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Savvy Cannabis Investors Pivoting to Markets Beyond North America

anthony wile cannabis colombia

Anthony Wile is the founder of The Wile Group. The Wile Group International is a value-added venture capital firm focused on powering private investment opportunities. Anthony talks about the cannabis landscape and why he is investing in South America cannabis companies.

Anthony has a keen eye for trends and has been remarkably prescient in predicting large tectonic political shifts and business opportunities.

Learn more at:
http://wilegroup.com/en/

Key Takeaways:
[1:24] – Anthony’s background
[4:04] – Status of cannabis legalization investments
[14:56] – Anthony talks about when the conversation around cannabis changed
[21:17] – Anthony gives examples of cannabis legalization unfolding
[26:12] – What role will Big Pharma and Big Tobacco play in cannabis legalization
[32:10] – Who do the government regulators really protect
[37:45] – Anthony talks about equatorial locations being ideal for cannabis cultivation
[43:00] – Why is Colombia ideal for cultivation
[52:37] – Flower to oil trend over the next five to ten years
[1:00:17] – Anthony compares and contrasts Canada and Colombia’s cannabis market
[1:05:29] – Anthony talks about block chain technology
[1:06:23] – Anthony answers some personal development questions
[1:14:29] – Anthony’s contact info

Important:
What are the 5 trends that will disrupt the cannabis in the next five years?
Find out with your free cheat sheet at http://www.cannainsider.com/trends

Read Full Transcript

As the walls of cannabis prohibition continue to fall around us, many of us assume it was the grassroots will of the people that made cannabis legalization possible. However, there are many that see cannabis legalization in the world in general through and entirely different lens. One of those with a different lens on cannabis and the world is our guest today, Anthony Wile. Anthony has a unique and refreshing perspective on a variety of topics from politics to international cannabis opportunities. Anthony, welcome to CannaInsider.

Anthony: Thanks Matt. It’s a pleasure to be here.

Matthew: Anthony, give listeners a sense of geography. Can you tell us where you are in the world today?

Anthony: Well I live in Toronto, Canada, and I also live part time in Medellin, Colombia. Those would be the two primary areas of living, and also from a work perspective, the majority of my time and energy has been spent in the country of Colombia for the past few years, and I anticipate it to be similar moving forward for quite a long period of time.

Matthew: Can you give us a little bit of a background on yourself, both personally and professionally?

Anthony: Sure. Well, I grew up in Canada, and went to a university, studied business, all those things and graduated and went on to work. Spent a few years working in the Canadian financial industry with a couple of the larger banks, investment arms. Before moving on to establish my own brokerage operations internationally, which at that time took me away from Canada at a fairly young age. I was about 26-27 years old when I became a non-resident Canadian and started living internationally and focusing on developing business opportunities abroad. That transitioned into a lot of different avenues, I guess you’d say, over the years, in terms of living and work related situations.

I’ve done business in many countries around the world, in Asia and Europe and South America, pretty much all over the world. And lived in several different countries over that time, with my wife and children. We’ve spent a fairly international, I guess you’d say, we’ve had a fairly international life experience. I don’t anticipate that changing so much. However, it’s always been reflective of where in the world I see or perceive financial trends to be emerging . That would be trends with sustainability over a mid to long period of time. Where we as a group, business group I’m referring to, felt it made sense to try and get in front of such trends, and then where in the world from a top down perspective, it made sense to be much like in the cannabis industry today.

We’ve identified Colombia, as a country that would be among the top, and in our case, our opinion would be the top choice destination for building business opportunities. So destination and living arrangements and business arrangements for me and my family and my business associates has always been driven by where the best opportunities are to develop ideas over time. We are a private equity group, primarily, who spread ourselves not too thin. In other words, we get involved with no more than two or three ideas over a five to ten year period, and we put our time, our money and our energy behind those efforts. In other words we’re all in when we get involved in anything that we’re involved with.

Matthew: You were one of the early voices talking and writing about cannabis legalization investment opportunities. Where are we today in terms of the cannabis legalization investment story, particularly in terms of internationally?

Anthony: Well, we’re very early. If we were going to use an analogy, I guess I would say we’re somewhere in the early part of the first inning of a ballgame. This industry has a lot of curves to straighten out in terms of regulatory synchronization, standardization of products. On many levels, there are a lot of issues to be addressed and a lot of stakeholders with different perspectives that need to be listened to, that need to be brought into the fold when straightening out those curves in order to get adoption by a greater portion of society.

At this time, you can certainly see there’s a lot of regional development occurring in countries like Canada, for example, which you have to put at the forefront of innovation in this space. I would say Colombia is very quickly now moving in that direction as well, based upon their regulatory and legislative maneuvering. Then at that international level, if you look at what the WHO and UN and other related bodies, NGOs and others are doing in this conversation at this time and how they’re helping to shape the future of where this is going, it is truly an international discussion and one that will require international support in order for this industry to become a global industry that rivals what you see with any other heavily regulated industry, such as spirits, alcohol, those sorts of things.

So there’s a lot of change, a lot of turbulence in some cases, and a lot of uncertainty that comes with that. You really need to step back a little bit I believe and pause. In an article I wrote in the Globe and Mail about a year ago in Canada, that’s one of Canada’s larger financial papers, and in that article I cautioned investors at that time to take a step back. It doesn’t mean you can’t make money in the marketplace off of the emotionally charged environment that often accompanies early trends or emerging sectors. No different than what we saw with technology stocks in the 1990s, but that emotional, in some cases irrationality can be very painful when regulatory and legislative changes occur that can dramatically effect revenue projections or other related concerns that should be of a concern to any investor who are looking to invest on fundamentals.

At least from our perspective as a group, we’re interested in being involved in developing businesses that are fundamentally sound and are looking to the future, planning as best as possible with knowledge and real-time information, and think with the trends, where they’re headed. Not necessarily what they’re doing today in any given marketplace, whether it be Canada or Uruguay or wherever it may be, but looking at the global synchronization and what that likely will lead to, and we think most investors who are looking for their capital they deployed in situations that will be standing tall post-fallout of whatever happens. It happens in every trend you’ve ever seen in history. There’s always a bubble. There’s always emotional instability that leads to that bubble as irrational investors run into whatever story sounds the best today, tomorrow, with very little due diligence. That’s an historical fact.

I mean you just have to go back and look at any of the big bubbles over time, and most recently you can take look at the tech stock industry. You can take a look at gold in 2006-2007. There’s many recent opportunities for analysis of said activity, but again there is opportunity out there. I think it’s just a matter of letting the global community and the regional governments that are part of that global community to work together to try and shape legislation that will allow for this industry to truly take root in a way that is sustainable over the long haul in all aspects. Not just from a profitability perspective, but environmentally and socially.

Matthew: I think you’re definitely right about the bubble aspect of cannabis, especially cannabis stocks, but it seems like they’re kind of blowing up into micro bubbles and popping and then blowing up again into a micro bubble and popping. I’m still waiting for the huge bubble. Maybe it just needs to be federally legal in a bigger market like the U.S. at some point before that happens. I don’t know, but I’ve been kind of watching that with interest. Also to your point about narratives, how we as humans become kind of aligned with a narrative and then assume that narrative is right. Over and over again I’m thinking tech stocks in the late 90s and then the housing flipping going on in the mid 2000s and whatever will come next. It’s kind of the tulip mania of the decade.

Anthony: I couldn’t agree with you more, and to add to your point. What you said at the first part of what you just mentioned here about New York and the U.S. To me this is as obvious as the day is long that this industry… when I said earlier that it was in the early phases of development it truly is. When you look at the global commission for drug reform and who the people are that paint that tape, in terms of the members of that commission, you’re talking serious names in global politics, from the upper chambers of finance and business. These are not small people, and the essence of what they’re driving towards and what they’re pushing towards, with a lot of support from a lot of governments, especially those governments in Latin America, is to see a wholesale change in transformation and the way the war on drugs is dealt with and to go in the direction of legalization and control channel distribution.

When you look at New York and you look at the United States I could care less what happened with Donald Trump and the charade of Hillary Clinton and that whole thing in the recent election, but I was certainly paying attention to what was happening in Massachusetts and in California and those different states that were voting for legalization. And when you see a state like California, I think it’s the fifth or sixth, I can’t remember the exact number, but largest economy in the world voting in favor. Of course that’s contrary to federal legislation in the United States. I mean how much longer can this, and I’ll use the terms again, charade continue in the U.S. with federal prohibition when you have 22 percent, as of today, of the population living in cannabis legal states, and somewhere north of 60 percent living in states with some form of cannabis legalization, medicinally or otherwise.

I mean there’s a point here where this changes, and I hear a lot of people talking about Donald Trump’s choices for this or that and how that will affect the industry. And I look at this as a very simple matter. It’s dollars and cents and Donald Trump is a business person first and foremost, more than he is an evangelical do gooder, if you will. Not to say that there’s anything wrong with evangelical do gooders here, but the point is that is not him, and the reality is is that this is a business and a business decision and all they have to do is you look at Canada north, and you say Canada is in the middle of going through a legislative policy implementation program here to legalize their industry, and that’s going to be forthcoming, and when it does, does anyone really think that the United States under Trump or anybody else is going to want to see dollars heading north for the weekends and otherwise to access cannabis from states that border Canada, and that’s a big border, that don’t’ have cannabis legal states at that time, or the cross-border loss of capital from one state to another.

How much longer will you (11.54 unclear) their ski resorts suffer under the pressure of Colorado ski resorts picking it up from the millennials and otherwise who choose to go there because they can enjoy legal cannabis at the same time. I mean, it has an effect on many different stakeholders that some point in time, and I would suggest sooner than later but we’ll see, over the course of the next two or three years, I’ll be shocked if we don’t see a change in regulatory policy at the federal level in the United States. And it’s also not going unnoticed in New York. If you talk to any investment bankers in New York, they see what’s happening in Canada. They see the enthusiasm that the public has for these cannabis stocks, if you will, and Wall Street doesn’t like to be missing out on let’s say revenue opportunities. That’s just not their nature.

So there’s a lot of pressure, a lot of pressure to come that will in my opinion lead to a opportunity for companies to access capital in New York. I expect at that time Wall Street will do what they always do, which is drain every last ounce of sweat, blood and tears out of the trend, like we saw with tech stocks, and that means that this first inning warm up that we’re seeing in Canada will likely become replicated in the United States, and probably taken to heightened levels of enthusiasm even more so than we see here north of the border today. So for a lot of reasons, mostly due to just the realization that today there really isn’t a lot of speculative activity feeding the general market. Gold is fairly stagnant. It has it’s days. It’s up, it’s down, it’s a little sideways. Oil is relatively, let’s just say deflated, at least in terms of investor speculative interest.

Also because of its low levels of pricing today has affected people’s appetite for alternative energy at related issues. So on technology spot you wouldn’t call that a trend. You don’t have a lot of competing trends in the marketplace for investor speculative capital, and the only real bright spot you can see on the horizon, and that is showing itself to be very bright, is this emerging cannabis sector trend, and we’ve been writing about this now for, I don’t e even know now, three and a half years or so, from a macro level perspective, dealing with these sorts of issues, and that’s also what led us to decide to get into this industry and then of course the next question was how did we get in and what was the best way to position ourselves for what we believe was sustainable long term approach that would yield the kind of returns that we would be looking for in anybody who tends to listen to what it is that we’re talking about.

Matthew: A few years back you correctly saw there were voices from the power centers that were starting to reframe the conversation around cannabis. Can you tell us when you first started noticing that conversation around cannabis changing, and what in particular made you feel that cannabis prohibition was ending?

Anthony: Well, I would say that there were a number of things that added into that. There’s not a light switch that just flipped on at some moment in time. I will tell you though, it’s kind of funny, the first time that anybody mentioned to me anything to do with cannabis I got a phone call from somebody that I had gone to the university with and hadn’t talked to for years. I think they came to me through my LinkedIn account or something, and said, what do you think about taking a look at a cannabis company opportunity.

That might be four years or four and a half years ago, and I said, geeze I don’t know what you’re talking about. I have no interest in cannabis. I really didn’t give it any thought at all. And over a period of a month or two and whatever it was after that, I started to notice more and more information coming out about cannabis. I just thought of it as some radical subculture movement that was in the process of evolving, that would never get any real traction or find any support passed a certain level. And then I started really digging into it. We have a fairly deep group of talented researchers that work with us on an ongoing basis and we started getting into this and saying let’s take a look and really see, is there anything behind this?

It started to smolder a bit, is what I’ll say, in our minds. A little bit of smoke started to generate and before too long we started to realize there’s something to this. This isn’t just a bunch of guys that have been growing in their basement, trying to knock on some doors and get some low level municipal government people onside and all that sort of thing. Of course all that happened too, but at the same time, wow, there’s quite a serious push here happening around the world. Many of the larger think tanks and brain trusts that have been pushing this forward, and credit to them. I mean, they’ve done a great job, I mean, in terms of moving the Hegelian dialectic, in this case, moving those posts very quickly. More quickly than most would have thought, and myself included.

I didn’t expect things to move necessarily as fast as they’re moving in this regard, but it became very obvious that there were extremely powerful financial hands behind it, and I would go back to that Global Commission for Drug Reform. When I really started looking into that, and looking into some of the financing that was happening behind some of the larger policy organizations that were really pushing, I mean global policy organizations, and then started having some meetings on a personal level with government leaders in Latin America, which fortunately I have some very strong relationships at the higher levels of politics, that enabled a better understanding as to where the real stakeholders’ interests were and what the thoughts were on an international level, which included having meetings in Geneva with several people who have a great deal of knowledge of what’s happen within the UN and the WHO and other organizations such as this, so that we could get a really firm grasp on we thought at least became the outcome.

To make it very clear, we went into this analyzing this trend and what we thought might occur with the attitude, as we always do, let’s find the holes in this, and let’s see why we shouldn’t as because we weren’t doing anything really at the time, why we shouldn’t do something, which is how we always approach things is looking for the negatives, looking for the holes in the story or the reasons why there fundamentally isn’t as much soundness as it may appear on the front side of the painting, if you will.

What we found was that the brush strokes were actually much deeper and much crisper and much better than we had anticipated they would be. We discovered that not only is the trend very much alive, but this trend seems to be fairly unstoppable, and there were a lot of reasons for it that became quite clear over time. And today, clearly what we can all see is that the train has left the station, that preverbal saying, but it is the case, and it’s moving quickly, and it’s moving at an international level. Anyone that was at the (19:17 unclear) in New York last April, which we did attend, and had a lot of very good feedback, good meetings. What we do know and we continue to have active conversation.

We have lots of people involved with us in Geneva, who are actively involved in what we’re involved with, and we try to stay on top of everything that is happening that could affect anything to do with legislative policy or standardization related issues, any of these sorts of matters, which are critically important to understand in this industry from an investment point of view and to manage your investment portfolio accordingly.

So that is what I would say. To answer your question, we saw that there’s a lot of significant power at an international and regional government level. And from international business men and women whose voices more than matter in the global conversation of where things are headed in any industry. So this industry is not one that we would subscribe to as being driven necessarily from the grassroots entirely, but we would certainly give a large amount of credit to the grassroots as well and what they’ve done to push this conversation. Because without the grassroots support, we probably wouldn’t see anything close to what we do see today. So I wouldn’t make it an all or none scenario. I would just say it’s nice to see that it is something that has the attention and the support of the necessary components that it will require and has required in order to advance the conversation and the direction that it will continue to move in our opinion.

Matthew: To many people cannabis legalization is happening as a response to decades of pressure from grassroots activism. What you’re saying sounds like you’re attributing much authority to those in positions of power. Do you have any more accessible examples of other situations similar to cannabis legalization unfolding?

Anthony: Wow, that’s something I haven’t thought about. I mean, I guess, no I don’t off the top of my head. An example that’s a direct parallel to this, I mean, first of all it’s hard to find a direct parallel. The only thing you can really come up with where you an existing industry that is black, if you will, that is turning white, I mean you’ve got to go back 100 years ago to the end of prohibition. Most markets of course, even the tech market of the 90s, I’ll even go back further than that. I remember in the cellphone industry, in the dawn of the cellphone industry when the presentations were being given and people were raising capital for it and there were hundreds of companies that were startups trying to become the next big cellphone company.

There were people that would be in the room that would ask the question of who would ever want to carry a telephone around like that. It’s true, but in the moment in time, I mean, it’s a viable thing to think about. Historically speaking, I mean you see where we are today, sounds ridiculous, but at the frontend of any trend that involves new technologies or innovations or whatever it may be, you first must do a market assessment as to what the potential market size of those products may or may not be, and that’s the first buy in that any investor has to have before your numbers of what your percentage of potential possibility of market share might be.

So in this case though that’s not the case at all. Everybody knows that there is a live and booming global market for black market cannabis, and that there has been one for many many decades. That’s a totally different situation than dealing with any new market that might come along. So to give you a parallel that could be even close to that is difficult. The one thing that makes this such an explosively powerful market from an investor point of view, I’m talking emotionally again, is the fact there is no need for a water cooler discussion or an explanation about what is the product. You say what the product is, and immediately okay, I get that. I mean, we understand what it is. That’s perfect.

That makes a very simple, easy, mass marketable trend, if you will, for Wall Street or Bay Street or any street that’s involved in the financial markets to gain investor interest, and you don’t need to convince anybody that that market is a very profitable market. Again I would go back to the fall of prohibition and say that much like that era, you have a lot of regulatory oversight that falls into play. You have a lot of synchronization of efforts that come into play. Just look at alcohol. Why is it when I get off a plane in Prague or in Canada or wherever it might be, any city in the world practically and I want to buy a bottle of spirits; vodka, rum, whatever it might be, why is it that they’re all pretty much capped out at about 40 percent? How did that come to be? Was it somebody just wrote it down and they all agreed?

The answer is no. These things, these standardizations occur over time, and it occurs with all kinds of input from all kinds of people and party stakeholders or otherwise; social, political, all those things. That’s the same kind of process that we haven’t really started really yet to any great extent, getting to in the cannabis space. So as we move forward, what I see is simply that there’s an industry here that has obviously garnered the support of very large hands, lots of investors around the world. There should be caution flags. I believe more caution flags than less along the way for people who are paying attentions. At the end of the day just like in cell phones, just like in technology stocks, just like at the end of prohibition, you’ll have a few large hands that likely will be predominantly in control of the market, just like you had with most things in the world, if you look around. I mean, that’s just the way it is and likely that will be the way it is in this industry as well.

So there’s money to be made and on the speculation that that’s what you’re looking for is just to speculate, chances are you can buy and sell and do fairly well in the emotionally charged environment in which we find ourselves today in what you see, for example, Canada. At least for our perspective, again I’ll come back to the fact that we’re more interested in being one of those few that are left standing longer term. That’s the objective, that’s where the real long term multigenerational wealth and value will be created.

Matthew: One of the trends I see as potentially happening is hybrid medications of cannabis or a compound of cannabis with the tradition pharmaceutical. What role do you see Big Pharma and Big Tobacco having in the cannabis legalization landscape over the next few years?

Anthony: Well I see a dominant role. I think your question about the pharmaceutical industry, I agree with you 100 percent. There’s a lot of people out there that actually believe that cannabis is going to change the way that the world works when it comes to what is medicine and how medicine is distributed, all those sorts of related issues. I would argue that that is fool hearty and I would suggest that cannabis will fit to the way that the world has structured itself, with respect to how medicines are dealt with, regulated and distributed and otherwise. And then you just take a look at who controls the majority of what fits on the shelves when you walk into a pharmacy somewhere to buy your medicines or your doctor prescribes it or whatever it might be. And what you find, of course, are that there are again what I mentioned a few minutes ago. There tend to be a fairly small number of very large corporations at the end of the day who dominate the landscape in any given sector.

In the pharmaceutical industry it’s no different. If anybody really believes that some little tiny company out of wherever it might be is going to boot Pfizer or Roche or any of these other companies off the shelf anytime soon in extremely valueable markets, I think that’s kind of a fool hearty thing to believe. I believe what you said, and I agree with that entirely, there will be pharmaceutical companies who will pull certain molecules from the cannabis plant and utilize them as part of the makeup of existing drugs, in many cases.

I mean if you look at a company that has seven years left on a patent for some specific medication that cannabis may be able to be beneficial in that particular sector, that market, that niche, if you will, it’s clearly in their advantage to reformulate with slight modifications and file a new patent around the new modification. The trend in the pharmaceutical industry is towards more of a buy it bio-pharma make-up. I mean, that’s obvious as well. That’s factual. It has a lower period of time to get to market for the new products. It’s less costly, but still very costly, and that’s the other issue here.

I mean, at the end of the day the FDA, DMA, Health Canada, all these different organizations, some of us may know what regulatory democracy is, and regulatory democracy, for those who don’t know, is really built on the shoulders of those large corporate interests that dominate the landscape in any given sector. The regulatory hurdles that are put in place are, yes, they appear to be very onerous for them and for anyone else in the industry, but the reality is they’re really putting barriers between themselves and anyone else who would try to become competition to them because they can handle the financial costs. They have the ability through their consultants and their lobbyists and otherwise to move things along through the process.

