Ep 289 – California: The Hunger Games of Cannabis, Here’s Who Survives…

seibo shen hanu labs

Is California the Hunger Games of cannabis?

In the face of regulatory failure in California, black market cannabis thrives as licensed sellers and growers – much like the pledges in the Hunger Games – compete to survive in a dangerous world controlled by The Capitol (Sacramento).

So what happens next? Will state leaders see the error in their ways or will dispensaries and cultivators unite to force a change? Here to help us answer this is Seibo Shen, CEO of Hanu Labs.

Learn more at https://hanulabs.com 

Seibo Shen’s new product The Hanu Stone from hanulabs.com

Key Takeaways:

  • Seibo’s background and how he came to enter the cannabis space
  • How California’s cannabis market has evolved over the last few years
  • Disadvantages that licensed growers and dispensaries deal with compared to those in the black market
  • How the black market has impacted the vaping crisis
  • Why so many cannabis businesses are undergoing financial difficulties
  • Slotting fees and why brands must pay to get their products on dispensary shelves
  • An inside look at Hanu Labs and its new, award-winning personal vaporizer
  • How Hanu Labs is unique to other big players in the pod manufacturing space
  • Where Seibo sees California’s cannabis market heading in the next few years
Click Here to Read Full Transcript

Matthew: 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. That's C-A-N-N-A insider.com. Now, here's your program.

Is California the "Hunger Games" of Cannabis? Dispensaries and licensed growers are like the pledges of the "Hunger Games," running around in a dangerous and competitive world that the capital, Sacramento, controls. In the face of regulatory failure, the capital turns a blind eye to the market being flooded with black market products. What's to come from California?

Will the capital see the error of their ways or will the dispensaries and cultivators unite to force a change? Here to tell us more about the California market is Seibo Shen. Seibo, welcome back to "CannaInsider."

Seibo: Hey, thank you so much, Matt. I'm super excited to be here and what a cool intro, I mean, to somehow figure in how to put in the "Hunger Games." That was awesome. I was listening with excitement and happy to be here.

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

Seibo: I'm in San Mateo, California. That's about 15 minutes south of San Francisco.

Matthew: Okay. And you've been on the show before, but it's been at least two years. For new listeners, can you just give us a snapshot of your business and your background?

Seibo: Yeah, absolutely. So, the last time I was on, I was running a company called VapeXhale. They make desktop vaporizers. And for those that aren't familiar with a nomenclature of desktop vaporizer, these are the first generation of vaporizers that weren't like the vape pens that you would carry around in your pocket. But these actually plugged into your wall like a desktop computer. So, when I was first on, we had created the highest rated desktop vaporizer, and since then, we utilize the technology that we learn from creating the desktop to create our first portable, the Hanu Stone.

Matthew: Okay. And what were you doing before you got into the cannabis industry?

Seibo: So, prior to the cannabis industry, I had a career in the high-tech space. So, I graduated in college. I had actually been looking to become immigration attorney, but law school just didn't work out for me for I could go into the tons of reasons. It wasn't right for me, but I had previously been selling software for various software companies like Salesforce and LinkedIn. And after a few years...not a few years, 12 years of selling software, I decided it was time for a change. And then I decided to get into the cannabis industry.

Matthew: Let's talk a little bit about California. Let's orient listeners so they can understand. It's really just a unique animal. If you were talking to a friend that was from a different part of the country, how would you explain the California cannabis market where we started a few years ago and where we are now?

Seibo: Yeah. So, the cannabis industry like many other new industries, it changes quite rapidly. So, even from let's say 9 to 12 months ago, I feel like California is a different climate right now. But I think when people think about the good old days, they're talking about pre-Prop 64 when we were still in SB 420 in Prop 215. And this is when we were very much more patient-focused.

The environment was I would say...I don't wanna say much more compassionate than it is today, but as the industry began to formalize and organize, we quickly started becoming less about compassion and more about profits. And there's nothing wrong with that. That's all what we were expecting, but I think that the quickness in which it changed caught a lot of people off-guard. There were a lot of legacy companies, pre-Prop 64 that were doing quite well that have had trouble making the transition either waiting too long for licenses or trying to lease buildings, but the price of the buildings would be too expensive and just struggling to evolve their business where it could survive in today's climate.

And on the inverse side, we have giant MSOs, Canadian LPs who have raised 8 figures, 9 figures, sometimes 10 figures in capital, and they came in with a strategy of just offering the lowest price possible. And in many cases, while that did help them buy a market share, they also found out that some of the price points that they were offering were not sustainable and not the way you would build a healthy business with. So, they kind of shot themselves in the foot.

