Big Technology Podcast - The Rise and Fall of Juul, With The Devil's Playbook Author Lauren Etter

Episode Date: June 2, 2021

You've heard this story before: Two Stanford kids take on a big bad industry, one that harms people, and they disrupt it. Typically, these stories are portrayed as heroic in Silicon Valley. Yet the story of Juul is different. The company sells sleek e-cigarettes packed with nicotine to cigarette smokers looking for a less harmful solution. But flush with VC cash and determined to grow, the company ended up addicting millions of kids, leading to a serious backlash and decline. Lauren Etter, a Bloomberg reporter and author of The Devil's Playbook, which covers the Juul saga, joins Big Technology Podcast to discuss the company's rise and fall. You can buy The Devil's Playbook here: https://amzn.to/2TsMoCK

Hello and welcome to the big technology podcast, a show for cool-headed, nuanced conversation of the tech world and beyond. Joining us today is the author of The Devil's Playbook, a new book about the rise and fall of Jewel, the sleek electronic cigarettes to your kids probably hit. She's also a reporter at Bloomberg News. Lauren Eder, welcome to the show. Thanks for having me, Alex. Great having you here. I don't know why, maybe because I've covered Facebook for a long time, but I have a real interest in vice and addiction. And so I saw that your book was coming out.

It's just out and couldn't wait to dive into it. And it's a fantastic book. So thank you for writing it. But what's interesting about your book is you write about two Stanford kids taking on a big, bad industry, one that harms people who see the need to disrupt it and, you know, take it down with a less harmful solution. And, you know, typically that's a tale of Silicon Valley heroism. And we celebrate that out here. But this one's a little different. So why is that? So, well, the first thing to say, just a short answer to your question is because it's tobacco. They, you know, they could have

chosen any industry to innovate on and they chose perhaps the most controversial one. Tobacco has a very long and sordid history in America, and it's one that's extremely controversial. We made it through the tobacco wars in the 1990s. The tobacco industry was near bankruptcy, and they touched a nerve like no other when, you know, there was this long history of deceit and lying to the American public about the addictive and deadly nature of their product. they embarked on one of the most consequential and large disinformation campaigns about their product. The cigarette makers. The cigarette makers, absolutely.

And so these two guys make sort of the alternative to that, which is a very appealing e-cigarette, kind of looks like a USB drive. And, well, why don't you keep going? But it is interesting how they see that there's this cancer-causing product. you're right even that most of the damage is done by the actual lighting of the cigarette it's not the tobacco it's the actual flame and the combustion and so this is supposed to be a safer alternative but yeah goes off the rails a little bit yeah i mean that's one of the most fascinating things this is one of the most deadly products that remains on the market today that's considered to be legal and the cigarette sorry yeah we should absolutely we're talking about the cigarette right now the cigarette is one of the most deadly products um it contributes to you know, causes or is the most leading cause of preventable death in America contributes to the death of 400 and almost 500,000 people every year. So why not? So a COVID, a COVID each year. Yeah. Yes, a COVID each year. It's a really interesting statistic. Um, so absolutely it seemed like it was absolutely ripe for innovation. This is what Silicon Valley does. They look for products that haven't been innovated on, you know, gaps in markets, that type of thing. and this is absolutely a product that had not been innovated on in more than a century. It was essentially paper, shredded tobacco leaf, you light it on fire, just like Christopher Columbus witnessed, you know, back in the day, and you inhale it into your lungs.

So there had been no innovation. So, of course, Adam and James, Adam Bowen and James Moncey's, the founder of, founders, co-founders of Jewel, realized that there was a big gap in the market and decided to try innovating on that. Right. And then Silicon Valley folks also go out. looking for problems and try to find ways that they can solve it using technologies. So yes, they had the cigarette obviously hadn't been changed in a long time. You mean, of course, the tobacco companies have played with it. You know, maybe it's a lighter, you know, drag or a more nicotine heavy drag or

different flavors like a menthol or something like that. But they were in this Stanford Design Lab and basically said, what are you, no one's touched this yet and thought that they could design something better. And it's interesting, like through the book, you know, the jewel. And I mean, I feel like if you've been breathing in the last three or four years, you've seen, you know, the duel out in public. But it is cool. It's sleekly designed. It looks like this USB.

It hits pretty well. And it has what, it started out with 5% nicotine, which is more. Well, yeah, actually, this is a good moment of pause. So we talk about cigarettes. There's tobacco. There's nicotine. Throughout the book, there's this theme that actually it's nicotine. That's the substance.

That's really so. so I want to hear a little bit more just like let's talk about baseline because so often we talk about these things we don't go into depth about them there's just typically a top line cigarettes are bad tobacco is bad you know combining everything the paper the tar the leaf the nicotine together but you know I'd like to hear your perspective first about you know what is it about nicotine you know that's so addictive and what's actually the harmful part of these products. So that's one of the most interesting aspects of this product and of this debate is that actually it's not the nicotine that kills Americans. It kills 480,000 Americans every single

year. It's a combustion of the tobacco leaf. So nicotine taken by itself is not necessarily harmful. There are studies that show that it can contribute to heart disease. It can, can, you know, there's nothing that shows that it can actually contribute to lung disease, that type of thing. The actual thing that causes long disease is a cigarette. So nicotine by itself, the proponents of the products will say it's just like caffeine or it's just like, you know, any other kind of enjoyable product that might give you like a little bit of a high or something like that. But the biggest problem with nicotine is that it's highly addictive. It's as addictive as heroin. And, you know, when you're a teenager, when your brain is not fully developed,

so the youth brain does not become fully developed until the age of 25. So your studies show that it can interfere with the development of your brain and cause harms down the road in terms of judgment and that type of thing. So we're really talking about youth addiction and whether or not, I mean, really what you're getting at is a super important question about why do we care if there are millions of Americans addicted to nicotine. Like, who cares? That is the question. Right.

