This unadulterated episode of 8RD+ Versustakes features the Dutch-based EUR 53.3 billion revenue conglomerate Unilever in the world of FATTY ACIDS. As a theoretical framework we are probing the subjects of asymmetric information, impression management, planned obsolescence, and of course my favorite term FRAGILITY. In laymen terms, we are talking about who controls the markets of margarine, corn oil, butter, and all that fatty stuff. Also making cameo appearances are the ones responsible for the legislative smoke screens.
In January 2016 three key pieces of information concerning fats filtered through my waxy ears. First I was astounded to find out that Jim Cramer – once gifted journalist who reported diligently the Ted Bundy murders in Florida for a Tallahassee Democrat newspaper in 1978 – suggested that investors should focus on “high-quality stocks” like Unilever (NYSE: UN). Most of us know the company as a producer of margarines and soaps.
Secondly I read – also in January 2016 – that the chief executive of Unilever’s margarine division, Sean Gogarty, had resigned after some disagreement with Amanda Sourry who had become the president of Unilever’s food business in October 2015. The new margarine man elected was Nicolas Liabeuf. Paul Polman – CEO of Unilever – had some trouble to ease the investors in this turmoil.
Thirdly – perhaps to average Joe or Jane the most important news – was that the ever so radiant true TV celebrity Kim Kardashian after giving birth to her son Saint West had decided to go back to her high-fat, low-carbohydrate (HFLC) Atkins Diet with the help of her Atkins Coach Colette Heimowitz. In some countries HFLC Diet is called LCHF Diet to highlight the small proportion of carbohydrates, but anyhow you pronounce it, the eating habits of Kim Kardashian were a shock to the medical community around the world.
The obvious question the odd reader or two should now be asking, is whether the margarine business is going up or down, and why? Another question that arises, is whether our knowledge of health aspects related to fats are mere brainwashing, and how our legislation has altered market structures? To use the terminology of my fellow writer 7/.V, are we having too much “HACK DATA” in the overall information load? Is there asymmetries in the information we use to govern our money and health?
Fat Tails and Fat Envelopes
In the eyes of both investors and customers, the fat industry shows all the signs of – pardon my pun – fat tail distribution. It means that extreme events are more probable than they should be in free markets. The whole point of industry lobbying is always to make the risk distribution more like fat tail distribution. For example the repeal of the age-old Glass-Steagall Act that demarcated commercial banking and investment banking was the key fact that made the Housing Bubble and the fall of Bear Stearns in 2008 possible – it was the birth of Western recession. The two laws generally blamed: Gramm-Leach-Bliley Act of 1999, and Commodity Futures Modernization Act of 2000, often are labelled under the term DEREGULATION, while what actually happened was the bureaucratization of CONTROL. To showcase the fat tail distribution, just a reminder that Bear Stearns had stellar profits in five consecutive years before the brief downfall and emergency landing in March 2008. A month before the crash, in February 2008, the stock price was USD 93, and then it turned to wall paper.
I would like to make my own terminology very clear: the difference between REGULATION and CONTROL is the procedural transparency. In REGULATION, some things are forbidden and everybody knows that. In CONTROL, there is always some governmental agency with advisory boards giving permissions, allowances, and exemptions – a system giving open invitation to bribery. The Housing Bubble with all those complicated derivatives could not have happened under old legislation following Glass-Steagall Act. One man, William “Phil” Gramm, often attributed to destroying Western economy with his Gramm-Leach-Bliley Act, has served both Democratic and Republican Parties and is now at Swiss bank UBS.
The ever so flammable topic of Transatlantic Trade and Investment Partnership (TTIP) has been heavily lobbied by Bob Stallman and other agricultural kahunas – forgive me my use of Hawaiian – like Kevin Paap from Minnesota – the land of Cargill. Although proponents of TTIP have been labeled as neoliberalists, the legislature is really a way to increase FRAGILITY – more Advisory Boards and Governmental CONTROL to make sure that intellectual property rights in farming and other fields also are utilized to the maximum. TTIP is all about patents, and therefore the use of monopoly power for predetermined periods of time. Big companies always want to make away chances in consumers preferences and all that nasty volatility in sales which would force the company – not the consumer – to adapt. ROBINSON GOOD is the ultimate goal, a product where advertised vehemence meets PLANNED OBSOLESCENCE, a product best before use – and used when ordered.