So, I think if I were to give someone that was brand new a snapshot of today's landscape, I would say that it is very much a dog-eat-dog world where everyone is really looking at figuring out how they could save more margins for themselves while at the same time struggling with all the taxes that have to be paid on the state level, which are... depending on which municipality you're in could be between 30 and 35%.

Matthew: Okay. So you talked about disadvantages, yeah, taxes. What are some of the disadvantages that license growers and dispensaries are dealing with compared to the black market while illicit has much more freedom? What are the disadvantages for people that had to actually have a license and competing in the regulated market?

Seibo: Yeah. So, I think there are many, many differences, and I'll try to go over what I think the major ones are. But obviously, the cost of doing business is much higher when you are in the legal market. You have to have compliant packaging. You have to get your products tested. You have to utilize a distributor. And each of those checkpoints requires additional capital and shaves off your margins. Now, when you're on the black and illicit market, you don't have to go through any of that. And on top of that, there are the taxes. So, it's kind of like a double, triple, quadruple whammy, depending on how you're looking at it.

And in the earlier days, Prop 64 and SB 420. I would say those days. I don't wanna call it the "Wild Wild West," but there was much less oversight. There was still testing being done to make sure that there wasn't any pesticides or things like that in your edibles or concentrates, but at the same time, the packaging requirements were quite a bit less. And this allowed a lot of mom-and-pop and artisanal shops to be extremely competitive because they would have products that were very unique and were differentiated.

But in today's day and age when you have to factor in all the different compliance, testing, distribution cost that you have, it really made it tough for these artisanal shops to compete. And this is why companies had to really scale up in order to still have margins left over after paying all the different people within the value chain.

Matthew: And just for listeners outside of California, could you just summarize what Prop-64, SB 420 are?

Seibo: Yep. So, SB 420 and Prop-215, that is what we had prior to Prop-64, which is when we had adult use in California. So, prior to that, we were a medical state. I don't know the details enough to delineate where Prop-64 or SB 420 and Prop-215 kind of bled over on each other, but this is when we had a medical market. This is when instead of giving product for cash, we would be giving product for what they would call donations. And it was just a different environment where there was just less oversight on what we were doing, but at the same time, we were kind of like a self-regulated industry. Like the people within the industry, if you were putting out bad products or products that were testing poorly, it was almost like we self-regulated and got rid of those bad actors.

Now that we're in the Prop-64 days and we have adult use, now we're counting on the legislators to kind of be the big brothers and give us oversight. But when you are giving this power to people that don't have a close understanding of how people utilize the plant, then, of course, they're gonna make some mistakes. And we knew that this was gonna happen. We just hope that the mistakes would be fixed more quickly than they actually are right now.

Matthew: Yeah. I think that's what...you said something interesting there. The industry self-regulates in a way, and bad actors don't thrive. People don't buy again when they like the product. And I think that's something we don't really think about too often like solutions do emerge in the absence of regulation. There could be consumer reports for cannabis that's $1.99 a month that would be an app on your phone that reviews. They only take money from their members, and they review the products and test them and so forth. So, a lot of things do emerge without state regulation.

And right now, the California regulation is...I would say as you described it earlier is tone-deaf. But I wanna go back to what the black market looks like right now. Do you have friends or family members that feel more comfortable buying on the black market? Can you talk a little bit about that?

Seibo: I would say the vast majority of people that I know under the age of 25 buy from the black market. And this is just my own experiences. So, I wouldn't use this as a blanket statement. But I would even go as far as to say pretty much everyone under the age of 30 that I know utilizes the black market.

And obviously, as you get older, you have more disposable cash, and you have more to lose from buying things on the black market. So I think that my older friends tend to have that mentality. But if they were given the choice and there was no risk from buying from the black market, I think the vast majority of them would opt for it.

I've only been to a handful of these, what they call secret sessions. But when you go to these things, it doesn't feel like you're going to a black market event. It very much feels like you're going to a pre-Prop-64 event where there's a lot of vendors that have a lot of great products, and you don't have to pay for samples. You could just give it a try.

So, I would even argue that the buying experience at these sessions is more enjoyable than going to a dispensary where the bartender is really pushing a product that the dispensary owner wants them to push versus giving the customer the type of product that they actually need. And obviously, there are huge massive savings when you're going to the black market. So, I would say the buying experience, the money that you save, these are all big reasons why people have opted to, even with the legalization of cannabis in California, to continue buying products off the illicit market.

Matthew: Interesting. Where do you think we are in the vaping crisis and how is the black market impacted that in your opinion?