Especially if it's not going to harm them to the point that a cigarette is. And that I think is the case that that Jewel and its proponents make. And in fact, what Philip Morris and I guess later named Altria was trying to make, which is that they're going to do this reduced harm cigarette, get off our backs. Right. And the most fascinating part of that with the tobacco industry is that for years, they said, no, it's not the nicotine that keeps people smoking. It's the enjoyable factor of a cigarette, and they denied for so many years that nicotine was even addictive.

Of course, we have this epic kind of historical moment in front of Congress in 1994, 1996, where they, all of the CEOs of the tobacco industry, the seven CEOs, sat before Congress and held up the right hands and said that they believe that nicotine was not addictive. They were splitting hairs there, but they did say that. So for so many years, they denied that. And suddenly the industry is saying, okay, well, no, we all agree that nicotine is addictive. And let's just kind of focus on the nicotine now. So it's a huge kind of 180 in terms of the public policy and thinking about this type of product. And it pays the way for e-cigarettes. It paves away for e-cigarettes.

Because suddenly you have people talking about, okay, well, cigarettes are deadly. It's a combustion that kills people. It's not the nicotine. And why don't we just take away the combustion? And if Americans want nicotine so badly, let's just give them what they want and allow them to have it. So what's the big deal? Yeah.

And so nicotine, you know, they think that a lot of the ways that the cigarette companies describe it is that it's satisfying, right? Yes. The chemical that satisfies brings a calm over somebody, but then as it, you know, and you inhale it through your lungs because that's the fastest way to deliver it into your

system, but as it dissipates, it leaves you wanting more pretty badly. Exactly. It is. It's highly addictive. It can, it begins,

a cycle where your your brain releases these neurotransmitters and, you know, dopamine and actually the cigarette and nicotine actually contribute to lots of things. It's like, it can relax you. It can give you, make you alert. It can, yes, focus. Make you feel cool. It can make you feel cool. It can give you that little buzz. It can, it can, it can, I mean, it has lots of different beneficial properties. There have even been studies showing that it can help with people who have Parkinson's disease. So there's a real reframing of what the problem is and how do we solve it. I mean, there's actually multiple threads to this that need to be dissected and talked about. But right now, just kind of fast

forward a little bit, we can go back. But right now, the tobacco industry, including Altria, is very focused on correcting the misinformation about nicotine. They feel like there needs to be re-education campaign, and they've actually asked the FDA to spend some of their fundraising dollars that they've spent on youth tobacco use in general and prevention to re-educating Americans about nicotine. Because the truth is a lot of people are confused about nicotine. A substantial and kind of shocking amount of people believe that it's nicotine that kills you when, in fact, it's a cigarette. It's a combustion. So I think we're going to hear a lot more about nicotine, and certainly it's not going away anytime soon.

Yeah, and listeners, I swear we're going to get to the technology aspect of this in a moment, but it's important to set the back stories. So having said what we've just talked about, tobacco, the combustion is the bad part. Nicotine is the addictive element to it, but coffee is addictive and we have that legal. So just briefly, what's the problem here then with having folks addicted to nicotine? If it is having these positive effects on people to focus, you know, the self-confidence and the satisfaction. what's the issue? Right. I mean, I think you should think about it this way. It's like, what is the purpose of it? And also the fact, what is the purpose of having nicotine and who's making money off of it? It always goes back to who's making money. And you have this gigantic industry that is predicated on people being addicted to their product and continuing to use it forever. So the problem really gets at the youth issue. One of the most startling and I think sticking statistics is that 90% of adult smokers today began smoking before they were 18.

99% of them began smoking before the age of 25, of course, is when your brain is fully matured. So you have people who are becoming addicted to a product when their brains aren't fully developed, and they become addicted to it for life, let's say, not all of them. them for life, but lots of them for life. And it's, you know, essentially inhaling something into your lungs. And if they didn't start when they were kids, they wouldn't start when they were adults. So essentially the industry is basing its entire business model on the next generation of users. So I don't know. This is really a social kind of moral question about whether or not we care, whether or not we care if, you know, if there's a product that's not as deadly as a cigarette if we care

that they're using it. And I think the answer, at least in my mind right now, is that, first of all, e-cigarettes are not proven to be safe. There is a lot of, you know, there's a lot of research going on right now, but there have not been long-term clinical studies showing that e-cigarettes are safe. Because at the end of the day, and, you know, the anti-e-cigarette, anti-bate people will, you know, point this out, like the lungs were designed to breathe air and nothing else. And so you're essentially, while you're not inhaling a fire-burning product, smoke, you are inhaling a vapor or actually an aerosol, which contains propylene glycol, vegetable glycerin, lots of flavoring compounds that have sub-compounds and, you know, lots of different things that when you heat them up, they can create

potentially cancer causing chemicals like aldehydes and stuff like that there just haven't been a long enough study so when you look back at the cigarette industry and you see how for so many years they obfuscated and lied about the nature of their product you and you know it took a generation to show that there were lung cancer that there was cancer developed from cigarette So it begs a question of whether or not in a generation we're going to see vapors have some sort of long disease. I'm not trying to be an alarmist. I'm not trying to be in that camp that says like, oh, my God, this is like the, you know, the worst thing in the whole world. But like, there are a lot of unknowns.

And it begs a question of whether or not, you know, the FDA endorses a product that hasn't been fully studied and it's like on the market for people to be using. So especially for kids. So I think there are lots of important questions. But yeah, nicotine, you know, it's, I think there's still kind of an open question about why do we care? I think we care. I think most people would say, eh, we don't really want our kids being addicted to anything, you know, especially highly addicted to product like nicotine. Yeah. And what struck me in the book is that Scott Gottlieb, who was running the FDA under Trump for some time, who you described as libertarian, even he was like, we are not going to have an epidemic of youth smoking under my while.

are youth nicotine addiction under my watch. And it turns out that's what happened. Yeah, exactly. When a libertarian is saying the government should step in and do something, that's when you sort of know, okay, you know, maybe this is something that, you know, we should be focused on here. And there could be some harm. Yeah, I mean, he was in a really difficult position.

