No Mercy / No Malice
Addiction Economy
Hair of the Dawg
It’s the final day of Dry January. I tried it, didn’t last. I’m now drinking (again) like a Pan Am pilot in the seventies. Anyway, the 22% of U.S. adults who abstained from alcohol this month will get a personality upgrade just in time for the Super Bowl. Ostensibly, the Super Bowl is a contest between the two best football teams, but really it’s a platform for the real economy: the addiction economy. As Matthew McConaughey says in the latest ad from Uber Eats, “the whole game is basically an elaborate scheme to make you buy more food.”
Super Bowl ads are a proxy for the addiction economy, as advertisers for the food industrial complex, beer and alcohol brands, online gambling, crypto, and social media platforms offer you dopa on demand. But there’s a downside to gorging, no? Not to worry, there will also be ads from the medical-pharma industrial complex for products that manage (some of) the damage. Pundits claim we live in an “attention economy.” We don’t. Attention is just a metric for addiction. The addiction economy is broader, encompassing media, technology, alcohol, tobacco, gaming, pharma, and health care.
The Spice
The world’s most valuable resource isn’t data, compute, oil, or rare earth metals; it’s dopa, i.e., the fuel of the addiction economy, which runs the most valuable companies in history. Addiction has always been a component of capitalism — nothing rivals the power of craving to manufacture demand and support irrational margins. Sugar and rum were the dopa-delivery systems and currency of the Triangle Trade. Later, the British East India Company was the Sinaloa Cartel of the 19th century, producing and distributing a product China became addicted to: opium. At its peak in the last century, Big Tobacco acquired customers with TV ads and endorsements from doctors, but the addictive ingredient, nicotine, is how the industry extracts $86k to $195k per customer — and costs those customers $1 million to $2 million in expenditures, opportunity costs, and health-care expenses.
Historically, the most valuable companies turn dopa into consumption. Over the last 100 years, 15 of the top 30 companies by cumulative compound return have been pillars of the addiction economy. The compounders cluster in tobacco (Altria +265,528,900%), the food industrial complex (Coca-Cola +12,372,265%), pharma (Wyeth +5,702,341%), and retailers (Kroger +2,834,362%) that sell both substances and treatments. To predict which companies will be the top compounders over the next century, consider this: Eight of the world’s 10 most valuable businesses turn dopa into attention, or make picks and shovels for these dopa merchants.
A Higher Love
Given a choice, most lab rats will pick sugar over cocaine. They’ll even self-administer electric shocks for a sweet boost. Sugar stimulates our reward system 20x faster than cigarettes. Food companies engineer processed foods, not to maximize nutrition, but to hit the so-called “bliss point” — the exact combination of saltiness, sweetness, and other tastes that makes their product delicious, but not so delicious that consumers feel sated after a small serving. In other words, their food is engineered for more, not nutrition.
The industry profits at the expense of its customers’ health. According to a 2022 meta-analysis, 20% of American adults are addicted to food. Consumption of processed foods raises your mortality rate by 25%. The U.S. has a diabetes epidemic and an adult obesity rate of 40%. Compounding this public health crisis, food companies have a history of purchasing their competitors: diet companies. In 1978, Heinz bought Weight Watchers for $72 million. Unilever paid $2.3 billion for SlimFast in 2000. Nestlé purchased Jenny Craig in 2006 for $600 million. In 2010 the private equity firm that owns Cinnabon and Carvel ice cream purchased Atkins Nutritionals. (Most of these diet brands were later sold.) These acquisitions are akin to Pablo Escobar buying the Betty Ford Center.
Breaking Bad
McDonald’s used to brag, “one billion served.” Considering the history of weight loss and diabetes drugs — desoxyephedrine, fen-phen, metformin, etc. — pharma might just as easily brag, “billions prescribed.” After the food industrial complex makes people sick, we hand them over to the health-care industrial complex to treat the chronic conditions of these lifelong customers.
GLP-1 drugs are the most effective weight loss drugs to date, as they make us feel fuller for longer and suppress hunger cravings by modulating dopa levels. About 12% of U.S. adults have now taken a GLP-1, and the average GLP-1 user spends 11% less on food and beverages. But it’s early days for GLP-1s. Cost remains a barrier, and only one-third of employer health-care plans cover GLP-1s for nondiabetic patients looking to lose weight. Anecdotally, a Bloomberg Businessweek profile of Bowling Green, Kentucky, where 4% of the residents take GLP-1s, tells us that restaurants, grocery stores, health-care providers, gyms, and clothing retailers are all feeling the GLP-1 impact. If 60 million of the roughly 100 million U.S. adults who are obese took the drugs, Goldman Sachs estimates GDP could grow by more than 1%. As their full impact and second-order effects play out, GLP-1s will likely transform the economy.
