Ep 327 – Insider Details the Mega Trends Impacting the Cannabis Industry

paul rosen globalgo

What will the cannabis industry look like in the next few years? Paul Rosen of Global Go shares the nine trends shaping cannabis worldwide (and wait till you hear #4).

Learn more at https://globalgo.consulting 

Key Takeaways:

[2:22] An inside look at Global Go, one of the world’s leading consulting firms for cannabis and hemp businesses

[4:34] Paul’s background and how he got into the cannabis space

[10:03] The nine trends shaping cannabis on a global scale, beginning with catastrophic failure 

[16:20] The divergence of medical and recreational markets

[21:36] The end of Canadian domination in cannabis and the rise of the US

[29:02] New FDA rulings on CBD

[35:39] Biosynthesis and what it could mean for the cannabis industry

[40:57] Why “cash remains king” in cannabis

Click Here to Read Full Transcript


Matthew Kind: Hi, I'm Matthew Kind. Every Monday look for a fresh new episode where I'll take you behind the scenes and interview the insiders that are shaping the rapidly evolving cannabis industry. Learn more at cannainsider.com. Now here's your program.

Today we're going to hear about the nine trends impacting the cannabis industry from industry insider Paul Rosen of Global Go. Paul, welcome to CannaInsider.

Paul Rosen: Great to be here. Thank you so much for having me.

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

Paul: I am in beautiful Canada where I am from, in the province of Ontario. I wish your audience could see where I am. I'm at my country home, which is on Lake Ontario, I think the third largest lake in the world. We're here in late fall, early winter. We had a bit of snow this morning, which happily did not stay on the ground. This is where I've been sheltering in place along with my family since, really, COVID struck hard in March.

Matthew: Okay. When are they going to let us Americans back up into Canada? I'm feeling a little bit like a secondhand citizen here? What's the deal?

Paul: Yes, I could [crosstalk]

Matthew: I know you were personally responsible for it.

Paul: Yes. I'll just make a quick phone call and everything will be fine. Let me say, Matt, that it's a reciprocal thing that we also are under some restrictions to just being able to enter the United States. We need to have a viable reason other than just feel like going on a holiday or visiting. I think with the promise around the Moderna vaccine and the Pfizer vaccine, there's a lot of optimism that will start in the spring, to start to see something that looks a bit more normal. I do think Americans can come to Canada still, but they need to have a compelling reason.

Matthew: Okay. Got it. How about just like our deep desire for authentic maple syrup? Is that a good reason--

Paul: So good. I was just driving in my neck of the woods and all the trees are being tapped for sap right now, so it is that season here. [chuckles] Yes, Canadians were good at maple syrup, bacon, doughnuts, hockey, and of course, cannabis.

Matthew: Yes. We're going to talk a lot about that. Good segue. Paul, before we do that, what is Global Go at a high level?

Paul: Global Go is a advisory platform that is delivering and set up to continue to deliver a whole range of service offerings to the global cannabis industry, so kind of my core thesis, which is something I know we're going to touch upon, is that cannabis already has gone global and more and more countries are beginning to adopt sensible cannabis reform, whether it's medical or recreational. I don't have enough fingers in both hands to count the number of countries that have transitioned if you will. I think that we can learn a lot from some of the early countries like Canada, where I was an early entrepreneur, as to what best practices work and what not so great practices should be discarded.

Global Go is really designed to help not just emerging cannabis entrepreneurs, but either mature or emerging cannabis entrepreneurs in any jurisdiction, minimize their risk, to be honest, because this is a risky industry. We have a whole range of service offerings from the very basics of applying for licenses, to meaningful consultation on growth technology, extraction technology, to brokering deals by being able to act for buyer or seller to move cannabinoids compounds from one regulated jurisdiction to another, to guide on capital strategy, to guide an M&A strategy. From the micro to the macro, we're a full-service advisory.

I call it a platform because we've opened up affiliate offices in a number of the countries that I predict will have a bright future in global cannabis. These include Colombia, Brazil, Ecuador, Switzerland, Cyprus, Mexico, Singapore as a hub into Asia. We're really building what I think is going to be like the McKinsey of cannabis. When I say we, myself and a lot of really talented, hard-working individuals that all have years of experience in the global regulated cannabis industry.

Matthew: Okay. Can you talk a little bit about your background and what you were doing before Global Go?

Paul: Definitely. I'm in my mid-50s just to put an age to a voice, which means I've been at it careerwise for a long time. My ark is kind of interesting, I think, as to how I got into cannabis, which leads to Global Go. I'm an attorney in Canada. Although I stopped practicing law in the late 1990s- Matt, I was a constitutional and criminal defense attorney, a wonderful career, the foundation stone of everything that happened since, but I was really more built for business than I was to be a lawyer. I just never loved selling my time by the hour as a business model. I could kind of calculate my lifetime earnings when I was about 30 years old, which concerned me, and I would really enjoy the risk and the potential upside of business.

