I think one could change a handful of words in this article and it would perfectly describe the .com crash of the early 2000's which gives me the impressions that lessons were not really learned in my opinion.
I'm skeptical. If you're out working in the yard and your buddy steps on a rake it's reasonable to put the rake away instead of stepping on it yourself later in the day.
Figuring out the connection between seeing someone stepping on a rake and immediately after getting smacked in the head seems much simpler than knowing about the .com bubble and from that alone managing to avoid the same mistakes decades later.
It's easy to call out the similarities now, but I doubt it's easy to avoid the mistakes in the situation.
I'm even more skeptical now. I lived through the .com bubble and the hype and bullshit were blandly obvious at the time. I worked briefly in the mortgage industry during the run up to the 08 implosion and after about 90 days of wondering what the sideways fuck was going on with all these obviously bullshit loans I decided someone was probably going to jail for something and got tf out of the industry before I found myself caught up in whatever. Now, I'm not carrying any kind of degree, so it obviously doesn't take a doctorate in economics to glance at a business (or even an entire industry) and pick up on the fact that their business model looks like a few tons of horseshit hiding behind a billboard for disney world.
Drilling into vertical farming specifically, all one has to do to surmise the entire industry is a crock of shit is note the following:
- agriculture has some of the narrowest margins of any industry
- vertical ag claims they'll be printing money by adding additional layers of complexity and overhead to the process
In my opinion the reason shit like this keeps happening is it's become standard practice in the financial industry to bet on dumb money instead of betting on actual value.
I agree with your general point but I think you have to inspect the numbers. Ag has problems that vertical farming still looks like a solution for:
- market gardening is labour-intensive
- water shortages look like getting worse, not better, in many regions
- food miles, fertiliser and pest controls are significant costs
- time to market is critical for some produce
Just today I read an article on HN about the labour costs of asparagus. A capital outlay that can reduce that labour is still appealing. And may I point out the complexity of conventional agricultural machinery?
A bubble bursting doesn't invalidate the field. Maybe the first generation of startups will go tits-up, but the growth opportunity is still there. You had inside perspective on the mortgage bubble, but I think that without that perspective in this case, you're only right by accident. I am not sure this is even a vertical farming bubble, it might be better described as a credit crunch affecting startups in multiple industries, and VF might be hit hard simply because it's all startups at the moment.
You get different pictures depending on what numbers you're squinting at. Staring at luxury produce like asparagus might lead one to believe the industry has a point. Turn your attention to cereals and grains and literally nothing the industry says makes sense. A quick examination of what percentage of the world population considers asparagus a dietary staple, and the delta in acreage utilization between say asparagus and soybeans makes industry claims that vertical farming has anything relevant to add to the current slow burning agricultural crisis seem ludicrious at current global population numbers.
I don't think that's a fair characterization of vertical farming. Yes, some of the startups in vertical farming say that they can print money right now, and I am with you that this is stupid.
However I think the actual value proposition is different.
Agriculture does have very thin margins. The current approach is only viable by achieving scale through enormous monocultures.
Unfortunately this is very bad for the soil and the surrounding eco-system.
We try to mitigate this by using fertilizer, but this is a stopgap solution and it won't work forever.
One example of this is that there now exists a thriving industry for rentable beehives, because all the bees living in the areas where we grow food that needs to be pollinated are dying. So instead we truck dozens of hives across the country, let them pollinate the fields and then pack them back up for the next one.
We are currently forced into ever more complicated counter measures, just to keep the output we have. This will get more expensive until it ultimately just won't work anymore and output shrinks.
Meanwhile, vertical farmings biggest expense is electricity, which will get cheaper over time. It uses way less water, does not have to rely on huge amounts of fertilizer, can grow anything year round and can be set up in dense urban spaces so that the output does not have to be shipped all over the place.
This isn't better than traditional farming right now (and for some food it probably won't be for a loooong time), but the balance will steadily shift in favor of smaller, more localized agriculture. Eventually, with ever growing citys/urban areas, vertical farming will be more economical.
However that day is not this day and the startups that burned through their stacks of vc cash while drinking their own kool-aid deserve to crash and burn.
A lot of people don't think that's a fair categorization of vertical farming. Sadly they either simply don't know anything about some combination of agriculture, real estate, the concept of unit margins, or they're pushing an agenda.
All of the problems you highlight with standard monoculture ag absolutely exist, and can only be solved by reducing the global population by some terrifyingly large number to get field utilization down to the point where rotation and fallow schedules start to make sense on a global scale. Attempting to resolve these issues with vertical farming would have you trying to capitalize a 10 story structure almost exactly the size of Vermont just to cover the US domestic wheat crop.
We've all heard the marketing song and dance around the industry and none if it scans in the face of even the most cursory examination of actual field acreage utilization figures either domestically or worldwide. You want to solve the global over-farming crisis (and it definitely is one) start engineering a pathogen.
Let's say you just started gardening by yourself and no one has stepped on a rake yet. You're going to be in some pain.
