have now reached the point where they’re able to discharge energy very fast. The variety of lithium-ion battery that Impulse uses is kind of like the battery in an electric motorcycle — optimized for rapid discharge instead of for weight or efficiency. You wouldn’t use these batteries to power a car. But they’re great for home appliances. In fact, these rapid-discharge batteries give Impulse one of their major selling points: enormous power. Impulse’s first product, a battery-powered stove, provides a demonstration of how this works. Gas stoves heat up food faster than traditional electric stoves. Induction is even faster. But Impulse’s battery-powered stoves can just heat things up incredibly quickly. Here’s a demo where their stove boils a liter of water in an open pan in 40 seconds — 10 times as fast as a gas stove!
“Not having to wait for water to boil seems like a big plus, in addition to being able to cook stuff that requires high heat. High power seems like it will also be a selling point for other electric appliances — dryers that can dry your clothes quickly, heating and air conditioning systems that can change the temperature of your house rapidly, and so on. This isn’t directly relevant to the climate, but I think the advantages of battery-powered appliances over their traditional gas-powered cousins will speed up adoption. It’s nice to own stuff that’s good for the environment, but it’s great to own stuff that’s extremely high-performance and also good for the environment. That was how Tesla broke through and started the EV revolution.
“(As a proud corporate shill, I should mention that Impulse stoves also don’t have the annoying buzzing sound that traditional induction stoves make, because batteries allow them to run off of DC instead of AC. Again, not directly relevant for the climate, but good for speeding up adoption.)”
More at Noahopinion (subscription needed)
Nuclear power and “Disaster-ous” misunderstandings
A double bill of nuclear power stories.
For the record, I am a passionate supporter of more nuclear power. I think it’s absolutely essential we build many, many more nuclear power stations, especially in the developing world. I also think the opposition to nuclear power is fundamentally flawed - and in some cases intellectually dishonest.
I can understand why the UK Treasury has doubts because of cost overruns but to me, that’s a motivation not to give up on the technology but to put extra effort into getting the costs down and work out how to build many more.
Back to the objections.
Perhaps the most dishonest attack on nuclear power is that it’s unsafe. It isn’t especially in comparison with its alternatives. On this subject, it’s worth reading Julia De Wahl who most recently worked on Starlink at SpaceX. She is an active angel investor and was an early employee at Opendoor and consultant at Bain & Company.
“Nuclear energy’s reputation has been dealt several major blows by the nuclear disasters of Three Mile Island (1979), Chernobyl (1986), and Fukushima (2011). Overblown response and media coverage to each of these events led to a vast misunderstanding of what happened at these events, and how damaging they actually were.
The accident at Three Mile Island in 1979, for example, killed a total of zero (0) people. The incident released negligible amounts of radioactivity — the estimated dose of radioactivity experienced in the local area is equivalent to ⅙ of the amount you’d get with a chest x-ray, and far below the level of background radiation typically experienced in a year.
However, the dramatic evacuation response, permanent shutdown of the reactor, and lack of clarification or attempts to accurately report what actually happened means many Americans still believe Three Mile Island to be a true “disaster” and reason to ban nuclear power plants. It didn’t help that Jane Fonda’s film China Syndrome, depicting a horrific nuclear meltdown, had debuted 12 days earlier.
Two other accidents, Chernobyl in 1986 and Fukushima in 2011, are similarly misunderstood, and Fukushima in particular, blown quite out of proportion. Chernobyl was operating without today’s safety standards. The plant didn’t have a containment dome, which would have helped to prevent the escape of radioactivity. Even more shocking is what caused the accident: the operating team was running an “experiment” that involved switching off automatic safety mechanisms and simulating an emergency. They did this without training or planning. The initial steam explosion killed 3, while 28 firefighters died from acute radiation syndrome (ARS). 15 died from thyroid cancer in the first 25 years after the accident.