Advisory boards and Governmental CONTROL are key components in the fat industry also. For example in Finland kids in school or day care are not allowed to drink full cream milk or eat butter even if their parents provide the food to the school. Two women – Klara Poikolainen and Elina Jaatinen – tried to orchestrate a campaign in Finland in December 2014 to change things around, but nothing happened. This episode of nutritional history was coined as “Voisota” or “Butter War” or “Buttergate.” A man from the same city of Espoo – Sami Uusitalo – has also with futile attempts tried to challenge the official truth to ban animal fats in all Western countries. Nutritional Guidelines are written by BIG AGRO and BIG PHARMA.
To illustrate my point, I would like to remind how American Heart Association (AHA) with its vast BIG AGRO and BIG PHARMA connections launched an “information” campaign in 2007. The object was to scare the public from using saturated fats, and it was coined “Meet the Fats.” These advertisements illustrated two cheesy Bad Fats brothers Sat and Trans, and two perky Better Fats sisters Mon and Poly. The cause really was to boost the sales of soybean oil and margarines, which had been affected by the organic paleo low-carb craze. The spokespersons were AHA Dr. Robert H. Eckel and celebrity chef and TV-personality Alton Brown. After following these official guidelines Chef Alton Brown got fat like a big, and had to go on a low-carb diet with less polyunsaturated fats in 2009. He managed to lose 50 pounds (23 kg) of weight by ignoring the official guidelines. A similar sort of incidence happened in Finland when a personal trainer who has lived in both Australia and Finland – his name was Tomi Kokko – decided to switch to official diet for the period of 30 days. You guessed right – his weight went up 13 pounds (6 kg) and the added weight was fat. To add insult to injury, a professor of Nutrition, Mikael Fogelholm, announced in mainstrean media that these kind of experiments are dangerous. Did he really admit that following the McGovern Dietary Guidelines is a threat to human health?
The Land of Lakes
In order to understand the triumph of vegetable oils and margarines in Western diet we must know something about the timeline of events leading to modern days. The geography plays an amazing part here. But before going to the intricate details, let’s focus on what happened at Christmas 1970 in United States. An often forgotten piece of legislation swirled through the 91st Congress with Democratic majority in both chambers, a law essentially written by Allenby L. White – a vice president in a Minnesota-based seed company Northrup & King – one of the power players in the Corn Belt. The law was “Plant Variety Protection Act of 1970” (PVPA), and it made possible to have intellectual property rights – i.e. patents – of living organisms.
The invention of hybrid corn – invention made in the University of Minnesota – now came to new light and new money. The fact that Ancel Keys from University of Minnesota had formulated the Diet-Heart Hypothesis declaring the benefits of using vegetable oils, came in handy later when Democrat Senator of Minnesota Hubert Humphrey sat in George McGovern’s Select Committee on Nutrition. Humphrey was, as we all know, a close friend of Dwayne Andreas and his wife Inez – the tycoons in Minnesota corn industry. Dwayne Andreas worked first at Cargill in Minnesota, and later at Archer Daniels Midland (NYSE: ADM), earlier located in Minnesota before moving to Illinois in 1969. Dwayne Andreas was one of the most generous political campaign contributors through all his life, and the corn industry lobbying is powerful even today.
Outside of Minnesota the main bulk od evidence supporting the beneficial nature of polyunsaturated vegetable oils comes from the other Land of Lakes, Finland – the small country near Russia. The link was here two Finnish Doctors visiting University of Minnesota in the 1950s: Martti Juhani Karvonen and Sven Matias Punsar. These men later orchestrated the studies in Finland supposedly linking cholesterol and saturated fats to coronary disease. The man who himself took the credit of eradicating coronary disease out of europe was Pekka Puska from Finland, who linked his own name to the infamous North Karelia Project and worked at the World Health Organisation.