I've been a small business owner and operator my entire career. Even as a lawyer, I opened my own law firm, but I entered the cannabis industry way back in 2012. That was around the time that the Canadian government was beginning to promulgate a commercial cultivation licensing program in Canada for cannabis. Those words really got my attention, licensing, commercial cultivation. I had a strong sense, like a lot of other early Canadian participants, that this was going to be quite a big economic boom to the country and a great opportunity for risk on entrepreneurs to enter the industry, and I did. I started a company with three co-founders that originally was called Hortican Incorporated, and then, it name changed to PharmaCan Capital Corporation.

We figured out quickly that our skillset was to analyze deals rather than necessarily run or apply to run a grow up, and so we became the first Canadian investment company to invest in other cannabis operators companies. I took that company public with my colleagues in Canada in 2014. I think we were the third public company in Canada. Then the company was corporate rebranded to the Cronos Group in October 2016, shortly after I had departed as CEO. That whole experience, which for me, lasted about four years was the deepest possible dive into what a regulated cannabis regime or platform would look like. It really blew my mind as to what the possibilities were around this plant, both as a medicine, as a wellness product, but also as a source of great commercial potential.

I've been super active in the cannabis industry. I won't bore you and your audience with everything I've done. I started a number of companies, one of which is Global Go. The reason I started Global Go, along with some talented partners, is when I wasn't starting my own companies, I was doing advisory on the side for a whole range of great cannabis companies, quite a few of which have gone on to great outcomes.

I was never an advisor. I always looked at consultants or advisors with a little bit of a skeptical eye. I always felt like entrepreneurs do advisors' advice. Probably, I was a little bit too prideful in that assessment but it was how I felt. I did discover that I had a knack, especially for helping early-stage entrepreneurs navigate both the opportunities and the potential risk around startup culture. I never really thought that was a scalable business, but it was a great pleasure to be able to mind share with all sorts of cool companies, not just in cannabis, in multiple industries, learn from them, but also impart what experience had taught me and wisdom and experience are really something that you earn over time. It's not a function of intelligence. It's a function of experience.

I love that advisory business because I really felt that I was adding value and I could see the impact that was having on young companies, but to me, it wasn't scalable. Then I met a great colleague of mine named Tom Zuber, another great colleague named Phil Valvardi, and we decided to launch this company together because we saw what was a scalable platform and we have scaled quickly. We have about 15 staff now. We operate in, as I mentioned, seven different countries, and we have a pretty incredible client list growing all the time.

I've been all-in Matt in the cannabis industry. Like once I got pulled into the gravitational orbit [chuckles] of the cannabis industry, I really just had to reorient my other companies that continued to operate, restaff them, replace myself, and I've never really looked back. I just cannot express my affection for this industry enough. I love it. I love what we're doing. Global Go is a vehicle to extend all the knowledge that we've picked up in North America over the last eight years, and help transport that to emerging economies even if emerging means a new state in America. To us, it's all really one global industry at this point.

Matthew: Okay. Yes, every other industry seems boring after hearing and this one for a while. It seems vanilla, so I agree with you. Let's talk about the nine trends affecting the cannabis industry. Jump right into the first one, what is catastrophic failure, and what do we need to know about it? 

Paul: Yes. We highlighted nine things that I think are-- They're not exhaustive. They're illustrative of things that are, at least from an investor perspective, or a market participant perspective, things to be aware of. Catastrophic failure in the cannabis industry looks like companies going into a form of creditor protection or receivership, possibly being taken over by their debenture holders or their debt holders if they can't maintain their covenants.

We have seen in the last year, even a year and a half, an increase in the velocity of either restructurings, workouts, or just outright failures were companies that were here last year are not here anymore. I don't want to go through a laundry list and name names, but we can definitely see, especially when structured debt came to the cannabis industry and just for the audience, this is highly, quite frankly, fairly expensive debt with very strong security attached to the loan, and usually with underlying warrant coverage. It's like a free carry on, the future of the equity, a guaranteed coupon, regardless of how the equity performs, and if the equity does not perform an ability to take over a company.

One recent example, just to put a name to it, would be iAnthus Capital, which is a company that actually I sat on the board on, a multi-state operator with assets in multiple states, but they recently were unable to maintain or service their debt covenant, and this resulted in them being offside with their lender. Their lender was senior secured, and the lender enforced security in that instance. What that meant for the equity holders, was that the lenders during the enforcement of security took over about 98% of the company, which isn't a catastrophic failure in the sense of the company will continue on, but for the equity holders, it was a near-catastrophic failure.