They also have the ability to make sure that other things don’t get moved along through the process that could be a threat or otherwise. So I don’t see anything changing in the medicinal marketplace, with respect to who it is that’s dominating the shelves or the prescription pads of the medical community at large, but I also, back to your point again, do see the pharmaceutical industry recognizing the power that comes from harnessing some molecules, CBD or THC or whatever it might be, from within the cannabis plant and incorporating it into some of their existing formulations or perhaps developing entirely new formulations. Definitely I would not be betting significant amounts of capital on companies that were professing to be the new drug company in the game.

If they are fortunate enough to take something far enough, I would suggest eventually if it’s a big enough market and there’s enough money in it, they’ll be swallowed up by that large pharmaceutical company anyway, which is typically how that works. And those are big homeruns. If you’re part of one of those, by all means, fantastic, but at least I know from our perspective, we’d be more interested in supplying the molecules than trying to develop the formulations ourselves.

Matthew: You had a great point there about how the regulators operate. It seems like the regulatory bodies in the U.S. government are not so much there to protect the consumer as they are to protect certain corporate interests. Perfect case in point would be the electronic cigarette industry, which recently the FDA said, you have to go through millions of dollars of jumping through hoops in order to bring your electronic cigarette to market and who does that leave standing? Only the companies that can do that type of thing. It wasn’t a simply submit that your liquid is not toxic. It was you’re going to have to jump through these huge hoops, and the only people that can jump through those huge hoops are the huge players, and the huge players are the ones that the big tobacco companies that can afford that no problem, and then all of a sudden it kind of turns into this olic-opoly. Sometimes I hear people say well, I won’t try this or that drug because it hasn’t been approved by this government body. And I just think to myself, gosh, this government body is not there to protect you. It’s there to protect these corporate interests, and the corporate interests make it look like they’re doing it for the good of the people is through this body. Do I have that totally wrong, or is it true somewhere in the middle?

Anthony: Well, I’m not going to comment on any industry specifically like in terms of names or whatever, like Big Tobacco, whatever, but what I will say is I think you’re 100 percent right. And again, regulatory democracy works in all industries, whether it’s banking. It doesn’t matter what the industry is. Those barriers and, I’ll call it, the wickets you got to go through to get to the post, using a croquet analogy here, is that if they really are designed to be difficult. Politics, and you just look at the political system and how the political system works and where the money comes from that elects the politicians and where the special interest groups, who has the lobbying power in all industries.

The industries themselves fight for more and more regulation, not less, because they can afford it. They design it in essence by lobbying and putting the pressures in the right way to get the end results you’re looking for, and it doesn’t matter what the industry is, whether it’s automotive or whatever it may be, those rules, regulations and the overall structure is designed to protect their Holy Grail. That’s human nature. When I say human nature it’s a reflection of human nature. I’m sad to say that. I’m certainly not someone that’s pleased, as a free market thinking libertarian, to say that that’s a good thing. When you said, and I agree with you, that there are many people that say I won’t take this drug or I won’t do this because it’s not legal, it hasn’t been approved. To me, that’s a sick mindset.

It is just the way it is. It’s the way people have become, through fear mostly, the fear of the unknown and the safety and the assurity the governments and related regulatory supposedly are able to provide and are there to provide. They buy into that, and it’s something that has become universal across the board. So, it doesn’t matter what we’re talking about, whether it’s global warming, climate change, all these different issues. Fear is the number one means through which people have succumbed to the regulatory power and the almighty state as the protector to ensure that whatever it is that they’re doing, if it’s been approved, if it’s legal, if it’s got the seal of blah-blah-blah, that I must be okay.

Coming back to this discussion, I would suggest that one side is reality and one side is perception. Perception oftentimes drives reality, and the perception of the public supports this structural system, so therefore it exists and it is able to continue to be beneficial to those who are the enablers of the system.

Matthew: Right. And not to bring up global warming, because it’s such divisive topic, but no matter what side of the global warming debate you’re on, if that can be a centralized and taxed event, then there’s people that can benefit from it. So whether you believe global warming exists or it doesn’t, the solution that’s proposed will benefit certain parties over others and maybe not create a solution that anybody finds useful, but just takes more taxpayer money into a cul-de-sac where you never have any actual results you can do anything with.

Anthony: You’re right, sorry to cut you off there, but I just want to say something. Global warming, it doesn’t matter whether you believe it’s right or wrong. It doesn’t matter what your beliefs are, partially right, partially wrong, however you want to view it. The reality simply is again, perception. What is the perception generally speaking? And you can go to your child’s grade four play at school and you’re going to see the polar bear falling through the icecaps. I mean, everybody is being indoctrinated, whether you agree or not, with the global warming discussion.

So you should deal with the perception being the reality because that is what we need to deal with, and when you get back to the regulatory hurdles and those wickets of croquet that you need to get through to get to the ultimate stake, at the end, by having a strict and heavily regulated environmental and social, we can go into that too, that’s another aspect of social responsibility and all those other related philosophical, if you will, areas of concern these days corporately. All of those wickets just bring that bar, that entry bar, that competitive bar and they put it higher and higher and higher so that again, the bigger, more better financed, systemically inbred, if you will, companies, who are dominating the various sectors, are never going to really be of threat of losing their Holy Grail. And even if they ever did, though really poor management or just being badly organized and operationally inefficient business, at the end of the day, due to the fact that they have such an important social role in society, in terms of employment or otherwise, they’re going to get bailed out. Whether they’re an airline, whether they’re this, that or the other thing, the governments just will not let their friends in need ever suffer, because the governments work for their friends in need.

Matthew: Yes, that’s true. You talk about equatorial locations being ideal for large scale cannabis cultivation. Why is that?

Anthony: Well it’s very simple. Forget cannabis for a moment and let’s just talk about flowers and the flower industry and much of the vegetative industry that we all rely upon for many of the things that need a natural life cycle and the right climatic conditions to be ultimately the more competitive environments to grow things in. You look at the equator and the countries around the equator, especially in the more stable regions of the world, politically and economically, like for example, Colombia and neighboring countries, Peru, Brazil, Ecuador, those regions. At the equator you have a natural 12 on and 12 off light cycle.

You have environmental conditions to go with it, climatically speaking, that provide you with, in some cases in certain locations, not all locations are equal at the equator. Clearly there are some that are too hot, some that are too high in elevation and therefore too cold, and there are some that are just perfectly conditioned and in the right elevation, with the right mix of temperature and other related factors for producing large scale flower production, regardless of whether it’s cannabis, chrysanthemums or whatever it may be. And on the equator, you have for example, just take Colombia itself. Almost 20 percent of the world’s production of cut flowers comes from Colombia. Over 80 percent of the cut flowers purchased in the United States come from Colombia.

Why not California? Why not Florida? Well, the answer is because they can’t produce as competitively, from a price point perspective and from an environmental perspective as well. That’s a whole other issue, but they can’t compete with that environment. You can’t replicate it. It is what it is. When you go a few degrees north or a few degrees south of the equator incur greater costs, electricity and otherwise. So when you’re dealing with ground zero being the equator, and for most people maybe they don’t know this, but flowers in order to go in and cannabis now, we’ll go into cannabis, like chrysanthemums, it’s almost identical in that respect. They require 12 on, 12 off daylight to night light or night time hours of an environment of such. So 12 hours of light, 12 hours of darkness. Now that is your perfect conditions for natural flowering, the flowering process.

So the only thing that you’re really dealing with power or electricity for, on a very low supplemental basis is the first three or four weeks during the vegetative state when you are not looking to flower yet the plants. When you’re just taking them from seedling to the desired height level and then of course literally turning off that very little bit of supplemental light that was used to trick the plants into maintaining themselves in a vegetative state and then you allow nature to do its job. So when you’re dealing with that sort of an environment there’s a natural reason, pardon the pun, why Colombia takes, as an example. Ecuador, as well, is a very dominant country in the flower industry. Other countries in the region are also obviously active in the region.

Together though, between the Dutch, Holland who provide a lot of the genetics and a lot of the background material that’s necessary in the flower business. I mean of course the Dutch, everyone knows how big and powerful and important they are in the global flower industry, but the Dutch in Colombia, I mean it’s like a highway system that’s been developed over 30-40 years here. Those two countries work together like a Swiss watch. Half of the greenhouse operations that I’ve visited, at least for example in the country of Colombia, have a great deal of direct or in some cases a little more arm’s length type of relationship with Dutch companies.

So when you look at that the Dutch, then why don’t they do it all in Holland? I mean, for the same reasons. They understand that there’s much better economies of scale and gains to be gotten through large scale production in countries that are equatorial positioned. It really comes down to cost and having nature do your job. And in a world that’s consumed with the consumption of naturally produced and environmentally friendly products, and when you can do it at a lower cost, those are almost no brainer decisions to make as to why you would be there. Like I said, the flower business is a multibillion dollar a year industry and why aren’t they growing the flowers that are supplying the United States in Florida and in California, instead of buying them from countries like Colombia, who supply 80 percent of flower market for cut flowers in the United States. It’s because they can’t compete economically at all, not at all.

Matthew: Okay so, you mentioned Ecuador, you mentioned Colombia. You don’t spend time in Ecuador. Why is Colombia specifically ideal. I mean I was there over the summer time, I really enjoyed it, both culturally, weather perspective, food, the people, very clear form of Spanish is spoken there, so it’s easy for a Gringo to pick up on relative to some other places in Latin America. Why is Colombia so compelling to you as a country?

Anthony: There’s a lot of reasons. First of all, I’ve been living and working in Colombia for 15 years. Everything you just said I agree with, and I would even bold it. Most people out there, I think the misconceptions that surround Colombia, once you’re there it’s kind of laughable. Look, that country is poised for nothing but growth over the next foreseeable future, many years in my opinion. I like what’s happening on the political front. I think we’re going to continue to see progress made in that country. I think everybody wants to see peace. It’s just a matter of what the final shape of that peace process ultimately is, and it’s a learning experience for all the parties involved politically.

When I look at that country I see a country that has proven itself to be the dominant leader in the flower industry in South America. It’s the country that has the most support financially from the United States for a couple of decades. It is the battering ram, if you will, against communism and leftist policies in Latin America. It is the more capitalist country, and America’s best friend in Latin America. So you’ve got a country that has an infinity. For example, for Americans, there is not a backlash against Gringos, if you will, that you would experience in other countries in Latin America.

Look, I’ve been in them all and extensively. I’ve done business in a lot of countries in Latin America. And for me, Colombia offers the best mix of all that is necessary to be able to truly dominate in this industry. Why not Ecuador? Well Ecuador, it’s interesting. Ecuador has the potential to be an important player in the global cannabis industry. I wouldn’t discount it, and I wouldn’t discount the potential for that country to proceed, but what I would say is Ecuador doesn’t have nearly the level of international stability in terms of what people perceive is necessary to invest large amounts of dollars in the country. It has shown leanings that have been more in the direction of Venezuela at different times over the past several years.

It doesn’t have the level of free trade agreements or the number of free trade agreements and established economic ties with other nations that, for example, Colombia does, which virtually has free trade agreements in pretty much every Western country, all of Europe, Canada and the United States, all over the world and has developed industries and particular an industry that’s relevant where you have the workforce. I mean (45.45 unclear) the Association of Flower Growers and Exporters in Colombia has about 130,000 people underneath that organization that are workers represented by the association in the various flower growers operations in Colombia. This is not small. I mean, it’s massive. When you look at the infrastructure and the experience, technological innovation this is not backwards production in Colombia. These are like the Mercedes and the Portias of the car industry.

They’re operations work with incredible precision, with planning and procedures and environmental issues, all those issues that we all talk about. These guys are leading in those areas. So you’ve got an industry with all the expertise, all the knowledge that’s necessary, excellent universities that are there to work in tandem with companies that are developing in this industry. And you’ve got ease of international trade. You’re sitting in a country that has two and half hour flights to Miami. Direct flights to Europe. I mean you have ease and accessibility and both coasts covered; Pacific and Atlantic. The only country in South America that has that. So you can ship products by ocean freight or otherwise, and that’s what happens across the board.

Colombia is in the middle of a boom infrastructure-wise that is really designed to connect. It’s all the rural regions that have in some cases have been suppressed because of economic investment due to their FARC involvement or other less than savory organizations that made it difficult for business to grow in some of these areas, very fertile areas. Areas that have lots of promise to develop agriculture or other related industries, but it’s the largest infrastructure development program in Colombia. One of the largest ever to occur in Latin America. All of the ports, airports, highway systems, road systems to improve transportation.

So the amount of money and the amount of resources that are going into that country is really quite impressive. And the foreign investment protection and other related issues to give investors the comfort that their money is safe in that country, they’re all in place at an international level and otherwise, you really have a perfect mix of environmental, social, climatic conditions and otherwise for this particular industry. Let’s not forget that Colombia has certainly got a past with this plant that isn’t new. I mean you go back to the 60s and the 70s, it was one of the big three out there in the world, as far as its reputation is concerned, as a high grade, high quality cannabis production region.

I would suggest that the only reason it didn’t keep pace with the rest of the world, maybe in terms of its legacy in that regard, not that it was a good legacy by the way, so let’s not call it that it was. So I’m not trying to put a positive light on that. I’m just simply saying, and I won’t use the word indigenous because I’m not so sure what an indigenous strain is in cannabis, unless you go to the Himalayas or what have you, but I would suggest that, there are strains that have been there for a hundred years or more that have been cultivated. So, now I guess you would call them somewhat native strains, and there are hundreds of them. It’s a treasure trove to be discovered of opportunity in strains with that country.

So with the support coming in, also internationally from the post peace process agreements that have been struck with different governments to support the transformation of Colombia in these areas that need the help and the support, there’s about a billion-three dollars worth of capital coming in. United States I think is $450 million. European Union is three or four hundred million Euros or whatever it is, but the point is it’s a lot of money and these very same countries are very unlikely to put up doors that bar products coming from Colombia in a legalized, international environment for trade, which is forthcoming in cannabis without any doubt. And as that, it does occur, at least I believe and we tend to believe, those who are working with us that Colombia will receive a great deal of empathy and that the doors will be opened, because there’s no country in the world, none, that has suffered as much as Colombia in the war on drugs.

There’s no country that deserves more for its people and for the country itself if there’s going to be a legal scientific and medicinal marketplace developed around the world, and for these products to move around the world, there’s no country that deserves more the opportunity to participate to help rebuild and to help ignite these areas that have been so dramatically effected through the war on drugs. That’s why Colombia is it.

One more thing I would like to add to this about the equator. If you look at the equator and draw a line around the world that would pick up a map or take a look, what you’re going to see quickly is, and you can just put an X over the nations in the South East Asian marketplace, because they’re pretty heavily Muslim populated. The Muslim countries are not buying into this industry at this time. Look at the Philippines, I mean quite the contrary. There’s lunacy, what’s going on in that country with respect to how they’re dealing with the drug issue. So none of those nations over there at this time make any sense from a developing of this business perspective. If you look at Africa, you’ve got a couple of countries that are trying to get their feet on the ground and grow and develop themselves from an infrastructure perspective to compete in the flower industry.

Forget about cannabis, but just the general flower industry. Over time you could see some of the African countries developing themselves in this industry as well, but today they just don’t have what it takes to literally plug and play and get going, where only a couple of countries really do that are positioned like that. Again that comes back to Latin American nations and Colombia is the obvious leader in this discussion, when you put all of the issues on the table.

Matthew: So to kind of crystallize your thesis here, are you saying that in the beginning, we’re in the beginning chapters, beginning innings here, generally a lot of people aren’t going to make money in the first few innings, but like all industries, as they mature, we’re going to move to lower cost producers who can do things in mass and scale and bring down their cost dramatically, wherever that is in the world, it’s going to move into a slightly more commoditized phase and perhaps even then get away from the flower itself and maybe start getting into oils, as looking at it cost per milligram or something like that, milliliter of oil. Is that the general trend you see happening over the next five to ten years?

Anthony: Those are a lot of specifics but yes, generally speaking it is. I’ll go back to Colombia again, and I don’t know if you know this or not, but just yesterday the Colombian government, President Santos signed the decree that now paves the way for and sets forth the rules of the road for the industry. This is the cultivation side, and that just happened, literally. So this industry in Colombia I can tell you has been designed around with an only oil focus. There is no ability to produce flower for the purposes of end supplying flower. That is not the industry at all in Colombia that they can complete. A complete approach towards standardized oils, extracts and related products that can be made from said extracts and products.

We firmly believe that that is the future of the industry. Anyone that really believes that you’re going to have the support of the world and World Medical Association and the subsequent medical associations and thus there the doctors who do definitely take a strong lead from their associations and as a peer group would not endorse and will not endorse on rolling up flower and smoking it. The carcinogenetic effects and otherwise that have affected the tobacco industry and of course will affect the flower industry. Carcinogens are carcinogens. It doesn’t matter whether you’re sitting next to a fireplace and someone’s making a fire and you’re inhaling them or whatever it might be, they are dangerous and they are extremely unhealthy obviously, without getting into that. We all know why, and it’s just a matter to what extreme they really are causing all those damage, cancer and otherwise, but we do know that they are horrible for our health, and they are not something that will be endorsed.

Look, when you get into that part of it that’s one obvious. The other part of it is simply the standardization and governments, regulators like to standardize. It’s just part of that whole regulatory wicket structure we just talked about. And so you can’t standardize flower. It’s just impossible to be specific, but you can standardize oil. You can standardize it and you can refine it to specifics to meet whatever those standards are and in some cases it’s companies to set those standards. That’s another point is the UN and the WHO and these organizations take their lead from private sector. They don’t sit in a box and say these are the new rules, now go do this.

What they do is they work together to pay attention and monitor and in some cases participate in the planning side of thesis, the things that may work and may make sense, but then it’s up to private sector to take those forward. And it’s always good to have the international organizations and the powers that be, if you will involved in the planning side of any of these sorts of standardization movements, but those standardizations, once they’re proven out to be able to be carried forth and they’re tested, subjectively or otherwise and all of this data and research and the necessary peripheral support that is required in order to endorse or get behind, structural changes or standardizations in the industry. As that all occurs, that’s when you’ll see these industries become more in sync and the move towards certain types of ways of producing and what you’re actually producing become commonplace.

Now in Colombia the government has recognized that that is the future of the industry, and we think that they’re dead on right with that. And as a result, they prohibit anything to do with the production of cultivation of cannabis, unless it’s for the purposes of manufacturing it into standardized oils and at a very high level. So you’re not going to see an industry develop in that country that reflects the Cheech and Chong days of the seventies. You’re just not going to see it. We’re going to see something here that is leading the world from a technological and innovative perspective and one that maintains its bearing and its focus at all times in that direction.

Matthew: Your emphasis on the standardization of oils has my wheels turning about once we have standards in place that maybe international community starts to look at is hey we agree with these standards. Does that open the door then for creating derivatives options, futures, swaps and those type of things on oils where I can say hey, in three months I want to buy this grade of cannabis oil at this price, and someone will sell it to me, allowing for businesses to have some predictability in their input cost and so forth and hedging and so forth. Do you see that happening and if so, do you think that would happen in a place like Colombia or more in a finance center like London or New York?

Anthony: Well I certainly see it happening, and I also don’t see it happening in Colombia. I mean production yes, and the ability to participate in that market, yes, but I believe those are New York, London and other related financial centers, and it will happen. I want to clarify one thing here. There’s a difference between just saying oil, to this standard oil, to that standard and then of course branding and what premium oils or subpremium oils look like. I think molecules are much easier to regulate in such a fashion and to design financial instruments around, such as for example, CBD, the molecule itself or certain other molecules that could be commoditized in such a way.

Hemp oil could be very easily commoditized to meet certain standards. And then yes, you can deal with oils in that way of all types but there will always be… if you believe that there will eventually be, and I’m one that does, I’ll fall into the Richard Branson camp on this one, that eventually we will see, much like with wines, much like with other types of things, that there will be an adult marketplace and that it will reflect stories. It will reflect history, that it will reflect local passions of the vineyard and venture who is making these wines and whatever it might be. That becomes your branding. So those are not something that I see as commoditized products that would fall into that camp, but I do see general oil. Oil that could be used by companies that are making beverages or whatever it is, finished goods producers that need to be able to ensure that they can access oil at a certain price so they can plan properly in developing their end products.

I think it’s an important part, as it has been proven in any business, in any sector that there are people willing to facilitate that futures market, if you will, for the provision of said raw material, if you’re viewing it as raw material. Finished goods will always be a marketplace I believe for well-branded, well-marketed and well-positioned products, consumer ready products that probably won’t fall necessarily into that camp, but there’s a large market that will. So yeah, I agree with you on that 100 percent.

Matthew: Good point. I think the hemp oil or hemp in general does seem a better candidate for that. Less of a focus maybe on terpene profiles and so forth. So yes, I agree with that. Now I want to pivot to Canada. Just give us a snapshot of what you think is going on in Canada. Maybe contrast it a little bit to the United States and Colombia and your general thoughts and feelings about the Canadian market in terms of cannabis.

