Business Lessons From the Drug Trade – Narconomics How To Run A Drug Cartel By Tom Wainwright

Narconomics was an entertaining read. Throughout the book i was struck by the similarities between the drug trade and legitimate business operations

The book reinforced the idea that if you abstract concepts into high level mental models, you can broaden their application across many applications or industries. Whether it’s supply, demand, supply chain management, or change management, the underlying concepts—and consequently, the tactics to manage them—remain consistent.

If you’re a fan of shows like “Narcos,” you’ll find the business perspective presented in this book fascinating.

Several interesting insights caught my attention:

Building a sense of pride and community among employees is crucial for retention, a priority even for drug cartels.

Cartels foster a sense of camaraderie among their ranks through team-building activities and societal responsibility initiatives, such as drug alms (narcolimosnas), protection services, and funding for churches and sporting events. Notorious drug lord Pablo Escobar even invested in sports facilities and public housing to gain support in Colombian neighborhoods. This sense of community is the primary tool used by cartels to retain employees. Cartels also use intimidation tactics and incentives like health insurance but they alone are not enough.

Supply chain redundancy is integral to the business model of drug cartels.

With law enforcement efforts posing a constant threat to their operations, cartels incorporate redundancy into their supply chains to mitigate risks. At any time drugs can be seized, key figures can be arrested and their distribution network can be disrupted. This requires redundancy to be baked in.
This strategy resonates with recent trends in the technology industry, where companies prioritize redundant supply chains following chip shortages during the COVID pandemic. Prior to COVID there were very little examples of mass disruption of supply chain in the tech industry.

Drug cartels share striking similarities with legitimate business models:

  • Franchising: Cartels adopt franchising to expand their territory and secure revenue streams, akin to the strategies employed by multinational corporations like McDonald’s.
  • Social Responsibility: They utilize social responsibility initiatives as a PR tool, similar to businesses investing in community projects to enhance their brand image.
  • Cost Reduction and Offshoring: Like multinational corporations, cartels engage in cost reduction and offshoring to increase profits.
  • Diversification: Cartels diversify into new markets to mitigate risks, reflecting the behavior of corporate entities seeking new revenue streams.

Exploring business concepts from this unique perspective was both enlightening and enjoyable.

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