The impetus behind this is a few things, Matt, as to why this was happening. It's a pairing of one, a tremendous enthusiasm in entrepreneurial startup culture to start cannabis companies. We have had literally tens of thousands of cannabis companies founded in the last five years, which I will argue, as the industry matures out is probably more than the actual amount of companies that are necessary to service this industry. We start with the fact that there are maybe too many market participants for a mature market to absorb.

Then we look at the fact that this is a very capital-intensive industry. It's very hard to grow a meaningfully viable cannabis asset without a lot of capital. We've seen companies in the cannabis industry now collectively raised or individually raised into the billions of dollars. Canopy Growth Corporation, Aurora Cannabis, Cronos, these companies have gone to market and each raised over a billion dollars, in some instances, multiple billions of dollars during their lifecycle. As long as the money is coming into the industry it protects us from understanding who are the more talented operators, who can really swim and who maybe can't swim but has this giant life preserver called unlimited capital.

We went through a period of time where capital, if not unlimited, was not particularly discriminating so I would say that the seeds of catastrophic failure where companies are going to, unfortunately, not have any future. Many will, but quite a few will not. Probably, more will not make it than will make it just because of the number of market participants. It began to assert itself when there was a bit of a bear sentiment into the overall industry, which we can correlate to more or less April of 2019. That's when stock prices started to go down, and that's when capital markets started to seize up a little bit.

You could say that the cannabis industry in some sense, like a lot of startup industries, could be compared to an enormous game of musical chairs with too many players and not enough chairs, but capital is the money. As long as the music's playing, you don't realize that, necessarily, there's not enough chairs or you don't know who's going to not find a chair, but when the music stops, and the music is the availability of capital for everybody, then you will see that there are not enough chairs. Chairs being total addressable market, too many participants, and without capital, these companies cannot continue on.

You can even see right now, Matt, some of the most mature names in our industry, Canopy Growth Corporation, Cronos, Aurora. Now, these are Canadian companies, but they're big names that trade on US exchanges. We're into year seven for these companies. I should know. I was involved with-- I knew them all well from day one. None of them are profitable yet. If you're not profitable for years and years, what you need to keep going is more and more capital, but that capital is not available to everybody, so we are beginning to see that type of market event where there is companies going out of business or going into a form of creditor protection, and I think this will continue. Even though the markets are warming up a little bit again, I still think that this will continue.

What it means for investors or for new founders is to be very aware of the risk, and to make sure you understand not only how much capital you need, but where that capital is coming from.

Matthew: Okay. Let's go to the second trend here, the divergence of medical and rec markets. What's important there?

Paul: Well, that's a really meaty issue. I'm glad that we're going to go through this. My belief is, and I think this is a belief shared by quite a few market participants, is right now we could talk about medical and we could talk about recreational, but the truth is, it's conflated into one amorphous market, featuring both medical and recreational patients. To me, if you look at the budtender, right now, the budtender, in a dispensary is almost playing the role of patient advocate. You have a lot of patients who are new to the plant as a source of healing, and their doctor or their nurse practitioner isn't necessarily strain knowledgeable.

They may not know or even want to know that you'd want to use a bubba kush for this or an OG for that. It's just not traditional medicine where you have approved products, approved by your health authority like the FDA, and you know, "Hey, if you have a blood-thinning issue, this is your medication. If you have an infection, this is your medication." Right now, I will say that both medical and recreational patients are going to a dispensary which is really meant for recreational ultimately.

Where we start to anticipate is that now that cannabis is legalized or partly legalized in many countries, we're finally having the type of necessary medical research or drug development, if you will, that will allow cannabis to go through a conventional drug approval process. We had the first instance of this a few years ago when GW Pharmaceutical got received the FDA approval for Epidiolex, which is a best in class, cannabis-centric remedy for Dravet syndrome, sometimes referred to as childhood epilepsy. This is what we'll call the canary in the coal mine that in no way was it a sort of a sui generis one and done that won't happen again. That's where the medical industry is going to go.

It's going to go into approved targeted formulations that physicians can or nurse practitioners can prescribe with the same certainty that they currently prescribe a whole- pretty much every other approved medication and that the true patients are more likely to seek the certainty of an Epidiolex, for example, versus the uncertainty of, "Hey, I've made a high-CBD low-THC strain, which probably will mirror some of the salutary effects or efficaciousness of an Epidiolex." You would be like, "No, that's okay. I'm just going to go with the approved medication."

I say that like that budtender that I certainly know and love, that budtender, I probably help, but some of those budtenders kids to university in my cannabis consumption career, but it doesn't strike me as overtly medical, and I think when I see patients in need asking a budtender, "This is my symptom--" The budtender is trying. They're not trying to be a disingenuous actor, but they're not trained medical practitioners and they don't have necessarily the body of scientific research to be be able to say with certainty, "If you suffer from neuropathy, this is what I recommend. If you're having early-stage Parkinson's syndrome, this is what I recommend. If you're an ALS patient, this is what I recommend." You're just putting too much burden on a non-trained professional that doesn't have the datasets to prove that.