Anthony: Well, I would be happy to do that. I think there’s going to be several companies in this country that will do very well over the long haul, and I believe that those are the companies that are savvy enough and recognize that the best way for them to develop their businesses is to have a hybrid structure. One in which cultivation, the low cost, environmentally friendly cultivation can occur and does occur as part of their supply chain in countries like Colombia, for example. Because if you look at the oil market, that’s going to be, and it is, becoming quickly the focus of most companies in this business who see where things are headed. The question then becomes what’s the cost of that end product going to be for me.

If your cost structure is 50 or 60 or whatever it is, times more expensive for that feeder stock cannabis, the flower itself that’s needed to make the oil, your entirely uncompetitive against the guy next door who decides I’m going to source my flower that has been processed to a certain point into oil, and I’m going to bring in that oil and I’m going to then fine tune that oil in my facilities for my domestic market and supply the domestic market and focus more on the finished goods side of the equation. Focus more on the end products and developing that oil into whatever it is that fits for their given market.

There is where you’ll see, I believe, the strong survive. I think those who fight against that and are determined to anchor their cultivation strategy in a country that is just not climatically suited, other than seasonally, for large scale production of cannabis, I think they’re the ones that will fail. The ones to me that make sense are the ones that will look abroad, will strike the right distribution relationships, the right partnership kind of structures, bring in that oil and then finish there.

That leads to another topic which is this nationalization wave that’s sweeping across America and in many countries. There is much to that. No one is suggesting that it’s an all or none in a country like Colombia or Ecuador or any other. I mean you can build a factory, a high quality CGMP processing facility in any country and the costs are going to be relatively the same with that facility. You can make it a smart building in Canada, you can make it a smart building in Prague. You can make it a smart building wherever you want to make it, and your cost of human labor, when you’re talking about a scientifically driven and medicinal grade facility, it’s going to be the same more or less wherever you are. There’s not going to be any dramatic effect on your bottom line cost when you’re dealing with that level of expertise. You’re going to pay for what you get and get what you pay for.

So you need great human resources to really run the type of business we’re referring to. So what I would suggest is likely to occur over time is that you will have producers, if you will, who are going to focus more on their end of the marathon where they can really take for their domestic markets and for other markets as well where they’re also involved to do the finish goods processing. Then you can see, for example, a situation where you can have a Canadian company that is able to brand the products as long as they meet WTO rules and regulations for what must be done in order to meet said capability for marketing something that’s a made in Canada product, but you can have made in Canada products that have a certain component or certain amount of the processing in finished goods manufacturing occurring here, employing high quality jobs with nice wages and all those things and let the lower cost, so to speak, cultivation activity, which means a lot in these other countries, in Colombia and these sorts of countries where there’s immense poverty, which doesn’t go unnoticed at the UN level as well I would add.

That’s also a big part of the thrust of what they’re always willing to support, are countries that are helping lift people out of poverty and create employment. Well this type of employment in countries like Colombia where the average monthly worker is making $400-$500 a month working really hard and very productive people. Obviously you can’t compete with those sorts of numbers when you’re talking about labor. But that all adds in to the finished cost of the cultivation. So I see a finished goods marketplace where Canada and the Canadian companies that are smart and strong have aligned themselves to be able to access the components of the supply chain that they just can’t compete from a cost perspective in their domestic markets, and hybriding that into their existing structure and that’s where I see the market going.

I think the other ones I will say will be great shorts at some point in time in the future. Today I wouldn’t short any of them because as I said earlier in the call, there’s a great deal of emotional enthusiasm behind what’s driving this Canadian marketplace at this time.

Matthew: Before we close, I have a couple more questions for you. What do you feel about block chain technologies in general like Bit Coin, and do you think there will be any overlap or disruptions maybe to the financial industry or other industries, including cannabis with the block chain?

Anthony: Well I’m for any form of competing currency. I’m a person who has spoken out against, what I call, the manipulative control of our monetary systems for many, many years. Therefore I support any efforts that compete and bring private industry initiatives to the table, and I would suggest let the market determine for itself what they would choose to use or not use as a form of trade or savings, wealth protection, what have you. And if that includes in some way, shape or form being part of the cannabis industry or otherwise, great. But other than that, I really don’t have much to say on it.

Matthew: Okay. I like to ask personal development questions to help listeners get a sense of who you are personally. Is there a book that has had a big impact on your life or way of thinking that you would like to share with listeners?

Anthony: Well the book that would have the most impact on me would be the first, what I would call, real book that I wrote. And that would be because that was a learning experience that involved reading many books and spending many hours with many great thinkers who I respect a lot. But outside of my own personal experience, and that book is called High Alert, for anybody who wants to look for it. You can find it around the internet or what have you.

Harry Brown was like a father to me. Harry Brown, I don’t know if you know who that is or not, but he was a New York Times number one best seller. He ran for President of the United States twice as a Libertarian. Just a tremendous person, wonderful person. That book, How I Found Freedom in an Unfree World, is timeless. Anybody who picks that book up and reads that book and can say that it didn’t affect their lives, either didn’t read it or they’re lying. I mean it’s a fantastic, fantastic book and I would urge anybody to read it.

There are many great thinkers and many great books that I’ve enjoyed reading over the years, and I’m an avid reader. I love history, and I like in particular to follow free market thinking history and read more Libertarian and an Austrian economic type of material. It certainly has inspired me and helped frame my way of thinking and how I look at world markets and trends and what’s evolving in front of us. So that would be my answer to your question.

Matthew: You know there’s a lot of people that don’t have exposure to Libertarian philosophies that listen to the show. We usually get people that fall into kind of the left/right paradigm that don’t have… and we’re kind of cattle chuted into being either for the red team or the blue team, and we don’t hear alternative narratives, and I think you have a really good way of sometimes stripping away the hype from topics and looking at actually what’s going on behind the scenes. If you were to kind of, maybe in a few bullet points, just kind of talk about what that philosophy is for people who are familiar with it, because sometimes I think the way it’s portrayed in the press is that Libertarian philosophy is this fringe, weird thing. And in many ways, I mean, the founding fathers of the United States were much closer to, I would say, the classical Libertarian philosophy, Austrian economics than modern left/right paradigm.

Anthony: Well you’re 100 percent correct. They were. And modern left/right is, again, it comes back to that whole structural system. Even our political system reflects a two-choice system or a few choice system. In this case, two, which is replicated around the world. But look, it’s really quite simple. Libertarian philosophy is I guess you would say socially liberal and conservatively fiscal. Meaning that Libertarians believe you should stay out of your bedroom. It’s none of your business what I do with my life, as long as I’m not bothering you, leave me alone. It doesn’t have anything to do with disrespect for morality in its essence of you shouldn’t murder, you should do this.

Of course not, everyone understands there are rights and wrongs in this world. Libertarianism just leaves it up to us individuals to be personally responsible and bear the responsibility for your actions, whatever those actions may be. But to be responsible for the decisions that you make and whatever those decisions are they affect me and my body, and whatever I choose to do in this world, they’re mine. It also has a lot to do with the… that comes back again to, the ability to use whatever you choose to use as currency. I mean, if I choose to trade my cow with you for your horse, I should be able to do that without somebody standing in the middle and taxing me on that transaction, or someone else demanding that I actually use dollars to make that transaction so it can become a taxable event.

Currency, the way the monetary system is structured, the infringement across the board on our civil liberties, all of that runs counter to Libertarian philosophy. Libertarians believe in living together in harmony, but living and allowing and respecting your right to be who you want to be, whoever that is. You may say something I totally disagree with, but that’s your right to say that. You’ll find yourself extricated from social circles because if your opinion is one that is offensive, people just will stop associating with you and you will find you will suffer through the realities of human interaction. You don’t need that people regulate, for example, hate speech. I would rather know, by the way, if somebody has something to say that I consider for me at least offensive morally, and that’s again to be derived I believe by your own self what you define as your own morality, what you’re willing to accept and not accept.

At the end of the day I would rather know what people are thinking. Maybe we wouldn’t be in such a situation as we are today with “this terrorism thing”. If we knew more about what people actually thought rather than trying to regulate people to keep everything in their minds and be bottled up and create your free speech zones in certain places where you’re allowed to talk under monitoring and powers that be oversight. I mean it’s all ridiculous. So Libertarianism is focused on transferring more power to the individual, less power from the state and really respecting that the government’s role on behalf of the collective should be to protect those civil liberties. That also leads to the big discussion about war.

Again, if you start with the individual and the right for an individual to live their life the way they like it, you may not like how I live my life. I may not like how you live your life, but I’ll respect your ability to do so. You respect my ability to do so. And the big thing about democracy, and America is a Republic, so a constitutional republic. So people should stop calling it a democracy. That’s a bastardization of the reality of what the founding fathers created, and a democracy works counterproductively against the individual because 50+ a little bit of a percent can choose to enact rules, regulations and otherwise that run against my interests, and that is completely anti-libertarian on its face.

When you look at wars around the world clearly we all know we need to have as group, as a country, as a people, wherever we are, however we’re centralized and whatever nation we are, that we need to have the ability to protect ourselves against those who don’t respect civil liberty and individualism, and therefore a strong defense is your best offense. But when we start becoming the soothsayers of democracy all over the world, the ones running around trying to impose what our views now are of how others should live their lives and what they’re doing, whether we like it or we don’t, and of course that’s the we don’t like it side of the equation. Opposing governments and all these other things that have happened around the world. All we’re doing is running it further and further away from what the founding fathers of the United States created when they created the Constitution of the United States. And libertarianism is much closer to the realities of what the Jeffersons of the world and others thought, felt and believed. Very intelligent people, when they drafted what they drafted and subsequent documentation around that era that protected our liberties and gave us the blueprint to maintain a high standard of living on an individual level with a collective relationship that really set rigid boundaries on where the government began and where it ended. So that’s my answer to your question.

Matthew: Well, that’s great. I think this will be something a lot of listeners perhaps has never been exposed to or heard anything like you just mentioned before. So I appreciate you giving that information. Is there any way that listeners can follow you online or keep track of what you’re up to?

Anthony: Yeah they can. I don’t charge for anything like this. So whatever I do publically-wise. I post, generally speaking, up to a website called www.anthonywile.com. I don’t do this often. I’m really, quite frankly, very busy. I stopped publishing basically about a year and a half ago more or less on a fairly regular basis. I still do pieces once in a while for Huffington Post. I’ve done a few and different papers around that are interested in the cannabis story because it’s mostly about that that I’ve been writing. However, I’m also involved in real estate development in Colombia and other grassroots private equity kind of things on a personal level. So we do do some of that.

Occasionally I’ll write or do a show like this about those sorts of topics, and I do love by the way discussing issues and it’s a passion but it takes time to really love that and live that passion. I’ve had the pleasure of doing that for a lot of years and now it’s just as I say. I’ve just become so occupied and so busy with what we’re developing in Colombia, and I want to make a disclaimer here because I think it’s important. I do have a very large financial interest in Colombia with a company that is licensed. I won’t say its name because it’s not necessary, but I just want to make it clear so there’s no misconceptions out there. I do have a financial interest and I think I’ve given the reasons why I like and in our group at least at (1.16.15 unclear) why we like Colombia a great deal in this space. So a disclaimer on that. But www.anthonywile.com would be the main place I would say for that. In the future there will be… there is something we’re building now as a new platform for Colombia focused publishing by the way.

So it’s a business related publishing effort, and when that surfaces in the next couple of months, I will take a chief editorial role with that voice for sure.

Matthew: Well, Anthony, thanks so much for joining us on the show. Again, that website is www.anthonywile.com and the book is High Alert. I assume that’s on Amazon?

Anthony: Yes, I think so. I’m embarrassed to say. I’ve written a few but I don’t know. But if anybody wants to find a copy of that, you can download it from www.anthonywile.com. I believe it’s there for free. I think there are four or five books that I have written there that you can pull down and again there’s no charge for that. I’m pretty sure they’re there. You might also find them at the www.thewilegroup.com. That’s a business that I’ve recently transitioned to, a new corporate branding, but the site is still live, and that’s just called www.thewilegroup.com. And at either of those two sites, all those books I’m confident are available for download. As I said, I haven’t looked at them in a while.

Matthew: Well Anthony, thanks again and good luck to you in both Canada and Colombia.

Anthony: And good luck to you, and thanks for the invite to be on your program. I think what you’re doing is fantastic and you’re providing a great educational service to your listeners and congratulations.

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The Five Disruptive Trends Shaping The Cannabis Industry Now

This Stunt Man Couldn’t Find The Perfect Vaporizer So He Created His Own

seibo shen

Seibo Shen is the co-founder and CEO of VapeXHale.

A former stuntman Seibo began a crazy quest to find the best vaporizer. After trying hundreds of vaporizers he finally gave up and decided to make his own. He posted his plan online and got over a million views to his site that documented his quest to make the perfect vaporizer. The end result is the VapeXhale.

Hear about Seibo’s quest and why athletes from MMA and the NFL seek his advice on how to effectively use cannabis.

Key Takeaways:
[3:27] – What is VapeXhale?
[5:07] – Seibo’s background and starting VapeXhale
[10:01] – Seibo talks about his high-tech career
[13:30] – Seibo talks about passion in business
[17:33] – Seibo talks about his blog that started the VapeXhale journey
[18:57] – Developing VapeXhale
[26:11] – Concentrates and VapeXhale
[31:58] – Seibo talks about working with athletes
[42:01] – Tweaking cannabis for athletes
[46:55] – What sports benefit most by using cannabis
[49:29] – Seibo answers personal development questions
[1:00:40].0 – Contact details

Learn more about the VapeXHale and get a discount at:
http://www.cannainsider.com/vx

Read Full Transcript

If you’re like me, you look out into the marketplace and see an ocean of vaporizers. However, there are few that really stand out. One company that goes to a near obsessive level, producing top of line desktop vaporizers is VapeXhale. I am pleased to welcome Seibo Shen, the Co-Founder and CEO of VapeXhale, to CannaInsider today. Welcome to CannaInsider Seibo.

Seibo: Hey, thank you for having me. I’m very excited to be here.

Matthew: Give listeners a sense of geography. Where are you in the world today?

Seibo: We are in San Francisco, California. That’s our headquarters, and yesterday we were in Los Vegas, doing something called the ASD Show, which is the world’s largest retail show, and it was one of the first that wasn’t a cannabis oriented show. So we were really happy to represent our company there.

Matthew: Cool. So that was like a general technology-type show.

Seibo: No, it was actually… ASD was for retail. So believe it or not, they had a little bit of everything for everyone. There was furniture, clothing, just knickknacks that you could import worldwide, but most importantly, they started doing what they call Culture Plus, which I guess was euphemism for cannabis, without saying cannabis.

Matthew: That’s funny. That’s a funny way of getting around that.

Seibo: Totally, and what was interesting was, and sorry to go on a tangent, is they had things that would be in a gas station, and then they had things that would be in the highest end head shops. So anything from (1.56 unclear) to male enhancement pills, all the way up to $20,000 Quave bongs. So, it was just really interesting to see such a wide variety of people, with varying levels of knowledge of cannabis look at all these things for the very first time and listen to us talk about why our vaporizer and our technology is head and shoulders above others.

Matthew: I like how you said male enhancement pill there. Wonder what you mean by that? Could you elaborate? I’m just kidding, but I do always ask when I’m at a gas station, I always ask the cashier, I say, you got a lot of knickknacks all over by the corner here, the counter, what sells the best? I’m just curious, because they have so much stuff. It’s like right there, it looks like for a reason. I’m just curious, and they’ll tell me. It’s just interesting to understand the patterns of what people want.

Seibo: Yeah, I mean, what’s even more interesting is I went up just to see what the sales pitch was and the first thing the guy says is, you know the male erection is a very complicated thing. I almost walked away at that point, but I listened to the rest, and it was your regular kind of sales pitch about how the ladies would be more attracted to you, more satisfied and ultimately why you would be like the hero of your own movie.

Matthew: Oh wow, they really paint a picture there. That’s good.

Seibo: Absolutely.

Matthew: Give us a really high level view of what VapeXhale is, so people can understand.

Seibo: Yeah, absolutely. So just a high level overview. We really tried to designed a vaporizer that was really optimized for not only the health aspect of vaping, which most vaporizers do, but also to put an emphasis on the user experience. And what I mean by that is the flavor, the smoothness of the vapor and the efficacy of the activation level and efficiency of transferring the cannabinoids from a solid state into a gascious state. And because our methodology or our ideology was to create a vaporizer that really promoted a really high user experience, we ended up finding out that many of our customers tended to be very aspirational people, people that were in the top one or top five percent of whatever field that they were doing, whether businessman, artist, athlete.

Through that we were able to meet a lot of high performing individuals that were utilizing cannabis to improve their life. And we’ve really kind of settled on this mantra of promoting responsible cannabis use, and trying to help people utilize cannabis in a positive way that doesn’t take away from their lives but really enhances it. And we like to call, it’s not a pro-cannabis company, but more of a pro-responsible cannabis use company. And that is all the way from how you use it to how you’re ingesting it.

Matthew: You have an interesting background. Can you tell us a little bit about your background, and then why you got so obsessively involved--I say that in a good way--in creating VapeXhale, what you saw in the marketplace and why you started.

Seibo: Yeah absolutely. So if we just kind of rewind the tape back to 1997 when I first discovered cannabis, I was 21 years old, in college. At that time I had worked a couple years as a stuntman. I had been accumulating quite a few injuries, and my roommate was a fellow stuntman who consumed cannabis every single day. And for some reason for me it wasn’t that I was anti cannabis, I just looked at my roommate who had all the promise in the world, and he seemed to really lack motivation, and I thought it was because of the cannabis.

And ultimately one day, after I had swallowed another eight ibuprofens and was complaining about my stomach, he turns to me and said, Seibo, this stuff is awesome for muscle pain. You’ve been complaining about this a long time. Just try it once and see how it works. So I finally gave in. I tried it once and it was through a water pipe. And not only did I enjoy the physical sensation, but me and my roommate we just laughed. We talked about a whole bunch of different things that were kind of outside of my normal sphere of conversation, and I really enjoyed that intellectual stimulation.

I actually began becoming a much more sympathetic and empathetic person because of it because I don’t want to say like singularly focused type of individual, but I had this idea that I would some day become a profession athlete, and everything around my life from my diet to my training was leading to become a professional athlete. Never mind the fact I was only 5’7 and 125 pounds and my sport of choice was football, but there was just a little bit of delusion in that. Once I started consuming the cannabis, not only did it dissolve the pain, but like I said, it started dissolving my ego where I started understanding hey I’m doing these things because I’m actually a small, insecure guy trying to be macho.

Before I used to just think I was just a macho guy, and I was a little guy that knew how to kick ass. But it was really a lot of that confidence was really hiding the insecurity. The cannabis, in a weird way, it revealed it to me in a way that it almost made me paranoid, but once I got over it, I started seeing there’s a lot of self-discovery that could happen with cannabis. As we’ve been looking and working with other athletes, we started seeing a very tight linkage between emotional pain and physical pain, and started experimenting with how cannabis could be utilized to not just reduce physical pain but emotional pain through conversations and basically peer groups to help people feel like they’re not isolated or for whatever reason. We work with veterans and athletes.

The idea is how do we use cannabis, not to just promote physical health, but also because there’s so many emotional benefits that you can get from it. Help people better understand how to properly utilize cannabis without abusing it, if that makes any sense.

Matthew: Sure. That makes total sense. Now did you have an epiphany at all the first time you consumed cannabis where you said hey maybe these stoners who I always looked down on they were right. They were right this whole time.

Seibo: I definitely became an instant evangelist. I went from pointing to the frying pan with the egg in it to saying that we’ve been suppressed this whole time by our government. And I’ve basically gone to the other end of the pendulum, and about that time, I think, broadband internet started coming into proliferation so I was just spending so much time on the internet. And I guess, that’s a really good segue into well, I had all these amazing benefits from cannabis, but smoking it, there was still some sort of dissonance within me to smoke something that was going to make me feel better.

So I stumbled across something that was called a vaporizer. It was essentially a heat gun that you bought at Home Depot with some glass components that allowed you to channel the heat from the heat gun into some shredded herb and vaporize it. And instantly I felt like I was on to something and from 1997 to 2010, 13 years, I probably bought easily 125 vaporizers, just out of curiosity and that being my hobby. And finally after 2010, my wife looked at me and was like, you know what, instead of working on high tech, I think you should design one of these. You obviously have a lot of passion for it. What was interesting was it was something that I had been thinking about for quite some time and once my wife, verbalized it, it was all that I needed to kind of get off and just start sprinting towards creating this vaporizer.

Matthew: What were you doing in the high tech arena there in the Bay Area?

Seibo: Yeah, so really interesting story, and I’ll keep it short, is I worked in high tech. I was mainly in sales and business development roles. I had also worked for five companies as employee ten or earlier, and just really learned about not only how to sell software, but how to grow and scale companies. And after I saw that five times, I decided I think it’s time where I feel confident to run my own company, despite being a sociology major.