I mean, this is, there's kind of many dimensions to this. but he, and we can talk about that, but he ultimately saw what was happening. And, you know, so after the Tobacco Wars in the 1990s, there had been this huge push, this huge youth prevention campaign to reduce the number of youth smokers. And it worked. It had been going down, down, down, down, down. And it had been at the lowest levels. And then e-cigarettes come in, and suddenly it starts ticking back up. And when Jewell arrives on the market in the summer, it just like really picked up. So suddenly it was like, wait, we solved this epidemic.

Oh, no, we didn't. Now there's this new product that's contributing to this new nicotine epidemic. And Scott Gottlieb did not want to be the person that oversaw the rise of this. Of course he did. He was that person. But it was complicated for Scott Gottlieb. There were forces outside of his control. But I don't want to get too deep into the politics of that nature.

But I do think that it was interesting that he came out, you know, pretty stringent. against and had this fiery kind of speech as one of his last actions as the head of the FDA. But I do want to get into, we talked a little bit. And I think the most compelling case against these things is the way that they do hook kids, teens and preteens. So do you have any stats about how many kids were using Jewel at its height? Because it has, I think it's declined a little bit. But just give us a picture of how pervasive this was among young people, even a couple years ago. Yeah. So it basically reached more than five million kids, more than five million teens, high school and middle school students were using e-cigarettes. Now, that's not broken down by Jewel, but most of them or a high percentage of them were Jewel because Jewel took off. So we have five million students who were using e-cigarettes slash Jewel. Over the past year, it's, did decline by about 1.3 million.

So you still have like three point some million that are still on it that are still using it. You know, it's something about the past 30 days they've used this product. So it's still millions of kids that are using it. Yeah. And like super young kids also that are. Yes. And that was kind of the shocking thing.

It wasn't like 18 year old, 17 year olds. It was like middle schoolers. You know, it was it was it was cascading through middle schools. So I think that was kind of the most alarming thing. It was just like, wait, is this really the solution to a bigger problem, which is about adult smokers, essentially? And that's a big tradeoff in the crux of the issue. Right. That's what it was marketed as originally.

That was the big, you know, well, the marketing. We'll get into the marketing in a second, but that was the initial, oh, the dreamy Silicon Valley language is we're going to heal the world by being this thing that will take people off these cancer causing cigarettes and put them onto Jewel. So there was a moment where it did seem like Jule was going to take over the world, you know, when those 5 million kids were using it and untold numbers of adults were as well. And now that doesn't seem to be the case. So what happened? Briefly. Well, briefly, what happened is the FDA kind of stepped in. They ended up taking off some of the flavored products. So Jule used to be sold in, you know, crumb roulet and mint and fruit and that type of thing. The FDA said we're not going to allow these pod-based products to come in flavored products. anymore. So right now you can only buy Jewel in tobacco flavor and menthol flavor. So that was a huge, like really took away a big percentage of their market. It really answers the question of whether those fun flavors actually were intended for kids. And I mean, once they took it off, the kids are off the market. That's very telling. Yeah. I mean, it's a little more complicated than that. There were new products that were coming down the market, like Puff Bar, the single use products that

came in like pink lemonade and other flavors. And they actually were not subjected. I guess it prove your point, but they weren't subjected to the flavor regulation. So you can still go out and buy pink lemonade flavor puff bar, for example. But so there was new competition in the market. But also, I think there was that scare. People suddenly got scared by Evali, which was the lung injury, chronic lung injury that initially was tied to vaping. Right.

To your point, we don't know how this will actually impact our health in the long term, but we saw some really scary stuff in the short term. where, like, previously healthy people were obliterating their lungs with vape machines. Right. And, yeah, vapes. And exactly. And this is like a flashpoint in the debate about e-cigarettes right now. The pro-vaping crowd, they're very upset at the CDC for basically causing this panic over e-cigarettes.

What happened was the product that was most directly contributing to the lung injuries was actually a bootlegged. CBD product like cannabis product. Yeah, it was stuff people were getting, well, anyway, sorry, go ahead. Oh, no, yeah. Yeah, right, at the end of the day. Even if it doesn't have the active ingredient, which is THC, but yeah. Oh, no, I'm so sorry. It didn't mean CBD.

It was actually THC. Oh, it was. It did have the active ingredient. They were getting high. They were vaping the pods that contain THC with, but the product on the market, they were cutting it with something called vitamin E. oil essentially. And that was what they found to be the contributing, one of the leading contributing factors of that disease. So the anti or the pro vaping crowd, they're very upset at the CDC

for not coming out sooner and saying it wasn't nicotine containing products. It wasn't Jewel that was causing people to get this long injury. It was actually these, you know, bootleg, black market products that were not, you know, most people weren't using. The CDC has remained pretty cautious about this. They continue to say that there are a number of, you know, people who've come down with the lung injury who used nicotine only containing products. So nicotine containing products only. So it's still, I mean, while it's pretty certain that the lung injuries that we saw,

the spate of lung injuries that we saw were contributed by this or caused by this vitamin E acetate and the THC, the CDC is, not ruled out that nicotine containing products contribute to this problem as well. So, you know, they're not, the industry is not in the clear necessarily, I would say. Yeah. Well, before we go to the break, I'm just curious, you know, we want to get to the tech stuff, of course, but I'm curious what inspired you to start writing about this stuff. Are you a smoker?

