November 11, 2019 • 33 mins
Now that cannabis is "legalish" there are a host of new opportunities for emerging businesses and investments... but also a decent amount of playing wait-and-see. Today, pot is legal in 33 states. But it is still illegal at the federal level. From a financial point of view, too, the short history of cannabis stocks is... high and lows! In this fascinating episode, Bethany talks with Jackson Tilley, author of the book Billion Dollar Dimebag, about the business of cannabis, what he calls the next great American industry. But is it really?
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Episode Transcript
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Speaker 1 (00:00):
I'm Bethany McLain. This is making a killing in this show.
I cut through the hype and handwringing to reframe the
stories you thought you understood and uncover the ones you
didn't know were important. Literally every day, a marijuana related
pitch pops into my inbox, whether it's to profile a
(00:21):
cannabis entrepreneur, to check out pot infused bath bombs and
facial creams, or to look at the launch of an
organic CBD infused sparkling water. That last one is a
direct quote, and it's not just me. A Shark Tank
episode featuring a doctor who had launched a CBD oil
was the most watched episode in Shark Tank history. The
craze is on investors, of course, love the eye popping
(00:45):
predictions for growth in the cannabis industry. Global spending on
legal cannabis is projected to grow two hundred and thirty
percent to thirty one point three billion in twenty twenty two.
According to one market researcher, pot is now leak for
medical use in thirty three states, but it's still illegal
at the federal level. Strange, and hence author Jackson Tilly's
(01:08):
use of the delightful word legal ish. In his new
book subtitle Billion Dollar Dimebag, An Insider's account of America's
legal ish cannabis industry. A self professed true believer, Jackson
calls cannabis the next great American industry. Is he right? Well,
there are some serious issues. From a financial point of view.
(01:29):
The short history of cannabis stocks is well highs and lows. Sorry,
I couldn't resist the opportunities to make and lose fortunes.
Of course, sound like any new industry, but is pot
just like any other new industry. There's a fierce debate
about whether we'll regret the rush to legalization. There's still
a lot about cannabis that we just don't know, including
(01:50):
its harms and benefits. Proponents think we're going to learn
good things. Detractors argue that THHC, the active compound in cannabis,
is strongly linked to psych kosis, schizophrenia, and violence. So
today I get to chat with Jackson Tilly, who, as
I've mentioned, is a total believer. His first job out
of college was it a cannabis company now called Organic Brands,
(02:11):
and he never left. In addition to being an author,
he's now the vice president of strategic partnerships and communications.
As for me, I'm interested in learning why it is
that Jackson believes so strongly in this industry. So I
want to start in a slightly odd place. One of
the fascinating things I learned from your book is this
idea that to those of you in the industry, marijuana
(02:33):
is actually a pejorative word. Tell us the history of
how it came to be. You might want to call
it the War on drugs. One point now in the
very first generation of cannabis being treated like something horrible.
So you have Anslinger who was trying to stoke fears
about anti immigrant sentiments in the United States. And this
is back in the nineteen thirties, right when pott became
(02:55):
illegal exactly. This was probably a year and a half
after it was first getting to carry with it a
criminal punishment. So you have Anslinger who's decided that the
best way to do this is to attach cannabis use
to anti immigrant sentiments. And so marijuana, I guess at
the time people felt like had some connotation with Mexico,
(03:15):
and so it sort of just took off from there
and it was spelled with the H then instead of
the jay. That you see more commonly now, So it's
funny to look back at it. It's sort of like
transparent and kind of unbelievable that that was ever a
thought that somebody had, but it worked at the time,
and I mean not dissimilar to what we're going through now.
You know, we have a huge debate about immigration happening,
(03:37):
and I think some of the worst parts of politics
stoke those fears and people and try to leverage that anger.
It's interesting everything old is new again. I was thinking
that when I read it, But I thought this was
also stunning from your book, that a lot of us
don't remember that cannabis was once actually legal, and you
write that before nineteen thirty seven, you could walk into
(03:58):
a pharmacy and purchase of file was called marijuana tincture
from behind the counter, and that it was prescribed as
a remedy for a malady known as female hysteria. Yeah,
so you have to get women stone don't let us vote, right, right,
I mean, And I think like whether or not that
was actually the impetus for any of that, who knows.
But it's just wild to think about the sort of
(04:18):
dramatic change back and forth and again it's not dissimilar
to alcohol prohibition legal before, made illegal, and then made
legal once again. Do you have any sense if the
alcohol industry had something to do with marijuana becoming illegal
back in the nineteen thirties, You know, I haven't read
anything to that effect. I wouldn't be totally surprised, but
(04:39):
I think largely the big push for it was hemp production.
That people did not want to see hemp as a
commodity used in the production of paper pulp, and so
that was like a huge driver for this sort of
anti cannabis sentiment. Oh, that's interesting, since they wanted the
hemp to be used in paper, so they didn't want
it being used elsewhere exactly. Well, that's fascinating. Okay, So
(05:00):
again your book with these quotes from three presidents, which
I think is great, and I'm just going to read
them because I think it sets the stage to talk
about how much attitudes are changing. Now again, you've got
Bill Clinton saying I experimented with marijuana time or two
and I didn't like it, and I didn't inhale and
I never tried again. And then you've got Barack Obama saying,
when I was a kid, I inhaled frequently. That was
the point. So talk about the changing attitudes toward cannabis.
(05:24):
You know, I think it's a lot like any big
social movement where the big piece that's always missing is
just time. And I think you could like in it
a little bit to gay marriage, almost in the same
sense that it was something that was forever enormously taboo yep.
And it was not until things like social media and
(05:46):
easier access to information at a broad scale that you
saw the conversations start to tilt. So I think it's
very similar with cannabis that people are just exposed to
it to a greater extent now than they were previously.
And I think the big piece is that you see
more and more people who are both successful and consume cannabis.
(06:08):
And for a long time those things were mutually exclusive, right,
So you're breaking that historic association of the loser on
his mother's coach with the right. And for as volatile
as you mentioned the stock market surrounding cannabis is, it's
also the first time that it's being taken seriously as
a real business. I mean, for its faults, it really
is and I want to come back to that, but
(06:30):
one other thing you write in your book that I
knew but had forgotten is that John Bayner, and the
former House Speaker right is now serving on the board
of a cannabis company. He is. You know, you can
type in cannabis investments into Google and you'll be served
an ad for America's Bigcashcrop dot Com. What John Bayner
has to say. That's just amazing, and it's part of this.
(06:50):
You note that the number of Americans supporting legalization is growing, right, Yeah, absolutely,
I mean it's the same thing. I think it's twofold. Really,
people are frustrated with the prison industrial complex the United
States that huge numbers, particularly people of color, are either
charged or jailed for cannabis or petty drug charges. And
then I also think people are just interested in new
(07:12):
forms of income and new additives to the American economic system.
So hence the push toward legalization. So tell us about Colorado,
because Colorado is obviously the first date to legalize pot entirely,
not just for medical use, but for recreational use as well.
What's the picture there. I think it's largely positive, certainly
if you compare it to places where there's a black
(07:33):
market that's still thriving look anywhere in the South and
see exactly what's happening. In contrast to Colorado, where just
like a typical day, if I were to walk off
the plane in Colorado, I could head to a dispensary.