Seibo: Yeah. So, while I was just singing some of the praises of the black market being cheaper and a better buying experience because there is less oversight and there's less testing, I would say that by and large, the black market is very much responsible for the vape crisis. Me being in the middle of the vape crisis, it's a little bit more difficult to have an objective view like, "Are we in the beginning of it, the middle of it, or are we coming out of it?" I tend to be a more optimistic person. So, I think that the worst part we've gotten through, and now we are beginning to rebound.

But in the case of vape pens, cartridges, and pods, it's much harder to delineate the quality of the oil inside a cartridge versus when you're looking at flour that you could smell and just kind of rotate 360 degrees in your hand. And I think with flour, just the visual cues could give you a good idea of the quality of the medicine that you are about to buy. But when it comes to oil, people look at clarity, people look at viscosities, and by and large, those are pretty good indicators, but they're not the best indicators.

So, what people have figured out in the black market is if you change the viscosity of your oil to look like thick honey, then that is the viscosity that... the regulated cartridges tend to have the highest quality oil. So if you start off with a thinner oil, you might add some vitamin E acetate or some MCT to it to thicken it up and give it that look. And because they aren't tested, the end-user, they buy a product that looks like a duck, walks like a duck, talks like a duck, but unfortunately, when they consume it, isn't the same thing.

And it's really exacerbated the situation in the cannabis space because...for those that are listening right now, there's probably enough interest in cannabis for you guys to read a little bit further and understand the difference between a quality cartridge and a bad quality cartridge. But for the vast majority of America that just reads the headlines, I think they just stop at the fact that people have been dying from these pulmonary diseases, and vaping is as bad or if not worse than smoking.

Matthew: Yeah. I'm surprised. Is there anything out there that you know of where you can kind of put in a vape cartridge or a pod and just kind of test it quickly for anything that might be objectionable that you wouldn't want in there?

Seibo: Currently, there is not. But if there's anyone listening, this could be a great business proposal and business opportunity. Like I've seen these types of testing kits for party and recreational drugs for people that go to raves, but as far as I know, there's nothing like that for the cannabis space.

Matthew: So people in the industry right now don't like to talk about it because it's not sexy, but there's a cash crunch for many businesses right now. Can you talk a little bit about that, what's causing it and what the environment's like?

Seibo: Yeah. So, again, this is one of those topics that I think you may find varying answers depending on who you speak to, but I tend to... being in the industry in California, I like to talk to a whole bunch of different entrepreneurs here and kind of combine everyone's experiences to get some sort of average experience. But when we first started talking today, we talked about how taxes have really impacted the growth of the industry, and more people are buying on the illicit market. So, I think all of it starts there.

And when there are less people buying, the retail stores are obviously wanting to carry less inventory. They wanna carry products that have higher margins. And this just starts a downward trend for everyone, and so I guess this cash crunch is also exacerbated by the fact that the BCC has been issuing licenses rather slowly. So, in addition to people waiting on the licenses...the vast majority of licenses were granted in San Francisco and Los Angeles. So, people that lived outside of those metropolitan areas still had trouble accessing the cannabis that they wanted.

So, because of this lack of availability, because of these higher taxes, people are going elsewhere to purchase their cannabis. When everyone was expecting the California cannabis market to be a certain size and it wasn't that size, we all had to figure out, "Okay. You know, we projected this much revenue for this quarter. We're gonna miss that number. Where can we make it up?"

And if we kind of rewind to what I was saying in the early stage where people are just buying less, this has led to retailers wanting to charge different things like slotting fees. For people like ourselves that depend on our partners to get paid in order for us to get paid, many times our partners were having trouble collecting on what they were owed from dispensaries. And when they can't collect, we can't collect from them. And it just becomes this cycle of accounts receivable being the main job of a lot of people.

And while this has very much impacted us, I still have a lot of empathy for our partners because I know that they're going through the exact same thing. It's a trend that...I mean, virtually every company that I've spoken to when I've expressed my own lack of effectiveness of collecting money that was owed to us. That's when I realized everyone is dealing with this.

And when you're looking at treating the symptom, I don't think you'll ever get to a solution. You really need to look at the cause, and at least in my opinion, the cause all starts with these higher tax rates that consumers have to pay in order to buy whichever cannabis product that they were used to buying in the past and having to pay 30 to 35% more for it.

Matthew: So you mentioned slotting fees there, and for some listeners, this might be the first time they've heard that or understand what that means. But in a dispensary, there's shelf space and there's...obviously, some shelf space is better than others, and it gets more exposure to people coming into the dispensaries. Can you talk a little bit about slotting fees, how much they are and how that works?

