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Lessons Learned from the E-Cigarette Market
 

TheKing's picture
O
 
Points)
 on 12/9/12 at 12:30pm
E-Cigarettes

I'm sure you've seen them somewhere before. Maybe you saw an ad at your local bodega. Or maybe you walked past them as they were sold at a mall kiosk.

Electronic Cigarettes.

Electronic Cigarettes, or E-Cigs, are a niche product in a growing market. The first time I saw an e-cig I couldn't help but laugh to myself. They just seemed so dumb, for lack of a better word. Imagine my complete and total surprise when reading a recent Bloomberg article that pegged the market for e-cigs at $300 million in 2012, with it predicted to grow to $1 billion in the next three years.

Now before I proceed, I want to be clear, this isn't a post about the wonders of the e-cigarette market. Rather, it has two focal points:

1.) Many people are too quick to be myopic and skeptical about the work and ideas of others

2.) It doesn't matter how silly a business idea may sound to you. What matters is that there exists a market for the product / service and a means to provide the product / service profitably

When I read the article on e-cigarettes, which is a pretty eye-opening read for someone who is both a non-smoker and an e-cig skeptic, it made me think of an interview that recently ran here on WSO. DonVon's interview with an ex-banking analyst who founded ThePillowPocket.

Why? Namely, because the same immense skepticism and attitude I had toward e-cigarettes was showcased in some of the responses to the idea behind ThePillowPocket.

Now, I'm not saying that the market for Pillow Pockets is going to explode and rival that of the e-cigarette market. Rather, I'm saying that it's foolish to knock any business that serves a market, assuming it's doing so legally and ethically. There may be legitimate questions about the product and the business model, but it's better to ask them to gain understanding instead of trashing the product outright because it doesn't suit your sensibilities.

It's far too easy, especially if you're in the bubble of high finance, to sit back and forget that there is an entire world of tastes that differ from your own. Instead of knocking a product idea because you wouldn't buy it, try instead to think about who would buy it. And, if a market legitimately exists, then think about how it could be served profitably.

Now, I might still personally find e-cigarettes to be stupid, but who cares? They aren't being produced for me, but for the millions of people who are looking for a safer alternative to traditional cigarettes. People are far too quick to hate on the ideas and work of others. It's a lot easier to criticize than it is to create something. Rather than hating on something, try and analyze and understand its potential merits.

When you're going down the Path on your way to Finance greatness, it's hard to imagine a way to make a living outside of banking, consulting, PE, or hedge funds. But, something I learned from my time in banking and PE, thanks to putting together countless pitches and reviewing hundreds of CIMs, is that there are literally millions of ways to make money.

Once you realize that and train yourself to drop the hater-first mentality, you'll open yourself up to a world of possibilities. Want to start a business but don't have any ideas? Open your mind. Spend some time reading and studying things that are outside of your usual comfort zones and areas of interest. Learn about something new and you might just come up with an awesome profitable idea that you can work on in your off-hours. But, as long as you're of the mind-set to dismiss out of hand instead of analyzing it critically, don't bet on coming up with any great ideas.

On the flip side, for companies like GroupOn, businesses that do more harm than good to their partners, that are built more on hype than anything else, and that have seedy management, bash away. My point is that it's important to have an open mind and to analyze the topic at hand before dismissing it.

Or else you'll risk doing as I did with e-cigarettes and completely dismiss a billion dollar market.

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Comments

WallStreetOasis.com's picture

So true. I thought the exact

EN
(Human, 12,188
 
Points)
 on 12/6/12 at 3:55pm

So true. I thought the exact same things when I heard about e-Cigs but have been seeing a lot more of them lately so people must find value in them. Again, not my idea, but must be making some people a lot of $s or they wouldnt be around :-)

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accountingbyday's picture

I've seen them a LOT in

CF
 
Points)
 on 12/6/12 at 4:03pm

I've seen them a LOT in certain poker rooms. The poker rooms don't allow smoking, but do allow e-Cigs.

They seem ridiculous to me as well, but someone is rich from the idea.

Nefarious-'s picture

I saw some fuckhead in the

CF
(Neanderthal, 2,218
 
Points)
 on 12/6/12 at 4:14pm

I saw some fuckhead in the gym the other day with one. Like, smoking it between sets.

You're born, you take shit. You get out in the world, you take more shit. You climb a little higher, you take less shit. Till one day you're up in the rarefied atmosphere and you've forgotten what shit even looks like. Welcome to the layer cake, son.

wolverine19x89's picture

lol I was actually pretty

O
(King Kong, 1,849
 
Points)
 on 12/6/12 at 4:21pm

lol I was actually pretty excited when I heard about them... I guess you have to be a smoker that realizes that cigarettes are f#$#@ing bullshit. I bought a Vapor King brand of e-cigs.

Pros:
-healthier than real cigs (my only pro, but that's a biiiig pro)

Cons:
-I have to buy the refills online... if I could go to the store and pick some up I'd still be using it instead of smoking real cigs.
-you're not going to get the real taste of a cigarette... I know real cigs actually taste horrible to non-smokers, but when you're drinking, nothing hits the spot like a Marlboro.
-no long-term medical research on the side-effects... big con to me, I don't like ingesting experimental stuff.

there are a looot of different flavors you can get, so I guess that could be a pro, but I just stuck with the menthol flavor that tasted like mint.

smoking it between sets does seem weird, but it shouldn't actually have a negative effect on your lungs. I've heard that the stuff inside of the liquid used to fill them up is what's found in inhalers (just not as strong of a "dose").

