The rise and fall of Juul: How the $38B company imploded

Juul was founded in the early 2000s by two Stanford students who saw it as a way to help people get off smoking. By 2018, their company and the product they invented had captured 74% of the vaping market, and they were billionaires. But just 4 years later, their company was worth a tiny fraction of what it was before. Uh, they were under investigation by virtually every state's attorney general, and they were pariahs. How did they go from so good to so evil so fast? This video is the rise and fall. Of Juul.

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In 2004, Adam Bowen and James Montse were graduate students in a design program at Stanford. They would keep meeting each other on smoke breaks during class. Like most smokers, they were frustrated. They just hadn't been able to figure out how to quit, and nothing on the market really helped. So they did the most Stanford thing possible about it. They wrote a grad thesis called The Rational Future of Smoking, which was their solution to the problem. Their core thesis was the nicotine was the thing that was addictive, but the thing that was really killing people around tobacco usage was all the other stuff: the burning of tobacco, the tar, the carcinogens, and all that junk. So their idea, and this is a very Silicon Valley idea, was to redesign smoking. They would rethink it and get rid of all the bad stuff and just leave the good stuff, and including a lot of things that made people addicted to it, including the rituals of smoking. So they entered the early years and later years of Juul thinking of it not as a smoking product, or an addictive substance, but really they were doing quote unquote harm reduction. Like most, the two guys had tried e-cigarettes as a way to get off of cigarettes, and they discovered that at the time, e-cigarettes just didn't satisfy real smokers. At the time, e-cigarettes used the same technology that you find in the quitting cigarette patches, freebase nicotine. And the problem was it delivered pretty slowly, so people didn't get the same high they got from cigarettes. And also at higher concentrations like you'd find in cigarettes, Well, it was harsh on the throat. So Juul's innovation here was a thing called benzoic salts, which when mixed with nicotine changed the way it was delivered when you basically vaped. Uh, and even at higher concentrations, it didn't have the nasty kind of effects that e-cigarettes did in terms of burning your throat and stuff like that. And when they created the first Juul pod, it would have as much nicotine in it as an entire package of cigarettes. Early Juul employees at the time would start to mix and match concentrations to see if they could figure out how to get the greatest hit from a Juul pod. An early sign that these guys weren't actually about smoking cessation. There was other kind of stuff creeping in. And these guys wanted the product to feel hip and cool, not like losery and kind of nasty like a Marlboro Red does. So they designed the Juul pods to look like an iPhone. Hip, sleek, and cool. As with any business, the first thing you got to figure out is how you're going to market it and then how you're going to sell it. So these two grad students went and found a resource inside of Stanford, a professor named Robert Jackler. And Robert had compiled the largest database of historic tobacco company advertising in the world. Jackler helped the students dig back through the old, like, archives of this stuff. The idea of his database was he didn't want people using those same techniques in the future, so he chronicled them. and he showed them to the Juul guys. And when the Juul guys came up with their very first campaign to market the business, Jackler noted to them that, hey, this looks like the same stuff people were doing to market tobacco to kids back in the old days. And the Juul guys kind of shrugged their shoulders and said, well, okay. The Juul founders, just by the way, later said that this episode never happened. But Jackler, well, he testified in front of Congress that it did. So you make your own judgment. I'll make mine. In July 2015, it was time to bring Juul to market. They'd figured it out. And their first campaign was called Vaporized. And Vaporized was, well, they said, meant to target smokers who were 25 to 35 years old who wanted to quit. But internal documents for Juul showed that the artistic director wanted to create a campaign for people who are teens and millennials looking cool, quote unquote, and sexy. And that's what they did. At the time, Juul actually turned down a campaign proposal that would target adults specifically. Instead, they focused on youthful, hip, and colorful party vibes. They placed vaporized ads on Nickelodeon, Seventeen magazine, and get this, Cartoon Network. Internally, their email database couldn't identify whether 83% of their customers were adults or not. And their own in-total marketing data showed that 62% of their customers were under the age of 20, and many of those were young teens. Those early Juul flavors were things like mango, crème brûlée, raspberry. Those aren't exactly the flavors you would run out if you're trying to get a 45-year-old Marlboro Red smoker to consider, consider stopping. In later trials, documents from this time came out, and there was a thing where executives of Juul would refer to their customers, not As customers, they referred to them as "feens," F-E-E-N-S. In other words, fiendishly addicted teenagers. Not good. Within weeks of their 2015 launch, they were getting calls at their headquarters from teenagers asking where they could buy Juul pods. And at the time, Juul knew who they were selling to. They knew who was buying the stuff and they kept selling it anyway. In 2017, Juul announced a new initiative called their quote unquote "Youth Protection and Education Division." And here's how it worked. They would go to schools and pay $10,000 to $20,000 to allow one of their representatives representatives to show up and give an education talk about the dangers of vaping. Some teens later testified at the trial that a representative came in and gave a talk. They asked the teachers to leave and proceeded to tell the young people that Juul was not bad for their health, that basically it was safe and the FDA was about to announce exactly that. And these weren't 19-year-olds. These were 9th graders. Juul also paid to do a, uh, summer camp in Baltimore. They paid $134,000 to put on the camp. They brought in kids as young as 3 years old to this camp that was sponsored by Juul. Internal documents at the time acknowledged that these programs were eerily similar to what Big Tobacco had done during its heyday when it was trying to get people addicted to its product. And the company kept doing them until September 2018. The obvious question is, why didn't anybody at Juul stop this? Like, what was going on in their head? In retrospect, some people like former COO, a man named Scott Dunlap, admitted that when he looked at their social media content, he'd be like, ooh, this looks really young. But it turns out that Juul had created what one whistleblower would later call a culture of concealment.