Revisiting the old studies of dietary fats made in Minnesota and Finland has been an eye-opening shock to modern researchers. One of the latest analyses was done by Christopher E. Ramadan and his team, and was published at the British Medical Journal (BMJ) in April 2016. The study was alluringly titled: “Re-evaluation of the traditional diet-heart hypothesis: analysis of recovered data from Minnesota coronary experiment 1968-1973.” The outcome was – as in all the re-evaluations – that back in the days the study abstract and press release had absolutely nothing to do with the actual findings of the study. Up to this day there is actually no scientific data to suggest that saturated animal fats would be unhealthy – despite the myriad of academic study press release material that make the claim. The corn and soybean industry is far better lobbying than dairy and meat industry. The HACK DATA managed to overshadow the BIG DATA for several decades.
Control Confronts Regulation
At first glance there seems to be no obvious link between vegetable oils and a piece of U.S. legislation called Durham-Humphrey Amendment of 1951, but because at the time the rising star of Democratic Party from Minnesota – Hubert Horatio Humphrey – was involved, the Dwayne O. Andreas connection to CORN industry should not be missed.
The Durham-Humphrey Amendment was one of the most important laws ever written to govern the markets of pharmaceutical products, and it was emulated all over Western world. The law explicitly defined two categories for medications; legend drugs requiring prescription, and over-the-counter (OTC) medications. Again, many people would say that this is REGULATION, but in actuality it is CONTROL. After Durham-Humphrey Amendment and the establishment of the Food and Drug Administration (FDA) drug manufacturers have to get permission from FDA to produce their products, and patients have to get permission from doctors to purchase the product. To maintain high prices, the monetary traffic goes through insurance agencies to further bureaucratize the procedures. While this medical establishment tells us to eat SOYBEAN oil and canola oil – not butter – you start to wonder is it really supposed to make people healthy or to make BIG AGRO and BIG PHARMA rich. The FRAGILITY factor and fat tail characteristics eventually will start to showcase when the public no longer believes in the establishment dogma.
The world lived happily hundreds of years under medical REGULATION. The Edict of Salerno in 1241 separated the professions on pharmacists – selling products – and doctors – selling services. The difference was clearcut. No conflict of interest. In the first part of the 20th century it was customary that all drugs like Benzedrine were freely available, and in the 1930s vitamins were the big buzz. No one would have bought nauseating drugs that make you slower. And those who didn’t die in wars lived to respectable ages – no cancer or obesity – like Supreme Court Justice Oliver Wendell Holmes Jr. who retired at the age of 91 in 1931, just when CORN and SOYBEAN were entering into people’s diets in oil form. Dwayne Orville Andreas of Minnesota started oiling the food industry.
When the peace time came after World War II, the United States started using agriculture as a power tool. CORN and wheat are of course immensely easier to ship abroad than milk, so Dwayne O. Andreas had the chance to run his Minnesota business mob. Again, shelf life was the real issue here. Vegetable oils are a perfect example of ROBINSON GOOD; best before use. All other vegetable oils except olive oil get rancid very rapidly, and this has always been a problem in packaging industry. The main feature of olive oil – the high monounsatured fatty acid content – was turned into a flaw by the CORN and SOYBEAN industry, the companies providing high polyunsatured fatty acid content. Unfortunately it was also known already in the 1930s that vegetable oils other than olive oil, coconut oil, and palm oil induced serious health hazards like heart problems, cancer, and asthma. The mechanism was not known at the time, but the picture started to emerge in full color in the 1960s.
Rat Poison for Mr. President
Now enter rat poison and preventive medicine. At the Corn Belt was invented a miracle rat poison by Karl Paul Link, and soon a New York pharmaceutical company Endo Laboratories figured it could be charged more if sold to people. To make matters even more interesting, the one compound chosen in the tests as best was originally labeled “Compound 42”, in binary 101010, and according to Sci-Fi classic “The Hitchikers Guide to Galaxy” the ultimate meaning of life is 42. In free markets – like before Durham-Humphrey Amendment – no one would have eaten rat poison unless trying to make suicide. But now, markets under CONTROL, doctors could prescribe rat poison to people having heart problems – with FDA permission. Endo was bought by DuPont in the 1960s when CEO Charles B. McCoy wanted to diversify market portfolio of the company, but soon found out that getting licenses from FDA was easier for the “real” drug companies – a further proof that cronyism is the essence of CONTROL economics.