Also, if everyone instantly learned from elders of every bad incident, we'd get nothing done because all the new people would be too scared to try anything.
Individuals can be excused for a lack of knowledge and experience. VC's and investment banks can not. This is a fundamental and basic part of their fiduciary responsibility. To me the article is a red flag that some people need to be investigated.
Not really though. The .com crash was really about investors not understanding how to evaluate the profitability of products that have low or no marginal costs.
If anything, vertical farming is an example of the opposite - investors who are used to a low or no marginal cost businesses having to learn unit economics for the first time.
Vertical farming is just a concept that makes no sense. It requires a lot of electricity in practice because there is not enough incident sun, building costs, and then there's the soil. Why not just build a greenhouse, or just a regular farm?
I think it's telling that everyone interested in vertical farming is from the tech industry, not agriculture.
The article uses the term "Controlled Environment Agriculture" (CEA), which seems like a better descriptor than vertical farming, which is pretty narrow in scope and a bit solarpunk in vision. The nice thing about the term Controlled Environment Agriculture is that it can cover a wide spectrum of enhanced farming techniques, including a plain old greenhouse. Then it becomes a question of which type of CEA is most appropriate for an area. Even the most crowded cities tend to have areas of much lower density nearby that make the high-rise farm idea not a good use of resources. But boring old warehouse space used to create a controlled or semi-controlled growing environment might work in some cases, especially for higher value, fussy plants. Probably will never make sense for things like iceberg lettuce.
It's funny you brought up lettuce because for my thinking, head lettuce and salad greens are likely the only thing vertical farming would make sense for.
The plants themselves are compact and mostly green bags of water. The big costs are cleaning, processing, transport, and refrigeratoration. There is almost no manual labor involved.The life cycle is extremely short. The demand is extremely high.
Lettuce might be the only vegetable that vertical farming makes sense for, but it would need to be able to cover the cost of expensive light-industrial space very close to market.
Ultimately plants are solar panels and even in vertical farming it's space you are paying for. Even if you can plant 10 layers deep, youre dealing with maybe having to pay >10x per SQ ft for space in a location close enough to be relevant.
I agree with the sentiment on lettuce. It should effectively be grown in-store. I'd say that a few other leafy greens fit the bill -- cilantro, basil, spinach, kale. There was a startup operating in my area doing just that, that recently went under. They were focused on higher-price herbs, and I think a major mistake in their model was in using valuable retail space for the hydroponic setups. A couple of stacked containers in the parking lot should be much cheaper, and produce enough volume to be competitive on lower $/kg crops like lettuce and spinach.
Chlorophyll has very narrow bands of absorption. Collecting wide spectrum insolation with solar panels gives you plenty of energy to emit narrow-band light from LEDs, even with efficiency losses. In fact, plants do fine in red light.
Hydroponics is a well-understood technique - retail kits are available for home ganja growers. Soil is not an input. You would be nuts to grow in soil.
Greenhouses are great, think of vertical farming as gen2 of greenhouses.
Don't mistake VF as a solution for land-extensive staple crops. It won't grow significant quantity of cereal any time soon. What it does promise is high-value crops like salad, herbs, tomatoes, strawberries. These crops benefit from short food miles and are labour-intensive to harvest. You can cut costs by growing them closer to cities, in beds that you can bring to a comfortable height for picking (or pick by robot).
Some of the big costs are: labour, fertiliser, and transport to market. The latter two are tied to energy costs, and the former is expensive in high-CoL places where you want to sell the goods. Hydroponics makes much more efficient use of fertiliser and water, and may reduce labour costs. Vertical farming enables you to operate close to cities where land coats are high.
Are you qualified to say who is and who isn't interested in vertical farming? Have you been reading Farmer's Weekly or just HN? But for the sake of argument: existing ag interests are the incumbent and tech is a sector known for disruptors. VF is tech-heavy. It wasn't farmers who invented tractors, it was engineers and entrepreneurs.
But this is an interesting point, and the whole thing may turn out to be delusional techbro vainglory. I think that's a stretch in a world where energy cost has tripled in a decade and desertification is an observable reality. I wouldn't look for farmers in the startup, I'd look for biologists and grocers. Farmers are the customers, and the ones losing their livelihoods are good sales prospects.
do you have any references for the 'speeds and feeds' kinds of basics here? I'm playing in this space and having a lot of fun. but sometimes when I look at my plastic tubs and custom water-cooled led fixtures - I often think that its a fundamentally stupid idea - a great way to grow a $30 tomato.
edit: I looked up some very high level and recent bloggy stuff. apparently a traditional greenhouse uses 5kw/kg of output (idk if that's just plant material or food) - and an indoor vertical farm is closer to 40.
The first thing that comes to mind for me is that cities are usually pretty far from the farms. This leaves farmers and those wishing to buy from them with long supply chains. In my experience, people that live in cities have never really had fresh vegetables before unless they've personally grown them.
