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🍋 McKinsey Helped with Addiction

🍋 McKinsey Helped with Addiction

Short Squeez
September 30, 2022

Together With

"One must assume the full range of possibilities when making investment decisions, especially during a crisis." — Li Lu

Good Morning! Happy Friday! Hurricane Ian has caused over 2.6 million power outages, while utility workers standby to make repairs. Meta has announced it will be "somewhat smaller," of an organization, with headcount and budget cuts to come, first major cut since the founding of Facebook in 2004.

Tony Blevins, a top Apple exec, will leave the company after getting caught making some unsavory remarks on TikTok. Amazon is telling its call center staff to work from home, as they plan to cut office costs. In Germany, inflation rose 10.9% from last year, over the estimated 10.2%, reaching double digits for the first time in the Euro era.

1. Story of the Day: McKinsey Helped with Addiction

If you feel like you're hooked on Juuls, cigarettes, or... let's hope not, opioids... You might have McKinsey to thank. No, this isn't a class action lawsuit infomercial to get paid back for being exposed to asbestos. This is a revelation that exalted consulting firm McKinsey, has worked with Juul, Big Tobacco, and opioid makers for years.

In 2017, McKinsey & Company sat down with execs of Juul Labs to provide marketing advice and help the tobacco replacement product, attract teens. In under two years, McKinsey charged Juul $15-17 million, while the company was growing to a higher valuation than Ford.

Trying to avoid reputational and headline risk, McKinsey kept this work a secret. Years later, Juul has agreed to pay a $438.5 million settlement with the government for its marketing practices. While McKinsey wasn't a part of the settlement, it was related to the work they did for Juul, and for plenty of other companies over the years.

Just last year, McKinsey agreed to pay over $600 million in a settlement regarding its work with Purdue Pharma, and other drugmakers, blowing up the opioid epidemic. McKinsey also helped Altria with ideas to keep customers and attract new smokers. For the old-fashioned tobacco brand, McKinsey went as far as making a mock-up of what a Marlboro app would look like, with a way for loyal smokers to win points for prizes.

Short Squeez Takeaway: McKinsey putting its clients above else has tossed its moral code down the drain. Seems like if the deal is sweet enough, McKinsey will do it. In the past few years, vaping has wiped out 20 years of work getting teens to quit cigarettes and we might just have McKinsey's high-quality consulting to thank for it.

2. Markets Rundown

Equity markets hit a fresh low for the year, while crypto was trading sideways, and ultimately ended down as well.

Movers & Shakers

(+) Occidental Petroleum ($OXY) +1.1% because Berkshire Hathaway added to its stake.
(+) Vail Resorts ($MTN) +2% on beating revenue estimates.
(–) Carmax ($KMX) -25% after second quarter earnings came in below analyst expectations.

Private Dealmaking

Berkshire Partners acquired cloud consulting firm Ahead, valued around $3 billion
Satispay, an Italian payment network startup, raised $312 million
Ocelot, an AI communication startup geared at college students, raised $117 million
Avidbots, a robotic cleaning manufacturer, raised $70 million
Chiru Labs, an NFT collection startup, raised $30 million
Energy Capital Partners buys waste management firm Biffa for $1.4 billion

3. Top Reads

Wall Street tumbles on growing concerns over economic growth (Reuters)
Mortgage rates hit 15-year high, race towards 7% (YF)
Google Ventures shelves its algorithm (Axios)
U.S. economy shrank 0.6% in spring, cementing start of recession (Fox)
Why home prices are cratering in one chart (Axios)
Hurricane Ian could push food prices even higher (CNN)
Porsche makes steady start after record $72 billion IPO listing (Reuters)
NASDAQ says Chinese IPOs could pick up dramatically amidst delisting fears (CNBC)
Why a bad year for the bond market is bad for both Wall Street and Main Street (CNN)

A Message from Hustle: Get Smarter on Business & Tech

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4. Book of the Day: Red Roulette

As Desmond Shum was growing up impoverished in China, he vowed his life would be different. Through hard work and sheer tenacity he earned an American college degree and returned to his native country to establish himself in business.

There, he met his future wife, the highly intelligent and equally ambitious Whitney Duan who was determined to make her mark within China’s male-dominated society.

Whitney and Desmond formed an effective team and, aided by relationships they formed with top members of China’s Communist Party, the so-called red aristocracy, he vaulted into China’s billionaire class.

Soon they were developing the massive air cargo facility at Beijing International Airport, and they followed that feat with the creation of one of Beijing’s premier hotels.

They were dazzlingly successful, traveling in private jets, funding multi-million-dollar buildings and endowments, and purchasing expensive homes, vehicles, and art.

But in 2017, their fates diverged irrevocably when Desmond, while residing overseas with his son, learned that his now ex-wife Whitney had vanished along with three coworkers.

This vivid, explosive memoir shows “how the Chinese government keeps business in line—and what happens when business people overstep.”

“Highly readable insider account of the most secretive of global powers.”