In Denver, if I'm over the age of twenty one,
I'll walk in, they'll scan my driver's license, and I
can buy something from behind the counter as if it
were a liquor store. And in turn, the state has
(07:55):
taken a huge portion of what you've just purchased as
tax revenue, and a great deal of it has been
earmarked toward public schools. So in Colorado, I hadn't lived
there in a long time, and then I recently moved back,
and it's sort of amazing to see this city is
Denver in particular, it's spotlessly clean, there's new buildings going
up everywhere, and it's consistently ranked as like one of
(08:16):
the best cities to live in the United States. And
I think a lot of that is probably due in
fact to this like move toward personal freedoms that people
want to be in Colorado and have access interesting correlation.
I'm going to go with correlation rather than causation. On
that point. But I'll give you a possible correlation, And
you haven't seen the explosion of violence in Colorado that
(08:37):
some of marijuana's detractors. And I'm sorry, I can't help it.
I'm going to keep using the word marijuana. I just fine,
bad word or not. I say it too. It's totally fine. Okay,
you haven't seen that explosion of violence that people expected, right, No,
absolutely not. And as a matter of fact, violence has
largely gone down in Colorado. There was like a brief
spike three years ago, but still far below the national
(08:59):
average and significan currently below what the projected national average
was when they did a study of future violence in
the United States as a whole. So I think that
that has largely been debunked. And I make this point
in the book that the sky just has not fallen
in Colorado. There are certainly issues, as there are with
any developing market, but these fears about children having easy
(09:21):
access to cannabis, the opposite has proven to be true.
And as far as crime, I think probably the biggest
crime that you see is robbery as it relates to
the transportation of cash in Colorado. Because there's no banking
system that will the banking system won't won't take cannabis money,
right exactly, So people are forced to use these private
(09:42):
armed car services and bank at credit unions instead of
just being able to conduct business like anybody. So it's
crime as a result of messed up regulations rather than Yeah,
I think the point you made is, while an obvious one,
it's one I often forget, which is that the black
market will exist. We're not talking about pot or right,
we're talking about legal pot or illegal pot. But it's
(10:03):
going to be one or the other, which I think
is an interesting point. So tell tell us about your
personal story, because you're an advocate for this industry and
yet you don't use it yourself. I don't, and I
did at one point in my life, but I got
sober in the midst of working in this industry actually,
and you know, my drug of choice was always prescription pills,
(10:23):
like I think many people in the United States, and
so for me it was sort of an awakening about
what's the root of this issue in the United States,
Like why are prescription drugs so prevalent and so easy
to get in cannabis, which carries far less of the
same dangers, Almost impossible in so much of the country,
And so that's like in one bucket, and then the
(10:44):
other piece is just And I've hit on this all
the time in the book, and I say it all
the time in real life too. But for me, it's
just a personal freedom's issue. It's like, I don't know
that it's harming anyone, and in fact probably has a
net positive effect. So the of the day, if you're
not hurting anybody, and we can make the rest of
the world safer by making it legal, why wouldn't you
(11:05):
advocate for that. We're going to come back to that,
but but I want to pause on your point about
prescription drugs because I thought that was a really interesting
point that opioids available legally prescription drugs kill people and
marijuana does not, and that there is some hypocrisy around
complaints about making pot legal when you compare it to
what is legally available and dispensed crazily in the pharmaceutical system. Right. Yeah,
(11:29):
I mean, and for me, I was an eighteen year
old fresh out of high school, dropped off at college,
and was getting a prescription for exorbitant amounts of xanax
from a doctor who just didn't think to question why
an eighteen year old needs to be taking six or
seven zanex a day. And wow, And that case isn't
unique to me. That's a widespread problem of over prescription
(11:49):
in this country. So when it comes to cannabis, I
just think it just doesn't carry the same risks. And
I hate to say that because I know they're detractors
who say that it's certainly does carry risks, and I'm
not saying it's risk free, but I think if you
look at the two and a vacuum, it's evident which
one carries a higher risk. I hadn't actually realized that
(12:10):
you couldn't kill yourself by overdosing on marijuana. I'm naive
about the industry and marijuana itself, I have to contest.
I think it's a study that they did said you'd
need to eat thirty six pounds of cannabis in order
to be able to overdose. And it wouldn't even be
from the THHC content. It would be from your stomach
expanding too rapidly from all of the plant materials. So
(12:31):
it's a high bar. Okay, that is a really disgusting image. Okay,
So let's start with some of the basics, just for
people who are listening who may know. What's the difference
between CBD and THHC. Sure, so it's most simple level.
THC is the psychoactive part of the cannabis plant, and
CBD is the non psychoactive. So CBD offers, according to some,
(12:53):
a lot of the same benefits as THHC, but without
feeling high essentially, And do you believe that these claims
about CBD are pretty astonishing? This Shark Tank episode with
this doctor that became this most watched episode in Shark
Tank history, is that it's been clinically proven to help
dozens of ailments including I just have to do the list,
chronic pain, arthrit a, stress, depression, anxiety, heart healthy diabetes,
(13:14):
improve cognition until hey, the onset of horrible conditions like dimension. Also,
I mean, seriously, you might be able to moonlight as
a narrator for prescription commercials on television. That was very quick.
You know, I don't know, and I think most people
don't know whether it's actually true or not. And a
huge piece of that is that there's no situation in
which you could do a controlled clinical study on the
(13:37):
effects of CBD because there's no regulatory body to oversee that.
So that's one issue, yep. And then beyond that, anecdotally,
most people believe in this thing called the entourage effect,
which is where you have to have multiple cannabinoids in
order for them to all vire at full power, if
you want to think of it that way. So CBD
(13:58):
works in its most effective way if it's paired with
some type of THHC or other cannabinoids that are present
in the plant, and there's hundreds of them. So taking
like a straight up CBD seltzer water for example, I
don't know that that necessarily does anything. However, there might
be a placebo effect and if that makes people feel great,
then more power to them. Why not, right? And it
(14:20):
sounds good. So we are really you mentioned that these
hundreds of strains in the cannabis plant, we're really at
the nascent stages of research about this, right, because the
research that was going on in the twenties and thirties
into the medical benefits of cannabis just went caput when
it became illegal exactly. And it's a huge issue. I mean,
I think there's a lot that the plant can do
more than we probably understand right now, and The only
(14:44):
way that we're ever going to figure it out is
if there's federal legalization, because until then, who can really
say no, one is equipped to be running those types
of studies. So where are we in understanding how useful
marijuana can be in treating various diseases, not just DBD,
but but thhc are we you hear these reports of
miracles of people seizures being cured, of cancer patients being
(15:06):
able to eat and tolerate their medication. Is this the
first inning? Is at the ninth inning? Where are we
in our understanding level? This is probably the third inning.
Baseball is not my strong suit. It's like the first
twenty minutes of the Academy Awards. Okay, that's that's a
concept I'm familiar with. We're waiting to see large scale
(15:27):
studies that happen, and I think, again, I hit on
this all the time, but it's until there's better legalization.
It's tough. However, anecdotally you can see it firsthand. There
tons and tons of people who move to places like
Colorado and California who have chronic health issues that rely
on cannabis. And I think, at the end of the day,
(15:48):
whether it's for pain, or for seizures, or for nausea, whatever.
If people are finding relief through something that is largely
free of many of the downsides of prescription pain medication,
our prescription alternatives, I would advocate for that one hundred
times over. So in the interim, I think people should
just continue to try products in a responsible manner and
(16:13):
see what works for them. There's powerful anecdotal evidence, I
will give you that, if no systematic scientific study. What
are you seeing in terms of the money coming into
the industry. I saw statistic earlier this year. I think
that a company got one hundred and twenty five million
dollars of venture capital money. Are you seeing the amounts
of money begin to skyrocket on the whole? I think
(16:35):
it's begun to level out a little bit. But in
the last two years, yes, an exorbitant amount of money
has been pumped into the cannabis industry. Our own company
as well, want public at the beginning of the year.