Do you have smokers in your family or was it just an interesting business story for you? So I'm not a smoker. I definitely smoked back in the day when I was a teen. And my grandfather died of lung cancer from smoking, a lifetime of smoking. But for me, it was more a business story, more than anything. It was a fascinating business story about, you know, Silicon Valley company taking on this very notorious industry that struck me as one of the most interesting business stories I've ever written about. So that was largely what drew me to it. But certainly I had some kind of. of like personal interest in the story as well. Yeah, definitely. Yeah, one of the things that I thought about as I was reading was, you know, in high school, of course, I mean, maybe not of course, but it seemed natural to me to try cigarettes. And I did. And I would probably still be smoking cigarettes today. And if I was jeweling, I'm sure I would be like a jewel addict at this point. But I got lucky and just had a bad experience. I think I got my hands on a pack of like really low quality cigarettes and then led them off a friend's stove and then just

changed smoke like four or five in a row threw it for like four hours and that was the end of cigarettes for me but without that and if I had like this like pretty easy device that you know delivers a nice hit of nicotine and you could smoke the equivalent of a pack of cigarettes in an afternoon without you know feeling what I felt you know I'm sure I would be addicted to that stuff well and that's a thing and like they came in these cool flavors like who wouldn't what teen wouldn't want to inhale gummy bears you know i mean it's a it's a very attractive kind of product and then it was like really cool and flashy we'll get into the tech and stuff like that but right i think it's important to note to read to underscore what you said is

that a single pod of jewel contains as much nicotine as a pack of cigarettes and there's no on a ross switch there's no like you know you light the cigarette the ash you put it out it's done Like, you can just keep inhaling all of this nicotine. You just reload the pod and you don't have to go anywhere. You don't have to step outside. Nobody's like, oh, you stink. Like, it's really ideal. Yeah.

All right. Well, let's get into the tech stuff right after the break. Because everyone says, you know, Jewel's a tech company, but are they really? All right. We'll be back with Lauren Edder right after this. Hey, everyone. Let me tell you about the Hustle Daily Show, a podcast filled with business. tech news and original stories to keep you in the loop on what's trending.

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Lauren Editor, the author of The Devil's Playbook. It's a great book about Jewel. We've been talking about the rise and fall of Jewel. Let's talk about the technology aspect, really dig into that. So, Lauren, I mean, is Jewel a tech company because they do seem like electronics company and they sell vapes. You know, they're not exactly like software savants. They're not building iPhones, which has hardware and software inside.

So we talk about them as, you know, a tech company in Silicon Valley. They obviously set up shop in San Francisco. I was found it weird that, like, their headquarters were just a few blocks away from our headquarters when I was working at BuzzFeed. And, you know, they're still not too far away from me here in San Francisco. So I'm curious what you think about, about the distinction. Do they really deserve to be a tech company? Because everybody wants to call themselves a tech company these days. I mean, it's interesting.

Like, is Tesla a tech company? You know, like I feel like they are a tech company. They innovated. Tesla, I would say, yeah, most definitely. yeah but let's hear about jule yeah yeah no i mean i guess the reason that i bring up that uh comparison is because i think it's interesting that you know it took silicon valley to innovate on detroit right like the innovation did not come from you know gm or forward initially well you know go back but anyway the real innovation didn't come from there it came from

silicon valley and i think it's the same with jule like i do think they're a tech company i mean as much as Jewel would like to distance themselves now from their tech company roots and from the kind of Silicon Valley roots, I think they are. I mean, they attempted to solve a problem, innovated on an old school market, brought to bear technology. They're certainly a hardware company. And yeah, I do think, I would definitely call them a tech. company for sure. I mean, one of the things that I think distinguishes them is that they did take VC money. Yes.

And when you take venture capital money, that changes everything. Because rather than being like an old school business that sort of built, you all of a sudden have some serious growth expectations. And you have to justify because VCs look for a 10, 20x returns and anything else is sort of considered a failure. And I'm curious from your perspective, how did taking that VC money change what Jewel ended up, what Jewel could have been and what it ended up becoming? You know, when I think about Jewel and what the company could have been and how they could have solved this real problem of smokers and smoking epidemic, I really do believe that taking the tech money and, you know, know, kind of fashioning themselves as a tech company was in a way their demise because it did put so much pressure on them to meet those metrics. Like one person kind of close to the company said it was like we suddenly had a gun at our backs and we had to run. Like you have to, once you take

the money, you have to basically figure out how to scale and to continue to justify the investment. And so that's exactly what they did. They took the money. They figured out how to scale. scale and they hired the wrong people. They hired people from Silicon Valley who, and this was kind of in their DNA, but they hired people who decided to scale the product as fast as possible to create a return on their investment and to scale the company and who were concerned first and foremost with marketing the product and getting it out there as fast as possible. And I think I really do think that that was a pain point for them. That was a point where they, you know, they could have done the business differently.

There were multiple options. It just would not have been a monster growth company, right? So, yes, I think that, you know, by fashioning themselves as a tech company, taking the BC money, kind of plugging into that entire ecosystem, put them in a situation where they had to scale very quickly and scaling for them and getting a highly addictive nicotine. product into as many hands as possible. And I think that ended up being problematic for them and they're paying for it dramatically right now.

Right. And just to hang on to one word that you said, the highly addictive part of it. So these devices were delivering 5% nicotine. How does that compare to like a regular cigarette? It's not an exact comparison because people smoke differently. Some people smoke slower. Some people don't plug holes on the filter. There's people smoking habits, but the best comparison is that it is one pod.

I think the easiest comparison is what I've already said, which is the one pod equals a pack of cigarettes. Yeah, but the point is that. But the other, sorry, the other comparison that's, I think, really useful is that at the time when Jewel came in the market, no other e-cigarette was 5%. Like the earlier competitors were like 2% at best, maybe 3%. it was the most highly addictive nicotine e-cigarette on the market by far right and you couldn't even if you wanted to get a less less concentrated nicotine pod from them you couldn't get it correct so uh yeah so i think they did that and then of course the marketing the kids right because they knew that that was going to give them the big market and that had a chance to to blow up due to virality so it seems

like those decisions are what are basically a factor of of this money. Right. So this is one of the most contentious issues right now. And this is, you know, the attorneys general are going to be litigating this. It's like a very hotly debated issue right now that has like very high stakes kind of legal ramifications, whether or not Jewel actually intended to market to kids. So essentially when they created their first marketing campaign, they designed a campaign that. seemed pretty cool, you know, and seemed like a very sexy, kind of flashy, using bright colors, using super hot models.

