Speaker 1: I'm Bethany McLean. This is making a killing in this show.
Speaker 1: I cut through the hype and handwringing to reframe the
Speaker 1: stories you thought you understood and uncover the ones you
Speaker 1: didn't know were important. Today, my guest is Joe no Sarah,
Speaker 1: an opinion columnist at Bloomberg. Here's how the pitch to
Speaker 1: investors went. Look, smoking hasn't evolved in a hundred years.
Speaker 1: It's literally killing millions of people. We are smokers were
Speaker 1: at risk of suffering the same fate, and we're scared.
Speaker 1: So how do we create a new ritual to replace
Speaker 1: the old one? At least that's how founders Adam Bowen
Speaker 1: and Jane Monsey's came up with their big idea for
Speaker 1: Jewel while they were getting master's degrees at Stanford. And
Speaker 1: so it is that Jewel was born, the now wildly popular,
Speaker 1: wildly valued, and wildly controversial vaping company. It's probably, as
Speaker 1: my kids would call it, one of the biggest drama
Speaker 1: lamma companies in the last year. If you could imagine
Speaker 1: Saint Peter presiding over Jewel in the way that he
Speaker 1: weighs your and your merits before you can enter the
Speaker 1: Kingdom of heaven. On one side of this morality play
Speaker 1: set people who argue that Jewell, whether on purpose or not,
Speaker 1: remains to be seen, is grotesquely addicting a whole new
Speaker 1: generation of kids who were previously non smokers. To that end,
Speaker 1: Jonathan Winnikoff, a professor at Harvard Medical School, told The
Speaker 1: New Yorker, if you were to design your ideal nicotine
Speaker 1: delivery device to addict large numbers of United States kids,
Speaker 1: you'd invent Jewel. On the other side of the morality
Speaker 1: place that people who defend Jewel as a company focused
Speaker 1: on harm reduction, arguing that vaping gets existing smokers off
Speaker 1: of lit tobacco, which is deadly, and who cares if
Speaker 1: it still delivers nicotine, the addictive substance, because hey, that's
Speaker 1: better than lung cancer. Although the public health community is
Speaker 1: loath to acknowledge it, the decrease in smoking correlates pretty
Speaker 1: straightforwardly with the increase in vaping. Jewel just closed a
Speaker 1: major strategic investment with Altria, who, of course also makes
Speaker 1: the Big bad Cowboy Marlborough. I wonder, is the lesser
Speaker 1: of two evils really the heart and soul of good business?
Speaker 1: Is that what American industry has made for or. As
Speaker 1: Fast Company wrote, if the traditional startup narrative once followed
Speaker 1: the outlines of identify needs, scale the solution, the modern
Speaker 1: version looks something more like identify a need, scale the solution,
Speaker 1: and deal with the unintended consequences and regulatory backlash. It's
Speaker 1: no coincidence that jewel like uber has become a verb today.
Speaker 1: My guest is Joe no Sarah, an opinion columnist at Bloomberg.
Speaker 1: I first met Joe over two decades ago when we
Speaker 1: both worked at Fortune. He's a friend and my co
Speaker 1: author on my last book, All the Devils Are Here.
Speaker 1: You can always count on Joe for an opinionated, although
Speaker 1: often nuanced view, and he's been thinking about this particular
Speaker 1: issue of harm reduction for at least ten years. The
Speaker 1: first time I wrote about tobacco wasn't two thousand and seven,
Speaker 1: and I did a big cover story for the New
Speaker 1: York Times magazine about Philip Mars. I remember that piece
Speaker 1: part of the process of that story was them telling
Speaker 1: me we're working on these new products. They're called harm
Speaker 1: reduction products, and I was like, what is that. I
Speaker 1: couldn't envision it, and I even went down to Richmond,
Speaker 1: to the factory. I met the scientists and I saw
Speaker 1: some of the work they were doing, and I still
Speaker 1: couldn't understand what could a harm reduction cigarette look like,
Speaker 1: what it would act like, how would it work? Cigarettes
Speaker 1: are killing four hundred and fifty thousand Americans every year.
Speaker 1: This is despite the fact that has gone from sixty
Speaker 1: percent usage in the nineteen fifties. Too, among American adults,
Speaker 1: it's under twenty percent, it's seventeen or so. It's really
Speaker 1: remarkable what's happened. Dramatic. Some years later, a product came
Speaker 1: on the market which was not introduced by tobacco companies,
Speaker 1: but by these startups that were harm reduction products. They
Speaker 1: gave you a hit of nicotine. They came in flavors,
Speaker 1: as we all know. We'll talk about that, I'm sure,
Speaker 1: but they didn't have tobacco. And the thing people have
Speaker 1: to remember about cigarettes is saying, is nicotine ad dicks
Speaker 1: tobacco kills. Back in the day before the public health
Speaker 1: community decided to attack the cigarettes, they actually used to say,
Speaker 1: if I had to trade one for the other, I
Speaker 1: would of course trade nicotine for tobacco if I could
Speaker 1: get rid of the tobacco and keep to nicotine. I
Speaker 1: would take that deal. It's a little bit like the
Speaker 1: environment in the sense that Exxon is not going to
Speaker 1: be the company that makes wind power or solar power.