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Marcie Hamilton, Juul's director of program management, filed a lawsuit in April of 2020, basically alleging that the NDA she had signed with the company should be like thrown out and she should be allowed to talk about what she had witnessed when she worked there. These NDAs had made it so the employees couldn't talk to the press. They couldn't share details about what was going on. And over 3,000 people had signed them as part of their employment process with Juul. It wasn't like people didn't see what was going on. On social media, people were talking about how JUUL was basically a company built around giving drugs to children. Some employees did quit over moral objections, but the NDAs they had signed ensured they wouldn't talk about it. Well, where were the owners and investors? Well, in the boardroom, it was growth at any cost. They were chasing the almighty dollar. When Moniz, one of the founders, stepped down as CEO in 2015, a man named Nicholas Pritzer and a number of the other investors took over and created an executive committee. Basically to overrule anything the executives wanted to do at that point. After all this was investigated, a federal judge basically allowed prosecutors to use the RICO statute, the same thing that they used to go after the mafia, to go after these investors and board members. But the money, well, it was hard to say no to for these people, evidently. In 2017, they grew by 700% month over month. Like, yeah, like, turns out dealing drugs is a pretty good business if you don't have morals. And while a lot of investors passed because they saw this business for what it was, there were some who ponied up in, in chasing the almighty dollar. Uh, Juul became the fastest company ever to reach $10 billion in valuation in 2017. And to put that in perspective, it was 4 times faster than Facebook did it. All these tactics worked, and by late 2018, Juul controlled 74% of the e-cigarette/vaping market in the United States. When companies become this dominant, like Xerox did and Kleenex did, uh, they become part of our permanent lexicon. And in this case, Juuling became synonymous with vaping. By 2017, 12% of high schoolers had vaped in the last month. By 2019, that number was up to 28%. Uh, Juul had created an entire new generation of nicotine addicts. A single pod of Juul contained as much nicotine as an entire pack of cigarettes. But one study around this time found that 63% of teenagers didn't know that Juul had any addictive properties in it at all. It's crazy because all of this happened at a time when America had basically beat smoking. It's like the one chronic disease and addictive substance war on drugs that we actually won. If you want to see that video, I recorded it here. Check it out. The FDA at this time issued warnings about Juul. The Surgeon General called it an epidemic. Everybody could see what was going on. But by this point, Monzie's and the rest of the gang was so far gone they weren't going to be able to come back or at least rationalize what they'd done. At a 2019 Time gala where everybody got together and celebrated entrepreneurs, uh, Monzie still got up and talked about how Juul had the potential to be one of the greatest public health, basically, aids in history. He still believed it. Like, all the vision they had early on, or at least having hundreds of millions of dollars thrown at him, had convinced him that he needed to believe it. In December 2018, tobacco giant Altria, the people behind Marlboro and a bunch of other brands of cigarettes, invested $12.5 billion in the company, valuing it at $38 billion. And suddenly Big Tobacco owned 35% of Juul. The founders got paid and the employees got paid overnight. They split a $2 billion cash bonus pool. People who had just been working normal jobs suddenly got million-dollar bonus checks. Many of these people still in their 20s were suddenly millionaires from getting teens addicted to a, well, basically nicotine. In late 2018, the feds raided the offices of Juul. Seizing thousands of documents. 39 states, uh, basically filed lawsuits against Juul for what they'd done, uh, and the Department of Justice, well, they went through over 55,000 internal documents that had been seized. CEO Kevin Burns, when all this happened, he resigned. Uh, Juul basically pulled all advertising from the market. They stopped doing flavors like mango that were loved by teenagers. Uh, basically they just went into a shell. All these lawsuits started to come in, and then justifiably, people started to settle. Uh, over $1.2 billion went out in settlements to various states' attorneys generals, and a quarter of that, about $255 million, that went out to individual complainants themselves, people who had sued. And Altria, by 2023, the big tobacco giant that had invested at that high valuation, they effectively marked their Juul investment down to worthless. The company was valued at less than 1% of what had been valued just a few years before. And from one of the fastest growth stories in American history, it became one of the fastest collapse stories in American business history. The two founders, Muniz and Bowen, they had stepped down in 2019 and 2020, respectively, from the board and being associated with the company. And interestingly enough, while they did testify in front of Congress, they have yet to kind of step forward and admit any wrongdoing in this whole saga. And while they had both become billionaires after the Altria deal, they were left, you know, just with a paltry $900 million or so each after all was said and done. And these guys who had declared their work once kind of a path of groundbreaking in the whole world, now they really don't talk about what happened. They've been just silent. There are times in human history when a small group of people get together and convince themselves of something that is just so wrong, convince them that in a weird way that it's right. And in those moments, you'll find yourself in the middle of an organization like that, and it takes a lot of courage to stand up and say, wait, even though all these hundreds of people and people I respect and my friends believe something, it's wrong. And while it's a lot to ask of any of us to have the courage to speak up in moments like that, I think the first step to being able to do that is to recognize that these types of groupthink moments can happen, and, uh, you just hope you don't get mixed up in one. And if you do, you can only hope that you do the right thing. And if you do watch the video that I did on the killing of smoke in the United States, you'll see a good fact. And the good fact is, after a lot of this got cleaned up around Juul and other vape, uh, product folks, uh, the youth smoking and youth vaping rates are coming back down again. There is hope for the future. Let me know what you think about this story of Juul in the comments below. I tried to read them all when I researched this one. It was crazy. Catch you later.