And in Canada, right because in Canada pot is legal,
so therefore yeah, okay, actually our friendly neighbors to the north,
so it's the way of just avoiding the patchwork of
US laws. Yeah, exactly, And there are other ways to
(16:56):
do it in the United States, but it's more complex.
So you write in the book that despite the seeming
popularity of the cannabis industry in the United States, there's
never been a worse time to get started. And all
of the companies here is included, I think lose money.
Why is that? Why is it so hard to make money?
People ask all the time, they say, should we get
involved in cannabis? And the answer I always say is
(17:18):
five years ago was the best time. And we actually
just at our quarterlies a couple of days ago bottom
line profits for something that's very exciting. But yeah, I
mean it's an incredibly expensive industry. Number one, talent retention
is super difficult. Payroll as a high expense across the
cannabis industry. If we're talking about big CpG geared cannabis
(17:39):
companies like Hours and like Cannapy Grow, what do you
mean by CPGA geared that it's a consumer package essentially? Yeah,
so it's that. And then just raw materials are incredibly
expensive though they've been compressed significantly or over year. The
cost of the actual cannabis flower that's being turned into
other goods, it is it volatile it's not. It's actually
consistently gone down that because more and more people are
(18:00):
growing as they see it becoming more legal. Right, okay,
and what about part of the problem with making money
are these quite contrary regulations. You talk about one section
to ade explain what that is. To ad, e is
the bane of every cannabis entrepreneurs existence, strong language. Indeed,
(18:21):
it's the section of the US tax code that excludes
any businesses that function in an illegal fashion from claiming
any expenses on their tax reports, any normal business expenses.
So when we talk about the incredible cost of running
a cannabis business in the United States, none of its
tax deductible exactly. So it's a realized tax rate of
(18:41):
eighty percent for some people. So it's incredible. Wow. And
then on top of that, you've got this complexity of
state law, right, no overarching federal law, and the state
law is really complicated in patchwork, absolutely, and I think
that also contributes to the high costs of operating in
the industry. If you were to work at McDonald's, all
(19:03):
of your supplies, all of the goods that you use
in your restaurant are coming from one or two or
three central warehouses. So that's all been brought into one place.
And in the cannabis industry, it's not the It's not
the case if I run an operation in Colorado and
I also have one in California. I'm creating those products
in a vacuum, separate from one another. And you can't ship, say,
raw material grown in California and use it in your
(19:26):
product in Colorado, right, and nothing has to stay within
the state. Wow. Yeah, Wow, it's a big logistical nightmare
I can imagine. So what do you think the picture
looks like for federal legalization. You seem mixed on it.
I'd say, yeah, I think it's farther away than a
lot of people would like to believe. That said, our
(19:50):
current political climate is extremely unpredictable. Interesting may you live
in interesting times? Right? Isn't that the old Chinese proverb?
So I wouldn't say it's out of the realm of
possibility that it happens in the next two years. But
it may. But you know, I think we're on the
right path, and I think eventually we hit this tipping
point where enough states have legalized that it's just a
(20:14):
no brainer to happen at the federal level, and I
think largely to infect us to the banking issues that
we spoke about. I think that's probably the thing that
will tip the scales in order to allow banks to
take money from cannabis entrepreneurs, right, so you don't have
this almost black market system of banking running in parallel
to the legal ish cannabis industry. Right is part of
(20:36):
the push for legalization. Will the move toward criminal justice
also help, do you think? I think so. I think
people are really frustrated by the amount of resources that
are spent on jailing people for petty drug offenses, especially
when we've seen there are better ways to rehabilitate people
than throwing them in jail. Like if people are being
arrested for drug charges because they have a drug problem,
(20:58):
going to jail is not the solution to that, not
going to do much. Right, So, how prior to legalization,
assuming it ever happens, how is a consumer do you
navigate all these different brands. I walked into a medman
when I was in Venice recently, and it's just it's
really hard to know what you're buying, what something is,
whether there's any consistency between products. Is that part of
(21:18):
the issue too, and how as a consumer do you
navigate that there's a couple pieces to it. Number one
companies like ours and we're certainly not the only one
to do this, but are called multi state operators, So
we have products and multiple states in the United States.
For US it's twelve, so you see some consistency among
those products. And then you obviously have state mandated testing
that you know, there's a label on the back of
(21:40):
every product that at its most basic level tells you,
here's how much THC is in it, here's how much
CBD is in it. It's cleared all of its besticide testing,
so you can get a general sense based on that
of what it's going to do to you. But it
would be there would be more consistency if we had legalization,
right absolutely, because you would probably walk into a Walgreen
and be able to buy it and it would all
(22:01):
be ABNBEV brand. You make pretty big claims for legalization,
both in terms of jobs. You think it might save
us from the next recession and not because we'll be
too stone to notice that there's a recession going on,
and also and also tax revenue. Right, those are those
in my right in thinking those are your two of
the big arguments you have for legalization. Yeah. Absolutely, And
(22:21):
I think the job creation we've seen it be the case.
In Colorado. We have one of the lowest unemployment rates
in the country. And whether you want to say that's
from cannabis or something else, that's I will leave up
to people to decide. We'll go for correlation again. And
then tax revenue, it's the same thing. It's we crossed
the billion dollar freshold and tax revenue in Colorado I
(22:42):
think a year and a half ago, two years ago.
I mean, so the money is coming in and on
a federal level it would be at an even greater scale.
But if you legalize federally, doesn't doesn't having it available
all over the country, then start to no pun intended
cannibalize from other from other areas. So do you really
get the tax benefit? You think maybe to a certain extent,
but I think I would have to pull the numbers up.
(23:04):
But in Colorado, I think it's something like only twenty
percent of people that come into dispensaries are out of
state visitors like it. Really it's mostly people who live
in Colorado. There's a ton of tourists in some cities. Yeah,
but you know, if you look on most small towns
outside of Denver and Boulder, people are going to dispensaries
that live in Colorado. So back to this idea that
these companies don't make money, I think the security is
(23:24):
an Exchange Commission even issued a warning about a year
ago warning investors about fraud in the pot industry. Because
if so many of the companies are traded on the
over the counter market there they're or they're based in,
they're traded on a Canadian exchange, and there's there's just
a lot people people don't know. What would you look
out for. What's a warning sign to you, as someone
who's now a veteran of this industry, what makes you
(23:44):
say this company is not one of us. It's tough
to say. And I think it's like with making an
investment in any novel industry. The onus is on both
sides for a retail investor to scrutinize what they're investing
in in the first place, and then I think to
a pretty significant extent, most people are not successful in listing.
(24:06):
Even if it is OTC, most people are not successful
in doing so. If it's an illegitimate business. Now, that's
not to say there's not plenty of hot air in
the pot stock market at the moment, but by and large,
there's about ten companies that you consistently see in business
media that are the real deal. Nason Stage company. So
there's a lot of risk, like with Canopy Brands, which
(24:28):
has a multi billion dollar backing from its parent Constellation
right but still went through a shakeup this year with
its CEO being ousted, And it's this we talked about,
harder to make money than they expected. I think so,
And I think I can't speak for anybody from Constellation
or Canopy, but I think my read is that they
probably didn't make their money back as quickly as they
wanted to. And it's a long term play, and that
(24:50):
has long been you forget. I forget because I've worked
in this industry for so long that all of that
stuff isn't immediately apparent to people from the outside. But
for me, when I got into it five and a
half years ago, it's thinking, Oh, this is a long
term play. Fifteen years from now, this is going to
be a fantastic business to be a part of. Wow,
that's actually interesting that you were thinking that far in advance,
(25:11):
I'm probably giving myself more credit than I deserved as
a fresh from college kid. But you know, pretty quickly
on you can realize that like, okay, it's great now,
but it's going to be even better in the future.