Speaker 1: It's going to come from other different companies. Right. So
Speaker 1: these companies started to crop up and I got started
Speaker 1: to get interested in them, and adult smokers started to switch,
Speaker 1: not a lot, but some. The one of the reasons
Speaker 1: jewels attractive more than these other companies is that people
Speaker 1: are used to a certain amount of nicotine and they're
Speaker 1: they're used to hitting your throat in a certain way,
Speaker 1: and they're just used to it acting the way it
Speaker 1: would act in a cigarette. And the reason Jewel was
Speaker 1: originally successful is that it could do that. But it's
Speaker 1: also a very cool looking thing and it's more of
Speaker 1: a silicon valley type device, and so it became very
Speaker 1: attractive to use, which is part of the problem. Right, Well,
Speaker 1: it depends on how you define the problem. So their
Speaker 1: pitch is the original pitch of Jewel was that it
Speaker 1: wasn't supposed to be about the money. It was supposed
Speaker 1: to be about doing good, about coming up with a
Speaker 1: solution to this problem of smoking. Do you believe them.
Speaker 1: I don't think they ever said it's not about the money.
Speaker 1: I think they said we don't want to sell to kids.
Speaker 1: I don't really believe that, particularly because if you look
Speaker 1: at the early advertisements they especially what was on Twitter
Speaker 1: and Instagram, they're very oriented towards youth, no question about it.
Speaker 1: Here's the tough part. You smoking is down to about
Speaker 1: eight percent smoking, and that's a drop of over fifty
Speaker 1: percent just since two. That's an astonishing thing. As Juel,
Speaker 1: the cause of that or is it just a correlation? Well,
Speaker 1: I mean the correlation seems pretty obvious. I mean you
Speaker 1: look at the line, it kind of stalled out, and
Speaker 1: then suddenly smoking goes like that down and vaping goes
Speaker 1: bloom up. The reason you don't know that, Why don't
Speaker 1: you know that? The reason you don't know that is
Speaker 1: because the government defines tobacco use as smoking and vaping,
Speaker 1: even though vaping doesn't have any tobacco in it. The
Speaker 1: statistics that are put together by the CDC basically are
Speaker 1: about any kid who has used an east cigarette, wants
Speaker 1: or more over the past thirty days. That's what the
Speaker 1: definition is. Does that mean they're experimenting? Does that mean
Speaker 1: they're hooked. Does that mean they're going to be an
Speaker 1: addex twenty years from now? We don't know. We don't know,
Speaker 1: but I would venture to guess that a whole lot
Speaker 1: less than twenty percent of high school kids are hooked
Speaker 1: on vaping. I think it's much more likely that's a
Speaker 1: lot of experimenting going on. So why isn't the federal
Speaker 1: government choosing to help people understand the difference between smoking
Speaker 1: and vaping. Should they be doing more? I strongly believe
Speaker 1: they should be doing more. The government in Great Britain has,
Speaker 1: basically it's it's government policy to say that vaping is
Speaker 1: ninety five percent safer than cigarettes because it doesn't have
Speaker 1: combusted tobacco in it. So in America there is a
Speaker 1: kind of I'm sorry to say this word hysteria over
Speaker 1: the evils of vaping. A lot of it has to
Speaker 1: do with the history of the tobacco companies and how
Speaker 1: they hid the dangers of cigarettes, and how they were
Speaker 1: the bad guys for so long, and how they hook kids,
Speaker 1: and so now today we have this different product, but
Speaker 1: the mentality of the public health community and the government is,
Speaker 1: oh my god, it's still big back tobacco. We have
Speaker 1: to stop them, so it's historical baggage. Well. And one
Speaker 1: other thing, if I dare say, there is a view
Speaker 1: in public health that the only way to stop smoking
Speaker 1: is to stop smoking, and that vaping, because it still
Speaker 1: allows you to have this addictive habit is somehow bad.
Speaker 1: And I would argue that if you've never smoked before
Speaker 1: and you start vaping, that's not a good thing. But
Speaker 1: if you're a lifelong smoker and you smoke for twenty
Speaker 1: years and suddenly you know you have a chance to
Speaker 1: get your nicotine fixed without killer tobacco, it's a great thing.