Seibo: Yeah. So what's interesting is slotting fees was a new concept to me, but as I spoke to more people in retail, slotting fees is quite common in most retail channels. And for example, so if you walk into a grocery store like Whole Foods, the packages and the products that you see that are eye-level, they tend to pay a premium for that because they know that when you are eye-level, there's a higher probability that someone chooses your product.

Also, if your product is at the end of the aisles, those are premium real estate areas where more people tend to see your product. So, when it comes to the cannabis space, retail stores especially the higher-end stores are beginning to charge slotting fees so that your product is placed in a certain area or on a certain shelf so that customers that come in that may not have familiarity with your product will see it first.

And the slotting fees that I've seen, they have been as low as $1,500 a month and as high as $20,000 a month. And when I asked the dispensary store owners why they started doing the slotting fees, many of them gave me the answer that it was because that business was down. They needed to figure out a way to make up for the loss in revenue. And a lot of the larger companies that we mentioned earlier, the MSOs or the Canadian LPs. These companies were happy to pay the slotting fees.

And as you can imagine if a company's paying you anywhere from $1,500 to 20,000 a month for slotting fees. You just need a handful of those in order to justify or cover the rent or to cover your lease of the location. And while it does seem like a smart and savvy business move, on the retail side, it does limit smaller players, the mom-and-pop, the more artisanal brands out there because...in the case of ourselves, and I'm not gonna mention any names, but we were going to open an account. The first order was $10,000. The slotting fee was $8,000. So, for us, we just couldn't justify getting paid $2,000 and giving away $10,000 worth of merchandise, and so we passed on that account.

And unfortunately, for us, I had thought that by passing, they would probably come back and give me a lower offer or give me a different offer with a lower slotting fee, but they made the business decision that they needed $8,000 slotting fee for whatever new product that they were bringing in. And unfortunately, we weren't able to come to an agreement.

Matthew: Do you feel like there's transparency then after a slotting fee is paid? I mean, a product gets moved up to a better exposure, and they get more sales as a result or they don't continue to pay that slotting fee. Is that typically how it works?

Seibo: I think that is typically how it works, and I've talked to a handful of these retailers about proposed alternatives to slotting fees where if a certain amount of inventory is moved, then a certain slotting fee or fee could be paid to the retailer but to ask for a significant amount upfront without any sales data to back it up.

Like I said, the companies that routinely pay these slotting fees, when you go to these high-end dispensaries, you'll start noticing it's all the same big boys. And these are also the same big boys when you start looking at their financials are the same ones missing their numbers by 20, 30, 40%. So, I wouldn't say that this is a strategy that seems to be working for people across the board.

Matthew: Yeah. Race to the bottom. Okay. So, tell us more about Hanu Labs, your products, and how it works and how you came up with the idea.

Seibo: Yeah. So, as we started off this interview, we talked about my previous company the VapeXhale EVO or the VapeXhale. And I've been on record saying that I would never create a vape pen, and I created the Hanu Stone, which is essentially a vape pen. But the reasons why I decided to do that was I noticed that whenever my parents or my in-laws would come over, they would use the VapeXhale EVO at my house. But one time as they were leaving, I saw that my mother-in-law was taking out her vape pen, and I just out of curiosity I asked her which one it was.

She had one of the dosist pens. She paid $99 for a disposable, and it really got me thinking about people's lifestyles and how they interact with cannabis. And seeing my in-laws as well as my parents who are obviously seniors utilize this device, it really kind of motivated me to come up with a better mousetrap.

And the first thing I wanted to do was...my in-laws and the vast majority of people that are new to cannabis are consuming cannabis, not for recreational reasons, but they think that it's gonna improve their health and wellness in some way. So we wanted to change the visuals of our vape pen. Most vape pens, regardless of their tubular or square or octagonal, are long and skinny, and to me, that reminds you of the form factor of a cigarette. And we're here talking about health and wellness. So why are we mimicking the form factor of something that's bad for your health?

And that's why we went with this stone shape, and the stone shape for anyone that doesn't know what it looks like, it's actually asymmetrical shape. And the reason why we made it asymmetrical was that...I live in the heart of Silicon Valley, I love technology, but I think even here, people are fed up with technology. We're always looking at our Apple watches. We're always checking our notifications are on our smartphone. I'm constantly deleting slack messages so that I won't be bothered and I can concentrate on work.

Well, because we were bringing out yet another piece of technology, we wanted it to have the imperfection of nature. So we made it asymmetrical. And the side benefit of that is this asymmetrical shape when you hold it in your hand, it just gives you this really great tactile feeling where you instantly start feeling relaxed. And we had also seen that many people around here were carrying what they call a worry stone, and worry stones are just smooth little rocks that you could buy on Amazon. And when you're feeling kind of anxious, you could just start rubbing it with your thumb, and it's kind of like the equivalent of like an adult fidget spinner. So, we wanted the shape to not just be visually appealing but to have that tactile sensation so that you would feel some calmness and relaxation even if you weren't inhaling from it.

