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Remember Juul? Not that Juul. Yeah, that one. Five years ago, everyone was jubilant. The company was worth more than Ford. And then... But somehow, flavored vapes are more popular than ever.
So what happened? How did it come to pass that out of the efforts to rein that company in, we got instead this insane Wild West where it seemed like the vaping problem transformed into something much less manageable, arguably, than it had been in the first place? That's coming up on Today Explained. Don't go vape your juice Cause it's full of nicotine Allow, vape your juice
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This week on Property Markets, we speak with Dan Ives, Managing Director and Senior Equity Research Analyst covering tech at Wedbush Securities. We discuss his reactions to Google's earnings, a bull case for Tesla, and why he's so optimistic about the long-term trajectory of the tech industry. I mean, this is a fourth industrial revolution that's playing out. Now, it's going to have white-knuckle moments and speed bumps along the way, but in terms of the underlying growth,
This is just a start. In our opinion, it's 9 p.m. at the AI party and it goes to 4 a.m. You can find that conversation and many others exclusively on the Prof G Markets podcast. It's Today Explained. I'm Noam Hassenfeld filling in as host here with Leon Nafok, co-host of a new show from Audible called Backfired. It's all about the rise and fall of Juul.
So, Leon, let's go back to the beginning of that rise. How did Juul start?
It started like so many of our most beloved companies at Stanford with a couple of guys who had an idea for a startup. Were they in like a garage or something? They weren't in a garage. They were in a design program, actually. Their names were James Monsies and Adam Bowen. They were both smokers. I'm from St. Louis, and when I grew up, I was a kid and exposed to cigarettes. And the fascination sort of lived on with me. You know, James Monsies had a family member, a grandfather, I believe, who had died of smoking-related illness.
They hated the fact that their classmates would look askance at them when they were outside their classroom smoking. They didn't like how it made them smell and so on. They decided to make a safer cigarette, one that didn't involve lighting tobacco on fire. We were really passionate getting into this about, as smokers ourselves, to end the combustible cigarette for once and for all. So this was like coming out of a desire to be healthy. This was actually like...
that was supposed to help people. Oh, yeah. No, 100%. I mean, you know, people will call me naive for saying this, but I do think their initial mission was to get people off of cigarettes. They wanted to invent something that would help, you know, millions of people around the world stop smoking. They obviously wanted to make a lot of money in the process. They saw that population of
Smokers, reluctant smokers, has a huge market opportunity. So you have a trillion dollar global market where 70% of those consumers don't want to use them.
So that's fascinating. But they knew from their own experience that quitting smoking is really hard. And they wanted to invent something that would go further and work better than the patch, the lozenge, all these smoking cessation tools that are not that effective. They wanted to see if they could improve on it.
So how big did Juul get at its height? So big. Tremendous growth in just a short time. It has roughly 72% of the e-cigarette market selling directly to consumers and through 100,000 retail outlets. I would say peak Juul was probably around 2018, 2019. Ironically, the kind of best or most vivid marker of their success was when Altria, the tobacco company that makes Marlboros, bought Juul.
a chunk of them, a 35% chunk of Juul for like 12 point something billion dollars, which valued Juul at $38 billion, which made it worth more than Ford and SpaceX and many other companies. More valuable than Ford, Delta Airlines or Target. Wow. So they were, I mean, they were a juggernaut. They were like the fastest growing startup ever.
And, you know, that obviously went up in smoke, so to speak. Yeah, what exactly happened? I remember hearing stories all the time about how Juul is so dangerous, which is kind of surprising if the original purpose of Juul was to be healthy, right?
Right. Well, so I will put an asterisk on healthy because they never made health claims, right? They weren't allowed to because they were trying to sell Juul as a consumer product. They weren't interested in being behind the counter at a pharmacy next to the cessation devices that we all know. Fair to say you think you're safer than cigarettes. I'm not going to comment about where I am in terms of that. Let's just say cigarettes are known to be
the number one source of preventable death in the world and are at the far end of the stream of that continuum of risk. They wanted this to be like something people wanted. They wanted it to be something people enjoyed using. The best they could do in terms of making claims about its relative health risks was to call it cleaner. That was the word they used at the time.
