Combined notes from Amazon review and me:

• Supply chains, especially cocaine. The raw product is grown in South America and must be infiltrated into the US-usually through Mexico. (For a while there was a prominent Caribbean route, but it was shut down-at least for a while.) This is where we learn about how the cartels adapt to eradicated crops, as well as how the product is marked up at various stages of the operation. Doubling the cost of growing coca leaves would only add 1% to the price of the finished product (100s of dollars vs 100Ks of dollars per kilo). And demand for drugs is generally inelastic, so decreasing supply just increases price. Demand-side policies to target drug consumption (public health, rehab, leisure alternatives, etc) are likely to cut demand and price, making market less lucrative.
• Decision to compete versus collude. We mostly read about the competition, because in a lawless market competition equals violence. However, over time cartels have been increasingly willing to agree on distribution of territory. Although, there are also clever means to compete unique to criminal enterprises, such as engaging in violence in someone else’s territory to cause the police to crack down there-thus making it harder for said opposition.
• Human resources, and the different approaches used to handle problems in this domain. In the movies, a drug cartel employee who fouled up always gets a bullet to the brain, but it seems that this isn’t always the case-though it certainly happens. Different countries and regions have differing labor mobility. In some cases, there is no labor mobility. (i.e. if one has a gang’s symbols tattooed all over one’s body, one can’t interview with a rival gang and Aetna sure as hell isn’t going to hire you.)
• Public relations and giving to the public. One doesn’t think about drug lords engaging in CSR, but in some cases they may be more consistent with it than mainstream businesses. The cartels face an ongoing risk of people informing on them, and at least some of those people can do so without their identities becoming known. Violence is often used to solve problems in this domain, but it can’t do it all. That’s why drug lords build churches and schools, and often become beloved in the process.
• “Offshoring” in the drug world. This may seem strange, but drug cartels, too, chase low-cost labor. But it’s not just about lowering costs, it’s also about finding a suitable regulatory environment-which in the cartel’s case means a slack one. An interesting point is made that all the statistics on doing business are still relevant to the drug business, but often in reverse. That is, if Toyota is putting in a plant, it wants a place with low corruption, but if the Sinaloa want to put in a facility–the easier the bribery the better.
• Franchising has come to be applied to drug cartels-famously the Zetas. The franchisor provides such goods as better weaponry in exchange for a cut of profits. Of course, there’s always a difference in incentives between franchisors and franchisees when it comes to delimiting territory, and this doesn’t always work out as well for drug dealers as it does for McDonald’s franchisees.
• Synthetic drugs. The topic is innovating around regulation, and so it’s certainly apropos to look at these drugs. If you’re not familiar, there are many synthetic drugs that are usually sold as potpourri or the like. Once they’re outlawed, the formula is tweaked a little. In a way, these “legal highs” may be the most dangerous because no one knows what effect they’ll have when they put the out on the street.
• Online marketplaces. Using special web browsers, individuals are able to make transactions that are not so difficult to trace. In an intriguing twist, the online market may foster more trust and higher quality product than the conventional street corner seller ever did.
• Diversifying, most notably into human trafficking. Exploiting their knowledge of how to get things across the border, they become “coyotes.”
• Effect of legalization, and it focuses heavily upon the effects that Denver’s legalizing marijuana has had in Denver, in the rest of the country, and on the cartels. Wainwright paints a balanced picture that shows that not everything is perfect with legalization. E.g. he presents a couple cases of people who ingested pot-laced food products intended for several servings, and did crazy stuff. However, the bottom line is that legalization (and the regulation and taxation that comes with it) seems to be the way to go if you want to really hurt the cartels and stem the tide of violence, as well as to reduce the number of people showing up at the ER having ingested some substance of unknown chemical composition.

Spending $1M to reduce cocaine consumption in US: targeting supply in Latin America cuts 10 kg; targeting interception during transit cuts 20 kg; prevention programs in schools cuts 25 kg; treatment for drug addicts cuts 100 kg. Focus on enforcement rather than treatment is inefficient. Similarly, governments could spend relatively small amounts on making prisons safe and minimally comfortable (to avoid gang recruitment) or on getting farmers to grow alternate crops instead of destroying coca crops.

Lack of cooperation between governments means drug cartels shift rapidly on both supply side (e.g. between Latin American countries) and demand side (e.g. European cocaine consumption rose as it fell in US), as uncoordinated crackdowns take place in each country.

Since 1998 governments have spent over $1 trillion enforcing drug prohibitions, but total consumption of marijuana and cocaine has increased by half, and consumption of opiates has tripled.

In Switzerland, a program targeted 3000 hardcore heroin addicts who accounted for 60% of consumption, and allowed doctors to provide them with free heroin taken under supervision. That reduced the number of robberies those addicts committed by 90%, removed them as dealers (many addicts are also dealers due to its expense), and removed their frequent business from other dealers.