Based on research by Piyush Anand (Rice Business) and Vrinda Kadiyali (Cornell)

Key takeaways:

• Teen smoking rates dropped significantly from 1991 to 2021, but e-cigarette use is now reversing this trend, with 37% of 12th-graders reporting vaping in 2018.
• A study using Instagram posts as a proxy for underage vaping found that California's 2017 e-cigarette tax temporarily slowed the increase in vaping-related posts, but the effect only lasted about six months.
• Taxing e-cigarettes may be preferable to banning them, as vaping can be a lower-harm alternative for adult smokers, but more research is needed to determine how to make tax effects more lasting.

Sometime in the 1990s, adolescent smoking began to be very uncool. 

Between 1991 and 2021, the percentage of U.S. teens who smoked even one cigarette dropped from 70.1% to 17.8%. And the rate of teens who smoked daily fell from 9.8% to 0.6%.

This downward trend is good news, given that smoking remains the leading cause of preventable death in the United States — still about 500,000 deaths every year — and 9 out of 10 daily users take it up in their teenage years.

The bad news? This trend has shifted direction. With the advent of e-cigarettes, also known as vapes, teens are returning to nicotine. 37% of 12th-graders reported vaping in 2018, compared to 28% in 2017.

One possible explanation for this reversal is that vapes have social media appeal. E-cigarettes come in a wide range of colors and flavors, and their marketing is bright and fun. Online vaping communities form organically around hashtags like #vapenation.

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It’s hard to know for sure that social media is causing this directional change because reliable data is hard to come by. For researchers wanting to study the potential impact of a national ban or tax on illegal teenage vaping, the dearth of data is a challenge.

But in their recent Marketing Science article, Piyush Anand (Rice Business) and Vrinda Kadiyali (Cornell) use vaping-related social media patterns to their advantage. By treating Instagram posting behavior as a proxy for underage e-cigarette use, Anand and Kadiyali draw conclusions about what might happen in the wake of federal regulation.

On July 1, 2017, California expanded its smoking tax to include e-cigarettes, which raised the retail price of these devices by 38.1%. Anand and Kadiyali wanted to know how the tax impacted teen vaping rates.

To arrive at their findings, they scraped over 380,000 public vaping-related Instagram posts during the period of January 2016 to December 2018. This allowed them to gather content data from before, during and after the California tax.

It turns out that the tax did have an impact. While the number of Instagram posts showing underage vaping continued to increase, it did so at a slower rate compared to the pre-tax period. However, this relative decline only lasted about six months. (Engagement in the form of likes, comments and hashtags remained consistent.)

Why was the effect short-lived?

It could be that companies implemented counter-strategies such as releasing new flavors. Or perhaps they increased their ad spending. Whatever the reason, the study makes clear that the impact of taxes can be undone in a short time unless regulatory bodies combine them with heightened attention to firm strategy. For example, policy language needs to be broad enough to anticipate innovation that could skirt oversight.

For many adult smokers, vaping can provide a lower-harm alternative to the more carcinogenic consumption of traditional nicotine. So, banning e-cigarettes would actually be counterproductive to the larger smoking cessation effort.

There’s also the issue of lessened tax revenue. If an adult smoker uses vaping as an exit ramp from cigarettes, that represents an economic loss unless a vaping tax is in place. So, in theory, a tax would simultaneously deter underage use while providing adult smokers an avenue for harm reduction.

More research is needed to figure out how to make the effects of a tax last longer. Perhaps social media is partly to blame for what seems like a temporary impact. But for now, it’s good to know Instagram isn’t purely a cause of the underage vaping trend — we can also use it to better understand how the trend works.

Written by Scott Pett

Anand and Kadiyali (2024). “Frontiers: Smoke and Mirrors: Impact of E-cigarette Taxes on Underage Social Media Posting,” Marketing Science.