And then the last thing that we did, and which I think is the most important part, is we created not just the best functioning pod but also one of the safest pods. And we talked about how vaping has come under attack over the last year due to bad actors utilizing low-quality hardware or low-quality oil. So we wanted to make sure that our pod was not only heavy metals and lead-free, we had it certified by a global standard called RoHS, which is for hazardous materials. So, we feel very confident from a hardware perspective that we are top in class.

And then on the functionality side, we created a pod that utilizes a lot of the technology that we learned from creating the desktop vaporizer. And essentially, we learned that if you have more surface area to interact with the heat, you have a much more efficient vaporization process. So, with vape cartridges and vape pods obviously creating a larger atomizer is difficult because it'll add size to the device.

So instead we did the inverse, which was we poked a bunch of holes into our atomizer. We made it more like a ceramic sponge in a solid piece of ceramic. So, when the oil interacts with the atomizer, it soaks into all the nooks and crannies. And we have roughly three times the surface area in our device, which allows us to use lower temperatures to give larger clouds and to also preserve the terpene profile. So, our value proposition is it tastes better, it hits better, and it hits smoother. And depending on what type of cannabis user you are, I think that one of those three value propositions will really resonate with you.

Matthew: So, portable vaporizer, customers just want it to work. They really don't care how it works. But on your side of things, it can be tricky to create these pods and cartridges that work just right because, for example, if it's hot outside, pods might leak, and there's all other kinds of considerations there. Can you share a little bit about your experience there with creating a pod and kind of the difficulties?

Seibo: Yeah. So, creating the pod and cartridge technologies, you know, on the surface level is it's very complex. There's an atomizer that heats up the oil then that heated oil turns into a vapor. But to your point, a lot of pods and cartridges, they end up leaking. And I had just talked about the porosity of our ceramic that gives it that great performance. So, if you can imagine that the atomizer acts like a dam for the oil. The more porous the atomizer, the more likely the oil will seep through and begin to leak.

So for us, the biggest challenge was how do we create an atomizer that is porous that will give us more surface area but at the same time have enough density so that the oil won't seep out and leak when the weather starts getting hot and the oil becomes less viscous. And this is the challenge that I think the vast majority of manufacturers have a problem-solving.

And not to pat ourselves on the back, but I think one of our advantages is that the engineering team and the team testing the hardware are all the same team. Whereas most manufacturers will leverage a team in China, and that team in China needs to take direction from the American team and then utilize their own translation of that to make a product that will fit the needs and requirements of their U.S. counterparts. Whereas for us, because we design, we engineer, and we manufacture it ourselves, there's much less lost in translation, you know, first and then also because the people building it are also the users, I think there's just a much more intimate understanding of what is a good hit, what is a tasty hit, what is unsmooth hit that is too smoky.

These are all things that we can resolve like in just a few days, whereas if you're a team in America working with a team in China, many times they have to create the product. They send it over to you. It takes a few days. You have to test it out. You have to write down the notes, translate it back to them. And this back and forth just takes a really, really long time. So I think having design, manufacturing, and engineering under one roof for us. That was our secret sauce into designing a vape product, our first vape product that is top of class, and then being able to resolve difficult issues like the porosity of the ceramic atomizer creating better flavor but also making it more leakable.

And I think like I said, it wasn't any secret techniques that we used. It was just a lot of trial and error and going back and forth with our various teams, and I think because we're all centrally located together, we're able to do that much quicker than teams that are in America that have their manufacturing and engineering in China.

Matthew: Yeah. You could iterate so much faster and also you don't have an extended team with kind of different motivations. If you're shipping your product overseas for engineering, they have a lot of customers, and you might be bottom-of-the-barrel some days, and you're sitting there waiting, waiting, get frustrated, where you could be tinkering on all of it. I guess this is kind of a trend here with tariffs and everything going on to you to come back to wherever you sell your goods to try to design and manufacture them there in that theater.

Seibo: Yeah. And just to be clear, we actually still manufacture the product in China. We have a team in Washington as well that they were previous, they back sale distributors. And they had been working with factories back in China, and they ended up having that same experience that you just talked about where sometimes their secret sauce would be exposed to other customers, or depending on their ordering volume, they would be their most favorite customer, or they would be put on the back burner. So, this group actually went out to China, started their own factory.

