[HN Gopher] How profitable was/is tobacco?
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How profitable was/is tobacco?
Author : Amorymeltzer
Score : 59 points
Date : 2021-11-06 18:30 UTC (4 hours ago)
(HTM) web link (genehoots.substack.com)
(TXT) w3m dump (genehoots.substack.com)
| markdown wrote:
| > Only a grove of an obscure exotic nut was higher.
|
| Anyone know which nut he's referring to?
| nemo44x wrote:
| I suspect Macadamia. Take forever to begin producing and have
| limited environments they thrive in. But they bring in a
| fortune.
| lindseymysse wrote:
| I've been reading Double Entry: How the Merchants of Venice
| Created Modern Finance by Jane Gleeson-White, and the last few
| chapters are an exploration of double entry accounting's
| inability to factor in environmental degradation and social
| costs. In the end, price and money are poor measures of important
| things in this world.
|
| Raj Patel estimates that the true cost of a Big Mac is $200:
| https://www.sfgate.com/books/article/The-Value-of-Nothing-by...
| SiempreViernes wrote:
| All that profit and the only "downside" is causing one in five
| deaths in the US (before covid)!
|
| https://www.cdc.gov/tobacco/data_statistics/fact_sheets/heal...
| twofornone wrote:
| I feel like this is misleading because it's not like 1 in 5
| people who smoke are dropping dead from a deadly poison. More
| like after 30-60 years of daily tobacco use someone dies a few
| years before life expectancy of cancer and/or heart/lung
| disease.
|
| It's an important distinction, because otherwise the danger of
| tobacco and culpability of tobacco companies are exaggerated.
| For many people a lifetime of pleasure from nicotine justifies
| the risk.
| nuclearnice1 wrote:
| Your post is posed as a plea to avoid misleading information.
|
| You wrote: "dies a few years before life expectancy"
|
| The article in the comment you reply to writes "Life
| expectancy for smokers is at least 10 years shorter than for
| nonsmokers"
| csee wrote:
| It's terrible but not all of that is because of smoking.
| Smokers are often also drinkers, drug users, bad eaters,
| and just generally unhealthy people.
| [deleted]
| Ma8ee wrote:
| Maybe on average it's only a few years. But some smokers live
| to old age, and some die of lung cancer in their early
| forties while their kids are still young.
| yokaze wrote:
| Some details, which are in my view not unimportant:
|
| - The tobacco use is not only affecting the person "choosing
| the lifetime of pleasure", but their surroundings too, thanks
| to second hand smoke.
|
| - Nicotine is highly addictive:
|
| "The majority of smokers would like to stop smoking, and each
| year about half try to quit permanently. Yet, only about 6
| percent of smokers are able to quit in a given year" [1]
|
| For me, that makes it highly questionable, if that is a
| voluntary choice. I know enough people, which have chosen to
| indulge in that particular pleasure, and after decades of
| abstinence still have to put a conscious effort into not
| relapsing (in certain situations).
|
| [1] https://www.drugabuse.gov/publications/research-
| reports/toba...
| betwixthewires wrote:
| Well, secondhand smoke is not an issue when one smokes only
| outside away from others or only in the company of other
| smokers, and I think a significant portion of people who
| try to quit smoking do so because of the potentially
| overstated risk pointed out in the comment you're
| responding to, or the artificially inflated cost due to sin
| tax imposed and justified by that potentially overstated
| risk. Would those people try to quit if they calculated the
| cost more accurately?
|
| That said, I'm an ex smoker, and I'm glad I quit, and I
| will never touch a cigarette again. To me it was not so
| much the risk of very early death as it was the impact on
| my health for however many years I will remain alive, the
| financial cost (imposed by governments) and the fact that I
| came to hate smoking cigarettes and got no pleasure from it
| whatsoever (which is not the case with nicotine in general
| or other forms of tobacco such as cigars, which I do enjoy
| once or twice a year).
| Talanes wrote:
| I imagine there's also some false positives from people
| who know that "wanting to quit" is the more socially
| acceptable answer.
| version_five wrote:
| I think the second hand smoke thing was largely overblown
| to make it an "us vs them" thing rather than letting
| smoking be a personal choice. Smoking is a terrible
| habit, I hate being around people who are smoking, but I
| really think that modern anti smoking campaigns were less
| about health and more about puritan values, and not being
| able to stand the idea of someone else enjoying
| themselves in ways you disagree with. We see this
| regularly but it usually doesn't get enough traction to
| matter. The "dangers of second hand smoke" happened to be
| what finally stuck.