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James Weston, the Harmon Whittington Professor of Finance, will join the Rice Business leadership team as senior associate dean for degree programs. James joined the Rice Business faculty in 2000 and has taught popular courses on economics and finance in all of the Rice Business MBA programs. James’ academic experience has been recognized often. He has presented his peer-reviewed research on corporate finance and financial institutions at many universities worldwide, and his work has been cited by journalists and in congressional testimony. He is also committed to teaching, having received many awards over the years. James was speaker of the Rice University Faculty Senate during 2014-16.

Outside of academia, James, a former assistant economist at the Federal Reserve Bank of New York, conducts executive education seminars, maintains professional consulting relationships and provides expert witness testimony and litigation support. His experience inside and outside the classroom will be a key driver of Rice Business’ future.

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Our thanks and congratulations to Barbara Ostdiek for her exceptional tenure in this position for the past 11 years as she returns to engaging our students in the classroom and to engaging in scholarly activities as a professor of finance. Barb, who has been a member of the faculty since 1994, held this leadership role during a time of unprecedented growth at Rice Business. She led the launch of both our online MBA program, the first online degree at Rice University, and our new Hybrid MBA. She also played a crucial role in launching and growing the undergraduate business major. Barb was instrumental in making key hires, significantly growing the Office of Academic Programs and Student Experience, building the Global Field Experience, and expanding and enhancing our experiential lab courses. Barb worked closely with faculty to create an innovative curriculum, evolving our footprint, particularly in business analytics, technology and the energy transition. Her efforts have greatly impacted our ability to prepare graduates who are vital to organizations and ready to lead. 

We thank Barb for her service with the administration and look forward to working with James as we head into a new academic year.

PREVIOUS CAREER AND CURRENT INTERNSHIP

Previous position before MBA:

• Title: Accountant
• Company: Milrose Consultants Inc.
• Location: New York City, NY

Summer Internship: 

• Title: Procurement Intern
• Company: Humana
• Location: Remote

HOW DID YOU SECURE YOUR INTERNSHIP?

I secured my internship during the pre-MBA recruiting season at the Consortium Conference. Before attending the conference, I received an email from the Humana recruiting team inviting me to apply for several open positions. They also invited me to a private dinner at the conference. While in Louisiana for the conference, I met and networked extensively with the Humana team. I had my first interview at the conference and then two final round interviews with different departments a few weeks after returning home. I was selected by the procurement department, and that's how I ended up interning with them over the summer.

WHAT WERE YOUR RESPONSIBILITIES DURING THE INTERNSHIP?

During my internship, I held the role of a procurement intern. My responsibilities included:

• Assessed processes, developed and communicated change strategies, provided training and support, monitored progress, gathered feedback, and made adjustments to improve effectiveness.
• Documented workflows to identify inefficiencies, collaborated with teams to create detailed process maps, streamlined operations, and supported the implementation of new procedures.
• Analyzed procurement data to identify trends, cost-saving opportunities, and areas for improvement, working with large datasets and analytical tools.
• Assisted in managing supplier relationships, including negotiating contracts, evaluating vendor performance, and ensuring compliance with company policies.
• Coordinated procurement projects from planning to execution, setting timelines, assigning tasks, and ensuring milestones were met.
• Worked on initiatives to streamline processes, reduce costs, and improve efficiency, developing new procedures and recommending best practices.
• Collaborated with various departments, such as finance, operations, and legal, to ensure alignment and support for procurement initiatives.

Through these responsibilities, I gained valuable experience and contributed to the success of the procurement department.

WHAT DEPARTMENT WAS YOUR INTERNSHIP WITH?

The Procurement (Center for Enablement) department.

HOW DID YOUR MBA COURSEWORK PREPARE YOU FOR THIS INTERNSHIP?

