Don’t be evil
Google’s famous slogan
As a nascent search engine in the early days of the internet, one of the first things the most successful search engine did was declare their intention to not be evil. They didn’t state their aim to do good, redefine the internet, or to create value for their shareholders. Google chose to not be evil.
As vices become more palatable investments, the question is then how we can avoid being evil. I am frequently asked whether I invested in Juul, and if Vice Ventures would consider investing in a company like that. Over the past several months, a multitude of articles have been written about the strategy behind Juul’s explosive growth, with many questioning whether they could have grown so quickly without appealing to minors. Many are concerned that the company might have marketed and developed their product with illicit sales in mind. This example is of understandable concern to investors and the public as a whole, and motivates a broader concern: is it possible to invest in vices while not being evil?
My strong conviction is that vice startups, and by extension vice investors, can deliver returns while still being mindful of social good. Products like alcohol, cannabis, sex toys and pornography, CBD, nicotine, caffeine, betting, and yet to be known vices all bring different challenges for the social-minded investor. I have yet to see a positively defined heuristic which covers all the nuance of vice industries, which gives a true insight into the difficulty of telling a prospective investor “I would <absolutely/never> invest in a company which does this.”
Indeed, when asked in the first meetings for Vice Ventures whether it would invest in private prisons, predatory rehab facilities, or 3D printed guns, I was at a loss for why my answer was “Of course not, never.” Some of the problem is definitional. I do not consider all of those products to fall within vice industries. Beyond that, however, there is a genuine moral question of how we can respect ourselves as members of any community while investing in products that some individuals may consider repugnant.
I also suspect that much of this attention is attracted by vice companies because they look different from the companies we have become comfortable with. The simplest comparison would be to a mainstream vice company like Phillip Morris, who lied to the public for years about the effects of tobacco and dedicated considerable effort to getting people to try (and continue) using tobacco products. Putting aside big tobacco, we find an investment community who has not shied away from investing in companies which contributed to and covered up climate change (Exxon), polluted local waterways (Dow), allowed improper access to customer data (Facebook), caused wildfires through poor maintenance (PG&E), designed and built tools of war (Boeing), or allegedly contributed to causing cancer in their customers (J&J). Even Google, the company which set out to not be evil, betrayed the public’s trust with questionable data practices. Investors would do well to avoid evil companies in any field, regardless of the product, but you don’t have to look far within a typical equity portfolio to find socially problematic investments.
In a world where the most mundane of companies can cause social harm, is it simpler for us to look for evil in companies which make products that society disapproves of? The hunt for morally satisfying investments is challenging enough without reducing all vice companies to the same level. Not being evil should be about more than the product a company produces — it should be about how they plan to operate and, most importantly, how they interact with their consumers.
It is imperative that we remember that vice companies still have the ability to be evil, to be the negative social forces we fear they can be. It would be naive to say otherwise, and the adult nature of these companies might even make them more likely culprits. This is the challenge facing a vice investor, to find companies with the power to grow explosively without hurting people. We are at the front of a social and economic wave, and must take responsibility for the outcomes we help create.
The challenge of defining evil, then, is one of the most central ideas of vice investing. I have spent a great deal of time working to define how morals will influence our investment strategy. In doing so, I was reminded that the fund itself was inspired by an overly broad attempt to avoid evil: the vice clause. In the same way that vice clauses paint with too broad of a brush, exhaustively defining evil within the vice space is an impossible task. By the same measure, the measure of “I’ll know it when I see it” is too vague and open for interpretation.
In place of a single statement, I’ve created several rules which I try to use as bare guidelines, backed up by a more intuitive sense of how companies and products influence society in a positive or negative way.
1) Good investments have founders and leaders who are ethical, open, and honest.
2) Good vice products are created for, marketed to, and consumed by consenting, responsible, and understanding adults who have power over their decisions.
3) Good vice products keep their consumers informed of how they may be affected by them.
4) Good vice companies care about their customers, and have real-world expectations for their behavior.
Humanity is imperfect. Vice Ventures believes in personal choice and responsibility. We understand that people often sacrifice their health for personal enjoyment. We do not aim to be modern arms dealers, profiting off society while destroying it from within. Vice Ventures exists to explore the nuance, and to invest in companies which have balanced their commitments to society and their ability to produce returns for investors.