The nuclear plant Fukushima Daichi suffered a meltdown from the flooding induced by the tsunami, however only 0 or 1 people died from the accident, with far more damage and loss of life caused by the overblown evacuation response to the accident. The earthquake that caused the tsunami that led to the Fukushima meltdown was the largest in its recorded history, leading to over 15,000 deaths and a massive toll on the built environment of Japan, including many industrial areas.
Despite these accidents, when compared to other industries, nuclear energy is very safe “
More at https://juliadewahl.com/nuclear-energy-past-present-future?utm_source=substack&utm_medium=email
I also recommend a fantastic article by a former opponent of nuclear power now turned supporter Bryony Worthington. It’s in the latest edition of the excellent Prospect magazine. Worthington carefully and systematically works through how we can deal with the safety concerns, and worries about cost:
“If we want to eliminate any (already remote) chance of a hydrogen explosion, as occurred at Fukushima in Japan in 2011, then we can take water away as a coolant and use liquid metals, salts or carbon dioxide instead.
If our concern is dealing with (the very low volumes of) toxic nuclear waste, reactors can be designed to use the spent fuel, a process that has been proven to work in the US and Russia but not yet commercialised because of the relative ease of using new fuel.
If the concern is that nuclear fuels may run out, even though this is a distant prospect, then reactors can be designed to breed more fuel than they use. Such reactors have been built but not prioritised due to high fuel availability. In India, however, so-called “breeder” reactors are seen as key since they enable power from thorium, an element found in large quantities in that country.
If we want to avoid another Chernobyl, then… there is no chance of another such disaster, because that Soviet-designed RBMK reactor had many uniquely dangerous features that will never be replicated elsewhere. Nuclear power has one of the best safety records of any form of power generation, and—measured by deaths per terawatt hour of electricity produced—only solar is (marginally) safer. Public awareness of this fact is very low as media coverage has tended to distort our perceptions of risk.
If we want to reduce costs, then we can focus on building standardised reactors in a production-line facility, similar to that of a shipyard. We can also speed up deployment that way too.
If we want to power isolated sites or sea- or space-faring ships, then we can use nuclear batteries that generate power for decades—if not centuries—without needing a refuel. (Though not nuclear-powered aeroplanes, because of the weight.)”
What caused Britain’s Industrial Revolution
As a self-confessed economic history nerd, I’m constantly drawn - like a moth to the flame - by the myriad explanations as to why the industrial revolution happened in the UK. There have been lots of factorial explanations ranging from coal availability to trade policies but I’ve always thought this underestimated the sheer quantity of engineering and scientific researchers beavering away in amateur laboratories or workshops.
The good news is that a bunch of US academics have recently released a paper affirming my own hunch about amateur (and professional) geniuses. It’s called Why Britain? The Right Place (in the Technology Space) at the Right Time and it’s by Carl Hallmann, W. Walker Hanlon, and Lukas Rosenberger.
Here’s the conclusion…
“Did it matter that in the early decades of the Industrial Revolution many British researchers worked in technology areas, such as steam engines or textile machinery, rather than technologies such as papermaking or chemicals? We argue that the answer to this question is that, yes, it did matter. Specifically, we show that the distribution of British inventors within the technology space differed in fundamental ways from the distribution of inventors in the most natural comparison country, France, and that this distribution had a meaningful impact on the difference in technology growth rates in the two countries.
….our findings may also shed light on why these advantages slipped away in the late-nineteenth and early-twentieth centuries. It seems likely that the structure of the innovation network was slowly evolving over the nineteenth century, with the rising importance of chemical and electrical technologies that characterized the the Second Industrial Revolution. This change in the technology space away from the mechanical technologies may help explain why Britain found it increasingly difficult to maintain its position as industrial leader. One interesting direction for future work is assessing the extent to which slow-moving changes in the underlying innovation network may have undermined Britain’s advantages and contributed to the erosion of British leadership in the late nineteenth and early twentieth century”.
More at https://conference.nber.org/conf_papers/f171957.pdf?utm_source=substack&utm_medium=email
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New Life Sciences fund manager in conversation, an alternative protein breakthrough, potential revolution in Iran and what made early modern industrial Britain