Matthew: Yeah, so I was just going to ask you, you’re a sociology major. You worked in sales and business development at tech companies, and then getting involved in developing vaporizers is quite different. Requires, I guess, some mechanical engineering, definitely electrical engineering. I mean, how do you cross that bridge? Is it just you’re so interested and passionate that you just delved in and just learned whatever you need to, to make it happen?

Seibo: You know, that’s definitely one part of the equation, and the great thing about living today is the internet is such an awesome resource for information. And I watched YouTube videos. I read a bunch of blogs, and ultimately what I ended up doing was I noticed that things like Twitter, Facebook, social media was becoming very prevalent and people were utilizing it as a way to either disseminate a lot of information quickly or to get a lot of feedback quickly.

So I started a blog called ‘The World’s Greatest Vaporizer’. And it was just a blog saying, I want to create the world’s greatest vaporizer. I’m a sociology major, although I work in high tech and I’m Asian. I am not an engineer. I need help. And within the first year we had over a million views, probably over 50 different actual engineers were contributing to all these ideas and essentially I just collated the ideas and brought them to a mechanical engineer who had a little bit of expertise in electrical, and he put together the first prototype for us that we took to Cannabis Cup, and we ended up winning.

Once we won Cannabis Cup, I was able to raise some money and really bring this thing to market. But the truth of the matter is a lot of the information that I did not know, I don’t want to sound like a hippy, but I just reached out to the universe of the internet, asked the question, and like I said, before the first year ended we had over a million views on that website. I like to think that’s why the vaporizer turned out the way it did, and it was because it wasn’t designed by one person or one team. It was designed by over 2,000 people that were actively participating in this thread, and I just had the wherewithal or the stamina to read through all of it and just kind of collate and pick out the best information and put that into the VapeXhale EVO.

Matthew: I’m sure a lot of people listening think that the destination of having a successful business is where it’s at, that’s where all the juice and energy comes from, but I have a feeling when you were going through this process of iteration and on this quest to create VapeXhale, you were probably in a real deep flow state, trying things over and over, thinking about them all the time. It’s like having a great book you can’t wait to pick up again. Was it just that sensation of ah, I feel like I’m on to something here?

Seibo: Oh man, the way you just described it, I had goose bumps because ever since I was little, I mean, I know that I have at least average native intelligence. I actually thought I was like a gifted individual when I was younger, regardless of the fact that I haven’t accomplished anything. I was just like I’m special. And as I became a 20 year old, as I graduated college and just started working, I really started like falling into this rut of okay, wait, I’m not special. Everything that I said wouldn’t happen to me. I will never be like my dad. I’m just like my dad, and I started seeing all these things where I was like, you know, actually I think I’m just a normal guy.

Ultimately once, my wife told me I could make vaporizers, another part of my brain just activated. It was almost like being in college again. Everything was exciting and new, and it really kind of taught me. I thought I knew what it meant to be passionate about something, but what I realized was all of my previous passions in life was just something that I was really interested in. And you are absolutely right. I mean without this passion for vaporization, there were at least, I can count, probably 20 times where I was ready to quit. Throw in the towel and just say I’m going to go back to my day job. I mean, I was making a quarter million a year working 40 hours a week.

I wasn’t stressed out. By that time I had figured out the code of how to just, I don’t want to say coast by, because I was in a sales position, but I figured out a formula that worked for me where I wouldn’t be stressed out at the end of each quarter trying to make my number. Without that passion, I definitely would have given up because it was much easier. I mean, I still make less now than I did before, but I’m much happier, but without that passion and that kind of fortitude, I definitely would have thrown in the towel many times. When I stumble upon other entrepreneurs or there’s other entrepreneurs that want to hear my story, I tell them it’s really important just to go all in on whatever you’re doing because if you don’t go all in, and you feel like there’s some sort of excuse, then there will always be that excuse in the back of your mind, especially if you fail.

So for example, for the first three years of this company I still worked my day job and I was justifying that I had a family and I had to feed the kids and blah, blah, blah. But in reality I was really just holding the company back because, you know, 40 hours of my work week was going towards my day job, and whatever I could contribute to VapeXhale would be what I could contribute. And ultimately when I decoupled from my day job, I mean, in the first six months we made more traction than the first two and a half years. And it really did kind of just cemented my brain that it’s really important to find what you’re passionate about, and then when you find it to really kind of attack it all in so that you don’t give yourself any type of excuse for your success or for your failure, and that’s the great thing.

It’s become very binary. Now I know this success happened because of my effort. This disappointment happened because my lack of effort. When I work for someone else I used to make all these excuses like, oh well my manager just made a bad call and because we were following his orders, this didn’t go through. Now I just realize that was a lot of just excuse making. And what I love about being an entrepreneur is the amount of accountability you have to have over yourself, and now I’ve been able to transfer that into my personal life as well and have much more engaging and rich relationships with my wife, my kids and my friends.

Matthew: That is great. That is a form of lifestyle design. It sounds wonderful.

Seibo: Thank you.

Matthew: Let’s jump into some of the specifics of you started this website, ‘The World’s Best Vaporizer’, first I’m just curious, how did you get traffic? How did people find out about it?

Seibo: So we actually linked it to a popular website. Maybe popular is a bit of a stretch, but it was a very popular underground website called ‘Fuck Combustion’. When I’m describing this to investors and they’re like what’s the name of the website. I’m super embarrassed to say the name of the website. As you can imagine, you know, they are anti-combustion people and really love vaporizers. So they had actually really good traffic despite that it was such a niche thing back in 1997, but yeah just through that we were able to kind of pick up and utilize their platform to get more eyeballs on what we were doing.

Matthew: Yeah that site is still around today. It’s definitely like the Fight Club of vaporization. I mean, these are committed folks there. So that’s cool. Okay so, you start this in a really public way and you get all these people coming to your website. I love the honesty that probably attracted a lot of people that can help you. What were the kind of things that jumped out to you early on, on how you wanted to make VapeXhale different or the problems you wanted to make sure you avoided that other vaporizers had in common?

Seibo: Yeah, so there were a few challenges that we wanted to address. As I said, I have been vaping since 1997 and became a huge evangelist of it. I’ve been really trying to get, you know, most of my friends, we’re all over 35 now, to convert to vaporization. And I had very little success, and what they told me was vaping isn’t as potent as smoking. Vaping doesn’t taste the same as smoking. Vaping also, like when you’re filling a water pipe, vaping is like drinking skim milk, if you’ve been drinking whole milk your whole life. It’s kind of the same, but it’s not the same.

So I went into this really trying to attack the user experience. I really wanted to address all those issues that people had about potency, about flavor, about the actual visuals of the vapor as well. So one of the things that I really ask the people was is there a way that we could improve the efficiency of the sublimation process of turning the THC crystal from a solid to a gas. And different things were talked about like increasing air turbulence within the air path, creating a vacuum to lower the boiling point of the repository of the flower.

So we took a bunch of these hypotheses. Another one was like doing Venturia Effect [ph], which is forcing a larger volume of air into a smaller chamber, and that also kind of tricks the boiling point of the cannabis or whatever is in that repository. So we did a combination of all those things to improve the opacity of the vapor. Once we did that we realized oh my goodness, this vapor is so thick right now that it’s making it difficult compared to other vaporizers to inhale because of the concentration of the vapor. So we ended up creating these hydra-tubes or moisture conditioned mouthpieces that sit right on top of the vaporizer that allow you to, or not allows you, that actually smoothes out and moisture conditions the vapor so that it’s much cooler and doesn’t dry out your throat, that way you can continue to medicate at the level that you want to without any throat irritation to get in the way.

I understand that. Some people listening might be like wow you guys need to consume that much cannabis to get to that medication level. And surprisingly the answer is yes. I mean, I’ve worked with a lot of NFL players and for me I may only need a tenth of a gram to get to the medication level that I need, but these guys that are over 300 pounds, I mean, I watched one of them take five dabs the very first time he ever dabbed, and he could handle it. And what we’ve come to understand is the more pain that you have in your body, I believe, there is some correlation between how much cannabinoids you can actually ingest as it bonds to all your CB1 and CB2 receptors to deal with the pain.

It’s a bit of a hypothesis right now, but like I said, we’re always trying to kind of think, you know, one step, two step, three steps ahead of what everyone else is doing because this is such a fascinating plant that I think just applying air to heat and then taking that heated air and applying it to the flower or the oil, yes, that is the basic nature of vaporization, but there’s so much more that you can do to ensure that the flavor tastes better, the potency is intact, and that it’s super smooth for the end user. I love Apple, and I understand some Android phone, you know, functionality-wise do have some more features, but the one thing about Apple products, what I do love is that, the design aspect is so great that something as complex as your iPhone, even Generation 1, it didn’t come with a large instruction set.

That’s when I started realizing the user experience is super duper important. How the person feels when they’re utilizing it. So we wanted to make sure that when someone used our vaporizer, because it is a plug in model and it’s not a portable, that they would just get so much of a better user experience. The way I like to describe it to people is like if you like to watch sports on your smartphone, think of that as using a portable vape, and when you get home do you ever watch sports on your smartphone. No, you turn on the HDTV. So we like to say our experience is more like an HDTV. It’s not better than a portable. It’s compatible. It’s actually, I don’t want to use the word synergistic, but they work together. It’s not binary one or the other, and that’s what we’re really trying to improve on. How do we keep making the user experience better for the user.

We are coming out with a lineup of portables, and I’m sorry to drone on and on about this question, but I think that this last part is going to make a lot of sense is when we started designing the VapeXhale EVO, initially, this was back in 2010, there were already several portables on the market that worked fine, but what we realized is with all technologies, things get smaller, cheaper and more affordable. And if you created a portable from the start, you would have that intellectual property of how it works, but the next generation would be smaller, longer battery life and probably a little bit cheaper. So we’ve seen that with the Pax1, Pax2, Pax3 or with the Firefly1, Firefly2. I mean, they’re essentially like the same device, but with extended battery life and smaller.

So for us we really wanted to understand the science behind mixing air with heat and applying it to flower and oil, and now that we’ve mastered that, now we can create portables that are leveraging this intellectual property and technology and really make portables that are head and shoulders above what the competition is offering, and we believe that just like our home unit has been widely anointed the best desktop unit, when our portables come out we’re going to see a similar quantum leap in performance for portables as well.

Matthew: Okay, so you’re working on portables right now?

Seibo: Yeah, we’ve been working on them for the last three years. So we just wanted to make sure that when we came out with a portable it would very much be like when Apple decided to make the iPhone. Something that was just so much different than the status quo that people would have no choice but to at least investigate what this new portable is like, but once they use it we’re very, very confident that this new technology will be one that really kind of changes the landscape of how people view portable performance and what to expect out of a portable.

Matthew: Now what do you tell people in terms of how to think about concentrates and combustion for the VapeXhale? I mean, do you have a concentrates extension and then you have a flower extension? How does that work?

Seibo: Good question. So you are right. It is one device that has two repositories. One for flower, one for oil and where I believe we really hit a homerun with the oil is that if you look at most of the oil consumption devices, whether it’s a vape pen, or a dab rig with a ceramic or titanium (26.31 unclear) you are essentially putting the oil right on top of the heat source. So you’ll either heat the titanium (26.38 unclear) or in the case of a vape pen, put the oil right on top of the nichrome wire heater. In both instances I like to say that’s more like frying your concentrate, and we’ve come up with the world’s first convection or hot air based way to deal with concentrates.

Previously I don’t think anyone had explored the concept of using hot air with concentrates because oils get viscous. Once it becomes viscous, it gets running and it can get dirty and sticky all over the place, but we knew that when flower vaporizers went from conduction to convection there was so many efficiency gained. So we really spend a lot of time to try to figure out a way to do “hot air” dabs, and as you can imagine, when you are using hot air versus frying your concentrate you use a whole lot less. It tastes a whole lot less smoky, and you feel a lot better because the vapor to smoke ratio is much higher in a convection based placed platform than conduction. And for anyone that is exploring concentrates that is graduating from the vape pen crowd, I really urge you guys to explore what we’re doing here because the convection based methodology, like I said, I believe that our device is just the very first version of this next generation of hot air based convection concentrates delivery tools because the efficiency gains just by themselves, let’s forget about the health claims.

Due to the hot air extraction, our customers are telling us they’re using about a third of the amount to achieve the same medication effects. So because of this we’ve created an ROI calculator on our website that allows you to enter in how many grams you consume a week and how much you paid per gram, and on average our $450 device pays for itself in 2.7 months. Sorry for this long-winded answer to your question about concentrates, but I do believe that in order for concentrates to be socially accepted, we have to get away from dabbing on a hot surface. And the whole reason why we created this hot air convection based concentrates consumption methodology is because I had some other parents from my school come over. They saw my dab rig, and that was the last time we ever had play dates with their kids.

They said that looked like a crack device. They didn’t know what I was doing. I could say it was for cannabis, but that didn’t look like any cannabis they had ever seen. And I just realized, after I started doing surveys, I have not met anyone that is outside of the industry over the age of 30 that has a wife that allows them to have a torch and nail or electric nail in the house. The only people that I found are people in the industry. So I saw this as a huge issue, and honestly, I mean, my wife was like you got to get rid of this dab rig. So I really started working over drive. I love dabbing. I need to figure out a way, and that’s when we came up with that concept for the VapeXhale. So part of the ingenuity was due to necessity as much as my entrepreneurial spirits.

Matthew: Yeah, there’s some truth around that. It’s like one thing if you’re in your twenties and you’re single and you pull out a dab rig, it’s another thing, like you were saying, it’s like parents come over for a play date and they see that thing and they’re like, what is Seibo into. Yeah, it’s a little crazy. I know what you mean. I’m glad you’re taking care of that problem though.

Seibo: Yeah, and you know kind of the next phase of what we’re really trying to work on here is how to help people come out of the green closet, because there’s many people like you, me, high performers that are cannabis enthusiasts and many times, obvious, the image that they portray of us is one of lacking motivation, sitting on the sofa, getting really good at role playing games on the video game console, but the fact of the matter is cannabis users are just kind of like you’re normal demographic of the country. It’s high achievers, low achievers, everyone in between, but I really wanted to highlight that there seems like there is a very high, an inordinately high percentage “successful” people that consume cannabis.

And I just want to really help them have consumption devices that are congruent with where they are in life. Just like, I loved Denny’s in college, but I don’t love Denny’s anymore. I like food that’s better. And I wanted to create consumption devices that were congruent with people’s palates as they grew in sophistication and wanted different ways of consuming their cannabis.

Matthew: That’s a good time to segue to you talked about high performing athletes just a little bit ago. Now you’ve said you’ve worked with some high performing athletes. When did you first discover that… what was their initial reaction when you started working with some of these guys and a light bulb went off, some of these athletes? What was happening there? How did they find you, and how did they come to start this initially, consuming cannabis for health reasons and recovery?

Seibo: Yeah so, interestingly enough, if you look at the price tag of our vaporizer, it’s $450, so obviously those that purchase it either really, really love marijuana or have expendable cash. And early on, every time an athlete would get busted in the news for cannabis, I would just Google them and learn more about them, and then just one day I started just checking our database to see if that name existed. And I was like, whoa we’ve got some NBA players, some NFL players that’s customers. Who are these people?

And obviously I’m just thinking, a huge kind of sports nut so I started emailing them, just introducing myself and saying hey, I’m the founder of this company. Thank you for buying this. I know that you can’t talk about this publically, but I’m just curious, why did you buy the device? How are you using the device? And about 80 percent of them were saying, not only were they using the device for recovery, but they were actually consuming before practice, before games. Some of these guys are UFC fighters. Some of them were consuming before they were punching and kicking each other in the head. And I had always consumed cannabis more on the recovery side.

Sometimes I would train on cannabis, but it just wasn’t for me at the time, but as I spoke with all these high level athletes, I really started thinking, well my first thought was okay these are just a bunch of young guys that like to get high all the time. No big deal. I’m not judging, but as I started speaking with them more, I started realizing, wow, these guys are actually performing better than when they are… we call it activated. I don’t say medicated. I call it activated, and essentially they are doing, kind of by accident or on purpose is, and you brought up this word earlier, flow state, is they are encouraging flow state while they’re training.

For some people they just need more focus. For me, when I’m doing Jujitsu, someone could be choking me out and I’ll still be thinking, oh, I need to return an email to Matt because I’m going to be late tomorrow. You really should be present when you’re doing these things. I asked these guys, can I come train with you guys? Can you guys show me what you do? And a lot of it was very non-structured. They just get high and start doing stuff, and then I started noticing, like hey guys when we take one dab and you guys do this, you guys seem to be a lot more focused, less horsing around. Let’s just stick with one dab instead of two dabs.

So I started being the numbers guy for these guys and started plotting and taking down the data like how much they were consuming, how they were performing and ultimately we started coming up with this template, and I wanted to see… Okay, so we were able to help high performing athletes perform better, and a lot of people were like well, they’re 19, 20, 21 of course you work with them, there’s going to get better. They’re at that age where they’re just supposed to get better. So at the age of 38, I decided hey I want to start competing with the Jujitsu teams.

So I started training, utilizing the techniques that we were talking about and really getting into flow state while I’m grappling. And I started competing, like I said, with the team. I’m undefeated. We all compete in an activated state. Six weeks ago we took home 10 of 14 gold medals. I have all the videos to prove this. We also have a documentary that shows us consuming right before the event. And most of these events in martial arts, they don’t have any specific rules. It’s more about steroids and things like that, but even if you don’t have the performance enhancement, the CBD, all the anti-inflammatory properties, they’re so good for your body anyway.

So we know that 100 percent of the athletes could benefit from utilizing cannabis for recovery, and about 70-75 percent of the athletes we’ve been able to successfully teach how to utilize the EVO to help them dose and titrate their cannabis, and then to compete at a higher level, whether it’s gymnastics, boxing, ballet, dancing, all of the above.

Matthew: So you mentioned a template there. I mean, we don’t obviously have time to go into a whole template, but you mentioned one dab, not two. Is there any other kind of quick bullet points you could mention as kind of optimization techniques?

Seibo: Yeah, absolutely. We have two different things. We have a CPA and CPF, not a certified public accountant, but a cannabis performance assessment and cannabis performance facilitation program. So during the cannabis performance assessment we get a base line of how you are when you’re sober. How fast you can run, how dexterous and coordinated you are. Jumping jacks, cartwheels, we have you do movements that are kind of challenging and difficult and kind of get a base line of where your physical abilities are without cannabis.

Then we start administering various amounts of cannabis and redo these tests and kind of see does it make you looser, does it make you more self-conscious and almost paranoid. And a lot of people physiologically react differently, and what we found is cannabis seems to invoke a state of homeostasis. So when you’re really amped up it can kind of calm you down. When you’re really tired it can kind of perk you up. So what we realized it because of this we needed to get the whole team to be on the same consciousness level initially.

So we started doing these breathing exercise called Breathifier, which is taken from Kundalini Yoga that is about five minutes of rapid breathing in and out of your nostrils. And by the end of five minutes, your brain, your blood is super oxygenated. You’re a little bit light headed from hyperventilating, but you’re very sharp and aware. Then when we administer the cannabis it allows you to… it’s like you don’t want to be so aware where you’re tense. You don’t want to be so loose where your reflexes are slow. So it’s kind of like this really delicate balance that we’re trying to achieve, and yes sometimes we miss the mark, but like I said, we’ve been pretty good at getting 70-75 percent of the people to be able to just relax and perform better.

And one of the things that is really simple to show someone is, okay can you touch your toes. Okay if you can’t touch your toes, are you close to touching your toes. A lot of people that are close to touching their toes, once we administer a little bit of cannabis, they can touch their toes, and then we let them know. We’re like look, you’re holding a lot of tightness in your lower back and your hamstrings. You’re probably not aware of that normally, but now that you’ve consumed some cannabis, pay special attention to your lower back and hamstrings and feel how tight they are. Many times once someone’s aware that they’re tight in a certain area, then they can start stretching it out more, working it out more and really kind of make the necessary changes.

Many times, believe it or not a lot of these athletes who are sensitive to their body, I think because they’ve been so conditioned to deal with pain, they don’t know what is pain versus what is an injury. We really kind of utilize cannabis to help them be objective with the way they’re feeling and to help them , like I said, not only improve performance but improve healing so that they can train more, which then improves performance. So it’s a really kind of awesome circle of life that we lead them through, and like I said, the reason I can speak about this so confidently is I’ve done it myself. I’ve gone through the program and, not to keep patting myself on the back, but I’ve competed four times now. The first time I competed sober. I went for about six minutes, I lost. The next three matches I competed in an activated state. The combined three matches was 1 minute and 52 seconds.