|
| From what I understand, anti smoking campaigns have
| actually had a positive impact on life expectancy in
| western countries. On that metric, this is a positive
| thing. Personally I don't believe it outweighs the ills
| of allowing others to tell you what to do in the name of
| your health. I actually think all of the covid craziness
| can trace itself back to some extent to when we gave in
| and banner indoor smoking in most places. You start
| letting people make rules "for your safety" (and try to
| spin it so it's really about others) and next thing you
| know we've got the current hysteria as a popular thing.
|
| Edit, because everyone that's replied so far has missed
| the point. I dont mean second hand smoke is pleasant. The
| rhetoric used to make it so it's not a business decision
| but a state mandate, is that it was killing people. This
| was overblown, and is a completely different bar than "it
| smells bad and gives me a headache" - I agree with that,
| but its unreasonable to argue the state should be telling
| people what they can't do because of it. I'd sooner see
| Axe body spray outlawed on those grounds, big again, it's
| not the states business.
| lotsofpulp wrote:
| Indoor smoking bans are about others. Other non smokers
| who do not want to smell disgusting cigarette smoke. It
| has tar in it and sticks to all surfaces and never goes
| away.
| twofornone wrote:
| So let establishments dictate whether or not to allow
| smokers. And smoking sections were generally well
| isolated from non smoking sections.
| acdha wrote:
| > And smoking sections were generally well isolated from
| non smoking sections.
|
| This definitely does not match my memory. If businesses
| had to meet air quality standards that'd be one thing but
| usually they just pretended that a 4 foot gap was an
| airlock.
| acdha wrote:
| I strongly disagree. Smokers always used the excuse that
| it only affected them, even though everyone knew it had a
| negative impact for anyone within 20-30 feet, if not how
| precisely bad it was.
|
| The studies confirming the risks of secondhand smoke were
| what gave social and legal weight to ending that period.
| When businesses were faced with liability, suddenly it
| became possible to taste your dinner and not be exposed
| to carcinogens. People stopped making excuses for
| exposing children as soon as society stopped indulging
| polite lies about it being harmless.
| TheOtherHobbes wrote:
| I was one of those children. My father used to smoke. I
| hated it, and so did my mother - who had given up and had
| various respiratory problem.
|
| We didn't get a choice.
|
| I have no doubt that the tobacco industry is simply evil.
| History still hasn't come to terms with the horror and
| catastrophe created by an industry devoted entirely to
| farming and promoting addictive toxins.
| acdha wrote:
| Me too - my dad only stopped smoking around us when my
| sister and I got migraines and he couldn't tell himself
| it wasn't a problem. This was 100% supported by the
| tobacco companies' well-funded propaganda machine.
| tshaddox wrote:
| It's not really an important distinction, because _all_
| deaths are deaths that would have happened later anyway.
| ohdannyboy wrote:
| I don't know a single old smoker who thinks that. My
| grandfather, great uncle and others acknowledged their shitty
| older years were their own damn fault but they urged me to
| never start. There was no "make a choice" or "it's worth it
| to some people."
|
| I've only heard younger smokers say that but I don't think
| they've internalized how bad it's going to be.
| systemvoltage wrote:
| How many deaths does smoking marijuana cause?
| hn_throwaway_99 wrote:
| Marijuana is much less damaging to the lungs than tobacco
| smoke:
|
| https://www.ucsf.edu/news/2012/01/98519/marijuana-shown-
| be-l...
| systemvoltage wrote:
| > Whether smoking marijuana causes lung cancer, as
| cigarette smoking does, remains an open question.
|
| https://www.drugabuse.gov/publications/research-
| reports/mari...
| dncornholio wrote:
| At least they die peacefully and not danger other people.
| Alcohol causes way more harm. Let people smoke if they want. It
| doesn't bother me as long as they do it respectfully and away
| from non-smokers.
| devwastaken wrote:
| No actions live in a bubble. Wether we like it or not what
| you and I do affect each other. Certain things we should
| protect for people to do individually, and others should not
| be. How that is weighed is based on the level of harm. The
| cost of medical and other socioeconomic issues in individuals
| that smoke, along with them harming others through second
| hand smoke is a far larger cost to society. Therefore, we tax
| it.
| [deleted]
| erulabs wrote:
| Not pushing one way or the other, but it's important to
| consider the framing: Ignoring the second-hand smoke
| complexity for a moment, if everyone pays for every one
| else's health, then of course we should ban or tax
| cigarettes and/or anything that causes excess harm to a
| single person that others have to pay for (taxes help cover
| the externality). However, if each individual pays for the
| entirety of their own health-care costs, then it is far
| less obvious what actions should be taken.