My MBA coursework prepared me for this internship in several ways:

• Courses in finance and data analysis helped me develop strong analytical skills, which were essential for evaluating procurement strategies and making data-driven decisions.
• Classes in business strategy and operations management taught me how to think strategically about supply chain management and procurement processes, enabling me to contribute effectively to the team.
• Leadership and communication courses enhanced my ability to work collaboratively with colleagues and present ideas clearly and persuasively.
• Specialized courses related to healthcare, such as Business of Healthcare and Operations Management, provided me with an understanding of industry-specific challenges and best practices.

Overall, my MBA coursework equipped me with a comprehensive skill set that was directly applicable to my role in the procurement department.

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HOW DOES THE INTERNSHIP ALIGN WITH YOUR CAREER GOALS?

The internship aligns with my career goals in several significant ways:

• Working with Humana provided me with hands-on experience in the healthcare industry, which is the sector I aim to build my career in.
• The internship allowed me to apply and further develop my skills in procurement and strategic decision-making, all of which are crucial for my future career aspirations.
• Networking with professionals and leaders at Humana helped me build valuable connections that can support my career growth and provide opportunities for future collaboration.
• The experience confirmed my interest in procurement and operations management as a long-term career path, helping me focus my future efforts and education on this area.

Overall, the internship was a perfect fit for my career goals, providing relevant experience, skill development, and professional connections that will be instrumental in my career progression.

HOW DO YOU THINK THE INTERNSHIP WILL HELP YOU WITH YOUR MBA STUDIES OR FUTURE CAREER?

The internship will help me with my MBA studies and future career in several ways:

• It allowed me to apply theoretical knowledge from my MBA coursework to real-world situations, deepening my understanding and enhancing my learning experience.
• My hands-on experience in procurement and supply chain management sharpened my analytical, strategic, and problem-solving skills, which are essential for both my studies and future career.
• Gaining insider knowledge of the healthcare industry provided me with a clearer perspective on industry trends and challenges, which will be valuable for class discussions and future career decisions.
• Building relationships with professionals at Humana has expanded my network, providing mentors and contacts who can offer guidance and support throughout my career.
• Having this internship experience on my resume makes me a more competitive candidate for future job opportunities, demonstrating my ability to succeed in a professional setting.

Overall, the internship has provided me with practical skills, industry knowledge, and professional connections that will benefit my MBA studies and significantly advance my career.

WHAT IS YOUR FAVORITE PART OF YOUR INTERNSHIP EXPERIENCE?

My favorite part of my internship experience was kickstarting a project and seeing it through to launch. Specifically, I had the opportunity to lead a procurement optimization project aimed at improving our supply chain efficiency.

The project began with identifying key areas where we could reduce costs and streamline processes. I worked closely with my team to gather data and analyze current procurement practices. I developed a comprehensive project plan, outlining the steps needed to achieve our goals. This included setting milestones, assigning tasks, and establishing a timeline.

During the execution phase, I coordinated with various departments, facilitated meetings, and ensured everyone was on track. I also monitored progress and made necessary adjustments to keep the project moving forward. Finally, we reached the launch phase, where we implemented the new procurement strategies. Seeing the positive impact of our work, such as reduced costs and improved efficiency, was incredibly rewarding.

The experience taught me valuable lessons in project management, teamwork, and problem-solving. It was fulfilling to see our hard work come to fruition and make a tangible difference for the company. Overall, leading a project from initiation to launch was the highlight of my internship. It provided me with practical experience and a sense of accomplishment that will stay with me throughout my career.

WHAT ADVICE DO YOU HAVE FOR PROSPECTIVE STUDENTS?