It doesn't mean that you can't go to a bartender and say, "I'm having trouble sleeping," and they can say, "Well, a lot of my clients or customers or patients have said try this." Let's just say that cannabis is one of those few medications that it's okay to trial and error. In fact, it might be essential because there's virtually no toxicity to it and it doesn't really contraindicate any other medication. It's not like the moral hazard of being wrong is just that it didn't work, not that it caused devastation to your organs or contraindicate with another medication that you were taking.

What I see inevitably is that the medical industry is going to behave like medicine, where there's approved targeted formulations that are proven to be efficacious for whatever condition you're seeking. The rec market will look a lot like it looks right now except that the rec market will really become more or less a giant CPG market with all the CPG playbook, quality of brand and quality of distribution, quality of manufacturing, having an outsized impact upon who were the big winners in a post-prohibition era recreational market.

Matthew: Let's talk about the next to you, which is the end of Canadian domination, the rise of the US. Talk about that a little bit.

Paul: As a good Canadian patriot there's very few things we dominate. To give up any one of them is painful. We want to be the best in hockey, which, of course, we are. I think everyone knows that. All flippancy aside, Canada continues to be, in my opinion, the most important cannabis jurisdiction in the world right now as measured by a whole number of different measuring sticks. Let's start with the fact that it's still, as a federally legal market, the largest federally legal market in the world. The United States if you aggregate all of the states, I'm talking about adult-use not medical, if you aggregate all of the states, of course, you have a larger total addressable market but it's not federally legal and that means it limits its market development.

Canada we're 37 or so million people and so just a large market to be in. Canada was- early we had a commercial medical cannabis cultivation in 2013. We went full rec in 2017 so we've been at it for a while. The big advantage that Canada had is it became the World Bank for Cannabis. Our capital markets were not at all shy in a way that US capital market participants like investment banks have to be because we were federally legal. It meant that there was no risk to jumping into the industry. Our transactional investment banks started, at first, raising money for Canadian companies but very quickly began raising capital for a whole range of companies regardless of where they're from.

If you look at, for example, Matt, the United States and you just do a roll call of the largest public cannabis companies in America. Every one of them has raised most of their capital in Canada using one of the Canadian investment banks, and every one of them is listed on the Canadian Exchange because they're not able to list on the NASDAQ or the NYSE. Curaleaf listed on the CSE, the Canadian Securities Exchange. Green Thumb Industries, GTI listed, on the CSE. Harvest listed on the CSE. Cresco Labs listed on the CSE. MedMen listed on the CSE. I'm just getting going. I think I've made my point. I don't need to name them all.

We became the wallet of global cannabis which allows us to have an outsize impact on the development of cannabis because it's such a capital-intensive industry that if we're the place to list a company-- By the way, I only mentioned US companies. Columbian have come here. Israeli companies have come here. Companies from the UK, from Germany, they've all come to Canada to either list or raise capital. Just by giving us that capital platform it ensures Canadian, I wouldn't say domination but a very strong and enduring role for Canada outside of our own borders. We have the largest rec market. We are the global bank for cannabis more or less. Of course, there's capital in other jurisdictions but we're still where most of the capital is being raised.

Then you look at the third measure which is who's exporting the most regulated cannabis in the world right now? It's Canada. We are exporting close to 20 countries right now, Israel, Brazil, Germany, the UK, et cetera. This is a future look at what cannabis is going to look like. We've developed the most export-minded economy in cannabis right now. We have some reasons why that is. In order to export regulated cannabinoids, the first condition precedent is that you be federally legal. Canada can export to other federally legal jurisdictions. We cannot export to America because it's not federally legal. Conversely, America cannot export anywhere because it's not federally legal.

This global trade in cannabinoids is increasing in frequency. It's allowing Canada to play an outsize role or has allowed Canada to play an outsize role in the development of global cannabis because we're raising the money, we're often exporting to emerging jurisdictions, and we're often taking stakes in these companies. A lot of our larger more well-capitalized [unintelligible 00:26:47] companies have either bought outright or made meaningful investments in a whole range of emerging market participants in other countries. We really have done an incredible job for a small country for the reasons I've outlined becoming the most dominant cannabis jurisdiction.

With that being said, that's not sustainable in the long term. Inevitably we're going to need Canada to always fight above its weight, but for the global cannabis industry to develop, to scale, it's going to require, quite frankly, the United States to take its rightful role as the global center of commerce. In some ways, we're beginning to see that already. Certainly, if you look at the economic performance of the largest US cannabis companies, they're cleaning the clock, at least, currently, of the Canadian companies. They're starting to put up meaningful revenue numbers but they're showing profitability in a way that the Canadian companies have not yet been able to achieve.