|
| To put it another way, if I was in command of an army, I
| wouldn't allow smoking or various unhealthy or time-wasting
| activities. China wants a higher GDP: ban all the video
| games!
|
| This sort of social-engineering is _possibly_ for the best,
| and possibly for the worse, but I think it's a bit of an
| injustice to just state "well we all have to pay for each
| other's health so the policy should be ______". We don't
| necessarily have to all pay for each others health.
| Absolutes aside, a smoker _should_ have higher insurance
| costs than a non-smoker.
|
| If we all had to pay for each others hobbies, for example,
| you'd bet there would be folks trying to get cloud-watching
| banned in favor of something productive like knitting. This
| sort of social planning rarely works out how one expects it
| to.
| wheels wrote:
| > _Absolutes aside, a smoker should have higher insurance
| costs than a non-smoker._
|
| This is probably false. Smokers rack up less health care
| costs than nonsmokers because they die earlier. The study
| I'm linking doesn't consider the possibility of exiting
| paying into a healthcare system early, but even most
| smokers die after retirement:
|
| https://www.nejm.org/doi/full/10.1056/nejm199710093371506
| alasdair_ wrote:
| Retired people provide a lot of useful labor, it's just
| much of it is in the home and therefore both unpaid and
| invisible.
|
| Grandparents provide childcare for working children and
| they help take care of their spouses that would otherwise
| need in-home care. It's a complicated calculation.
| Clubber wrote:
| I would argue in the US, that sort of thing benefits
| corporate healthcare more than anything. Nobody wants
| other people telling them what to do. In other words, the
| more people say we're going to ban ______ because I don't
| want to pay for your risky lifestyle through my
| healthcare taxes, the less likely universal healthcare
| will ever be a thing in the US. If we really want
| universal healthcare, we should allow everyone to join,
| thus the universal part.
|
| But people like to preach to other people, so Que Sera,
| Sera.
| Talanes wrote:
| > _If we all had to pay for each others hobbies, for
| example, you 'd bet there would be folks trying to get
| cloud-watching banned in favor of something productive
| like knitting._
|
| If I had to pay for other people's hobbies, surely I'd
| want the opposite? Why would I prefer to buy someone yarn
| rather than let them watch clouds for free?
| TheOtherHobbes wrote:
| I find it it interesting that spending billions on
| promoting smoking somehow _isn 't_ considered social
| engineering, but trying to prevent it somehow is.
| rank0 wrote:
| This is a horrible argument. I could apply the same logic
| to all your unhealthy habits as well.
|
| I don't smoke but regressive tax structures and social
| control "for the greater good" are signs of a dystopia.
|
| Good intentions, road to hell...etc
| MichaelZuo wrote:
| Quite a lot of people on HN are arguing for such social
| control in the US through promoting a universal
| healthcare system. And which many countries currently
| implement... so your contrarian opinion is interesting.
|
| How would you balance tradeoffs in either direction?
| im_down_w_otp wrote:
| That's not a very complete representation. When my
| grandmother died from lung cancer that metastisized to her
| brain, there was nothing particularly peaceful about the
| coughing and hacking (sometimes with a fair share of blood)
| that would send her into fits of convulsions, the tumor
| induced dementia, etc. Nor the effects that it had on her
| kids who grew up in an environment of insatiable chain
| smoking.
| dncornholio wrote:
| You're putting your argument out of my context. Your
| grandmother was not a 'respectful smoker'.
| hn_throwaway_99 wrote:
| Peacefully?? Go watch someone die of emphysema, it's pretty
| terrifying to be slowly suffocated to death.
| dncornholio wrote:
| Misinterpretation. Peacefully in the sense, without
| violence.
| Groxx wrote:
| Second-hand smoke causes plenty of harm.
| markdown wrote:
| No danger to other people? I wonder how many deaths are due
| to cancer patients using up an outsized proportion of a
| nation's healthcare budget.
| NilsIRL wrote:
| And there are also (naturally) economic downsides as well:
| The costing model in this study covers three areas where
| smoking has been shown to create 'external' costs: the
| direct costs to European public healthcare systems in a given
| year; productivity loss to the EU27 economy due to increased
| absenteeism; and the monetised cost of premature
| mortality Taking the three main cost factors
| together, the loss to the EU in 2000 is estimated to be at
| approximately EUR363 billion. This figure corresponds to about
| 3.4% of the EU27 GDP.
