As read by George Hahn. https://www.profgalloway.com/addiction-economy/ Learn more about your ad choices. Visit podcastchoices.com/adchoices
Chapter 1: What is the addiction economy?
And that means your people can focus on the work that they want to do. That's putting AI agents to work for people. It's your turn. Get started at servicenow.com slash AI dash agents. I'm Scott Galloway, and this is No Mercy, No Malice. America has been described as an attention economy. That's incorrect. We're an addiction economy. Addiction economy, as read by George Hahn.
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 70s. 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.
Chapter 2: How do Super Bowl ads reflect the addiction economy?
As Matthew McConaughey says in the latest ad from Uber Eats, quote, the whole game is basically an elaborate scheme to make you buy more food, unquote. 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.
Chapter 3: What role does DOPA play in capitalism?
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.
Chapter 4: How have historical companies profited from addiction?
But the addictive ingredient, nicotine, is how the industry extracts $86,000 to $195,000 per customer and costs those customers $1 million to $2 million in expenditures, opportunity costs, and healthcare expenses. Historically, the most valuable companies turned 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 plus 265,528,900%, the food industrial complex, Coca-Cola, plus 12,372,265%, pharma, Wyeth, plus 5,702,341%, and retailers, Kroger, plus 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 ten most valuable businesses turn DOPA into attention, or make picks and shovels for these DOPA merchants. 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 20 times 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 make their product delicious, but not so delicious that consumers feel sated after a small serving. In other words,
Chapter 5: What is the impact of processed foods on health?
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. Nestle 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. McDonald's used to brag, one billion served. Considering the history of weight loss and diabetes drugs, desoxyfedrine, 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 healthcare 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 non-diabetic patients looking to lose weight.
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Chapter 6: How might GLP-1 drugs transform the economy?
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. 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 cell phone, 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 are seeking 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 time 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.
Yonder, a firm that makes locking pouches for phones, has increased sales to schools by 10x since 2021 to $2.1 million. 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.
Somehow, all the other... Billionaire tech boys are jealous, including the CEO of Meta, Mark Zuckerberg, who's been kissing Trump's ass like it's the Blarney Stone lately. Mark Zuckerberg showed up to debate, debase himself at Mar-a-Lago shortly after the election. Today, he released a suspiciously Trump friendly announcement.
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, quote, the largest uncontrolled experiment humanity has ever performed on its own children, unquote. So far, the results are a mental health crisis.
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