Hillbilly fantasy: Tomatoes to die for

Opinion editor’s note: Strib Voices publishes a mix of guest commentaries online and in print each day. To contribute, click here.

•••

In 2020, newly minted venture capitalist JD Vance embarked on his new career. Vance invested in and joined the board of AppHarvest, a Kentucky-based hydroponic tomato and vegetable startup. As in “Hillbilly Elegy” (2016), his autobiographical remembrance, he had returned to his old home near Breathitt County, Ky. Now he was promoting economic development to his Appalachian kinfolk in a business growing hothouse tomatoes. Vance’s preparation for an agricultural adventure in Kentucky’s highlander country had not been well-informed by Yale Law School or his studies in philosophy at Ohio State. But he and his fellow wealthy investors had sacks of cash to burn — and burn it they did.

Venture capitalists are what the 18th-century Scottish economist Adam Smith called “undertakers.” This antique usage has changed, but Merriam-Webster still includes it in the definition as “one who undertakes the risk and management of business.” Successful investing is an undertaking requiring calibration of risks and careful due diligence — skills one should expect in a potential president. But by almost any standard, investors in AppHarvest failed these tests. In Vance’s case, the more recent definition of undertaker is more apt.

Venture capitalist (hereinafter VC) Vance, new to growing tomatoes in greenhouses, had undertaken an investment that, had he read Adam Smith carefully, might have given him pause. Smith’s “Wealth of Nations” (1776), helpfully curated by the Online Library of Liberty, quotes this observation: “By means of glasses, hotbeds and hotwalls, very good grapes can be raised in Scotland and very good wine too can be made of them at about thirty times the expense for which at least equally good can be brought from foreign countries.” As Smith noted (appealing to Vance’s 18th-century vision of families): “It is a maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy.” Smith writes that the prudent tailor does not make his own shoes, but “buys them from the shoemaker.”

At AppHarvest, the shoemakers were Mexicans. Adam Smith’s truths were lost on VC Vance, as well as on Senate Minority Leader and Kentuckian Mitch McConnell, who figured that Kentucky could produce tomatoes just fine without Mexico or Mexicans. Until they couldn’t. When McConnell visited AppHarvest’s tomato operation in November 2021, its heavy reliance on Mexican workers had to be hidden. They were put on buses and sent back to the trailers where they lived four or five to a room until McConnell’s photo-op was over and they could get back to work. “I like the idea of taking the tomato market away from the Mexicans,” McConnell was recorded as saying, to surprised silence from the remaining workers.

VC Vance and company had failed to absorb Smith’s lesson. Even when paying substandard immigrant wages in Kentucky, tomatoes have an absolute advantage when grown in Mexico. In 2023, according to USDA, the U.S. imported $2.7 billion worth of tomatoes from Mexico, that country’s major export crop, an increase of 10% over 2022, with Mexico exporting more than 90% of U.S. market share. California produces about 95% of domestic tomatoes in the U.S., largely with immigrant labor. Most of the rest are grown in Florida, with a similar workforce. In a list of the top 10 tomato-producing U.S. states, Kentucky doesn’t even rank, producing around 2% of the national total.

At least it has room for improvement.

Another thing the venture capital geniuses apparently missed is that even in Kentucky hill country, hothouses are, well, hot. At AppHarvest, they sometimes reached 155 degrees Fahrenheit, according to a Nov. 18, 2023, documentary in Grist, prepared for the Kentucky Center for Investigative Reporting. The results, for both native Kentuckians and immigrant labor, were repeated episodes of dehydration, fainting and medical evacuations. Workers passed out and were wheeled out on steel trolleys as they pruned, watered and carried tons of tomatoes in temperatures well over 110 degrees. In a how-not-to-run-a-business lesson, AppHarvest “took people who had never done this before, threw them in a greenhouse, gave minimal training on how to do it, and expected us to produce Grade A tomatoes,” said a former worker quoted in Grist.

Despite an apparent aversion to international trade, agricultural economics and worker health and safety (though not immigrant labor) AppHarvest managed to go from a darling of the venture capital world to a goat in less time than Theranos. In the summer of 2023, lenders began demanding repayment of their investments. AppHarvest soon declared Chapter 11 bankruptcy. All of its facilities were sold. Back in 2021, when it went public at $35.19 a share, its valuation sat at $3.7 billion. By August of that year, its CEO informed investors that it was facing a $32 million loss. By the end of 2021, it had earned only $9 million of a projected $21 million in revenues. By early 2023 its stock, which had peaked at $42 a share, fell below a dollar, never to recover.

In the 1960s, when the Kennedy administration first gave the Appalachian region the attention it deserved, Ned Breathitt, the distinguished Democratic governor of Kentucky (1963-67) was elected on a platform of labor and civil rights protections for people of all races. His family had given Vance’s home county its name. He had defeated a colorful primary opponent, “Happy Jack” Chandler, who campaigned on the slogan: “Stuff the sack for Happy Jack.”

Silicon Valley and his other sponsors stuffed Vance’s sack and made him rich. When AppHarvest failed, Vance resigned from the board and the investors took shelter in bankruptcy. But the Kentuckians and Mexicans who worked there lost jobs and their hopes for a new future. This pattern, taken as evidence of skill at business, is familiar to Vance’s running mate, who started with millions in gifts from Fred Trump Sr. and has declared bankruptcy six times. Like his running mate, Vance’s primary talent in business has been to take money from a sack-stuffing sugar daddy.

Then lose it.

Carlisle Ford Runge is Distinguished McKnight University Professor of Applied Economics and Law at the University of Minnesota. The views in this article are his own and are not intended to represent those of the university.