I think that as soon as America resolves the dichotomy between the legality at 35 plus states and the federal illegality, as soon as that is resolved then, immediately, America is going to become the most important and dominant cannabis jurisdiction in the world. The same things that made Canada so dominant, America is going to have access to the same opportunities. Import, export, a domicile to raise capital, and the largest federally legal total addressable market in the world, that's what made Canada dominate, and that's what will erode Canada's domination.

When America has the federally legal resolution, all those things will just naturally start to gravitate towards America. Which is not to say that the Canadian industry is going to atrophy or necessarily undergo major compression. It just means that it will continue to play an important role but it won't dominate quite the way it has.

Matthew: What about the FDA and CBD as the next trend? What's important there?

Paul: The important thing to note there whether you're an investor or whether you're a market participant is we're still waiting for the FDA to set out with clarity what you can and cannot do with CBD. Specifically, there's a whole range of issues if you're a farmer. There's a whole range of issues around hot crops, what's the threshold? Is it going to be 0.3%? Just for clarity, the 0.3% is the maximum ratio of THC and biomass in order for it to be categorized as hemp not as regulated cannabis.

There is a lot of uncertainty from both the FDA and the USDA about what the final rules are going to look like. To be specific if you're a grower, a farmer if you will, you need to make sure that you don't inadvertently break federal law because when you tested or when you cured your product, you tested a THC content below the threshold, but as it cured, it exceeded the threshold, and all of a sudden, you might be violating the controlled substances act, which is not what any farmer is expecting when they're growing what they think is a hemp product.

We need to have clarity from the USDA on a whole bunch of issues relating to testing, relating to thresholds. That's when that is fully ideated, it'll be easier for the ag side of the business to understand what they can and cannot do. On the recreational side or the CPG side right now it's not clear to us that you could add CBD to food and advertise it as such. It's not clear that we could advertise it in a beverage, and advertise it as such. Now it's okay to do those things if it's paired with THC.

For example, Lagunitas sells beverage like a hard seltzer, if you will, in California that can be 5 milligrams CBD, 5 milligrams THC. It's a regulated product. It's fine, but I'm talking about where you're trying to be an over-the-counter non-regulated product sold at a whole foods, or a Kroger's or a Ralphs or any other grocery store or on amazon.com for that matter. Then there's still uncertainty about whether, for example, you can add it to food or beverage. We'll just start with that two huge form factors.

I've seen beverages now on the shelves of multiple retailers that don't have any THC in them, or at least they're not putting it on the label. Obviously, there's none if they're sold at mainstream retail, but they're not using the word CBD. They're using euphemisms like hemp extract, for one example. Right now we don't know necessarily whether you will be able to add CBD to food without having to go through a regulatory approval process. We don't know if you could add it to a beverage right now in the absence of THC.

We know that it's okay today to be a topical cosmetic. That is okay. We have clarity on that, but the FDA has been going through a research and an information-gathering phase for the last year or so. We will wait to hear what the final rules in order to say whether you can put CBD in food. You will see that no mainstream grocery retailer is yet putting CBD in food or beverage on their shelves. You'll get some boutique, more cutting edge smaller retailers, not chain-wide, but you're not going to see it in Walmart yet. Just not yet. You will see if you went to walmart.com, you will see a topical, but you will not yet see a vegan protein bar with CBD in it yet because it's not clear.

There's a lot of anticipation that the FDA could either make or slow down the development of the CBD industry, depending upon what actually they will opine on. There have been CBD warnings from the FDA. It should be said. Last year the FDA warned, I think, 17 companies for selling CBD products. Congress and the FDA have squared off over CBD. CBD companies have been sued for false advertising in the United States. FDA has warned that CBD has the potential to harm you. FDA has said that CBD products run real risks. It's just a state of exquisite uncertainty right now as to what will be the final status of CBD as a consumer product good, and it is inhibiting the market potential, I will say so.

When you can actually put CBD in a beverage without having to go through a licensed cannabis rigmarole and just treat it like any other ingredient, whatever else you might put sugar, frankly, or syrup, then you're going to see a huge development in the available CBD products. No doubt you'll see Coca-Cola and PepsiCo and Keurig Dr Pepper release CBD products. You could ask yourself, "Why doesn't Coca-Cola have a CBD product yet? Why doesn't PepsiCo have a CBD product yet? Do they not believe in the CBD industry?" Of course, they believe in it. They can't wati but there's no way they're going to put their global reputation at risk by jumping the gun.

That is the clarity that we're waiting for. That is why you have to be somewhat mindful and respectful of the fact that these rules have not been written yet. If you want to go out and spend $7 million setting up a CBD bottling plant because you'd think it's safe to do that, and you're going to sell CBD beverages, you have to be prepared for the fact that you might not be able to operate that bottling plant in a few months.

