We receive dozens of thoughtful emails each week from people (mostly young men) asking for advice. They all deserve a response, but the time/space continuum gets in the way. So we’ve set out to leverage AI to develop a digital twin capable of answering questions in my voice. ProfG.ai is an experiment we hope will provide insight into AI and (someday) help people make better decisions re their offline lives. Or not. For more about how and why we made it, check out our podcast announcement here.
Disruptive innovation is often felt more in second-order effects, clear of the original idea’s blast zone. The automobile was transformative, not because of the cars but the suburban lifestyle they inspired. Global power was increasingly shaped by the flow of energy. And the manufacturing innovation required to wrap steel around four wheels and an engine at scale became central to the West’s economy.
Today the media (including this newsletter) is obsessed with the changes wrought by artificial intelligence. In my view, it’s an obsession caused by the collision of techno-narcissism and the idolatry of innovators. Our new gods, tech innovators, posit that they are the fathers of the singular point of leverage that will save or destroy humanity. “Now that my options have vested, I want to profess that I am such a fucking genius, I’m now worried about my brilliance being unleashed. I’m so awesome as to be dangerous, accidentally of course.”
Jesus Christ, get over yourself.
I believe there is another innovation that will also be transformative as its full impact and second-order effects play out. What GPT is to the media, GLP-1 will be to the real economy.
GLP-1 > GPT 4
GLP-1 is an agonist, a hormone our bodies use for internal communication. Among other things, it triggers the pancreas to produce insulin, which brought it to the attention of diabetes researchers, who developed a synthetic form of GLP-1 called semaglutide. In 2017, Novo Nordisk brought semaglutide to market in the U.S., under the brand name Ozempic.
Note: My use of the word “agonist” in the previous paragraph was an attempt to appear more intellectually svelte. My use of the word “svelte” in the previous sentence is an attempt to sound prim. Using “prim,” more British. Trying, always trying … desperate for other people’s affirmation. But I digress.
The scientists who developed semaglutide faced a problem when conducting their research — if the dose was too high, patients taking the drug lost their appetite. Ozempic was formulated at a low enough dose to reduce this side effect. However, Novo Nordisk realized this was a feature, not a bug, and formulated a higher-dose class specifically for weight loss, Wegovy, approved in 2021.
Semaglutide will be followed by similar GLP-1 drugs, including retatrutide and tirzepatide, both in trials from Eli Lilly. Studies with overweight patients show weight loss of 15% to 24% of body weight. Both Wegovy and Ozempic are weekly injectables, which discourages some people, but now there’s a pill version, Rybelsus. Whatever the label on the box, GLP-1 drugs make us feel fuller for longer and suppress hunger cravings. In sum: the most effective weight loss drugs to-date.
The market for this product, and the potential for meaningful societal change, are massive. In America, 70% of people are obese or overweight. There isn’t anything that over two-thirds of America is. (Only 30% of Americans watched the last season premiere of Game of Thrones.) More than 42% of U.S. adults are obese, up from 31% in 1991. Globally, the prevalence of obesity has tripled since 1975, and 800 million people, including 50 million children, are now obese. People with limited access to healthy food or bad genetic luck with their body chemistry are preyed upon by one of the most well-oiled marketing and distribution engines ever built: the industrial food complex. They’d like to teach the world to sing, in perfect harmony with addiction and diabetes.
Obesity is not a form of personal expression or finding one’s “truth,” it’s a disease that invites illness and disability, including coronary heart disease, stroke, cancer, gallbladder disease, and Type 2 diabetes. Globally, obesity is the fifth-largest cause of premature death. Our health-care system suffers from many problems, and the chaser to many/most of them is obesity. According to The Milken Institute the direct and indirect costs of obesity total $1.7 trillion, or 7% of U.S. GDP. A 15% reduction in body weight would move 43 million Americans out of the obese column.
In the fourth quarter of 2022, 9 million prescriptions for GLP-1 drugs were written in the U.S. Over the past two years the share of health-care patients in the U.S. using semaglutide has tripled to 1.7%. That number will grow, as an estimated 93 million Americans could benefit from the drug. I believe even that understates the economic opportunity for Novo Nordisk (and, eventually, other GLP-1 drugmakers), as the numbers understate the demand. In the past 24 hours I have spoken to three people, whom I wouldn’t describe as being overweight, much less obese, who are on Ozempic to lose that last stubborn 15 pounds.
What happens when millions of people start taking a drug with a limited track record? The FDA (and foreign) approval processes are robust. The average FDA approval involves six different studies in four phases over 10 to 15 years. But they’re not perfect. Long-term and widespread use of a compound can surface side effects invisible in trials. The FDA approved a diabetes drug with a different mechanism, rosiglitazone (branded as Vandia), in 1999, but it has subsequently been associated with an increased risk of heart failure, and many countries have pulled it from the market. GLP-1 drugs are already associated with severe stomach issues in a small number of patients, and they may cause some people to lose lean muscle.