To once more showcase how CONTROL can lead to inefficient market outcomes, let’s take a look at one more drug originally manufactured by Endo Laboratories. The drug in question was found to be very effective to treat alcoholism – i.e. to slowly desensitize alcoholics to not want booze so much. The drug is naltrexone – and the man behind using it in very low doses and only temporarily was the late John David Sinclair. Sinclair was born in the East side of the Corn Belt in America, but he had to move to Finland to even study the subject. Low-dose naltrexone treatment is banned in almost everywhere for a simple reason: it is cheap and effective – a total opposite of ROBINSON GOOD classification. It is however used in very serious cases of obesity when people are desensitized to not like polyunsaturated fatty acids and not to eat all those deep fried foods soaked in soybean oil. Remember that polyunsatured fats are supposed to be officially healthy.
If you look at any modern pharmacy book you soon notice that this miracle rat poison “Coumadin” or “Warfarin” is labeled under Vitamin K antagonists. Not surprisingly, the main source of excess vitamin K in Western diet is SOYBEAN oil and canola oil. Vitamin K is key component in clotting of the blood, and it is needed in small amounts. And according to statistics, the rat poison “Coumadin” is one of the top four drugs to cause hospitalization and drug induced death. All this makes the health markets bigger in revenue terms. First get money for inducing a problem and then second time when you try to solve it. The modern reputation of Unilever – our main case study – is not at all helped by the fact that one of the founding fathers of the infamous Bilderberg Group in the 1950 was CEO of Unilever Paul Rykens.
There are of course those men wearing tinfoil hats that say there is a worldwide conspiracy to make people sick. But you have to remember that modern dietary guidelines have their origins in the era after the shock of World War II. Peace for ever was the thing most people were yearning for. Now enter the MOM maxim from criminology – means, opportunity, and motive. The multicorporate food industry had them all – the means, the opportunity, and the motive to make nations more tranquil, obese, and lethargic. Even CIA was involved when Bilderberg Group was formed.
What a better way to endorse sales of rat poison than to get a Republican President to eat it daily. Therefore Dwight Eisenhower had to be persuaded to first use more vegetable oils and then after his heart attack in 1955 to use “Coumadin” for the rest of his life. All newspapers, TV, and radio were celebrating this wonder drug that had saved the war hero’s life, and the business of preventive medicine leaped slowly to astronomical sphreres. The link between agribusiness and drug business has been enforced even tighter with laws like the aforementioned Plant Variety Protection Act of 1970. The Swiss-based Syngenta – producer of GMO corn MIR 162 and soybean S48-D9 – has huge operations in Minnesota, but the company has its roots in drug companies Novartis and AstraZeneca.
Hack Data Meets the Press
The problems of using vegetable oils – other than olive, coconut, or palm – is not only linked to excessive amounts of vitamin K, but also to the amount of polyunsatured fatty acids. As I mentioned in my earlier article “Will DuPont Change the Monkey Business in Beverage Business?”, it is the saturated fatty acids that are actually needed for energy. The role of unsaturated fatty acids – especially the long ones – is mainly to be formed to eicosanoids and leukotrienes. From the names you should get some idea of the chemical structure, but for the laymen it is needed to know that these are needed for inflammatory processes and altered cell division. The problem with excess intake therefore leads to asthma, allergic reactions, cancer, and inflammation in the heart and lungs. None of these sound very nice, but all of them lead to bigger medical expenditure, i.e. economic growth.
The 1982 Nobel Prize for Physiology or Medicine was awarded to Sune K. Bergstrom, Bengt I. Samuelson, and John R. Vane for their studies on prostaglandins. It was hailed in the newspapers as a way of explaining why anti-inflammatory medicines like Aspirin actually work, but the other perspective to the question is why the Western world is in so much pain. The way news are presented to us dictates whether you receive the BIG DATA or only the HACK DATA – a brilliantly constructed misinterpretation of the facts to misguide investors and consumers.
To the diligent reader or two the 1982 Aspirin Nobel should have been a warning not to meddle with the precursors of prostaglandins – the polyunsaturated vegetable oils and margarines from which the 20-carbon series 1,2, and 3 eicosanoids are made of in our bodies. Whereas animal fats have molecules like lipokines that help you utilize fats for energy, all the other vegetable fats except for olive oil, palm oil, and coconut oil mainly increase inflammations. All this BIG DATA has been available for decades, but lobbying had deprived the ears of both investors and consumers alike from the appliance of science. The HACK DATA has persistently prevailed. It is disturbing to find out how many of the most prescribed drugs – not only Aspirin and Coumadin – are direct antagonists for the substances derived from vegetable oils.