Speaker 1: I was just on the phone with a friend this
Speaker 1: morning and I told her what I was doing, and
Speaker 1: she said, oh, I know all about Jewel. My kids
Speaker 1: are really into it. She has a junior and a
Speaker 1: ninth grader. And how do you square that side of Jewel,
Speaker 1: the fact that they did originally try to appeal to kids,
Speaker 1: and that that is a huge, some chunk of their
Speaker 1: market even if they don't break it out. Let me
Speaker 1: ask you this first, is your friend horrified, She's I'd say,
Speaker 1: moderately horrified. Is that an oxymoron? Moderate? I actually think
Speaker 1: that's the right position to have. Moderately horrified. Yeah. Yeah,
Speaker 1: it's like two of my three older kids smoked. And
Speaker 1: this is despite all the indoctrination they get in grade
Speaker 1: school and even in high school. But smoking becomes irresistible
Speaker 1: at a certain point. And you know, my daughters in
Speaker 1: her mid thirties now, and she's tried to get off
Speaker 1: a bunch of times, and sometimes she's successful and sometimes
Speaker 1: you're not. The fundament was still a smoker, and so
Speaker 1: it's my other son who's just turned thirty. I would
Speaker 1: much rather they had used jewel when they were teenagers
Speaker 1: than cigarettes. So your argument would be that jewel appeals
Speaker 1: to the kid who would have been a smoker anyway.
Speaker 1: It doesn't convert the kid who would never have been
Speaker 1: a smoker into someone who uses nicotine. That's fundamentally my argument.
Speaker 1: The problem with my argument is that the product hasn't
Speaker 1: been around long enough for anybody to know whether it
Speaker 1: moves people into cigarettes or not, or whether the use
Speaker 1: themselves wind up, you know, stopping because it's less addictive.
Speaker 1: We don't know the answer to those questions, and really
Speaker 1: won't know those answers for another ten fifteen years. So
Speaker 1: then the question is what do you do In the meantime,
Speaker 1: the impulse of the American public health community and also
Speaker 1: to launch part of the federal government, is to try
Speaker 1: and put the clamps on these cigarettes as much as possible,
Speaker 1: which you should be trying to do. Is two things
Speaker 1: at once. The government and the public health community should
Speaker 1: be saying, we have this product that addicts you but
Speaker 1: doesn't kill you. We don't want kids to use it,
Speaker 1: but we really, really really want you, the twenty years smoker,
Speaker 1: to switch to this, to try it. It's way better
Speaker 1: for you, and it works better than the patch and
Speaker 1: all that other stuff, and you should do it. What's
Speaker 1: happened instead is that everybody's saying don't let kids use it.
Speaker 1: That's bad, bad, bad, bad bad, without saying the adult
Speaker 1: smoker should switch to this. It has a bad part
Speaker 1: and it has a good part, and the government and
Speaker 1: everybody else is only the bad part. Given that the
Speaker 1: government is only stressing the bad part, and the government,
Speaker 1: it would seem to me, has the power to put
Speaker 1: this company out of business, how do you reconcile that
Speaker 1: existential threat with the thirty eight billion dollar valuation. Oh,
Speaker 1: that's a good question. I mean, the reason for that
Speaker 1: is because the market, and investors don't really believe the
Speaker 1: government will ultimately put it out of business. Do you
Speaker 1: believe the government could also that a business. I think
Speaker 1: they could. One of the things that's happened is the
Speaker 1: government has actually pulled back from some very tough regulations,
Speaker 1: I guess because it's a Republican administration and given the
Speaker 1: companies a little bit of new life. If you put
Speaker 1: them out of business, what would ultimately happen is the
Speaker 1: only company selling reduced harm products would be Philip Mars,
Speaker 1: Altria and Reynolds. And is that really what you want?
Speaker 1: How do you contrast their reduced harm products with Jewel?
Speaker 1: Is it really clear that Jewel is much better than
Speaker 1: the cigarette companies reduced term products? I believe it is.
Speaker 1: The company that has the most potent product is Philip
Speaker 1: Mars International. And I'm a little suspicious of it myself
Speaker 1: because it does have tobacco in it, but it's not combusted.
Speaker 1: It's been a huge hit in Japan. It's actually got
Speaker 1: an insane seventeen percent of the cigarette market, not the
Speaker 1: vape market, the cigarette market, right, but it hasn't really
Speaker 1: caught on anywhere else. What's also interesting is that Philip
Speaker 1: Marris International, which makes its money on cigarettes. If you
Speaker 1: go to their website, basically says we want to get
Speaker 1: out of the cigarette business. This is our future. We
Speaker 1: see this as the future. And I think another reason
Speaker 1: for jewels thirty eight billion dollar valuation is that there
Speaker 1: is a perception the world will eventually move to vaping.