Yeah, not only that, they were talking about how, internally, I think you have this detail in the book, they were talking about how the models look young, and they were happy about that. Yeah, that was, that's going to be probably introduced in litigation, the fact that they were talking about the youngness of the models. I mean, that's crazy to me. It's like, I, anyway, sorry. go ahead.

Well, but, you know, for, you know, to kind of play devil's advocate or to come to Jewel's defense a little bit, like, they did talk about how we should get models who look, you know, you know, older or we should get model. They talked about it. And I think that's going to actually be potentially problematic for them because they were aware of it. But they did say, let's try to get models who are at least like 25 or older. So they don't seem like they're young.

But like how you've worked. I've worked in marketing. Like you don't get something out the door unless you go. through like 50 rounds of approvals. It's not like some rogue marketer is going to go out and say, bam, and then you're going to, you know, you refine the message. And by the time something gets out the door, everyone signed off on it. A hundred percent. And Jewel was unique because the board, the board of directors was extremely hands on. This was not a board that met occasionally to kind of like check numbers and make sure like things were going off the rail.

They were living in the offices. Yes. And they were extremely involved. And they absolutely saw the marketing campaign and signed off on it. And so yeah, but, you know, they, they were, their mindset was, okay, let's create a product that's cool and that people are going to like and that people are going to use. And how do you market a product to a 25 year old that's not cool to an 18 year old? You know, it's a very kind of difficult marketing kind of line to walk. And yeah, I mean, I think that getting back to tech, they relied heavily on social media. You know, Jewel was everywhere.

It was on Instagram. It was on Twitter. It was on Facebook. It was, you know, they had these splashy parties that they threw in the Hamptons. And, you know,

they showed up at, um, um, music festivals. And so, of course, they marketed their product to be cool. And they immediately got backlash and tried to kind of correct.

But the genie was out of the bottle. Yeah. Just like you know with social media, once something goes viral, you can't take it back. You can't be like, oh, I wish I didn't send that tweet or, oh, I wish I hadn't done that. I mean. A lot of people find that out the hard way. Right. Yeah.

Yes. The genie was out of the bottle and their product was out there. And again, getting back the danger of having a viral product that is also addictive is that there's a snowball effect, people want more of it, and they can continue to come back for it. And that's partly the genius of the business model too, right? It's like, it's not like a razor blade. They kind of built their model like similar to like Gillette or something like that, but razor blades aren't addictive. Right. Because you want to buy the refills, but you don't get addicted to shaving. You might like it, but you're not going to have a chemical need for a smooth

face. Correct. Correct. So I really think that it was their entire business model, their entire business model was flawed. They could have, they could have like gone the slow route where they, you know, sought approval from the FDA to sell it as a therapeutic device that treated nicotine addiction or they could smoke the cigarette addiction rather. They could have, you know, you know, marketed to adults, truly marketed to a lot. smoker's. And they just didn't. I think it gets back to your question about, is this a tech company? They had the pressure of Silicon Valley. And then once you see money in particular, which demanded those returns. And I view this thing as such a tragedy. Honestly, I view the Jewel story

as a as a tragedy. Because as I read your book, you know, I learned so much about the industry. And I learned about how, you know, like we spoke about at the top, the damage is through the burning of the cigarettes. And this is actually a real harm reduction. tactic that can be used and can help people. And Jewel had that opportunity, you know, through the design and through all the brilliant scientists they brought in to help engineer the product just right. And they could have been, you know, I mean, who knows what will happen to them in the future, but they could have been this great respected business that had a massive market, just

marketing to the people smoking cigarettes already who are looking for an alternative. And in fact, people in the book, You were talking about how employees started reaching for the jewel instead of their cigarettes in the early stage. So it did have that replacement capability. But it was this drive to just get so big, you know, growth at all costs. We hear that all the time out here in Silicon Valley. And that ended up turning this thing into, you know, you wrote it right in the title, you know, the devil. When you start hooking kids on this stuff, you know, in pursuit of growth at all costs.

and you know delivering so much nicotine it becomes impossible to put down you know it's a big issue so it's i don't know what you think about it but i i viewed as a tragedy for sure yeah i mean i think so too and i i don't want to um speak for the founders at all but i believe that you know we won't penalize you on this one yeah i mean i do i do think i do think that they really intended initially to solve that problem And I think that they just got put into the meat grinder. I think that Silicon Valley meat grinder, you know, I think that they like, you know, just. And I think the other thing that we haven't really talked about is at the time, there was actually a lot of competition.

So not only did they take VC money, but they had humongous competition from the cigarette companies. Like Reynolds had created this product called Vuees. Altria, of course, had created this product called Mark 10. Like, they're about to get squashed. by the 500 pound gorilla, you know, so like they had to be scrappy and to like figure out how to compete and to out innovate. Now, those companies were not innovative, which is, you know, why Altria ended up like basically crawling to them and saying, here, take my $12.8 billion. But like, you know, they really did have to like, if there was this moment in time where they

were like, it's basically live or die. Like we either compete or we're like out of this market immediately. So there's huge competition, aside from the VC money that I think really kind of pressured them to, you know, take on this all growth at all cost model. But at the end of the day, we're all our decisions. And I've given the VCs a hard time here so far. And they deservedly so. The people that decided to invest, it's not just a problem here with Jules, it's a problem all over the tech industry. And of course, sometimes it leads to amazing, life-changing things. And without it, we probably wouldn't have some great companies. But we know the downside of it, which is that sometimes companies go nuts and they do you know it's part of the ethos to you know bend the law sometimes

break the law get uber you know jewel is another example um they're all over the place look at what's happening with facebook in order to grow uh and so yeah the vcs definitely have the blame but so like i don't know if i can um let these founders off the hook like they you are the choices that you make and at the end of the day and you know even though they were in this meat grinder they definitely made the choices and um you know they they knew what they were doing at least from my perspective no i think so and i think they just kind of got like topsy turvy it's like you know they had this idea to create this product and then just um it took off so fast i think it just took off so fast and there was just like a cannon filled with money that was like being blasted at them

and um yeah i think i you know i think another kind of lesson is that in Silicon Valley, you really need to surround yourself with ethical people, you know, with people who are making ethical decisions. You need to have your moral compass, like, really, you know, straight. And I think that they, their moral compass was off. Yeah, you had an employee who was like asking himself before he took a job there, like whether he was the banality of evil by going to work for a company like this. And, you know, then he goes and works for them and then ends up regretting not staying on when they ended up selling a good chunk of their company to Altria, which is what used to be Philip Morris. And it's like, wait, you were worried about being the banality of evil now.