We aligned with them very quickly because we knew that they had kind of...I don't wanna say American business style. But the way that they did the business was very much in line with the way VapeXhale did business, and because they moved their family out there to start the factory, we actually came up with a very great working relationship where I get to utilize my creative mind, come up with new products, and then I get to leverage their larger engineering team to see if my ideas have legs or if it's just some crazy idea I had the last time I took a dab that was way too big.

And by having this type of relationship, even though we aren't physically under one roof, the cultural differences are very little, and there's a very, very high level of trust too because we've worked with each other for the last seven years. So, this was a very ideal scenario for us, and in the coming months, you'll probably see some announcements of tighter and tighter integration between us and our manufacturer.

Matthew: And who are the big players in the pod and cartridge manufacturing space, and how do you compare those for people that aren't familiar with them?

Seibo: Yeah. So I would say the 800-pound gorilla in the space is a company called CCELL. CCELL, based on what I was told, is currently pumping out 30 million cartridges a month. CCELL has other cartridge competitors like Greentank, Convectium, 14th Round.

And based on my research, the second-largest company is pumping out about 3 million cartridges a month. And there are a handful of companies that are in the 1 to 3 million cartridge volume-wise. So as you could see, CCELL is the biggest, biggest player in the space. Now, on the pod side, it's a little bit different.

We have players like Pax. We have players like G Pen and Stiiizy. And on the cartridge side, they had standardized on what they call the 510 cartridge, and that is linked to like the type of threading that is on the cartridge itself. On the pod side, there is still no standard. So, what works in the Pax device doesn't work in the G Pen device, and that doesn't work in the Stiiizy device or in our device.

And the company that we have aligned with, it's a company called AVD. They are quickly becoming the Samsung to CCELL's Apple. And the vast majority of their current customers are X-CCELL customers. So they feel very strongly that they can be a reasonable competitor to CCELL on the 510 side.

And then we are working very, very closely with them to ensure that the Hanu pod system becomes the pod standard on the pod side of things. So, there's still a lot of heavy lifting to be done, but I do believe that our combination of creativity and engineering capabilities will allow us to make a lot of headway.

AVD is a fairly new company. There are only 18 months old, but in the last 18 months, they have won accounts like Blue River, True Leaf, Friendly Farms. And if you guys aren't familiar with any of those companies, these companies are...they're basically like the blue-chip extract companies in their specific geographies. So, I think if you look at their customer base, that gives you a good idea of the type of traction that they're getting.

And we're super excited because we know that with our ability to generate ideas for new products, their ability to engineer, we have a very, very potent design and manufacturing entity under our belt. And this is just the beginning. We have a whole bunch of other products that we're super excited to bring out in their near future.

Matthew: So, a lot of business owners are running around like crazy thinking they have to do everything like be a Swiss Army knife, and they have to have every extension on that knife and do everything themselves. And that might be true in the beginning, but long term, it has some hazards. Can you talk about how you've kind of settled into your workflow and decide what to do and not to do and let someone else do?

Seibo: Oh, man, that analogy really resonated with me. I would be the first to admit that I thought that you had to be...not only be a Swiss Army knife but to be the best tool in each of those categories of the Swiss Army knife. And I think the best analogy that most people could understand is when you look at a basketball team, you know, the shortest player tends to be the point guard, the tallest player tends to be the center, and the players in between fill in the shooting guard, small forward, and power forward roles. But there are certain attributes that people have that make them more optimized for certain roles.

And for myself, what I realized about myself is I love being creative. I love making things. And many times, I would beat myself up for perhaps not being the most process-oriented person or perhaps not having the best operational efficiency. And I would stay up at night just beating myself up over these things, and as I matured in my role as a CEO, I began to realize that it's okay to not have all these skill sets under your belt. And as a matter of fact, it's probably counter to being super productive and hiring people that are experts in those core competencies where you might be weak. Ultimately, that's what is needed to grow and scale your organization.

And I can only give anecdotes from myself, but I kind of fancied myself as a decent marketer. So, I would sit in on all the marketing meetings, and I would give a lot of my input and say I would have an open mind. And ultimately, while I did say I had an open mind, the marketing team, the vast majority of programs we did were the ones that I recommended.

So, in retrospect, I started realizing I had an open mind as long as they chose my idea, and in those cases, I often...when I look back, I was like, "Well, I hired this girl because she had so much creativity. She had great execution." And here I was kind of getting in the way of her being the best marker that she could be.

So, that's not to say that you shouldn't have some sort of fundamental understanding of all the different categories of business, but understanding what your strengths are and understanding what your weaknesses are and operating more in the areas that you're optimized in. I think that's ultimately what will help your company grow and also help you get out of the way of others that are looking to grow and enhance their skill set by doing whatever programs that they wanna do within your own company.

