
When Capitalism Meets Cannabis - robg
http://www.nytimes.com/2010/06/27/business/27pot.html?ref=homepage&src=me&pagewanted=all
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brc
I thought it was a great article, it will be a long time before authors can
resist Cheech and Chong references, a bit like how motoring writers cannot
review an Aston Martin without mentioning James Bond.

What the people retailing pot will find is that an easily-growable
agricultural commodity is subject to perfect competition and prices will be
driven down to a very low level.

Applying the 'sell shovels in a gold rush' rule, I think being a medicinal-pot
lawyer or consultant is probably the best way to profit from this. Each time
the government gets nervous and changes laws, these people will be needed to
help shop owners navigate the new laws. The shop owners themselves are facing
a price-sensitive consumer, regulations and retail leases. I wouldn't be
surprised if the eventual winning business model looks more like a Walgreens
and less like Starbucks.

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JeffL
Like the prices of wine all get driven down to a very low level? I suspect
there will be lots of expensive premium varieties.

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dagw
Most people drink wine because it tastes really nice, most people smoke pot to
get stoned. I've listen to my pothead friends discuss pot, and not one of them
has ever mentioned its flavour and bouquet. Equally I've never heard wine
connoisseurs talk about which wine is better for getting you really drunk. If
people drank wine simply to get drunk then no wines would cost more than 2-3$
a bottle.

~~~
garply
Maybe you don't have enough friends who smoke pot. Not only will marijuana
consumers judge by flavor, they will also judge by harshness, and, probably
most importantly, by the style of intoxication the strain creates (for example
racing, innovative thoughts vs. warm, bodily comfort).

~~~
dagw
Oh they discuss harshness and intoxication. However I imagine that those two
aspects will be a lot easier to control and manipulate via simple chemical
means if marijuana productions ever becomes properly industrialized and placed
in the hands of smart and educated engineers. I just don't see a pot smoker
paying $20 for a joint that tastes a bit different from $2 joint assuming they
both get him equally intoxicated.

~~~
garply
No, I don't think taste is the biggest selling point, but just as there is a
dizzying array of potential flavors in nature, so too is there a dizzying
array of marijuana intoxications. Just because most types of 'drunk' are
similar does not mean most types of 'marijuana high' are similar - thus while
a wine type might trade on its flavor, a marijuana strain would almost
certainly trade on its style of intoxication.

That is, you can make niche highs just as you can make niche wine flavors.

~~~
dagw
It has admittedly been several years since I smoked pot and things may have
changed, but within markets where the sale of marijuana was open and legal (or
at least tolerated) I simply don't recall seeing any significant price
differentiation. Sure there where countless variations, but they all cost more
or less the same, and certainly nowhere near the price differences one sees in
wine.

Now perhaps once the major PR and ad companies get behind the concept we'll
see luxury pot brands charging premium prices, and perhaps we'll even see pot
snobs who look down on anyone paying less then $15 a joint. With the right
marketing campaign you can sell basically anything for basically any price, so
I suppose the $500 oz. will probably become a reality if pot is fully
legalized, and there will no doubt be plenty of suckers lining up to buy it.

In fact, I was probably wrong when I said that legal pot won't see the same
prices as high end wines. The reason we haven't seen those sorts of prices is
because the semi to illegal nature of it has meant a lack of fully protected
brands and trademarks and advertising. Once we have those then there will be
real money to be made.

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LarrySDonald
You'd have to be pretty naive to think being legal would then suddenly mean
you can easily make it. Burgers are legal. The vast majority consume them. Now
open a burger joint and corner the market! Oh wait.. Health code regulations?
Employee benefits? Payrolls? Tax? Inspections? Fire code? Have to be better
and/or cheaper then the big chains? Who would have guessed running a
successful business wasn't trivial!

People who were in the game before competed against anyone who couldn't run a
small time dry cleaning shop. They were in it because it was illegal and those
good at business was instead running legal businesses.

~~~
sliverstorm
I am completely out of touch with the black market, so I don't know for sure,
but I was always under the impression people involved in the black market were
there for the potential for large profit, not because they can't run a
business.

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code_duck
The already existent, well developed multi-billion dollar black market is a
much more pure expression of capitalism than what the article describes. This
is more like 'when capitalist bureaucracy is applied to retailing cannabis'.

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karzeem
This reminds me of the whole should-you-build-on-someone-else's-platform
thing, with the unpredictable, ever-shifting platform rules being in this case
the mishmash of federal/state/local laws. The next family values president
could put all these people out of business (and in jail, for that matter) with
the stroke of a pen.

~~~
Groxx
Can one be put in jail for doing something not-illegal? I mean, sure, if they
don't _stop_ , but actions strictly prior to a law being passed don't seem
questionable.

