Friday Nonsense?, entry #412: On Prohibition

Recommended listening: The Missourians’ ”Prohibition Blues”(1) - Spotify mini-playlist here, set to collab mode. Add to it if you're so inclined.

(Free dad joke: jackhammers - a truly groundbreaking innovation.)

Both the concept of unintended outcomes(2) and the outcomes themselves are fascinating. Chaos theory’s butterfly effect(3) comes along for the ride, with funky causata occurring downstream in our predominantly nonlinear systems. Given our current perma-state of extrinsic and intrinsic change, how innovation slots into that is worth a coup d'oeil… bringing us to American Prohibition, i.e. the nation-wide illegalization of the manufacture, storage, shipping and selling of alcohol(4).

Why all this? Calling it "a great social and economic experiment, noble in motive and far-reaching in purpose", President Hoover and his predecessor President Coolidge not only hoped to rid the country 'of the tyranny of drink', but also expected an economic boom. All of that free time and money would now hockey-stick the sale of, say, clothing and household goods. With bars closing, real estate developers could expect crime to drop, neighborhoods to 'improve' and rents to rise. Companies making gum, juice or sodas were primed to move in on now-unoccupied territory. (In a bit of highest-office-of-the-land non-alignment, President Lincoln some 83 years prior said of Illinois' statewide alcohol ban that "Prohibition will work great injury to the cause of temperance. It is a species of intemperance within itself [...]".)

Innovation is often linked to ethics or some definition of morality(5). At its core, however, innovation is amoral. It’s simply a new way of doing something, be it via method, device or idea. Below you’ll find 11 unintended outcomes and innovations leading up to and/or stemming from Prohibition, chunked into four groups:

Behavior:

• Consumption: A few years into Prohibition, alcohol increased sharply, about 65% above pre-Prohibition levels(6). Oopsies.
• Modern home/micro-brewing: Chicago’s Genna brothers for example distributed hundreds of one-gallon stills to families in Little Italy, making illicit production a family affair (see the stitched rhyme) and creating a small army of entrepreneurs. (The Prohibition Bureau seized nearly 700K stills across the nation between 1921 and 1925).
• Camouflage: the art of hiding in plain sight went into overdrive – alcohol was hidden in canes, porcelain Cornish hens wrapped in greasy paper, lipstick-shaped flasks and actual eggs(!), emptied, cleaned, filled with whiskey and sealed with wax.

Society:

• Proto-influencers: Carrie A. Nation(7) (get it?), a pro-Temperance figure who literally put hatchet to barrel and also figured out how to fund her activities with branded items (merch) and communicate to her audience via newsletter (an analog blog)
• The rise of ‘pressure groups’(8): Wayne Wheeler became one of the most powerful non-politician political powers in U.S. history, influencing six state Congresses and in the ear of two consecutive Presidents towards enacting Prohibition.
• Entrenching the income tax: Many states relied heavily on alcohol excise taxes (75% of New York’s revenue was booze-based, close to 40% of all U.S. taxes were paid by brewers and distillers). Not only did Prohibition cost over $300M to enforce, it also led to $11B in lost tax revenue. With apologies to the Lone Star State, don’t mess with taxes.

Business:

• ‘Medicinal’ alcohol: there’s an argument to be made that Walgreens ($133B in revenue last year) made its early bones on this, going from 20 locations in 1920 to 525 by 1929. In the first six months of Prohibition, 57,000 pharmacists and 15,000 physicians applied for licenses to prescribe alcohol to ‘treat’ patients.
• Manufacturing and supply chain innovations: the sheer ingenuity that went into figuring out how to manufacture, transport, hide and sell all that alcohol was wild – 700M gallons of beer were home-brewed in 1929, New York alone sported at least 32,000 speakeasies. ??
• Organized crime: Prohibition removed the legitimate means by which the ‘needs’ of a massive consumer market were fulfilled. Both nature and the mob hate a vacuum. Given the massive influx of immigrants without immediate access to conventional wealth creation paths, there was no way this wasn’t happening. (Al Capone's crew alone made $60M in 1927, with a good chunk of the Chicago PD on payroll).

Recreation:

• The modern craft cocktail movement: most bootleg booze tasted terrible and required various mixers to make it palatable. Canada Dry’s Ginger Ale and Coca-Cola (yes, containing cocaine and yet hilariously still branded as ‘The Temperance Drink’) owe their start to Prohibition(9).
• Automotive ‘innovation’: Prohibition-era bootleggers showed immense creativity when it came to modifying their wheels to have an edge vis-à-vis the local constabulary. Modern NASCAR has a direct line back to the 18th amendment(10).