You're kicking yourself for not taking the money from the tobacco company. It is. So, of course, like, you know, it's this push and pull. It's the system. And then it's the individual. And, you know, people do make these choices. I guess, like, who's responsible for it? I don't know.

But people do make choices at the end of the day. And they got to live with them and they got to own up to it, my perspective. Right. But like a lot of it was when as Jewel was recruiting employees, it was all, it was the story, right? And again, back to Silicon Valley. And every company has its story about, you know, how it's going to change the world and how it's going to solve this problem that nobody else can solve. And Jewel's story was that it was solving the smoking problem.

And I think that a lot of employees were kind of seduced by that. They liked the idea of going to work for a company that had. gone public yet that had a lot of upside potential upside and yeah um so so yeah i think everybody kind of convinced themselves that they actually weren't working for the tobacco industry right because at the time they really weren't but they were in the tobacco space but yeah i think that i think as i say in my book there was this moment when when altru invests 12.8 billion dollars where the glass shattered where everybody was like oh shit like We kind of told ourselves for a while that we were the underdog, that we were, you know, out to...

Now we work for big tobacco. Yeah. Now we work for big tobacco. So, and I think that the founders kind of struggled with that, too, is like, oh, wow, okay, we were supposed to take on big tobacco. Now suddenly we are big tobacco and it's gone in, you know, entirely different direction. It's basically being subsumed by big tobacco. Yeah.

And now we talk a lot about the regulations also. We might have touched about this earlier, but like, shouldn't, like, aren't the people that pick up these things making a choice from themselves to start smoking them so maybe the government shouldn't intervene what do you think about that argument well i 100% agree with that argument when it comes to adults like no questions asked like you want to use nicotine for the rest of your life go for it you know enjoy it great have fun with that um you know and reap the consequences if there are them but like for kids i think it's just a different equation it's like for kids um you know And then, you know, people will say, well, it's up to the retailers to police that.

They shouldn't be selling to underage kids and stuff like that. But, you know, for a while, there were not very many barriers for the kids to getting the products and stuff like that. So I don't really think that argument applies for young people. Like they, they're teens. Like their brains aren't fully developed. Like, you know, yeah, they're probably going to end up doing some, some of them will end up doing something bad, smoking cigarettes or, you know, smoking pot or drinking alcohol or whatever. But it's when you have that kind of the risk factor that's there with the highly addictive product combined with the marketing that appears to be targeting the kids, I think that's the problem. And I think that's really the problem for Jewel.

Had they not gotten the kids addicted, I don't think people really would have cared as much. It wouldn't have been a big deal. I think they would have had that more heroic veneer, honestly. It was they stepped on the third rail of American culture. I mean, like, we went through the tobacco wars where like, you know, whatever, almost 30% of teens were smoking and it was. Right. And tobacco, they were explicitly marketing to kids. Oh, 100%.

They had joking and backpacks. Yeah. No, that was, there was no, I mean, nobody even, it's not even up for argument. I mean, there were internal memos talking about how to attract that, you know, the next generation. They called them the, you know, their replacement, smoke replacement customers. It's unbelievable. But who were they replacing? Oh, yeah, the people, the four or five hundred thousand people, that products killed.

That die. They literally called them the replacement customers. Yeah. And that's the problem. That's the problem with hooking up with the tobacco industry is like you're hooking up with like the most like, you know, this industry that has been discredited that has been just continually untrustworthy. And it's hard for people to separate that out. I think Jule has a real uphill battle, honestly. I want to get to some more regulation stuff in a minute.

But one question before we go to our second break, which is how important was social media in spreading this thing to kids? And do the social media companies bear some responsibility? I am reticent to call for social media companies to censor stuff because we know where that goes. Like this whole, like for a long time, you know, you weren't allowed to mention the possibility that coronavirus could have come from a lab on Facebook. And then now you can because they're now open to it. So they're obviously not very good at, you know, monitoring what we can and can't say. But on the other hand, when it comes to kids' health,

maybe that is something they should step in. So I'm kind of curious, like what you think their responsibility is there. Well, that was really interesting, actually. Like, I think the social media companies have kind of dodged a bullet on this one in a way. Like, they bear a lot of responsibility. Like, to be fair to Jewel, after their. campaign, the vaporized campaign that was like, oh, my God, clearly targeting at least youngish people. They kind of tried to pull back and then they started dialing back on social

media. But like there were by that time, the product was already out there. And there were all of these creators on social media that would like, you know, I write about this guy who created a Jewel Nation account and like, who's on Instagram. Yes. And, you know, you had these people who had figured out how to monetize it on social media and jewel would actually like beg Instagram please take down this account like and the social media companies wouldn't do anything about they're like they're not violating any of our rules like there's nothing we can do about it and like also eBay I feel like eBay has gotten off the hook too like eBay was allowing them to like anybody to essentially buy Jewel even after they tried to age gate the product more strictly

Like, you could still go to eBay and buy some Jewel pods and stuff like that. So, like, I absolutely think, you know, whether or not they should have censored Jewel, that's a whole other conversation. But, like, I absolutely think that the social media companies bear a lot of culpability and really kind of dodge a bullet on this whole, like, youth addiction issue because a lot of it was on social media 100%. And there's the right to say something. And then there's a totally separate question about whether algorithms should spread it. And the people that you write about in the book, they got engagement. The algorithm spread it. It wasn't paid for.