Smart (Phones) Needles
Some people (smokers) used to reach for a cigarette immediately after finishing a meal; in the movies they’d reach for a cigarette after sex. Today most restaurants are smoke-free, but phones are ubiquitous before, during, and after every meal. We used to pick up a landline (Google it) to “reach out and touch someone.” Now that everyone has a cellphone, we spend 70% less time with our friends than we did a decade ago. We’re addicted to our phones, and even when we’re not seeking our fix, our phones seek us out — notifying us on average 46 times per day for adults and 237 times per day for teens. In college, I spent too much time smoking pot and watching Planet of the Apes, but when I decided to venture on campus, my bong and Cornelius didn’t send me notifications.
The compounders here are in your pocket. Sales of iPhones have made up roughly half of Apple’s revenue since 2009. Of late, the company has rolled out screen time tracking and other anti-addiction tools. Apple’s brand positioning is a bartender opening an AA chapter. Alphabet is incentivized to maximize screen time, as 76% of its revenue comes from targeting eyeballs with advertising. Alphabet is a niche player in the device market, but its Android OS (73% market share) is the perfect gateway drug, as it’s open-source and free.
It took us 20 years to wake up to the danger of opiates, and about the same for the phone. But it is happening. Eighteen states have passed laws restricting the use of phones in school, and roughly three-quarters of schools have policies restricting their use in the classroom. Yondr, a firm that makes locking pouches for phones, has increased sales to schools by 10x since 2021, to $2.1 million.
Anxious & Depressed
When Mark Zuckerberg released a video announcing the end of Facebook’s fact-checking program, Jimmy Kimmel joked that Zuck was “dressed like a molly dealer from Chechnya.” The shoe fits. The difference: MDMA makes you euphoric, while social media makes you anxious and depressed. As my NYU colleague Jonathan Haidt put it, the unconstrained combination of phones and social media has been “the largest uncontrolled experiment humanity has ever performed on its own children.” So far, the results are a mental health crisis: Eight percent of teens are addicted to alcohol or drugs; 24% are addicted to social media.
Fentanyl
Unlike other platforms, TikTok is built around affinities, not the social graph. If chasing likes from our friends is digital heroin, TikTok’s AI is fentanyl. The algorithm rapidly calibrates what triggers a user’s dopa response by feeding them hundreds of videos every hour, turning the user into a blissed-out zombie. According to a lawsuit filed by the Kentucky attorney general, users can become addicted to TikTok within 35 minutes. The same lawsuit cited TikTok’s own research, which stated that “compulsive usage interferes with essential personal responsibilities including sufficient sleep, work/school, and connecting with loved ones.”
Weapons of Mass Addiction
We’re hard-wired for addiction. We’re also wired for conflict, as competing for scarce resources has shaped our neurological system to swiftly detect, assess, and respond to threats — often before we’re aware of them. As technology advances, our wiring makes us more powerful and more vulnerable. We produce dopa monsters at internet speed. We can wage war at a velocity and scale that risks extinction in the blink of an eye.
Our Worst Instincts
Human beings evolved in small, cooperative groups, where loyalty meant survival. This instinct makes us naturally favor in-groups (our people, our nation, our ethnicity) and distrust out-groups (foreigners, outsiders, “the other”). Genocide exploits this instinct by amplifying group identity and dehumanizing outsiders, making mass killing seem justified or even necessary. Violence, repeated, becomes routine. What was unthinkable on Monday becomes “standard procedure” by Friday. Removing the security details of our political adversaries, who are under real threat from foreign enemies, is simply repackaged violence. In sum, it’s Tuesday in America.
80
This week marked the 80th anniversary of the liberation of Auschwitz by the Soviet Army. Our proudest moment, in my view, was America’s role in arresting this genocide, which represents the very worst perversion of human instincts. Now the U.S. risks becoming the font of this abomination. The president has repeatedly said that “immigrants are poisoning the blood of our country.” The world’s richest man is making Nazi gestures and told a far-right group in Germany, “It’s good to be proud of German culture, German values, and not to lose that in some sort of multiculturalism that dilutes everything.” Our (worst) instincts remain static — it’s our technology that’s evolving.
Instinct morphing into fear and demonization, coupled with propaganda, rail transport, and Zyklon B gave rise to the largest murder site in history. What might happen if these same instincts take root in a nation with unprecedented industrial might, armed with social media and AI? We need to cauterize this hate. People/bots in the comments section will accuse me of TDS. Have. At. It. The road to fascism is littered with accusations of overreacting. So … color me overreacting. It’s both the correct response, and impossible to overreact.
Never forget,
P.S. This week on Prof G Markets, my co-host Ed Elson and I discussed the Stargate Project, the rise of Oracle, and my stake in La Equidad Football Club. Listen and follow here on Apple or here on Spotify.
P.P.S. This is the last day to get 30% off AI Academy membership with Section, using the code GALLOWAY30. Sign up here.
