Leslie Bocskor is a managing partner of Electrum Partners, founding chairman of the Nevada Cannabis Industry Association, and a member of ArcView Angel Investor Network. Having worked on the investment side of the tech world, Bocskor’s interest turned to cannabis in 2012 when he began looking at data surrounding the industry. Following the election later that year that made adult use legal in Colorado and Washington, Bocskor explained “the writing was on the wall and that was when I knew there was something very substantial happening and I was certain it was going to be enormous.”
So much so that when my friend Joe Brezny (editor’s note: Brezny is now with the Coalition to Regulate Marijuana Like Alcohol), who I was collaborating with on a technology project, told me to pay attention to what’s going on with cannabis I thought, ‘Oh, Joe, you are just hopeful because you want to see this issue come to the forefront. And he said, ‘Oh, no, no, no there’s going to be a big market here. It’s going to be enormous.’ So I started looking at the data around 2012 and it started to look more compelling. Then the election of 2012 happened where Colorado and Washington made adult use legal and to me that was the writing on the wall. And that was when I knew there was something very substantial happening and I was certain it was going to be enormous and Joe was right and I told him he was right and I thanked him for getting me in the business. So it really started around the winter of 2012, beginning of 2013.
So during the session, Joe and I were probably spending 10 to 20 hours a week together on this project. As we know, it only passed by one vote and that was (Nevada Assemblywoman) Michelle Fiore who crossed party lines to make the difference. The fact that it passed by one vote meant that every little bit helped and that everybody provided.
Has it unfolded as I would have expected? In fact, it’s unfolded even better than I thought it would. Many people are very critical and they point out all the shortcomings, I would say having studied this on a national basis and an international basis, whether you look at what’s happened in Holland, Israel, Canada, and their missteps and you look at the laws and missteps of Massachusetts, Colorado, Washington, Arizona, Oregon, New York, Florida, Michigan, Illinois, they have all had really rough goes of it.
When you take a look on a purely objective perspective and evaluate first off how transparent and fair is the regulatory framework in Nevada? Well arguably it’s the most transparent and fair framework that yet has been devised, and thorough. Why is that? Well, because Nevada has a history of being able to establish a regulatory framework for things that have been looked at as taboo in other jurisdictions and the history goes back decades. We have been through it and had it gone wrong and figured out how to do it right.
Then people were complaining about how long it took. I understand, we wanted it to happen faster. Nobody wanted it to happen faster than I did as Chairman of the Nevada Cannabis Industry Association, and someone who has interests here in Nevada, and as someone who has interest in seeing Nevada develop its presence on a national basis. I, of course, wanted to see it move quickly. That being said, slow is better than fast, patience is power. And now the fact that we have the best regulatory framework, the best testing standards, the best quality cannabis being produced here in Nevada, of anywhere in the world, because our testing is more strict than anywhere else.
You can be sure what you are getting when you buy cannabis from a Nevada dispensary and that it’s going to be a clean product. We should be so fortunate as to have our food tested to the same level that our cannabis is here in Nevada. And so, how has it unfolded? It’s unfolded better than I could have expected to be quite honest.
Adult use cannabis, according to Rand Corp., in 2010 with a 10-year look back, was $50 billion dollars a year. MLB, NBA, NFL, and NHL together represent about $35 billion dollars a year in revenue; illegal cannabis adult use in 2010 represented $50 billion dollars a year in revenue. So that gives you an idea of the scope. Let’s do that contrast. When the Internet and new media was really born back in the mid- to late ‘90s there was no internet yet, there was no industry, nobody knew what was going to happen. When Jeff Bezos was saying he was going to start something called Amazon and sell books on the internet people would say: What is the Internet? And why would I ever buy a book there?
And so there was this great uncertainty in terms of how big it would get, which is why people like Paul Krugman in 1998 said that the Internet was a fad and that no one would ever make any money there. Because nobody really knew and it was the same reason why people said Amazon would go out of business by 2000, which obviously they didn’t. And why all sorts of other predictions wouldn’t happen and there was a reason for that, there was an uncertainty, nobody knew…would we ever be able to get consumers to start using the internet like they do now? Would they buy books? Would they buy homes? Would they buy cars, book movies, communicate with all their co-workers, would they set up software platforms on the internet to manage businesses? We didn’t know that. It had never been done before. So how could we say it?
But we do know that people: #1) use cannabis recreationally on a global basis and we know they spend a lot of money doing it. #2) we know that they use it for medical marijuana, which is a new industry, but it’s been growing. We also know that industrial hemp is a gigantic market, we don’t even know how big it was because the illegality of it has crushed an industry that is probably in the tens of millions of dollars. What do I mean? I mean, industrial hemp for paper. Hemp uses something like 25% of the water and produces something like 1/10 of the toxic waste that a pulp paper mill does. Plus, we can have 2 harvests of hemp a year in a place that takes 20 years to grow the trees to yield similar amounts of paper from hemp. We can use hemp for textiles and, once again it uses much less water than cotton and is better for remediating the soil and it doesn’t have as much toxic waste produced in processing it. We can also use it for fuel. You can make hemp bio fuel. You can also use it for making plastic and people don’t know that. Henry Ford made a car in the early 1900s where part of it was made from hemp plastic and soy plastic. Once again, it’s not nearly as toxic. Remember, hemp is above the ground and plastics these days are from petro chemicals below the ground which work against us in the overall carbon emissions issue because you are getting carbon out of the ground and putting it in above the ground.