And so if you use your crystal mirror and you
think about five ten years, do you think there's going
to be a constant flood of new companies offering I
don't know, gold whatever, whatever's or do you think the
(25:32):
industry is going to consolidate into a couple of big companies.
I think we're headed toward large scale consolidation. I think
you'll always have your sort of boutique, bespoke cannabis products
and brands, but I think those will make up a tiny,
tiny portion of what's sold on the market. I think
we'll see it become a lot like alcohol, where it's
three or four big companies that own everything. It's interesting.
(25:54):
I've read a history of the automobile industry this summer,
and I hadn't known that they're with that of little
auto companies in the late eighteen hundreds and early nineteen hundreds,
and of course we ended up with three, right, So
maybe that will be the history here too, So talk
a little bit about the culture inside the industry. One
of the things that I thought was fascinating you had.
You had this observation about the culture that's quite ironic
(26:17):
that marijuana does have these really deep anti establishment and
anti capitalist routs, and yet now people in the industry
are rooting for government regulation and capitalism. So how does
that sort of contradiction in terms play out. It's funny.
I think we're in a growth stage right now where
people are sort of reckoning with this notion that they
(26:39):
got into the industry to fight back against the man
ten years ago, and now they're very much the man themselves, right,
So I think we're seeing a lot of that play
out in I think a lot of these IPOs speak
to that that people are ready to be taken seriously
as business leaders in the space. So I think from
the top down that influences a lot of the culture
(26:59):
where people have had to sort of pull themselves up
and like get everything done at the highest possible degree
because the stakes are just higher now than they were previously.
So it's certainly, you know, I wouldn't say it's as
bad as being on a trading floor. But it's certainly
high stress, high pressure because there's just so much at
stake right now. That's a huge cultural shift within the
(27:22):
industry that would be fascinating to live through. So what
was the industry's reaction. It's just one of many critiques.
But my journalist named Alex Berenson published a book I
think earlier this year called Tell Your Children, basically arguing
that marijuana is the THC, is linked to psychosis, schizophrenia,
other really really terrible things. And his major point was
(27:43):
that this fresh to legalization is very premature, and you
hear that from other groups as well. What's the industry
reaction to that? I mean to his book in particular,
it's not just the industry who has pushed back against
And I think there was an open letter from one
hundred different clinicians and psychologists who said that he had
cherry picked the data in his book and was drawing
conclusions that just aren't rooted in science. And that's certainly
(28:06):
my belief as well as far as schizophrenia and cannabis,
that's an argument that's been made over and over again,
and the science for either side of the argument is
just not there. There certainly can be a relationship between
the two, but it's like a chicken and egg. Argument
is that that people had psychosis first, and as many
people with mental health issues do or self medicating with cannabis,
(28:30):
or were they using cannabis and it triggered the psychosis.
I tend to think that it's probably that the psychosis
was underlying first. But those cases are also exceedingly rare,
more rare than I think his book would lead you
to believe. Yeah, it's that correlation causation issue again. Right,
what do you in the industry do to push back
because it's not just his book, there's plenty of this
(28:51):
criticism everywhere. No, absolutely not. I mean, and it's funny
we've been talking about this a lot lately because of
even just issues with companies like Jewel where vaping is
becoming like a larger and larger issue among children, whether
intentionally or unintentionally. Right, but they have certainly found themselves
on the wrong side of the regulatory apparatus. Yeah, I
would not want to be sitting over there at the moment.
(29:14):
A big piece of it is, as with everything else
in the industry, that we're fervent believers in regulation and
that We're happy to comply with the law because it's
both in our best interest and in the best interests
of the consumer. Products are safer, they're difficult for children
to get, and at the end of the day, like
that benefits all of us. I'm hesitant to even say it,
(29:36):
But no marketer is going out and thinking like, oh,
I'm going to think of a way to market cannabis
to kids, because at the end of the day, they're
not our consumers and they can't come into a dispensary.
So do you think some of the pushback is coming
from the alcohol industry or the tobacco industry, and that
there's some threat to them if pot becomes illegal substitute? Right?
Isn't there some line you had in your book about
(29:57):
getting rid of beer bellies, I mean, which maybe they
might be replaced by munchy bellies. I don't know. That's
such a trite thing. I'll get yelled at for having
even said that. You know, I think I think largely
the alcohol industry is in favor of it, and as
you've seen with Canopy Growth Corporation, Constellation made a four
billion dollar investment in them. So I think the tides
(30:20):
are turning to a certain extent, and I think people
are choosing different intoxicants aside from alcohol now, and I
think alcohol companies are wise and now that if that's
the way that history is going to play out, then
they're going to be involved in it, not fight back
against it. If indeed the legalization trend does continue, it
will be interesting to see how that plays out. I
think you might be a little bit optimistic on that front,
(30:42):
or perhaps naive about the competitive forces at work. Absolutely,
but whatever, maintain some happy naive to take if you can.
A last question for you, do you think this industry
is going to look like any other industry in ten
or fifteen years If you put back on your your
future hat and say, what is it going to be like?
Is this justin industry like alcohol? I think it'll always
have a certain cultural cache to it that makes it
(31:06):
seem like the outsider industry. But you know, fifteen years
from now, I think it'll be federally legal. I think
we'll have seen huge consolidation, so it's just a few companies,
maybe even alcohol companies that have acquired and absorbed them.
Who knows, But I really do think there's this huge
push and especially at a company like ours, to really
(31:28):
move towards this CpG model, focusing on the highest value
portions of the consumer package goods. For those who have
forgotten the agronive, there's this increased focus on the highest
value portion of the supply chain. And so I think,
while there's always going to be this cool factor to
cannabis and to working in cannabis, I don't think it'll
be dissimilar to anything else that you walk in and
(31:51):
buy off the shelf in the store. And maybe it'll
take longer than fifteen years to get there, but we're
certainly headed there right now. It's going to be fascinating
to see if your predictions pan out. So before I
read Jackson's book and talk to him, I think I
would have been anti legalization. Why take the risk? Isn't
the safer route to just say no? But he makes
(32:11):
some compelling arguments, whether it be the inevitable existence of
the black market or the hypocrisy of allowing ads for say, alcohol,
to run freely on billboards across America. His most powerful argument,
I thought, was the comparison between pot and prescription opioids,
a topic we've covered here on making a killing he
writes for the skeptics, I beg you to look at
(32:33):
these two drugs side by side and tell me which
one has the highest likelihood of causing harm. Even so,
I'm going to bet that Jackson might be just a
tadbit optimistic about the future of this industry. I'd think
that they're going to be some big scandals and some
billion dollar losses. But then again, isn't that just like
any other industry. I'm Bethany McLean, host of Making a Killing.
(32:56):
We're taking a short break. We'll be back in a
couple of weeks and I'll talk to Kyle Pope, the
executive editor of the Columbia Journalism Review, about how journalism
is changing looking forward to it. Making a Killing is
the co production of Pushkin Industries and Chalk and Blade.
It's produced by Ruth Barnes and Rosie Stouffer. My executive
(33:18):
producers are Alison McClain no relation in Making Casey. The
executive producer at Pushkin is Mia Loebell. Engineering by Jason
Gambrell and Jason Rostkowski. Our music is by Jed Flood.