Matthew: Good points. How about biosynthesis? I agree with you. That's a big trend there. Talk about that a little bit, if you would.

Paul: Biosynthesis, just to give a little bit of-- If you saw my marks in high school science, you'd be like, ''Please don't explain science to us, Paul'' I'm going to give it a go anyways. It's essentially using non-plant mediums to grow cannabinoids at scale. You can produce, you can use all sorts of mediums. Mold would be one example. I invested in a Canadian company called Hyasynth.

Matthew: Yes, we have Kevin on the show a couple of times.

Paul: There you go. I was actually one of their first investors back in 2014 because I understood immediately what I thought the potential of that could mean because, just using Kevin as one example, the footprint he needs to grow cannabinoids at scale is microscopic compared to having to grow plants. The environmental- the carbon footprint which is going to be very important, because let's face it, cannabis is a dirty environmentally insensitive industry right now. His carbon footprint is teeny tiny compared to what a conventional plant-based cultivator would require to grow plants. This is a really, really important part is their ability to achieve standardization is just something that the plant-based therapies cannot necessarily ever achieve.

The way I anticipate is that biosynthesis is really being built, not for the recreational market, but for the pure medical market. I think that when large pharmaceutical companies are looking to source APIs, active pharmaceutical ingredients, which would make up the core chip into what they're going to produce, they're unlikely to use plant-based cannabinoids because of the reasons I outlined. First of all, standardization is really, really tricky. You can take one cannabis plant and you could, through multiple harvest in a controlled environment, still see variation. That's where you have to test each batch one by one. You can still see why this harvest I had 27% THC, the next harvest I only had 24% THC.

Now in the recreational market that's not a catastrophic outcome, but in pharmaceutical drug development, you can't have that type of variation. You need to have precise standardization. I really see biosynthesis beginning to become commercially viable when we have more approved cannabis therapies, cannabinoid therapies and it's likely going to be a source to buy low cost, low carbon footprint, perfectly standardized cannabinoids. That's the case with biosynthesis is it just makes sense for conventional pharma to want to get out of the plant business.

Now that's not a certainty. Let's just say that Epidiolex, which is the only approved medication is still derived from plants. It can be accomplished, and I'm not saying it's one or the other, but biosynthesis will likely play a role. It could also play a role just in CPG because if it gets to the point where you can have an isolated cannabinoid, that is exactly the same as a plant, that same isolated cannabinoid in a plant. The only difference is that's a lot cheaper and it can be made a lot more quickly. Then it's going to likely also play a role in CPG, in consumer packaged good development as well.

I see that biosynthesis is going to play a role. Now, I also just want to walk that back a little bit and say it's not going to devastate the plant-based economy because I do think there's something near miraculous about the cannabis plant, its sort of entourage effect, if you will, full spectrum. It may be that, despite the challenges of creating standardized formulations, it's still, from a pure efficacy side, could not be replicated precisely in a laboratory. I do think that it's going to take years of development and study and research to understand where is biosynthesis appropriate for? Where are you better off served by the plant?

I think the plant will always be the larger economy of the two but I do think that biosynthesis isn't just like a noble idea that will not be commercialized. It will be commercialized, and it'll operate on a parallel track to the plant-based economy, and where there is improved outcomes, specifically, we'll go to biosynthesis depending on how you measure that improved outcome, and where the plant still provides improved outcome we'll use the plant. Largely, I think you'll see amongst either medical or recreational applications, you'll see companies wanting to have both a biosynthesis, as well as a plant-based cultivation asset.

Matthew: Okay. The last trend is cash remains king. Can you talk about that a little bit?

Paul: I can go back to my musical chair comment which is that this industry is always going to be cash-intensive. Even if you're "cash flow positive," you're still probably going to want to have access to fertile capital markets in order to be able to make sure that if you want to go acquire another asset or if you want to expand meaningfully, your production footprint without dipping into your own account or your own working capital having access to capital, is still going to have a dramatic impact.

To be more specific when I look at a cannabis company to evaluate them, I will do call it a holistic evaluation. I'll look at their growth technology. I'll look at their management team. I'll look at their go-to-market strategy. I'll look at their marketing strategy. I'll do all that stuff, but it won't matter a wit if I don't like the balance sheet because I know that every cannabis company, what they said in their investment deck in terms of how quickly they would achieve revenue targets and what their gross margins would be and when they become cash flow positive, I've yet to see one company actually deliver on what they said.

No, I'm not accusing anyone of fraud. It's excessive exuberance about how great this industry is and how good we are as operators but the old rule, everything is going to cost twice as much and take twice as long is a pretty good mantra to expect. If I see a company, I don't care if it's like we've got the Google algorithm for cannabis, unless they've got cash on the balance sheet, it's very hard to get excited about that company because we know empirically now that if you want to build a large scalable asset, you're probably going to burn through tens of millions, possibly hundreds of millions and in some instances, billions of dollars. I'm not speculating. That's happened already.