|
| https://ec.europa.eu/health/sites/default/files/tobacco/docs...
| listenallyall wrote:
| Seems like some double dipping here. Not familiar with the EU
| patterns, but if seniors & retired people receive income from
| public sources, like Social Security in the US, then
| premature mortality results in a big savings, not additional
| costs.
| ksaj wrote:
| They should break this down further, and state the average
| dollar hit per smoker. Most people don't mentally comprehend
| how many smokers there are in the world at any given time, or
| whether the financial impact even high when applied to an
| entire population.
|
| "On average YOUR smoking costs approximately $X" would be far
| more easy to understand.
| qwertyuiop_ wrote:
| Social Media along with monopolistic ad giant Google is the new
| Tobacco.
| joe_the_user wrote:
| I'm always skeptical of an industry or business being inherently
| profitable in the context of a public stock/equity market.
|
| Sure, high profitability from the start is possible. But it seems
| like once you have an ongoing public company, whether growing or
| stable, the market is going to be pricing in future profits and
| that the profitability of the stock will tend toward average.
| Microsoft, Apple and Google, for example, have a tremendous venue
| stream and good prospects for the future ... so their stock
| prices are correspondingly high and investing in these stocks
| shouldn't be inherently better than investing on other stocks.
|
| _Each fall, farmers supplied the leaf tobacco. How did they fare
| economically? Tobacco had the second highest profit per acre of
| any crop in the world. (Only a grove of an obscure exotic nut was
| higher.)_
|
| Sure, I'm not even sure what matters here. Different land uses
| produce crops of higher or lower value. Land that can produce
| higher value crops is quite valuable, sure. So is land in
| Manhattan.
|
| Tobacco tended to be a monopoly, monopolies get a large revenue
| per capital invested.
|
| It's simpler to say tobacco was a large, concentrated industry
| producing an addictive drug. Any industry like tends to produce a
| lot of revenue per dollar invested and this is because industry
| leverage their connections or ability to navigate/manipulate
| regulators and the state.
| stefan_ wrote:
| What does the stock valuation have to do with the profit of the
| actual enterprise?
| loeg wrote:
| > The price-to-earnings ratio (P/E ratio) is the ratio for
| valuing a company that measures its current share price
| relative to its earnings per share (EPS). The price-to-
| earnings ratio is also sometimes known as the price multiple
| or the earnings multiple.
|
| > P/E ratios are used by investors and analysts to determine
| the relative value of a company's shares in an apples-to-
| apples comparison. It can also be used to compare a company
| against its own historical record or to compare aggregate
| markets against one another or over time.
|
| https://www.investopedia.com/terms/p/price-earningsratio.asp
| mxschumacher wrote:
| The global tobacco industry is more concentrated than ever, we
| might see Altria and Philipp Morris International merge again,
| then practically all of the world's cigarettes will be sold by
| 4-5 companies.
|
| For Tobacco companies a few things are going on, the number of
| cigarettes sold in Western countries is declining, yet profits
| are up (a conundrum explained by the industry's enormous
| pricing power). Smoking rates are still extremely high in
| countries like Indonesia.
|
| The biggest brands in the various "alternative" tobacco
| products like e-cigarettes are already owned by the
| conventional incumbents.
|
| Simultaneously these stocks face a lot of ESG pressure and are
| being sold by many funds on principle, not valuation. Just
| looking and multiples on profit, it is remarkable how low the
| valuations of some of these firms is.
| barney54 wrote:
| How was tobacco a monopoly? And if it were a monopoly why was
| it profitable to farmers instead of the monopolist squeezing
| the farmers?
| monocasa wrote:
| > How was tobacco a monopoly?
|
| https://en.wikipedia.org/wiki/United_States_v._American_Toba.
| ...
|
| > And if it were a monopoly why was it profitable to farmers
| instead of the monopolist squeezing the farmers?
|
| The monopolists did squeeze the farmers. It was still
| profitable for the farmers, but under what a fair market rate
| would be. Just because you're getting paid enough to keep
| going doesn't mean you're getting a fair rate.
|
| It's sort of like the SF tech anti poaching. No one denies
| that SF engineers get paid a lot. That also doesn't mean that
| they didn't get shafted out of thousands by a wage fixing
| scheme.
| megablast wrote:
| > The monopolists did squeeze the farmers. It was still
| profitable for the farmers, but under what a fair market
| rate would be. Just because you're getting paid enough to
| keep going doesn't mean you're getting a fair rate.