Special thanks to Jacob Weisberg at Pushkin and everyone on
the show. I'm Bethany McClain, thank you so much for listening.
(33:38):
You can find me on Twitter at Bethany mac twelve
and let me know which episodes you've most enjoyed.
I'm Bethany McLain. This is making a killing in this show.
I cut through the hype and handwringing to reframe the
stories you thought you understood and uncover the ones you
didn't know were important. Literally every day, a marijuana related
pitch pops into my inbox, whether it's to profile a
(00:21):
cannabis entrepreneur, to check out pot infused bath bombs and
facial creams, or to look at the launch of an
organic CBD infused sparkling water. That last one is a
direct quote, and it's not just me. A Shark Tank
episode featuring a doctor who had launched a CBD oil
was the most watched episode in Shark Tank history. The
craze is on investors, of course, love the eye popping
(00:45):
predictions for growth in the cannabis industry. Global spending on
legal cannabis is projected to grow two hundred and thirty
percent to thirty one point three billion in twenty twenty two.
According to one market researcher, pot is now leak for
medical use in thirty three states, but it's still illegal
at the federal level. Strange, and hence author Jackson Tilly's
(01:08):
use of the delightful word legal ish. In his new
book subtitle Billion Dollar Dimebag, An Insider's account of America's
legal ish cannabis industry. A self professed true believer, Jackson
calls cannabis the next great American industry. Is he right? Well,
there are some serious issues. From a financial point of view.
(01:29):
The short history of cannabis stocks is well highs and lows. Sorry,
I couldn't resist the opportunities to make and lose fortunes.
Of course, sound like any new industry, but is pot
just like any other new industry. There's a fierce debate
about whether we'll regret the rush to legalization. There's still
a lot about cannabis that we just don't know, including
(01:50):
its harms and benefits. Proponents think we're going to learn
good things. Detractors argue that THHC, the active compound in cannabis,
is strongly linked to psych kosis, schizophrenia, and violence. So
today I get to chat with Jackson Tilly, who, as
I've mentioned, is a total believer. His first job out
of college was it a cannabis company now called Organic Brands,
(02:11):
and he never left. In addition to being an author,
he's now the vice president of strategic partnerships and communications.
As for me, I'm interested in learning why it is
that Jackson believes so strongly in this industry. So I
want to start in a slightly odd place. One of
the fascinating things I learned from your book is this
idea that to those of you in the industry, marijuana
(02:33):
is actually a pejorative word. Tell us the history of
how it came to be. You might want to call
it the War on drugs. One point now in the
very first generation of cannabis being treated like something horrible.
So you have Anslinger who was trying to stoke fears
about anti immigrant sentiments in the United States. And this
is back in the nineteen thirties, right when pott became
(02:55):
illegal exactly. This was probably a year and a half
after it was first getting to carry with it a
criminal punishment. So you have Anslinger who's decided that the
best way to do this is to attach cannabis use
to anti immigrant sentiments. And so marijuana, I guess at
the time people felt like had some connotation with Mexico,
(03:15):
and so it sort of just took off from there
and it was spelled with the H then instead of
the jay. That you see more commonly now, So it's
funny to look back at it. It's sort of like
transparent and kind of unbelievable that that was ever a
thought that somebody had, but it worked at the time,
and I mean not dissimilar to what we're going through now.
You know, we have a huge debate about immigration happening,
(03:37):
and I think some of the worst parts of politics
stoke those fears and people and try to leverage that anger.
It's interesting everything old is new again. I was thinking
that when I read it, But I thought this was
also stunning from your book, that a lot of us
don't remember that cannabis was once actually legal, and you
write that before nineteen thirty seven, you could walk into
(03:58):
a pharmacy and purchase of file was called marijuana tincture
from behind the counter, and that it was prescribed as
a remedy for a malady known as female hysteria. Yeah,
so you have to get women stone don't let us vote, right, right,
I mean, And I think like whether or not that
was actually the impetus for any of that, who knows.
But it's just wild to think about the sort of
(04:18):
dramatic change back and forth and again it's not dissimilar
to alcohol prohibition legal before, made illegal, and then made
legal once again. Do you have any sense if the
alcohol industry had something to do with marijuana becoming illegal
back in the nineteen thirties, You know, I haven't read
anything to that effect. I wouldn't be totally surprised, but
(04:39):
I think largely the big push for it was hemp production.
That people did not want to see hemp as a
commodity used in the production of paper pulp, and so
that was like a huge driver for this sort of
anti cannabis sentiment. Oh, that's interesting, since they wanted the
hemp to be used in paper, so they didn't want
it being used elsewhere exactly. Well, that's fascinating. Okay, So
(05:00):
again your book with these quotes from three presidents, which
I think is great, and I'm just going to read
them because I think it sets the stage to talk
about how much attitudes are changing. Now again, you've got
Bill Clinton saying I experimented with marijuana time or two
and I didn't like it, and I didn't inhale and
I never tried again. And then you've got Barack Obama saying,
when I was a kid, I inhaled frequently. That was
the point. So talk about the changing attitudes toward cannabis.
(05:24):
You know, I think it's a lot like any big
social movement where the big piece that's always missing is
just time. And I think you could like in it
a little bit to gay marriage, almost in the same
sense that it was something that was forever enormously taboo yep.
And it was not until things like social media and
(05:46):
easier access to information at a broad scale that you
saw the conversations start to tilt. So I think it's
very similar with cannabis that people are just exposed to
it to a greater extent now than they were previously.
And I think the big piece is that you see
more and more people who are both successful and consume cannabis.
(06:08):
And for a long time those things were mutually exclusive, right,
So you're breaking that historic association of the loser on
his mother's coach with the right. And for as volatile
as you mentioned the stock market surrounding cannabis is, it's
also the first time that it's being taken seriously as
a real business. I mean, for its faults, it really
is and I want to come back to that, but
(06:30):
one other thing you write in your book that I
knew but had forgotten is that John Bayner, and the
former House Speaker right is now serving on the board
of a cannabis company. He is. You know, you can
type in cannabis investments into Google and you'll be served
an ad for America's Bigcashcrop dot Com. What John Bayner
has to say. That's just amazing, and it's part of this.
(06:50):
You note that the number of Americans supporting legalization is growing, right, Yeah, absolutely,
I mean it's the same thing. I think it's twofold. Really,
people are frustrated with the prison industrial complex the United
States that huge numbers, particularly people of color, are either
charged or jailed for cannabis or petty drug charges. And
then I also think people are just interested in new
(07:12):
forms of income and new additives to the American economic system.
So hence the push toward legalization. So tell us about Colorado,
because Colorado is obviously the first date to legalize pot entirely,
not just for medical use, but for recreational use as well.
What's the picture there. I think it's largely positive, certainly
if you compare it to places where there's a black
(07:33):
market that's still thriving look anywhere in the South and
see exactly what's happening. In contrast to Colorado, where just
like a typical day, if I were to walk off
the plane in Colorado, I could head to a dispensary.
In Denver, if I'm over the age of twenty one,
I'll walk in, they'll scan my driver's license, and I
can buy something from behind the counter as if it
were a liquor store. And in turn, the state has
(07:55):
taken a huge portion of what you've just purchased as
tax revenue, and a great deal of it has been
earmarked toward public schools. So in Colorado, I hadn't lived
there in a long time, and then I recently moved back,
and it's sort of amazing to see this city is
Denver in particular, it's spotlessly clean, there's new buildings going
up everywhere, and it's consistently ranked as like one of
(08:16):
the best cities to live in the United States. And
I think a lot of that is probably due in
fact to this like move toward personal freedoms that people
want to be in Colorado and have access interesting correlation.