Then, there’s pharmaceuticals. We have been keeping the cannabis plant out of being a derivative ever since there has been a pharmaceutical industry in the United States, since the early 1900s.So what I am saying is that the contrast between cannabis and the tech industry is that the cannabis industry is far larger than we anticipated. It is so large, it is probably in the hundreds of billions of dollars once it matures. Sure the tech industry is in that number now, 15 or 20 years later, but my point is that the time it will take to grow, and the uncertainty, isn’t there. What I mean specifically is when you take a black market industry and move it into a regulated market you don’t have the same uncertainty around consumer behavior because what we are doing is we are taking a market right now where you have to put your personal freedom at risk, you might get arrested for buying it or selling it, you certainly have a significant amount of inconvenience associated with it because you gotta go meet some guy on a street corner or someone’s home or God knows how else you buy it on the black market, but when you contrast it with a licensed store with policies or if there’s a recall you will be able to look at the serial number and say, ‘Oh, mine was recalled’ and give it back, there’s no comparison.
People buy cannabis on the black market and they don’t know whether it’s been sprayed with paraquat or DDT or what. Anything could be on it. They have no idea. So as soon as you make it a regulated market that is much easier and much more comfortable for consumers and you take this already existing $50-billion-a-year market, it’s going to explode and double in size quickly. Why? Because so many people are currently sitting on the fence because they have used it in the past in high school or college but are scared to break the law or take the risk to get something they don’t know about. But if you can go to a store like a liquor store and just look and read reviews and find out test results — all of sudden it’s a completely different experience.
In the birth of a new industry, its similar in terms of what happens with the entrepreneurs and things start to bubble to the surface but the contrast is much more significant now than the comparison was when I first was looking at it. Contrast in how quickly it is going to grow, contrast in how much less risk there is, contrast in how quickly businesses become profitable.
For example, another fact that came out of the MMJ Business Daily Fact Book in 2015 is that half of the businesses started in the legal cannabis industry are profitable or break even within a year. And that’s never happened for any industry in the history of the world.
Also, there’s the federal illegality that is keeping big players out. See you can’t have the Pfizers and Johnson & Johnson, CVS Pharmacy, Anheuser-Busch, whoever it might be, they can’t come in and crush the small guy with their wallet because they are prevented from coming into the industry. Plus, it’s regionalized so you can’t do interstate commerce so that means each state is like its own market which presents entrepreneurs in that state with opportunities that they haven’t had in any other type of industry in any other time in the recent past. So the contrasting points from a business perspective are much more significant to me now than the comparison.
The other surprise is the profitability. Maybe the reason we can think about our values is because the industry is so profitable. Maybe because 52% of businesses in the legal cannabis industry hit break-even or profitability in the first six months, that’s unheard of. It leaves me speechless at times when I start to think about the consequences of that. So it is the profitability of the industry combined with it being managed by the values that are being established in terms of how operators in this business behave. And you see people come into this business and they say they are just here for the money and then six months later they are talking about values and they are talking about the importance of doing the right thing.
Once again it is this convergence of forces, being able to do the right thing, know that you are fighting for a social justice cause, and knowing that you are making the world a better place, and knowing that you are taking part in establishing sensible policy that is leading to compassion and fewer people’s lives being destroyed and leading to access to something that will make people’s lives better, and, you are able to do it profitably. I meet other entrepreneurs who literally say, ‘I have to pinch myself because it feels like this is a dream.’
So first off, no residency requirement. Secondly, making the licensing process a merit-based process where you have to be thoroughly vetted by the state and you have to really show that you put together all of the components to have a qualified team and enterprise. The licensing process was a transparent one. The state had issued the requirements, and the scoring schema being published prior to licenses being completed was also really well done.
Reciprocity. Let’s talk about Hawaii and New York for a minute. New York just issued five licenses, Hawaii is about to issue eight. Both have substantial tourist trades. New York is comparable to Nevada and Hawaii certainly. The idea of saying we recognize that marijuana is medicine, and that we are going to set up a medical marijuana program and we also are a very big tourist destination and we want you to come visit our state and we are going to make you break the law if you are a medical marijuana user and a tourist coming to our state so you either have to buy it on the black market when you get here or you have to travel with it illegality. To me that is just patently absurd. It’s just bad policy. And the fact that Nevada has what I would consider sensible policy around reciprocity, that’s as clearly articulated as it is, just, once again, puts us head and shoulders beyond the rest.
Then you add the transfer of ownership being done in the way that it is being done. Look at our testing requirements as to how strict Nevada is compared to everywhere else and now people are starting to copy us. That is the surest sign that we are doing something right is when other jurisdictions are looking to Nevada and think maybe our state should start to do something like Nevada did.
So if I had to pin it on a couple of things, it would be the licensing process, the transparency associated with it, the basic underlying components of that licensing process, for-profit entities, no residency requirement, merit-based system, and reciprocity for the patients that travel here. And then the fact that Nevada is so good at regulating things that would be taboo in other jurisdictions, giving us a leg up on everybody else.