I just ended up destroying these people because I was able to not think about the text messages, the emails, my kids, my wife and just let my body go into flow state and do everything that we’ve been drilling for repetition, and it just comes out. And I like to tell people, for me, Jujitsu, I like to call it kinetic chess. And most people when they play chess they have maybe, set up traps one or two moves ahead and that’s kind of how my Jujitsu game is like when I’m in my normal state of mind. When I’m activated, my decisiontry and flow chart of moves it just exponentially increases and I’m able to see things that aren’t normally there. Like oh, there’s a pawn that I could take. I’ll take that. Oh, I’ll take that rook.

It’s really hard to explain, but once we help people achieve it, and they feel it for the first time, it’s easy for them to become believers. We actually had one really big skeptic. He was an ex-water polo player from Stanford. He actually wrote a scathing article about cannabis and athletics, and someone put him in touch with me, and after just two days, I helped him run a personal best for an eight mile run. And now he’s a huge proponent of this, and now we just got to back this up with more data so that it just doesn’t sound like a bunch of guys in a gym just doing whatever they want and maybe they win some tournaments here and there, but really get the imperical data so that we can speak about this intelligently and really kind of show the naysayers that this isn’t people just getting high. This is about increasing physical performance, and more importantly, the cannabinoids a neuro protectant. So if you’re in a high impact sport, your guy should be taking this anyways to protect their brain.

Matthew: You mentioned about anecdotally about 70-80 percent of people that are doing this CPA or CFA are getting the desired results, but for the people that aren’t is there any kind of insight you can provide around that, the 20-30 percent? How can you try to stay out of that 20-30 percent and stay in the 80 percent that are getting the desired outcomes?

Seibo: Wow, what a loaded question, but I’ll do my best to answer this one. Okay so, this is more a little bit of bro science and arm chair quarterback for me. Number one is I do believe that a very small percentage of people’s biochemistry just does not allow them to enjoy cannabis in this way where I could improve their athletic performance. But the remaining 20 percent or so people or 19.5 percent or so people I 100 percent believe it’s a psychology issue. Having worked with athletes, entrepreneurs, artists and just listening to them talk about what makes them tick and really looking at the high performers versus the middle of the pack and the low performers, you know, I kind of self-believe is a huge important factor.

If you look at any of these athletes, you ask them who is the best athlete, they’ll most like say themselves. The number 200 ranked fighter, if you ask him could he beat the world champion, he will say yes. Many times it’s not rooted in logic, but there is this really strong self-belief. One of the things that we really try to encourage is objective accountability. And there is no magic to what we’re doing. The magic to what we’re doing it just being objective and being accountable. So being objective is did this help me or not. If it’s not helping me, let’s stop doing this.

Being accountable is if I lost, was it because the coaches didn’t train me well, or was it because I didn’t put in the effort. There are just tons of people always making excuses for this, that and the other, and ultimately most of the people that can’t take advantage of the cannabis, they will always give me a million and one reasons why it won’t work, and very few reasons why it will work. And ultimately I’m like well, if you’ve conditioned your mind to think it won’t work, then it won’t work. One study I always draw upon is a few years ago, they had a bunch of famous sommeliers drink wine and try to tell the people where they thought it was from and what the quality of the wine was.

They took the expensive wine, put it in the cheap wine bottles and the cheap wine and put it in expensive wine bottles. As you can guess the sommeliers were just wrong about everything. They were super embarrassed and they asked for a second test. During the second test, they actually put some sensors on their brain, and they saw that when the sommeliers were about to drink an expensive bottle of wine their pleasure receptors started going into overdrive. So this kind of showed that the anticipation and belief that something will be good actually stimulates some sort of neurochemical change in your mind.

Ultimately I am a believer that with the proper mindset, anyone could almost do anything. Obviously there are limitations. Like Shaq will always dunk on me. It doesn’t matter how much I believe I could dunk on Shaq, that will not happen. A lot of these things about self-belief and performance, and that’s why I do believe the sports psychology or psychology in general is so interesting because as I’ve grown older, I’m 40 years old now, one of the things that I’ve really come to discover is most of the things that were getting in my way or that I thought were getting my way was just a mental issue that I thought all these people were judging me. No, no one was even looking at you Seibo. That was all in your head. Just little things like that.

We’ve kind of taken those experiences and really tried to distill it down. Like what I said, to distill it down we call it objective accountability, because we believe that if you could distill something down to those two things and be objective and accountable for yourself, then you can start making the improvements that you need to make, either in your athletic career, business career or personal life.

Matthew: Yeah. Great points there. I think one thing that would be helpful too is if there was some test that would show us how we metabolize cannabis. Are you a fast metabolizer or slow metabolizer? If there was some objective way that we could start to hone in on that, that would really help. If that exists out there someone, let me know. Just email me at feedback(at)cannainsider(dot)com, but I think that would be a super helpful way. Is there a particular sport that… I mean, it sounds like you’re into the Jujitsu world. So perhaps you see the most in Jujitsu, but is it football, mixed martial arts? Is there one or two sports that comes out as having the most cannabis users that benefit from optimizing or recovery with cannabis?

Seibo: Yeah very good question. So you name those two sports, football and mixed martial arts. Kind of more broadly I would say anything that has high physical impact, either to the body or to the brain. Obviously the cannabinoids have shown neuroprotective qualities. Where the numerous research studies that have shown this, I had always thought that is why, despite being a very disciplined person, I just always wanted to smoke weed, especially when I was boxing. And my hypothesis is that my body was kind of like pushing me towards doing something that was good for it even though in my mind I was like, don’t smoke anymore weed. Only once a month.

When I was first introduced to week I was super scared about being addicted so I kind of gave myself these weird limitations. And more recently, Reggie (47.50 unclear), who is the chief scientist at Steep Hill, we had a discussion and he was telling me that in these preliminary studies they have shown another cannabinoid, CBG, to not only be a neuroprotectant, but showed neuroregenerative properties, and I know that’s a huge claim. So this was just some initial research that they saw. The impact is something potentially being neuroregenerative, it’s huge, and that’s why I do believe a lot of athletes that are in these high impact sports where there’s CTE or traumatic head injuries, a highly disproportionate percentage of them use cannabis.

At least for myself is that when I take CBD before exercising that also increases my capability to recover quicker. I used to just take it after practice, but now I’ve been taking it before practice as well and just noticing that, you know, it’s almost like the tin man who gets his joints lubricated. I just feel like, wow, I ingested this. I have an extra 15 degrees of extra stretching in my shoulders and different areas, and it’s really remarkable. Like I said, the main thing is we want to capture this empirical data so that we could speak from a place of data versus just anecdotal stories.

Matthew: Seibo, I like to transition to a couple personal development questions to let listeners get to know you a little bit better personally, although I feel like I know you personally after this interview already, but let’s jump into those questions. Is there a book that has had a big impact on your life or way of thinking that you would like to share?

Seibo: There’s a couple good books. One of them is the 48 Laws of Power. It discusses office politics, but I look at it as a book more about human nature. And the reason why I love this book is that even though it discusses office politics and talks about how people would be trying to get over on you to get ahead, it really just talks about human nature. For example, if you and a coworker are up for a promotion, and you’re a single person, but he has a wife and three kids, even though he might be a nice person that likes you, because this will benefit his family so much, he may go above and beyond to compete against you where you might think this guy is betraying my trust.

In reality, all he’s trying to do is make a better life for his family. It kind of really put office politics into context because I had always thought people were colluding with each other like let’s “F” this guy by all of us get together and make his life hell so he quits, but it’s usually nothing like that. It’s everyone is super busy, everyone protects their best self-interests, and they operate that way. So once I got to that, I started realizing these things that people do, despite some of them being negative towards me, they’re hardly every personal for personal reasons. So there’s no reason for me to take offense to them. So that’s really helped me kind of deal with all the different personality types I have to deal with while running this company.

Now the second book that I really, really like is The Four Agreements by Don Miguel Ruiz. This is almost like the exact opposite of The 48 Laws of Power. This is a book about how you need to love yourself, how if you never love yourself, you can’t really give yourself the full version of yourself to other people. It was like a self-improvement book without being a self-improvement book, if that makes any sense. And it was only a 70 minute read. It’s pretty big font, but it was so impactful. I mean, when I was reading it, I don’t ever cry, tears were just coming down my eyes because I was just thinking man, I’ve been leading this weird Type A, alpha male existence for what? For what, to impress other people.

The Four Agreements really started shining a light. If you really work on yourself and you make yourself the best version of yourself, they you can really start impacting the world in a positive way, because you’re doing it with some sort of clarity, with some pureness and it’s not just… For example, when I was younger I saw Bill Gates, and I was like, I want to be like Bill Gates, but I wasn’t too sure exactly why I wanted to be like Bill Gates. I just knew he was super rich and famous. Through reading this book it really helped with a lot of self-discovery. Okay, this is what Seibo likes for these reasons. This is what Seibo thought he like because of these false reasons, and it goes back to being objective and accountable. I think these are just little lessons that I’ve learned from each of these books.

I really encourage your listeners to pick these books up because they’re short reads, probably just a couple hours each, but have really benefitted me as far as reducing my stress levels, The 48 Laws of Power. And then The Four Agreements, to be able to love myself. I know it may sound weird, but I kind of just really disliked the version of myself when I was younger, and I think that’s why I was always striving to be the best because I was not satisfied with what I was. After reading that book I realized, what I am is very special already. Let’s just foster the best version of Seibo. Not Seibo trying to be like Steve Jobs, not Seibo trying to be like Bill Gates, but Seibo just being Seibo.

What I found is once I started doing that, I don’t know, it’s just like the universe just started giving me stuff. The right people enter my life. The business transactions start happening better. There’s a lot of transparency in what I say. People don’t feel like I’m saying one thing and doing another. It’s just a wonderful feeling to live in a life that way because I had always been so concerned about image, especially being an entrepreneur now. I had learned about The Four Agreements before being an entrepreneur, and then I found being an entrepreneur, brought me back to that whole phase of my life again where I gave a fuck about what other people thought of me and place such a big emphasis. And that was causing me to make some really bad business decisions and I had to reread The Four Agreements, and rebuild that confidence. Like, Seibo, you know what you’re doing. You don’t need to impress these people.

These people are telling you all this stuff because they have limited data points to make their decisions. So, just believe in yourself. Be yourself again, and once I started doing that, the company started rocking and rolling again.

Matthew: Yeah, great suggestions there. Now is there a tool, web-based or otherwise, that you consider indispensible to your day-to-day productivity, other than VapeXhale?

Seibo: I was going to say, my VapeXhale, but I think most people will talk about some sort of productivity tool or something that really helps with efficiency, but for me, not to sound hokey dokey, but I use a meditation app called Brain.FM. It has four settings like nap, sleep, energize and meditate. And they range anywhere from 10 minutes to 30 minutes. And typically in the morning that’s the first thing I do, like a 10 to 20 minute meditation. At lunch I will do the same, and then right before bed I do the same. And I do believe that the practice of having that, it really just allows me to recharge my batteries.

I eat healthy, I exercise, and I do a lot of the physical things that someone would think would keep you healthy, but I really found being able to exercise the brain or just not think about anything other than that guided meditation that you’re listening to has been instrumental in helping me feel rested. If I do that routine and only get a few hours of sleep, I feel 100 percent. If I don’t do the routine and get six or seven hours of sleep, for some reason it just seems like the level of sleep is not the same unless I have that practice. So I really highly recommend anyone, especially living in this crazy day and age where just expressing a political opinion, 20 people jump down your throat, that you really need to spend time by yourself and kind of have that self-development time for yourself so that you don’t just get caught up in the business of this world and get taken away.

What I’ve found is by doing that, I started getting some of my own consciousness back. And I mean that when I’m very busy I almost feel like I’m on auto pilot. I’m just this autonomous robot that does sales calls, that does meetings, that gets on an airplane. It’s just like very formulaic. And by doing this, it’s like oh okay, that’s what Seibo does during the day. He does love it, but Seibo still needs some hippy smoking time, and just meditating and just thinking about anything I want to think about or nothing at all, and really just watching myself evolved from an objective point of view. Now that my wife has joined me, I mean, our relationship is so much better than before.

I mean, we’ve always had a great relationship, but now that we practice this together it’s like we have a deeper connection. So there’s so many benefits, I think, from having a practice like that where it’s individual. It could be with other people, and ultimately I believe if you know yourself and treat yourself and love yourself very much, then your purpose on this Earth becomes much more clear to you.

Matthew: Normally I only ask two personal development questions, but I got a third one for you. Is there any public figure, actor, politician, anybody, if you could pick only one person that looks like they probably don’t consume cannabis and you would like them to take a huge rip off of VapeXhale, who would that be?

Seibo: This is such a great question. So this individual has never publically spoken about it. I do have a hunch he may consume cannabis, but it was be the astrophysicist, Neil deGrasse Tyson.

Matthew: Yeah that’s true.

Seibo: He’s the guy that really got me into science. I was basically a sociology major. But the way Neil deGrasse Tyson could break down complicated topics and talk about so simply that a layman could understand, he really blew my mind. I had read so many books on quantum physics, and after reading ten pages, I’m like, what did read. None of that stuck in my head. And when Neil deGrasse Tyson would explain it, it was just like oh okay. He would use normal things like this is a shoe. Just imagine the shoe was the universe and the shoe laces are the energy that’s expanding and contracting in the universe.

Just these weird analogies, and I was like, man, if I could ever sit this guy down and enjoy one with him, how awesome would that be. We would have probably… I could ask him all of my alien questions and then he could use his astrophysicist background to tell me, yes, that’s plausible or that’s completely idiotic Seibo.

Matthew: Gosh, he would be a good choice. I hadn’t thought about him. I watch the NetFlix series, Cosmos, where he was the narrator and walks you through everything, and he does do a great job of explaining very difficult concepts very easily. Visually stunning show too. I don’t know if you’ve had a chance to see that, but it’s incredible.

Seibo: Oh, it’s one of my favorite shows. I mean, I remember seeing the original with Carl Sagan when I was younger. To be honest, there were times when I was watching that show non-activated, and the universe itself is just so fascinating I felt like it was getting me high. I was like whoa, just getting goose bumps, just hearing him explain these concepts. Fact is definitely more strange than fiction, especially if you watch Cosmos, it will just, like you said, blow your mind with just the way the universe works.

Matthew: Well Seibo, this was a great interview. In closing, can you tell listeners how they can find out more about VapeXhale and follow you?

Seibo: Yeah absolutely. The best place is our website, www.vapexhale.com or the word “vape” and then the word “exhale” after it. The company that we work with the athletes for is CannaAthlete, and you can find that at www.getcannaathlete.com. And our social channels are just VapeXhale and CannaAthlete, and if you guys are ever interested, I answer every single email. My email is seibo@vapexhale.com. I love hearing people’s feedbacks. Like I said, I answer every single email. I want to know what you guys think about what we’re doing with cannabis and athletics, what you guys would like to see in future products, and I really like to be engaged with our customers as well because like I said, the first model was created by the people for the people, and want to really continue that tradition because cannabis technology is moving really quickly and we want to make sure that we produce products that are really hitting the requirements of not just the patients, but also the rec users, as well as anyone aspiring to be the best versions of themselves.

Matthew: Seibo, thanks so much for coming on CannaInsider today. We really appreciate it. Good luck to you.
If you enjoyed the show today, please consider leaving us a review on iTunes, Stitcher or whatever app you might be using to listen to the show. Every five star review helps us to bring the best guests to you. Learn more at www(dot)cannainsider(dot)com/itunes. What are the five disruptive trends that will impact the cannabis industry in the next five years? Find out with your free report at www(dot)cannainsider(dot)com/trends. Have a suggestion for an awesome guest on www(dot)cannainsider(dot)com, simply send us an email at feedback(at)cannainsider.com. We would love to hear from you.

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The Five Disruptive Trends Shaping The Cannabis Industry Now

Running Cannabis Operations in Multiple States with Pete Kadens

pete kadens

Pete Kadens is the co-founder and CEO of GTIGrows.com. Pete and his team run cannabis grows and dispensaries in multiple states.

Pete goes over the challenges and opportunities in each market and his unique way of identifying the markets where he wants to establish a presence.

Learn More:
http://www.gtigrows.com

Key Takeaways:
[1:00] – Pete’s background and starting GTI Grows
[2:36] – Pete talks about the solar company he sold
[4:21] – States that GTI Grows has a presence
[7:41] – Pete compares and contrasts the markets GTI Grows is in
[12:52] – Decision-making process around picking geographies
[15:53] – Pete talks about obstacles GTI Grows has faced
[19:07] – GTI Grows’ methodology on choosing strains
[22:22] – Pete talks about extraction and in infused products
[25:00] – Pete talks about team building
[31:01] – Compliance challenges
[33:49] – Pete uses his solar background to incorporate energy efficiency
[36:33] – Pete gives an idea to entrepreneurs to solve one of his problems
[38:35] – Pete talks about his partner’s skill sets
[41:47] – Pete talks about the next three to five years in the industry
[45:53] – Pete answers some personal development questions
[49:18] – Contact details for GTI Grows

Important Update:
What are the five trends that will disrupt the cannabis market in the next five years? Find out with your free guide at: http://www.cannainsider.com/trends

Read Full Transcript

As cannabis Prohibition ends in state after state, some entrepreneurs are tackling multiple markets at the same time. Pete Kadens, CEO of GTI Grows, is one of those entrepreneurs, and I’m pleased to welcome to today. Pete, Welcome to CannaInsider.

Pete: Matt, thank you for having me.

Matthew: Give us a sense of geography. Where in the world are you today?

Pete: I am in a very snowy Chicago, Illinois where we have a foot and a half of snow on the ground here.

Matthew: It’s the new North Pole.

Pete: Yes it is.

Matthew: Tell us, what is GTI Grows? What does that mean? What do you do, and how did you get started in this crazy industry?

Pete. So GTI is an organization that operates cannabis cultivation processing and dispensary licenses around the country in several states. I got into the business, I’ve been an entrepreneur for the last 15 years. Even before I was an entrepreneur, starting when I was a little kid, I had an anthropological fascination with poverty and homelessness. It’s something that I dealt with and tried to figure out my entire life. Why would someone be poor? Why would someone be homeless? In that study, that anthropological fascination took me to a place where I started learning a lot more about the War on Drugs and started reading everything I could about the War on Drugs.

As I met homeless people and impoverished folks, what I found out is that poverty wasn’t just some permutation of addiction or a mental illness. It was in fact this other bucket, which was largely minority populations who were incarcerated for non-violent drug related crimes. So when an opportunity came up three years ago, when I was running a solar energy company, to invest in the marijuana space, I took advantage of it. And at that point, frankly, not because I wanted to enrich myself, but because I just believed in the cause. So that’s how I first got in, as a passive investor when I was running another company, and then I fell so much in love with it that I decided to leave that company and go do this full-time.

Matthew: Tell us a little bit about your solar company. That sounds interesting.

Pete: In 2008, I started a solar energy company that installed solar panels on the rooftops of companies like Target, Walgreens and Kohl’s, and basically scaled that company over a period of 7 years to a company that operated in 17 states around the country. Had a lot of fun doing it, but I got to tell what, the cannabis industry is a lot more fun. So it had a great run, and I will tell you this, I learned a lot about provincial regulatory frameworks. And that knowledge of how to play the law in different markets, because they’re all different in the solar space given the incentives and such, was fundamentally really, really import to being successful in the cannabis business.

Matthew: Do you feel like this solar adoption has maybe hit a new place? I mean, is it really getting in more to the hockey stick exponential growth curve now?

Pete: It definitely is, the cost of solar has come down dramatically. With that said, there are fundamentally still a couple of huge challenges and frankly not the least of which is the new administration and their views on renewables which I think will probably slow down the progress of solar for the next couple of years because solar still does need a little bit of incentive in most markets to work. Yeah, I mean, the cost curve is, over the time I was in the space, costs came down 75 percent, and frankly I expect that same cost curve to hit the cannabis industry in the near future here too.

Matthew: Good, if you’re prepared for that and still plan to be profitable, you’re one of the few. So tell me, what states are you operating in right now?

Pete: We operate in Nevada, Massachusetts and Maryland. And then we have an affiliate business that I was one of the first passive investors in, in Illinois as well. So really four states around the country, but I run the business that operates, licenses in Nevada, Massachusetts, Maryland and applying in Pennsylvania and Ohio here soon as well.

Matthew: I used to call my home state of Illinois the “Poster child for a dysfunctional cannabis market,” but it seems like even the politicians there are starting to make some changes that have made it a little bit better. Would you agree with that at all or do you think it’s still dysfunctional?

Pete: It’s starting. The law here was passed under Governor Quinn, who was a strong advocate for medical cannabis. Shortly after the law passed and after the applications came out, Governor Quinn was upset by Governor Reiner, who was not as big of a fan. You’re right, it is progressing. We started with 3,000 or 4,000 patients a year and a half, 2 years ago. Now we’re up to 15,0000 or 16,000. It’s still a smaller market than even comparably a market like Nevada, which has a lot fewer people in terms of total population, but yeah it’s growing. The advances it in largely have made have been in the expanding condition list.