|
| Obviously it paid better than other crops, so it is not
| about getting paid enough to keep going.
| monocasa wrote:
| Enough to keep going with that crop versus others.
| netcan wrote:
| >How was tobacco a monopoly.
|
| Philip Morris.
| netcan wrote:
| I think you're assuming a level of market rationality that
| doesn't exist IRL. In practice, certain industries _have_
| tended to be more profitable than others... even long term.
|
| Same for stock. Apple & MSFT's stock price does, in theory,
| "price in" their tremendous revenue, growth potential and
| profitability. But.... This was also true 10, 20 & 30 years
| ago. Yet, investments in tech companies over those years _did_
| yield market beating returns.
|
| I think that for tobacco and other cash crops, it helps that
| it's relatively durable and that the market is quality
| oriented.
| intrepidhero wrote:
| Yeah, wow. No mention of external costs makes this an incredibly
| naive analysis. What's the name for the fallacy of getting
| distracted by dollar signs to the point of ignoring downsides?
| "There ain't no such thing as a free lunch" is a truism for a
| reason.
| loeg wrote:
| It sets out to address a very specific question, and does so
| relatively concisely. I like that it doesn't get distracted and
| try to address every possible question.
|
| It's worth understanding the incentives of the businesses
| profiting from tobacco to help understand how it is so
| pernicious to society. I don't think the author is wrong to
| highlight the profits to businesses.
| curmudgeon22 wrote:
| I think it's fine for the article to have a focus,
| profitability in this case. It's an interesting thought
| experiment after seeing how many people profit at each stage in
| the tobacco supply chain to then consider how pervasive tobacco
| was despite all the downsides.
| personjerry wrote:
| What are the external costs?
| Hjfrf wrote:
| Healthcare is the big one
| Iefthandrule wrote:
| Who gets the profit vs who pays for the costs?
| missedthecue wrote:
| Smokers pay more for healthcare, at least in the US. That's
| an internalized cost, not an externality.
| more_corn wrote:
| You misunderstand what externalized means. Externalized
| cost means external to the manufacturer. It is a phrase
| used to refer to a method os extracting profit while
| harming society/humanity/the world. It literally means a
| cost born by someone other than the one profiting.
|
| The health cost is externalized for the producer because
| it is shifted to the consumers.
| [deleted]
| lalaland1125 wrote:
| Cigarettes actually are a net reduction in overall cost.
| They mostly kill people before they get old enough to have
| really expensive conditions.
|
| It also significantly reduces costs in terms of social
| security.
| pengaru wrote:
| Such a claim requires impossible amounts of hard evidence
| to make.
|
| There's a _lot_ of casual smokers who never become that
| pack-or-two a day kind of extreme addict one can clearly
| attribute their smoking to their lung /mouth/throat
| cancer.
|
| But they are still more likely to develop some kind of
| ailment from their lighter smoking, as it's equivalent to
| frequently subjecting your body to a poison that enters
| the bloodstream. Especially since it's not necessarily
| going to be a respiratory cancer, attributing cause
| becomes ambiguous enough to to make all the stats
| unreliable at best.
|
| Consider the fact that some american cities ban wood
| burning fireplaces/stoves as a public health measure. And
| that's diffuse atmospheric smoke, nobody is sucking
| directly from the stacks day after day, year after year.
| more_corn wrote:
| This is obviously false. As people die of lung cancer and
| emphysema they generate astronomical costs on the
| healthcare system. Health insurance then spreads that
| burden widely so healthy Americans pick up the tab.
| (assuming of course that markets would accurately reduce
| the cost of health insurance if costs of healthcare were
| to drop)
| Ma8ee wrote:
| I suspect that is a myth. Treating lung cancer isn't
| cheap.
| op00to wrote:
| Uh, do you know what COPD ICU end of life treatment
| costs? I have first hand experience. It's not cheap.
| jliptzin wrote:
| Why should a profitability analysis include external costs when
| no one in the cigarette supply chain cares about the external
| costs?
| d0mine wrote:
| wow. The comments are just filled tobacco sympathizers. I thought
| the topic was closed after decades upon decades of research. My
| guess some people wouldn't mind to see the world burn tomorrow if
| they make profit today.
| crocodiletears wrote:
| Decades of research have illustrated the consequences of
| tobacco consumption.
|
| Science is descriptive, not prescriptive.
|
| The actions individuals and societies take based on that
| information are based on their own subjective values.
| dehrmann wrote:
| Parts of the tech scene have a libertarian bent.
| [deleted]
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