I'm going to go with correlation rather than causation. On
that point. But I'll give you a possible correlation, And
you haven't seen the explosion of violence in Colorado that
(08:37):
some of marijuana's detractors. And I'm sorry, I can't help it.
I'm going to keep using the word marijuana. I just fine,
bad word or not. I say it too. It's totally fine. Okay,
you haven't seen that explosion of violence that people expected, right, No,
absolutely not. And as a matter of fact, violence has
largely gone down in Colorado. There was like a brief
spike three years ago, but still far below the national
(08:59):
average and significan currently below what the projected national average
was when they did a study of future violence in
the United States as a whole. So I think that
that has largely been debunked. And I make this point
in the book that the sky just has not fallen
in Colorado. There are certainly issues, as there are with
any developing market, but these fears about children having easy
(09:21):
access to cannabis, the opposite has proven to be true.
And as far as crime, I think probably the biggest
crime that you see is robbery as it relates to
the transportation of cash in Colorado. Because there's no banking
system that will the banking system won't won't take cannabis money,
right exactly, So people are forced to use these private
(09:42):
armed car services and bank at credit unions instead of
just being able to conduct business like anybody. So it's
crime as a result of messed up regulations rather than Yeah,
I think the point you made is, while an obvious one,
it's one I often forget, which is that the black
market will exist. We're not talking about pot or right,
we're talking about legal pot or illegal pot. But it's
(10:03):
going to be one or the other, which I think
is an interesting point. So tell tell us about your
personal story, because you're an advocate for this industry and
yet you don't use it yourself. I don't, and I
did at one point in my life, but I got
sober in the midst of working in this industry actually,
and you know, my drug of choice was always prescription pills,
(10:23):
like I think many people in the United States, and
so for me it was sort of an awakening about
what's the root of this issue in the United States,
Like why are prescription drugs so prevalent and so easy
to get in cannabis, which carries far less of the
same dangers, Almost impossible in so much of the country,
And so that's like in one bucket, and then the
(10:44):
other piece is just And I've hit on this all
the time in the book, and I say it all
the time in real life too. But for me, it's
just a personal freedom's issue. It's like, I don't know
that it's harming anyone, and in fact probably has a
net positive effect. So the of the day, if you're
not hurting anybody, and we can make the rest of
the world safer by making it legal, why wouldn't you
(11:05):
advocate for that. We're going to come back to that,
but but I want to pause on your point about
prescription drugs because I thought that was a really interesting
point that opioids available legally prescription drugs kill people and
marijuana does not, and that there is some hypocrisy around
complaints about making pot legal when you compare it to
what is legally available and dispensed crazily in the pharmaceutical system. Right. Yeah,
(11:29):
I mean, and for me, I was an eighteen year
old fresh out of high school, dropped off at college,
and was getting a prescription for exorbitant amounts of xanax
from a doctor who just didn't think to question why
an eighteen year old needs to be taking six or
seven zanex a day. And wow, And that case isn't
unique to me. That's a widespread problem of over prescription
(11:49):
in this country. So when it comes to cannabis, I
just think it just doesn't carry the same risks. And
I hate to say that because I know they're detractors
who say that it's certainly does carry risks, and I'm
not saying it's risk free, but I think if you
look at the two and a vacuum, it's evident which
one carries a higher risk. I hadn't actually realized that
(12:10):
you couldn't kill yourself by overdosing on marijuana. I'm naive
about the industry and marijuana itself, I have to contest.
I think it's a study that they did said you'd
need to eat thirty six pounds of cannabis in order
to be able to overdose. And it wouldn't even be
from the THHC content. It would be from your stomach
expanding too rapidly from all of the plant materials. So
(12:31):
it's a high bar. Okay, that is a really disgusting image. Okay,
So let's start with some of the basics, just for
people who are listening who may know. What's the difference
between CBD and THHC. Sure, so it's most simple level.
THC is the psychoactive part of the cannabis plant, and
CBD is the non psychoactive. So CBD offers, according to some,
(12:53):
a lot of the same benefits as THHC, but without
feeling high essentially, And do you believe that these claims
about CBD are pretty astonishing? This Shark Tank episode with
this doctor that became this most watched episode in Shark
Tank history, is that it's been clinically proven to help
dozens of ailments including I just have to do the list,
chronic pain, arthrit a, stress, depression, anxiety, heart healthy diabetes,
(13:14):
improve cognition until hey, the onset of horrible conditions like dimension. Also,
I mean, seriously, you might be able to moonlight as
a narrator for prescription commercials on television. That was very quick.
You know, I don't know, and I think most people
don't know whether it's actually true or not. And a
huge piece of that is that there's no situation in
which you could do a controlled clinical study on the
(13:37):
effects of CBD because there's no regulatory body to oversee that.
So that's one issue, yep. And then beyond that, anecdotally,
most people believe in this thing called the entourage effect,
which is where you have to have multiple cannabinoids in
order for them to all vire at full power, if
you want to think of it that way. So CBD
(13:58):
works in its most effective way if it's paired with
some type of THHC or other cannabinoids that are present
in the plant, and there's hundreds of them. So taking
like a straight up CBD seltzer water for example, I
don't know that that necessarily does anything. However, there might
be a placebo effect and if that makes people feel great,
then more power to them. Why not, right? And it
(14:20):
sounds good. So we are really you mentioned that these
hundreds of strains in the cannabis plant, we're really at
the nascent stages of research about this, right, because the
research that was going on in the twenties and thirties
into the medical benefits of cannabis just went caput when
it became illegal exactly. And it's a huge issue. I mean,
I think there's a lot that the plant can do
more than we probably understand right now, and The only
(14:44):
way that we're ever going to figure it out is
if there's federal legalization, because until then, who can really
say no, one is equipped to be running those types
of studies. So where are we in understanding how useful
marijuana can be in treating various diseases, not just DBD,
but but thhc are we you hear these reports of
miracles of people seizures being cured, of cancer patients being
(15:06):
able to eat and tolerate their medication. Is this the
first inning? Is at the ninth inning? Where are we
in our understanding level? This is probably the third inning.
Baseball is not my strong suit. It's like the first
twenty minutes of the Academy Awards. Okay, that's that's a
concept I'm familiar with. We're waiting to see large scale
(15:27):
studies that happen, and I think, again, I hit on
this all the time, but it's until there's better legalization.
It's tough. However, anecdotally you can see it firsthand. There
tons and tons of people who move to places like
Colorado and California who have chronic health issues that rely
on cannabis. And I think, at the end of the day,
(15:48):
whether it's for pain, or for seizures, or for nausea, whatever.
If people are finding relief through something that is largely
free of many of the downsides of prescription pain medication,
our prescription alternatives, I would advocate for that one hundred
times over. So in the interim, I think people should
just continue to try products in a responsible manner and
(16:13):
see what works for them. There's powerful anecdotal evidence, I
will give you that, if no systematic scientific study. What
are you seeing in terms of the money coming into
the industry. I saw statistic earlier this year. I think
that a company got one hundred and twenty five million
dollars of venture capital money. Are you seeing the amounts
of money begin to skyrocket on the whole? I think
(16:35):
it's begun to level out a little bit. But in
the last two years, yes, an exorbitant amount of money
has been pumped into the cannabis industry. Our own company
as well, want public at the beginning of the year.
And in Canada, right because in Canada pot is legal,
so therefore yeah, okay, actually our friendly neighbors to the north,
so it's the way of just avoiding the patchwork of
US laws. Yeah, exactly, And there are other ways to
(16:56):
do it in the United States, but it's more complex.