Really there are 41 conditions, in which most are very severe, the cancers, the Parkinson’s, the epilepsies. Recently they added PTSD, which really advances the market. Still not on the list, and notably, is chronic or intractable pain, and that, as you know Matt, in many markets a real key element of the patient condition set.

Matthew: Are they requiring the fingerprinting, background check and prostate exam? I’m just kidding about the prostate exam, but the other stuff I’m not kidding.

Pete: They have made some of the components of accessing cannabis easier in terms of getting your patient card. So yes on the full background check. The fingerprint thing is a little bit diluted now, and it is easier for doctors to recommend. This is a fundamentally, really important change, and this is a change I expect to sweep the country. It used to be that physicians had to recommend a patient specifically for cannabis. They had to say, John is my patient and I recommend medical cannabis for him. They’ve changed that now, this is I think a very important change, to where a physician only has to certify that that patient has a condition that is eligible for cannabis. So the physician can say, yes indeed this person has epilepsy, and epilepsy is qualified condition. That indemnifies the physician, makes them feel a little removed from the recommendation of medical cannabis and thus removed from the liability of it. So that is also advancing the market in a big way. I think that’s fundamentally the most important change that happened here in Illinois recently.

Matthew: That’s good, a much lower bar. That’s definitely progress. Can you compare and contrast Nevada, Massachusetts and Maryland, their regulatory frameworks? What you like, dislike, the opportunities and challenges and both so people can get a sense.

Pete: Sure. This business is so hyper provincial. I mean, that’s why it makes it so difficult. Every market, every operating or legal market has its own fiefdom of laws. And in fact that’s one of my recommendations, for later I think you’re going to ask me, what do I recommend for the industry, is if there is any way for us to collaborate as states and standardize laws, that would really make things a lot easier for us operators in the space.

Maryland is a very restrictive state, 15 grow licenses, 15 processing licenses and there are 102 dispensary licenses, but that’s a small number of licenses for a population of roughly 7 million people, just under 7 million people. I think that’s a good thing personally. I’ m in favor of cap licenses and a rigorous application process. The laws there do not include edibles, which does take out a big chunk of the product offering, that especially some patients are looking for. I think their position there is we want to sit back and study the edible market and see how it evolves and see how standards around dosage counts and labeling evolve before we get in too deep into that space, and I understand that.

The Maryland market has had some real challenges. Unfortunately my company is involved in one of those legal challenges where the cannabis commission there has made some pretty serious mistakes. Unfortunately I would say, that up to this point, Maryland has been the most poorly run market that we operating in, in terms of how the regulations have been introduced and how they have been managed.

Nevada is a little bit more of a free-flowing market, and Nevada interestingly, is the opposite of almost every other market in the country. Most markets in the country are like Maryland where there’s a smaller number of cultivation licenses and a much larger number of retail establishments, and Nevada is exactly the opposite, 180 cultivation licenses and 60 dispensary licenses. That makes the Nevada market really interesting in terms of being a retailer. The one interesting thing about Nevada of course too is that there are only two real markets, which would be North Nevada, Reno, Carson City area and Southern Nevada, which is basically just Las Vegas. So because of that there’s nothing in between.

The third thing about Nevada, I always mention that’s kind of interesting, is many folks who live in Nevada are folks who have a firearm license. And because of the federal prohibition on accessing a controlled substance, if you also have a firearm license, many folks in Nevada are not able to access medical cannabis because they are not willing or able or interested in giving up their weapons license. So that has cast a shadow over the market, and I think that’s a very interesting dilemma that we’re going to have to face here in the coming years.

Then these two markets in particular, Nevada and Maryland, are interesting in that they are two states that recognize reciprocity. So if you have a medical cannabis license in another state that’s recognized by a physician and by the state, you can go to a dispensary in Nevada or go to a dispensary in Maryland and access medical cannabis. So that’s a nuance of those two markets that happens to be very interesting. And as you know, Nevada has voted in favor of legalizing recreational cannabis, which we think will be implement later in 2017.

In Maryland, I’m sorry Massachusetts is also a state that voted in favor of legalizing recreational cannabis which will be in 2018. It looks like July of 2018. Massachusetts was an interesting process. It’s a rolling process. There’s no real cap, no real stated cap on licenses, although the regulators talk about a cap from time to time. There’s about 85 organizations that have qualified to provide both medical and recreational cannabis to the state, to Massachusetts. The interesting thing there now is even after three years of being up and running, there are only nine organizations up and running and selling cannabis in Massachusetts, including only one west of Worcester. So there’s about a million people who live west of Worcester which is kind of the dividing line of Massachusetts, and only one operator is open in that market.

So it’s an interesting market headed for full legalization. Definitely has some challenges. I will tell you that the process of getting through the Massachusetts Regulatory Framework is a three-step process and it is very time consuming, meaning a year to a year and a half plus, and extraordinarily expensive to get through. So I apologize for being long-winded, but I wanted to lay the landscape for all those markets.

Matthew: Yes and Wister is pronounced Worcester for the rest of the country, right?

Pete: Right, exactly, except in Massachusetts where it is Worcester.

Matthew: Okay, and how do you go about deciding which city in a market to go with, in let’s say in Nevada or Massachusetts or so forth, what’s your strategy there?

Pete: This is something that GTI has been really focused on. We’re very surgical with our approach to where we locate. We mine a lot of data. We’re studying everything from demographics to household income to traffic patterns. And importantly, we’re studying where other people are going. While we are focused on the impact we make in our communities, as well as, the number of employees we can bring in and the benefit to patients, we’re also focused on shareholder value. And we believe we can derive more shareholder value by being in markets that are less competitive.

So we look at a major metropolitan area where people are clamoring, other operators are clamoring to be in, say Boston or Las Vegas, and we go elsewhere. We go to (13.45 unclear) markets where there aren’t as many operator servicing of those folks but there is as much interest and there is as much demand. We believe that’s the best way to preserve margins and to avoid significant margin oppression in a commoditized industry, an increasing commoditized industry.

In addition, from a cultivation perspective, we have a couple key factors that we look at that help us determine where we’re going to operate. And those key factors are things like we want relatively high minority density in the markets where we have a cultivation facility. We want relatively high unemployment. In other words, we look for areas that have been economically depressed for two reasons. One is we like to give back. I talked earlier about my anthropological fascination with poverty. That’s not just something that I have. That’s me and all of my partners share that, and we like to be a part of revitalizing communities. That’s a fundamentally important thing to us as people.

Number two, those are markets where the mayors and the city council members, they want us there. We are not a burden to them. They don’t see us as a nuisance. We’re not a not in my backyard type of business. Our 50 jobs or 75 jobs are critical to the development of their urban corridor and to revitalizing their city. And so when you have a community who stands up for you in the face of drama or in the face of people not liking what you do that’s where we like to go. We want to be supported by the community and we want to be in a communities where we can make a big difference, and frankly in communities where we can drive shareholder return.

Matthew: What about operating GTI Grows has been a bigger obstacle than you imagined initially? You mentioned you came from the solar industry. It sounded like there was a lot of regulatory headaches there, compliance headaches perhaps, but what about this industry has been a bigger obstacle for you than you initially thought that hey I’ll be able to surmount this, no problem.

Pete: Yeah that’s a good question. I tell people this all the time that this business is two times harder and three times more expensive than you could ever have imagined. And primarily because the mundane in any other business is incredibly challenging in this business. I just totally underestimated that, for example. In almost any other business I have operated, I’ve had directors and officers insurance, which is a standard insurance. It’s one of the more expensive lines of coverage because of the risk associated with shareholder lawsuits and other lawsuits, but it’s an important coverage to have so that the directors and board members of the organization aren’t naked.

In this business you’re hard-pressed to find anyone who will buy the policy that is of substance. And what I mean by that is I’ve been to 20 different insurance markets with 20 different brokers and people who I know and trust, who I’ve worked with, who have gotten me great deals even in challenging situations in the past. And they’ll go and they’ll get a directors and officers policy, and I’ll go immediate to the exclusions of the policy and the first line in exclusions is, “If you’re breaking any federal law, this policy is null and void.”

So they want me to pay $45,000 in premiums to protect my fellow directors and officers and yet they’re saying that my policy is null and void, effectively because of a federal breach, effectively the policy isn’t worth the paper it’s written on. In any other business, that’s just par for the course. That’s easy. The banking thing is a challenge. I mean, we have banking relationships, but it’s not easy. I mean, in my prior life I spent less than 1 percent of my time focusing on banking. We had people banging on our doors to try and get our deposits and get our lending business.

In this space, I’m spending 10-15 percent of my time, as the CEO of the company, focusing on accessing banking relationships and securing depository relationships. It seems like a waste of time to me, but unfortunately it’s a necessity. So I would say the most surprising thing and the biggest obstacle is that I’m spending, and the other executives are spending, a lot of time on things that should be easy and that aren’t revenue generating, but in this business they’re hard. And in effectively that impacts the bottom line. That impacts the top line. That can impact employee morale, and so you’ve got to work really, really hard to overcome those obstacles.

Matthew: Gosh sometimes is wish the politicians could see what the consequences are of the behaviors, the unintended consequences. I know most of them are trying to look out for their citizens or maybe they’re not. Maybe I’m in la-la land. Maybe they’re totally corrupt, but I wish they could see either way what happens. I mean, how you’re spending your time and how you could be spending your time. It’s crazy. Let’s transition to some more granular details. How do you decide which strains are the proper strains to grow and how do you come up with that? What’s your methodology around that?

Pete: We like to say that data is everything. So for example, just to kind of isolate hey we want to grow an OG Kush or we want to grow Golden Goat because it’s got a high THC, it’s not good enough. It seems fun, but really that’s not good enough to really be successful. Market data is everything. You have to match incidents rates in a market to the medicine that help alleviate those conditions. For example, in certain markets certain forms of cancer have a higher incidents rate. Heart disease or diabetes or things like that have higher incidents rates. Epilepsy, believe it or not, there are certain markets where there are higher incidents rates.

So you have to match the medical conditions and the incidents rates to the strain. Obviously for a spastic disorder, which is epilepsy, tourettes, (20.04 unclear) Syndrome, Parkinson’s, those diseases that cause the tremors, if there’s a lot of that in a market where you operate a dispensary, you want to be growing a lot more Indica, and you want to be growing at a higher CBD ratio of products that would settle those tremors for those patients. So we’re constantly studying data, but also this is an evolutionary process.

You come into a market, you study the incidents rates. I mean, the incidents rates for medical patients don’t tell you everything and you kind of make some educated guesses. I think it’s important though then that you study the data to understand who is buying what and why. So when we first opened up within one of our markets we did see that our highest THC content strain was the one that was flying off the hook, and it was 26 percent flower, it was a 26 percent Golden Goat flower and it was by far our best seller. I mean two to one, over the next closest flower.

Then as we started educating patients on the entourage effect and you don’t just have to have high content THC to get what you want out of this solution, we started to see those sales dip. Because what happens is, is people come into a market and they don’t know much. They’re novices at this. They have to learn and we have to teach them. Once we teach them, they adjust their tastes accordingly, and we’re educating them. So we’re using data, we’re using trial and error. We’re using experience. We’re using what flies off the shelf, and we’re taking all of that and putting that into a formula and basically determining which strains to grow.

The other thing is, and the last thing is, and this is more in the horticultural side, is there are certain strains that are more predisposed to things like powdery mildew and spider mites and other sorts of viruses, and we definitely try and stay away from those strains. For whatever reason, the genetics of certain strains are more predisposed to that, especially in an indoor climate. And the last thing you want is to be setting yourself to have to just eradicate a crop because of a spider mite infestation or a ton of powdery mildew. So we tried these very sensitive to using genetics that will allow us to avoid having those catastrophic viruses.

Matthew: Pete, how does extraction and infused products play a part in your business?

Pete: To me this is really the future, Matt. I mean, every week we look at our data, and our data tells us that people are migrating away from flower and more towards different types of product. The penetration is increasing for things like topicals, edibles, concentrates. And we believe that the business is becoming much more about experience and much less about strains. I have publically stated, I’ve given public discussions. I serve on the National Board of MPP (Marijuana Policy Project). I have stated a number of times, I think that we don’t do ourselves any service by using nomenclature like Maui Wowie and Great God Bud and OG Kush.

The reason I bring that up and I think that’s important is because we have to be a sophisticated industry, and I think the products and the nomenclature of the products has to be sophisticated along with it. So we’re working very hard to tweak our product offerings to provide more extracted products and to provide more experiences for people. I do believe that in 2-3-4 years that marketing will not be done via strain name, via flower. It will instead be done the formulation of some form of oil and extract. In other words, the example I always give, and it’s a little bit crazy, if I’m hiking in the Sierra Mountains and I want to enjoy the majesty and splendor of the Sierra Mountains, but I want to forget about the 40 pound backpack on my back, there should be a formulation of an extracted product for that.

I believe that the market is going to transition towards more extracted products that are formulated for very specific experiences and people will buy product based on experiences. So it is becoming a much bigger part of our business, and I think it’s going to be an incredibly important part of the industry going forward.

Matthew: Pete, running cultivation facilities and dispensaries is capital intensive. We know that, but it’s also human resources intensive. How do you organize your team members to ensure your goals are being met, especially when most people don’t have a background in executing on these things because no one really has experience in it because it was federally illegal, or still is federally illegal but it wasn’t state legal before. So how do you organize people to meet your objectives?

Pete: I and four other partners and all of us bring different assets to the equation here. I think the thing that I’m most well-known for in our partnership is my knowledge of hiring and recruiting and building up a team. That’s kind of what I’ve done with my prior businesses. So first we implement a system that ensures that we hire the right people. That system that we use is called Top Grading. It was invented by a guy named Bradford Smart out of Peoria, Illinois, and it was then basically kidnapped by Jack Welch of G.E. who made it famous, but the founder is this guy, Bradford Smart.

Effectively what he says is, no matter what industry someone comes from you should make sure that they have a track record of success. So even if someone was working behind the counter at a fast food restaurant or if they just got out of college or if they were actually in the cannabis space, you should see consistent success. You should see promotions. You should see that their manager elevated them and believed in them. You should see indications that they had a good attitude. So we use this system and it’s a very thoughtful, thorough interviewing process. Then we ask really, really tough questions. And you don’t have to have experience in the cannabis space to answer these questions.

Let me give you an example. We’re hiring a dispensary manager right now for our facility in Massachusetts, and one of the questions we asked him, and it’s an essay-type question, one of the questions we asked him is you find out that your best salesperson, your best patient consultant has been stealing money. Not a ton, $50, $75 a day out of the drawer and a couple weeks later you catch up with it and you see it on camera, and this person is a really, really talented salesperson, your best salesperson by a country mile. And if you fire him the patients will revolt. They’ll go elsewhere because he will undoubtedly get another job elsewhere. What do you do? Now that is a really tricky question.

Matthew: Yeah that is a tricky one.

Pete: But fundamentally it’s an important question and it’s important to assess how people answer that question. And that question, someone could have been managing a fast food restaurant, again, and would have had credible background. They don’t have to have cannabis specific knowledge, but we want to understand how people think. We want to understand what their attitudes are towards their colleagues and their employees and their subordinates and their managers too. So we ask tough questions. We go through a ridiculously challenging and arduous hiring process, and then congruent with hiring slow is frankly and honestly firing fast.

I mean we don’t screw around with people who we know are going to be cancerous to the culture. We don’t screw around with people who are not A players and have bad attitudes. We move them out quickly. And that may scare off some people from working at GTI, but the fact of the matter is is that I’ve learned over my 15 years of employing people that there’s nothing more that an A player hates than sitting next to and working next to a B player. So we focus a lot on, not on cannabis specific knowledge and the fact that say we, I’d advocate that we actually like the cross-pollination of other industries coming into our orbit, but we focus on the human being, their track record of success. Matt, this is not just senior level people who are managing operations. This is all the way down to the woman or the man who is trimming flower.

Matthew: Wow, such a good point there. I’ve been part of teams where you’re in a group of seven or ten people and everybody’s got a positive attitude and working hard except for one person brings it down, and it’s like you can’t help but notice it really does ratchet the whole operation down. There’s something about the morale, and the vibration of the team just gets anchored by that somehow. Also the difficult thing is that everybody has a bad day sometimes. So I guess you just try to look for patterns that are more medium and long term versus short term.

Pete: Yeah, everybody does have a bad day and unfortunately that includes me too. So we do recognize that. I have a theory around managing and employing people and I call it unwavering authenticity. If I’m transparent and really honest with you, there’s nothing more than a colleague or an employee hates than a manager who isn’t transparent with them about things like compensation or just about what’s going on in a business. Are we going to get acquired? Are we selling? Stuff like that really scares employees, and they don’t like that. So there’s this thing that I try to establish, kind of the core of the organization, where I am unwaveringly authentic with my colleagues, in exchange just by the associated property, they will in turn oftentimes be unwaveringly authentic with me. And that transparency allows for someone to be a little pissed off some days.

It doesn’t preclude you from kind of going on a rant every once in a while. There are times I have who is a little more reserved and like to really be contemplative, and I advocate to him, hey it’s okay to get mad once in a while. That is okay because those are human emotions and we don’t employ robots. We employ humans and they have emotions and they have bad days. And so you’re right, as long as we don’t see a trend there that makes us uneasy, those things happen and we deal with them on a case-by-case basis.

Matthew: You’ve compared and contrasted the states a little bit earlier, but is there any particular compliance challenges that you’re suffering through right now or have recently that you feel like may not be on the public’s radar neither in Nevada, Massachusetts or Maryland to an extent? It sounds like Maryland there’s legal proceedings going on, but for Nevada and Massachusetts, anything in the compliance structure there that’s particularly difficult to deal with?

Pete: Yeah, I mean, those states, all three of these states frankly, Maryland, Massachusetts and Nevada, have done a pretty good job. I mean, there have been issues in Maryland that we’re in the center of, but all-in-all I think the regulations are pretty good. There are some interesting things going on. For example, there’s some issues around hardship, and this has really reared its head in Massachusetts. There are some requirements from the Commonwealth on how to treat patients who are going through hardship.

So those are patients who are perhaps on federal benefits, who are impoverished. These are patients who I have a real soft spot for, but the problem is is there’s a number of people who are trying to take advantage of that. And as a result, there was this idiosyncratic thing happening where the laws weren’t necessarily congruent with reality. And reality was is that yeah we want to offer hardship allowances to people who can’t afford the medicine because there are no benefits that cover this medicine obviously. We also can’t give it to everybody, and a lot of people are trying to take advantage of the system and take a hardship allowance so that they can get their medicine for half off.

So, that isn’t just Massachusetts, but Massachusetts is where it’s kind of reared its head, but that issue is a pervasive issue and a really, really challenging issue and the markets are going to have to figure this out. We get questions all the time, when we go to open forums or community forums. In fact, I had a question the other day, which is a tough question to answer. There was a gentleman in the audience in a community that is kind of a little bit of a down and out community, and he asked me, he said, so we can’t use any benefits to secure this medicine. I said sir, unfortunately you can’t. And he said, so what you’re telling me is cannabis is for rich people, and that’s a tough thing to answer.

Unfortunately we don’t make the rules because if we did, it would be a lot different. That’s one of the regulatory compliance challenges that we see in other markets. We have to run a business, and we have to be profitable or else we do no one any good, but by the same token too, we want to offer hardship allowances to people who really deserve them. And so how do we manage through that, and that’s a really challenging thing. We’ve seen it in Massachusetts but also in all of our markets.

Matthew: How is your background in solar? I mean, I’m constantly getting questions about how can I conserve energy in my cultivation facility. What’s the better lighting, LED or traditional? All these types of questions. Do you try to bring any of your energy efficiency models or solar background into the grow facility for energy efficiency?

Pete: Yes. So I think there’s a difference between energy efficiency and solar. Energy efficiency is the process of looking at how you’re consuming power and tweaking that and reducing your demand. Whereas, solar is an onsite generating asset. The important thing that I explain to people, because everyone always says, oh is your facility powered by solar. I say no it’s not, and the reason it’s not is because our energy demand is so intense, I mean, millions of kilowatt hours, that if we were to throw up a solar installation on our roof or in the field around our facility, the offset would be so insignificant. Solar panels are still not that efficient.

So roughly 19 percent of the sunlight that hits a solar panel, only 19 percent of that sunlight actually converts into kilowatt hours. And so you have to have huge, huge, huge, you would have to have 20 acres of solar panels to make a dent in the energy demand. So I don’t advocate that solar is a good investment because I think your offsetting 1 or 2 or 3 percent of your total load. It’s going to make a marginal difference at best. I would advocate, and this is what we’re studying now, is that it is better to study the operations in the facility. Know your mechanical load, your lighting load, the way you bring CO2 into the building. It’s better to study those facets and to figure out how you can save kilowatt hours and be more efficient with the functions that are actually up and running than to add new power sources like solar onsite.

Matthew: Okay, that makes sense. Although Elon Musk there in Nevada in his huge factory might disagree with you. Are you pretty close to that Tesla factory in Nevada?