Here is my advice for prospective students:

• Building relationships with peers, professors, and industry professionals is crucial. Attend conferences, join clubs, and make the most of networking opportunities to create a strong support system and open doors for future opportunities.
• Participate in extracurricular activities and take on leadership roles. These experiences will help you develop valuable skills and make your resume stand out.
• Pursue internships and practical experiences in your field of interest. These opportunities provide hands-on learning and can significantly enhance your understanding and career prospects.
• Balancing coursework, extracurricular activities, and personal commitments can be challenging. Develop effective time management skills and stay organized to ensure you can meet all your responsibilities.
• Do not hesitate to ask for help when necessary. Whether it's academic support, career advice, or personal guidance, reaching out to mentors, professors, and peers can make a significant difference.
• Be willing to explore new areas and take on challenges outside your comfort zone. This openness can lead to discovering new passions and opportunities you may not have considered.
• Use your time in school to develop not only academically but also personally. Engage in activities that promote personal growth, such as volunteering, attending workshops, and reflecting on your goals and values.

Delphine Ariguzo is a Full-Time MBA student in the Class of 2025.

PREVIOUS CAREER AND CURRENT INTERNSHIP

Previous position before MBA:

• Title: Sr. Attribute Delivery Engineer
• Company: Rivian Automotive
• Location: Normal, Illinois

Summer Internship: 

• Title: Product Planning and Strategy Intern
• Company: Toyota Motor North America
• Location: Plano, Texas

HOW DID YOU SECURE YOUR INTERNSHIP?

I had an idea from my past career that automotive product planning might be an interesting role for me, so I was on the lookout for such positions. Toyota held a virtual networking session where Rice students were invited. At that event, I learned more about the internship and met some of the department members. I knew this was a great fit and applied as soon as applications opened. From there, I had coffee chats with department members before ultimately interviewing for the role and receiving the offer.

WHAT ARE YOUR RESPONSIBILITIES DURING THE INTERNSHIP?

As a product planning and strategy intern, I handle multiple projects where I conduct competitive analysis of other vehicles, develop strategies to keep Toyota products fresh throughout their lifecycle, create customer profiles for future vehicles, and work on projects involving the future of mobility.

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WHAT DEPARTMENT IS YOUR INTERNSHIP WITH?

I work on the Product Planning and Strategy Team for the Toyota Truck and Rugged SUV team.

HOW DID YOUR MBA COURSEWORK PREPARE YOU FOR THIS INTERNSHIP?

Core concepts from marketing and finance are used daily, as we build business cases for our products and define the customers who will purchase them. Business communications skills help with presenting in front of many people. Classes like New Product Development and Customer Experience Management have helped me form a consumer-centric mindset.

HOW DOES THE INTERNSHIP ALIGN WITH YOUR CAREER GOALS?

My lifelong passion has always been cars. I was lucky to work in automotive engineering before my MBA, but I wanted to get more involved in product concept definition. Toyota’s Product Planning and Strategy internship is a great step towards that. Our department is the “Guardian of the Customer Voice,” responsible for defining future vehicles, their target audience, and ensuring their business viability.

HOW DO YOU THINK THE INTERNSHIP WILL HELP YOU WITH YOUR MBA STUDIES OR FUTURE CAREER?

My internship has helped me directly correlate concepts I learned in class and will continue to learn in my second year. For example, building customer profiles in marketing and new product development classes. At Toyota, I applied these concepts to create customer profiles for future vehicles. This experience helps define what products should be and their target customers. I hope to continue my career in "Voice of the Customer" roles where I can impact future products. 

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WHAT IS YOUR FAVORITE PART OF YOUR INTERNSHIP EXPERIENCE?

At Toyota, we follow the Japanese phrase “Genchi Genbutsu,” which means “go and see it.” This approach has enabled opportunities to experience off-roading in trucks and SUVs, visit RV dealerships to learn about customer needs, and see firsthand what customers demand from products. I also toured design, engineering, and manufacturing facilities. Toyota encourages networking inside and outside the department, setting up a Lunch and Learn series for interns to interact with executive leadership. The insights and knowledge gained from these sessions have been highly rewarding.

WHAT ADVICE DO YOU HAVE FOR PROSPECTIVE STUDENTS?