This is an expensive industry. It's a problem that it's expensive because it creates access issues and another trend is social equity. I think there's a connection between the paramountcy of capital and as of yet unmet social equity ambitions of our industry. Cash is going to be king for a while, Matt, because there's no-- This is to say in every aspect a brick by brick, [unintelligible 00:43:44] industry and it ain't cheap. It's quite the opposite. It's very expensive. It's not to say that the capital investments are not worth it. We're fighting for a market that's going to be measured in the trillions of dollars. It's very much worth it, but how much did Amazon spend to become Amazon? We're talking about billions and billions of dollars.

The cannabis industry is not much different so that's why these things are connected. Catastrophic failure is connected to a shortage of capital for all the market participants which is connected to the market getting more intelligent about how it allocates capital which, again, buttresses the thesis that those that have capital, those that have cash have almost unique advantage to those that do not. Even if their technology isn't as good, even if their management teams aren't as good, even if their go-to-market isn't as good, the cash levels things up very quickly.

Matthew: Paul, I want to move on to some personal development questions to help listeners get a better sense of who you are personally. With that, is there a book that's had a big impact on your life or way of thinking that you'd like to share?

Paul: Yes. I am a truly avid reader. I'm trying to be like a book a week for a lot of my adult life. It's like, "Tell what's your favorite album." It's a tough question to be honest. I have so many, but I did give this some thought because I didn't want to whiff on the question. I'll say a few from a business book. The book that had the biggest impact on me is a book called The Hard Thing About Hard Things by Ben Horowitz, a well-known Silicon Valley monster. That book, as a lifelong entrepreneur, I've started I think 13 companies in my life. It's one of the few books, and I've read a lot of great business books like Shoe Dog or Bob Iger's book.

I've read really into those business memoirs but I love The Hard Thing About Hard Things because it was one of the few books to really deal with the emotional journey of being an entrepreneur. The insane highs and the challenging lows, the lying in bed not being able to sleep at night, the amazing amount of stress that we put on ourselves, the sort of chip on the shoulder that we all typically have if we're entrepreneurs. I thought that book for me was very personal. It was like, "Oh, okay. It's not just me that has gone through these crazy almost operatic emotional cycles in my career," where I feel like what is wrong with me. Anyway, I said, "There's nothing wrong with me. This is just the nature of entrepreneurship." That book was great.

Another book on a personal level that I have read I think four times now is called Zen and the Art of Motorcycle Maintenance by Robert Pirsig. It's a classic. It's sort of a counter-culture book but I've been a lifelong spiritual questor and that book was just a remarkable elucidation of a western mind embarking upon a spiritual pursuit. It's an iconic book. It's probably well-known to many people but for whatever reason that was one of those books I read. I think I first read it when I was 17 and it took me months to read it. Then I read it again when I was 22, and then I read again when I was 35. Each time I read it, it just exploded in terms of its relevance. In fact, the more experience I gathered the more that book spoke to me.

I've just chosen those two out of-- I could talk books for days out of just an immense pile. I'm a huge believer in reading makes you a better person. You can tell a lot about who you are by the friends you have in the books you read. I've always loved that expression. I switch my reading up. I love fiction. I love literature and I love non-fiction especially business memoirs.

Matthew: What's most interesting thing going on in the cannabis industry apart from what you do today?

Paul: I think, not to circle back on a subject we've covered, but it's got to be the globe-- It is what's happening in the United States in some sense and that we're all waiting and uncertain about how we're going to move from here. The United States cannabis industry is really excited right now. The stocks of the well-known companies have been on quite a run. The Biden bump was a real thing. The ballot initiatives that resulted in six states evolving or birthing programs, all of this is, in some sense, I think the most interesting thing but just to peel that onion layer back a little bit more it's what's going on in global cannabis that's just blowing my mind.

When I entered this industry back in 2012 I just didn't-- I had a very bullish, very almost like pollyannic view of where industry could go but I miscalculated the accelerated development or the expediency in which we've got to such rapid growth. I just see the new countries that are looking seriously at what I call sensible cannabis reform. It's incredible. It's shattering any geopolitical, regional, stereotypes you may have. Pakistan, South Korea, Lebanon, Russia started articulating now.

I'm doing a webinar tonight through Global Go on hemp and CBD in China, Thailand, most of the EU, mostly of Latin America, all over the African continent, cannabis is undergoing now a quick transmogrification from this taboo product to an essential part of a country's health program, a reflection on that it should not be a criminal justice issue, and a meaningful sense and understanding that it can be a source of great economic development.