But is it actually bad for you? We don't have long-term data on what happens when you spend, you know, 30 years or 40 years vaping. It's much safer than smoking. That's the thing that I think has gotten lost in a lot of this discourse. Like,
There are surveys that show that like 60% of doctors think vaping is just as bad for you as smoking. And it's just not true. Like the important thing to realize is that nicotine is not the thing in a cigarette that causes cancer or that causes you to develop emphysema. It's the carcinogens that are generated when you light tobacco on fire. And if I remember correctly, when it came to the controversy around Juul, it was mostly about kids, right? Exactly. Exactly.
The annual youth tobacco survey came out in 2018 showing a huge, huge increase in kids who were routinely using e-cigarettes. I think it was like a 75% increase in one year. Millions of high school kids, not quite a million middle schoolers, but a lot of teenagers using vapes and generally using Juul. Teachers started noticing kids...
with jewels in class. How often would you guys say you've been offered a vaping product? Multiple times a week. Multiple times a week? During class. During class? There were kids bunched together in bathrooms, juuling. Yo, what's good? We got the jewel here. Gonna teach you some tricks.
And that really freaked people out. Take a close look. This student is outfitted with vaping devices, but you can't see them. Why? They're designed to look just like normal school gear. So we have this fear that kids are using vaping
too many e-cigarettes, too much, they're dueling too much. And then we also have this idea that maybe it's not as bad for you as, well, it's definitely not as bad for you as cigarettes. We don't know exactly how bad it is for you. Why did Juul end up losing, essentially?
So, I mean, a couple of things happened at the same time. I think the Youth Tobacco Survey numbers came out and were a huge red alert for the FDA, for the Center for Tobacco Products. The head of the FDA at the time, Scott Gottlieb, announced that there was an epidemic. Summer of 2019, this other thing happens, which is extremely devastating.
damaging to Juul, which is that people start developing a deadly lung illness. And it seems like what they have in common is that they vape. I remember we covered that on the show back in 2019. Today's episode is about vaping, but I can almost guarantee you it won't make you want to vape because now people are dying.
Yeah, we didn't know what was causing this lung illness that was literally killing people. And kids were in the hospital struggling to breathe. At 18, doctors say Adam Hergenrader has the lungs of a 70-year-old. I was devastated because I didn't think that...
that little pod could do so much damage on my body. And people were, you know, in the news were talking about it as the vaping illness, the vaping-related lung illness. The CDC came out with a recommendation essentially advising people
maybe to not vape at all, just to consider not doing it. And what exactly was that was causing it was unclear until eventually the evidence came in and it became pretty, I think, it became a matter of empirical fact that what was really causing this lung illness was black market THC vapes. So it wasn't Juul? Correct. There's a thing called vitamin E acetate that was in these black market THC vapes, has nothing to do with what's in a Juul, and
And in the meantime, everyone got convinced that vaping kills you and gives you this lung illness. Right. Just sort of vaping in general without making the distinction between like black market weed vapes and e-cigarettes. Yeah. Vaping in general, Juul in particular. There's probably a lot of, you know, I think resentment on the part of
people who believe in vaping as a harm reduction tool for what they see as like basically a politically opportunistic move on the part of the U.S. government to crack down on nicotine vapes on the basis of this lung illness that actually had nothing to do with it. So what ended up happening? What did the government do? So what happened?
One was, you know, a lot of the analysis of why teens were picking up this habit had to do with the fact that vapes came in attractive flavors, right? So the early Juul flavors, I think, came in mango. That was like always the people pleaser, the crowd favorite. Okay. Creme brulee was one. I never liked that one. Cucumber, that one was pretty nice. Two recent studies found mint pods are the number one flavor among high school users and Juul is their favorite brand.
And the theory was that this was what was making kids want to vape. Uh,
You know, maybe in addition to the fact that it was like a cool, you know, just an aesthetically cool thing to have in your pocket. And so flavors became a major focus of efforts to reign in this industry. And so what happened was that under the Trump administration, there was a flavor ban on nicotine vapes. But we can't allow people to get sick and we can't have our youth sick.
So that's the last I feel like I heard about Juul in the news cycle. Was that the end? No, it was not the end. It may have been the end of people paying attention to Juul in the way you just described, but it was only the beginning, I think, of a new phase in the vaping industry's evolution. In a minute, how the attempt to ban Juul may have made flavored vapes more omnipresent
And even more of a black box. And here we go. Cherry pop, everybody. Let's get into it. Cheers. Wow. Hey, Today Explained listeners. Sue Bird here. And I'm Megan Rapinoe. Women's sports are reaching new heights these days, and there's so much to talk about and so much to explain. You mean, like, why do female athletes make less money on average than male athletes?
