Genetically modified organisms, or GMOs, have been the subject of controversy pretty much
since their inception.
More recently they’ve become sort of a buzzword for outraged social media experts, but don’t
let these Twitter crusaders fool you, GMOs are in fact a very serious topic.
They have an impact on everyone.
Take the US, for example, where the most produced crop by far is corn.
In 2014 over 361 million tons of corn were cultivated, more than all other crops combined.
That corn is then used to make a variety of different products.
Not just food: you’ll find corn derivatives in Coke, milk,
toothpaste, aspirin and varnish.
Corn is also the most popular animal feed, and when you consider the fact that 85% of
all US corn is genetically modified, you’ll realize GMOs are all around you.
That’s why this week on Behind the Business we’ll be taking a look at the company that
started it all: the world’s largest seed company, Monsanto.
Monsanto was originally founded as a chemical company in 1901 by John Francis Queeny.
Queeny was in his forties by that point and he had had a pretty rough start to his life.
The Great Chicago Fire of 1871 left his family homeless when he was only 12.
He had to quit his education in order to start working full-time as an office boy at a wholesale
drug firm.
Through hard work and dedication John climbed the ranks of the pharmaceutical industry,
and he eventually moved to St. Louis in 1891 as a representative of the Meyer Brothers
Drug Company, the largest drug distributor at the time.
Fiver years later John married Olga Monsanto and when he decided to establish a business
of his own in 1901, he named his company after her.
John established Monsanto in order to produce saccharin, an artificial sweetener that is
300 times sweeter than table sugar and has effectively no nutritional value.
Saccharin was first synthesized in 1879 and although it is a widely popular sugar substitute
today, back in the 1900s nobody in the US had even heard of it.
Germany had a near-monopoly on its production, and there wasn’t a single manufacturer in
the United States.
John’s newly established business was the first US saccharin producer and the American
market turned out to be very lucrative.
One of his earliest customers was actually the Coca Cola company, which still uses saccharin
in its popular Diet Cokes.
By 1905 John had added two more food additives to Monsanto’s repertoire: vanillin and coumarin,
which up until then were also produced only by Germany.
In its first decade Monsanto barely turned a profit because the Germans were constantly
undercutting them.
When the United States declared war on Germany in 1917 though, all chemical imports were
halted, leaving a huge void in the market that Monsanto was more than happy to fill.
Its revenue jumped from 81,000 dollars in 1913 to 905,000 dollars in 1919, establishing
Monsanto as one of the big US chemical companies.
1919 also marked Monsanto’s first steps abroad when it acquired a Welsh chemical producer
that made aspirin and rubber catalyzers.
This was Monsanto’s first big acquisition, but it would definitely not be the last.
The 1920s saw Monsanto expand its product range to feature industrial chemicals, the
most notable one being polychlorinated biphenyl, or PCB.
Now, PCBs can come in various molecular configurations, 209 to be precise, and all of them are very
toxic.
They’re proven carcinogens and pollutants that are resistant to acids and heat, and
need about 200 days of direct sunlight just to start breaking down.
If you’re thinking that this was some exotic, rarely used chemical, you’d be wrong:
PCBs were used as coolants in various electrical devices prior to the 1970s, most notably in
power transformers and capacitors.
Odds are, if you go to some of the more neglected cities in your state, you’d find transformers
with PCB warning labels there.
Monsanto was the only US producer of PCBs for almost 50 years before Congress finally
banned the substance in 1979.
Internal documents leaked in 2002 show that Monsanto was well aware of the toxicity of
PCBs more than a decade before their eventual ban.
In fact, Monsanto’s first move at circumventing environmental laws happened all the way back
in 1926 when the company incorporated a town in Illinois called, you guessed it, Monsanto.
Back then local jurisdictions were responsible for most environmental laws, and Monsanto
the town was very lenient with its regulations, so much so that Monsanto the company built
its largest PCB factory there.
That town still exists, by the way, but it’s called Sauget now and it barely has 159 residents.
The case with PCBs is one of the earliest examples of Monsanto’s extreme for-profit
culture that has by now become nothing short of an immortal Internet meme.
The sad thing is that Monsanto’s awful reputation is actually pretty well deserved, but you’ll
see more about that later.
So, by the time the Second World War had started in 1939, Monsanto had established itself as
the US military’s premiere chemical supplier.
Their most valuable product at the time was Styrene, a compound crucial for the production
of synthetic rubber.
Interestingly enough, Monsanto was also a large contributor to the Manhattan Project.
They were instrumental in the development of the polonium-based initiators used in the
two atomic bombs dropped on Japan.
During the postwar decades Monsanto got into the agriculture business by developing pesticides.
Their first one, called dichloro-diphenyl-trichloro-ethane or DDT, went into production in 1944, and
was banned less than 30 years later due to its extreme toxicity.
Another herbicide produced by Monsanto was Agent Orange, which became infamous after
the US military used it as a defoliant during Operation Ranch Hand of the Vietnam War.
Agent Orange was very effective at destroying the crops of the Viet Cong, but it was so
toxic that it also ended up contaminating more than 3 million people and causing half
a million Vietnamese children to be born with deformities.
The early 1970s saw Monsanto make huge progress in the development of LED lights.
In fact, Monsanto was the first company to mass produce them, which brought the price
of LEDs down from 200 dollars to less than ten cents a piece.
Just a few years later though the US government finally cracked down on Monsanto’s reckless
use of harmful chemicals.
The bans on PCBs and several pesticides hurt Monsanto’s revenue greatly, and on top of
that several class-action lawsuits were initiated that ended up costing hundreds of millions
of dollars.