It wasn't organic. It was, well, it was organic, you know, that it wasn't paid for. But it wasn't, you know, people going directly to their page. It was the algorithm saying, hey, this is an engaging thing. And we should show it to more people. And actually, I even look today. And hashtag jewel boys is still populated with some young looking people, jewelling it up.

So if you work at Facebook and are thinking about this, I'd love to hear from you about it. because it does seem like an issue you should reckon with. All right, let's take a break. I want to talk a little bit about the regulatory aspect here, more broadly from like a technology standpoint. So we'll break and come right back for one last segment. And we're back here for our final segment with Lauren Eder, author of The Devil's Playbook and also a reporter of Bloomberg News.

Book is great. You should buy it, especially if you're already here in a minute, But mid in the 40s in the conversation, you'll like the book, I promise you. Okay. So like the regulation aspect, it's kind of interesting to me because one thing that I've seen, you know, when it comes to social media companies in particular, but tech companies in general, is that the tech moves so fast that a lot of times the damage is done before Congress or the regulatory bodies can, you know, even get their heads around what's happening. It seems like part of that happened here. but they also moved pretty fast. So do you think, I'm curious what you think about this inside the tech industry and how

it's played out with with Jewel in particular. Yeah. No, it's interesting that you characterize it as playing out really fast because actually I think it like they dragged their feet for years. Like really. I'm coming at it from the perspective of like what's going on with the big tech companies. And what we see with them is Congress drags them in front of hearings, makes YouTube moments. And it doesn't do jack shit.

So actually they made, they acted here. And to me that was, but I guess like when you're addicting millions of kids to e-cigarettes, it's fairly slow. It's a couple of years. But sorry, go ahead. I didn't mean to interrupt. No, I mean, yeah, no, I think we're on the same page. The point that the important point, though, is that Jewel was able to exploit a regulatory gap. So essentially, Congress did not act fast enough to bring e-cigarettes under their regulatory

structure for tobacco products. So in 2009, the FDA was allowed finally to regulate tobacco products. But in that law, they didn't stipulate that e-cigarettes were a tobacco product. So it wasn't until 2016 that Congress finally deemed e-cigarettes to be considered a tobacco products. So from 2009 to 2016, e-cigarettes were kind of still already out there, and they were basically no regulations whatsoever. So Jewel launches in 2015, takes advantage of this existing regulatory gap and knows that the gap is going to be closed. That's really interesting to me is that Jewel knew that the regulations were coming. And that was also part of, we've talked about, you know, the pressure from the BCs and the, you know, existing competition from the tobacco industry. But there is also this, this impending

regulatory structure that was getting ready to basically close the curtain, as people call it. the curtain fell and so basically jewel was incentivized to act really fast to get their product out there as fast as possible before the regulations kicked in so yeah so one that's when they start shipping out all these wacky flavors because totally we're not going to have a chance to do this afterwards yes it's like it's like bird you know like being like oh shit the city's gonna the city's gonna like regulate scooters but let's just like dump scooters on every street corner as fast as possible so we can air or like Uber like Uber doing the same thing.

Like, it was a similar kind of race between regulators and the company. So, yeah, so finally, the regulations do come down and they're still sort of in flux. But, yeah, they took flavors off the market. They implemented age requirements, that type of thing. So now there's basically, they do have some sort of regulatory structure, but there's going to be more. The FDA is essentially in the process right now. as we speak, evaluating whether or not Jewel will meet this public health standard and whether

or not they're going to be able to remain in the market. So the FDA has another few months to decide whether or not Jewel will be able to remain on the market. Yeah. So, yeah. By the way, there are like these always these negative consequences that we see with regulation and, you know, second order effects. Like when they said we're going to, you know, put these rules in a place, then you see

these companies scrambling to get everything on the market. And even when I was reading, I found it was really interesting that the master's settlement agreement with big tobacco companies after they had agreed to reform their businesses in order to, you know, reduce the harm on the public, they had agreed to essentially make all their documents public. And yeah, that's great from a public accountability standpoint. But also it ended up, I don't know where Jill would be without those documents because the company's founders.

ended up combing through them. And all the competitors ended up coming through it. And they essentially had maybe that's what it is, the playbook, you know, right? Oh, totally. They're, you know, because of the regulation that we've done. So I just make this point to say that oftentimes people say that regulation is simple. And, you know, X outcome will will inevitably be good if X regulator does this. But it's complicated stuff that can have all these second order effects that aren't immediately apparent and don't get summed up in catchy headlines.

Yes. And I think in this instance, the most important effect is that if, you know, these products aren't allowed on the market anymore, smokers, legitimate adult smokers who are essentially, you know, have confined themselves to a death sentence, they don't have the opportunity to access a product that's potentially safer than, you know, a cigarette like jewel. So, you know, there are super like large consequences. It's a balance. And I think that the. the regulators, the FDA in particular, has a very tough balance to strike and they're under a lot of pressure from all sides. I can't imagine the FDA taking this product off the market. I think that, you know, they'd be sued. I think that there would be huge blowback, political blowback. So, so yeah, this is, I mean, this is an industry that is truly at an inflection point right now. And it'll be very interesting to see which way it goes. Weird question, but, you know, we've talked a lot critically about the company, but do you think that, well, I mean, obviously the damage has been done in some way, but if they do end up getting all these adults that, like, as you mentioned, are hooked on cigarettes and have basically, you know, create a death sentence for them. And it does turn out that this stuff is safer than, it seems like it's safer at least. Can Jewel one day be a good thing for society? Yeah. I mean, I think if Jewel can.

thread the needle, which is essentially excluding the next generation off from nicotine addiction while treating adult smokers that they can. But I had this very interesting conversation with Mike Moore, who is the former attorney general who really brought this one of the first tobacco lawsuits and was super consequential. He essentially said, these companies exist solely because they've gotten people addicted to nicotine. And if you can't convince people to pay money to inhale something into their lungs, then you don't have a business anymore.