Great question. So, Sue and I are launching a podcast where we're going to deep dive into all things sports, and then some. We're calling it A Touch More. Because women's sports is everything. Pop culture, economics, politics, you name it. And there's no better folks than us to talk about what happens on the court or on the field.
and everywhere else too. And we're going to share a little bit about our lives together as well. Not just the cool stuff like Met Galas and All-Star Games, but our day-to-day lives as well. You say that like our day-to-day lives aren't glamorous. True. Whether it's breaking down the biggest games or discussing the latest headlines, we'll be bringing a touch more insight into the world of sports and beyond. Follow A Touch More wherever you get your podcasts. New episodes drop every Wednesday. Parents are all the same when it comes to vaping. Bye, Mom. Bye, honey. Bye.
None of them think today's plane is doing it. Leon, we're back talking about flavored vapes.
And I guess my first question here is just, are flavored vapes legal right now? No, they are not. Okay, wait. So the producer for this episode, Miles Bryan, he told me that he brought a mango-flavored vape to this taping. He found a mango one? A mango jewel? I don't think a jewel, but he got a mango one, and he says he bought it at a convenience store.
So how was he able to do that after this Juul ban? Well, so the ban on flavored vapes really only applied to Juul.
I mean, frankly, the way it was written, it only covered cartridge-based or pod-based devices, which left this huge opening for companies that made disposable vapes. What is going on, guys? Today we're going to be doing a review on the Lemon Sparkling Wine Lost Mary MO5000. Vapes that didn't include any kind of cartridge. You just bought one, you puffed on it for a week or two or however long it lasted, and then you threw it away. Very, very sweet lemon. You get that wine aftertaste, but it's not overpowering in my opinion. It's like...
nice natural taste. That loophole that the FDA ban left open gave rise to a massive industry that they're still trying to rein back in, even though the loophole has since been closed. The reason I say no, none of these things are legal is that... The Food and Drug Administration recently finalized new regulations that would make electronic or e-cigarettes subject to the same federal rules as traditional cigarettes and other tobacco products. Anyone who enters the market
after 2016.
who wants to sell vapes of any kind, anyone who wants to sell nicotine, e-cigarettes, has to be approved affirmatively by the FDA. They have to submit what's called a PMTA, an authorization request, basically. And so Juul, which obviously had already been on the market, could continue selling their products even as the FDA reviewed their application. And so the reality is that none of these companies have been approved by the FDA.
Where are all these flavored vapes coming from? Well, they're mostly made in China, specifically in Shenzhen, which listeners may recognize. I mean, it's a massive city, very famous. That's sort of like the big tech hub, right? Yeah, people remember it because Foxconn was in Shenzhen. It's like where all our iPhones were made. And...
Now it's home to the central hub of the world's e-cigarette manufacturing. We're located in Shenzhen city, Bao'an district. It's very, very, very easy to find a full supply chain in this city. And because we have a full supply chain of the electronic products, so it's very easy for us to find all the raw material we need. There's a neighborhood in Shenzhen known as Vapor Valley.
where most of these things are made. The European market is very strong right now, and the Middle East, but U.S. still the top one sales right now of the vaping industry. It's like the biggest market in the world right now. Wow. Most of these flavored vapes that are coming in are coming from this one place? Yeah, that's the sense that the people we interviewed have, is that, and I say that, and I hedge that a little bit because people
people know very little about these companies. Like, one of the subplots of our, you know, attempts to figure out who was in charge is that they're really good at kind of...
hiding. And, you know, there was one company called Puff Bar where there's all this speculation for a long time about whether these two, you know, American guys in their 20s who said they were in charge were actually just a front for a Chinese company that, you know, was actually calling the shots. And so there's a lot of hazy territory here where you don't really know who is behind these things. All you know is that they're everywhere. If I understand this correctly, the market for all of these Chinese vapes was created in
by the American government or the FDA saying Juul is not healthy and habit-forming for kids. Are these new vapes healthier? Are they tested? No, they are not tested by anyone. We tested some, actually, for our podcast. We took a handful of disposable vapes that we bought in LA to a lab where they mostly test THC vapes. But basically, they have this robot
that can smoke like 10 vapes at a time. Wait, what is it? I just imagined like a robot with a really wide mouth? It's not an anthropomorphic robot, but it is a device that can double fist.