Pete: We are relatively close, but the problem is is that he has not quite yet commercialized battery storage. Battery storage would make a huge difference. That factory, the Giga Factory, is attempting to bring down the cost of battery storage and to commercialize battery storage at a price point where all of us can afford it. If we had battery storage, then all of a sudden maybe it makes more sense. Still though, that facility isn’t commercialized to the point where the cost of battery storage has come down. Then if you integrate battery storage, at this point, solar definitely wouldn’t make sense unfortunately.

Matthew: So you have a background as an entrepreneur, both in the cannabis business and before that, do you have any pain points where you’re wishing, god I wish an entrepreneur would come in and solve this problem for me. I’m too busy running my day-to-day or I would do it myself. What do you see where someone could step in and add some real value for a business owner like you?

Pete: I think the cool thing about being in inefficient and (36.39 unclear) market like cannabis is that there’s so much to improve. I don’t even know where to start. But the one that’s interesting is in the solar energy industry there was a portal, this is a very simple solution, but I kind of like simple things. There was a very simple solution called DSIRE, and it was this portal that anyone could go to in the industry and you could, in one click, figure out what the laws were, what the parameters were, how you had to comply with the laws in any state around the country. You could even drill in and figure out, okay I’m in Maryland. What are the laws in Baltimore County? What are the zoning requirements? How far do have to be from a place where children congregate.

It was this one stop shop for all this information. And when you end up spending a lot of time, energy, effort and frankly money with lawyers doing is researching the provincial laws and even the hyper provincial laws specific to a city or a county or a municipality relative to zoning and permitting. It’s not all in one place. It reeks havoc on your legal bills, and I really wish that the industry would come together, and essentially that’s what the solar industry did. The solar industry came together and collaborated with North Carolina State University to bring this database together that was updated in real time.

As we know look, on any given night in America, a city council could meet and change an ordinance. And so the other thing is this portal has to be responsive to those overnight changes. It has to be real time. I wish that we had that. And frankly, I think that would even the playing field for companies in the space. We, because maybe we’re a little bit better capitalized, can afford the lawyers in all these markets to study the markets and keep us up-to-date. There are a lot of other companies that can’t. I do think the industry should level the playing field in that regard, and that would be a huge win for the industry.

Matthew: Tell us a little bit about your partners. You’ve got some interesting people working at your business with different backgrounds, and I would love to hear a little bit more about them.

Pete: Yeah, I always say, you cannot do good business with bad people, and I’ve learned that over the time, over my 15 years in business and I have had some partners who frankly I probably regretted having. And I look back and I’ve learned from that. The luxury of picking your business partners and picking your colleagues is just this awesome luxury. And I work with an amazing team, but specifically four of the greatest guys in the world, each with different backgrounds.

Eugene Monroe is a former NFL football play, the 8th pick in the draft. Grew up in total poverty, the youngest of 16 children to drug addicted parents. Overcame everything to get to the University of Virginia. And last year kind of came out and became the first active NFL player to advocate for the use of medical cannabis in lieu of the opiates that frankly were killing his fellow athletes. So he’s just a great, smart guy who’s had real life experience that makes him believe that medical cannabis is the path to begin to alleviate the opioid epidemic.

A gentleman named Ben Kovler, who is a fascinating guy in his own right. He wrote a book called Fundrum My Conundrum, which is a very well-read book on puzzles and games, and Ben thinks in terms of solving puzzles and solving riddles. That’s how his brain works. You can buy his book Fundrum My Conundrum on Amazon. That’s a paid promotion for him. But he wrote this when he was twenty, and he’s a super smart guy and I just love the way he thinks. He balances me because I run businesses a lot more by gut and intuition, and he uses a lot more data, puzzle solving, analytics than I do.

Then got two other partners, Anthony Georgiadis, who is heavily involved in the industry. Anthony and I have known each other for 20 years. We have some good stories about one another. He was a fraternity brother of mine at Bucknell University. And then a gentleman named Andy Grossman, who started as an investor and love what we were doing so much, after he retired from the hedge fund industry, decided he was going to come work for us full time. So I’ve got a great crew of people, and like you said, from totally different walks of life.

Matthew: Yeah, it’s really nice to have people with different backgrounds and balance the ying and yang and all the different things involved. So that’s great because if everybody is exactly the same, then someone’s redundant.

Pete: Exactly.

Matthew: So where do you see the industry going in the next three to five years? It’s already changing now. I mean, especially after all the ballot initiatives in November. That was just a huge, huge change, but where do you think things will settle in three to five years? Especially I’m interested in what you think in terms of automation because there’s a lot of manual processes in this business. Do you see more automation coming in, because we are dealing with a plant that’s very high priced. I mean, if we’re talking about tomatoes, maybe not so much, but when a plant is over $1,000 maybe there’s room for some more automation. What do you think?

Pete: Yeah, no I totally agree Matt. I mean, like I said earlier, I saw, I personally first-hand witnessed the cost of solar coming down by 70 percent over 7 years, 75 percent over 7 years. I’m not sure that kind of cost compression is going to be as accelerating in the cannabis space, but I will tell you it’s coming, and it’s going to be led by industry leaders who thoughtfully figure out how to produce high quality cannabis at lower prices. I mean, you’ve seen it in markets across the country. I think most notable is Colorado of course, but that cost compression is coming fast and it’s through robotics. It’s through automation. There could be some artificial intelligence in there.

I frankly think it’s through just labor efficiencies, or what I call the learning curve and the experience curve. As we get more and more experienced at trimming plants, at drying and curing plants and packaging the plant and labeling, as we get better and better, we learn more and more. And so I think that the costs are going to come down over the next 2 to 3 years between 40 and 50 percent. And I think there are some organizations that won’t be prepared for that, and frankly they’ll be distressed as a result of that cost compression. I think there will be a market of opportunity that opens up for people who are well capitalized to begin to roll up the industry and consolidate it based upon that cost compression because there will be companies who just can’t get there. They can’t invest the cap X in systems and people and processes that help them reduce their costs, but that’s coming. And the day of reckoning associated with that cost compression is coming as well in my opinion.

And the other thing, I talked about it earlier, is I just believe there’s going to be this major shift in experiential marketing. I just believe people are going to be buying product for what it does for them, not just based on the phenotype, which is the taste, the smell, the feel. I think it’s going to be marketed to them based upon the experience it gives them, and I believe that’s going to be a huge momentous shift over the next two to three years, as this market becomes more educated as consumers and it becomes more pervasive and consumers have more access to it.

Matthew: If you could go back and prepare or change something about how you went into this business, what would it be?

Pete: I think we’d all raise more capital. I would have more lawyers in-house because you end up spending lots of money on outsourced lawyers, as I talked about earlier, each market has its own legal nuances. When you bring legal in-house I think my analysis is that you save money. So more capital and actually I’m advocating for more lawyers in-house with a real marijuana skill set. I think one of the challenges is we go to these professional service providers on the outside who to this point have had no experience in cannabis. And so you pay them, in large part, to get trained and educated.

I think one thing is I probably would have spent more time off the clock, hopefully, educating my professional service consultants, my accountants, my attorneys about the specifics of the industry so I wouldn’t had to have paid for that. I would like to go back and collect some of those dues and fees that I paid, but those are two things that I think of. I mean, the capital thing again. It’s just way more expensive than you could ever imagine. We’ve raised a good amount of capital, but I think we need even more because the challenge around real estate. There’s very little financing. There’s no such thing as a commercial mortgage in the cannabis space. And so you’re deploying your equity capital into real estate investments and that’s a real challenge I think. So I wish I’d had more equity capital to deploy for real estate, and I wish I kind of had more lawyers in-house. Those are the two things.

Matthew: I like to ask some personal development questions to give listeners and opportunity to get to know you a little bit better. With that, is there a book that has had a really big impact on your life or your way of thinking that you would like to share?

Pete: Yeah. I don’t know if there’s one book, but I’m going to give you two quick ones. The first, and it sounds kind of cheesy, but I read it when I was 12 years old, and I think it had a huge impact on my life. I think other than the Bible, I actually think it’s the most well-read book of all time, and that is How to Win Friends and Influence People by Dale Carnegie.

Matthew: Oh my gosh yes, I think I read it about the same age. That’s crazy.

Pete: Pretty simple stuff, right. The sweetest sound in the English language is a person’s own name. Don’t use I, the word I, the pronoun I, if you can avoid it. I mean, really simple stuff. But when you read it and you see and watch the stories and the anecdotes, the tales of a real life anecdotes about how using someone’s name could impact the success of a person over a lifetime. It really hit me hard and it made me a believer in being dignified and how you treat other people. I think that has hopefully been reflected in how I’ve employed people and how I work with my colleagues and being humble, using other people’s name. Simple stuff, but that really did make a big impact on my life.

I think the other one, just more from a business perspective is, there’s a book called American Icon and it’s a book about Alan Mulally. Alan was the CEO of Ford during the 2066-2010 crisis, and what he did with Ford during that period of time was a total metamorphosis. And it went from the brink of total collapse to being enormously successful. In many ways he did it by using data. And because I’m not predisposed to use data, my mind doesn’t think like my partner, Ben, I had to be trained on how to use data, and that book was really important in teaching me how to use data to better assess how to build businesses.

Matthew: Is there a tool, web-based or otherwise that you consider valuable to your day-to-day productivity?

Pete: Unfortunately I would say the tool, the app that I use most often at this point is the Southwest Airlines app, and I hate to admit it. But given my travel schedule to all these markets where we operate, that’s what I’m using most often. But truthfully, I’m not an app guy. Maybe it’s a little odd, but I still read the hard copy of newspapers and magazines, and now what I’m doing, which is kind of interesting, is I’m actually reading the hard copy of the newspapers and journals where we operate our businesses. So in Massachusetts, the Springfield Republican, and in Maryland, the Hagerstown Herald. And in Carson City, Nevada, the Nevada Appeal, and to me I want to really have the flavor of what’s going on, on the ground in the markets where we operate. So instead of using apps, I still like kind of touching and feeling the newspaper and so I get those sent to me and that’s what I read.

Matthew: Well thanks for Pete. I’m also going to link to your TED Talk so people can listen to that from the show notes here. So I would encourage everybody to take a listen to that too, if you would like. Just visit www(dot)cannainsider(dot)com and go to Pete’s interview, and you’ll be able to find the link directly to that TED Talk. Before we close, Pete can you tell listeners how they can find out more about GTI online and connect with you?

Pete: Sure. Our web address is www.gtigrows.com. And from that website you can find out all you need to know, and I think on my bio there’s a link to my email, if anyone wanted to reach out to me.

Matthew: Pete, thanks so much for coming on the show today. We really appreciate it. Good luck with the 20 inches of snow just dumped on Chicago, and good luck in all the different markets you’re operating in. You got your hands full.

Pete: Thanks Matt, it was a great time. Thank you so much.

Matthew: If you enjoyed the show today, please consider leaving us a review on iTunes, Stitcher or whatever app you might be using to listen to the show. Every five star review helps us to bring the best guests to you. Learn more at www(dot)cannainsider(dot)com/itunes. What are the five disruptive trends that will impact the cannabis industry in the next five years? Find out with your free report at www(dot)cannainsider(dot)com/trends. Have a suggestion for an awesome guest on www(dot)cannainsider(dot)com, simply send us an email at feedback(at)cannainsider.com. We would love to hear from you.

Please do not take any information from CannaInsider or its guests as medical advice. Contact your licensed physician before taking cannabis or using it for medical treatments. Lastly the host or guests on CannaInsider may or may not invest in the companies or entrepreneurs profiled on the show. Please consult your licensed financial advisor before making any investment decisions. Final disclosure to see if you’re still paying attention. This little whistle jingle you’re listening to will get stuck in your head for the rest of the day. Thanks for listening and look for another CannaInsider episode soon. Take care. Bye-bye.


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The Five Disruptive Trends Shaping The Cannabis Industry Now

Helping Cannabis Businesses Get & Keep a Bank Account

sundie seefried

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Sundie Seefried is the CEO of Safe Harbor Private Banking and shares why she is successful in helping cannabis companies get and keep a bank account. She also covers how to interpret The Cole Memo to stay in compliance with regulators and how she is successfully processing 65-70 Million dollars a month.

Key Takeaways
[0:51] – Sundie’s background in banking
[2:31] – What Partner Colorado Credit Union does
[5:51] – The current landscape of cannabis banking
[8:18] – Understanding The Cole Memo
[10:51] – Why Sundie is successful in cannabis banking
[13:38] – How Partner Colorado Credit Union makes money
[16:48] – Sundie talks about day-to-day banking challenges
[20:19] – Sundie talks about how they deal with all the cash
[22:12] – Common regulator concerns
[25:14] – Does banking work for companies that are licensed in multiple states?
[29:02] – How do debit and credit cards work for cannabis businesses
[31:57] – Sundie gives advice on banking in the cannabis industry
[33:44] – Sundie talks about her trip to D.C. to meet politicians
[35:37] – Cannabis banking three to five years in the future
[40:39] – Sundie answers some personal development questions
[43:38] – Contact details for Partner Colorado Credit Union

What are The Five Trends Disrupting Cannabis Industry?
Find out with your free guide at http://www.cannainsider.com/trends

Read Full Transcript

In the United States banking for cannabis related companies is a huge problem. Here to tell us about it and how you can have a responsible and safe banking relationship is Sundie Seefried, CEO and President of Partner Colorado Credit Union. Sundie, welcome to CannaInsider.

Sundie: Thank you Matt, glad to be here.

Matthew: Before we get started with banking, can you tell us a little bit about your background and how you got into banking and specifically, helping cannabis companies get banked?

Sundie: Sure, it’s an interesting story because I was headed to retirement. I’d actually put my notice in with the credit union here, and I had about six months left. And I was meeting with some attorney friends and they said well you’re a banker. Why can’t our clients get any bank accounts? And I said, well gee, we just came out of a recession, and nobody is interested in taking on additional risk, and I think our regulators really kind of just shake their heads no when the topic comes up, but let me do some research.

So I went and did some research, and I was really surprised by my findings. And I guess, the safety issue really stuck out, and when I explained to the board how the cash was being handled in their own communities they were a little appalled as well and feared for their members and their families. And the more we learned the less we could ignore the situation around us. The second thing that really bothered me about my research, as we were going through it, was that this was an industry that was emerging and legitimizing itself, and the lack of banking actually was forcing them to do less than legal activities within the system in order to get payment services.

So we were technically making criminals of the industry by not banking them, and I felt as a banker, our side of that equation, we weren’t living up to what we should be doing for our communities, especially as a credit union. So we really felt compelled to right this wrong and find a solution for Colorado.

Matthew: Well I’m glad you did. Can you tell us a little bit about Partner Colorado Credit Union, where it’s located and who you serve?

Sundie: We are in the greater Denver metro area, so we have about four branches around the city. And we were chartered in 1932 as a postal credit union. Post office employees pulled their funds and decided that they were going to create a credit union, and that’s where it started, as a cooperative. The interesting thing about credit unions is that we were actually chartered by Congress to serve the underserved and the unbanked. So philosophically this entire project fit into the foundation upon which credit unions were built to exist. And since we exist to serve our communities, it was important that we stepped up. Our communities changed when marijuana became legal and therefore our objectives and our strategies needed to change with our community. Safe Harbor Private Banking is actually a division of Partner Colorado Credit Union, and the reason we named it separately and hold all the accounts separately is for additional security purposes on these accounts.

Matthew: How long exactly have you been working with cannabis companies? How far does it go back specifically?

Sundie: I started my research in 2014, which is right after they issued the guidance from D.C. And we actually launched the program in January of 2015, after about 6 months of jumping through hoops and getting ready and developing all of our strategies. So it’s just been about over two years now, and we have about 110 clients. And we process probably $65million to $70million a month, which we feel pretty good about that because our intent was to get the money off the streets. Our first ten charter members were really quite instrumental in the success of the program.

They really trusted us, first of all, to bank with us, and then second of all, they understood that for us to bank the business we really needed to understand the industry. And so they were really generous with their time and their education and bringing us on-site and showing us all of their monitoring systems and allow us to just see everything in order for us to build a program that incorporated everything about the industry into this program and be able to mitigate all of the risk factors that we would find. So I really give them a lot of credit for helping us get this program launched.

Matthew: Can you paint a picture of where we are right now in terms of banking for cannabis related companies here in the United States? Because there’s a lot of people listening that will have one or two really bad pain points for their cannabis business. There’s people right now that are just starting their cannabis business, and they’ve heard there’s issues and they’re not quite sure of what they are. They just know there’s some pain. And then there’s even people in Canada or different places in the world that are just appalled by what’s going on with our banking. So maybe you could just paint a picture at a high level of what the situation and the problems and some of the opportunities are.

Sundie: Well first of all, I think the industry offers a lot of opportunity for the banking world, but the discrepancy between the legality at the state level and the illegality at the federal level makes it very difficult for anybody to enter this business. We are subject to prosecution and heavy fines just for doing what we’re doing today. It hasn’t been a practice of what’s happened in terms of people trying to serve the industry. Most of the time programs just get shut down, but you can’t put the entire credit union or banking institution at risk for a segment of business because what would happen is if it wasn’t done correctly, an institution could be easily fined millions of dollars, which would shut the entire organization down, not just the program.

So banks and credit unions are in a situation where they want to serve the industry, they see the legitimacy of the industry and the opportunity, but to enter that they’re thinking they’re risking their entire organization. And the larger the organization, the less likely they are to enter it. So what you find are more smaller community organizations, like ourselves, that would enter the market and pay attention to the community and take that risk, and it’s still a risk, but the way we went at it, and the way the other credit unions are going at it, is to be very transparent and very close to the regulators to make sure we’re doing it right.

I think everybody with whom we speak on any level knows the money needs to get off the streets. And so that is a factor that we took into consideration. If they want the money off the streets, even though there’s this discrepancy and the legality issue, are they really going to come in and prosecute us, or are they going to come in and say, somebody is going to have to start somewhere and this money has to get off the streets and we’re going to tolerate this until we can fix the legality issue. And that’s pretty much, I think, what we’re banking on.

Matthew: And can you talk a little bit about what the Cole Memo is and why that’s such an important memo?

Sundie: The Cole Memo is what I would consider a real show stopper for a lot of banking institutions and credit unions that want to get into this. And the reason is with our normal business accounts we don’t have to know how they’re protecting themselves on every level from prosecution or legal ramifications. But with this industry, the Cole Memo spells out the eight priorities, and every licensed entity needs to make sure they’re not implicating one of those eight priorities set forth in the Cole Memo.

Now to take that one step further, the bank environment has to make sure the client in this case isn’t doing anything to implicate one of those eight priorities. So if you take just one priority, which says, don’t sell cannabis to a minor, it’s difficult enough for the business to protect themselves, but how does your banking entity actually guarantee that that client is not implicating that priority and actually selling to a minor. How can anyone guarantee that product isn’t going over state lines? I don’t think anybody can guarantee that at any level. So the best thing we can do is monitor the business practices, get into the organization, see how they’re protecting themselves. The more they mitigate the risk, the less likely we are to get stuck in a situation where the regulators are thinking that we’re not watching the shop.

So that’s why the relationship is much tighter with cannabis organizations than regular organizations with whom we bank. It’s extremely important for us to watch this particular issue and to know that our clients know how important that Cole Memo is to them because it is also important to us.

Matthew: So the thing that strikes me about what you’re doing here is that you’re able to actually have live bank accounts for your clients. I mean, I keep on hearing all the time about people in the industry, oh I just got this bank account closed, I just got this bank account closed. But you seem to have a model here that works because you’re really, let’s say, focused on the details of what the entire ecosystem wants. So tell us, how are you able to accomplish this when all these other banks and credit unions just don’t seem to be able to?

Sundie: Well first I have to give credit to those who came before us, because I studied them and their actions and activities to make sure that I wouldn’t make any similar mistakes, or that I could learn from their experience. What I learned was if I was going to go into this, we had to go to the very highest level of compliance. And the thing about the guidelines that they give us is that they only give us red flags. The rest of it we have to make up. We have to meet the criteria sufficient enough to find those red flags and avoid any criminal activity.

So you’ve got every banking institution and credit union out there creating their own processes. So I said to myself, well I’m just going to create the highest level stand, and I have over 30 years of experience in the banking environment. So I had enough information and enough experience to know what an auditor would be looking for, what a regulator would be looking for, and I was able to create solid mitigating strategies. What has kept us in the business at this point in time is that we have spared no expense on resources, and we told all of our clients this coming in the door. That we have to operate to the highest level, which means it’s a compliance program first.

We now for those 110 clients have 10 full-time, management level bank secrecy officers, which is not a low cost resource. Sixty percent of their time is spent on compliance, not service. And even after two years, if I look to streamline the program I have to say that I have not been able to find any manner in which I could streamline this. And the same thing about that is I don’t know that I want to streamline this and put anybody’s account at risk because our whole objective was never to be that bank calling somebody and saying, we have to close your account because we didn’t do it thoroughly enough.

