RuBisCO – Suboptimal Environments | The Acquirer's Multiple®

During their recent episode of the VALUE: After Hours Podcast, Taylor, Brewster, and Carlisle discussed RuBisCO – Suboptimal Environments. Here’s an excerpt from the episode:

Jake: All right, veggies time. Do you guys have any guesses as to what the most abundant enzyme on planet Earth is?

Tobias: Enzyme? That’s tough. No idea. What’s an enzyme?

Jake: Well, an enzyme is a– I think it’s a type of protein that–

Tobias: It’s a building block for a protein, I think.

Jake: Well, it actually will like cut things or speed up a– it’s like a catalyst that will speed up a reaction. So, this particular enzyme is called RuBisCO, I think is how it’s pronounced. And that’s like mashing together of a lot of really big words that I’m not even going to embarrass myself by pronouncing. When you read the back of the package of some really prepared boxed food and it’s all these crazy chemicals, that’s what it sounds like.

Tobias: Is it yeast?

Jake: [crosstalk] No, it’s ribulose bisphosphate carboxylase, something like that.

Tobias: No idea. I thought that was a stock.

[laughter]

Tobias: [crosstalk] –RuBisCO.

Jake: Yeah. This thing drives photosynthesis by catalyzing the capture of carbon dioxide out of the atmosphere. So, what they call like carbon capture, it’s plants are what use this enzyme. If you stop for a second and think, this has always blown my mind but if you look at a tree or any plant, where did it come from? Where did the actual material to create this 300-foot tall tree come from? And the answer is actually thin air. Carbon out of the air was captured by this plant to build more of itself.

Tobias: That’s how they do it, then it’s suck it up for the soil.

Jake: No, it’s not the soil. It’s the air for most of it.

Tobias: These are good veggies.

Jake: Yeah, so RuBisCO, what’s interesting about it is that it evolved actually a very, very long time ago before the Earth’s atmosphere was as oxygenated as it is now. It was mostly carbon dioxide. But today, what happens is that RuBisCO can mistake oxygen for CO2 and capture it. And what that’ll do is it’ll produce these harmful byproducts in the plant sometimes. And it’s also very wasteful, relatively speaking, like metabolically. Photosynthesis is actually about 25% less efficient than it could be if it wasn’t based on RuBisCO. And it’s called photorespiration where sugar is actually consumed within the plant instead of produced by photosynthesis, anyway.

RuBisCO is so interlocked in the plants, this very delicate biochemistry that it can’t be replaced. And instead, the plants have evolved all this complex patchwork of workarounds to still use this enzyme and maintain how it evolved to work. So, the question really is what else in our world is so entwined in the system, but it’s actually very suboptimal, but we can’t root it out. Bill, please.

Bill: Can I go with the Fed, please?

[chuckles]

Jake: Judges? Yes, we will accept that answer.

Tobias: Yeah, I need to keep thinking. Sorry, I’m still thinking about the RuBisCO.

Jake: You’re thinking about eating biscuits right now.

[laughter]

Jake: So, I have a couple things that might be interesting on that. I’m going to go from least interesting to me most interesting. I think that I’ve read somewhere that the HTTP protocol of the internet is not necessarily the best way that things could be done, but it was the original protocol. So, sort of embedded in a system that we can’t really root it out at the moment.

Tobias: The QWERTY keyboard.

Jake: QWERTY keyboard is another great example.

Bill: Ooh, that is a good one.

Tobias: Because it’s purposefully designed to slow you down, so you don’t get the typewriter keys mixed up. They get them overlapping, but– [crosstalk]

Bill: Dude, I’ll tell you what it messes up, is autocorrect. I have never said ducking in my entire life. Okay, and I’ve never said congs. I used longs. Why does Apple not understand that it’s fucking and longs?

[laughter]

Jake: Usually, it’s the same– [crosstalk]

Tobias: I text that a lot too! [laughs]

Bill: Yeah, but the QWERTY keyboard ruins it. Apparently, it makes–

Tobias: Can’t you teach it?

Bill: – the machine learning too difficult because the keys are too close. So, I get ducking congs in all my stuff which people think I’m like in some fiction movie.

Jake: [chuckles] To piggyback on Bill’s, I would say, tinfoil hat alert, but potentially Keynesianism, especially the way that we practice it, might be one of those things. Maybe even the two-party system is something that we’re stuck with that we can’t seem to evolve away from.

And then, the last one, which I think is the most interesting actually, is Excel. And when I say that– I actually I have huge respect for Excel. It can do so many things and it’s actually as more general modeling software. It’s incredibly robust and useful. I think it’s been now used in so many different ways suboptimally, potentially, but yet it’s part of the system. And I could tell you from personal experience, that you’d be shocked at how much of critical infrastructure is run on Excel, and lives and functions because Excel is working.

Tobias: I’ve seen discussions on Twitter about– there are lots of analysts who maintain their positions at funds because they were the one who built the super complicated Excel spreadsheet for some big holding, and nobody else can configure the spreadsheet out. They’re just not going anywhere, because they’re the only one who knows how to work that spreadsheet.

Bill: It turns out, they hardcoded the one cell to making it all working your way.

Tobias: That’s how you do it.

[laughter]

Bill: I can’t figure this thing out.

Jake: It’s a RuBisCO of the software world. This early enzyme that works, but then when the environment has changed, it hasn’t really, really kept up necessarily. And it got me thinking about, are those type of situations, what you might call like complexity attractors, or something like that? Because imagine all the built-in– you have this real thin sort of base, and then you build all this Rube Goldberg type of machinery on top of it. There’s a lot of complexity and fragility that can be brought in by not evolving the entire system. So, if you get some part of it that’s stuck, maybe that becomes an attractor for complexity.

Tobias: But there’s some businesses out there that are like that. I think HEICO is explicitly hunting for that kind of thing where it’s not the most important part of the ecosystem, it’s a small part of the ecosystem but just nothing else functions without it. It doesn’t cost you much or it’s going to overpay for it because it’s just too much of a pain to go and figure out how to do it yourself. That’s what they’re hunting for. So, that might be the RuBisCO of– maybe as an investor, you should be hunting for RuBisCOs.

Jake: Quite possibly, yes.

Bill: Something that you just said reminded me, Jake, of this tweet that is– I’m pretty sure it’s a guy, might be a girl, but the fool on Twitter said that, he’s like, “One of the things that bothers me is when people’s answer is this solution must win because it’s the best.” That is not true because there’s a lot of instances that existing infrastructure while suboptimal precludes the optimal answer. It was like two sentences ago that you said, and I was like, “That really reminds me of that statement.”

Tobias: The reason many things survive–

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