We have all heard of cheerleaders and usually think of them in a positive light: a supportive group of people rooting for a sports team. What many may be unaware of is that the cannabis industry has its own kind of ‘cheerleaders.’ Unfortunately, these groups of cheerleaders are not as beneficial for the industry as the dancing ones. “While they are promoting the industry in their own ways, their exuberance and actions often comes from a place of hubris,” says Mitchell Osak, CEO at Quanta Consulting. Osak explains how to identify the three different groups of cannabis cheerleaders, the different causes of their hubris, and what can be done to mitigate their consequences.
Who are the cheerleaders?
According to Osak, the first group of cheerleaders is the most benign. “They are the legacy growers and sellers who believe that cannabis is a miracle plant. They are so taken with the plant and culture surrounding it that you could pretty much see them as extreme fans of cannabis. Of course, being a fan of something is not necessarily a bad thing. Millions of people across the globe get a lot of help from cannabis, so there is some medical and lots of anecdotal evidence to support their claims. However, if we look at real-world evidence with medical and adult-use cannabis, we know it is just not for everybody.”
The second group of cheerleaders is made up of the entrepreneurs of the cannabis companies. “Like the first group, they can have great experiences consuming the product. This group goes one step further than consumption, fusing their cannabis passion with capital and commerce. Their entrepreneurialism supercharges their hubris. Since they are building a cannabis company, they naturally and inevitably will become an evangelist for the plant – and their industry and firm.”
Then there is the third group, a minority of the cheerleaders but maybe the most pernicious: the hit and run investors. “They come into a company to invest money, watch that company go all the way up, sell their shares and move on to the next company or industry. They are often the loudest group of cheerleaders. However, early-stage angel investing is a nuanced issue. These cheerleaders do provide a lot of the early capital for high-risk industries. They will usually jump around different sectors, chasing the next big thing. Some of them were in cannabis a couple of years ago and have now transferred to psychedelics or crypto, for example. While they’re important in terms of germinating the industry, they are not always beneficial for the long-term health of the industry, unfortunately. There is a fine line between self-interest vs. the interest of the company they are investing in vs. the overall interests of the industry. While they understand finance very well, they do not usually have the thorough understanding of cannabis and operations that the other groups of cheerleaders have.”
What are the dangers?
Now that we know who the hubris-fueled cannabis cheerleaders are, it is also important to know what the consequences are. “The hubris of the first group comes from the fact that they have had a lot of personal experience with the plant,” explains Osak. “While they think they are experts, there are some major gaps of knowledge. For example, growing 10-100 plants illegally yourself is not the same as growing 10,000 cannabis plants in an automated and compliant greenhouse. The danger of the hubris of this group is that while their product knowledge may be deep, they think it easily translates over to industrial-style cannabis cultivation. However, those are two different worlds. It’s a big blind spot, as they don’t know what they don’t know.”
When it comes to the entrepreneurs, Osak explains that they know a little bit about a lot of things but not a lot about some of the important operational, product, and compliance details. “Oftentimes, they will look at other major players in the industry and try to follow their playbook. However, you can’t simply copy-paste another company’s success. You also need a talented team around you, for example, and that is not easy to find. Unlike the previous group, these cheerleaders are not surrounded by a community of other cannabis consumers, growers, or retailers. Therefore, their challenge is recognizing their personal gaps and then finding the right people with the right knowledge – and then listening to them.”
According to Osak, the hubris of the last group is the most interesting. “Oftentimes they are very successful and charismatic. They invest in different companies and make a lot of money. Yet what they are really successful at is finance & raising capital, and telling a good story to the markets. Unfortunately, many people equate making a lot of money with being operationally smart and confuse stock market success with knowing about cannabis. What these people don’t really know is the cannabis consumer, plant, and how to build up an organization.” As their goal is often just about making money in the capital market, they usually don’t bother learning too many operational details before they leave.”
What to do
“Unfortunately, hubris is human nature.” While we might not be able to prevent it, Osak does have some advice. “From a company perspective, governance is important. By creating effective policies and following best practices, we could insist upon implementing better corporate governance. For example, ensuring that there are boards created early on with a proper diversity of knowledge and expertise in areas like compliance, accounting, and HR. In addition, following ESG reporting would encourage good corporate citizenship and help tamper down the cheerleading and enthusiasm. Moreover, introducing independent voices from the outside who can give a different perspective. These voices can provide a more prudent and sensible point of view that might result in slower but more profitable, lower risk growth over the long term. Overall, it is important to think a bit more critically about decisions so that we can build the cannabis industry into a responsible and mature, professional industry.”
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