We're talking about better outcomes for all stakeholders, better outcomes for patients, better outcomes for consumers, better outcomes for the government in terms of now being able to capture, through private enterprise, high paying or decent-paying jobs, taxes, quality assurance. It's just the speed that cannabis is unfurling across the globe that is to me the most interesting thing going on. Now I'll just take that a step further to say, what's going on in psychedelics is very much the long tail of what's going on in cannabis.

I'll say that cannabis was the battering ram that knocked down the partition to re-evaluate and rediscover plant-based medication. We knocked that door down and now rushing in right behind us, is the psychedelic industry, which is going to have transformative impact on mental health in the world. That is staggering to me how quickly the psychedelic industry is developing and it's in large part because the cannabis industry laid down the tracks, and by laying down those tracks, we should lubricate it, reduce the friction for the psychedelic industry to develop. It's moving in some sense more quickly or as quickly as the cannabis industry.

Those are the two things for me as a long-term market participant that makes me go like, "Holy blank, this is just what we dreamed of, what we imagined, what we hope for, is actually happening in the here and now." It would be just the globalization of plant-based therapies led by cannabis, but with others following them, that is electrifying me at the moment.

Matthew: Thanks. Here's the Peter Thiel question for you, last one. What is the one thought you have that most people would disagree with you on? It can be about anything.

Paul: All drugs should be decriminalized.

Matthew: It makes a lot of sense. Portugal's done that. I've been over there and the sky's not falling.

Paul: Portugal's done it. Oregon's on the verge of doing it, and I think that we have to understand-- When I say all drugs should be decriminalized, I mean, the use, not necessarily the sale of. I do think that there is moral hazard associated with certain street-level drugs, but I do think that the mistake we've made in multiple economies is treating a drug user as a symptom to be responded by the criminal justice arm of government rather than the health arm of government.

Using Portugal as an example, we want less people to die from opiate addiction than are currently dying, and these numbers are staggering. As you probably know, more Americans die of opiate overdoses in one year than died in the entire Vietnam War. It's crazy statistic. The way to measure the success of any government regulation around, say, opioid abuse, starts with not how many people are in jail, but how many people died, and that if you can lower the amount of people that died by decriminalizing it and treating it as a health issue, which is largely what we do in Canada. We have methadone clinics in Canada, for example, that are legalized. I'm going to say that's the superior outcome.

Addiction should not be a criminal act. It should be if someone is addicted- and I'm not advocating everyone should do all drugs all the time at scale, far from it. I'm saying that a criminal justice response is blunt when we need something more subtle. I'm not opposed to criminalizing drug cartels, moving crystal meth across borders. That's not what I mean by decriminalized. I mean, going after the user is not really solving any problems. It's just, in a way, criminalizing people that need a healthy response. That would be, I guess, my one thought that most people would disagree with.

If I had a second one, I would say we're living in a simulation, [chuckles] like Elon Musk. What we think is reality is not actual reality. I'm very comfortable saying that. I don't know if that's controversial, and most people would not agree, but I view that we are living on some form of a simulation. Unnecessarily someone else's video game, but something like a simulation, where we're getting a mutated version of what is real. Those are my two so-called controversial most-people-would-disagree-with-me thoughts.

Matthew: Until Elon Musk said that, that there really wasn't a lot of places where you could talk about that without it seeming like some sort of, I don't know what, like people wouldn't take that seriously. Now we can actually talk about that and it is compelling in many ways. He calls it a simulation or there could be some other maybe name for it besides simulation, but you're right, a lot of more people jumping on that idea, and I think it's maybe got some merit. It's hard to describe it while you're in simulation, right? Unless you're- it's like Ready Player One.

Paul: It's like Ready Player One, exactly, that Ernest Cline book. When you're in a dream, you're pretty convinced the dream is reality, during the dream. Then you wake up and you say, "Okay, that was just dreaming." You could just say life is a dream that we haven't woken up from.

Matthew: Right. Row, row, row your boat, merrily down the stream. Finish it, Paul. I'm waiting.

Paul: [laughs] I can't. I'm laughing too hard.

Matthew: Okay. Paul, as for the listeners that want to connect with you, and learn more about what you're doing with Global Go, how can they do that?

Paul: They can reach out to me. I'm going to give my Gmail because the Global Go handles a mouthful, then I'll switch you off. Life is but a dream. I will just say that, [chuckles] to your point, merrily so. Everyone, ready. It is my name, paulrosen44@gmail.com. Look forward to hearing from anybody and everybody. I love to bring an open tent and most people that know me know that I will pretty much try to talk or meet with as many people that want to talk with me.

Matthew: Paul, thanks so much for coming on the show. Enjoy your maple syrup in the simulation, and we'll hope to connect with you, again, soon.

Paul: Thanks, Matt. Best wishes to you as well.


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