Speaker 1: It's a little unclear when. So then the question about
Speaker 1: Jewel becomes is this the right time for them or
Speaker 1: is this way too early? And maybe this valuation will
Speaker 1: blow up and it will become an e Toys, maybe
Speaker 1: it will find the sweet spot and become an Amazon. Okay,
Speaker 1: here's some truly stunning numbers. The twelve point eight billion
Speaker 1: dollars deal, which all Tree announced at the end of
Speaker 1: December twenty eighteen, values the less than two year old
Speaker 1: vaping company at thirty eight billion dollars. At that point,
Speaker 1: Jewel became the fastest startup ever to reach a valuation
Speaker 1: of more than ten billion dollars, beating the pace set
Speaker 1: by tech giants Facebook and Snap by four times. Jewel
Speaker 1: is also worth twice as much as left Are, about
Speaker 1: eight billion dollars more than Airbnb and Elon Musk's SpaceX
Speaker 1: at thirty eight billion dollars. Jewel is even bigger than
Speaker 1: popular publicly traded companies like Target and Ford. Over the
Speaker 1: past year, Jewel captured about seventy percent of the total
Speaker 1: three billion dollars E cigarette market, according to Nielson data
Speaker 1: compiled by Wells Fargo's Bonnie Herzog, But that E cigarette
Speaker 1: market represented just three percent of the seventy two point
Speaker 1: eight billion in overall tobacco sales, which includes cigarettes, E sigarettes,
Speaker 1: chewing tobacco, and cigars, according to Nielsen. In other words,
Speaker 1: the opportunity is huge. What we don't know is what
Speaker 1: percentage of Jewels sales are coming from former adults smokers
Speaker 1: and what percent comes from teens, although critics would say
Speaker 1: that too much is coming from the ladder groom. Given
Speaker 1: all that you know about this market, if you had
Speaker 1: been in the boardroom when Ultrea was making the decision
Speaker 1: about whether or not to make this valuation, would you
Speaker 1: have said yes or no? I probably would have said yes,
Speaker 1: simply because all the tobacco companies are trying to get
Speaker 1: into this business. Philip Mars has more money than it
Speaker 1: knows what to do with, and Jewel is by far,
Speaker 1: by far the best product. I wrote a couple of
Speaker 1: columns about Enjoy, which at that point was a leading
Speaker 1: contender to be the best product, and Jewel just wipe
Speaker 1: them off the map in like six months. Is that
Speaker 1: because of the product design. Product design definitely has a
Speaker 1: lot to do with it. It doesn't look like anything else.
Speaker 1: It looks more like a flash drive than it does
Speaker 1: a cigarette. And kids can hold it in their hand,
Speaker 1: and adults can hold it in their hand and put
Speaker 1: it up to their mouth. You don't even see it.
Speaker 1: So it's the Apple of vaping bingo. That's what it is.
Speaker 1: And you know, Apple's got a valuation that's pretty high too.
Speaker 1: So if you had been in Jewels boardroom when they
Speaker 1: were making the decision about whether or not to take
Speaker 1: this investment from Philip Morris, what would you have said,
Speaker 1: is the risk worth it for them of affiliating with
Speaker 1: Big Tobacco. That is a problem because to this day,
Speaker 1: Big Tobacco was demonized with good reason based on things
Speaker 1: they did historically. The problem is that the vaping companies
Speaker 1: are being demonized too. So it's like, you know, why
Speaker 1: should I worry about being demonized since it's not like
Speaker 1: it's going to change anything. If we're with a tobacco company,
Speaker 1: if the country, if the government, if the public health
Speaker 1: community had been willing to make a distinction between big
Speaker 1: tobacco and little vape, then yeah, it would have been
Speaker 1: much more dangerous. But given the situation, it's like, well
Speaker 1: why not. You know, whenever you see a scientist put
Speaker 1: out a paper and he says, you know, I was
Speaker 1: aided in my res search with money from Bristol Myers
Speaker 1: or merk or something, the people on the other side say, oh, see,
Speaker 1: it's tainted. It's tainted by money from big corporation, So
Speaker 1: you can't really believe that research. But I think that
Speaker 1: ideology is as powerful a force in coming up with
Speaker 1: studies and creating studies and creating science as money is.
Speaker 1: And I think that the vaping versus anti vaping is
Speaker 1: the great case study of this, because each side says,
Speaker 1: my science is good, Your science is bad, your science
Speaker 1: is tainted, my science is pure, And if you look
Speaker 1: at them, the science on both sides has problems. See,
Speaker 1: your argument is there's no such thing as pure, not
Speaker 1: in this sphere, not in this sphere. It's interesting, there's
Speaker 1: this recent news that Jewell took the flavors that appealed
Speaker 1: to kids. They took them off the market. That's great,
Speaker 1: but why didn't they start there? Well, the reason they
Speaker 1: didn't start there is because weirdly, adults like a lot
Speaker 1: of those flavors, and that's actually turned out to be
Speaker 1: part of the appeal of vaping as the flavors. What
Speaker 1: Jewels thinking is, I think we have such a lock
Speaker 1: on the market that we can afford to do this
Speaker 1: and not lose very much market share. People may go
Speaker 1: to other devices, but they probably won't, and therefore we
Speaker 1: can do something that's good without hurting ourselves financially. I
Speaker 1: think about how this company builds itself, and it looks
Speaker 1: like how Uber or any other Silicon Valley company has worked,
Speaker 1: which is find a need, scale it, aggressively, wrap yourself
Speaker 1: in a shield of altruism and damn the torpedoes. Let
Speaker 1: the investigations and the regulations come and deal with that later.