If your dreams don't scare you, then they are not big enough.

"There are two types of people in this world: People who say they pee in the shower, and dirty fucking liars."-Louis C.K.

Going Concern's picture

Haha, need some e-juice for

(King Kong, 1,865
 
Points)
 on 12/6/12 at 6:13pm

Haha, need some e-juice for your e-cigs so you can live your e-life. For some reason reminds me of 2001 A Space Odyssey where instead of food they're gobbling up this colorful paste that's easy to scoop up.

You have to play the game to find out why you're playing the game.

wolverine19x89's picture

Yeah, I'm ahead of you guys.

O
(King Kong, 1,849
 
Points)
 on 12/6/12 at 4:36pm

Yeah, I'm ahead of you guys. Get with the times. Geeze.

If your dreams don't scare you, then they are not big enough.

"There are two types of people in this world: People who say they pee in the shower, and dirty fucking liars."-Louis C.K.

down on the upside's picture

I vaguely remember e-cigs

CD
(Baboon, 143
 
Points)
 on 12/6/12 at 4:36pm

I vaguely remember e-cigs being brought up as RJR Nabisco's future in Barbarians at the Gate, it sounded like the only person who thought it would go anywhere was Canada's own Ross Johnson, could it really be making headway in the 21st century?

Underground's picture

Great post.

(Baboon, 109
 
Points)
 on 12/6/12 at 4:49pm

Great post.

AndyLouis's picture

no e-cigs down here, ha they

(Almost Human, 6,114
 
Points)
 on 12/6/12 at 5:25pm

no e-cigs down here, ha they still have old fashioned cigarette vending machines (didnt those go away in the early 90's? except for bowling alleys I guess).

good points on people jumping to conclusions and being skeptical, so many niche profitable products out there where the idea may seem absolutely silly to one person, but extremely useful to another

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Kenny Powers's picture

i'll never give up the real

O
 
Points)
 on 12/6/12 at 5:55pm

i'll never give up the real thing and i know im not alone.

pick em, lick em, stick em

blastoise's picture

anyy one know when these

O
 
Points)
 on 12/6/12 at 6:29pm

anyy one know when these first came out ?

sandsurfngbomber's picture

Hahaha. I fucking lost it at

IB
 
Points)
 on 12/7/12 at 1:16am

Hahaha. I fucking lost it at the "smoking at gym" comment.

My chain-smoking buddy actually bought these and was all stoked about quitting. Less than a week later he was back. According to him these taste like shit and he would have to smoke all day to get a similar effect

wolverine19x89's picture

The stuff I was getting from

O
(King Kong, 1,849
 
Points)
 on 12/7/12 at 2:53am

The stuff I was getting from Vapor King had various amounts of nicotine per "dose" or whatever and a lot of different flavors. Like I said though, it's not a cigarette...

If your dreams don't scare you, then they are not big enough.

"There are two types of people in this world: People who say they pee in the shower, and dirty fucking liars."-Louis C.K.

technoviking's picture

Living in Europe. Had a drag

O
 
Points)
 on 12/7/12 at 5:57am

Living in Europe. Had a drag of a friends E-cigarette last weekend. Pretty nice. Lots of vapor

In reply to down on the upside
gstackle32's picture

down on the upside: I vaguely

O
(Gorilla, 500
 
Points)
 on 12/7/12 at 3:10pm
down on the upside:

I vaguely remember e-cigs being brought up as RJR Nabisco's future in Barbarians at the Gate, it sounded like the only person who thought it would go anywhere was Canada's own Ross Johnson, could it really be making headway in the 21st century?

As I recall the main issue RJR had was that their product was poorly made (hard to inhale) and tasted like shit. I'd say there has been some headway made in the technology. That being said, until they have some long term study on the effects of inhaling liquid nicotine I'm skeptical how big the market will grow due to the FDA or some other agency stepping in.

ladubs111's picture

i remember back in 2005-06ish

IA
 
Points)
 on 12/7/12 at 8:02pm
In reply to wolverine19x89
duffmt6's picture

wolverine19x89: Cons: -no

IB
(Neanderthal, 2,471
 
Points)
 on 12/9/12 at 1:00pm

"Social cohesion and puritanical morality place roughly on my list of concerns between whether I'll pick up jock itch at the gym this week (not likely, since I don't go the gym) and whether it'll rain in Christchurch, New Zealand next Tuesday."
-Eddie

Febreeze's picture

problem with the e-cig is, it

(King Kong, 1,158
 
Points)
 on 12/9/12 at 1:05pm
Edmundo Braverman's picture

They just opened an e-cig

ST
(Human, 14,702
 
Points)
 on 12/9/12 at 2:34pm

cphbravo96's picture

While I share the same view

PE
 
Points)
 on 12/9/12 at 2:39pm

"The trouble with our liberal friends is not that they're ignorant, it's just that they know so much that isn't so."
- Ronald Reagan

In reply to duffmt6
wolverine19x89's picture

duffmt6: wolverine19x89: Co

O
(King Kong, 1,849
 
Points)
 on 12/9/12 at 5:30pm

If your dreams don't scare you, then they are not big enough.

"There are two types of people in this world: People who say they pee in the shower, and dirty fucking liars."-Louis C.K.

atleastimnotabanker's picture

I made my girlfriend switch

CO
(Baboon, 123
 
Points)
 on 12/10/12 at 4:49pm

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