With this in mind, I can see a large former factory building being converted into vertical farming and then selling fresh produce, year round, to select clients at a premium.
Being able to farm and produce year round is also quite a nice bonus. You can largely ignore the weather, except where it impacts your supply chain.
All that said I think it's a fine idea and a great use for previously used industrial spaces.
> The first thing that comes to mind for me is that cities are usually pretty far from the farms.
This isn't actually that true though.
Even in places like San Francisco or Seattle you can find farms and greenhouses within 10 miles of downtown. Moving them, like, 5 miles closer at the cost of millions and millions of dollars doesn't make much sense.
The long supply chains are for things like avocados or apples or prepackaged salads. All things that vertical farms don't really do.
> In my experience, people that live in cities have never really had fresh vegetables before unless they've personally grown them.
This is a hilarious argument to me because most grocery stores in our area already offer hydroponic lettuce and tomatoes, but they are sold as an inferior product to the stuff grown in soil.
That feels like it’s missing the forest for the trees. The article is specifically about how cheap money let these business deprioritize a functional business model for the sake of growth, which is exactly what we’ve seen happening across all of tech and other sectors.
If it’s too expensive, then explain why the Netherlands has had such huge success with CEA.
The cheap money problem is, at root, that investors were pouring money into projects with bad unit costs. Had they understood that the product can't* be sold at a profit, they would not have done that.
* in the current business environment, where it competes with farmers who have lots of nice land and free sunshine. Maybe in some future hellscape, food towers will be our most economic option. Or indeed in a future paradise where the externality provided by wilderness is priced appropriately, such that people have an incentive not to waste precious land and biodiversity for the sake of corn and beef.
Compare agriculture in the Netherlands, including the people running it, with the average vertical farm and the people running those, and the answer is obvious.
Seems like this really doesn't have a whole lot to do with vertical farming, but rather just startups being startups and vc money coming with the strings that it does. Which is good, because vertical farming will only ever become more important (unless population size and density start trending downwards, which doesn't seem likely).
They'll figure it out eventually. Local, space efficient, variable controlled agriculture has so many upsides for dense, urban areas that I doubt the idea will fail.
I know they say this, but what are the upsides really? I’m far from an expert but afaik neither land nor transportation are the bottleneck when it comes to food.
- Consistent output, less variability due to seasonal concerns like drought. Also output is constant year round. Less concerns about financial instruments (futures) to manage risk.
- More water efficiency which is becoming more of a concern with changing climes.
- Less need for fertilizer and pesticides, resulting in less potential toxicity for consumers.
- Precise control over growth conditions allows for perfection of individual crops when it comes to taste and nutrient density.
- Less biodiversity impact of traditional land based farming, more forest area available land.
- Transport is still a huge environmental impact, especially when it has to be transported internationally.
Edit: Also less concern of agriculture contamination, e.g. cattle farm upriver causing bacterial infection like salmonella.
How’s any of that better than Hot House style tomatoes I can buy year around? Why farm in expensive areas that require vertical farms when land is everywhere in the US.
Head lettuce might make sense since it needs a lot of packaging and refrigeratoration to get to market. I can imagine a vertical system where it's grown in its clamshell, not dissimilar to some head lettuce you find at the store. It's gotta be in a refrigeratorated truck or car for the journey. It's also in pretty high and constant demand.
You’re missing the point. To the extent these things are true (unclear why an artificial environment would have less need for fertilizer), they’re true about ordinary greenhouses.
So what does verticality add other than complication, and why is it so valuable for “dense urban areas”? Do any of the gains you propose make up for the enormous loss of free energy from the Sun? So far, in real life, the answer is a resounding no.
> Many CEA companies' growth plans didn't include things like "positive unit economics." If your unit economics is a negative number for whatever reason (already a bad sign), then you have to determine what the "escape velocity" or volume of sales + production costs is that turns that number positive
Counterpoint: even if you have the most amazing set of patents, no one is going to give you venture capital if your margins are "slightly better than a farm". Even if you have positive unit economics. You'd be insane to pick that investment over, like, a McDonalds franchise.
If you actually look at the profit margins of even the successful companies in this space vs the capex investment, it's kind of bananas. They took an industry (agriculture) and targeted investors completely unfamiliar with that industry with the help of a bit of misdirection.
Given the amount of money dumped into these operations and the tiny margins they operate in, the most viable endgame for them is to become too big to fail. Invest as much money into infrastructure and distribution as possible and get to positive margins. Investors would have nothing left to pull and would have no choice to write off their investments and just let the companies do their thing.
Optimizing for unit economics vs. top-line growth are opposites in building a company. In the years of free investor money (2020, 1999, etc), companies choose growth over unit cost because their boards and investors are trying to drive huge valuations. This is true in software, farming, and many industries.
My understanding is that these are controlled environment green houses. They have lights throughout and if any one of the pests you mentioned was found during a sweep, the whole system would be shut down and sanitized.
Think: urban hothouse agriculture with more lights.
