Caricatures
Whenever there’s a story about two Stanford co-founders starting a company, there is usually a bit of technology involved.
However, when the business model advances the intake of nicotine in young people, it’s not a pleasant storyline.
Adam Bowen and James Monsees met as graduate students in the product design program at Stanford University over 15 years ago and then, shortly thereafter, JUUL was born.
Since the end of last year, JUUL has been valued at around $38 billion, which is a higher price tag than SpaceX without needing to leave the Earth:
“A Juul is not a cigarette. It’s much easier than that. Through devilishly slick product design… the startup has massively lowered the barrier to getting hooked on nicotine. Juul has dismantled every deterrent to taking a puff.
The result is both a new $38 billion valuation thanks to a $12.8 billion investment from Marlboro cigarettes-maker Altria this week, and an explosion in popularity of vaping amongst teenagers and the rest of the population. Game recognize game, and Altria’s game is nicotine addiction. It knows it’s been one-upped by Juul’s tactics, so it’s hedged its own success by handing the startup over a tenth of the public corporation’s market cap in cash.”
One of the drawbacks to investing in index funds and ETFs is that you never know when a few dollars may be going directly to vices.
Altria ($MO) is certainly not on my Christmas card list, even if it did rebrand itself from Philip Morris back in 2003, but it remains a strong figure in the S&P 500 and S&P 100:
“There are no exceptions to Newton’s third law of physics. Every action has an equal and opposite reaction.
This is mostly true in business and investing too. It’s why it’s easy to underestimate how quickly things change.
Most of investing history goes like this: Something abnormally good or bad happens, and then another thing equal and opposite thing occurs to push things in the other direction.
Altria is the best-performing stock of all-time, earning more than 20% a year for more than half a century. A lot of this performance was because people didn’t want to own the stock for moral reasons, or fears over new regulations. That kept the share price low, which kept the dividend yield high. And reinvesting a high dividend yield is like gasoline on a flame to compounding. So hating the stock led to stock outperformance — one action, then an equal and opposite reaction.”
The author of 1984, George Orwell, once said, “At 50, everyone has the face he deserves.”
A generation from now, there will be a contrast between those who use JUUL to vape nicotine versus marijuana.
At the proverbial stroke of midnight, the closing narration of “The Masks” episode of The Twilight Zone may ring true for some:
“Mardi Gras incident, the dramatis personae being four people who came to celebrate. And, in a sense, let themselves go. This they did with a vengeance. They now wear the faces of all that was inside them, and they’ll wear them for the rest of their lives. Said lives now to be spent in shadow. Tonight’s tale of men, the macabre, and masks — on The Twilight Zone.”