So you write in the book that despite the seeming
popularity of the cannabis industry in the United States, there's
never been a worse time to get started. And all
of the companies here is included, I think lose money.
Why is that? Why is it so hard to make money?
People ask all the time, they say, should we get
involved in cannabis? And the answer I always say is
(17:18):
five years ago was the best time. And we actually
just at our quarterlies a couple of days ago bottom
line profits for something that's very exciting. But yeah, I
mean it's an incredibly expensive industry. Number one, talent retention
is super difficult. Payroll as a high expense across the
cannabis industry. If we're talking about big CpG geared cannabis
(17:39):
companies like Hours and like Cannapy Grow, what do you
mean by CPGA geared that it's a consumer package essentially? Yeah,
so it's that. And then just raw materials are incredibly
expensive though they've been compressed significantly or over year. The
cost of the actual cannabis flower that's being turned into
other goods, it is it volatile it's not. It's actually
consistently gone down that because more and more people are
(18:00):
growing as they see it becoming more legal. Right, okay,
and what about part of the problem with making money
are these quite contrary regulations. You talk about one section
to ade explain what that is. To ad, e is
the bane of every cannabis entrepreneurs existence, strong language. Indeed,
(18:21):
it's the section of the US tax code that excludes
any businesses that function in an illegal fashion from claiming
any expenses on their tax reports, any normal business expenses.
So when we talk about the incredible cost of running
a cannabis business in the United States, none of its
tax deductible exactly. So it's a realized tax rate of
(18:41):
eighty percent for some people. So it's incredible. Wow. And
then on top of that, you've got this complexity of
state law, right, no overarching federal law, and the state
law is really complicated in patchwork, absolutely, and I think
that also contributes to the high costs of operating in
the industry. If you were to work at McDonald's, all
(19:03):
of your supplies, all of the goods that you use
in your restaurant are coming from one or two or
three central warehouses. So that's all been brought into one place.
And in the cannabis industry, it's not the It's not
the case if I run an operation in Colorado and
I also have one in California. I'm creating those products
in a vacuum, separate from one another. And you can't ship, say,
raw material grown in California and use it in your
(19:26):
product in Colorado, right, and nothing has to stay within
the state. Wow. Yeah, Wow, it's a big logistical nightmare
I can imagine. So what do you think the picture
looks like for federal legalization. You seem mixed on it.
I'd say, yeah, I think it's farther away than a
lot of people would like to believe. That said, our
(19:50):
current political climate is extremely unpredictable. Interesting may you live
in interesting times? Right? Isn't that the old Chinese proverb?
So I wouldn't say it's out of the realm of
possibility that it happens in the next two years. But
it may. But you know, I think we're on the
right path, and I think eventually we hit this tipping
point where enough states have legalized that it's just a
(20:14):
no brainer to happen at the federal level, and I
think largely to infect us to the banking issues that
we spoke about. I think that's probably the thing that
will tip the scales in order to allow banks to
take money from cannabis entrepreneurs, right, so you don't have
this almost black market system of banking running in parallel
to the legal ish cannabis industry. Right is part of
(20:36):
the push for legalization. Will the move toward criminal justice
also help, do you think? I think so. I think
people are really frustrated by the amount of resources that
are spent on jailing people for petty drug offenses, especially
when we've seen there are better ways to rehabilitate people
than throwing them in jail. Like if people are being
arrested for drug charges because they have a drug problem,
(20:58):
going to jail is not the solution to that, not
going to do much. Right, So, how prior to legalization,
assuming it ever happens, how is a consumer do you
navigate all these different brands. I walked into a medman
when I was in Venice recently, and it's just it's
really hard to know what you're buying, what something is,
whether there's any consistency between products. Is that part of
(21:18):
the issue too, and how as a consumer do you
navigate that there's a couple pieces to it. Number one
companies like ours and we're certainly not the only one
to do this, but are called multi state operators, So
we have products and multiple states in the United States.
For US it's twelve, so you see some consistency among
those products. And then you obviously have state mandated testing
that you know, there's a label on the back of
(21:40):
every product that at its most basic level tells you,
here's how much THC is in it, here's how much
CBD is in it. It's cleared all of its besticide testing,
so you can get a general sense based on that
of what it's going to do to you. But it
would be there would be more consistency if we had legalization,
right absolutely, because you would probably walk into a Walgreen
and be able to buy it and it would all
(22:01):
be ABNBEV brand. You make pretty big claims for legalization,
both in terms of jobs. You think it might save
us from the next recession and not because we'll be
too stone to notice that there's a recession going on,
and also and also tax revenue. Right, those are those
in my right in thinking those are your two of
the big arguments you have for legalization. Yeah. Absolutely, And
(22:21):
I think the job creation we've seen it be the case.
In Colorado. We have one of the lowest unemployment rates
in the country. And whether you want to say that's
from cannabis or something else, that's I will leave up
to people to decide. We'll go for correlation again. And
then tax revenue, it's the same thing. It's we crossed
the billion dollar freshold and tax revenue in Colorado I
(22:42):
think a year and a half ago, two years ago.
I mean, so the money is coming in and on
a federal level it would be at an even greater scale.
But if you legalize federally, doesn't doesn't having it available
all over the country, then start to no pun intended
cannibalize from other from other areas. So do you really
get the tax benefit? You think maybe to a certain extent,
but I think I would have to pull the numbers up.
(23:04):
But in Colorado, I think it's something like only twenty
percent of people that come into dispensaries are out of
state visitors like it. Really it's mostly people who live
in Colorado. There's a ton of tourists in some cities. Yeah,
but you know, if you look on most small towns
outside of Denver and Boulder, people are going to dispensaries
that live in Colorado. So back to this idea that
these companies don't make money, I think the security is
(23:24):
an Exchange Commission even issued a warning about a year
ago warning investors about fraud in the pot industry. Because
if so many of the companies are traded on the
over the counter market there they're or they're based in,
they're traded on a Canadian exchange, and there's there's just
a lot people people don't know. What would you look
out for. What's a warning sign to you, as someone
who's now a veteran of this industry, what makes you
(23:44):
say this company is not one of us. It's tough
to say. And I think it's like with making an
investment in any novel industry. The onus is on both
sides for a retail investor to scrutinize what they're investing
in in the first place, and then I think to
a pretty significant extent, most people are not successful in listing.
(24:06):
Even if it is OTC, most people are not successful
in doing so. If it's an illegitimate business. Now, that's
not to say there's not plenty of hot air in
the pot stock market at the moment, but by and large,
there's about ten companies that you consistently see in business
media that are the real deal. Nason Stage company. So
there's a lot of risk, like with Canopy Brands, which
(24:28):
has a multi billion dollar backing from its parent Constellation
right but still went through a shakeup this year with
its CEO being ousted, And it's this we talked about,
harder to make money than they expected. I think so,
And I think I can't speak for anybody from Constellation
or Canopy, but I think my read is that they
probably didn't make their money back as quickly as they
wanted to. And it's a long term play, and that
(24:50):
has long been you forget. I forget because I've worked
in this industry for so long that all of that
stuff isn't immediately apparent to people from the outside. But
for me, when I got into it five and a
half years ago, it's thinking, Oh, this is a long
term play. Fifteen years from now, this is going to
be a fantastic business to be a part of. Wow,
that's actually interesting that you were thinking that far in advance,
(25:11):
I'm probably giving myself more credit than I deserved as
a fresh from college kid. But you know, pretty quickly
on you can realize that like, okay, it's great now,
but it's going to be even better in the future.