This is unbelievable. Basically a robot sucking down about seven vapes at once. Well, it does them one at a time, but yeah. What they told us was that the vapes contained some nasty stuff, but in very, very, very, very small quantities. There's arsenic.
everywhere in your drinking water, in your, you know, your home floating around in the air. It's something to get too crazy about. Okay, so that's the physical stuff, you know, maybe not terrible, but also unregulated.
What about the kid stuff? So this is sort of interesting. You would think, and I certainly did think, that disposable vapes, which like, again, come in like insane flavors. Like, I mean, it's like literally like seltzer. You know what I mean? Like the same way that there's this insane explosion of flavor specificity in the seltzer world. I feel like you have the same thing with nicotine vapes. They don't look like the Juul. Like they're not, they don't resemble a cigarette in any way. Arguably, the Juul is still like a thin, like,
thing you hold in your fingers. Like, this is like a little egg almost. And they come in all the different forms, but like the main form is like an AirPods case almost that if I were a teenager, I would want.
But the reality is, and this is why I say it's quite interesting, teen vaping is way down, like way down from its peak. According to the National Youth Tobacco Survey, the number of high schoolers using tobacco products dropped from 16 to 12 percent. That drop largely driven by a decrease in the use of e-cigarettes.
And meanwhile, like the sales of disposables have continued to go up. So it's like it seems as if it's adults who are driving the adoption of these disposables, which is interesting. So I'm curious. We had this product in America, Jules, that people were really scared about and were at least somewhat regulated. And then there was a push to kind of
get them out, and now we've essentially replaced them with much less regulated vapes. Why aren't these new unregulated Chinese vapes causing kind of outrage? Why aren't they getting crackdowns? So they are. They're getting some outrage, and they're definitely getting at least the trappings of a crackdown. ♪
I accompanied the New York City Sheriff's Department on a raid of a smoke shop in the Bronx. It was something they did every single day. They go to these places that sell flavored vapes and weed, I should say. This is the Elf Bar. We see this one a lot. Elf Bar and then this one, the Miles Bar.
Once it's bagged up, you'll see how many bags that come out of this location. You know, they sort of like play whack-a-mole with these convenience stores that often just like reopen a week later. So that's like the small ball effort to crack down. Just the other week, it was announced that the FDA is going to go after disposables in a new way by joining up with like a
a bunch of different bureaus, including DOJ. The FDA says it sent hundreds of warning letters to shops and manufacturers over the years, urging them to stop selling the e-cigs, but it just hasn't been effective. That seems like a signal that they're serious, you know, about going after these companies with, like, real...
enforcement power. Up to this point, and I think this is what has been really difficult for them, is that they didn't really have a weapon against these companies other than trying to stop them from importing their products. But there were so many different brands and so many different companies, again, operating somewhat in the shadows that the FDA just couldn't keep up.
This is kind of a story of unintended consequences in a lot of ways of good intentions here. I guess it just makes me wonder, is there another strategy the government could have chosen to follow here? This is a boring answer, but like one thing they could have done differently is not left a huge loophole that these companies took easy advantage of. So that's one thing. But I think, you know, in a more philosophical sense, they could have, I think,
done a more careful job of balancing the need to contain the youth vaping epidemic, as they called it, with the reality that smokers like vaping, that vaping helps people who smoke cigarettes quit. You know, the research is pretty clear. Vaping is by far the best, you know, most effective tool we have for smoking cessation.
And I think, you know, in other countries, especially the UK, they've taken a more balanced approach in terms of trying to make sure that kids aren't picking up this habit and developing, you know, lifelong nicotine habits.
while also encouraging adults to switch and having messaging that didn't completely demonize vaping as a phenomenon. I think in the United States, the reason so many people kind of assume that vaping is no better for you than smoking or if anything, it's worse, is that the messaging in the U.S. has been so prohibitionist, so kind of unambiguously negative on this thing that actually could help
Leon Nafok is the co-host of Backfired: The Vaping Wars, a podcast from Audible.
Right now, I'm on the patch, actually. I've introduced that into the rotation. And it works quite well. That's sort of where I am now. It's trying the old school method of quitting, which is to use the patch. This episode was produced by Miles Bryan, edited and fact-checked by Matt Collette, and engineered by Patrick Boyd and Andrea Christenstatter. I'm Noam Hassenfeld. It's Today Explained.