Last week, The New York Times ran an editorial piece with the headline, “Do We Really Want a Microsoft of Marijuana?”
The author of the report, Christopher Caldwell, opines that the SAFE Banking Act would disproportionately help giant operators at the expense of smaller companies. That, in turn, would usher in a dystopian future in which multinational businesses develop new flavors and products to turn America’s children into a nation of potheads.
I read a lot of wrongheaded news and misinformation pieces about cannabis, but this one may be the winner in terms of getting things wrong.
In barely 1,000 words, the author makes three points that need addressing.
The first is the overall theme. We absolutely want a Microsoft of marijuana!
We want one as investors, as consumers, and as supporters of the industry. Microsoft Corp. (NASDAQ: MSFT) has its flaws, but overall, a lot of people have benefited from the success of the tech company. We can partially thank Microsoft for reliable computer operating systems, sophisticated spreadsheets, and cheap cloud computing that allows us to share our ideas in real time all over the world.
Do we want a company with the resources to improve the accuracy and speed of cannabis testing, one that can grow more precise strains for medical patients, and one that can perfect security and seed-to-sale tracking?
I want those things. So do you.
And he doesn’t know it yet, but so does Mr. Caldwell. Here’s why…
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The second issue I had with the article was that Mr. Caldwell imagines that sophisticated banking will turn “an artisanal space into a corporate one.”
He has it backwards.
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As he acknowledges, there is already big business in cannabis. Billionaires fund several multi-state operators (MSOs), and multinational companies – like Constellation Brands Inc. (NYSE: STZ), Altria Group Inc. (NYSE: MO), and Molson Coors Brewing Co. (NYSE: TAP) – are in the business.
Huge companies have the tools to get in the industry without banking.
It’s the smaller companies that are threatened by the continued absence of banking, and it’s not even “sophisticated” banking services that they can’t access.
We’re talking about basic banking services like checking accounts, credit cards, merchant services, and wire transfers.
Since small businesses would continue being barred from banking, Mr. Caldwell’s proposal would cause the very concentration of big business that he seems to oppose.
Mr. Caldwell seems convinced that the only likely outcome of larger companies coming to dominate the cannabis industry is a horrifying future – an industry full of Joe Camels and OxyContin, to use his examples.
He is wrong about this, too.
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The legal market has compliance departments, lawyers, testing equipment, and executives who are following the laws.
That’s not the market to worry about. The real concern should be with illicit markets.
The illicit market is where children are buying cannabis. The illicit market is where people are killed in drug wars and from unsafe products.
It is this part of the cannabis market that lacks the accountability Mr. Caldwell wants to see. The illicit market does not have multimillion-dollar brands that would become worthless in the event of a scandal. These illicit dealers don’t stay up at night worrying that the state is going to pull their licenses.
And most relevant to Mr. Caldwell’s article, the illicit operators are the ones who benefit from an all-cash industry.
The SAFE Banking Act would bring the legal industry into the financial system, where regulators can track transactions. The individuals working in the legal cannabis market are among the most ethical people I’ve ever met in any industry, and I am proud to be in an industry where they lead the way.
Cannabis is about much more than just profits. It saddens me to see someone predicting that a whole industry will go the way of Joe Camel when the majority of the sector is more akin to the thousands of ethical companies across the world that take pride in their products and give positive contributions to their communities.
I have read Mr. Caldwell’s book, “Reflections on the Revolution in Europe: Immigration, Islam, and the West,” and he is clearly an intelligent and thoughtful person.
He is someone interested in much deeper analysis than is evident from his latest column.
So to me, his report on the cannabis industry is merely proof that almost everyone is uneducated about something.
I would encourage Mr. Caldwell to meet some of the people running cannabis companies – big companies, small companies that aspire to be big, and companies that are perfectly happy staying on the craft side of the business.
I think he’d come away as impressed as I am, and I’m certain he’d be convinced that they should not be denied a checking account.
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