Cannabis at a Crossroads: Speaker Series Examines Industry’s Future

It was late afternoon and 40 or so Haas MBA students were getting a dose of reality from cannabis entrepreneurs on the challenges they face—even in a time of widespread legalization.

One surprising insight: cannabis businesses operate exclusively in cash, even to make payroll, and even in states where recreational use is legalized. That’s because banks fear putting their charters at risk if they do business with marijuana outfits, since the plant is still illegal under federal law.

“We’re navigating a space that, until now, hasn’t had a playbook or set of rules,” said Victor Pinho, marketing director at Berkeley Patients Group, the nation’s oldest medical cannabis dispensary. “My day, every day, has been making up those rules and testing and seeing what fits. It’s going down paths that no one has ever been down before.”

Sounds like the just the kind of challenge that might pique an MBA’s interest.

Pinho was one of the speakers in the final session of a 6-week series called “High Margins: The Business of Legal Cannabis.” The student-organized, one-credit course brought in a wide range of experts, offering perspectives on the most promising business models, investment strategies, future regulatory schemes, and the changing risks for a market long forced to operate underground.

The course sessions straddled the Nov. 8 vote to legalize adult use of marijuana in California beginning in 2018, which is estimated to triple the size of the legal market for cannabis in the US. Twenty-nine states and the District of Columbia now have laws legalizing cannabis in some form. ArcView Market Research and New Frontier Data project the legal cannabis market will grow to $22 billion by 2020, a three-fold increase from this year.

“What’s interesting is that this isn’t an industry that came about because of some invention,” says Jessica Sun, MBA 17 (right), one of the two students who organized the course. “Cannabis has been around for centuries. It’s a social movement that’s now turning into an industry.”

For students like Nick Miele, MBA 17, the experience served as a fresh reminder of why they had come to Haas.

“Berkeley is such a progressive place and, as a business school student, to be able to explore in-depth an industry that has operated for so long in the grey has been fascinating,” says Miele.

A Reality Check

The course was the brainchild of Michael Katz of the Haas Career Management Group. Katz, who was then director of full-time MBA careers, came up with the idea earlier this year after talking with a friend who had joined a cannabis startup. Expecting legalization, he saw an opportunity to put the school at the forefront, and open a new job market for students.

“Cannabis is in the very, very early stages of becoming an advanced business, but the people entering this space are botanists or chemists. They’re not experienced business people,” says Katz.

The growing industry, he says, cuts across multiple sectors, from health and food to consumer products and agri-tech. It also has important social implications. “Cannabis lives at the intersection of technology, markets, and social justice, and Berkeley belongs in any area that’s at that intersection,” says Katz, who now leads the school’s Interpersonal Development Program.

As it happened Katz wasn’t alone in his thinking. Two Haas students were working on a first-of-its kind case study on a cannabis business and the obstacles facing minorities in the industry. That study, co-authored by Jamaur Bronner and Mohsin Alvi, both MBAs 16, along with Assoc. Prof. Rui de Figueiredo, was published in October.

Katz didn’t have to look far to find students willing to run with the speaker series idea. Both Sun and Cody Little, also MBA 17 (left), had been drawn to Haas for its reputation as an incubator for business leaders committed to making a social impact. After meeting early last year, they began talking about ways they could further push the envelope on social justice issues at the school.

“We wanted to start conversations at school about fringe economies and how they generate opportunity for people but simultaneously entrap them in non-institutional ways of working in the world,” explains Little.

Cannabis was an obvious place to start, and the CEOs and other top investors, entrepreneurs and drug policy reform advocates that Sun and Little reached out to jumped at the chance to engage with an MBA talent pool.

But while momentum at the federal level appeared headed toward eventual legalization, the election of Donald Trump is causing a lot of anxiety in pro-cannabis circles. Predictions of a “green rush” may have been premature.

“We’re not there yet. We’re not mature enough as an industry,” said Christopher Esposito, who heads up human resources at Dark Heart Nursery and formerly worked at Charles Schwab. Involved in the pro-cannabis movement marijuana business for decades, he told students about the plant’s history as a source of palliative care for AIDS patients. “You go into this because you have passion for cannabis.”

In other words, says course co-organizer Sun, “the takeaway, for anyone interested in cannabis as a business, is not to expect riches and glamour.”