It is OK to have a plan but not stick to it. During the MBA program, you will explore and learn about opportunities you didn’t know existed. Keep an open mind and explore opportunities you didn’t initially think about. Balance your MBA approach by recruiting for your internship or job, doing well in classes, getting involved in activities, meeting new people, and taking care of yourself. Enjoy the journey because time passes quickly.

Cyrus Mistry is a Full-Time MBA student in the Class of 2025.

An MBA is not just a degree; it's a strategic investment you make in yourself — two years of time, money and effort for a lifetime of dividends. At Rice Business we make it easy for you to enjoy your return on investment. But don’t just take our word for it; the numbers show a high financial ROI.

Let's boil it down.

What will my MBA cost me?

1. Tuition: The first and one of the biggest expenses is, of course, tuition. At Rice, the annual tuition is $73,500 for the two-year degree. This means that students will pay roughly $150,000 for their MBA.
2. Opportunity cost: Another significant expense, especially for the full-time program, is opportunity cost. Prior to entering the program, our students typically have a $70,000 salary. Meaning: for the two-year degree, the opportunity cost of not having that full-time job is roughly $140,000.

These seem like daunting numbers for any prospective student. However, with every investment, there comes a payout and an MBA degree gains more than most.

What are the financial benefits of an MBA?

1. Starting salary: First, upon graduation, Rice MBAs see a significant rise in their starting salaries. The median starting salary for one of our MBAs is $157,000 — representing a 124% raise from the $70,000 salary they previously had.
2. Future growth: Beyond the initial salary increase, MBAs experience accelerated growth rates compared to those without. Non-MBA salaries grow at a rate of roughly 2.5%, compared to an MBA’s growth rate of 3.5%. This higher rate provides significant long-term benefits.

How will this look over the next 30 years?

Let’s consider all variables: cost, salaries, a ballpark figure of 25% income tax and, to calculate the time value of money, let’s say a 10% discount rate. Now, we have all the factors for a final investment proposal.

1. Without an MBA: With a starting salary of $70,000 growing at a rate of 2.5% for 30 years, factoring in taxes and a discount rate of 10%, the present value of your future salary without an MBA would be $631,250.
2. With an MBA: Starting with a salary of $157,000 growing at a rate of 3.5% for 30 years under the same tax and discount conditions would result in a present value of future salary of $1,041,491. In other words, the MBA provides a net present value of $410,241 and a final ROI of 20%.

Present any company with an investment that would generate a $410,000 return, or 20% ROI, and you’re getting promoted! This is the truth of getting an MBA. The net present value of the degree is just about the highest ROI you can find in academia. And Rice Business can help you get there. 

Let’s look at the ROI for a Rice MBA, specifically.

Simpler Version  

Additional Considerations:

Everyone’s financial situation is unique, so this breakdown does not include loan and interest payments. (We discuss those here.)

It also does not include additional benefits like sign-on bonuses and stock options. (In 2022, the average starting bonus for a Rice MBA was $35,879.)

But even with just these numbers, it’s clear that pursuing an MBA is not only personally transformative — it also comes with considerable financial and career growth potential. We invite you to invest in your future today and join us at the Jones Graduate School of Business.

In this video, you can watch James Weston (Harmon Whittington Professor of Finance) break down the ROI of a Rice MBA:

Explore Our Rice MBA

Based on research by Stefan Huber (former Rice Business professor), Chongho Kim (Seoul National) and Edward M. Watts (Yale)

Key findings:

• Unlike stock markets, corporate bond markets see decreased transaction costs and improved liquidity around earnings announcements, with bid-ask spreads dropping by 6-7%.
• This difference is due to the over-the-counter nature of bond markets, where more trading activity makes it easier to find counterparties and negotiate better prices.
• The study challenges the assumption that information asymmetry always increases trading costs, highlighting the importance of considering search and bargaining frictions in OTC markets.