I think what really drove us, because this was not an easy process for us in any way, shape or form, but what really drove us was doing the right thing for our community, and the more we saw that cash starting to flow through, the more we started wondering where in the community this was being stored and hidden. And so I think that just gave us a good driving factor to keep us on track to get this done.

Matthew: Now how does your credit union make money from cannabis companies to keep the lights on and to continue to operate? Because typically credit unions are kind of low fee, but you have a high overhead model here with these banking secrecy officers and a lot of the compliance infrastructure you’ve set up. So how do you make money?

Sundie: Well I think everybody in the industry who’s banking will tell you that banking is expensive and it is. As a credit union professional, it’s been difficult for me to even charge the fees we have to charge, but at the same time, I know it won’t always be that expensive, but until that black market is minimized and the majority of industry has a bank account, we are going to have to keep this high level of resources on the task. We charge on incoming funds because that is where the risk is. Everything we do is based upon the dollars and the checks and any monetary instrument that comes into an account. We have to track that. We have to report that. We have to validate that, and we have to monitor that.

When I say monitor that, I mean also monitoring outgoing funds. We can’t just monitor incoming funds. We have to also, according to our guidelines, make sure that none of the funds are outgoing to any illicit or criminal activity. So it is expensive. It just depends on how people price it, but I kept watching this the first year and I think my clients realized it was a test for us. And we have made a sufficient amount of money. I can tell you that actually we are charging the same thing we started charging year one. So we were right on track with that, and it’s been plenty and sufficient money to do it. I haven’t really thought about increasing the fees because it’s covering the costs plus a little extra, which we do need to make money.

Matthew: So you charge as the money comes in, that’s the highest risk point is. Can you give us an idea of is there a range of what you charge per how much comes in, or is there a risk profile assessed by the type of companies, or how does that work specifically?

Sundie: They’re all charged the same amount, and it’s between 30 basis points and 45 basis points, at this point in time, but with the consideration of our national launch in program. We’re going to have to match the standards of the national program, and unfortunately taking a program nationally is not inexpensive. So if you were depositing at this point in time a million dollars a month, your fees would be about $3,000, and therefore when you get to the lower end they’re paying much less because they’re depositing less.

Matthew: So kind of between a quarter and a half of a percentage point.

Sundie: Yes, that would be about right.

Matthew: You mentioned your secrecy officers. You have a growing team there. Can you tell us what your day-to-day life is like? You’ve give us some details there, but day-to-day, week-to-week, what’s your life like? What kind of issues are you grappling with? You’re looking at transactions coming in and going out. You’re probably having things that your secrecy officers are coming back to you with. What other kind of issues do you grapple with, or do you find challenging, or if you could wave a magic wand, wish they would go away?

Sundie: I think the interesting thing too I’d like to say is that we are trying to slow our program down because we’ve gotten to a comfort point where we don’t want to have this program get much larger. You can only do so much at a certain size organization. We have limitations to manage too, which is unfortunate because there’s one thing. It’s really difficult for every one of us in the program is somebody calling and saying I just need a bank account, and they have all these stories, and we want to solve the problem, but we can’t solve it for all of them.

The most time consuming thing we do is onboard and do our due diligence, which can take two to three weeks, easily. And then all of the on-site activities, so bankers are required to go on-site and meet with the owners and the managers and understand all the cash flow, understand all the strategic direction and keep track of any changes in ownership or key personnel. That’s all required, so that’s very time consuming. And if we didn’t have to do that, I think life would be easier. In a normal business account, you probably have to do a drive-by once a year to make sure the business is still there.

So we’re looking at quarterly visits to do all of this, which is very, very time consuming. The rest of our time, as I said, 60% of it is spent on compliance. What that means is they’re looking at the deposits going into the account. They’re looking at the validation documents on a regular basis to make sure that the sales that are being reported to the state match the deposits going into the account. That legitimizes those transactions, but it’s not just sales deposits that require validation. There’s a lot of other cash and money flowing through these accounts. As an example, investment funds.

People would think that would be an easy thing to bring into a bank account, but even that must be validated. We have to know the source of all funds coming in to a cannabis account, and we have to validate it. So if there’s ten investors, we have to validate the process in which those investors are vetted. Are they accredited investors? Are they friends and family? We have to ensure those dollars coming in from investment funds are (1) not coming from any criminal activity or source out there, and (2) as they’re being returned to the investors, that they’re returning it according to contract and not necessarily… I mean, there’s a channel where additional money could run through if we’re not watching.

So it’s quite a process. That validation process is probably what takes up the most of their time. And while it would be nice to automate it, I think we’re going to be able to automate the sales activity as it matches up to the state and point of sale systems, but you’re never going to be able to validate automatically every deposit coming through an account. That personal element will always be there, which requires the banker’s attention.

Matthew: Now I’m curious, how do you deal with the massive amounts of cash that cannabis companies need to deposit? I mean, most of them are taking cash only. They have ATMs in their dispensary. Some have found ways to take debit cards and other inventive solutions that are out there, but what about all the cash?

Sundie: Yes, well we’re at approximately $2.4million a calendar day. That’s not even a business day. So you can imagine there’s no safe way for us to manage that kind of money through our staff and our branching footprint at this point in time. So we have been forced to use armored services to pick up the cash from each of our clients, and then take it to a vaulting facility, verify the cash, look for counterfeits, count it, and then they pool all of our client money and they take it to a federal reserve account.

This takes it one step further in terms of safety. Our members are safe because it’s not coming through our branches. Our employees are not fearful because they’re handling so much money. And then the businesses themselves are not carrying this cash all over town. So it’s just a big safety factor all around, and I think while it’s a little more expensive to do the armored services, it definitely starts taking the fear out of the communities about where that money is because they know it’s being handled from start to finish by the right professional resources.

Matthew: Yeah, because that’s a big bounty, a big booty, if some criminal gets their eyes on that much cash.

Sundie: Yes.

Matthew: I’m surprised that we don’t hear about more armed attacks and things like that because that is just such a mass amount of cash. But anyway, so when you talk to regulators is there one or two concerns that pops into their heads the most, that you hear the most, like we want to know this, we want to know that, or if you can give us this detail or that detail that assuages their concerns?

Sudie: I think right now the greatest concern at the regulatory level is the change in administration. We were starting to build some comfort, I think, at that level. And I think everybody thought it was going to be business as normal, as it was under Obama, but when the administration changed and a lot of talk has been out there everybody is kind of up in arms as to what’s going to happen and are banks and financial institutions in harm’s way at this point in time by continuing to bank this business.

So the biggest issue we talk about is, unfortunately, what’s your exit strategy. If there is one thing that comes out of the federal government, say the revocation of the Cole Memo, we’re all going to have to jump into action. Not just one of us, we’re all going to have to jump into action because they’re taking protective measures away. The other thing we’re talking about is the amendments are driven toward medicinal and not recreational or adult use as well, and you can’t bank half a business. So if they don’t straighten out the fact that all cannabis is the same for banking purposes, we are going to have to deal with that issue as well. It’s impossible for me to bank half a business.

The liquidity issue is driven by the exit strategy. In other words, if I’m sitting on $20million or $30million in deposits in cannabis money, I can’t use that money. I can’t loan it out. I can’t invest it. I must always have that money in reserve prepared to exit at any given day, which causes credit unions of my size to actually go out and borrow money to keep that money liquid. So it costs me money to have that money sitting on deposit. So those are issues that we’re dealing with at this point in time.

I think my bigger concern is if anything comes out of D.C. that would cause our regulators such discomfort that we would have to enact an exit strategy, putting $70million back on the streets in Colorado, inside of a month or two really should concern everybody. It definitely concerns me. How does that happen without disrupting an entire community and disrupting the lives of all those employees that are working for the industry. I think many times in D.C. they think a lot about just the business, and they forget how many employees would be forced back into a cash paycheck if not banked.

Matthew: Yeah, I don’t even think they think that far ahead. That’s my impression.

Sundie: We keep telling them that.

Matthew: Yeah. So if I’m an edibles company and I’m in multiple states, maybe through licensing or some other way, can I have one checking account, or how does that work?

Sundie: Well this is an interesting question because it goes back to the FINs and guidelines and the interpretation of the red flags and what were my mitigating strategies to meet that red flag. My interpretation in this particular situation is that you cannot co-mingle any funds derived from the sale of product between states. Therefore if I have ABC Company, Colorado and they want to have ABC Company in Nevada, they have to have two very separate bank accounts and keep that money completely separated. Of course that’s my interpretation.

Matthew: And do you have to close accounts often, and if you do, what are the typical reasons for that?

Sundie: Actually in two years I think we’ve closed less than five, five or less. So we don’t do that often. We’re really good about educating incoming clients on the rules. And when the bankers are on site quarterly they’re always talking about things they don’t want to do and put their bank account at risk. So because we’ve been able to offer the continuity of banking for them, our clients are more than cooperative to make sure that they’re doing all the right things to keep that bank account safe and the program safe.

Things that would cause us to close an account would be first and foremost if a business was not compliant with state regulations surrounding cannabis. That’s (26.49 unclear) and guideline is very clear on that. So if there are issues and a license is revoked, that account has to be closed. If licenses stop getting renewed, we have to determine at that point in time what’s happening and that’s probably going to cause us to close an account. Obviously violations and citations don’t necessarily force us to close an account, but it causes us to do deeper investigation in that organization. Ask them, how did this happens? What are you doing about this? How many violations is this now in the last 12 months? And then consider the risk of that organization at that point in time.

We’ve had citations happen or violations. And our clients are really good about being forthright and forthcoming and have solutions and do the right things, and keep themselves out of problems and try to prevent to the best of their ability for this to happen again. So that really makes us feel really good they have that level of cooperation. The last thing would be a lack of cooperation with their banker in terms of providing timely and sufficient documentation to justify deposits. Every dollar that banker allows to run through their portfolio has to be validated, and that banker is personally liable and can be banned from the financial industry if they don’t do this correctly. So it’s really up to the level of comfort that bank secrecy officer has with that account.

So I always tell clients, you got to keep your banker comfortable because they’re the one who actually has to make the call in the end on whether or not they can stand in front of federal agency or regulator and say, I can show you how legitimate all the dollars are that run through this account. So that’s why it becomes very important that the cooperation and providing documentation is there between the client and the banker.

Matthew: Now do you allow for your clients to accept debit and credit cards in a dispensary or even for wholesale transactions? I mentioned that briefly, but how does that work?

Sundie: That’s an interesting topic, and I think the majority of people I know in the industry are still holding their breath hoping that Visa and Mastercard and the other credit card companies will come around. This is really not something that is up to us. Really it’s up to the Visa, Mastercard, American Express, those companies as to whether they want any cannabis funds running through their channels. And so, where it really falls is to the sponsor bank who is allowing those transactions and guaranteeing those transactions to some level.

If a sponsor bank is willing to accept those, then we are willing to accept those. What’s happened and we did have a sponsor bank in the very beginning of our program, and we had several of our clients up on cards, and all of a sudden the volume got so high that the sponsor bank got nervous and then shut the program down. So That’s where the shutdown happens. The other thing that happens in this arena is a lot of times a sponsor bank isn’t aware it’s a cannabis organization and suddenly they find it. And then when they find it they go to that merchant processor who signed up that client and they just start shutting down all of their accounts because they know if they brought one cannabis entity, then they probably brought more in and they weren’t completely transparent.

So more than likely it’s not always the cannabis company that’s misrepresenting themselves. It’s the broker in between, the merchant processor that allows that to transpire. There may be some that are allowing this. We just don’t know where they are or who it is and they won’t probably open up to everybody because of the volume. We, on the other hand, have been beginning work with Wallet Solutions, mobile device solutions, real debit and ACH solutions that will be used on the phone where the consumer can go in and type in a code and just make a payment, and the money flows right through us. Right from the dispensary from the consumer into an account and distributed into the dispensary each time.

So those things will take a little time and adjustment, but I think in the long run, because it’s all mobile, I think people will adjust rather than have to worry about carrying cash. And ultimately in my opinion if the cannabis industry can move to these wallet solutions and implemented them, that’s a pretty big consumer base, and I think Mastercard and Visa and the other credit companies will probably lose out on a pretty good market.

Matthew: Yeah. Now if there are people that are listening that are looking to start in this industry, what advice would you give them about banking?

Sundie: I do get a lot of phone calls like that regularly. I tell them to do their research. First see if there’s anybody else being banked, and prepare for cash transactions for the majority of the time until the market changes and more banks and credit unions get into this. And in order to prepare for cash transactions, I would recommend that they hire somebody that understands cash handling. An ex-banker is a good bet, if they’ve handled cash and they’ve handled accounting and that type of thing.

As financial institutions, we are very limited in terms of what we can do. We have concentration limits. And in our particular case, we need to keep our program less than 10% of our assets. So once we start getting close to those limitations, we have to start slowing down the program or stopping the program in order to work within our concentration limits, which is also what we consider our comfort zone. So in our particular case, the cash flow has gotten so high that it’s just too much for once institution in Colorado to do it. We know that we need other institutions, and we’re trying to help in terms of bringing other banks and credit unions to the table.

That’s one of the reasons we went public with what we’re doing because nobody believed anybody was banking this. And that in itself was a risk to go public, but until I would go public and say we’re doing this, it can be done, it’s not easy, then other people weren’t going to be willing to follow. So I’m hoping that what we’re doing is going to help open up options for the industry.

Matthew: Now you went to D.C. last week and met with some politicians. Can you tell us what you did there?

Sundie: Sure, our trip to D.C. we have each year where all the credit unions from across the country fly into D.C., and we lobby all together and get caught up on all our governmental affairs and meet with all of the legislators, and they meet with us. I think there was over 5,000 people from the credit union industry there. And in particular we did two things. The first thing we did was we introduced our program, the Safe Harbor Program, to many credit unions while we were there, so that they understand that there’s a program that they can use that’s been proven and they can implement in their own state.

The second thing we did was I think even more important and that was we had a congressional briefing with four credit unions that got up in front of these congressional staffers and offices and told them what the banking issue was and the safety issue, and the fact that this money needs to continue to be banked and any quick decision in D.C. was going to put this money back on the streets. And I think that we made a lot of headway. A year ago people wouldn’t even want to talk about it. Two years ago they would laugh us out of the offices and say, nobody in D.C. wants to talk about marijuana right now.

So I think the fact that we had the ability to hold a congressional hearing and that we had a lot of attendees, and they were interested in knowing what the issues were as far as banking the money, I think we’re making progress. I think that’s forward movement. It doesn’t mean we’re going to sell the problem anytime soon, but each year we’re progressing forward.

Matthew: I know it’s hard to speculate, especially with a new attorney general, but where do you think we’re going to be with banking in three to five years in the U.S.?

Sundie: Everyone with whom I speak wants this money banked. They want it banked for the accountability purpose. They want it banked for the taxation purposes. They want it banked so they can monitor where the money is going, and they can start sorting out the bad players and the criminal activity. If it’s unbanked, they can’t do any of those things, not accurately. So it’s not that they don’t want it banked. It’s about getting legislation passed and through and signed, and it’s going to be a process.

I think it will probably take a couple more years, but I really believe that, after we launched our program, I really believe that people are going to start stepping up to the plate because they know that it’s working. And they also realize the money needs to be banked. Again, because we’re presenting this to credit unions, they’re concerned about their communities, and they know that they need to look at their communities and the safety in their families and members. So I believe credit unions will be the group of financial institutions that says we need to get this done. We were put here and created by Congress to serve the unbanked and it’s definitely an unserved market.

So I think we’re going to see progress. I think we’re going to see a few credit unions step up to the plate this year and some banks. And I think then after we get a footprint across the country where maybe four or five are operating under the program, then I think people are going to say okay, there’s a way to do this that the others are doing it and we can follow them.

Matthew: No I have a question for that’s unrelated to cannabis bur related to banking. When I go to the Office of the Controller of the Currency website, which anybody can go to, if you just type into Google “Office of Controller of Currency,” you can see the derivative exposures of different banks. And the big, big banks that almost everybody is at are doing a lot of casino level stuff that people just don’t understand. Derivatives trading, which not necessarily itself is bad. It’s just when you look at the size of the derivative exposure of some of these big banks, which almost everybody banks at, it’s in the trillions. The notional value of this derivatives exposure. And eventually we don’t know which snowflake will cause the avalanche here, but at some point this derivatives trading will have a crash again. I’d love people to understand that credit unions don’t have this going on do they? I mean, you don’t see, you’re not doing any kind of derivatives trading at a credit union are you?

Sundie: Credit unions are regulated quite differently than the banks, and our ability to invest in certain things is very limited. Once again, because we’re not for profit and we’re a cooperative. So we can only invest in things like government securities and mortgages. And the majority of the funds that we bring in in the cooperative are supposed to be loaned out to the very cooperative members. So that’s really how we operate. If we need more money to loan out, we raise interest rates. If we have a lot of money to loan out, we lower loan rates because that’s exactly how we invest our money. We really turn it right back and invest into our communities and our members.

So you’re absolutely right that credit unions are not making those risky investments. And that really was great, especially during recession because that’s what kept most all credit unions safe during recessionary times. We all had the same issues in terms of the housing market, but we didn’t make those loans and we didn’t participated in all of that activity that caused the problems that occurred

Matthew: Let’s move on to some personal development questions. I like to ask a few personal development questions to help listeners to get to know you a little bit. With that, is there a book that you feel like has had an important impact in your life or opened you up to a new way of thinking?

Sundie: I am not a big reader. I have to put that right out there. I think what I’m doing here and where we’ve gone as a credit union was really based upon the way I was raised. And my parents were Baptist missionaries my whole life, and they really taught us to do good by the people around us, to pay attention. So it’s probably why I ended up in a credit union as a career, but they always taught us that you need to do the right thing and don’t ignore it.

So when this project came up it was just all around us, and it was just pervasive in everything I did in terms of moving this forward. In fact I will tell you that I probably say it to myself two or three times a month when things get tough. You’re doing the right thing. Just stay on track, this is the right thing to do and it’s not always going to be easy, but you’re supposed to do the right thing, and people respect that. I find that if I had gone into this for the reason of profitability or to build a big reputation, even off of myself, it wouldn’t be the same thing if it was just for doing the right thing. I think some of that stuff happens because of what you do. I think a lot of good things happen when you do the right thing. I think that’s what really drives both myself and my team to keep going forward, even in the face of adversity.

Matthew: I think this is like karmic banking is what I’m hearing here. Doing the right thing.

Sundie: It’s kind of a credit union philosophy. It’s kind of pervasive in how we get taught in terms of banking through credit unions.

Matthew: One more question. Is there a tool, web-based or otherwise, that you consider vital to your day-to-day productivity?

Sundie: I have to say, as it pertains to this particular project, one of the toughest things I think I’ve ever tackled in my life is still the good ole fashioned talent, drive, perseverance, organizational skills and time management skills. But even beyond that, that’s just entrepreneurial talent, and beyond that in this industry you have to have that perseverance in order to sustain that performance long term, because it is such an uphill battle to do anything in the cannabis industry, that you’re always taking that two steps forward and one step back.

So sustaining a high-level performance is really necessary. This is not an industry or even banking program for anybody that doesn’t have a high-level of performance that they can sustain for a long period of time. You really have to have courage to be in this industry and a lot of stamina.

Matthew: How can listeners find out more about Partner Colorado Credit Union and Safe Harbor?

Sundie: That’s an interesting question. We actually had someone send… they came in to open an account the other day, and the interesting thing was he said he had heard about us because we were serving the cannabis industry. And then he had purchased my book and he read it and he couldn’t believe how community focused we were. So he and his wife decided that this was the place they wanted to bank because we were doing good things for our community.

If you want to learn about Partner Colorado Credit Union, you can go to our website which is www.partnercoloradocu.org. Again, that’s www.partnercoloradocu.org. The second place that you can learn about what we’re doing in terms of the cannabis program would be www.navigatingsafeharbor.com. That’s where you’ll learn a little bit more about the program and the journey and process it took to get where we are today.

Matthew: And you mentioned a book there that talks about community banking. What book is that?

Sundie: So very early I was getting a lot of phone calls and I really didn’t have time to take them because I needed my eyes on this program. So I wrote this book called Navigating Safe Harbor, and it answers a lot of questions. the reason I really wrote that book and put it out there was to get the conversation started. Bankers aren’t always the most progressive people, and to start a conversation regarding cannabis in the boardroom is very sensitive. So this book actually walks them through how to start having that conversation. All the things they need to consider about the industry in order to start a program of their own.

Matthew: Great, great, I’m guilty of not really thinking that deeply about when I make a deposit at a credit union that hey, this is going to a small business in my community. It’s like the circulatory system of communities, the cash flow, the money. So I’m glad that you’re doing that and I’m glad you’re doing this work Sundie, and thanks for coming on the show and educating us about banking. We really appreciate it, and thank you for what you are doing in the community there. It’s really important.

Sundie: Well thank you for having me. I have really enjoyed meeting the community. I’ll tell you that much.

Matthew: Great, well good luck to you.

Sundie: Alright, thank you Matt.

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