A new story from Biz 1190 Overnight


And chasing Kelly from Bloomberg radio the story Jill is not unlike that of so many esteem Silicon Valley tech started to move fast it disrupted established industry we're talking about the cigarette business that's right and it has found itself in the middle of probably one of the biggest public health controversies we've seen in quite some time learn at our joins us from LA she is the co author of one of the really most compelling read the magazine this week it's all about jul I learned a ton from this story Lauren this back to the beginning because the origins of this company are fascinating yeah absolutely so like many other Silicon Valley companies this one started at Stanford University the two founders of the company were graduate students studying at the business school and today were smokers and they were sharing smokes out back and decided that wow this is a very outmoded product and maybe we can innovate on this so that's what they set out to do they did a lot of research they launch their very first version of an E. cigarette at a time when there wasn't too much competition in the market so they basically innovated and the cigarette space and launched what became the most popular E. cigarette in the world it wasn't so easy right the first I think the the initial device maybe didn't work so well it was hard getting investor money to initially yeah yeah you know it's interesting because at the time when they were seeking money this is circa two thousand and five to two thousand and ten when they're really starting to have a prototype they want to start launching it and they kind of got the cold shoulder from Silicon Valley investors originally this is considered the tobacco industry is kind of considered to be one of the sin industries and Silicon Valley really kind of shined and shun those sin industry so they originally had a very tough time getting some funding but that all changed of course a little bit later down the road and what changed it I mean obviously part of it was is this sinning because they got people on board with this idea of no no no no this is actually an antidote in a way to what was already considered then a public health crisis exactly so two things well multiple things happen but really cigarettes hedges it was very clear that cigarettes were going to be a dying industry fewer people every year were smoking three percent declines year over year and everybody was starting to turn away from cigarettes but of course they're addicted they are due to the nicotine so that's sort of what the company founders really zeroed in on we cannot allow smokers to continue to have the nicotine fix but it's not gonna have the combustion that causes the tar and along sin is ultimately the causes lung cancer so the kind of position it almost as more helpful product is helpful attributed to cigarettes and that's really it started catching on but the second thing was really it's a very addictive product they invented to something called a nicotine salts vape liquid and basically they had tennis early on in their laboratories and they devices will try a powerful nicotine liquid and that that for sure helps get a lot of people hooked onto their products and I think it is so troubling is how did so many teenagers right those under age get hooked on a product like tool well this is victorious tissue regarding tool but the fact of the matter is early on jul laid out and marketing campaign that was pretty much designed to attract kids it was super edgy it had colorful graphics really bold they hire models on it just made it look like a very cool product they they marketed on Instagram and sure enough to much to nobody's surprise high school students eventually and medical middle school students eventually started trying the product and the combination of the market and a highly addictive nature of the product really allow this product facilitated this it facilitated the spread of this products across America and high schools and middle middle schools right and so now you have millions of people addicted to it well the other element your street it's so interesting is you say like many other Silicon Valley stars I think of something like were they just kind of came into the market may be ignored you know regulations this fast moving mindset that was very much a part of the jewel model like just kind of get it out there because from what I understand and your reporting along with Ellen Hewitt is that there were folks within the company there were uncomfortable about kind of how fast they were ramping up into who they were ramping up yeah exactly they really adopted and embraced the model that is ask ask forgiveness not permission and that's we saw that with uber or when they flooded the streets with these on demand cab drivers and then we thought with birds scooters that's why you trip over bird scooters everywhere on street corners so they really they adopted that models like let's just get it out there as fast as possible we need to really own this market as quickly as possible because was rapidly becoming more competitive with the big cigarette companies getting in it so they really did they scaled up super quickly they were hiring lots of new people they were producing the product at a really and fast free and yeah that'd make people inside the company uncomfortable they felt like well wait a minute let's let's slow down a little bit let's make sure our internal controls are adequate enough so we don't have any sort of problem down the road but the reserve constantly a mind set of growth first and then let's figure it all out later which is a traditional Silicon Valley model but when you have a product that has such it huge health implications that sort that's where got sticky well and learn it feels like also mindful of the fact that regulators and didn't really know what to make of this lawmakers didn't know what to make of it so they had this moment that they could seize that while those were filled for figuring it all out they were going to build a big business yeah this is the most interesting aspect of all of this is when the cigarettes and jewel started really on rolling and I'm rolling the products I was on two thousand and fifteen and the FDA have been regulating cigarettes and tobacco products now for several years but when they wrote the regulation they didn't include any cigarettes as a quote unquote tobacco product so here come these companies that are starting to sell these highly addictive nicotine products and there is virtually no regulation from the FDA so they had a golden opportunity tool and all these other E. cigarette companies they had a golden opportunity to seize the market to flood the market with as much as their product before regulators came in a kind of rain that man so jul definitely exploited that and all the other E. cigarette companies did too and that facilitated definitely the rapid wildfire spread of the jewel that we've seen over the past few years that's morning at our joining us from Los Angeles this feature story Jason unite talked about a lot the news and I think what's interesting about this one is I think we all just kind of take for granted jewel in the market place but this gets into the to Stanford you know graduates who worked on this created this the troubles and kind of bring it to market initially but how they became really the major player in this market and how they did it I find really under the radar of regulators well and now very much friend of mine for regulators in very much friend of mine I feel like in the broader public conversation this happened very quickly it's a fast moving story this is really important context and full transparency Michael Bloomberg the founder majority owner Bloomberg LP the parent company of Bloomberg radio Bloomberg television has campaigned and given money in support of the ban on flavor E..

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