In this period of distress Monsanto’s executives decided to shift the company’s focus away
from chemical production and towards agricultural biotechnology.
This transition occurred during the early 1980s, and back then biotechnology was a very
young science.
Monsanto was early to the party, which gave the company’s immense R&D division a head
start.
In 1983 Monsanto scientists led by Robert Fraley became the first in history to genetically
modify plants.
This pivotal achievement ushered in a new era for agriculture: the era of GMOs.
Now, despite what the armchair experts from Twitter might be telling you, genetically
modified crops are not bad in and of themselves.
The reason there is such a negative perception of GMOs is that, as has happened numerous
times in history, people take a good thing, and out of greed they take it so far that
it eventually becomes a bad thing.
GMO crops are a perfect example of this.
There are a number of ways to genetically modify a crop without compromising the health
of the people who eat it: some of the most basic ones are shortening
the plant’s seed-to-seed period or outright pumping up the size of the resulting fruit
or vegetable.
Monsanto, however, in their quest for ever-increasing yield, took GMO crops to a whole new level.
Back in the early 1980s, when Monsanto was faced with a slew of lawsuits and a ban on
its best products, they discovered glyphosate, an extremely potent herbicide that saved the
company from potential bankruptcy.
Monsanto marketed their herbicide under the name Roundup, and in the span of just two
decades it became the most widely used herbicide in the Untied States.
The reason for its success lies in Monsanto’s development of GMO crops.
You see, in the past farmers had to plant their seeds a good deal away from each other.
They needed that space in order to till their fields; otherwise weeds would grow around
their crops and kill them.
When Monsanto developed GMO crops that were resistant to Roundup, however, a whole new
avenue of cultivation emerged.
Suddenly, farmers could plant their crops much closer together, since they could just
dump tons of Roundup directly onto their crops without harming them.
As you can imagine this was a huge increase in crop yield, and combined with the cost
reduction of not having to till the land as much, farmers quickly switched to Monsanto’s
GMO solution.
Up until the year 2000 Monsanto was the sole producer of glyphosate due to the patents
they held, and it is during this time that the company expanded into the titan it is
today.
Roundup was, of course, just the beginning, and since then Monsanto has spent tens of
billions into the development of various pesticides and seeds.
Last year alone they spent 1.5 billion dollars on R&D, and these investments have more than
paid off: Two years ago Monsanto’s GMO seeds accounted
for 80% of the USA’s total corn acreage, and today that number is even higher.
One reason for Monsanto’s immense success in the seed business is their creative use
of patents on their seeds.
Farmers who plant Monsanto’s GMO seeds are subject to strict rules about what they can
actually do with them.
They’re not allowed, for example, to replant these seeds, nor to sell or share them with
anyone else, thus ensuring that Monsanto’s revenue remains stable and growing.
The language of these rules is so convoluted that farmers could potentially be found liable
even in cases when the wind randomly blows Monsanto seeds from a neighbor’s farm.
To complete its transformation into an agricultural behemoth, in 1997 Monsanto spun off the entirety
of its chemical business into a separate company called Solutia.
This was Monsanto’s attempt at a fresh start, and on their website they even claim to be
a relatively new company that just happens to share the same name with its polluting
predecessor.
Of course, this was all for show, as the new Monsanto’s executives were the same people
that had led the old company for decades.
What they did with Solutia was to essentially try to wash their hands of Monsanto’s morally-questionable
past.
Solutia inherited not only the struggling chemical business, but also the majority of
litigation relating to Monsanto’s PCBs and other industrial pollutants.
It probably won’t come as a surprise that just six years later Solutia filed for bankruptcy,
only to be eventually swallowed up by the Eastman Chemical Company.
The new Monsanto, of course, has been incapable of shaking off its bad reputation, but that
hasn’t stopped it’s global expansion.
Today it is bigger than ever, with 15 billion dollars of revenue just from last year alone.
About half of that money, by the way, came from the sales of the Roundup pesticide and
the GMO seeds resistant to it.
It’s sad how despite all the boycotting and controversies, Monsanto’s products are
so ingrained in modern agriculture that there’s no getting rid of them.
By all accounts Monsanto is here to stay, but it’s actually very possible that they’ll
soon stop being an independent company.
Germany’s pharmaceutical titan Bayer, on which we’ve also done a video, by the way,
had been trying to acquire Monsanto for the past four months.
Just a few days ago Monsanto accepted a $66 billion dollar all-cash offer, which still
needs regulatory approval, sure, but consider this:
in the past 14 months we’ve seen the mergers of six of the biggest companies in the industry,
and so far analysts are giving the Bayer-Monsanto merger a 50% chance of going through.
Even if the merger fails though, it’s very hard to be optimistic about a Monsanto-free
future.
From an investment point of view it would make sense to buy shares of the company that
controls the world’s food supply, but sometimes it’s better to forego revenue in order to
actually make the world a better place.
Hi there!
I hope you liked the video despite the rather questionable nature of the subject.
I can tell you that making this video was not easy.
I mean here at Business Casual we try to take an objective look at companies we cover, which
tends works most of the time, but when you’ve got a corporation like Monsanto that’s,
you know, literally Hitler for most people, remaining neutral can get a little bit harder.
Nevertheless, it was pretty interesting learning how they became the giant that they are today.
If you’d like to see another video of ours you can click in the top right corner to watch
the history of Boeing, from the time of the Wright brothers to the Second Space Race.
To watch the full Behind the Business series, you can click in the bottom right corner to
access our main playlist, and if you’d like to subscribe to our channel you can do so
by clicking over there in the middle right.
Once again, thanks a lot for watching, and as always: stay smart.