IANAL, however, just an idealist, forever at odds with the Real World™.

~~~
jeffcoat
It's certainly possible in this case: There shouldn't be any problem with
"actions strictly prior to a law being passed" -- the US Constitution frowns
on _ex post facto_ punishments -- but everything described in the article is
only legal under state, not federal law.

An aggressive attorney general could therefore decide to prosecute them as
federal criminals. It's happened before; see, e.g., Gonzales vs Raich.

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GFischer
Why do cannabis dispensaries need 24-hour webcams, and other MUCH more
sensitive businesses (say, firearm sellers) don't? (AFAIK).

I'm against excessive regulation, and this seems more egregious than most.

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jpdbaugh
"The new rules, many of which will take effect over coming months, treat
dispensaries a bit like pharmacies and a bit like casinos. Felons will soon be
prohibited from owning dispensaries."

Are people with DUI's or other alcohol related offenses banned from owning
bars? I don't know personally. If they are then I am okay with this.

~~~
dnsworks
Felons are prevented from owning bars, a felon could not get a liquor license.

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stcredzero
I had no idea Walgreens was around from before prohibition, nor that they
expanded 20-fold during prohibition.

 _But when was the last time your pharmacy had a milkshake night?_

Well, I don't think there were doses in the milkshakes, but I used to go to
drug stores in Indiana for a malted.

~~~
tptacek
Walgreens is one of Jim Collins "Good to Great" companies; there are other
interesting things about their business model to know too. For instance, they
"pioneered" the "blanket every other major intersection with a retail
location" model that Starbucks uses (unlike McDonalds, which is a franchise
system, SBUX and WAG do this because there are logistical efficiencies they
can exploit).

~~~
stretchwithme
That's a great book, even better than the first one. They made us read it at
founder institute.

Those logistical efficiencies must work in the convenience store biz as well.
Honolulu has all of these ABC stores. I even saw 2 almost across the street
from each other.

~~~
cma
ABC stores aren't necessarily owned by the same company:

[http://en.wikipedia.org/wiki/Alcoholic_beverage_control_stat...](http://en.wikipedia.org/wiki/Alcoholic_beverage_control_state)

~~~
riffic
it's interesting (from the article) that during the temperance period, alcohol
too was sold from stores called 'dispensaries'

> At the beginning of the temperance movement in the United States, many
> states curtailed where and when alcohol could be sold. Before this time,
> most alcoholic beverages for off-premises consumption were often sold just
> like any other item in stores or in saloons/bars. Because of heavy lobbying
> by temperance groups in various states, most required off-premise beverages
> to be sold in dedicated stores (primarily called dispensaries)

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stretchwithme
I think very local control is much state or federal control of marijuana
sales, medical or otherwise.

    
    
      http://www.theanswerisliberty.com/2010/06/can-democracy-and-recreational-drug-use.html

~~~
albemuth
...much better than state...

or could be worse, idk :)

~~~
stretchwithme
I think if the decision makers face the consequences directly, they'll be
inclined to make better choices and also learn more quickly from their
choices. Legislators don't necessarily have to live with the consequences of
their choices. The local condo board does.

And the consequences will undoubtedly be worse. To someone. And ideal to
others. But if they can each live in a community with rules they prefer,
there's no problem.

That is a major challenge and opportunity of good government. Drawing the
lines so that people are free but not stepping on each other's toes.

~~~
jpdbaugh
If marijuana or any other drug for that matter were 100% legal tomorrow
nothing at all would change from the way it is now. The people who want to use
it will still use just like they do now. The fact is that even being illegal
most places it is incredibly easy to get.

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philwelch
For marijuana this may be true--marijuana is easily identifiable and it only
takes a little bit of networking to "know a guy". For other drugs this is
emphatically not true--LSD, for instance, has faced supply-side crackdowns to
the point where it's very difficult to find on the street, and additionally,
no easy way to distinguish supposed LSD from other hallucinogens.

~~~
jpdbaugh
I agree that other drugs are definitely harder to obtain, however I still
believe that the people who would try and use harder drugs would remain the
same. I just don't think the demand is that high for hard drugs such as LSD,
cocaine, heroine, etc would increase with additional supply. Its just not that
common for people to want to to them. Therefore, if they were legal there just
wouldn't be that much of a market for those drugs and again there wouldn't be
any noticeable difference in the day to day to the non-user.

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philwelch
LSD isn't a "hard drug" in the slightest. But more importantly, cocaine and
heroin don't have constricted supply--you can get plenty of both. I don't
think there's enough LSD to satisfy demand at the moment, especially not with
authenticity concerns.

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jpdbaugh
You are right I shouldn't have lumped LSD in with Cocaine and Heroine. I have
heard before that LSD doesn't even have any real side affects. Is that true?

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GFischer
I got interested in that, the most authoritative source I could find on the
fly (the NIH) seems to say it might cause flashbacks, but "LSD is not
considered an addictive drug since it does not produce compulsive drug-seeking
behavior.":

<http://www.nida.nih.gov/infofacts/hallucinogens.html>

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afhof
Not relevant to hackers.

~~~
sliverstorm
Sometimes thoughts like that cross my mind, but don't forget the target
audience of this newsfeed is _entrepreneurs who happen to be hackers_ , so
practically any article about markets (esp. up and coming markets) is
potentially relevant.