And so if you use your crystal mirror and you
think about five ten years, do you think there's going
to be a constant flood of new companies offering I
don't know, gold whatever, whatever's or do you think the
(25:32):
industry is going to consolidate into a couple of big companies.
I think we're headed toward large scale consolidation. I think
you'll always have your sort of boutique, bespoke cannabis products
and brands, but I think those will make up a tiny,
tiny portion of what's sold on the market. I think
we'll see it become a lot like alcohol, where it's
three or four big companies that own everything. It's interesting.
(25:54):
I've read a history of the automobile industry this summer,
and I hadn't known that they're with that of little
auto companies in the late eighteen hundreds and early nineteen hundreds,
and of course we ended up with three, right, So
maybe that will be the history here too, So talk
a little bit about the culture inside the industry. One
of the things that I thought was fascinating you had.
You had this observation about the culture that's quite ironic
(26:17):
that marijuana does have these really deep anti establishment and
anti capitalist routs, and yet now people in the industry
are rooting for government regulation and capitalism. So how does
that sort of contradiction in terms play out. It's funny.
I think we're in a growth stage right now where
people are sort of reckoning with this notion that they
(26:39):
got into the industry to fight back against the man
ten years ago, and now they're very much the man themselves, right,
So I think we're seeing a lot of that play
out in I think a lot of these IPOs speak
to that that people are ready to be taken seriously
as business leaders in the space. So I think from
the top down that influences a lot of the culture
(26:59):
where people have had to sort of pull themselves up
and like get everything done at the highest possible degree
because the stakes are just higher now than they were previously.
So it's certainly, you know, I wouldn't say it's as
bad as being on a trading floor. But it's certainly
high stress, high pressure because there's just so much at
stake right now. That's a huge cultural shift within the
(27:22):
industry that would be fascinating to live through. So what
was the industry's reaction. It's just one of many critiques.
But my journalist named Alex Berenson published a book I
think earlier this year called Tell Your Children, basically arguing
that marijuana is the THC, is linked to psychosis, schizophrenia,
other really really terrible things. And his major point was
(27:43):
that this fresh to legalization is very premature, and you
hear that from other groups as well. What's the industry
reaction to that? I mean to his book in particular,
it's not just the industry who has pushed back against
And I think there was an open letter from one
hundred different clinicians and psychologists who said that he had
cherry picked the data in his book and was drawing
conclusions that just aren't rooted in science. And that's certainly
(28:06):
my belief as well as far as schizophrenia and cannabis,
that's an argument that's been made over and over again,
and the science for either side of the argument is
just not there. There certainly can be a relationship between
the two, but it's like a chicken and egg. Argument
is that that people had psychosis first, and as many
people with mental health issues do or self medicating with cannabis,
(28:30):
or were they using cannabis and it triggered the psychosis.
I tend to think that it's probably that the psychosis
was underlying first. But those cases are also exceedingly rare,
more rare than I think his book would lead you
to believe. Yeah, it's that correlation causation issue again. Right,
what do you in the industry do to push back
because it's not just his book, there's plenty of this
(28:51):
criticism everywhere. No, absolutely not. I mean, and it's funny
we've been talking about this a lot lately because of
even just issues with companies like Jewel where vaping is
becoming like a larger and larger issue among children, whether
intentionally or unintentionally. Right, but they have certainly found themselves
on the wrong side of the regulatory apparatus. Yeah, I
would not want to be sitting over there at the moment.
(29:14):
A big piece of it is, as with everything else
in the industry, that we're fervent believers in regulation and
that We're happy to comply with the law because it's
both in our best interest and in the best interests
of the consumer. Products are safer, they're difficult for children
to get, and at the end of the day, like
that benefits all of us. I'm hesitant to even say it,
(29:36):
But no marketer is going out and thinking like, oh,
I'm going to think of a way to market cannabis
to kids, because at the end of the day, they're
not our consumers and they can't come into a dispensary.
So do you think some of the pushback is coming
from the alcohol industry or the tobacco industry, and that
there's some threat to them if pot becomes illegal substitute? Right?
Isn't there some line you had in your book about
(29:57):
getting rid of beer bellies, I mean, which maybe they
might be replaced by munchy bellies. I don't know. That's
such a trite thing. I'll get yelled at for having
even said that. You know, I think I think largely
the alcohol industry is in favor of it, and as
you've seen with Canopy Growth Corporation, Constellation made a four
billion dollar investment in them. So I think the tides
(30:20):
are turning to a certain extent, and I think people
are choosing different intoxicants aside from alcohol now, and I
think alcohol companies are wise and now that if that's
the way that history is going to play out, then
they're going to be involved in it, not fight back
against it. If indeed the legalization trend does continue, it
will be interesting to see how that plays out. I
think you might be a little bit optimistic on that front,
(30:42):
or perhaps naive about the competitive forces at work. Absolutely,
but whatever, maintain some happy naive to take if you can.
A last question for you, do you think this industry
is going to look like any other industry in ten
or fifteen years If you put back on your your
future hat and say, what is it going to be like?
Is this justin industry like alcohol? I think it'll always
have a certain cultural cache to it that makes it
(31:06):
seem like the outsider industry. But you know, fifteen years
from now, I think it'll be federally legal. I think
we'll have seen huge consolidation, so it's just a few companies,
maybe even alcohol companies that have acquired and absorbed them.
Who knows, But I really do think there's this huge
push and especially at a company like ours, to really
(31:28):
move towards this CpG model, focusing on the highest value
portions of the consumer package goods. For those who have
forgotten the agronive, there's this increased focus on the highest
value portion of the supply chain. And so I think,
while there's always going to be this cool factor to
cannabis and to working in cannabis, I don't think it'll
be dissimilar to anything else that you walk in and
(31:51):
buy off the shelf in the store. And maybe it'll
take longer than fifteen years to get there, but we're
certainly headed there right now. It's going to be fascinating
to see if your predictions pan out. So before I
read Jackson's book and talk to him, I think I
would have been anti legalization. Why take the risk? Isn't
the safer route to just say no? But he makes
(32:11):
some compelling arguments, whether it be the inevitable existence of
the black market or the hypocrisy of allowing ads for say, alcohol,
to run freely on billboards across America. His most powerful argument,
I thought, was the comparison between pot and prescription opioids,
a topic we've covered here on making a killing he
writes for the skeptics, I beg you to look at
(32:33):
these two drugs side by side and tell me which
one has the highest likelihood of causing harm. Even so,
I'm going to bet that Jackson might be just a
tadbit optimistic about the future of this industry. I'd think
that they're going to be some big scandals and some
billion dollar losses. But then again, isn't that just like
any other industry. I'm Bethany McLean, host of Making a Killing.
(32:56):
We're taking a short break. We'll be back in a
couple of weeks and I'll talk to Kyle Pope, the
executive editor of the Columbia Journalism Review, about how journalism
is changing looking forward to it. Making a Killing is
the co production of Pushkin Industries and Chalk and Blade.
It's produced by Ruth Barnes and Rosie Stouffer. My executive
(33:18):
producers are Alison McClain no relation in Making Casey. The
executive producer at Pushkin is Mia Loebell. Engineering by Jason
Gambrell and Jason Rostkowski. Our music is by Jed Flood.
Special thanks to Jacob Weisberg at Pushkin and everyone on
the show. I'm Bethany McClain, thank you so much for listening.
(33:38):
You can find me on Twitter at Bethany mac twelve
and let me know which episodes you've most enjoyed.
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