The legal cannabis industry is smoking hot: sales are projected to reach $6.7 billion this year and to top $21 billion by 2020, according to research firm IBISWorld. Twenty-four states now allow medical use of the drug, four states permit adults to partake for fun, and eight more—including California—will vote on legalizing recreational use in November.
As entrepreneurs and investors move in on the “green rush,” Haas is set to publish one of the first business school case studies on a cannabis enterprise.
The case, “Cannabusiness in Washington D.C.,” was spearheaded by two MBA students interested in exploring not only the business opportunities presented by the budding industry, but also the public policy and social justice issues that surround a substance that is still illegal under federal law. The study will appear in the Berkeley-Haas Case Series and the California Management Review in October.
Also kicking off next month: “High Margins,” a one-credit speaker series organized by students Cody Little and Jessica Sun, both MBA 17, with the help of Michael Katz, director of full-time MBA careers. Lecturer Greg LaBlanc is the faculty sponsor. Speakers include investors focused exclusively on the cannabis industry, entrepreneurs, and drug policy reform advocates.
“With legalization there is massive growth projected for the cannabis industry in this country,” Little says.
One goal of the speaker series, Little notes, is to connect legal cannabis pioneers with the talent they will need to succeed. Another goal, Sun adds, is “to normalize cannabis as a legitimate industry and career path for MBAs.”
A Promising Future—But Only for Some
Rui de Figueiredo, an associate professor at Haas who served as lead author on the case study, says the legal cannabis business is a ripe topic for business schools. There are challenges facing the fledgling industry that, taken together, are unique. These include questions about strategy, leadership, and—given that the federal government classifies marijuana among the most dangerous drugs—public policy.
(Industry proponents prefer to use the name of the plant, cannabis, over the term marijuana, which is associated with the plant’s criminalization and the illegal drug trade.)
“Basically, the legal side of the industry is starting from scratch,” says de Figueiredo. “You don’t typically see that in traditional business school cases and discussions.”
There’s another critical piece of the cannabis story that caught de Figueiredo’s attention—and that of co-authors Jamaur Bronner and Mohsin Alvi, both MBA 16, and Deena Malaeb, BS 17. To date, very few minorities have been able to break into the legal cannabis business, though they have been disproportionately affected by drug laws.
This troubled Bronner and Alvi, both management consultants who came to Haas through the Consortium for Graduate Study in Management, a nonprofit that works with select business schools like Haas and Fortune 500 companies to recruit underrepresented minorities and others who promote diversity into MBA programs and the upper ranks of management. Inspired by the Consortium’s mission, Bronner and Alvi wanted to make a concrete contribution to raising awareness of social justice issues in business.
They decided to write a case study and searched for a topic that was both novel and rife with diversity challenges.
During Bronner’s first winter break while Haas, a childhood friend took him on a private tour of a cannabis grower and seller in his native Colorado, which in 2014 became the first state to allow adults to buy weed for recreational use. There, he had a chance encounter with several top-level executives running the company. They were former private equity honchos—and they were all older, white, and male.
“It was a bit ironic that the people of color who were victimized or negatively impacted by the sale and distribution of marijuana aren’t the ones getting rich in places where it’s legal,” says Bronner, who is African American and a management consultant with The Boston Consulting Group. “It didn’t sit right with me.”
Alvi felt the same way. As a high school math teacher with Teach for America after college, Alvi, who is Pakistani-American, recalls some of this brightest students dropping out to deal drugs. They could be great employees at a legal cannabis business, he says, except that state laws bar anyone with a drug conviction from working in the business. “I thought, ‘Here we go again, boxing out minorities,’” says Alvi, now an operations manager at Google.
An Uphill Climb
The case study profiles Corey Barnette, a Duke Fuqua MBA and former Bank of America investment banker who is African American. Corey owns District Growers, a cultivation center, and Metropolitan Wellness Center, a dispensary in D.C.
The study describes what Barnette calls the “three pillars” of success as a cannabis entrepreneur: a qualified and capable team, political influence, and access to capital.
“Corey has all three pillars, but the road ahead won’t be easy,” says Bronner. For Barnette, the core business challenges facing cannabis businesses are compounded by his race. “He’s got to be a special type of leader in order to be successful.”
Bronner and Alvi credit Haas, and de Figueiredo in particular, for encouraging them to pursue the case study. They also received a $2,500 grant from the Eckles Diversity and Social Impact Fund to conduct their research.
De Figueiredo, who has served as Faculty Equity Officer at Haas, adds that a new case study with an African-American protagonist is a step toward providing another much-needed form of diversity. “Most cases are about male, white protagonists,” he says. “As a teacher you don’t always realize that.”