Speaker 1: Is there a way that Jewels should have been smarter
Speaker 1: about this to get the public health community on their
Speaker 1: side from the beginning. There is no vaping company that
Speaker 1: the public health community likes, none, and there's nothing they
Speaker 1: could have done. Nothing, Well, there is they gave the
Speaker 1: public health community AMMO by doing. Those who hip Instagram ads, Yeah, yeah,
Speaker 1: that hurt them for sure, because every time somebody wants
Speaker 1: to whack Jewel, they pull those ads out and say, see,
Speaker 1: see they're marketing to kids and jewels saying, well, we're
Speaker 1: not marketing the kids anymore, and we've pulled all those ads.
Speaker 1: It's too late, it's too late. Do you believe they
Speaker 1: were marketing to kids with those ads? I don't know.
Speaker 1: You know, I'm rooting for them. I think it's important
Speaker 1: for the health of the world. You'd still argue that
Speaker 1: even though one cartridge of jewel contains the same amount
Speaker 1: of nicotine as an entire package of cigarettes. So to me,
Speaker 1: that's a red herring because nicotine doesn't kill. If you
Speaker 1: took all the nicotine out of cigarette and still had
Speaker 1: combustible tobacco, it would still kill you if you smoked it.
Speaker 1: So maybe part of the problem is this confusion in
Speaker 1: all of our minds between nicotine and tobacco. Absolutely, and
Speaker 1: this is another place where the federal government could really help.
Speaker 1: Don't forget. Under the law, none of the vaping companies
Speaker 1: are allowed to say this is a healthier alternative to cigarettes.
Speaker 1: They're not allowed. You have to get FDA approval to
Speaker 1: say that, and it's a long process and most of
Speaker 1: them can't afford it, and they might not get it anyway.
Speaker 1: So they're not allowed to say we're a reduced risk
Speaker 1: product that they're not. That's actually stunning. So the federal
Speaker 1: government is in control of saying what's reduced risk and
Speaker 1: what's not. And the federal government has chosen not to
Speaker 1: do that. And why is the federal government chosen not
Speaker 1: to do that? Are they too influenced by the public
Speaker 1: health community. Yes, they absolutely are. The public health community
Speaker 1: believes that abstinence is the only answer. And there are
Speaker 1: a few outliers in the public health community, and they're
Speaker 1: really interesting outliers as ken Warner, who's an economist at
Speaker 1: the University of Michigan, very highly respected. The former president
Speaker 1: of the American Cancer Association is pro vaping. But they're
Speaker 1: the outliers. And when Scott got leave, the head of
Speaker 1: the FDA makes a speech, he'll mention reduced risk and
Speaker 1: it's importance and so on. But they have never done
Speaker 1: anything to promote that idea, and they have never allowed
Speaker 1: the vaping companies to say they were reduced risk. And
Speaker 1: part of the reason is they say, look, we don't
Speaker 1: have the science. We don't really know. You know, maybe
Speaker 1: twenty years from now the stuff will turn out to
Speaker 1: be horrible for you. Has duel made an effort to
Speaker 1: cater to this community, to get people in the government
Speaker 1: on its side if they can never convince the public
Speaker 1: health community, is there a government path? By and large,
Speaker 1: the public health community won't speak to anybody in the industry.
Speaker 1: They won't speak to anyone in Philip Mars or Altaria.
Speaker 1: They want speak to anybody in the vaping community. You know,
Speaker 1: alternatives speaking alternative here and now. Alternative said, yeah, exactly.
Speaker 1: The federal government is trying to figure out how to
Speaker 1: regulate them, and they're busy making comments and there's all
Speaker 1: that kind of formal back and forth. But they really
Speaker 1: have no ability to go into the government and say,
Speaker 1: could you think about this in a different way. Congress
Speaker 1: doesn't really have much to do with it. Not since
Speaker 1: the tobacco legislation was passed in the mid nineties, Congress
Speaker 1: has lost interest in the topic. What about this idea
Speaker 1: that it's the less or of two evils? Coming back
Speaker 1: to this notion that that's how Jewela is set itself up.
Speaker 1: Is that good enough? Or should a company aspire to
Speaker 1: more than that? It is good enough. One evil is
Speaker 1: to die. The other evil is at its absolute worst,
Speaker 1: to be addicted to a substance. That's basically like supercharge coffee.
Speaker 1: I'd take supercharged coffee. We don't even know whether vaping
Speaker 1: truly addicts the way cigarettes addicted. We don't even know
Speaker 1: that yet. You know, all these use who are using
Speaker 1: jewel now, are they going to use it when they're
Speaker 1: twenty one? Are they going to use it when they're
Speaker 1: twenty five? Are they going to use it when they're thirty?