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

Seibo: Yeah. So, I think the last time I was on, I shared that I liked the book on, "The War of Art," which is the inverse to the art of war, and it's to conquer the enemy within. Since then, I've read two really good books that I've probably read two or three times since my initial read. The first one is "The Four Agreements," and the second one is a book called "Sapiens" by Yuval Noah Harari.

And the book "Sapiens," it is the history of humankind condensed into I think 500 pages. It's not a short read. In my opinion, it's the one book that I've recommended that when people read it always call me and wanna discuss everything about the book. I was curious. Have you heard about the book "Sapiens" by any chance?

Matthew: Oh, yes, I've definitely heard of it, and I've actually listened to some podcasts with the author. But I have not read it, which I am disappointed that I haven't. It sounds great.

Seibo: Well, I would say that there's one specific premise that stood out to me in the book, and the author talks about how there's three different types of reality. There's objective reality. Like, it's 72 degrees outside. And then there's subjective reality, which is, you know, Matt thinks 72 degrees is cold, Seibo thinks it's hot. So, you're in a t-shirt. I'm in a jacket. And then there's a third type of reality, which is intersubjective reality, and he gives a few different examples like the stock market is intersubjective reality in that if everyone believes a stock is going up, well, the stock goes up.

And fashion is also another example of intersubjective reality where, you know, if mom jeans and bell-bottoms are out of style, and everyone agrees, well, then it's out of style. And then 10 years later, when we all agree bell-bottoms looks cool again, it's cool again. And the author posits that the vast majority of life is intersubjective reality, and it is all the stories that we agree to believe together.

And I think when you have that framework of thinking, at least for me, it's helped me more easily navigate life, more easily navigate the political situation that the United States is currently in, and helps me better understand why sapiens do the things that sapiens do. And it's always to build and add to the intersubjective reality and narrative that we live in.

Matthew: Yeah. That's a great suggestion. I wanna check that out. What is the most interesting thing going on in your field besides what you do?

Seibo: Oh, man, that's such an interesting question. As much as I love my own product, you know, I wouldn't say that it is the most interesting thing going on. Where I do have a lot of interest is in all the new cannabinoids that are being studied now. We already through experience know that when you just isolate THC by itself...while it does a good job in relieving certain symptoms, you know, we all know that the entourage effect is so much more important to someone's overall feeling of well-being.

And more recently, I think that they've found different compounds. You know, THCV and CBG were ones that they were starting to about 18 months to 24 months ago. Now I think there's like THCP and some other cannabinoid derivatives where the psychoactivity maybe even stronger than THC. So, you would utilize even smaller amounts to get the therapeutic benefit that you are looking for.

And to me, you know, the study of the cannabinoids how they interact with the terpenes. This is the area that is most fascinating to me because I understand that everyone's biochemistry is different. And I've always been on this quest to find consistent methodologies for people to utilize cannabis where they would feel confident that if they tried it this way, you know, it would be like an early morning cup of coffee. If they did it this other methodology, it would be like taking a sleeping pill.

And right now I feel like we're still at that stage of it's just trial and error, and you gotta try, you know, 5 different strains, 10 different strains until you find one that works for you. But I think that with this research into these other cannabinoids that aren't as famous as THC or CBD, you know, we'll start making baby steps towards having something that is much more predictable and consistent for the end-user.

Matthew: Seibo, what is one thought you have that most people would disagree with you on?

Seibo: You know, this one was a question that I put a lot of thought into, and I thought of a few different answers. But the one that I'm gonna give maybe is controversial, but I think is the one that will give the biggest impact. And that is that those with different political views than you are not bad people. Like in my travels, you know, I live in California. So, the vast majority of people here are bleeding liberals, and they have a certain view of people that support Trump or our conservatives. And then I've flown to conservative states, and I've heard all the different stereotypes of progressives and liberals from California.

But in all of my conversations with all these various people, one thing that I've come to in conclusion of is none of these people are bad people. They have their own opinions. They have their own perspective of what types of policies will impact them negatively or positively. But when I speak to them, like, I rarely see just like a dark and evil heart.

It's just that the way they grew up, the experiences that they have have led them to believe and interact with society in a certain manner. And as I've traveled more and I've met more people, you know, I've come to the conclusion that, you know...and maybe it's because I'm here in the heart of Silicon Valley and we're working on a lot of robotics and AI, is that humans are just like machine learning algorithms.