Now, what happened to ‘good’ innovations in this era? While filed patents shouldn’t be the exclusive metric for measuring innovation trends(11), they’re a decent place to start. An interesting angle here is the where and how of innovation – during Prohibition, patents in formerly ‘wet’ states dropped 8-18% percent compared to their ‘dry’ neighbors.?Why? Large swaths of the innovation ecosystem (venues where people met, talked shop and swapped ideas) ceased to exist, and with them those established processes of co-creation(12). The word ‘interesting’ provides a broad semantic umbrella – Prohibition was easily one of the most interesting large-scale policy experiments in human history.)

Last week on a spring break road-trip, I walked past a prop 1921 Ford Model T on Saint Julian Street in Savannah, next to a sign pointing out Prohibition-driven vehicular modifications. The Prohibition Museum nearby (13) is wonderfully curated, covering a ton of historical ground within a very small physical footprint – an innovation in its own right.

TL;DR? John Barleycorn(14) didn’t actually die, he just went on a sabbatical. In Prohibition America, innovation drives you. There's gold in them there hills, but whiskey in these here eggs.

Happy Friday, all. Let me know what you think of this format. (I continue to have no idea what I'm doing).

#innovation #transformation #strategy #entrepreneur #mobility #automotive #manufacturing #supplychain #culture #fn412?#fridaynonsense

Footnotes:

1. Alternative tunage: Social Distortion’s ‘Machine Gun Blues’, The Dubliners’ ‘Whiskey in the Jar’, Traffic’s ‘John Barleycorn Must Die’.
2. An excellent paper by Dr. Sumera Jabeen looking at this from an international development angle if you’re interested – ‘Do we really care about unintended outcomes?’, Evaluation and Program Planning (Volume 55, April 2016) https://www.sciencedirect.com/science/article/abs/pii/S0149718915001342?via%3Dihub
3. Really, the Madame Butterfly Effect is the pop culture portmanteau we’re all waiting for.
4. Legislated through the 18th Amendment in 1919, which nationally made the manufacture, sale, and transportation of alcoholic beverages illegal in the U.S. from 1920 to 1933. (In an early Christmas present to some, this was repealed via the 21st amendment in December of 1933.)
5. Frank Buytendijk wrote a neat (non-Gartner) book maybe a decade ago called ‘Socrates Reloaded’, looking at the role of ethics (“don’t be creepy”) in data and information innovation. https://www.beastmagazine.lu/socrates-reloaded-with-frank-buytendijk/
6. Neat working paper from the National Bureau of Economic Research here https://www.nber.org/system/files/working_papers/w3675/w3675.pdf
7. https://www.history.com/news/carry-nation-temperance-prohibition-alcohol
8. Wheeler himself coined the term. He was an intense dude. https://www.smithsonianmag.com/history/wayne-b-wheeler-the-man-who-turned-off-the-taps-14783512/
9. As a former bartender, I found this fascinating https://winehistoryproject.org/temperance-and-prohibition-stimulated-new-beverages/#:~:text=Charles%20Leiper%20Grigg%20(1868%2D1940,before%20the%20stock%20market%20crashed.
10. Junior Johnson, five-time NASCAR circuit winner in 1955, grew up in family moonshine business and as a child had to climb over crates of hooch to get to his bed.
11. Plenty of reasons for this – there are patents for ‘methods of exercising a cat’ (1993, USP# 5,443,036), Apple’s design patent for an actual shape (2010, USP# 67,028,6S1) or the ‘concussion alarm clock’ (1882, USP#256,265). Patent trolls are a whole ‘nother thing. Many organizations no longer go the patent route, Tesla having perhaps taken it to the extreme. Good crunch on this here https://www.promarket.org/2021/03/19/patents-bad-measure-innovation-new-metric/
12. I highly recommend you check out a ridiculously neat paper by Michael Andrews called ‘Bar Talk: Informal Social Interactions, Alcohol Prohibition, and Invention’ on this. ?https://economics.harvard.edu/files/economics/files/bar_talk_3_20.pdf
13. https://www.americanprohibitionmuseum.com/
14. https://library.nashville.org/blog/2020/01/death-john-barleycorn-prohibition-nashville