Speaker 1: We don't know. I want to come back to that
Speaker 1: notion that you've talked about about harm reduction, about this
Speaker 1: idea that vaping is okay if somebody who was a
Speaker 1: smoker starts to vape, it's not okay if somebody who
Speaker 1: has never smoked starts to vape. How do you think
Speaker 1: about that? Very easily? Harm reduction is a widely accepted
Speaker 1: technique in public health. You know, if you've never shot
Speaker 1: up to done is a terrible thing. But if you're
Speaker 1: a heroin addict, methadone is a huge improvement. Right, it
Speaker 1: won't kill you. It's the same thing cigarettes will kill
Speaker 1: four hundred and fifty thousand Americans every year. We don't
Speaker 1: know the dangers of vaping, but it's hard to believe
Speaker 1: that it would have that kind of impact given that
Speaker 1: there's no combusted tobacco. Combusted tobacco has the carcinogens that
Speaker 1: kill people, not the nicotine. Right. But though we don't
Speaker 1: know the danger is of vaping is what's terrifying to
Speaker 1: every parent of a teenager, right. I think that's true.
Speaker 1: But I think if you told the parent, look, would
Speaker 1: you be happier if your kid was smoking a cigarette?
Speaker 1: I would hope they would say, no, that's worse. Let's
Speaker 1: come back to this notion the lesser of two evils,
Speaker 1: and that's how Jewell has set itself up. Vaping is
Speaker 1: less evil than smoking? Is that? Do you think what
Speaker 1: a corporation should aspire to the lesser of two evils?
Speaker 1: I think if a corporation is setting itself out to
Speaker 1: say we want to be the replacement for smoking, I
Speaker 1: would say, yes, that's worth aspiring to. I mean the
Speaker 1: United States, you know, a fifth of the country still
Speaker 1: smokes amazingly, even after every fifth adults. I'm talking about adults.
Speaker 1: I think that's about right, twenty percent, maybe a little
Speaker 1: less eighteen or seventeen. But I just saw a statistic
Speaker 1: that there are one hundred million smokers in India. Wow,
Speaker 1: and think about how many smokers there are in China
Speaker 1: and Russia and Poland and hungry places where people really
Speaker 1: smoke a lot. And if somebody could say, I have
Speaker 1: a product that will satisfy your craving for nicotine, but
Speaker 1: you won't die from it, I don't view that as
Speaker 1: the lesser of two evils. I view that as a
Speaker 1: product that could really help save a lot of lives.
Speaker 1: So you'd see the lesser of two evils as a
Speaker 1: false dichotomy in this particular case. Yes, again, it depends
Speaker 1: a fifteen year old high school kid. Yes, it's the
Speaker 1: lesser of two evils, smoke or vape. Yes, an adult smoker.
Speaker 1: It's not the lesser of two evils. It's potential salvation.
Speaker 1: So are there any problems with being cooked on nicotine?
Speaker 1: You will liken it to a giant cup of coffee, right,
Speaker 1: I do, which I'm not sure everybody would agree with.
Speaker 1: But they complain about Now what you read now is
Speaker 1: that it can be harmful to the brains of teenagers.
Speaker 1: That's what they say. But if that were true in
Speaker 1: a real sense, then all the people who smoke cigarettes
Speaker 1: all those years would be brain damaged. And that doesn't
Speaker 1: appear to be the case. Who says it would be
Speaker 1: harmful to the brains of teenagers? Where is this coming from?
Speaker 1: You see it in public health stuff, and there's a
Speaker 1: glimmer of it once in a while. You see the
Speaker 1: CDC kind of mentions it in passing. When people complain
Speaker 1: about the harmful effects of vaping, they don't really talk
Speaker 1: about the nicotine per se. They talk about the ingredients
Speaker 1: in the juice, particularly apparently there's a trace of fmaldehyde
Speaker 1: and some of thatmaldehyde. Yeah, but you know, it's like
Speaker 1: one of those things that's all around us. The question
Speaker 1: is how much. Don't even look too closely at your
Speaker 1: cup of coffee exactly. And then, of course there's the
Speaker 1: whole issue of the flavors, which is another entirely interesting argument,
Speaker 1: because the public health community says, with some validation, some
Speaker 1: of these flavors like bubble gum and so on, are
Speaker 1: directly aimed at children, but a lot of adult vapors say,
Speaker 1: you know, I like the flavors and I'll be very
Speaker 1: unhappy if they take the flavors away. Are there benefits
Speaker 1: to nicotine? Well, I mean every writer you ever saw
Speaker 1: in the nineteen sixties and seventies has a cigarette coming
Speaker 1: out of their route. I mean it makes you more alert.
Speaker 1: Is that what's gone wrong with journalism? It could be
Speaker 1: it makes people more alert, it helps their short term memory.