And like if you think about it, if this industry doesn't have a next generation of users, there's not a very like long tail on the industry, right? It's going to peter out eventually. So there's this huge, fascinating kind of business incentive for them to continue hooking users. But at the same time, they say, no, it's just for adult smokers. So I think if Jewell can truly be a solution for adult smokers and adult smokers only and not lead to initiation of either youth or non-nicotine users, then it's probably a pretty good product.

But there's a big butt there's a big butt because what company wants to be in business for a single generation, no company talks about it like that. You talk about multi-generations. How do you build a business, not just for one generation, but multiple generations? And if they're true to their word that they want to, you know, be a product for current smokers, then they have a, there's a finite kind of element to their business. But everybody knows that they're going to get new users, whether or not those are, you know, teen smokers, perhaps. whether or not those are, you know, just kids who want to try nicotine. I mean, I think we're always going to have nicotine users. So, but yeah, I think it opens up a lot of interesting questions.

But if Jewel can, like, be true to its, you know, it's stated mission of getting adult smokers off of cigarettes, smoking cigarettes, then it could be a okay business. Yeah. And I asked that question because I was tweeting out the end of your book, which I think was great talking about. They didn't need to get. I basically was saying what we talked about. They didn't need to try to get this big. And they could have been this force for good that they hoped for in the beginning. And, you know, someone tweeted back, you know, what about the utilitarian argument?

And it's like, all right, well, it's still in play. It's just kind of far-fetched. And what is the utilitarian argument? It's basically like it did, will it take people who smoke cigarettes and end up turning them on to e-cigarettes? Essentially, we've been talking about it. So, TBD. TBD, but not looking good. What have they felt about the book?

Have they contacted you or have you gotten a chance to speak with the founders? Because I didn't see any direct quotes from them in the book. Right, right. Yeah. So what I'll say is that I've heard a lot of feedback from Richmond, which is very interesting. There's a Richmond is where Altria is based. That's in the hometown of the tobacco industry. and I know that there's a lot of interest there and, you know, I've gotten some interesting

feedback and stuff like that. But so far, yeah, it's so far pretty interesting, but I'll leave it at that. Okay. They're not threatening to sue you or anything like that. No. No. And I really don't see why, you know, it's like I, you know, there are lots of haters out there, people who, you know, think that I'm like some sort of anti-vaping person. But like, you know, I feel like it's like a pretty nuanced look at this, you know, complicated, super controversial industry. And if like they read my book, then they'll realize that. But, you know, I don't, I don't think that I don't see a lawsuit. I just don't. Yeah. Last thing I'll, I want to end with is there's a scene of the beginning of the book where the two jewel founders go into Altria, which again is the rebranded Philip Morris. Come on, guys, stick with the name. You know, own what you've done. But okay, Altria. They go into Altria and they, uh, they, try to sell the product to them or try to get investment and they get laughed out of the

out of the room and like they were all gung-ho we're going to destroy big tobacco then a number of years later they end up selling 35 percent i believe of the company to altria for somewhere around 13 billion dollars yeah uh price tag so big that altria had to lay off a number of people in its traditional businesses uh and then they had to write right either the they've written down their investment or they don't believe that it's worth anywhere close to what they paid for. So, you know, in some sense, they actually did stick it to big tobacco, but not exactly in the path that they hope for. I thought the exact same thing. It was like, it was like they, they're like saying they're going to take big tobacco down. And I think

somebody, there's even a quote in my book where they're like, we just punked this 100 year old company, you know, cigarette company. And I mean, it was a. deal of the century for for jewel and the jewel board i mean they didn't even have to sell stock they just got a dividend they got a 12.8 billion dollar dividend and got to continue holding all of their shares and basically just took all of that money off the table so you know they did distribute some of it to the employees but the the vast majority of it went into the pockets of the original founders and the biggest shareholders so yeah In a way, they did stick it to big tobacco.

I agree with you. I like that. And they were so worried that the employees wouldn't come along for the ride that they had to put aside a billion dollars or so and distributed among the employees who walked away with what minimum of $600,000, but often a million or more. Exactly. It's amazing what money will do.

It's amazing what money will do. Definitely clear their conscience a little bit for sure. Made it a little bit, made the sugar, the medicine go down. Sugar like the medicine go down. So, yeah, for sure. And I read that scene of the employees at Philat, Altria, hearing the news that they were going to get laid off. And lots of them were going to get laid off as part of this $600 million cost-cutting effort in order to bring Jewel in. And I did feel bad a little bit, but not too much.

I'm going to be honest. I felt like that was one of the most kind of jarring scenes was like the fact that that happened on the same day. Like one company in Silicon Valley is getting like money rained down on them. And the same day, you know, across on the other side of the country in Richmond, they're being delivered the news that they're going to be layoffs. And it was a much different tone. It was like one was celebrating the other was very somber, almost like a funeral procession. So yeah, but that's the, you know, collision of these two industries.

It's just there are winners and there are losers in multiple different realms, I guess, in this story. Yeah. It's what disruption looks like, except this is a very unique story of disruption. The book is Devil's Playbook by Lauren Eder. Lauren, thank you for joining so much. It was a pleasure reading the book, and it was great getting a chance to speak with you about it. Thanks for coming on. Oh, thank you so much for having me.

It was a lot of fun to talk to you, Alex. Likewise. And thanks everybody for listening. Thank you, Nick Guatny, for turning this around on short notice as usual. And with the editing, of course, mastering, and Red Circle for selling the ads and hosting the show. We always appreciate that. We will be back next Wednesday with a. another show with a tech insider, outside agitator, or journalists.

We'll keep you waiting in suspense for which one. It will be, thanks again for Lauren. Pick up the book, Devil's Playbook. It's out and available at all major booksellers today. All right. We'll see you next time.