Wolff: Disruption is cheap; cravings are profitable

The recent study by Credit Suisse that sin businesses, most notably tobacco and alcohol, have since the beginning of the 20th century outperformed every other business sector is a bracing reminder of what is constant in this time of radical change.

Or, put another way, it's not disruption that wins the race, but habituation — serving and understanding basic human impulses and needs.

A dollar invested in tobacco in 1900 would be worth $6.28 million today.

This is a teaching moment type of revelation, particularly for the media and tech businesses, where high valuations go to the new and the next instead of to the fixed and proven.

Television, for instance, is habituating; music, too, is hard to do without; even books stand up. And yet all of these businesses are generally looked at as low-value forms. They are being disrupted, or even put to shame, not just by new distribution methods, but by new behaviors that are, in theory, changing the very nature of these old dependencies.

But perhaps that's the ultimate short sight.

In fact, looked at from the vantage point of 100 years of ritual and habit, the problem with technology is that it changes so quickly. Social media has existed for eight or nine years, and probably is logically destined to be replaced by new capabilities in less time than that. And yet, here we are, making long-term business decisions on the basis of social media's present functionality instead of on fundamental human desires.

Not just desires, in the case of tobacco and alcohol, of course, but addiction. And yet addiction is just the metaphor for what we can't or don't want to do without — the things that satisfy us (whether wisely or not). Social media is merely on the continuum of more efficient forms of organization and communication. The fact that we can't imagine what comes next does not show the strength of social media, but its limitations — because it represents functionality, not need, there will always be something better. Only a true believer, or an overly optimistic investor, would bet that it isn't fleeting.

It is far less likely that we can do without traditional media and the classic forms of entertainment and distraction. Social media is easy; comedy is hard.

It's true, of course, that most technology investors are not thinking about 100 years from now. The returns they seek are immediate ones. In fact, the attraction of technology is that, in the short term, it's offering, at least for some, tobacco-like returns.

But tobacco is real, and technology is, as has been amply demonstrated, a bubble. So if you're not in the technology business, if you're in, say, print, with its long history of human habit and satisfaction, why would you throw over what's been so reliable for something that, likely, is here today and gone tomorrow?

Say this for the booze and tobacco industries, they held to their guns.

A hundred years of alternatives and concerted efforts at disruption have still not worn them out (although tobacco's long run is finally ebbing). Their producers believed in their product. (Tobacco's impact on sociability has surely had greater human meaning than Facebook's.)

This sounds, I appreciate, like parody. It is not. Survivability is the issue — the race is long.

The chances in media for the survival of the dramatic form, of expression with a beginning, middle, and end, is — does one even have to argue — vastly more certain than the long-term future of Facebook's anodyne understanding of the human condition.

And yet, certainly for music and print, the specter of the new and novel has resulted in those industries all but admitting defeat. The music business sold cheap to iTunes and streaming services; print capitulated to Google.

In part, this is not only a failure to appreciate what works, and to panic and fix what is not necessarily broken, but to be awed by someone else's success. And yet, the authors of the Credit Suisse study, Elroy Dimson, Paul Marsh and Mike Staunton of the London Business School, also point out the significant long-term disparity of the returns of the priciest one-fifth of industries in the U.S. and U.K. versus the cheapest fifth. If, since 1980, you had only bought companies that had been public for at least 20 years, your return would have been 60x; if you had bought only new companies, 20x.

Vast amounts of new money — most new money — now pours into the proposition that the way we entertain and amuse ourselves and satisfy our longings to be part of a collective culture is in radical transition. All kinds of new products and new methods to hasten and exploit this transformation want your money (and, indeed, are getting it).

And yet, the basic forms of entertainment and connection remain the same. We certainly understand this when it comes to sports. And, too, more people than ever before spend more time watching television. E-books have suddenly appeared to plateau — real books, it seems, satisfy a more basic urge, to hold the physical word.

The market for disruption, for novelty, for greater efficiency, caters to another basic impulse, short-term returns. But the better business, and the true lesson of tobacco and alcohol's amazing value proposition, is that if you have a product with a proven ability to satisfy basic human desires, just keep making it.

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