Speaker 1: I mean, it actually has benefits. You know, I'm not
Speaker 1: saying you should get addicted for that reason, but it does.
Speaker 1: And on the notion of addiction, we're criticizing to all
Speaker 1: for potentially providing an addictive product. And yet there are
Speaker 1: many people who would argued that social media is addictive,
Speaker 1: and yet we don't criticize, or at least we haven't
Speaker 1: until recently, criticize the social media giants for the addictiveness
Speaker 1: of their product. Would you argue there's a double standard there,
Speaker 1: I would. The difference is that Jewel acknowledges from day
Speaker 1: one that it has an addictive product, and Facebook and
Speaker 1: Google and the other social media companies have never acknowledged
Speaker 1: that and don't to this day, even though it's it's very,
Speaker 1: very true so at least Jewel isn't hypocritical. If the
Speaker 1: company's core mission is to get people addicted to its product,
Speaker 1: that means its core mission is to get people addicted
Speaker 1: to nicotine. Yeah, how is that? Okay? The society has
Speaker 1: been brainwashed into believing that nicotine is as bad as tobacco.
Speaker 1: So what Jewel will say is, we're not trying to
Speaker 1: get people addicted to nicotine. We're trying to get people
Speaker 1: who are already addicted to use a different form of
Speaker 1: ingesting their nicotine. That's what they're saying. And given that,
Speaker 1: you know, a fifth of the country or something like
Speaker 1: that smokes, that's a heck of a big market. It's
Speaker 1: not an infinite market, but it's a heck of a
Speaker 1: big market. And now then you say, well, what happens
Speaker 1: twenty years from now or thirty years from now it
Speaker 1: really catches on, then you're going to bump up against
Speaker 1: these issues of what are kids going to do? Or
Speaker 1: is the company's market cap going to shrink and shrink
Speaker 1: and shrink because fewer people are using it? Right? But
Speaker 1: I want to push you on that because when in
Speaker 1: all your years of covering business, have you seen a
Speaker 1: company that is really content just to say, this is
Speaker 1: our existing market as it's defined. Our existing market are
Speaker 1: the people who are already using tobacco. We're not going
Speaker 1: after any new market, and we never will. Have you
Speaker 1: ever seen a company not do that when the opportunity
Speaker 1: presents itself and when the bottom line is at stake. No, right, Okay, no,
Speaker 1: this is where the federal government should come in. But
Speaker 1: the world has been handed a great opportunity because now
Speaker 1: there's a product that exists that can, for the most part,
Speaker 1: satisfy the cravings of smokers around the world, not just
Speaker 1: in the US. There are a lot of smokers around
Speaker 1: the world. A government that jumped in early on this
Speaker 1: business and said we are going to try and regulate
Speaker 1: it in a way that keeps it confined to this
Speaker 1: universe of people who already smoke would be doing a
Speaker 1: remarkable thing. And it's the government's job to put limits
Speaker 1: on what companies can do and who they can sell to,
Speaker 1: and so on and so forth. That's why we have government.
Speaker 1: I don't expect Jewel to say, if you non smoker
Speaker 1: want to try our product, we don't want to give
Speaker 1: it to you because you don't smoke. I don't expect
Speaker 1: Jewel to say that, but I do expect the government
Speaker 1: to find ways to discourage that person from crying Jewel.
Speaker 1: So the company should do what a business should do,
Speaker 1: and the government should provide the guardrails. Essentially, yes, absolutely so,
Speaker 1: more broadly than Jewel. Putting Jewel aside for a moment,
Speaker 1: asking this larger question about the role of business in society.
Speaker 1: If a company like Jewel is making a lot of money,
Speaker 1: is that what its goal should be or does a
Speaker 1: company have a larger responsibility beyond that? Well, you know
Speaker 1: Howard Schiltz says they should have a larger responsibility, and
Speaker 1: he's running for president. But it hasn't worked so well
Speaker 1: when Starbucks has tried to do that. Right, it has
Speaker 1: in terms of how he's dealt with his employees, but
Speaker 1: it certainly hasn't when he has tried to single handedly
Speaker 1: man race relations. People who work for companies want to
Speaker 1: feel that they have a sense of mission that transcends
Speaker 1: dollars and cents. I think that's really true for most
Speaker 1: people and for most companies. I think a lot of
Speaker 1: the stuff that companies do that is characterized as socially
Speaker 1: responsible as bs and my favorite example is Ford. When
Speaker 1: Bill Ford was the CEO, he retrofitted their factories so
Speaker 1: that they were completely green. They were the most environmentally
Speaker 1: friendly factors in the world, except the way he made
Speaker 1: his money was by selling trucks gas guzzling trucks. That
Speaker 1: was Ford's biggest product. I'm skeptical of social responsibility, but
Speaker 1: on the other hand, I do think companies ought to
Speaker 1: care about more than maximizing profits. I do believe that
Speaker 1: they should support the communities in which they exist. I
Speaker 1: think they should not expect their employees to need food stamps.