The obesity economy is the iceberg below the surface of our $23 trillion consumer economy, and GLP-1 is the latest taste to inspire salivation across Wall Street’s greed glands: Traders have been shorting restaurant stocks, putting nearly $1 billion on the Do Not Pass line in just the last month. One analyst told CNBC that the revenue hit to the restaurant business could be $25 billion by 2025.
The evidence? Morgan Stanley surveyed 300 Ozempic users, and 77% of them said they visit fast-food restaurants less often now that they’re on the drug. Walmart is already seeing a decline in food purchases among people taking GLP-1 medications. These effects likely aren’t yet visible in firms’ EPS as these drugs are limited in supply and a fraction of overweight people are taking them … so far. However, the stock market is a mechanism for trying to see around the corner, and the decline in share values across the obesity industrial complex will front-run the impact.
Fast food gets hit first, but fast casual is also under threat. Look for snack foods, frozen meals, candy, soda, and baked goods to all take a hit. Among GLP-1 users, 58% report they ate four or more snacks per day before taking the drug, and 90% say snacking decreased while they were on it. In any category, profits are driven by a minority of customers. And these products’ best customers are becoming Novo Nordisk’s newest.
Food sales are an obvious target, but the effects of lower obesity rates will inspire other aftershocks, some greater in magnitude than that felt at the food epicenter. One interesting knock-on effect: it’s estimated that United Airlines would save $80 million a year in fuel costs if its customers lost an average of 10 pounds. Sports and fitness will be restructured: Gyms, built on a consumer base trying to lose weight, will see lower revenue, whereas sports for which fitness is a prerequisite (skiing, mountain biking, climbing) stand to benefit.
Apparel likely sees a short-term bump, as people splurge on clothes to fit their remodeled bodies, but the longer-term outlook is harder to predict: Less yo-yo dieting means some people won’t need separate wardrobes to accommodate different selves, but formerly overweight people spending less money on food might allocate that cash to clothing. Where else could that extra food budget go? Discretionary spending increases will spread through every non-caloric category. Could this help reverse trends around loneliness and declining birth-rates as people feel better about themselves and are increasingly ready to mingle?
If that’s all these drugs did, they’d still be a first-ballot hall of fame medical breakthrough. But this may be just the beginning. The Washington Post reports: “For some, these new weight loss drugs also seem to dampen the rewards of addictive substances, whether that’s nicotine, opioids or alcohol.” Let that sink in. It’s possible GLP-1 drugs are not weight loss drugs, but anti-craving drugs.
In lab tests, mice on an earlier form of synthetic GLP-1 receive a lower dopamine hit from alcohol. Rats are less interested in cocaine. Monkeys with a demonstrated preference for booze drank less. Anecdotal evidence from human users includes reports of reduced nail biting, shopping, and smoking.
If you scroll back through previous issues of this newsletter, you’ll find a recurring theme: societal ills resulting from cravings. From meme stocks and Robinhood to TikTok addiction and Twitter enragement, to obesity itself, human weakness subjugated to our brain’s reward circuitry is no less a threat to our well-being than climate change, authoritarianism, or cancer. According to Harvard’s Grant Study on happiness, the factor most commonly present in the least-happy cohort was alcohol. It’s that fundamental.
A drug that rewires these reward circuits could be an epochal step in human evolution. And why not? We’ve compensated for evolution in many other ways, from the protection of clothing to the assistance of eyeglasses to the power of wheeled transport. Perhaps we’ve reached the point where a salt/fat/dopa drive, evolved on the savannah of scarcity, can give way to a motivational superstructure suited for our era of superabundance. GLP-1 innovation may be scaffolding for instincts in need of updating.
Large health-care insurance companies and providers, starting with the U.S. Government, should make delivering GLP-1 drugs a priority (instead of pulling back, as the short-sighted insurance industry has done). Globally, the WHO and national health organizations could do the same. You can get Ozempic over the counter in five Emirates in the Gulf. And Americans are venturing to Mexico and Canada where cost is (spoiler alert) a fraction of what it is in the U.S. Government funding will test the fulcrum between the obesity industrial complex (food, pharmaceutical, and hospital networks) and long-term economic thinking, because these drugs will register an enormous ROI for society as health-care costs decline and mental health improves. Depression rates among obese children are double those of average-weight kids and can haunt them in adulthood. A 5% reduction in weight can cut an obese person’s medical costs by $2,000 per year, and it’s estimated that a full transition from obese to a healthy weight saves nearly $30,000 in direct medical costs and productivity.
Fun fact: My digital twin (ProfG.AI) believes “obesity drugs, while important for public health, are more of a niche solution.” It’s obvious he disagrees with me as he’s jealous I got to go to Chiltern Firehouse (in person) last night. Anyway, the potential to calibrate the drug for specific addictions is mind-blowing. One can envision similar hormone-mimicking drugs that could be engineered to address addictions to money, affirmation from strangers, short-form videos of chiropractic care, WWII documentaries, Zacapa, edibles, smoked meats, or reading random theories about the universe. Because here’s the thing — I’m slim, but obese.
Life is so rich,