No wonder Novartis has blockbuster drugs like asthma medication Xolair and heart medication Entresto, and no wonder President Barack Obama wanted obligatory private medical insurance for everybody. With regard to President Obama, the FDA appointments of Michael Taylor – ex-Monsanto (NYSE: MON) – and Robert Califf – ex-Portola Pharmaceuticals (NASDAQ: PTLA) and ties to Merck (NYSE: MRK) are a little dubious.
The Tiger Heart Syndrome
The Tiger Heart Syndrome is a name given in veterinary field for the striped lesions in the hearts of animals using much polyunsaturated fatty acids – mainly that means animals given soybean meals. The use of soybean meals combined with animals growing faster like Cobb 700 or Ross 708 chicken, means that animal husbandry is a fine line to kill the animal before its heart fails. Another FRAGILE phenomenon in the field of food industry.
A way to explain the necessity of the so-called ESSENTIAL fatty acids – some polyunsaturated fatty acids – I would urge you to think about cars. You should understand that different tires and motors are all substrates – they can be replaced with something almost similar – but the key to your car is essential – it must be just the right one. You can’t use your neighbor’s car keys to start your own car, but you might swap your tires with him. The point here is to realize that if something is truly ESSENTIAL – not replaceable – you only need it in small volumes. There is no benefit of having thousands of car keys to your own car. The same goes for the ESSENTIAL fatty acids – they are not needed for energy but for inflammation processes in your body. You do need it, but only a bit.
The original study that started the excessive use of polyunsaturated vegetable oils is quite revealing in terms of asymmetric information. Working in Minnesota – where else – George Burr noticed that rats deprived of fats fell ill, but by giving them 0.4 percent of their Caloric intake as pork lard, they get better. Voila – for the whole medical community this was a proof that people need 30 percent of their Caloric intake as vegetable oils. I don’t personally see the logic here – maybe it’s fuzzy logic – but the food industry in Minnesota and Mayo Clinic in Minnesota and nutrition experts in Minnesota certainly did notice the striking inevitable conclusion. Therefore all the planet was destined to eat vegetable oils. But one more warning – market structure based on CONTROL and advisory board recommendations is FRAGILE. It can break at any moment like derivatives markets.
A quite different example would be the market for shoes. People have been wearing shoes for thousands of years, and slowly they have become better. Someone like Bill Bowerman can use his wife’s waffle iron and make soles for shoes and start a company like Nike (NYSE: NKE). There is no governmental shoe inspection agency – at least none that I know of – and therefore there are no crashes in shoe markets. These types of markets are ANTIFRAGILE – they are self-correcting. Sometimes they go up and sometimes down, but they never crash.
The New Coke Moment
Unilever has been having trouble with its spread division, and the rumours about divesting have been around for years. Unilever has in the past owned even the legendary Mazola corn oil brand, so making brand portfolio changes is nothing new in this field. Procter & Gamble, another major lobbyist back in the days and once producer of Crisco, the lard substitute, has nowadays nothing to do with food business.
The New Coke Moment – a product alteration gone horribly wrong – came to public when Paul Polman proudly launched a new Unilever Cool Blending technology in 2012 with advertised benefits of having even less saturated fatty acids in margarine. Palm oil was of course a key ingredient. But the customers didn’t like it and there was no way beating around the bush with it. EUR 35 million investing was going down the drains. After 18 months in 2014 the company had to bring the old margarine back to markets, depending on the country with names Flora or Rama. In 2014 Flora Gold was released, a margarine with butter added in the mix – something Paul Polman probably couldn’t ever conceive happening when he entered his job as CEO in January 2009.
Unilever’s fat division has had legal problems also, as well as sales problems. One of the more famous cases was Evangeline Red versus Unilever in California District Court. The hydrogenation of fatty acids is not looked upon so kindly as it was in the past. Why on earth the public doesn’t act like the BIG AGRO lobbyists want? Who is going to buy the spreads division away from Unilever?