The types of conclusions that machine learning comes to, it's very much based on the type of data that you put into it, and humans are no different. So, if you grew up seeing immigrants coming in and taking jobs, or you've had bad experiences, like, I could totally see why you would have a certain stance on immigration policy. Conversely, if you've had great experiences with immigration, you love the cultural diversity, you love like all the different foods that you could eat, you know, and those things, and you have a totally different view.

And ultimately, what I've come to reconcile with myself is that...you know, I just mentioned that I am a liberal, but if I had grown up in areas that were much more conservative, and I was told the things that I was told, you know, I don't have any type of...I don't think that I would think any different is basically what I'm saying, and that I am a product of my environment and all the various experiences that I've had.

And by switching to this type of attitude, and I wouldn't say it was a conscious switch. It was just based on what I've seen, you know, I've been able to I think kind of go between both groups, get a better understanding of what's troubling both groups, and reconcile and come to a conclusion of like, you know, not which group is right, but what do we have to do to resolve the differences between both groups and come to a solution.

And sorry for rambling on, but the main thing that I wanted to get to you was that, you know, I realized that...growing up in California, we always wanted to be liberal and progressive, but as I grow older, I realized there are some ideas that are worth conserving. And this is why conservatives and progressives need to be able to speak to each other because there are some ideas that absolutely need to progress and get better. And then there are some ideas like being kind to your neighbor, you know, loving your family. These ideas need to be preserved. So, my hope is that with this attitude, we could start building bridges between both polarized communities and get to a place where, you know, we're living in a state where or a country where, you know, there's more hugs and there's more love and there's less divisiveness.

Matthew: Maybe after this podcast, it'd be good if you hold up a sign and go downtown San Francisco and to say free hugs. What do you think about it, Seibo, challenge accepted?

Seibo: Not only challenge accepted, I may bring a few of my kids with me who are much cuter, so my probability of giving and getting hugs is much higher.

Matthew: Great. To add to your point, it's like not only is the other side are they good people, but I actually think that both sides need the other, because if you think what would happen with any ideology that's unchecked, it's not a happy ending. They need each other to some extent, which is not something, you know, right now people wanna think about. And to your point, like, "Hey, I'm the product of my environment."

I kind of had that epiphany some time back, and I was like, "Well, what wait a second. I got my values pretty much from the environment I was raised in, the people I hang out with, the zip codes. I'm in the most...and somewhat maybe on my interests." So are they really my values or are they kind of soaked in through osmosis and then galvanized so I believe that they're mine? So I went through an exercise where I defined what I consider my values and created a personal mission statement. And I realized that they borrow from both, but they're really neither. And it's an interesting thing to consider. And I encourage anybody, there's a lot of stuff on Google, you know, this personal mission statement and how you come up with one. But it's helped me achieve kind of a true north and once I know what my individual value system is. So, I really appreciate what you said there.

Seibo: Yeah. And I think that exercise that you did, I'm gonna look that up as well and do something like that because it's really important. And one of the things that I found is as I've gotten older, you know, I'm in my early 40s now, is that, you know, these values change in the different stages of your life. So, it's good to do these exercises every few years because you're consistently evolving as a person.

I'd like to say my wife and I, we have a very, very happy marriage. And one of the things that we actively do is as we evolve, we try to make sure that we're evolving with each other so that we're not just evolving apart, and we're taking interest in the new things that we're all interested in because, you know, as I said, if I was the same person that I was in high school or the same person as I was in my 20s and 30s, you know, I just don't know if I would be as happy as I am now with this constant evolution to become a better person.

Matthew: Yeah. Well said, Seibo. As we close, let listeners know how they can find your new product, the Stone and Hanu Labs. It sounds really compelling. It reminds me of a river stone, by the way, when I look at it. That's what I think of is like a hand-sized river stone. If anybody knows, that mean that asymmetrical kind of smooth rounded shape.

Seibo: Yep. So, thank you. It was very much inspired by river rocks, and I didn't even get into the story of like how we came up with that shape. But you could find it at www.hanulabs.com. We're currently only available in California, but we are about to release a farm bill compliant CBD line. So if you are outside of a cannabis medical or recreational state, you'll still be able to purchase the product. And in California, we are in a few locations in both northern and southern California. But we are about to sign up with a direct-to-consumer delivery service so that you could just go to our website and order the product direct. So, hopefully, by the time this podcast airs, that functionality will be built in, and if not, you know, shortly thereafter.

Matthew: Great. Thanks so much, Seibo, for coming on the show. We appreciate it, and good luck in the rest of 2020.

Seibo: Oh, thank you, Matt. I really appreciate the conversation, and hopefully in two or three more years if I come on again, I'll have some awesome stories to share about how California cleaned everything up, and now everything is kumbaya, and we're all holding hands and singing songs.

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