Speaker 1: It's one of the things I find so fascinating about
Speaker 1: the dual debate is it does shed a slightly different
Speaker 1: light on this question, which is so relevant to where
Speaker 1: we are Today's what is the responsibility of a business,
Speaker 1: whether it is broader than the Milton freedmen esque idea
Speaker 1: of just making profits. And yet, as you say, when
Speaker 1: we see companies that position themselves as being about something else,
Speaker 1: it's usually just so much be us layered on top
Speaker 1: of a profit motive. A good way to think about
Speaker 1: this is the farmer industry. Twenty five years ago. The
Speaker 1: farmer industry did not view maximization of profits as their
Speaker 1: sole goal. One consequence of that is that you didn't
Speaker 1: see these huge run ups in drug prices. On an
Speaker 1: annual basis. Insulin would remain the same price for twenty years.
Speaker 1: And Mark famously helped care blindness in Africa right by
Speaker 1: providing a drug low costs. Don'ta salt wooden patent, the
Speaker 1: polio vaccine. Now farmer companies are totally about maximizing profits,
Speaker 1: and it has been horrible for society. Drugs are expensive
Speaker 1: and even when you can afford the co pay, your
Speaker 1: insurance company is picking up a big tab and ultimately
Speaker 1: we are all paying for their share price. Right, But
Speaker 1: the devil is always in the details. Right in terms
Speaker 1: of how you parse this argument for any individual company, Yeah, well,
Speaker 1: you're right. You can't be Murk and care about you know,
Speaker 1: low prices when Fizer doesn't, and you can be Jewel
Speaker 1: and sell a product that is arguably harmful or arguably
Speaker 1: somewhere in the middle, but makes a great deal of
Speaker 1: money for its investors. One of the reasons Jewels interesting
Speaker 1: to companies like Altrea and also you know in the press,
Speaker 1: is because they don't come out of the traditional cigarette industry.
Speaker 1: They are classic Silicon Valley people technologists, and that's how
Speaker 1: they approached it. One of the reasons their product is
Speaker 1: better than the product that Philip Marris International or Altrea
Speaker 1: came out with themselves is because they started with a
Speaker 1: completely blank slate. They didn't have a cigarette in their
Speaker 1: mind when they were doing this. It's just like, how
Speaker 1: do we get nicotine into somebody's lungs in a way
Speaker 1: that will make them feel okay and it will be
Speaker 1: kind of cool to hold? And what does that tell
Speaker 1: you about innovation? Does it, generally, in your mind, come
Speaker 1: from somebody who has nothing to do with the existing industry.
Speaker 1: I totally believe that. I don't understand why environmentalists are
Speaker 1: always yelling at the oil companies to be green renewable, Yeah,
Speaker 1: to be greener, to develop renewable energy. That's not what
Speaker 1: they do. They know how to drill holes on the ground.
Speaker 1: That's what they know how to do. Let them drill
Speaker 1: holes on the ground until you're done. So then that
Speaker 1: actually makes perfect sense to me. But then doesn't it
Speaker 1: become a problem When an Altria takes over a Jewel,
Speaker 1: can jewel maintain it independence in its fresh sense of
Speaker 1: the world world When suddenly it's a part of the
Speaker 1: oil company. I think that is always a problem. Absolutely.
Speaker 1: I mean it's kind of like what Facebook is about
Speaker 1: to do to What's app, which is basically wreck it.
Speaker 1: But because Altrea needs this product and because Jewell knows
Speaker 1: how to do this way better than Altrea does, I
Speaker 1: think it's possible that Jewel will be allowed to go
Speaker 1: its merry way and Althrea won't get involved all that much.
Speaker 1: Going into this conversation, I thought the question was whether
Speaker 1: Jewel had a broader responsibility to society. Is it okay
Speaker 1: for a company to make a lot of money while
Speaker 1: arguably producing a product that's harmful. Joe actually convinced me
Speaker 1: that there is some value and harm mitigation. But I
Speaker 1: do think there still is a really important question facing Jewel,
Speaker 1: and the question is can Duel survive given the enemies
Speaker 1: that it's made and should entrepreneurs be more thoughtful from
Speaker 1: the very beginning about who they get on their side
Speaker 1: and who they offend. Making a Killing is a co
Speaker 1: production of Pushkin Industries and Chalk and Blade. It's produced
Speaker 1: by Ruth Barnes. My executive producers are Alison McClean no
Speaker 1: relation and Megan Casey. The executive producer at Pushkin is
Speaker 1: Mia Loebell. Engineering by Jason Gambrel. Our music is by
Speaker 1: Jed Flood. Special thanks to Jacob Weisberg at Pushkin and
Speaker 1: everyone on the show. I'm Bethany McClain, Thanks so much
Speaker 1: for listening. Find me on Twitter at Bethany mac twelve