At the end of every quarter, publicly traded companies announce their profits and losses in an earnings report. These updates provide insight into a company’s performance and, in theory, give investors and shareholders clarity on whether to buy, sell or hold. If earnings are good, the stock price may soar. If they’re down, the price might plunge.

However, the implications for the stock price may not be immediately clear to all investors. In the face of this uncertainty, sellers will ask for high prices, and buyers will offer low ones, creating a significant “bid-ask spread.” When this happens, it becomes more costly to trade, and the stock becomes less liquid.

This is a well-documented effect on equity stock markets. However, according to research by Stefan Huber (Rice Business), Chongho Kim (Seoul National University) and Edward M. Watts (Yale SOM), the corporate bond market responds differently to earnings news. This is because bond markets differ from stock markets in a significant way.

Stocks v. Bonds: What Happens When Earnings Are Announced?

Equities are usually traded on centralized exchanges (e.g., New York Stock Exchange). The exchange automatically queues up buyers and sellers according to the quote they’ve entered. Trades are executed electronically, and the parties involved are typically anonymous. A prospective buyer might purchase Microsoft shares from someone drawing down their 401(k) — or they could be buying from Bill Gates himself.

Corporate bond markets work differently. They are “over-the-counter” (OTC) markets, meaning a buyer or seller needs to find a counterparty to trade with. This involves getting quotes from and negotiating with potential counterparties. This is an inherent friction in bond trading that results in much higher costs of trading in the form of wider bid-ask spreads.

Here’s what Huber and his colleagues learned from the research: Earnings announcements prompt many investors to trade. And on OTC markets, potential buyers and sellers become easier to find and negotiate with.

A Stronger Bargaining Position for Bonds

According to Huber, “When earnings information comes out, a lot of people want to trade. In bond markets, that makes it much easier to find someone to trade with. The more options you have to trade, the stronger your bargaining position becomes, and the lower your trading costs go.”

He compares the process to shopping in a market with a flexible approach to pricing.

“Let's say you're at a farmers market and you want to buy an apple,” Huber says. “If there is only one seller, you buy the apple from that person. They can ask for whatever price they want. But if there are multiple sellers, you can ask around, and there is potential to get a better price. The price you get depends on the number of options you have in trading partners.”

What’s at Stake?

Although bonds receive less attention than equities, the stakes are high. There is about $10 trillion in outstanding corporate debt in the U.S., and more than $34 billion in average daily trading volume.

A detailed record of bond trades is available from the Financial Industry Regulatory Authority (FINRA), which requires that trades be reported via their Trade Reporting and Compliance Engine (TRACE). The study from Huber and co-authors uses an enhanced version of TRACE to examine trades executed between 2002 and 2020. The team analyzed the thirty-day periods before and after earnings announcements to gather data about volume, bid-ask spreads and other measures of liquidity.

They find that, like on the stock market, there are more investors and broker-dealers trading bonds around earnings announcements. However, unlike on the stock market, transaction costs for bonds decrease by 6-7% in the form of bid-ask spreads.

What Sets This Research Apart?

“Taking a purely information asymmetry-based view would predict that what happens to stock liquidity would also happen to bonds,” Huber says. “A piece of information drops, and some people are better able to work with it, so others price protect, and bid-ask spreads and the cost of trading go up.”

“But if you consider the search and bargaining frictions in bond markets, you get a more nuanced picture. While information asymmetry increases, like it does on stock markets, the information prompts more investors into bond trading, which makes it easier to find counterparties and get better transaction prices. Consequently, bid-ask spreads go down. This search and bargaining friction does not really exist on equities exchanges. But we cannot ignore it in OTC markets.”

As corporate debt markets continue to grow in importance, it will become crucial for investors and regulators to understand the nuanced factors influencing their liquidity. This study provides a solid foundation for future research.

Huber, Kim, and Watts (2024). “Earnings News and Over-the-Counter Markets.” Journal of Accounting Research.